<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999 Commission File Number 000-20364
BANYAN SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2798394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 Flanders Road
Westboro, Massachusetts 01581
(Address of principal executive offices)
(508) 898-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common stock as
of April 30, 1999:
Class Number of Shares Outstanding
- -------------------------------------- -----------------------------
Common Stock, par value $.01 per share 21,281,084
- 1 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
March 31, 1999 and December 31, 1998
Consolidated Statements of Operations 4
Three months ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows 5
Three months ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 15
Market Risk
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 18
EXHIBIT INDEX 19
This Quarterly Report on Form 10-Q contains forward-looking statements,
including information with respect to the Company's plans and strategy for its
business. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause actual
events or the Company's actual results to differ materially from those indicated
by such forward-looking statements. These factors include, without limitation,
those set forth below under the caption "Factors Affecting Future Operating
Results" included under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part I, Item 2 of this Quarterly Report
on Form 10-Q.
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
BANYAN SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,648 $ 15,160
Marketable securities 3,591 4,052
Accounts receivable, less allowances of $2,885 and $2,917 16,203 21,392
Inventories 935 890
Other current assets 4,108 3,808
-------- --------
Total current assets 46,485 45,302
Property and equipment:
Computers and peripherals 24,709 24,859
Equipment 10,615 10,455
Furniture and fixtures 2,636 2,659
Leasehold improvements 2,608 2,586
-------- --------
Total 40,568 40,559
Less accumulated depreciation and amortization (35,894) (35,609)
-------- --------
Property and equipment, net 4,674 4,950
Marketable securities 5,648 3,076
Other assets, net of accumulated amortization of $1,346 and $2,669 2,910 2,882
-------- --------
Total assets $ 59,717 $ 56,210
======== ========
LIABILITIES
Current liabilities:
Accounts payable 3,721 3,861
Accrued compensation 3,653 4,137
Accrued expenses 6,798 6,741
Accrued costs for restructuring and other charges 441 710
Other current liabilities 575 626
Long-term debt-current portion 568 548
Deferred revenue 17,657 18,430
-------- --------
Total current liabilities 33,413 35,053
Software licenses payable, non-current 75 150
Long-term debt 600 600
Minority interest in consolidated subsidiary 1,975 2,008
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.01 par value; authorized 1,000,000
shares; 263,158 issued and outstanding 3 3
Common stock, $.01 par value; authorized 35,000,000 shares; issued
21,253,011 and 20,818,982 shares 213 208
Accumulated deficit (31,128) (31,585)
Additional paid in capital 83,984 79,485
Unearned compensation (1,044) (1,326)
Treasury stock at cost; 1,848,000 shares of common stock (28,564) (28,564)
Accumulated other comprehensive income 190 178
-------- --------
Total stockholders' equity 23,654 18,399
-------- --------
Total liabilities and stockholders' equity $ 59,717 $ 56,210
======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
- 3 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Software $ 8,271 $ 11,718
Services 9,153 4,955
Internet advertising 1,602 1,080
-------- --------
Total revenues 19,026 17,753
Cost of revenues:
Software 1,504 1,287
Services 6,007 3,133
Internet advertising 350 472
-------- --------
Total cost of revenues 7,861 4,892
-------- --------
Gross profit 11,165 12,861
Operating expenses:
Sales and marketing 6,317 8,196
Product development 2,520 2,847
General and administrative 1,810 1,481
-------- --------
Total operating expenses 10,647 12,524
-------- --------
Income from operations 518 337
Other income/(expense):
Interest income 273 150
Interest expense (30) (22)
Other, net (168) (21)
-------- --------
Total other income 75 107
-------- --------
Income before income taxes 593 444
Provision for income taxes 136 67
-------- --------
Net income $ 457 $ 377
======== ========
Income per common share:
Basic $ 0.02 $ 0.02
======== ========
Diluted $ 0.02 $ 0.02
======== ========
Weighted average number of common shares:
Basic 19,158 17,672
======== ========
Diluted 24,632 19,880
======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
- 4 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 457 $ 377
Adjustments to reconcile net income to net cash provided by/(used in)
operating activities:
Depreciation and amortization 880 1,348
Amortization of unearned compensation 283 --
Changes in operating assets and liabilities:
Decrease in accounts receivable 5,117 3,477
(Increase) in inventories (45) (210)
(Increase) in other current assets (83) (277)
(Decrease) in other liabilities (33) (162)
(Decrease) in accounts payable and accrued compensation and expenses (871) (1,832)
(Decrease) in accrued costs for restructuring and other charges (269) (249)
(Decrease) in software licenses payable, net (75) --
Decrease in other non current assets 58 --
(Decrease) in deferred revenue (774) (1,128)
-------- --------
Net cash provided by operating activities 4,645 1,344
Cash flows from investing activities:
Capital expenditures (481) (332)
(Purchases of)/proceeds from marketable securities, net (2,099) 1,123
-------- --------
Net cash (used in)/provided by investing activities (2,580) 791
Cash flows from financing activities:
Net proceeds from issuance of convertible preferred stock -- 9,500
Net proceeds from issuance of warrants 2,832 --
Proceeds from stock plan purchases and stock options 1,671 787
-------- --------
Net cash provided by financing activities 4,503 10,287
Effect of exchange rate changes on cash and cash equivalents (80) 23
-------- --------
Net increase in cash and cash equivalents 6,488 12,445
Cash and cash equivalents at beginning of the period 15,160 6,674
-------- --------
Cash and cash equivalents at end of the period $ 21,648 $ 19,119
======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
- 5 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries as of March 31, 1999, and have
been prepared by the Company in accordance with generally accepted
accounting principles. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments,
consisting only of those of a normal recurring nature, necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows at the dates and for the periods indicated. While the Company
believes that the disclosures presented are adequate to make the
information not misleading, these consolidated financial statements should
be read in conjunction with the consolidated financial statements and
related notes included in the Company's 1998 Annual Report to Stockholders
and Annual Report on Form 10-K.
The results of operations for the three-month period ended March 31, 1999
are not necessarily indicative of the results expected for the full fiscal
year or any future interim period.
B. Reportable Segments:
Banyan Systems Incorporated has two reportable segments: Network software
and services, and Internet advertising. The Company's network software and
services segment designs, develops and markets standards-based networking
directory and messaging products that help people communicate across
enterprise networks, intranets and the Internet. In addition, the network
software and services segment delivers professional services including
technical support, education and consulting, including network performance,
integration and Year 2000 compliance services. The Company's Internet
advertising segment is organized as a majority-owned subsidiary,
Switchboard Incorporated, and generates advertising revenue from major
domestic corporations through its Internet people-to-people and business
directory services. The Company's reportable segments are managed
separately because they market and distribute distinct products and
services.
- 6 -
<PAGE>
Segment Information for the Three-Months Ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Network Internet Total
Software and Services Advertising Company
--------------------- ------------ --------
<S> <C> <C> <C>
Revenues
Network software $ 8,271 $ -- $ 8,271
Network services 9,153 -- 9,153
Internet advertising -- 1,602 1,602
------- ------- -------
Total revenue 17,424 1,602 19,026
Cost of revenues 7,511 350 7,861
------- ------- -------
Gross profit 9,913 1,252 11,165
Operating expenses 9,181 1,466 10,647
------- ------- -------
Operating income/(loss) $ 732 $ (214) $ 518
======= ======= =======
Total assets $56,503 $ 3,214 $59,717
======= ======= =======
</TABLE>
- 7 -
<PAGE>
C. Basic and Diluted Earnings Per Share:
Basic earnings per share is based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share
includes the dilution of weighted average common equivalent shares
outstanding during the period. Common equivalent shares result from the
assumed exercise of outstanding stock options and warrants, the proceeds of
which are then assumed to have been used to repurchase outstanding common
stock using the treasury stock method, and the conversion of preferred
stock using the if converted method. The following table reconciles the
numerator and denominator of the basic and diluted earnings per share
computations shown on the Consolidated Statements of Operations:
<TABLE>
<CAPTION>
For the three months ended March 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Basic earnings per share
Numerator:
Net income $ 457 $ 377
Denominator:
Weighted average common shares outstanding 19,158 17,672
------- -------
Basic earnings per share $ 0.02 $ 0.02
======= =======
Diluted earnings per share
Numerator:
Net income $ 457 $ 377
Denominator:
Weighted average common shares outstanding 19,158 17,672
Weighted average common stock equivalents 5,474 2,208
------- -------
Total shares 24,632 19,880
------- -------
Diluted earnings per share $ 0.02 $ 0.02
======= =======
</TABLE>
Options and warrants to purchase 1,817,000 shares of Common Stock
outstanding during the quarter ended March 31, 1999 were excluded from the
calculation of diluted net income per share because the exercise price of
those options and warrants exceeded the average market price of Common
Stock during the quarter. Options to purchase 1,449,000 shares of Common
Stock outstanding during the quarter ended March 31, 1998 were excluded
from the calculation of diluted net income per share because the exercise
price of those options and warrants exceeded the average market price of
Common Stock during the quarter.
- 8 -
<PAGE>
D. Comprehensive Income
Other comprehensive income includes unrealized gains or losses on the
Company's available-for-sale investments and foreign currency translation
adjustments.
<TABLE>
<CAPTION>
For the three months ended March 31, 1999 1998
- ------------------------------------ ---- ----
<S> <C> <C>
Net income $457 $377
Other comprehensive income 12 50
---- ----
Comprehensive income $469 $427
==== ====
</TABLE>
E. Strategic Alliance
On January 11, 1999, the Company announced a strategic alliance with
Microsoft Corporation to deliver integrated messaging, networking and
Internet solutions and the collaboration on the design and implementation
of packaged services, solutions and support offerings based on Microsoft's
enterprise platform. Under the agreement, Microsoft has committed to
contribute $10,000,000 over a three-year period for the training of at
least 500 professionals, certain marketing and product development efforts
and the purchase of 1,750,000 common stock warrants. The first of these
three payments was received in January 1999 in the amount of $5,900,000, of
which the Company had recorded approximately $3,000,000 in deferred
revenue, approximately $2,800,000 in additional paid-in capital for common
stock warrants and approximately $100,000 in accrued marketing expenses.
The remaining two payments of $2,500,000 and $1,600,000 are scheduled to be
received on or before December 31, 1999 and 2000, respectively. The common
stock warrants are subject to a three-year lock-up provision, based on
continuation of the alliance, and have an exercise price of $10.00 per
share. Based on the Company's capitalization as of March 31, 1999, if
exercised, Microsoft's warrants would represent approximately 7.5 percent
ownership in the Company.
- 9 -
<PAGE>
Item 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Total revenues for the three-month periods ended March 31, 1999 and 1998 were
$19.0 million and $17.8 million, respectively. The increase in 1999 was due to
an increase in services and Internet advertising revenues offset in part by a
decline in software revenues. The Company's software revenues decreased by 29%
compared to the corresponding period in 1998 from $11.7 million to $8.3 million.
The decline in software revenues in 1999 was attributable primarily to lower
levels of sales of the Company's VINES and messaging products, as a result of
competitive product offerings. Services revenues increased by 85% compared to
the corresponding period in 1998 from $5.0 million to $9.2 million. The increase
in services revenues in 1999 was attributable primarily to additional revenues
generated from consulting services and end-user support services. Internet
advertising revenues increased by 48% compared to the corresponding period in
1998 from $1.1 million to $1.6 million. The increase in Internet advertising
revenues in 1999 was due to increases in third party license fees for
directory services and local merchant advertising delivered by the Company's
majority-owned subsidiary, Switchboard Incorporated's ("Switchboard") Web site.
The increases were partially offset by declines in national advertising
revenues. International revenues for the three-month periods ended March 31,
1999 and 1998 were $5.7 million and $5.5 million, respectively. The increase in
1999 was primarily due to an increase in consulting revenues offset in part by a
decline in software revenues. The Company also continues to be negatively
impacted by delayed purchasing decisions in Southeast Asia due to continued
economic uncertainty in the region as a result of financial market instability.
International revenues accounted for 30% and 31% of total revenues for the
three-month periods ended March 31, 1999 and 1998, respectively.
Gross profits for software were $6.8 million, or 82%, for the three-month period
ended March 31, 1999, compared with $10.4 million, or 89%, for the corresponding
period in 1998. The decrease in both gross profit percentage and dollars was
primarily due to the impact of fixed costs being spread over lower sales volume
and a higher mix of lower margin third party product sales.
Gross profits for services were $3.1 million, or 34%, for the three-month period
ended March 31, 1999, compared with $1.8 million, or 37%, for the corresponding
period in 1998. The increase in gross profit dollars was primarily due to an
increase in revenues from consulting services and end-user support services,
offset in part by an increase in delivery personnel and related costs to expand
consulting services. The decrease in gross profit percentage was primarily due
to additional delivery personnel and related costs to expand consulting
services.
Gross profits for Internet advertising were $1.3 million, or 78%, for the three-
month period ended March 31, 1999, compared with $0.6 million, or 56%, for the
corresponding period in 1998. The increase in gross profit dollars and
percentage was primarily due to an increase in revenues, offset in part by an
increase in variable costs.
Sales and marketing expenses decreased 23% from $8.2 million to $6.3 million for
the three-month period ended March 31, 1999, compared to the corresponding
period in 1998. This decrease was primarily due to redeployment of staff into
the Company's expanding consulting
- 10 -
<PAGE>
service activities, as well as a cessation of promotional fees paid to America
Online, Inc. ("AOL") under the Company's former marketing relationship between
Switchboard and AOL. Sales and marketing expenses as a percentage of revenues
were 33% and 46% for the three-month periods ended March 31, 1999 and 1998,
respectively.
Product development expenses decreased 11% from $2.8 million to $2.5 million for
the three-month period ended March 31, 1999, compared to the corresponding
period in 1998. This decrease was primarily due to lower headcount committed to
the Company's traditional products and less costs associated with year 2000
compliance in the quarter ended March 31, 1999 when compared to the
corresponding period in the prior year. The Company has modified and tested its
current product offerings for year 2000 compliance issues as of December 31,
1998. The Company continues to focus its product development resources on
Internet-related product initiatives, Switchboard technology and services, and
enhancing its existing product offerings. Product development expenses as a
percentage of revenues were 13% and 16% for the three-month periods ended March
31, 1999 and 1998, respectively. There were no software costs capitalized during
the periods ended March 31, 1999 and 1998. For the year ending December 31,
1999, the Company anticipates a similar level of investment in product
development as compared to the year ended December 31, 1998.
General and administrative expenses increased 22% from $1.5 million to $1.8
million for the three-month period ended March 31, 1999, compared to the same
period in 1998. This increase was attributable to an increase in professional
service expenses. General and administrative expenses as a percentage of
revenue were 10% and 8% for the three-month periods ended March 31, 1999 and
1998, respectively.
The tax provision represents amounts provided for foreign income and foreign
withholding taxes, for the three-month periods ended March 31, 1999 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $10.2 million at December 31, 1998 to $13.1
million at March 31, 1999. At March 31, 1999, cash and cash equivalents combined
with short-term marketable securities were $30.9 million, compared with $22.3
million at December 31, 1998. Cash and cash equivalents increased $6.5 million
resulting in a cash balance of $21.6 million at March 31, 1999. This increase
was due primarily to $5.9 million in cash received from the Microsoft
Corporation, a $5.1 million decrease in accounts receivable, $1.7 million in
proceeds from stock plan purchases and stock options, net income of $0.5 million
and other various operating, financing and investing activities. This was offset
in part by a $3.7 million decrease in deferred maintenance and support revenues,
$2.1 million in net purchases of marketable securities, and a $0.9 million
decrease in accounts payable and accrued compensation expenses.
On September 4, 1997, the Company entered into a $15.0 million line of credit
agreement (the "Credit Agreement") with Foothill Capital Corporation
("Foothill"). In general, the Company's obligations under the Credit Agreement
bear interest at the variable base rate per annum of Norwest Bank Minnesota,
National Association. The Credit Agreement has a three-year initial term.
Foothill was granted warrants to purchase 75,000 and 50,000 and will be granted
warrants to purchase 25,000 shares of the Company's common stock at the then
current fair market value on September 4, 1997, 1998 and 1999, respectively. On
January 13, 1999, Foothill exercised its warrants to purchase 75,000 shares of
the Company's common stock pursuant to a "cashless" exercise resulting in the
issuance of 58,603 shares
- 11 -
<PAGE>
to Foothill. There were no amounts outstanding under the line of credit
agreement during the period ended March 31, 1999.
On January 11, 1999, the Company announced a strategic alliance with Microsoft.
As part of the agreement, Microsoft has committed to contributing $10.0 million
to the Company over a three-year period to fund the training of at least 500
professionals, marketing and development costs as well as the purchase of a
warrant to purchase 1.75 million shares of common stock. The first of three
payments to be made by Microsoft to the Company was received in January 1999 in
the amount of $5.9 million. The remaining two payments totaling $4.1 million are
scheduled to be received on or before December 31, 1999 and 2000.
The Company believes that existing cash and marketable securities, combined with
cash expected to be generated from operations and an available line of credit,
will be sufficient to fund the Company's operations through at least the next
twelve months.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain of the information contained in this Form 10-Q, including information
with respect to the Company's plans and strategy for its business, statements
relating to the sufficiency of cash and cash equivalent balances, anticipated
expenditures and the intended effects of the Company's sales and marketing, and
product development efforts, constitutes forward-looking statements. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "expects," "anticipates," "plans," and similar expressions are
intended to identify forward-looking statements. Important factors that could
cause actual results to differ materially from the forward-looking statements
include the following factors:
In 1998 and the first quarter of 1999, a majority of the Company's network sales
were to existing customers for upgrade, expansion of their networks, or
consulting delivery. The Company's results will depend on its ability both to
continue to sell products for use in networks of existing customers and to
attract new customers for the Company's products and services. There can be no
assurance that the Company will be successful in its sales and marketing
efforts. In addition, in 1998 and the first quarter of 1999, the Company
experienced extended selling cycles due to competitive products introduced by
other vendors, an increase in multi-year customer agreements and longer
evaluation of operating systems and hardware platforms by potential customers.
The Company expects that extended selling cycles will continue to affect the
Company's operating results for the foreseeable future.
The Company is evolving its strategic focus, seeking to decrease its reliance on
its traditional networking software products while devoting additional resources
to its network services and internet business initiatives. As part of this
strategy, on January 11, 1999, the Company announced a strategic alliance with
Microsoft to deliver integrated messaging, networking and Internet solutions and
the collaboration on the design and implementation of packaged services,
solutions and support offerings based on Microsoft's enterprise platform. The
agreement contains various obligations and milestones that must be met by the
Company, including the certification of 500 Microsoft-trained professionals. The
failure of the Company to meet such obligations and milestones could result in a
termination of the agreement, which could have a material adverse effect on the
Company. In addition, the Company's future success will depend in part upon its
ability to continue to grow its network services business, acquire additional
network services customers and adapt to changing technologies and customer
requirements. Any failure to do so could have a material adverse effect on the
Company. There can be no assurance the Company will be successful in its new
strategic focus.
- 12 -
<PAGE>
The Company's results are partially dependent on its ability to enhance existing
products and introduce new products on a timely basis, and to achieve market
acceptance for such enhanced new products. The Company has invested significant
resources to develop products and services to bring the Company's directory and
messaging capabilities to Internet users. The Internet market space
is increasingly competitive and rapidly changing. Any delay in developing
additional or enhanced products and services for the Internet or failure of its
Internet products and services to achieve increase market acceptance could have
a material adverse effect on the Company's future results of operations. In
1999, the Company entered into agreements with Oblix, Incorporated ("Oblix"),
and Check Point Software Technologies Limited ("Check Point") to resell Oblix
and Check Point products. On May 2, 1999, the Company introduced Worktop/TM/, a
browser-based productivity tool that helps organizations maximize the value of
their intranets by providing employees with a highly personalized start page to
organize and monitor key Web-accessible information. Failure of these products
and the Company's other recently released products to achieve market acceptance
could have a material adverse effect on the Company's future results of
operations.
In 1996, the Company, through a majority-owned subsidiary, introduced
Switchboard, a directory service for internet users. A substantial percentage of
the traffic on the Switchboard Internet Web site in 1998 was attributable to the
Company's marketing arrangements with AOL, a minority owner of Switchboard
Incorporated. Accordingly, a substantial percentage of Switchboard Internet
advertising revenues in 1998 were generally dependent on the marketing
arrangements with AOL. In August 1998, the Company announced that the White
Pages contract between Switchboard and AOL would not be renewed at the end of
November 1998. On December 10, 1998, the Company announced that the Yellow Pages
contract between Switchboard and AOL would not be renewed at the end of 1998.
The Company estimates that AOL's customers accounted for approximately 45
percent of its overall traffic and 30 percent of its total advertising revenues
in 1998. There can be no assurance that termination of these arrangements with
AOL will not have any further material adverse effect on the Company.
In February 1999, Switchboard launched its "local merchant strategy" to
substantially increase its business with local merchants through display
advertising, Web site hosting and other on-line services. This launch included
strategic partnerships with Discover Financial Services, Comcast Online
Communications, Quest Communications International Inc., Cox Interactive Media
and Advance Internet Inc. In March 1999, Switchboard entered into an agreement
with the At Hand Network Yellow Pages which calls for Switchboard to fulfill the
yellow page searches conducted primarily in the Northeast region of the United
States on the At Hand Network Yellow Pages and provide e-mail address searches
for the entire At Hand Network. The success of the Company will depend in part
on the success of this and the Company's other strategic alliances and the
Company's ability to enter into new strategic alliances with other Internet
providers.
In the three months ended March 31, 1999, international revenues accounted for
30% of the Company's total revenues. The Company's results of operations in
1998 and the first three months of 1999 were adversely affected by the global
economic uncertainty, and in particular, the financial market instability in
Asia. There can be no assurance such uncertainty will not continue to adversely
affect the Company's operating results. On January 1, 1999, the participating
member countries of the European Union adopted the Euro as the common legal
currency and fixed conversion rates between their existing sovereign currencies
and the Euro. The Company believes the Euro conversion will not have a material
impact on its operations.
Because of the foregoing factors and the factors incorporated herein by
reference, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and it expects that its results
of operations may fluctuate from period-to-period in the future.
- 13 -
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The following statement shall be considered a Year 2000 readiness disclosure to
the maximum extent allowed under the year 2000 Information and Readiness
Disclosure Act. This Year 2000 readiness disclosure does not constitute a
warranty of any kind, or extend the terms of any existing warranty.
In the past, many information technology products were designed with two digit
year codes that did not recognize century and millenium fields. As a result,
these hardware and software products may not function or may give incorrect
results beginning in the year 2000. In order to address this issue, such
hardware and software products may need to be upgraded or replaced in order to
correctly process dates beginning in the year 2000.
The Company has created a Company-wide year 2000 team to identify and address
year 2000 issues. The Company's year 2000 compliance program has identified
three potential areas of impact for review: (i) the software, information and
non-information systems used in the Company's internal business systems; (ii)
the Company's software offered to customers; and (iii) third-party vendors,
manufacturers and suppliers of products used in the Company's internal systems
or distributed with the Company's products. The Company has identified and is
testing its main internal systems and expects to complete testing by mid-1999.
Currently, the testing is approximately 80% complete. During 1999, the Company
expects to complete implementation of any needed year 2000-related modifications
to its critical information systems.
The Company is also in the process of communicating with its main suppliers of
technology products and services used in its internal systems regarding the year
2000 status of such products or services. Based upon these communications, the
Company is considering the suppliers' year 2000 preparedness in the Company's
decision to continue to deploy or migrate from these technology products or
services. In addition, the Company is currently assessing its internal non-
information technology systems, and expects to complete testing and any needed
modifications to these systems in mid-1999. To date, the Company has not
developed a comprehensive contingency plan to address situations that may result
if the Company is unable to achieve year 2000 readiness of its critical
operations. The Company expects in mid-1999 to finalize its assessment of and,
if deemed appropriate, contingency planning for potential operational or
performance problems related to year 2000-related issues with its information
systems.
The Company's total cost relating to these activities has not been and is not
expected to be material to the Company's financial position, results of
operations, or cash flows. The Company's current assessment is that the cost of
completing the Company's year 2000 compliance program will be approximately
$250,000, which does not include amounts related to the diversion of internal
resources including, without limitation, employee salaries, which amount the
Company is not separately tracking. The Company has and expects to continue to
fund its year 2000 compliance program from operating cash flows and does not
expect to separately account for these costs. There can be no assurance that
there will not be a delay in, or increased costs associated with, the
implementation of any necessary modifications, or that the Company's suppliers
will adequately prepare for the year 2000 issue. It is possible that any such
delays, increased costs, or supplier failures could have a material adverse
impact on the Company's operations and financial results, by, for example,
impacting the Company's ability to deliver products or services to its
customers.
The Company's year 2000 effort has included testing products currently or
recently on the Company's price list for year 2000 issues. Products have been
and are expected to continue to be tested internally. Generally, for products
that were identified as needing updates to address year
- 14 -
<PAGE>
2000 issues, the Company has prepared or is preparing updates, or has
discontinued or will discontinue the product. Currently, this testing is
approximately 99% complete. Some of the Company's customers are using product
versions that the Company will not support for year 2000 issues. The Company has
completed a process of notification to its customers of these year 2000 issues
and has encouraged these customers to migrate to current product versions that
are year 2000 ready. There can be no assurance the Company will be successful in
migrating these customers to the year 2000-compliant products of the Company.
For third-party products that the Company distributes with its products, the
Company has sought information from the product manufacturers regarding the
products' year 2000 readiness status. Customers who use the third-party products
are directed to the product manufacturer for year 2000 status information. On
its year 2000 Web site at www.banyan.com, the Company provides information
regarding which of its products have been tested to be year 2000 ready and other
general information related to the Company's year 2000 efforts. The Company's
total costs relating to these activities has not been and is not expected to be
material to the Company's financial position or results of operations.
The Company believes its current products, with any applicable updates, are year
2000 ready when used in a system and with other components that are year 2000
compliant. However, there can be no guarantee that one or more of the Company's
products do not contain year 2000 date issues. The most reasonably likely worst
case scenarios would include (i) corruption of data contained in the Company's
information systems, (ii) hardware failure and (iii) the failure of
infrastructure services provided by third parties (e.g. electricity, phone
service, etc.)
Because the Company is in the business of selling software products, the
Company's risk of being subjected to lawsuits relating to year 2000 issues with
its software products is likely to be greater than that of companies in other
industries. Because computer systems may involve different hardware, firmware
and software components from different manufacturers, it may be difficult to
determine which component in a computer system may cause a year 2000 issue. As a
result, the Company may be subjected to year 2000-related lawsuits independent
of whether its products and services are year 2000 ready. The outcome of any
such lawsuit and the impact on the Company cannot be predicted. Any year 2000
problems in the Company's products could also result in delay or loss of
revenue, diversion of development resources, damage to the Company's reputation
or increased service or warranty costs, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The foregoing discussion of the Company's Year 2000 readiness contains forward-
looking statements, including estimates of the timeframes and costs for
addressing the known year 2000 issues confronting the Company, and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved, and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the availability of personnel with required remediation skills, the ability
of the Company to identify and correct all relevant computer code and the
success of third parties with whom the Company does business in addressing their
Year 2000 issues.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Not applicable.
- 15 -
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Microsoft Warrant Issuance
On January 8, 1999, in connection with the Alliance Agreement dated January 8,
1999 between Microsoft and the Company (the "Alliance Agreement"), the Company
issued to Microsoft a warrant (the "Microsoft Warrant") to purchase 1,750,000
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"). The Microsoft Warrant is exercisable, in whole or in part, at any time
through January 8, 2006 by the cash payment of a $10.00 per share exercise
price. At any time after January 8, 2002, the Microsoft Warrant may be
exercised by means of a "cashless" exercise provision.
The exercise price and number of shares purchasable under the Microsoft Warrant
are subject to adjustment (i) in the event of a capital reorganization of the
Company's capital stock, a merger of the Company into another entity, a sale of
substantially all of the Company's assets or other similar events, (ii) certain
stock splits, reverse stock splits and stock dividend by the Company and (iii)
certain stock issuances by the Company for a per share consideration less than
the exercise price of the Microsoft Warrant. In addition, in general, if the
Company makes any special dividend or other distribution in the form of cash or
property with respect to the Common Stock other than in the ordinary course of
business, the holder of the Microsoft Warrant will receive upon exercise of the
Microsoft Warrant, a portion of such cash or property (and of any further
distributions on such cash or property) as if it had held the shares of Common
Stock issued upon such exercise as of the record date for such special dividend
or other distribution. Also, in general, in the event of a spin-off
distribution by the Company of the capital stock of a subsidiary, the holder of
the Microsoft Warrant shall receive an additional warrant to purchase the number
of securities subject to the spin-off distribution which the holder would have
received had the holder exercised the Microsoft Warrant in full immediately
prior to the record date for the spin-off distribution, and the exercise price
of the Microsoft Warrant shall be adjusted accordingly.
The Company and Microsoft agreed that $4,160,214 of the funding provided by
Microsoft to the Company on January 8, 1999 under the Alliance Agreement be
allocated as the purchase price for the Microsoft Warrant. As the issuance of
the Microsoft Warrant did not involve any public offering, it was exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) thereof. No underwriters were utilized in
connection with the issuance of the Microsoft Warrant, and no underwriting
discounts or commissions were paid or incurred thereby.
Foothill Warrant Exercise
On January 13, 1999, the Company issued to Foothill 58,603 shares of Common
Stock (the "Foothill Stock") at a per share price of $2.28125, upon Foothill's
exercise of a warrant of purchase 75,000 shares of Common Stock. The aggregate
purchase price of $133,688.09 for the Foothill Stock was paid by Foothill by
means of the cancellation of the remaining 16,397 shares of Common Stock subject
to the warrant, pursuant to the "cashless" exercise provision of the warrant.
As the issuance of the Foothill Stock did not involve any public offering, it
was exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. No underwriters were utilized in connection with the issuance of the
Foothill Stock, and no underwriting discounts or commissions were paid or
incurred thereby.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The exhibits listed in the Exhibit Index filed as part of this report are
filed as part of or are included in this report.
- 16 -
<PAGE>
(b) The Company filed no reports on Form 8-K during the fiscal quarter
for which this report is filed.
- 17 -
<PAGE>
BANYAN SYSTEMS INCORPORATED
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANYAN SYSTEMS INCORPORATED
Date: May 17, 1999 By: /s/ Richard M. Spaulding
------------------------
Richard M. Spaulding
Vice President and Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer and Principal
Accounting Officer)
- 18 -
<PAGE>
EXHIBIT INDEX
Exhibit Number Title Of Document
- -------------- -----------------
10.1* Alliance Agreement dated January 8, 1999 between the Company and
Microsoft Corporation.
10.2 Warrant Purchase Agreement January 8, 1999 between the Company and
Microsoft.
10.3 Common Stock Purchase Warrant issued by the Company to Microsoft on
January 8, 1999.
10.4 Employment Letter dated as of January 15, 1999 between the Company and
Scott G. Silk.
10.5 Non-Qualified Stock Option Agreement dated February 4, 1997 granted by
the Company to William P. Ferry.
10.6 Non-Qualified Stock Option Agreement dated March 20, 1997 granted by
the Company to Robert D. Burke.
10.7 Non-Qualified Stock Option Agreement dated June 11, 1997 granted by the
Company to Anthony J. Bellantuoni.
27 Financial Data Schedule.
- ----------
* Confidential treatment has been requested as to certain portions, which
portions have been omitted and filed separately with the Commission.
- 19 -
<PAGE>
EXHIBIT 10.1
------------
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
ALLIANCE AGREEMENT
------------------
This Alliance Agreement (the "Agreement") is entered into as of January 8,
1999 (the "Effective Date"), by and between Microsoft Corporation, a Washington
corporation, located at One Microsoft Way, Redmond, Washington 98052
("Microsoft") and Banyan Systems Incorporated, a Massachusetts corporation
("Banyan"), located at 120 Flanders Road, Westboro, Massachusetts 01581
(individually, a "Party," and collectively, the "Parties").
RECITALS
WHEREAS, Banyan desires to develop and promote Microsoft Enterprise
Solutions Platform-based Enterprise Services targeting the following specific
market opportunities: Network/Directory Services WAN Internetworking;
Internet/Intranet Infrastructure and Applications; Banyan VINES/StreetTalk to NT
Server Integration and Migration; Integrated Messaging Infrastructure; Banyan
BeyondMail to Exchange Integration and Migration; and
WHEREAS, Microsoft desires to establish a relationship with a global
services and technology company to provide Clients in the Enterprise Market with
Microsoft Enterprise Solutions Platform-based Enterprise Services targeting the
following specific market opportunities: Network/Directory Services WAN
Internetworking; Internet/Intranet Infrastructure and Applications; Banyan
VINES/StreetTalk to NT Server Integration and Migration; Integrated Messaging
Infrastructure; Banyan BeyondMail to Exchange Integration and Migration; and
WHEREAS, In furtherance of their relationship, Microsoft will provide funds
to Banyan for joint marketing, certification and training of Banyan's consulting
personnel in Microsoft technology and other purposes, and Banyan will undertake
certain obligations and to make royalty payments to Microsoft, in each case, on
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises as stated herein
and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows:
AGREEMENTS
1. DEFINITIONS In addition to those terms defined in the other sections of
-----------
this Agreement, capitalized terms shall have the following meanings:
1.1 "BANYAN BEYONDMAIL TO MICROSOFT EXCHANGE INTEGRATION AND MIGRATION
MARKET" is defined as the business opportunity that is represented by
providing interoperability and migration tools and Enterprise Services
to Clients in the Banyan installed base that currently use Banyan's
BeyondMail and Intelligent Messaging client and server products. This
customer group forms a market that, in aggregate, is potentially
interested in both improving the level of interoperability between
Banyan products and Microsoft Outlook and the combination of Windows
NT Server (and, as available, Windows 2000 Server) and Exchange
server, as well as moving users to the Microsoft Outlook/Exchange
platform.
1.2 "Banyan's Customer Solution Center(s)" is defined as the collection of
physical locations that Banyan designates to present and demonstrate
Microsoft technologies and interoperability and migration capabilities
to Clients.
1.3 "Banyan Microsoft Practice" is defined as the part of Banyan's
professional and support services organizations that provide Microsoft
Enterprise Solutions Platform-centric Enterprise Services to Clients.
The Banyan Microsoft Practice will be staffed by consulting and
management personnel in the field as well as staff at the corporate
headquarters who are focused on the design, deployment, and management
of Microsoft products at Client sites.
1
<PAGE>
1.4 "Banyan Microsoft Practice Revenue" is defined as the total of all
Enterprise Services revenues generated by Microsoft funded Banyan MCSE
and MCSD certified consultants in the Go-to-Market Focus Areas
recorded by Banyan during each Royalty Period. It is an auditable
figure included as part of Banyan's standard reporting and is computed
in accordance with generally accepted accounting principles
consistently applied.
1.5 "BANYAN SERVICES REVENUE" is defined as Banyan services revenues that
are earned as a result of the billable activity of employees of the
Banyan professional services business and that are broadly supported
by the joint development and marketing activities of the Banyan and
Microsoft alliance.
1.6 "BANYAN VINES/STREETTALK TO MICROSOFT NT SERVER INTEGRATION AND
MIGRATION MARKET" is defined as the business opportunity that is
represented by providing interoperability and migration tools and
Enterprise Services to Clients in the Banyan installed base that
currently use Banyan's VINES and StreetTalk for Windows NT client,
server, and management products. This customer group forms a market
that, in aggregate, is interested in both improving the level of
interoperability between Banyan's VINES and StreetTalk for Windows NT
networking operating system platform and Microsoft Windows NT Server
(and, as available Windows 2000 Server), as well as moving users to
the Microsoft Windows NT Server (and, as available, Windows 2000
Server).
1.7 "BANYAN WEB SITE" is defined as the world wide web site currently
located at http://www.banyan.com and any successor site that is
---------------------
Banyan's primary corporate site.
1.8 "CLIENTS" is defined as existing and prospective customers of Banyan
and/or Microsoft.
1.9 "ENTERPRISE CLASS" is defined as attributes heretofore associated with
mainframe, business critical computing, including scalability,
availability, system and network management, security, very large
database support, transaction processing support, interoperability,
and 7 x 24 support services.
1.10 "ENTERPRISE MARKET" is defined to include organizations with greater
than 1,000 personal computers ("PCs").
1.11 "ENTERPRISE SERVICES" is defined as business process redesign, IT
strategy consulting, analysis, architecture/design, planning,
development, infrastructure installation, solutions deployment,
systems integration, operation, support, training and lifecycle
management services.
1.12 "GO-TO-MARKET FOCUS AREAS" is defined as Network/Directory Services
WAN Internetworking Market; Internet/Intranet Infrastructure and
Applications Market; Banyan Vines/StreetTalk to NT Server Integration
and Migration Market; Integrated Messaging Infrastructure Market;
Banyan BeyondMail to Exchange Integration and Migration Market.
1.13 "INTEGRATED MESSAGING INFRASTRUCTURE MARKET" is defined as the subset
of the information technology product and services market for
electronic mail, fax, voice mail, groupware, and other communication
infrastructure and applications.
1.14 "INTERNET/INTRANET INFRASTRUCTURE AND APPLICATIONS MARKET" is defined
as the subset of the information technology product and services
market for Web (Internet, Intranet and Extranet) infrastructure as
well as n-tier Web applications using server, browser, and various
middleware technologies that support highly scalable, data-driven Web
sites.
1.15 "JOINT BOARD" is defined as the group of an equal number of designated
Banyan executives and Microsoft executives and other appropriate
personnel responsible for the strategic direction of the Relationship,
evaluation of mutually agreed metrics and escalation of issues and
opportunities.
2
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
1.16 "MCSD" is defined as a Microsoft Certified Solution Developer.
1.17 "MCSE" is defined as a Microsoft Certified Systems Engineer.
1.18 "MICROSOFT ENTERPRISE SOLUTIONS PLATFORM" is defined as Microsoft NT
Server, Exchange Server, SQL Server, SMS Server and Internet
Information Server (as separate products and collectively as Microsoft
BackOffice); complementary BackOffice products; Microsoft SNA Server
and Microsoft Proxy Server; Microsoft Site Server, Microsoft
Commercial Internet Services (MCIS); 32-bit Windows and Microsoft
Office; Windows CE; Internet Explorer; Microsoft Transaction Server;
Microsoft Message Queue Server; Microsoft Wolfpack clustering
technology; Microsoft's visual development tools Visual Basic, Visual
C++, Visual J++ and Visual Interdev (as separate products and
collectively as Microsoft Visual Studio); Windows Distributed interNet
Applications (DNA) and Component Object Model (COM, DCOM and COM+)
architectures; and, as mutually agreed, successor products and
technology focused on the development, deployment and management of
business solutions in the Enterprise Market.
1.19 "MICROSOFT WEB SITE" means the world wide web site currently located
at http://www.microsoft.com and any successor site that is Microsoft's
------------------------
primary corporate site.
1.20 "NETWORK/DIRECTORY SERVICES WAN INTERNETWORKING MARKET" is defined as
the subset of the information technology product and services market
for LAN, WAN, internetworking, routing, directory, remote access,
virtual private network (VPN), communications, network management and
network security infrastructure.
1.21 "NORMAL BUSINESS HOURS" is defined as 8 a.m. to 5 p.m. local time,
Monday through Friday, excepting national holidays.
1.22 "RELATIONSHIP" means the arrangement between Banyan and Microsoft
contemplated by this Agreement.
1.23 "ROYALTY PERIODS" are defined as successive periods [**], the first
of which commences on [**].
1.24 "Royalty Rate" is defined as [**] percent. The Royalty Rate will be
applied to the Banyan Microsoft Practice Revenue (the "Projected
Revenue Base", as set forth in Exhibit A) during each Royalty Period.
However, if the cumulative realized Revenue Base is less than [**] of
the cumulative projected Revenue Base for the Royalty Period ending
[**] in Exhibit A (collectively, the "Measurement Threshold"), the
Royalty Rate thereafter will be applied to Banyan's Services Revenues
(which includes the Banyan Microsoft Practice Revenue). The
Measurement Threshold shall be subject to the following adjustments:
(a) If Banyan utilizes greater than [**] of the maximum Royalty
Reduction as defined in Section 7.3(b) by [**], the Measurement
Threshold will increase to [**];
(b) If Banyan utilizes greater than [**] of the maximum Royalty
Reduction as defined in Section 7.3(b) by [**], the Measurement
Threshold will increase to [**];
(c) The Measurement Threshold will be evaluated semi-annually for all
Royalty Periods subsequent to [**].
1.25 "ROYALTY REDUCTION" is defined in Section 7.3.
1.26 "ROYALTY TERM" is defined as the period of time commencing on [**]
and ending on the date on which Banyan has paid Microsoft aggregate
royalties equal to the Total Royalty Payment.
3
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
1.27 "Target Clients" is defined as the mutually agreed list of 50 to 100
clients that have a minimum of 1,000 Banyan VINES/StreetTalk and/or
BeyondMail seats, and be managed by both the Banyan sales force and
the Microsoft Enterprise Customer Unit team. The list will be
reviewed semi-annually and can be updated on as as-needed basis, and
will include (a) Headquarter location, (b) the number of Banyan
VINES/StreetTalk and/or BeyondMail seats installed.
1.28 "TERM" means the three-year period of time commencing on the
Effective Date and ending three years thereafter.
1.29 "TOTAL ROYALTY PAYMENT" is defined as the sum of [**], subject to the
Royalty Reduction pursuant to Section 7.3.
2. Joint Banyan and Microsoft Obligations
--------------------------------------
2.1 GO-TO-MARKET COOPERATION. Microsoft and Banyan will cooperate in
collective activities in connection with marketing, public relations,
sales/services engagement and client engagement ("Go to Market") in
the delivery of Microsoft Enterprise Solution Platform products and
related Enterprise Services offerings to the Enterprise Market in the
Go-to-Market Focus Areas.
2.2 ALLIANCE PLAN. Within the ninety (90) day period immediately
following the Effective Date, the Parties will mutually develop and
document an alliance plan detailing the Target Clients and specific
initiatives supporting each of the Go-to-Market Focus Areas, including
a spending plan for the Marketing Fund and any additional funds (the
"Alliance Plan"). The Alliance Plan will also include, without
limitation, geographic priorities, objectives, metrics,
roles/responsibilities, resource and infrastructure requirements,
critical success factors and risks. All marketing expenditures shall
be made substantially in accordance with the Alliance Plan. Banyan
and Microsoft will each identify and assign at least one individual
responsible for leading the development of the Alliance Plan. Such
individuals shall also be responsible for implementation of the
Alliance Plan throughout the Term. No later than the twelfth month of
each of year one and year two of the Term, the Joint Board will engage
in a formal evaluation of the Go-to-Market Focus Areas, the Marketing
Fund and the Alliance Plan. Following this annual evaluation, and
upon mutual agreement of the Parties, funding may be increased beyond
the minimum allocation identified above.
2.3 MARKETING. Banyan and Microsoft will work together in external
marketing efforts that may include, but not necessarily be limited to,
press releases, advertising, use of logos, white papers, customer
references, case studies, demand generation seminars, industry
conferences and thought leadership initiatives.
2.4 MARKETING FUND. Banyan will establish a marketing fund to support
alliance objectives including both marketing and Client-oriented sales
engagement initiatives (the "Marketing Fund"). The Parties agree that
a minimum of [**] will be allocated and spent by Banyan during the
Term.
2.5 MARKETING PLAN. Within the ninety (90) day period immediately
following the Effective Date, the Parties will mutually develop and
document a joint marketing plan, including how the Marketing Fund and
any additional funds will be spent (the "Marketing Plan"). All such
expenditures shall be made substantially in accordance with the
Marketing Plan. Banyan and Microsoft will each identify and assign at
least one individual responsible for leading the development of the
Marketing Plan. Such individuals shall also be responsible for
implementation of the Marketing Plan throughout the Term. No later
than the twelfth month of each of year one and year two of the Term,
the Parties will engage in a formal evaluation of the Go-to-Market
Focus Areas, the Marketing Fund and the Marketing Plan. Following this
annual evaluation, and upon mutual agreement of the Parties, funding
may be increased beyond the minimum allocation identified above.
4
<PAGE>
2.6 Press Releases. Banyan and Microsoft will publicize the Relationship
throughout the Term. The Parties shall prepare press releases and
other public announcements, which identify specific Enterprise
Services, Go to Market cooperation and include reciprocal endorsement.
Neither Party will make or release the initial and subsequent press
releases or any other public announcement without the prior written
approval of the other Party as to the content, form and timing of such
press release or announcements, which approval shall not be
unreasonably withheld. The Parties shall develop a description of the
Relationship that may be used without further approval of the other in
any press release of either Party that references the Relationship and
the Go-To-Market Focus Areas.
2.7 SENIOR MANAGEMENT PARTICIPATION. A senior management executive from
each of the Parties will participate in and endorse the joint
announcement of the Relationship by issuing a statement within 30 days
immediately following the Effective Date, as well as in other selected
and mutually agreed events from time to time.
2.8 PUBLIC RELATIONS OPPORTUNITIES. The Parties will exercise
commercially reasonable efforts to take advantage of public relations
opportunities that are expected to occur throughout the Term that
increase the likelihood of Banyan services and Microsoft products
being purchased by Clients in the Enterprise Market. Examples of
these types of opportunities include, without limitation, those that
(a) confirm the quality of Banyan Enterprise Services focused on the
Microsoft Enterprise Solutions Platform, (b) endorse the momentum
behind the Microsoft Enterprise Solutions Platform, (c) support the
implementation of line-of-business solutions on the Microsoft
Enterprise Solutions Platform, (d) accompany the release of Microsoft
product updates including Windows 2000 Server, Microsoft Exchange and
Microsoft Site Server and (e) accompany the release of new Banyan
Enterprise Services offerings. On mutual written agreement, the
Parties will participate together in industry events relevant to the
Relationship.
2.9 WEBSITE CONTENT. During the Term, the Parties agree to publish
marketing content, as each Party deems appropriate, regarding the
Relationship on each Party's external (Internet) and internal
(Intranet) web sites, subject to the approval process set forth in
Section 2.6.
2.10 MICROSOFT AND BANYAN LINK LOGOS. Banyan shall have the right to use
the Microsoft link logo found at http://www.microsoft.com/misc/mslogo
or any successor thereof, on the Banyan Web Site, subject to the
Microsoft guidelines for use of such logo ("Microsoft Logo
Guidelines") as may be promulgated by Microsoft from time to time, the
current version of which is attached hereto as Exhibit B and
incorporated herein by this reference. Microsoft shall have the right
to use the Banyan link logo found at http://www.banyan.com or any
successor thereof on the Microsoft Web Site subject to any applicable
Banyan guidelines for use of such logo ("Banyan Logo Guidelines")
provided by Banyan from time to time.
2.11 LINK TO WEB SITES. Microsoft agrees to provide a link from the
Microsoft Web Site to the Banyan Web Site using the Banyan logo
subject to the terms of the Banyan Logo Guidelines. Banyan agrees to
provide a link from the Banyan Web Site to the Microsoft Web Site
using the Microsoft logo subject to the terms of the Microsoft Logo
Guidelines.
2.12 SALES ENGAGEMENT. During the Term, the Parties will cooperatively
engage each other's consulting/field sales organizations in an effort
to educate sales, consulting and marketing management in support of
the Relationship. Activities will include, without limitation,
creating virtual sales and services teams to pursue specific Client
opportunities, exchanging organizational charts and key contact lists,
sponsoring joint seminars and briefings, proactively managing a
cooperative sales funnel of high priority product and services
opportunities, and development of field engagement recommendations and
processes.
2.13 ESCALATION PROCESS. Within the ninety (90) day period immediately
following the Effective Date, the parties will establish an escalation
process to facilitate resolution of critical Client situations in a
timely manner.
5
<PAGE>
2.14 Banyan Consultation Process. Within the ninety (90) day period
immediately following the Effective Date, the Parties will have
documented an agreed consultation process that will afford Microsoft a
comprehensive, early opportunity to provide input to Banyan personnel
on the benefits of the Microsoft Enterprise Solutions Platform.
2.15 MICROSOFT CONSULTATION PROCESS. Within the ninety (90) day period
immediately following the Effective Date, the Parties will have
documented an agreed consultation process that will afford Banyan a
comprehensive, early opportunity to provide input to Microsoft
personnel on the benefits of Banyan's product and Enterprise Services
offerings.
2.16 PARTICIPATION IN INTERNALLY SPONSORED EVENTS. The Parties will
participate in each other's internally sponsored global and industry-
specific events relevant to the Relationship, subject to terms and
conditions mutually agreed upon in writing. Microsoft will make
opportunities available to Banyan at Microsoft's annual Global Sales
Summit ("MGS") and other appropriate Microsoft events to participate,
sponsor, and present Banyan's services and solutions as they relate to
the Relationship. Banyan will make opportunities available to
Microsoft at Banyan's annual sales meeting and other appropriate
Banyan events to participate, sponsor, and present Microsoft's
products and solution initiatives as they relate to the Relationship.
2.17 SERVICE GUIDES. As appropriate and on mutually agreed terms, Banyan
and Microsoft will work cooperatively to develop Microsoft service
guides and technology consulting blueprints.
2.18 POSITIONING. The Parties will agree upon positioning regarding the
suitability of the Microsoft Enterprise Solutions Platform
(collectively or as separate products) to address the requirements of
the Enterprise Class environment. Suitability considerations may
include, but are not limited to, throughput, availability,
scalability, interoperability, reliability and manageability. The
initial positioning will be developed within the ninety (90) day
period immediately following the Effective Date and will be revised as
appropriate every six months throughout the Term. Participants in
such development efforts will include Microsoft product group and
Microsoft Consulting Services ("MCS") personnel along with
representatives from Banyan. The positioning will be documented in a
manner suitable for presentation and distribution to the Parties'
product groups, sales and consulting personnel, clients, and, as
appropriate, press and analysts.
2.19 OTHER INITIATIVES. The Parties will develop and implement integrated
solution initiatives relevant to the Go-to-Market Focus Areas.
Specifically, the Parties are expected to collaborate on Microsoft's
Windows Distributed interNetwork Architecture ("DNA"), Microsoft's
Digital Nervous System initiatives, messaging
interoperability/migration, enterprise network and directory services
interoperability/migration, and the use of DNA products and
technologies to design and build dynamic, scalable, data-driven Web
applications.
2.20 CENTER VISITATION. The Parties shall encourage any Client that is
visiting either Banyan's Customer Solution Center(s) or Microsoft's
Executive Briefing Center to visit both centers, subject to execution
of appropriate non-disclosure agreements and mutual agreement by the
Parties.
2.21 COOPERATIVE USE OF FACILITIES. Each Party shall make its facilities
(Microsoft's Executive Briefing Center and Banyan's Customer Solution
Center(s)) available to the other Party's personnel according to an
agreed upon predetermined process, to use for, among other purposes,
mock-ups, staging, prototyping, demonstrations and related activities.
Access to such personnel shall be allowed during Normal Business
Hours. Either Party's personnel's use of such facilities shall be
subject to availability and prior written notice by the requesting
Party and approval by the other Party. Each Party shall make all
mutually agreed-upon equipment and utilities available to the other
Party's personnel, so long as such use does not conflict with ongoing
projects.
6
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
2.22 Metrics. The Parties have developed and documented a set of mutually
defined objectives and metrics to be used to evaluate the success of
the Relationship ("Metrics"). Metrics include, but are not limited
to, the number of Banyan MCSE and MCSD certified consultants, Banyan
Microsoft Practice Revenue, the number of Microsoft Windows NT Server
(and, as available, Windows 2000 Server) and Microsoft Exchange Seats
migrated in Target Clients, the number and results of Client-focused
demand generation events, the number and market acceptance of Banyan's
packaged or replicable Enterprise Services offerings focused on the
Microsoft Enterprise Solutions Platform and, as an acknowledged
priority for Parties, the number of Client references and case
studies.
2.23 JOINT BOARD. The Joint Board will meet at least once per year during
the Term to evaluate the implementation of the Alliance Plan and
discuss appropriate methods to increase the overall value and
performance of the Relationship, [**] the Go-to-Market Focus Areas.
2.24 PROCESS TO REVIEW POTENTIAL BARRIERS. In the event that Banyan
personnel providing Enterprise Services in connection with the Go-to-
Market Focus Areas determine that commercial or technical issues would
appear to prevent a solution development or deployment on the
Microsoft Enterprise Solutions Platform, Banyan will provide Microsoft
with an opportunity to involve, as appropriate, its MCS personnel and
relevant Microsoft product groups for consultation with Banyan
personnel to evaluate the potential barriers and how they may be
resolved. Banyan will exercise commercially reasonable efforts to
consider and implement Microsoft's written response. Microsoft agrees
to coordinate its consultation process with Banyan personnel so as not
to interfere with or delay the Customer's project schedules. Banyan
shall maintain the single point of contact with the Customer and shall
have sole and final responsibility for determining and advising the
Customer on the appropriateness of the Microsoft Enterprise Solutions
Platform in conjunction with an Enterprise Services engagement.
2.25 REFERENCES. Within the ninety (90) day period immediately following
the Effective Date, the Parties will define a process of collaborative
work on securing external and internal Client references to promote
joint solutions wins in the Go-to-Market Focus Areas. The Parties
will agree upon goals for the number and timeframes of references for
each Go-to-Market Focus Area. Banyan shall exercise commercially
reasonable efforts to complete the reference identification process
for each Target Client to ensure that a maximum number of references
are secured.
3. MICROSOFT OBLIGATIONS
---------------------
3.1 ENDORSEMENT. Microsoft agrees to publicly and internally endorse
Banyan as a Microsoft alliance partner with a cooperative and
worldwide focus on the Go-to-Market Focus Areas.
3.2 TRAINING AND CERTIFICATION FUNDING. Microsoft will provide funding to
Banyan to partially offset the costs associated with training,
certification and the development of competency with respect to the
Microsoft Enterprise Solutions Platform among Banyan's consulting
personnel as set forth in Section 6.1.
3.3 TRAINING SUPPORT. Microsoft will exercise commercially reasonable
efforts to notify Banyan personnel of key Microsoft-sponsored
technical training events such as TechEd, Fusion, Microsoft Technical
Briefings, and the Professional Developer's Conference and other
Microsoft sponsored technical training events. In addition, Microsoft
will exercise commercially reasonable efforts to make a reasonable
number of spaces available to Banyan personnel at such training
events. Banyan's access to such training events shall be upon
substantially the same terms and conditions as they are made available
to other participants, unless otherwise agreed to by the Parties in
writing. In addition, Microsoft will exercise commercially reasonable
efforts to identify specialized training opportunities made available
by individual products groups within Microsoft to which other network
integrators and alliance partners are invited, for the purpose of
previewing and providing feedback on upgraded Microsoft products,
services or technology strategies.
7
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Microsoft will work with the appropriate personnel within Microsoft to
try to make such product-group events available to Banyan personnel.
3.4 CONSULTING SERVICES.
(A) MCS PARTNER PROGRAM MANAGER(S). During the Term, Microsoft will
make available to Banyan on a for-fee basis, one full-time
equivalent MCS Partner Program Manager ("PPM") to assist in
activities contemplated by this Agreement, pursuant to the terms
and conditions of the Microsoft Master Services Agreement to be
entered into in accordance with Section 4.8. The current price
for a full-time MCS PPM is approximately [**] per year. Banyan
may, at its sole discretion, elect to engage the services of one
PPM on a full-time basis, or to engage an equivalent level of
services of MCS consulting resources on an appropriate basis to
fulfill specific work orders entered into by Banyan under the
Master Services Agreement.
MCS PPMs perform the following types of services: (i) partner
and customer liaison and advocate; (ii) enterprise planning;
(iii) enterprise assessments; (iv) solution architectures and
design; (v) pilot systems; (vi) migration planning; (vi) legacy
application disposition planning; (vii) disaster recovery
planning; (viii) training programs and related knowledge transfer
activities; (ix) planning and developing support process and
infrastructure; (x) network-planning and design; (xi) project
management/quality assurance; (xii) organizational development;
(xiii) knowledge transfer; (xiv) service readiness; and (xv)
facilitate communication with Microsoft product groups, Premier
support organization and field sales/consulting personnel.
(B) DISCOUNT FOR ADDITIONAL SERVICES. Microsoft will provide Banyan
with a minimum [**] discount off of standard (non Partner) MCS
consulting service rates for any additional MCS resources that
Banyan may purchase pursuant to this Agreement.
3.5 DEMONSTRATION SOFTWARE. Microsoft hereby grants Banyan a non-
exclusive, royalty-free, non-assignable, non-transferable license to
reproduce for internal use only at the Banyan Customer Solution
Center(s) up to the number of copies of each Software Product listed
in Exhibit C, together with a non-exclusive, royalty-free, non-
assignable, non-transferable license to reproduce up to the number of
Upgrades and Successor Products corresponding to the number of copies
of original version of each Software Product identified in Exhibit C,
on the following terms and conditions:
-
(A) UPGRADES/SUCCESSOR PRODUCTS. Original copies of the Software
Products must be removed from computers on which the Upgrades and
Successor Products are installed.
(B) LICENSE RESTRICTIONS. Banyan's use of the Software Products,
Upgrades and Successor Products is subject to the following
restrictions: (a) they shall be used exclusively for internal
use at the Banyan Customer Solution Center(s); (b) each product
is provided for use pursuant to the standard terms of the end
user license agreement ""("EULA") enclosed with the particular
product (except that such licenses may not be transferred or
assigned despite any EULA provisions to the contrary) the terms
and conditions of which are incorporated herein by this
reference; and (c) all license rights granted under this Section
3.6 shall terminate immediately upon the earlier of expiration or
termination of this Agreement; provided, however, that Banyan
shall have the right to continue to use such licenses after
expiration or termination of this Agreement for so long as Banyan
purchases Upgrade Advantage for such licenses at the end of the
Term for a minimum period of two years.
8
<PAGE>
(c) AUDIT RIGHTS. Microsoft shall have the right to review and audit
once each year the use by the Banyan sites of such Software
Products, Upgrades and Successor Products upon reasonable notice.
Microsoft agrees to conduct the review in a manner so as not to
unreasonably interfere with Banyan's normal business operations.
3.6 TECHNOLOGY DISCLOSURE. Microsoft shall, as appropriate and for
products included within the Microsoft Enterprise Solutions Platform
and for other products Microsoft and Banyan mutually agree are
important to the Parties' implementation of this Agreement, on a semi-
annual basis disclose to Banyan future product and technology
directions. As available, Microsoft will provide to Banyan beta
releases for products included within the Microsoft Enterprise
Solutions Platform and for other products Microsoft and Banyan
mutually agree are important to the Parties' implementation of this
Agreement. Banyan acknowledges and agrees that Microsoft's
obligations under this Section 3.6 are subject to Microsoft's sole
determination that disclosure of such information and/or providing
such beta releases is appropriate.
3.7 BUSINESS DEVELOPMENT EXECUTIVE. Microsoft will provide, at no charge
to Banyan, a designated Business Development Executive whose purpose
will be (a) to serve on the Joint Board, (b) to act as a contact and
liaison between the Parties in supporting the Relationship, and (c)
to facilitate joint sales activities and provide assistance on
worldwide marketing initiatives.
3.8 PARTICIPATION IN EAP AND RDP. Microsoft agrees to include Banyan in
appropriate Early Adopter Programs, Rapid Deployment Programs and
similar or successor programs aimed at mapping alliance partners to
Microsoft Client opportunity, ensuring comprehensive and early
knowledge transfer and to accelerate the momentum of new product and
services offerings.
3.9 MICROSOFT FACILITIES ACCESS. As appropriate and subject to Microsoft
terms and conditions for such access, Microsoft will grant a limited
number of Banyan personnel access to the relevant facilities at
Microsoft's Redmond campus. Such Banyan personnel will be housed at a
Banyan facility, and not at Microsoft's facilities.
3.10 CONSULTING SUBCONTRACTING. Microsoft will make commercially
reasonable efforts to work with Banyan to develop and promote a
program to engage, either through leads or MCS sub-contract, Banyan
MCSE/MCSD certified consultants at Microsoft consulting customers.
Such sub-contract engagements, if any, shall be undertaken pursuant to
the standard MCS subcontract terms and conditions in accordance with
statements of work and pricing to be mutually agreed between the
parties.
3.11 BOOTCAMP PARTICIPATION. Microsoft will make commercially reasonable
efforts to include Banyan in appropriate future program offerings
specific to MCS Technology Bootcamps and Internships.
3.12 PRODUCT GROUP RELATIONSHIPS. As appropriate, Microsoft agrees to
facilitate relationships, communication and direct knowledge transfer
between Microsoft product groups and Banyan personnel.
3.13 INTERNAL USE. In order to support Banyan's adoption of the Microsoft
Enterprise Solutions Platform for internal use, Microsoft will grant
Banyan certain Microsoft software licenses as set forth in Exhibit D,
subject to the execution of and under the terms set forth in the
Microsoft Select 4.0 Master Agreement, the Amendment No. 1 to
Microsoft Select 4.0 Master Agreement, and the purchase of
upgrade/maintenance rights in the Microsoft Select 4.0 Enterprise
Enrollment Agreement, to be executed by Banyan pursuant to Section
4.10 (collectively, the "Enterprise License Agreement").
9
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
4. BANYAN OBLIGATIONS
------------------
4.1 PUBLIC ENDORSEMENT. Banyan will publicly and internally endorse the
Microsoft Enterprise Solutions Platform as the preferred Platform for
delivery of Enterprise Services in the Go-to-Market Focus Areas.
Additionally, Banyan will publicly and internally endorse the
Microsoft Enterprise Solutions Platform (with explicit reference to
Microsoft Windows NT Server, Microsoft Internet Information Server,
Microsoft Windows 2000 Server, Microsoft Active Directory, Microsoft
Exchange Server, Microsoft Outlook and Microsoft Site Server) as the
recommended Platform for transition from Banyan's VINES and StreetTalk
for Windows NT network operating system platform and Banyan's
BeyondMail and Intelligent Messaging client and server products.
4.2 MCSES & MCSDS. Banyan will cause a minimum of 500 employees to be
certified as MCSEs or MCSDs during the Term. This level will be
aggressively pursued with a commitment to achieve an incremental
minimum of [**] MCSEs and MCSDs by [**], an incremental minimum of
[**] additional MCSEs and MCSDs in [**] (for a cumulative total of
[**] MCSEs and MCSDs), and an incremental minimum of [**] additional
MCSEs and MCSDs in [**] (for a cumulative total of 500 MCSEs and
MCSDs) of the Term. Banyan employees certified as MCSEs or MCSDs as
of the Effective Date and new employees hired after the Effective Date
with previously earned MCSE or MCSE certification shall not count
toward fulfillment of these minimums. Should a Banyan employee whose
certification has been previously counted according to the
requirements of this Section no longer remain employed by Banyan, such
event shall not reduce the calculation of the number of certifications
Banyan's employees have achieved toward fulfillment of these
requirements. Banyan shall report its achievements on MCSE/MCSD
certifications, including specific tests passed and the location of
MCSE/MCSD certified consultants by state and country twice per
calendar year during the Term, no later than each June 30 and December
31.
4.3 CUSTOMER SOLUTION CENTER(S). Throughout the Term, and where
applicable to meet Banyan's business needs, Banyan will staff, equip
and operate one or more Banyan Customer Solution Center(s). Initial
locations may include but not limited to a location in Westboro,
Massachusetts. Banyan shall be responsible for staffing and all other
day-to-day aspects, costs and effects of the Customer Solution
Center(s). At each such location, an appropriate set of hardware,
software, and marketing materials shall be available to demonstrate
the Banyan product and Enterprise Services capabilities that support
Banyan's alliance with Microsoft. The centers will include, without
limitation, facilities to:
(a) Develop, deliver and support solutions based on the Microsoft
Enterprise Solutions Platform for the Go-to-Market Focus Areas.
(b) Demonstrate the Enterprise Class attributes and business value of
the Microsoft Enterprise Solutions Platform as a basis for the
Go-to-Market Focus Area solutions.
(c) Provide an environment for formal training of both Banyan and
Client personnel as well as less formal knowledge transfer.
(d) Promote interoperability and migration between Microsoft Windows
NT Server and Banyan VINES/StreetTalk, Novell Netware, Unix and
other networking and directory services environments.
(e) Promote interoperability and migration between Microsoft Exchange
and Banyan BeyondMail, Lotus Notes, Microsoft Mail, Lotus ccMail,
Novell Groupwise and other messaging and groupware environments.
(f) Perform stress testing, performance evaluation and scalability.
(g) Client project developments.
10
<PAGE>
4.4 JOINT USE OF SOLUTION CENTERS. Given appropriate notice, Banyan will
exercise commercially reasonable efforts to make the Customer Solution
Center(s) available to Microsoft personnel for the purpose of
demonstrating solutions capabilities on the Microsoft Enterprise
Solutions Platform.
4.5 ADOPTION OF MICROSOFT ENTERPRISE SOLUTIONS PLATFORM. Banyan will
explicitly and unambiguously lead with the Microsoft Enterprise
Solutions Platform in the Go-to-Market Focus Areas. Banyan will
develop and deliver to Clients a comprehensive portfolio of Enterprise
Services targeting the Go-to-Market Focus Areas. Specific commitments
include:
(a) Banyan will develop and deliver to market packaged and replicable
Exchange interoperability and migration services including a
specific set of capabilities oriented to Banyan's BeyondMail
base.
(b) Banyan will develop and deliver to market packaged and replicable
Windows NT Server and Windows 2000 Server interoperability and
migration services including a specific set of capabilities
oriented to Banyan VINES networks and StreetTalk directories.
(c) Banyan will develop and deliver to market packaged and replicable
Microsoft Active Directory planning, architecture, design and
implementation and application integration services.
(d) Banyan will develop and deliver to market packaged and replicable
Microsoft Enterprise Solutions Platform based network operation
services including help desk, network monitoring, troubleshooting
and management.
(e) Banyan will acquire, enhance, or develop Exchange
coexistence/migration tools including: Intelligent Messaging
mailbox migration tools; StreetTalk to Windows NT SAM/Exchange
Directory/Active Directory synchronization tools; Banyan
Intelligent Messaging to Exchange mail connector that are built
using Exchange tools and wizards; and BeyondMail to Outlook
address book migration tools.
(f) Banyan will acquire, enhance, or develop Active Directory
migration tools including: StreetTalk to AD migration wizard,
including capability to move file systems and print services
along with user, groups, lists and directory attributes; and
Active Directory synchronization-StreetTalk synchronization tools
that will allow for coexistence during large network migration.
(g) Banyan will acquire, enhance, or develop additional products that
facilitate the interoperability of Banyan and Microsoft products
including: StreetTalk for Windows NT LDAP service enhancements to
ensure compatibility with Active Directory; and IMS server
product updates to ensure compatibility of Outlook 98/2000
through IMAP in order to support network migrations.
4.6 REPORTING DATA. Banyan will provide Microsoft, on a semi-annual
basis, the Target Client Seat Migration Report set forth in Exhibit E.
This report will detail Microsoft products sold or influenced as
components of Banyan's Microsoft Practice engagements.
4.7 BUSINESS DEVELOPMENT EXECUTIVE. Banyan will provide, at no charge to
Microsoft, a designated Business Development Executive whose purpose
will be (a) to serve on the Joint Board, (b) to act as a contact and
liaison between the Parties in supporting the Relationship, and (c) to
facilitate joint sales activities and provide assistance on worldwide
marketing initiatives.
11
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
4.8 MASTER SERVICES AGREEMENT. Banyan is executing a Microsoft Master
Services Agreement simultaneously with the execution of this
Agreement, providing for the purchase the following services:
(a) Banyan shall purchase Premier Support services to support
Banyan's internal use of Microsoft products and to support
solutions development and other Client-related activities in the
Go-to-Market Focus Areas and other agreed areas; and
(b) optionally, at Banyan's sole discretion, Banyan may purchase
Consulting Services for the PPM services referenced in Section
3.4(c) (or related full-time equivalent services).
4.9 INTERNAL DEPLOYMENT OF MICROSOFT PRODUCTS. Banyan will publicly
announce its intent to use, globally deploy and maintain Microsoft
products through the Term. Banyan will globally deploy and maintain
Windows NT Server, Microsoft Exchange, Microsoft Site Server,
Microsoft Windows 9X and/or Windows NT Workstation, Microsoft Office
and Microsoft Internet Explorer as internal standards. Banyan will
deploy Windows 9X, Windows 98 or Windows NT Workstation, Office 2000
and a BackOffice client-access-license to [**] of Banyan user PCs
within [**] from the Effective Date. Banyan will implement an
Exchange Server based messaging and groupware infrastructure deployed
to [**] of Banyan users within [**] from the Effective Date. Banyan
will implement a Windows 2000 Server based networking, print & file,
communications and directory infrastructure deployed to [**] of Banyan
users [**] following commercial availability and to [**] of Banyan
users [**] following commercial availability. In addition, Banyan
agrees to host http://www.banyan.com/ and successor sites on Microsoft
----------------------
Site Server and any internal sales force automation applications on a
Windows NT Server/SQL Server Platform.
4.10 ENTERPRISE LICENSE AGREEMENT. Within sixty (60) days of the execution
of this Agreement, Banyan shall execute the Enterprise License
Agreement to provide for the terms, conditions and maintenance for the
software licenses provided in Section 3.13 above.
4.11 NON-EXCLUSIVITY. This Agreement shall not preclude Banyan from
offering, promoting and developing other platforms, products and
Enterprise Services offerings that compete with any identified
Microsoft products where it considers that such other platforms or
products better meet the needs of its Clients.
5. NO TRADEMARK LICENSE. Nothing in this Agreement or its performance shall
--------------------
grant either Party any right, title, interest, or license in or to the
other's names, logos, logotypes, trade dress, designs, or other trademarks.
Banyan shall only use the Microsoft mark depicted on Exhibit F hereto
during the Term of this Agreement according to the terms, conditions and
specifications set forth or referenced in Exhibit F.
6. DISTRIBUTION AND USE OF MICROSOFT FEES
---------------------------------------
6.1 MICROSOFT FEES. Microsoft shall pay the following amounts to provide
for joint marketing, intellectual property, services engagement, and
training and certification initiatives in an aggregate amount of Ten
Million and No/100 Dollars (US$10,000,000.00) in three annual
installments as summarized below.
<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
---------------------------------------------------------------
<S> <C>
Effective Date $5,900,000
---------------------------------------------------------------
December 31, 1999: $2,500,000
---------------------------------------------------------------
December 31, 2000: $1,600,000
---------------------------------------------------------------
</TABLE>
12
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
As a condition of Microsoft disbursing these funds on December 31,
1999 and December 31, 2000, Banyan must have demonstrated attainment
of its cumulative certification commitments per Section 4.2 above,
attainment of [**] of Banyan Microsoft Practice Revenue forecast per
Exhibit A and Royalty Payments in accordance with Section 7 below.
These payments are allocated for the activities set forth in the
following table:
<TABLE>
<CAPTION>
MICROSOFT PRACTICE SUMMARY
------------------------------------------------------------------------------------------------
1999 2000 2001 TOTAL/AVERAGE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Training
------------------------------------------------------------------------------------------------
# of MCSE/Ds [**] [**] [**] 500
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Total Training Advance [**] [**] [**] [**]
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Marketing Programs [**] [**] [**] [**]
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Intellectual Property -
Migration Tools, Methods, etc. [**] [**] [**] [**]
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Total MS Advance $5,900,000 $2,500,000 $1,600,000 $10,000,000
------------------------------------------------------------------------------------------------
</TABLE>
6.2 PAYMENTS. The first payment is due upon execution and each subsequent
payment provided for under Section 6.1 shall be made within 30 days
after the date on which such payment is due by wire transfer (in
accordance with Banyan's written instructions) of immediately
available funds to the following account:
Beneficiary Name: Banyan Systems Incorporated
Account Number: [**]
Beneficiary Bank: State Street Bank & Trust, 225 Franklin St, Boston
MA 02110
SWIFT Code: [**]
ABA#: [**]
or to a different account specified by Banyan's by written notice to
Microsoft at least fifteen business days prior to the date such
payment is due.
7. BANYAN ROYALTY PAYMENTS.
-----------------------
7.1 ROYALTY PAYMENTS. On or prior to each July 31 and January 31 during
the Royalty Term commencing on [**], Banyan shall make a Royalty
Payment as described in Section 7.2 to Microsoft with respect to the
most recently ended Royalty Period by wire transfer (in accordance
with Microsoft's written instructions) of immediately available funds
to the following account:
Beneficiary: Microsoft Corporation
Account #: [**]
Bank: NationsBank of Texas, N.A.
Dallas, Texas
ABA: [**]
SWIFT: [**]
or to a different account specified by Microsoft by written notice to
Banyan at least 15 business days prior to the date such payment is due
(the "Microsoft Account").
13
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
7.2 ROYALTY CALCULATION. During the Royalty Term, Banyan shall pay a
royalty (the "Royalty Payment") on the Banyan Microsoft Practice
Revenue to Microsoft at the Royalty Rate during each Royalty Period.
Banyan shall have no further obligation to make royalty payments once
it has made such payments that are equal in the aggregate to the Total
Royalty Payment.
7.3 ROYALTY REDUCTION. The Total Royalty Payment shall be reduced by the
sum of [**],[**] and [**] in year 1, year 2 and year 3 respectively,
for each Target Clients' VINES/StreetTalk or BeyondMail seat in excess
of the cumulative minimums set forth below that is migrated to
Microsoft Windows NT Server or Microsoft Exchange (the "Royalty
Reduction"), in accordance with the following table and limitations:
<TABLE>
<CAPTION>
1999 (YEAR 1) 2000 (Year 2) 2001 (YEAR 3)
---------------------------------------------------------------------------------------------
<S> <C> <C>
[**] per seat [**] per seat [**] per seat
---------------------------------------------------------------------------------------------
[**] [**] [**] [**] [**]
---------------------------------------------------------------------------------------------
Royalty reduction for seats [**] in Reduction Reduction Reduction
the first [**] ([**] seats @ for for [**] for [**]
[**]/seat, [**] seats @ [**]/seat) [**]seats @ seats @ seats @
[**]/seat [**]/seat [**]/seat
---------------------------------------------------------------------------------------------
</TABLE>
(a) The amount of Royalty Reductions for [**] migrations that are
within the limitations set forth above in which initial
deployments have been realized by [**] and are completed prior to
[**] will be included as part of the aggregate Royalty Reduction;
(b) The maximum Royalty Reduction shall in no event exceed the sum of
[**].
(c) Qualified seats will be limited to those Target Clients for which
Banyan and/or Microsoft have delivered a migration proposal
including specific details on Banyan's migration services
offerings.
(d) Qualified seats will be limited to those Target Clients for which
Banyan is actually engaged to deliver VINES/StreetTalk to Windows
NT Server and/or BeyondMail to Exchange migration services. An
engagement may be reported multiple times to account for an
increase in the number of Seats associated with the solution.
(e) Banyan will provide a semi-annual report to Microsoft summarizing
incremental seats migrated by Target Client and Microsoft
product.
(f) The aggregate Royalty Reduction amount will be calculated at the
end of each Royalty Period, [**]. The Royalty Reduction offset
will be applied to each Royalty payment until fully used. In the
event that the Royalty Reduction exceeds the Royalty Payment for
a given period, the amount that the Royalty Reduction exceeds the
Royalty Payment for that term will be carried over and credited
as a Royalty Reduction against future Royalty Payment(s).
8. ACCOUNTING.
----------
8.1 TAXES. All taxes levied on account of any payments made or owed to a
Party pursuant to this Agreement will be the sole responsibility of
such Party, including taxes levied on the income of such Party. In the
event taxes are required to be withheld on payments made under this
14
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Agreement by any U.S. (state or federal) or foreign government, the
Party making such payment may deduct such taxes from the amount owed
the other Party and pay them to the appropriate taxing authority. The
Party making such payment shall in turn promptly secure and deliver to
the other Party an official receipt for any taxes withheld. The Party
making such payments will use reasonable efforts to minimize such
taxes to the extent permissible under applicable law.
8.2 AUDIT. During the term of this Agreement and for a period of [**]
years thereafter Banyan will keep complete and accurate records of
Banyan services related to the Microsoft Enterprise Solutions Platform
and related expenditures in sufficient detail to permit Microsoft to
confirm the compliance with Banyan of its obligations under this
Agreement. Microsoft shall have the right to cause an independent
accounting firm to audit such records to confirm Banyan's compliance
with its obligations with respect to the expenditure of Microsoft-
provided funds, compliance with Banyan marketing commitments and other
obligations of Banyan under this Agreement. Such audit rights may be
exercised during Normal Business Hours upon reasonable notice.
Microsoft shall bear the full cost of such audit unless such audit
discloses a variance between actual and required expenditures greater
than three (3.0)% percent. In the event of such variance, Banyan
shall bear the full cost of such audit. The terms of this Section 8.2
shall survive for [**] years following the end of the Term.
9. NON-DISCLOSURE AGREEMENT. The Parties agree that the terms of the
------------------------
Microsoft Reciprocal Non-Disclosure Agreement executed by the parties and
dated May 28, 1998, attached hereto as Exhibit G will be deemed
incorporated herein, and that all terms and conditions of this Agreement
will be deemed Confidential Information as defined in such Non-Disclosure
Agreement. Notwithstanding the foregoing, Banyan may file this Agreement
(and any associated documents contemplated hereby) with the United States
Securities and Exchange Commission if it believes that this Agreement is a
material contract under its reporting obligations pursuant to the
Securities Exchange Act of 1934, as amended and the regulations thereunder.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
10.1 BY BANYAN.
(a) Banyan represents and warrants that it has full and exclusive
right and power to enter into and perform according to the terms
of this Agreement.
(b) Banyan represents and warrants that its performance of activities
pursuant to this Agreement will not violate any agreement or
obligation between it and any third party.
(c) Banyan represents, warrants and covenants that it shall comply
with all applicable local, state and federal laws, statutes and
regulations, including specifically all laws prohibiting
harassment of any kind in the workplace and shall comply with
Microsoft's rules for its own employees while on Microsoft's
premises. Banyan assumes all responsibility for providing to its
employees and subcontractors any training that may be required to
ensure compliance with such laws and rules.
(d) Banyan shall have no right to make any other warranties or
promises on behalf of Microsoft with respect to any products or
property owned or provided to it by Microsoft pursuant to this
Agreement which are not contained in written statements or
documents accompanying that item, or the written warranty
document accompanying the Microsoft products.
10.2 BY MICROSOFT.
(a) Microsoft represents and warrants that it has full and exclusive
right and power to enter into and perform according to the terms
of this Agreement.
15
<PAGE>
(b) Microsoft represents and warrants that its performance of
activities pursuant to this Agreement will not violate any
agreement or obligation between it and any third party.
(c) Microsoft represents, warrants and covenants that it shall comply
with all applicable local, state and federal laws, statutes and
regulations, including specifically all laws prohibiting
harassment of any kind in the workplace and shall comply with
Banyan's rules for its own employees while on Banyan's premises.
Microsoft assumes all responsibility for providing to its
employees and subcontractors any training that may be required to
ensure compliance with such laws and rules.
10.3 DISCLAIMER OF WARRANTY. THE WARRANTIES SET FORTH IN THIS SECTION 10
ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE. THERE IS NO WARRANTY OF TITLE OR NON-INFRINGEMENT
WITH RESPECT TO ANY MICROSOFT PRODUCTS.
11. INDEMNIFICATION.
---------------
11.1 Banyan agrees to defend, indemnify and hold harmless Microsoft and
its successors, officers, directors, partners and employees from any
and all third-party actions, claims, demands, costs, liabilities,
expenses and damages, including reasonable attorney's fees and
expenses associated therewith or with successfully establishing the
right to indemnification hereunder, to the extent that a third-party
claim arises out of or relates to (a) any act or omission of any
Banyan employee, partner, subcontractor or agent in the Banyan
Microsoft Practice and/or Banyan's Customer Solution Center(s), or (b)
for injury to any person, including death, or damage to tangible,
whether real or personal, property in connection with the performance
of this Agreement by Banyan, its employees, agents and its
subcontractors.
11.2 Microsoft agrees to defend, indemnify and hold harmless Banyan and
its successors, officers, directors, partners and employees from any
and all third party actions, claims, demands, costs, liabilities,
expenses and damages, including reasonable attorney's fees and
expenses associated therewith or with successfully establishing the
right to indemnification hereunder, to the extent that a third party
claim arises out of or relates to injury to any person, including
death, or damage to tangible, whether real or personal, property in
connection with the performance of this Agreement by Microsoft, its
employees, agents and its subcontractors.
11.3 The indemnifying party shall indemnify the indemnified party with
respect to third-party claims as set forth above provided that: (a)
the indemnified party promptly notifies the indemnifying party in
writing of the claim; (b) the indemnifying party has sole control of
the defense and all related settlement negotiations with respect to
the claim, provided, however, that the indemnified party has the
right, but not the obligation, to participate in the defense of any
such claim or action through counsel of its own choosing at its own
expense; (c) the indemnified party cooperates fully to the extent
necessary, and executes all documents necessary for the defense of
such claim, and (d) the indemnified party has the right to approve
settlement of any claim, such approval not to be unreasonably withheld
or delayed. In the event the indemnified party and the indemnifying
party agree to settle a claim, the indemnifying party agrees not to
publicize the settlement without first obtaining the indemnified
party's written permission, which permission will not be unreasonably
withheld or delayed.
11.4 This Section 11 shall survive any termination or expiration of this
Agreement.
16
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
12. LIMITATIONS OF LIABILITY.
------------------------
12.1 EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 12.2 BELOW, TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL EITHER
PARTY, NOR THEIR RESPECTIVE SUPPLIERS, BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL
DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION,
OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THIS AGREEMENT, EVEN IF A
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
12.2 This section 12 shall not apply to either party's indemnification
obligations under Section 11, any infringement of one of the party's
intellectual property rights by the other party, breaches of the
Reciprocal Non-Disclosure Agreement and/or Section 9 and any breach of
the license terms enumerated in the Enterprise License Agreement.
13. TERM AND TERMINATION; ROYALTY PAYMENTS ON TERMINATION.
------------------------------------------------------
13.1 The Term of this Agreement shall begin on the Effective Date and
shall continue in full force and effect until December 31, 2001,
unless terminated pursuant to Sections 13.2, 13.3, 13.4 or 14.4.
13.2 Either Party may terminate this Agreement immediately for cause upon
30 days' prior written notice in the event the other Party is in
material breach of this Agreement and fails to cure the default within
the 30 day period following written notice except that no "cure"
period shall apply to breaches of Section 9 of this Agreement. In the
event of a breach of Section 9, the non breaching Party shall have the
right to terminate this Agreement immediately upon notice to the
breaching Party.
13.3 This Agreement may be terminated immediately upon written notice, by
either Party in the event the other Party (a) becomes insolvent or (b)
admits in writing its inability to pay its debts as they become due or
(c) makes an assignment for the benefit of creditors or (d) if a
petition under any bankruptcy act, receivership statute or the like,
as they now exist or as they may be amended, is filed by the other
Party or by any third party or an application for a receiver is made
by anyone and such application is not resolved favorably to the other
Party within sixty (60) days
13.4 ROYALTY PAYMENTS ON TERMINATION. In the event of a termination of
this Agreement, Banyan shall make the following payments in lieu of
the Royalty Payments provided for under Section 7:
(a) In the event of a termination pursuant to Section 14.4, Banyan
shall pay royalties to Microsoft, in two (2) quarterly
installments (initiated no later than thirty (30) days following
the date of termination), in the aggregate equal to the amount
expended by Microsoft pursuant to Section 6.1 as of the date of
termination, plus interest at an annualized rate of [**] percent
[**], less any Royalty Payments already made by Banyan pursuant
to Section 7. In the calculation of such Royalty Payments,
Banyan shall receive no credit for any Royalty Reduction under
Section 7.3.
(b) In the event of termination by Microsoft that occurs prior to
December 31, 1999 due to Banyan's material and uncured breach of
this Agreement (but not a termination pursuant to Section 14.4),
Banyan shall pay royalties to Microsoft, in twelve (12) monthly
installments (initiated no later than thirty (30) days following
the date of termination), in the aggregate equal to the amount
expended by Microsoft pursuant to Section 6.1 as of the date of
termination, plus interest at an annualized rate of the prime
lending rate as specified by the Wall Street Journal on the date
of termination plus two (2) percent (2%).
17
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
(c) In the event of termination by Microsoft on or after December 31,
1999 due to Banyan's material and uncured breach of this
Agreement (but not a termination pursuant to Section 14.4),
Banyan shall pay royalties to Microsoft, in twelve (12) monthly
installments (initiated no later than thirty (30) days following
the date of termination), in the aggregate equal to the amount
expended by Microsoft pursuant to Section 6.1 as of the date of
termination, plus interest at an annualized rate of [**] percent
[**], less any Royalty Payments already made by Banyan pursuant
to Section 7. In the calculation Royalty Payments, "Royalty
Payments already made" will include the amount of any Royalty
Reduction under Section 7.3; provided, however, that in no event
-----------------
will the payments to be made to Microsoft under this Section
13.4(c) be less than an amount equal to the amount expended by
Microsoft pursuant to Section 6.1 as of the date of termination,
plus interest at an annualized rate of the prime lending rate as
specified by the Wall Street Journal on the date of termination
plus two (2) percent (2%), less any Royalty Payments already made
by Banyan pursuant to Section 7.
(d) In the event of termination by Banyan due to Microsoft's material
and uncured breach of this Agreement, Banyan shall pay royalties
to Microsoft, in twenty-four (24) monthly installments (initiated
no later than thirty (30) days following the date of
termination), an amount equal to the amount expended by Microsoft
pursuant to Section 6.1 as of the date of termination, plus
interest at an annualized rate of the prime lending rate as
specified by the Wall Street Journal on the date of termination
less any Royalty Payments already made by Banyan pursuant to
Section 7. In the calculation of such Royalty Payments, Banyan
shall receive no credit for any Royalty Reduction under Section
7.3.
(e) The payments to be made pursuant to this Section 13.4 shall be in
addition to, and not in lieu of, any other remedy provided under
this Agreement or by law.
13.5 Sections 8, 9, 10, 11, 12, 13.4, 13.5 and 14 shall survive termination
or expiration of this Agreement for any reason.
14. GENERAL
-------
14.1 NOTICES. All notices, authorizations, and requests required or
desired to be given or made in connection with this Agreement will be
in writing, given by certified or registered mail (return receipt
requested), or express air courier (charges prepaid), and addressed as
follows (or to such other address as the Party to receive the notice
or request so designates by notice to the other):
To Banyan: To Microsoft:
Banyan, Inc. Microsoft Corporation
120 Flanders Road One Microsoft Way
Westboro, MA 01581 Redmond, WA 98052-6399
Attn: Richard Spaulding Attention: Ian Rogoff
Title: Chief Financial Officer Title: General Manager,
Enterprise Partners
Phone: (508) 898-1629 Phone: (425) 882-8080
Fax: (508) 898-9509 Fax: (425) 936-7329
Copy to: Mark G. Borden, Esq. Copy to: Law & Corporate
Affairs
Hale and Dorr, L.L.P. Fax: (206) 936-7329
60 State Street
Boston MA 02109
Fax: (617) 526-5000
18
<PAGE>
If a notice is given by either Party by certified or registered mail,
it will be deemed received by the other Party on the third business
day following the date on which it is deposited for mailing. If a
notice is given by either Party by air express courier, it will be
deemed received by the other Party on the next business day following
the date on which it is provided to the air express courier.
14.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
construed as creating an employer-employee relationship, a
partnership, agency, franchise or a joint venture between Microsoft
and Banyan and neither Party shall have the right, power or authority
to obligate or bind the other in any manner whatsoever without its
prior written consent. The non-employing Party will not be
responsible for any of the below-referenced payments, obligations,
taxes or benefits. Each Party shall be responsible with respect to
its own employees and/or subcontractors, including, without
limitation, for (a) withholding and payment of FICA, FUTA and all
other payroll and employment related taxes and amounts relating to
services performed by staff under this Agreement; (b) providing all
insurance or other employment related benefits to staff; (c) proper
payment of wages to staff, including overtime when due, in accordance
with the Fair Labor Standards Act, the Contract Work Hours and Safety
Standards Act, where applicable, and corresponding state law and
regulations; (d) providing any accommodation required under the
Americans with Disabilities Act or corresponding state law and
regulations; (e) verifying that all staff possess valid work
authorization in accordance with the Immigration Reform and Control
Act.
14.3 GOVERNING LAW; ATTORNEYS' FEES. This Agreement shall be governed by
the laws of the State of Washington as though entered into between
Washington residents and to be performed entirely in the State of
Washington. Banyan further consents to exclusive jurisdiction by the
state and federal courts sitting in the State of Washington. Process
may be served on either Party by regular mail, postage prepaid,
certified or registered, return receipt requested. In any action or
suit to enforce any right or remedy under this Agreement or to
interpret any provision of this Agreement, the prevailing Party shall
be entitled to recover its costs, including reasonable attorneys'
fees.
14.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of each Party's respective successors and lawful permitted
assigns. Notwithstanding the foregoing, Banyan may not assign this
Agreement, or any rights or obligations hereunder, whether by contract
or by operation of law, except with the express written consent of
Microsoft, which consent shall be granted or withheld in Microsoft's
sole discretion. Any attempted assignment in violation of this
Section shall be void. For purposes of this Agreement, an
"assignment" under this Section shall be deemed to include, without
limitation, the following: (a) a merger of Banyan where Banyan is not
the surviving entity; (b) any transaction or series of transactions
whereby a third party acquires direct or indirect power to control the
management and policies of Banyan, whether through the acquisition of
voting securities, by contract, or otherwise; or (c) the sale of more
than 50% of Banyan's assets (whether in a single transaction or series
of related transactions). In such an event, either party shall have
the right to immediately terminate this Agreement upon written notice
without being considered in breach of this Agreement.
14.5 CONSTRUCTION. If for any reason a court of competent jurisdiction
finds any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect. Failure by either Party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision. This Agreement has been negotiated by the
Parties and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor
of or against either Party.
14.6 Conflict. In the event of any conflict between the terms of this
Agreement and the Reciprocal Non-Disclosure Agreement, the Microsoft
Premier Support Services Agreement, and the Microsoft Consulting
Services Master Services Agreement, the terms of the agreement in
question shall govern, but only with respect to the services, rights,
and obligations set forth therein.
19
<PAGE>
14.7 ENTIRE AGREEMENT. This Agreement does not constitute an offer by
either Party and it shall not be effective until signed by both
Parties. This Agreement and the documents referenced herein
constitute the entire agreement between the Parties with respect to
the subject matter hereof and merges all prior and contemporaneous
oral and written communications. It shall not be modified except by a
written agreement dated subsequent to the date of this Agreement and
signed on behalf of Microsoft and Banyan by their respective duly
authorized representatives. Except as otherwise provided herein, the
Reciprocal Non-Disclosure Agreement, the Microsoft Premier Support
Services Agreement and the Microsoft Consulting Services Master
Service Agreement are governed by their own terms.
20
<PAGE>
IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
Effective Date written above.
MICROSOFT CORPORATION BANYAN SYSTEMS INCORPORATED
By (sign): /s/ Ian Rogoff By (sign): /s/ William P. Ferry
------------------------- -------------------------
Name (print): Ian Rogoff Name (print) William P. Ferry
---------------------- -----------------------
Title: General Manager, Enterprise Title: Chairman/CEO
Partnerships -----------------------------
Date: January 8, 1998 Date: 1/8/99
------------------------------
EXHIBITS
--------
Exhibit A .......................................... Projected Revenue Base
Exhibit B ....................................... Microsoft Logo Guidelines
Exhibit C ............Microsoft Software License Grant--Development Centers
Exhibit D ...................Microsoft Software License Grant--Internal Use
Exhibit E ........................... Target Customer Seat Migration Report
Exhibit F .................................. Microsoft Trademark Guidelines
Exhibit G ................... Microsoft Reciprocal Non-Disclosure Agreement
21
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asteriks denote omissions.
EXHIBIT A
Projected Revenue Base
----------------------
<TABLE>
<CAPTION>
Banyan
-----------------------------------------------
Date Revenue %
-----------------------------------------------
<S> <C> <C>
-----------------------------------------------
12-31-98
-----------------------------------------------
6-30-99 [**] [**]
-----------------------------------------------
12-31-99 [**] [**]
-----------------------------------------------
6-30-00 [**] [**]
-----------------------------------------------
12-31-00 [**] [**]
-----------------------------------------------
6-30-01 [**] [**]
-----------------------------------------------
12-31-01 [**] [**]
-----------------------------------------------
6-30-02 [**] [**]
-----------------------------------------------
12-31-02 [**] [**]
-----------------------------------------------
6-30-03 [**] [**]
-----------------------------------------------
12-31-03 [**] [**]
-----------------------------------------------
6-30-04 [**] [**]
-----------------------------------------------
12-31-04 [**] [**]
-----------------------------------------------
-----------------------------------------------
Total [**] [**]
-----------------------------------------------
</TABLE>
22
<PAGE>
EXHIBIT B
USING THE MICROSOFT(R) LINK LOGO ON NON-MICROSOFT WEBSITES
----------------------------------------------------------
[LOGO OF MICROSOFT APPEARS HERE]
1. Except as Microsoft may authorize elsewhere, non-Microsoft websites may use
only the logo provided by Microsoft ("Logo"). By displaying the Logo, you
agree to be bound by these Policies.
2. You may only use the Logo on your website, and not in any other manner. It
must always be an active link to Microsoft's Homepage at
http://www.microsoft.com/.
3. The Logo .gif includes the words "To www.microsoft.com", describing the
significance of the Logo on your site (i.e., the Logo is a link to
Microsoft, not an endorsement of your site). You may not remove or alter
this or any other element of the Logo.
4. The Logo may be used only on web pages that make accurate references to
Microsoft or its products or services, and must be displayed adjacent to
the reference or at the bottom of the same page. Your web page title and
other trademarks and logos must appear at least as prominent as the Logo.
You may not display the Logo in any manner that implies sponsorship,
endorsement, or license by Microsoft.
5. The Logo must appear by itself, with a minimum spacing (the height of the
Logo) between each side of the Logo and other graphic or textual elements
on your page. The Logo may not be used as a feature or design element of
any other logo.
6. You may not alter the Logo in any manner, including size, proportions,
colors, elements, etc., or animate, morph or otherwise distort its
perspective or two-dimensional appearance.
7. You may not use the Logo on any site that disparages Microsoft or its
products or services, infringes any Microsoft intellectual property or
other rights, or violates any state, federal or international law.
8. These Policies do not grant a license or any other right in Microsoft's
logos or trademarks. Microsoft reserves the right in its sole discretion to
terminate or modify permission to use the Logo at any time. Microsoft
reserves the right to take action against any use that does not conform to
these Policies, infringes any Microsoft intellectual property or other
right, or violates other applicable law.
9. MICROSOFT DISCLAIMS ANY WARRANTIES THAT MAY BE EXPRESS OR IMPLIED BY LAW
REGARDING THE LOGO, INCLUDING WARRANTIES AGAINST INFRINGEMENT.
23
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asteriks denote omissions.
EXHIBIT C
MICROSOFT SOFTWARE LICENSE GRANT--CUSTOMER SOLUTION CENTER
----------------------------------------------------------
<TABLE>
<CAPTION>
MICROSOFT PRODUCT NAME QUANTITY INITIAL LICENSE ESTIMATED RETAIL INITIAL LICENSE ESTIMATED
PRICE VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BackOffice Server 5 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
BackOffice Client Access Licenses 2 [**] [**]
(20 Clients Pak)
- --------------------------------------------------------------------------------------------------------------------
Windows 2000 Pro 10 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
Windows 9x 10 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
Microsoft Site Server Enterprise 2 [**] [**]
- --------------------------------------------------------------------------------------------------------------------
Total [**]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The above Microsoft products will be provided to a total of one (1) Banyan site
worldwide including: Westboro, Massachusetts.
24
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asteriks denote omissions.
EXHIBIT D
MICROSOFT SOFTWARE LICENSE GRANT--INTERNAL USE
-----------------------------------------------
INITIAL GRANT OF LICENSES REQUIRED DURING YEAR ENDING DECEMBER 31, 1999
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
MICROSOFT PRODUCT NAME LICENSES GRANTED
--------------------------------------------------------------------------------------------
<S> <C>
Microsoft BackOffice Server [**]
--------------------------------------------------------------------------------------------
Microsoft BackOffice Client Access Licenses [**]
--------------------------------------------------------------------------------------------
Microsoft Site Server Enterprise Edition [**]
--------------------------------------------------------------------------------------------
Microsoft Exchange Server Enterprise Edition [**]
--------------------------------------------------------------------------------------------
Microsoft Windows NT Professional [**]
--------------------------------------------------------------------------------------------
Microsoft Windows 98 [**]
--------------------------------------------------------------------------------------------
Microsoft Office 2000 Professional [**]
--------------------------------------------------------------------------------------------
Microsoft Project [**]
--------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
EXHIBIT E
TARGET CLIENT SEAT MIGRATION REPORT
------------------------------------
Please complete the following template below with requested information, and
return to (TBD Microsoft Banyan Business Development Executive) via email or by
fax at (425) 936-7329.
CONTACT: _____________________
TITLE: _____________________
PHONE: _____________________
FAX: _____________________
EMAIL: ____________________________
ADDRESS: ____________________________
____________________________
THIS SALES REPORT IS FOR THE CALENDAR QUARTER: ____________________
THIS SALES REPORT IS FOR THE FOLLOWING PRODUCT LINE(S): ALL
Sales Results. Please estimate the quantities of the following Microsoft
licensed products installed during this quarter. Include licenses delivered by
any authorized Microsoft reseller, to the best of your knowledge, during the
period of or as a direct result of a Banyan consulting engagement.
<TABLE>
<CAPTION>
Microsoft Licensed Products No. Installed NO. CONTRACTED Client BANYAN PRODUCT
MIGRATION (Y/N)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Microsoft Windows NT Server
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Windows NT Client Access Licenses
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Windows NT Professional
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft SQL Server
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft SQL Server Client Access Licenses
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft SQL Server Runtime
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft SQL Server Runtime Client Access Licenses
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Exchange Server
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Exchange Client Access Licenses
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Site Server
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft BackOffice Server
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft BackOffice Client Access Licenses
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Signature of Sponsoring Executive. Please have this document signed by Robert
Burke, Senior VP Worldwide Sales and Service.
Print Name: ____________________________ Title: ____________________________
Signature: _____________________________ Date: ____________________________
26
<PAGE>
EXHIBIT F
MICROSOFT TRADEMARK GUIDELINES
------------------------------
The Mark:
[LOGO OF MICROSOFT APPEARS HERE]
Specifications:
1. Banyan may only use the Mark in connection with services when promoting,
distributing, or selling Microsoft products. Banyan may use the Mark solely
in white papers, advertising, collateral, and other marketing materials for
the Enterprise Services, and may not use the Mark on any of Banyan's
products or other services.
2. Banyan's company name or logo must appear on any materials where the Mark
is used and must be at least as prominent as the Mark.
3. Banyan may use the Mark only as provided by Microsoft electronically and in
hard copy form. Banyan may not alter the Mark in any manner.
4. The Mark may not be used in any manner that expresses or might imply
Microsoft's affiliation, sponsorship, endorsement, certification, or
approval, other than as contemplated by the Agreement.
5. Banyan may not combine the Mark with any other object, including, but not
limited to, other logos, words, graphics, photos, slogans, numbers, design
features, or symbols. The Mark must appear by itself, with a minimum
spacing (the height of the Mark) between each side of the Mark and other
graphic or textual elements.
6. Minimum size for the Mark is 3/4" or 2 cm in width.
7. Banyan may not use the Mark, in whole or in part, as part of its company
name, domain name, product or service name, logo, trade dress, design,
slogan, or other trademarks.
8. The Mark may not be used as a design feature on any materials
9. The Mark may not be imitated in any manner in any materials.
10. The Mark shall include the appropriate (R) symbol as shown in this Exhibit.
11. The Mark shall be attributed to Microsoft Corporation in all materials
where it is used, with the attribution clause: ""Microsoft is a registered
trademark of Microsoft Corporation in the United States and other countries
and is used by Banyan under "license."
27
<PAGE>
EXHIBIT G
(COPY OF MICROSOFT RECIPROCAL NON-DISCLOSURE AGREEMENT)
28
<PAGE>
EXHIBIT 10.2
------------
WARRANT PURCHASE AGREEMENT
This WARRANT PURCHASE AGREEMENT dated January 8, 1999 (the "Agreement"), is
made by and between BANYAN SYSTEMS INCORPORATED, a Massachusetts corporation
(the "Corporation"), and MICROSOFT CORPORATION, a Washington corporation (the
"Purchaser").
The Corporation wishes to sell to the Purchaser, and the Purchaser wishes
to acquire from the Corporation, a Common Stock Purchase Warrant, in the form of
Exhibit A (the "Warrant"), to purchase an aggregate of One Million Seven Hundred
Fifty Thousand (1,750,000) shares of Common Stock, par value $.01 per share, of
the Corporation, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and of the representations, warranties, conditions and promises
hereinafter contained, intending to be legally bound hereby, the parties hereby
agree as follows:
ARTICLE I
ISSUANCE OF WARRANT
Simultaneously herewith, the Corporation is issuing and delivering the
Warrant to the Purchaser for investment purposes only and not with a view to
resale thereof. The parties agree that $4,160,214 of the funding provided by
Purchaser to the Corporation on the Effective Date under the Alliance Agreement
dated the date hereof between the Purchaser and the Corporation (the "Alliance
Agreement") is allocated to the purchase price of the Warrant.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to the Purchaser and agrees that:
2.1. Organization; Good Standing The Corporation is a corporation duly
---------------------------
organized, validly existing and subsisting under the laws of the Commonwealth of
Massachusetts and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the nature of its business or
the ownership of its property makes such qualification necessary, except where
the failure to be so qualified will not have a material adverse effect on the
Corporation, and has the corporate power and authority to own and lease its
properties, to carry on its business as presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Warrant.
2.2. Due Authorization The execution, delivery and performance of this
-----------------
Agreement and the Warrant have been duly authorized by all requisite corporate
action by the Corporation and will not violate or result in a breach of any
provision of any law, statute, rule or regulation, any order of any court or
other agency, the Articles of Incorporation (the "Charter") or Bylaws of the
Corporation (the "Bylaws"), or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon the properties or assets of
the Corporation, in each case except as would not have a material adverse effect
on the Corporation or the ability of the Corporation to perform its obligations
hereunder.
2.3. Binding Obligation; No Consents This Agreement and the Warrant have
-------------------------------
been duly executed and delivered by the Corporation and constitute valid and
legally binding obligations of the Corporation, enforceable in accordance with
their respective terms, except as rights to indemnity and contribution under the
Warrant may be limited by applicable law and except as the enforcement hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally or by general equitable
principles. No registration or filing with, or consent or approval of, or other
action by, any Federal, state or other governmental
<PAGE>
department, commission, board, bureau, agency or instrumentality or any third
party is necessary for the execution, delivery and performance of this Agreement
or the Warrant or for the issuance of the shares of Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares") other than those required under
applicable federal and state securities laws (the "Securities Consents and
Filings"). The Corporation covenants and agrees to make and obtain all required
Securities Consents and Filings within the applicable statutory periods
prescribed for such consents and filings.
2.4. Capitalization The authorized capital stock of the Corporation
--------------
consists of 35,000,000 shares of Common Stock, $0.01 par value per share (the
"Common Stock")(of which 18,970,982 shares are issued and outstanding, 1,848,000
shares are held in treasury, 2,386,661 shares have been reserved for issuance
pursuant to the Corporation's stock and option plans and other outstanding
options and warrants, and 3,947,380 shares have been reserved for issuance upon
conversion of shares of Preferred Stock), and 1,000,000 shares of Preferred
Stock, $0.01 par value per share, of which 263,158 shares have been designated
as Series A Convertible Preferred (all of which are issued and outstanding),
65,790 shares have been designated as Series B Convertible Preferred (all of
which are reserved for issuance pursuant to outstanding warrants) and 65,790
shares have been designated as Series C Convertible Preferred (all of which are
reserved for issuance pursuant to outstanding Warrants). Schedule 2.4 attached
hereto contains a complete and correct description of the percentage ownership
of each subsidiary of the Company, beneficially and of record, and the names
(and the percentage ownership) of any other owners thereof. All of the
aforesaid issued and outstanding shares of the Corporation and the subsidiaries
of the Corporation are duly authorized and validly issued, fully paid and
nonassessable and have been offered, issued, sold and delivered by such entity
in compliance in all material respects with applicable federal and state
securities laws, except where such noncompliance would not have a material
adverse effect on the Corporation. Schedule 2.4 also contains a complete and
accurate description of all agreements to which the Corporation is a party that
obligate the Corporation to register any of its equity securities with the
Securities and Exchange Commission (the "Registration Agreements"). The
Corporation has provided to Purchaser true and complete copies of all such
Registration Agreements, as amended to date. All of the shares of Common Stock
issuable under the Warrant have been duly reserved for issuance upon exercise of
the Warrant.
2.5. Litigation, Etc. There are no material (i) actions, suits, claims,
----------------
legal or administrative proceedings or to the Corporation's knowledge,
investigations pending against the Corporation or any of its subsidiaries
relating to or affecting the Corporation, whether at law or in equity, or before
or by any governmental authority or arbitrator, which if determined adversely
against the Corporation or any of its subsidiaries could reasonably be expected
to materially adversely affect the business, results of operations, financial
condition, assets, liabilities or prospects of the Corporation and its
subsidiaries, taken as a whole, or (ii) judgments, decrees, injunctions or
orders of any governmental authority or arbitrator against the Corporation or
any of its subsidiaries that could reasonably be expected to materially
adversely affect the business, results of operations, financial condition,
assets, liabilities or prospects of the Corporation and its subsidiaries, taken
as a whole.
2.6. Financial Information. The Corporation has delivered to Purchaser
---------------------
copies of the Corporations: (i) audited financial statements at and for the
years ended December 31, 1995, 1996 and 1997 and (ii) unaudited financial
statements for each of the first three fiscal quarters of 1998 (collectively,
the "Financial Statements"). The Financial Statements are in accordance with
the books and records of the Corporation and in all material respects present
fairly the financial condition and results of operations of the Corporation, as
at the dates and for the periods indicated, and have been prepared in accordance
with generally accepted accounting principles consistently applied, except as
may be otherwise stated therein and, with respect to any unaudited financial
statements, except for such adjustments, consistently applied, necessary for
such fair presentation.
2.7. Corporation Information The Corporation has delivered to Purchaser
-----------------------
copies of all periodic and other reports filed by the Corporation with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended, on or after January 1, 1998 and all proxy
statements, annual reports and other materials distributed to the Corporation's
shareholders on or after January 1, 1998 (collectively, the "Corporation
Information"). The Corporation Information is true, correct and complete in all
material respects as of the respective dates of the information set forth
therein, and the Corporation Information, as of its respective dates, does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or
Warrant Purchase Agreement--Page 2
<PAGE>
necessary to make the statements therein not misleading in light of the
circumstances under which such statements were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation that:
3.1. Organization The Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Washington and has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
3.2. Due Authorization The execution, delivery and performance of this
-----------------
Agreement have been duly authorized by all requisite action by the Purchaser and
will not violate or result in a breach of any provision of any law, statute,
rule or regulation, any order of any court or other agency, or the Articles of
Incorporation or Bylaws of the Purchaser, in each case except as would not have
an adverse effect on the Purchaser or the ability of the Purchaser to perform
its obligations hereunder.
3.3. Binding Obligation; No Consents This Agreement constitutes a valid
-------------------------------
and legally binding obligation of the Purchaser, enforceable in accordance with
its terms. No registration or filing with, or consent or approval of, or other
action by, any Federal, state or other governmental department, commission,
board, bureau, agency or instrumentality or any third party is necessary for the
execution, delivery and performance of this Agreement by the Purchaser.
3.4. Investment Representations
--------------------------
(a) The Purchaser is acquiring the Warrant hereunder and will acquire
Warrant Shares upon the exercise of the Warrant for its own account, for
investment and not with a view to the distribution thereof.
(b) The Purchaser understands that the Warrant and Warrant Shares
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act and that they must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
(c) The Purchaser understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Purchaser)
promulgated under the Securities Act depends upon the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for sales
under certain circumstances and only in limited amounts.
(d) The Purchaser is an "accredited investor" (as such term is
defined in Rule 501(a) promulgated under the Securities Act).
ARTICLE IV
WARRANT FORFEITURE PROVISIONS
4.1 Termination of the Alliance Agreement. The termination of the
-------------------------------------
Alliance Agreement under the following situations will affect the rights of the
Purchaser with respect to the Warrant and any Spin Off Warrant (as defined in
the Warrant, and referred to collectively herein as the "Warrants") and the
shares of Common Stock purchased thereunder (the "Warrant Shares") as specified
in this Article IV below. The effective date of termination of the Alliance
Agreement is referred to herein as the "Termination Date."
(a) In the event the Alliance Agreement is terminated by the Purchaser
pursuant to the provisions of Section 13.2 or 14.4 thereof and the Termination
Date is on or prior to January 31, 2000, on the Termination Date and without any
further action on the part of the Corporation the Purchaser shall (i) forfeit
rights to purchase 41% of the Warrant Shares then purchasable under the Warrants
and (ii) sell to the Corporation 41% of the
Warrant Purchase Agreement--Page 3
<PAGE>
Warrant Shares purchased under the Warrants prior to the Termination Date
(including all Distribution Assets and Additional Distribution Assets (as such
terms are defined in Section 4 of the Warrant) paid or distributed with respect
thereto).
(b) In the event the Alliance Agreement is terminated by the
Corporation on or prior to the following dates pursuant to the provisions of
Section 13.2 of the Alliance Agreement (a "Microsoft Breach"), on the
Termination Date and without any further action on the part of the Corporation
the Purchaser shall (i) forfeit the following percentage of rights to purchase
Warrant Shares under the Warrants and (ii) sell to the Corporation the following
percentage of the Warrant Shares purchased under the Warrants prior to the
Termination Date (including all Distribution Assets and Additional Distribution
Assets paid or distributed with respect thereto):
Termination Date Percentage Forfeiture
---------------- ---------------------
June 30, 1999 100%
January 31, 2000 41%
January 31, 2001 16%
4.2 Procedures for Forfeiture. In the event the Purchaser shall forfeit
-------------------------
rights to the Warrants and Warrant Shares pursuant to the provisions of Section
4.1, upon receipt of a written request of the Corporation the Purchaser shall
return to the Corporation (within 10 business days of receipt of the
Corporation's written request therefor) the Warrants for cancellation and the
Corporation shall reissue and return to the Purchaser (within 5 business days of
receipt of the original Warrants) one or more replacement Warrants, as the case
may be, of like tenor representing the balance of the rights thereunder to which
the Purchaser has not so forfeited (the "Warrant Reissue"). In addition,
simultaneously with the Warrant Reissue, Purchaser shall sell to the Corporation
and the Corporation shall purchase the Warrant Shares forfeited pursuant to the
provisions of Section 4.1 (including all Distribution Assets and Additional
Distribution Assets paid or distributed with respect thereto), if any, for a
purchase price equal to Purchaser's purchase price therefor under the Warrants.
4.3 Buyout of Remaining Warrants. In the event the Alliance Agreement is
----------------------------
terminated by the Corporation due to a Microsoft Breach or pursuant to the
provisions of Section 14.4 thereof and the Termination Date occurs on or prior
to January 31, 2001, the Corporation shall, at its option (which option shall
expire 15 days after the Termination Date), purchase and the Purchaser shall
sell to the Corporation all remaining rights to purchase Warrant Shares under
the Warrants which are not forfeited pursuant to the provisions of Section 4.1
above (together with all Distribution Assets and Additional Distribution Assets
held in the Escrow Account (as defined in the Warrant) with respect to such
rights to purchase Warrant Shares). The purchase price per share for the
remaining rights under the Warrants shall equal the Deemed Market Value (as
defined below) per share of common stock (or such other security into which such
warrant is then convertible (the "Conversion Stock")) as of the Termination Date
less the then applicable exercise price per share specified in each Warrant.
The purchase price for all Distribution Assets and Additional Distribution
Assets, if any, shall equal the Fair Market Value thereof (as defined below).
The purchase price shall be paid by the Corporation on or prior to 30 days
following the Termination Date (the "Closing Date") and shall be payable, at the
election of the Corporation, in cash or shares of Common Stock of the
Corporation (valued at the closing price for the Common Stock on the Nasdaq
Stock Market (or such other primary stock market or exchange on which the stock
then trades (the "Primary Market") on the last trading day immediately prior to
the Closing Date), or any combination of cash and shares of Common Stock of the
Corporation. As used herein, the "Deemed Market Value" of the a publicly traded
security shall equal the average of the closing prices for the security on the
Nasdaq Stock Market (or such other primary stock market or exchange on which the
security then trades) for a period of 30 trading days commencing on the date
which is 15 trading days prior to the Termination Date and ending on the date
which is 15 trading days after the Termination Date. As used herein, the "Fair
Market Value" of any Distribution Assets or Additional Distribution Assets shall
equal (i) if such assets are publicly traded securities, the Deemed Market Value
thereof, (ii) if such assets are cash, the amount thereof as of the Termination
Date, and (iii) if such assets are other than cash or publicly traded securities
the fair value thereof as of the Termination Date as mutually determined in good
faith by the Purchaser and the Corporation. In the event that the Purchaser and
the Corporation do not mutually agree on any amount which is payable under this
Section 4.3, the parties will submit such determination within 10 business days
of the date such payment is due to an independent national accounting firm which
shall not be the primary auditor for either the Purchaser or the Corporation to
Warrant Purchase Agreement--Page 4
<PAGE>
determine such amount by "Baseball Arbitration." The determination of the
accounting firm shall be (i) limited to determining the amount in dispute under
this Section 4.3, (ii) made within 10 business days of submission thereof and
(iii) final and binding on the parties and shall be enforceable in a court of
law. For purposes hereof, "Baseball Arbitration" shall mean a procedure under
which each party proposes a resolution of the amount in dispute to the
independent accountant and the independent accountant chooses one party's
proposal in its entirety without compromising the proposals of the parties or
exercising discretion unrelated to the parties' proposal. The fee of the
accounting firm shall be paid by the party whose proposal is not selected.
ARTICLE V
MISCELLANEOUS
5.1. Amendment, Modification or Waiver This Agreement shall not be
---------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by each of the parties hereto.
5.2. Entire Agreement; Content of Exhibits This Agreement, and the
-------------------------------------
Exhibit attached hereto and the Agreement contain the entire agreement of the
parties with respect to the transactions contemplated hereby and thereby and
supersede all prior agreements or understandings among the parties with respect
thereto. The Corporation acknowledges that Microsoft is acquiring the Warrant
solely as an investment and not in connection with the performance of services
by Microsoft and agrees to treat this Agreement, the Warrant and all actions
taken in connection therewith consistently with such characterization for all
purposes.
5.3. Descriptive Headings Descriptive headings are for convenience only
--------------------
and shall not control or affect the meaning or construction of any provision of
this Agreement.
5.4. Counterparts This Agreement may be executed in two counterparts, and
------------
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
5.5. Governing Law This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts, without regard to
its conflicts of laws principles.
5.6. Benefits of Agreement All the terms and provisions of this Agreement
---------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
[Remainder of page intentionally blank]
Warrant Purchase Agreement--Page 5
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Warrant Purchase
Agreement to be executed on its behalf as of the date first above written.
CORPORATION: BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
-----------------------------------------
Richard M. Spaulding
Vice President, Chief Financial Officer
PURCHASER: MICROSOFT CORPORATION
By: /s/ Gregory B. Maffei
-----------------------------------------
Gregory B. Maffei
Vice President, Finance;
Chief Financial Officer
Warrant Purchase Agreement--Page 6
<PAGE>
SCHEDULE 2.4
REGISTRATION AGREEMENTS
Securities Issuance Agreement dated as of September 4, 1997 between
Foothill Capital Corporation and Banyan Systems Incorporated.
Preferred Stock and Warrant Purchase Agreement dated as of March 5,
1998 between HarbourVest Partners V-Direct Fund, L.P. and Banyan Systems
Incorporated.
SUBSIDIARIES
------------
Jurisdiction of
Company Incorporation
------- ---------------
1. Banyan Systems International Incorporated Massachusetts
120 Flanders Road
Westboro, MA 01851
2. Banyan Securities Corporation Massachusetts
120 Flanders Road
Westboro, MA 01581
3. Banyan Systems Asia-Pacific Incorporated Massachusetts
120 Flanders Road
Westboro, MA 01581
4. Banyan Systems (UK) Ltd. England
Banyan House
Northwood Park
Gatwick Road
Crawley, West Sussex, U.K.
5. Banyan Systems (Holland) B.V. Holland
Planetenbaan 28
3605 AK MAARSSEN
The Netherlands
6. Banyan Systems (Deutschland) Germany
GmbH
Kappellenstr. 10
85622 Feldkirchen
Germany
7. Banyan Systems (France) S.A.R.L. France
11 Rue Salomon de Rothschild
92150 Suresnes
France
<PAGE>
8. Beyond Incorporated Delaware
120 Flanders Road
Westboro, MA 01581
9. Banyan Systems S.A. de C.V Mexico
Diego Rivera 27-202
Col. San Pablo Tepetlapa
Mexico, D.F. 04380
10. Banyan Systems Asia Pacific Ltd. Hong Kong
1301 Harcourt House
39 Gloucester Road
Wanchai
Hong Kong
11. Banyan Systems (Taiwan), Incorporated Massachusetts
120 Flanders Road
Westboro, MA 01581
12. Nihon Banyan Systems K.K. Japan
Kokusaikougyo Gobancho
K Bldg.
12 Gobancho, Chiyodo-ku
Tokyo 102 Japan
13. Banyan Systems (Korea) Co., Ltd. Korea
6F Eunseoung Bldg.
601-18 Yeoksam-Dong
Kangnam-ku
Seoul, Korea 135-729
14. Banyan Systems do Brasil Ltda. Brazil
Av. Roque Petrone Jr.
999-13 Andar
CEP 04707-910, Sao Paulo
SP Brasil
15. Banyan Enterprise Networks South Africa
P.O. Box 98910
Sloanpark
Bryanston 2152
Johannesburg, South Africa
16. Coordinate.com Incorporated Delaware
120 Flanders Road
Westboro, MA 01581
17. Switchboard Incorporated Delaware
115 Flanders Road
Westboro, MA 01581
Warrant Purchase Agreement--Page 8
<PAGE>
BANYAN OWNERSHIP OF SUBSIDIARIES
--------------------------------
Equity Structure of Switchboard
Certificate of Incorporation, as Amended:
- ----------------------------------------
Authorized Common Stock, $0.01 par value per share
(the "Common Stock"): 17,500,000 shares
Authorized Preferred Stock, $0.01 par value per share
(the "Preferred Stock"): 4,000,000 shares
Designations of the Preferred Stock:
Series A Convertible Preferred Stock ("Series A
Stock"): 750,000 shares
Series B Convertible Preferred Stock ("Series B
Stock"): 1,500,000 shares
Outstanding shares of Common Stock
- ----------------------------------
Ownership: 7,015,000 shares total
7,000,000 shares - Banyan Systems Incorporated
750 shares - Martha Collins
500 shares - Michael Dinsmore
1,500 shares - David A. Mary
1,000 shares - Vishwanthan Ramamurphy
2,000 shares - Christopher Shaw
7,500 shares - Deepak Taneja
1,750 shares - Patricia A. Ward
Outstanding shares of Series A Stock:
- ------------------------------------
Ownership: 750,000 shares total
375,000 shares - America Online, Inc.
375,000 shares - Digital City Inc.
Outstanding shares of Series B Stock: 0 shares total
- -------------------------------------
Warrant Purchase Agreement--Page 9
<PAGE>
Outstanding Series B Stock Purchase Warrants:
- --------------------------------------------
3.75% of the issued and outstanding
shares of capital stock of Switchboard
Incorporated on a fully diluted basis
on the date of exercise, subject to
adjustment
- America Online, Inc.
(The Company believes the foregoing Warrant to America Online, Inc. has
expired pursuant to its terms.)
3.75% of the issued and outstanding
shares of capital stock of Switchboard
Incorporated on a fully diluted basis
on the date of exercise, subject to
adjustment
- Digital City Inc.
(The Company believes the foregoing warrant to Digital City Inc. has
expired pursuant to its terms.)
Outstanding Common Stock Purchase Warrants:
- ------------------------------------------
A maximum of 250,000 shares, subject
to adjustment - America Online, Inc.
(The Company believes the foregoing warrant to America Online, Inc. has
expired pursuant to its terms.)
Up to 300,000 shares, subject
to adjustment - Continuum Software Inc.
1996 Stock Incentive Plan:
- -------------------------
Shares of Common Stock Authorized for issuance:
1,500,000 shares
Outstanding Options to Purchase Common Stock (as of
December 31, 1998): 1,205,625 shares
Nihon Banyan Systems K.K.
-------------------------
The Company owns a 66.67% interest in Nihon Banyan Systems K.K. with the
remaining 33.33% interest owned collectively by Marubeni Corporation and NTT
Technology Corporation.
Other Subsidiaries
------------------
Other than Switchboard Incorporated and Nihon Banyan Systems K.K., all of
the subsidiaries of the Company listed in Schedule 2.4 are wholly owned by the
Company.
Warrant Purchase Agreement--Page 10
<PAGE>
EXHIBIT 10.3
------------
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THIS WARRANT OR
OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY
APPLICABLE STATE SECURITIES LAW.
COMMON STOCK WARRANT NO. 2 JANUARY 8, 1999
BANYAN SYSTEMS INCORPORATED
COMMON STOCK PURCHASE WARRANT
-----------------------------
Banyan Systems Incorporated, a Massachusetts corporation (the "Company"),
hereby grants to Microsoft Corporation, a Washington corporation ("Microsoft"),
or its permitted assigns or transferees (Microsoft and each such permitted
assignee or transferee being referred to herein as a "holder" and collectively
as the "holders") the right to purchase, at any time after the Exercise Date (as
defined below in Section 1.2) and from time to time on and after the date hereof
until the Expiration Date (as defined below), up to an aggregate of One Million
Seven Hundred Fifty Thousand (1,750,000) shares of Common Stock, par value $.01
per share (the "Common Stock"), on the terms and subject to the conditions set
forth below.
This Common Stock Purchase Warrant (hereinafter, this "Warrant") was
originally issued on January 8, 1999 (the "Original Issue Date"). This Warrant
shall expire and be of no further force or effect on the date (the "Expiration
Date") seven (7) years from the Original Issue Date.
1. Exercise of Warrant.
-------------------
1.1 Exercise and Vesting. Subject to adjustment as hereinafter provided,
--------------------
the rights represented by this Warrant are exercisable on and after the Original
Issue Date until the Expiration Date (the "Exercise Date"), at a price per share
(the "Exercise Price") of the Common Stock issuable hereunder (hereinafter,
"Warrant Shares") equal to TEN Dollars ($10.00). The Exercise Price shall be
payable in cash, by certified or official bank check as hereinafter provided or
in accordance with Section 1.2 below. This Warrant is fully vested.
Upon surrender of this Warrant with a duly executed Notice of Exercise in
the form of Annex A hereto, together with payment, if applicable, of the
-------
Exercise Price for the Warrant Shares purchased, at the Company's principal
executive offices presently located at 120 FLANDERS ROAD, WESTBORO,
MASSACHUSETTS 01581, or at such other address as the Company shall have advised
the holder in writing (the "Designated Office"), the holder shall be entitled to
receive a certificate or certificates for the Warrant Shares so purchased. The
Company agrees that the Warrant Shares shall be deemed to have been issued to
the holder as of the close of business on the date on which this Warrant shall
have been surrendered together with the Notice of Exercise and payment, if
applicable, for such Warrant Shares.
<PAGE>
1.2 Right to Convert.
----------------
(a) Subject to the provisions of Section 1.1, at any time or from
time after the third anniversary of the Original Issue Date to and including the
Expiration Date, the holder of this Warrant shall also have the right to convert
this Warrant or any portion thereof (the "Conversion Right"), without payment by
the holder of this Warrant of the Exercise Price in cash or any other
consideration (other than the surrender of rights to receive Warrant Shares
hereunder), into shares of Common Stock as provided in this Section 1.2. Upon
exercise of the Conversion Right with respect to a particular number of Warrant
Shares (the "Converted Warrant Shares"), the Company shall deliver to the holder
of this Warrant (without payment by the holder of this Warrant of the Exercise
Price in cash or any other consideration (other than the surrender of rights to
receive Warrant Shares hereunder)) that number of shares of Common Stock equal
to the quotient obtained by dividing: (x) the difference between (i) the product
of (A) the Current Market Price of a share of Common Stock multiplied by (B) the
number of Converted Warrant Shares and (ii) the product of (A) the Exercise
Price multiplied by (B) the number of the Converted Warrant Shares, in each case
as of the Conversion Date (as defined by Section 1.2(b)), by (y) the Current
Market Price of a share of Common Stock on the Conversion Date. No fractional
Warrant Shares shall be issuable upon exercise of the Conversion Right, and if
the number of Warrant Shares to be issued determined in accordance with the
following formula is other than a whole number, the Company shall pay to the
holder of this Warrant an amount in cash equal to the Current Market Price of
the resulting fractional Warrant Share on the Conversion Date.
(b) The Conversion Right may be exercised by the holder of this
Warrant by the surrender of this Warrant as provided in Section 1.1, together
with a written statement specifying that the holder of this Warrant thereby
intends to exercise the Conversion Right and indicating the number of Converted
Warrant Shares which are covered by the exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Corporation of this Warrant,
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"). The Corporation shall issue to the
holder of this Warrant as of the Conversion Date a certificate for the Warrant
Shares issuable upon exercise of the Conversion Right and, if applicable, a new
warrant of like tenor evidencing the balance of the Warrant Shares remaining
subject to this Warrant.
(c) The term "Current Market Price" for the Common Stock as of a
specified date shall mean: (i) if the Common Stock is publicly traded on such
date, the average closing price per share over the preceding 10 trading days as
reported on the principal stock exchange or quotation system on which the Common
Stock is listed or quoted; or (ii) if the Common Stock is not publicly traded on
such date, the greater of the book value (determined in accordance with GAAP)
and the appraised value per share of Common Stock as of such date determined by
an investment banking firm of recognized standing selected and paid for by the
Company and reasonably satisfactory to the holder hereof. In the event that the
holder disputes such appraised value, the holder shall be entitled to select an
additional investment banking firm of recognized standing and paid for by the
holder to calculate the appraised value and the Company and the holder shall use
their good faith best efforts to agree on the appraised value based on the
reports of the two investment banking firms. In the event that the Company and
the holder are still unable to reach agreement as to the appraised value, the
Company and the holder agree to submit such determination to binding
arbitration.
2. Transfer; Issuance of Stock Certificates; Restrictive Legends.
-------------------------------------------------------------
2.1 Transfer. (a) Except as expressly permitted in the following
--------
sentence, this Warrant and the rights hereunder are not transferable by the
holder hereof. Notwithstanding the foregoing, this Warrant may be assigned to
any entity controlled by or under common control with (as evidenced by ownership
of 50% or more of the outstanding voting stock or other interests of such
entity) Microsoft. Subject to compliance with the restrictions on transfer set
forth in this Section 2, each transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the Designated
Office, together with a written assignment of this Warrant in the form of Annex
-----
B hereto duly executed by the holder or its agent or attorney. Upon such
- -
surrender and delivery, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, if any. A
Warrant, if properly assigned in compliance with the provisions hereof, may be
exercised by the new holder for the purchase of Warrant Shares without having a
new Warrant issued. All Warrants issued upon any
Banyan Inc. Common Stock Purchase Warrant--Page 2
<PAGE>
assignment of Warrants shall be the valid obligations of the Company, evidencing
the same rights, and entitled to the same benefits as the Warrants surrendered
upon such registration of transfer or exchange.
(b) In addition to the foregoing, this Warrant and the Warrant Shares
shall not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act or (ii) the Company shall have been
furnished with an opinion of legal counsel, reasonably acceptable to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act.
2.2 Stock Certificates. Certificates for the Warrant Shares shall be
------------------
delivered to the holder within a reasonable time after the rights represented by
this Warrant shall have been exercised pursuant to Section 1, and a new Warrant
representing the share, shares or fraction of a share of Common Stock, if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder within such time. The issuance of certificates for
Warrant Shares upon the exercise of this Warrant shall be made without charge to
the holder hereof, other than any tax that may be payable by the holder hereof
(including any income tax to which the holder hereof may be subject in
connection with the issuance of this Warrant or the Warrant Shares).
2.3 Restrictive Legends.
-------------------
(a) Except as otherwise provided in this Section 2, each certificate
for Warrant Shares initially issued upon the exercise of this Warrant, and each
certificate for Warrant Shares issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER
IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAWS, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY
THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
(b) Except as otherwise provided in this Section 2, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NO
TRANSFER OF THIS WARRANT OR OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAW, OR (B)
THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OF ANY APPLICABLE STATE SECURITIES LAW.
Notwithstanding the foregoing, the legend requirements of this Section 2.3 shall
terminate as to any particular Warrant or Warrant Share when the Company shall
have received from the holder thereof an opinion of counsel in form and
substance reasonably acceptable to the Company that such legend is not required
in order to ensure
Banyan Inc. Common Stock Purchase Warrant--Page 3
<PAGE>
compliance with the Securities Act. Whenever the restrictions imposed by this
Section 2.3 shall terminate, the holder hereof or of Warrant Shares, as the case
may be, shall be entitled to receive from the Company without cost to such
holder a new Warrant or certificate for Warrant Shares of like tenor, as the
case may be, without such restrictive legend.
3. Adjustment of Number of Shares; Exercise Price; Nature of Securities
--------------------------------------------------------------------
Issuable Upon Exercise of Warrants.
----------------------------------
3.1 Exercise Price; Adjustment of Number of Shares. The Exercise Price
----------------------------------------------
set forth in Section 1 hereof and the number of shares purchasable hereunder
shall be subject to adjustment from time to time as hereinafter provided.
3.2 Reorganization, Reclassification, Consolidation, Merger or Sale. If
---------------------------------------------------------------
any capital reorganization or reclassification of the capital stock of the
Company, or any consolidation or merger of the Company with another entity, or
the sale of all or substantially all of the Company's assets to another person
or entity (collectively referred to as a "Transaction") shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities, cash or assets with respect to or in exchange for Common Stock, then
reasonable, lawful and adequate provisions shall be made whereby the holder of
this Warrant shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant, upon exercise
of this Warrant and in lieu of the Warrant Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such number, amount and like kind of shares of stock, securities, cash or assets
as may be issued or payable pursuant to the terms of the Transaction with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby as if such shares were outstanding immediately prior to the
Transaction, and in any such case appropriate provision shall be made with
respect to the rights and interest of the holders to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Exercise Price and of the number of Warrant Shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be practicable, in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof.
3.3 Stock Splits, Stock Dividends and Reverse Stock Splits. In case at
------------------------------------------------------
any time the Company shall subdivide its outstanding shares of Common Stock into
a greater number of shares, or shall declare and pay any stock dividend with
respect to its outstanding stock that has the effect of increasing the number of
outstanding shares of Common Stock, the Exercise Price in effect immediately
prior to such subdivision or stock dividend shall be proportionately reduced and
the number of Warrant Shares purchasable pursuant to this Warrant immediately
prior to such subdivision or stock dividend shall be proportionately increased,
and conversely, in case at any time the Company shall combine its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced.
3.4 Issuance of Additional Shares of Common Stock. If at any time prior
---------------------------------------------
to the Expiration Date the Company shall issue any Additional Shares of Common
Stock for a consideration per share (the "Subsequent Issue Price") less than the
Exercise Price as in effect immediately prior to such issuance, the Exercise
Price shall be reduced to the lower of the prices calculated by:
(a) dividing (i) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issuance multiplied
by the Exercise Price then in effect plus (y) the aggregate consideration, if
any, received by the Company in connection with such issuance by (ii) the total
number of shares of Common Stock outstanding immediately after such issuance;
and
(b) multiplying the then existing Exercise Price by a fraction, the
numerator of which shall be the quotient obtained by dividing (i) the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such
issuance multiplied by the Current Market Price per share of Common Stock
immediately prior to such issuance plus (y) the aggregate consideration received
by the Company in connection with such issuance divided by (ii) the total number
of shares of Common Stock outstanding immediately after such issuance, and the
denominator of which shall be the Current Market Price per share of Common Stock
immediately prior to such issuance.
Banyan Inc. Common Stock Purchase Warrant--Page 4
<PAGE>
For purposes of this Section 3.4, "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued or issuable by the Company after the
Original Issue Date, other than (i) shares issuable upon exercise or conversion
of options, warrants or securities of the Company described in Section 2.4 of
the Warrant Purchase Agreement dated the Original Issue Date between the Company
and Microsoft Corporation (the "Warrant Purchase Agreement"), (ii) shares issued
by the Company in an underwritten public offering, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets or other reorganization, (iv)
securities issued to employees, consultants, advisors, officers or directors of
the Company or any subsidiary of the Company pursuant to any stock option plan
or stock purchase or stock bonus arrangement or employment letter, agreement or
arrangement in effect on the date hereof or hereafter approved by the Board of
Directors of the Company, (v) securities issued or issuable pursuant to the
Securities Issuance Agreement dated as of September 4, 1997 between Foothill
Capital Corporation and the Company, including shares issuable upon exercise of
the warrants issued pursuant thereto, (vi) shares of capital stock issued as a
dividend to holders of such class of capital stock or upon any subdivision or
combination of shares of such class of capital stock or (vii) upt to 100,000
shares of Common Stock issuable in any calendar year in connection with any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by or involving any type of debt or equity instrument
(provided that such equity is, in the good faith judgment of the Board of
- ---------
Directors of the Company, ancillary to such borrowing). For purposes of this
Section 3.4, in the case of Convertible Securities, there shall be determined
the price per share for which Additional Shares of Common Stock are issuable
upon the conversion or exchange thereof, such determination to be made by
dividing (i) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon conversion or exchange thereof by (ii) the maximum aggregate number
of additional Shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities for such minimum aggregate amount of additional
consideration; and such issue or sale shall be deemed to be an issue or sale for
cash (as of the date of issue or sale of such Convertible Securities, whether or
not then exercisable or convertible) of such maximum number of Additional Shares
of Common Stock at the price per share so determined.
If any rights of conversion or exchange evidenced by Convertible Securities
the issuance of which resulted in an adjustment to the Exercise Price and the
number of Warrant Shares issuable hereunder pursuant to this Section 3.4 shall
expire without having been exercised, or if any such Convertible Securities are
exercised for a consideration greater than or for a number of Additional Shares
of Common Stock less than those used for purposed of determining the adjustment
to the Exercise Price provided in this Section 3.4, the adjusted Exercise Price
shall forthwith be readjusted to such Exercise Price as would have been in
effect had an adjustment with respect to such Convertible Securities been made
on the basis that the only Additional Shares of Common Stock issued or sold were
those issued upon the conversion or exchange of such Convertible Securities, and
that they were issued or sold for the consideration actually received by the
Company upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of such Convertible Securities.
In addition, upon adjustment of the Exercise Price under this Section 3.4,
the holder hereof shall thereafter be entitled to purchase at the Exercise Price
resulting from such adjustment a number of Warrant Shares obtained by
multiplying the Exercise Price immediately prior to such issuance by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such issuance
and dividing the product thereof by the Exercise Price resulting from such
adjustment. The provisions of this Section 3.4 shall not apply to any issuance
of Common Stock (i) for which an adjustment is provided for under Sections 3.2
or 3.3 or (ii) upon exercise of any option or warrant of the Company outstanding
on the Original Issue Date. Notwithstanding anything to the contrary in this
Section 3.4, in no event shall (i) the Exercise Price be increased or (ii) the
number of Warrant Shares purchasable hereunder be decreased pursuant to the
provisions of this Section 3.4. The provisions of this Section 3.4 shall
terminate in the event that the Alliance Agreement is terminated pursuant to
Section 14.4 thereof.
3.5 Dissolution, Liquidation or Wind-Up. In case the Company shall, at
-----------------------------------
any time prior to the exercise of this Warrant, dissolve, liquidate or wind up
its affairs, the holder hereof shall be entitled, upon the exercise of this
Warrant, to receive, in lieu of the Warrant Shares which the holder would have
been entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to such holder upon any such dissolution,
liquidation or winding up with respect to such Warrant Shares, had such holder
hereof been the holder of record of
Banyan Inc. Common Stock Purchase Warrant--Page 5
<PAGE>
the Warrant Shares receivable upon the exercise of this Warrant on the record
date for the determination of those persons entitled to receive any such
liquidating distribution.
3.6 Accountant's Certificate. In each case of an adjustment in the
------------------------
Exercise Price, number of Warrant Shares or other stock, securities or property
receivable upon the exercise of this Warrant, the Company shall reasonably
promptly compute, and upon the holder's request shall at the Company's expense
cause independent public accountants of recognized standing selected by the
Company and reasonably acceptable to the holder to certify such computation,
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of (i) the number of
shares of Common Stock of each class outstanding or deemed to be outstanding,
(ii) the adjusted Exercise Price and (iii) the number of Warrant Shares issuable
upon exercise of this Warrant. Thereafter, the Company will reasonably promptly
mail a copy of each such certificate to the holder hereof. In the event that
the holder in good faith disputes such adjustment, the holder shall be entitled
to select an additional firm of independent certified public accountants of
national standing and paid for by the holder to certify such adjustment and the
Company and the holder shall use their good faith best efforts to agree on such
adjustment based on the reports of the two accounting firms. In the event that
the Company and the holder are still unable to reach agreement as to such
adjustment, the Company and the holder agree to submit such determination to
binding arbitration. Upon determination of such adjustment, the Board of
Directors shall forthwith make any adjustments described therein.
3.7 Definition of Common Stock. As used in this Section 3, the term
--------------------------
"Common Stock" shall mean and include the Company's authorized common stock of
any class or classes and any securities convertible into or exchangeable for
such common stock.
4. Anti-Dilution.
-------------
(a) In the event that the Company at any time after the Original Issue
Date shall pay a special dividend or make any other distribution with respect to
its Common Stock (or any other shares of the capital stock of the Company for
which this Warrant becomes exercisable pursuant to Section 3 above) other than
in the ordinary course of business in the form of cash or other property (other
than (i) a distribution to which the provisions of Section 3.2 apply, (ii) a
stock dividend subject to the provisions of Section 3.3 above or (iii) a
dividend or distribution consisting of capital stock of a subsidiary, which is
covered by paragraph (b) below), then upon exercise of this Warrant the holder
shall be entitled to receive (in addition to the number of Warrant Shares
acquired upon such exercise) such cash or property as the holder would have
received had the holder held, as of the record date for the payment of such cash
or property (the "Distribution Date"), such number of Warrant Shares as were
then acquired upon exercise (the "Distribution Assets"), together with all such
other cash or property distributed or paid on or with respect to the
Distribution Assets after the Distribution Date through the date of exercise
hereof (collectively, the "Additional Distribution Assets"). The Company
covenants and agrees to hold all Distribution Assets and Additional Distribution
Assets in trust for the benefit of holder in a segregated escrow account
established and maintained with a national banking institution reasonably
acceptable to the holder hereof (the "Escrow Account"). Such Distribution Assets
and Additional Distribution Assets shall be deposited in the Escrow Account no
later than the record date for payment of such assets.
(b) In the event that the Company at any time after the Original Issue
Date shall pay a special dividend or make any other distribution with respect to
its Common Stock (or any other shares of the capital stock of the Company for
which this Warrant becomes exercisable pursuant to Section 3 above) in the form
of shares of capital stock of a subsidiary (other than a distribution to which
the provisions of Section 3.2 apply)(a "Spin Off Distribution"), then on the
date of payment of the Spin Off Distribution (the "Payment Date"): (i) the
Exercise Price under this Warrant shall be adjusted in accordance with the
provisions of paragraph (c) below, and (ii) the Company shall issue to the
holder an additional warrant identical to this warrant to purchase such number
of securities of the type being distributed by the Company as is equal to the
number of such securities the holder would have received had the holder
exercised this Warrant in full immediately prior to the record date for
determining stockholders entitled to participate in the Spin Off Distribution,
with an exercise price determined in accordance with the provisions of paragraph
(c) below (the "Spin Off Warrant"). The Company covenants and agrees that for so
long as the Spin Off Warrant remains outstanding it will reserve and keep free
of all liens, claims and encumbrances of any third party such securities as are
issuable upon exercise of the Spin Off Warrant.
Banyan Inc. Common Stock Purchase Warrant--Page 6
<PAGE>
(c) The Exercise Price in effect under this Warrant immediately prior to
the Payment Date (the "Pre Spin Off Exercise Price") shall be adjusted effective
on the Payment Date to a price (the "Post Spin Off Exercise Price") determined
by multiplying the Pre Spin Off Exercise Price by a fraction (x) the numerator
of which shall be the average closing price of the Company's Common Stock as
reported on the primary exchange or trading market on which it is then traded
(the "Primary Market") on the next trading day following the Payment Date (the
"Post-Spin Off Market Price"), and (y) the denominator of which shall be the
average closing price of the Company's Common Stock as publicly reported on the
Primary Market over the ten trading days immediately preceding the Payment Date
(the "Pre-Spin Off Market Price"). The exercise price of the Spin Off Warrant
on the date of issuance (which shall be subject to adjustment as described
therein) shall equal the amount obtained by subtracting the Post Spin Off
Exercise Price from the Pre-Spin Off Exercise Price.
5. Registration; Exchange and Replacement of Warrant; Reservation of Shares.
------------------------------------------------------------------------
The Company shall keep at the Designated Office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result in
preventing or delaying the exercise or transfer of this Warrant.
The Company may deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration or transfer as provided in this Section 5.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant upon delivery of an
indemnity agreement (with surety if reasonably required by the Company) in the
case of theft or loss.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise hereof. The Company covenants and agrees that, upon
exercise of this Warrant and payment of the Exercise Price therefor, if
applicable, all Warrant Shares issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable.
6. Registration of Common Stock.
----------------------------
6.1. Registration and Qualification.
------------------------------
(a) Piggyback Registration. If, after the Exercise Date, the
----------------------
Company proposes to register any equity security (as defined in Section 3(a)(11)
of the Securities Exchange Act of 1934, as amended) of the Company under the
Securities Act of 1933, as amended (the "Securities Act"), on any registration
form prescribed by the Securities and Exchange Commission (the "Commission")
permitting a secondary offering or distribution other than (i) Form S-4 or S-8
(or any successor form thereto), (ii) a registration filed in connection with an
exchange offering or an offering of securities solely to existing holders of the
Company's securities, or (iii) any registration statement covering only
securities proposed to be issued in exchange for securities or assets of another
company, not less than 20 days prior to each such registration, the Company
shall give to the holder hereof and the holders of the Warrant Shares written
notice of such proposal which shall describe in detail the proposed registration
and distribution (including those jurisdictions where registration or
qualification under the securities or blue sky laws is intended) and, upon the
written request of any holder hereof or any holder of Warrant Shares given
within 10 days after the date of any such notice, proceed to include in such
registration such Warrant Shares issued or issuable upon the exercise of this
Warrant as have been requested by any such holder to be included in such
registration. The Company will in each instance use its commercially reasonable
best efforts to cause any Warrant Shares issued or issuable (but not for when-
issued trading) hereunder (the holders of which shall have so requested
registration thereof) to be registered under the Securities Act and qualified
under the securities or blue sky laws of any state reasonably requested by a
prospective seller; provided, that in the event such registration is an
underwritten offering
Banyan Inc. Common Stock Purchase Warrant--Page 7
<PAGE>
and the managing underwriters advise the Company in writing that, in their
opinion, the number of securities requested to be included in such registration
exceeds the number which can be reasonably sold in such offering without being
seriously detrimental to the price of the shares sold therein, the Company will
include in such registration only the following shares: (i) first, the aggregate
number of securities to be issued by the Company, (ii) second, to the extent
permitted, the Warrant Shares issued or issuable hereunder requested to be
included in such registration and (iii) third, to the extent permitted, other
securities requested to be included in such registration; and provided further,
however, that to the extent such priority violates any agreement of the Company
outstanding prior to the Original Issue Date with respect to registration of its
equity securities, the shares covered in any such agreement shall be treated on
a pro rata basis with the Warrant Shares issued or issuable hereunder requested
to be included in such registration. The Company shall select the managing
underwriters for any offering made pursuant to this Section 6.1(a). In the event
of any underwritten offering, the right of any holder hereof or holder of
Warrant Shares to registration pursuant to this paragraph 6.1(a) shall be
conditioned upon such holder's participation in such underwriting, including the
execution of an underwriting agreement on the terms and conditions applicable to
all selling shareholders thereunder; provided, that in no event shall any such
holder's maximum liability for indemnification or contribution thereunder exceed
the net proceeds received by such holder from the sale of shares thereunder.
(b) Demand Registration. The holders may: (i) on two (2)
-------------------
occasions require the Company to effect the registration of Warrant Shares
issued or issuable hereunder on Form S-3 (or any successor form thereto, a
"Short Form Registration), provided that the Company is eligible to use such
form for such registration; and (ii) in the event a Short Form Registration is
unavailable at the time of such request on one (1) occasion, require the Company
to effect the registration (but not for when-issued trading) of Warrant Shares
issued and issuable hereunder on Form S-1 (or any successor form thereto, a
"Long Form Registration"), in each case pursuant to the provisions of this
Section 6.1(b). If holders of Warrant Shares issued and issuable hereunder shall
give notice to the Company to the effect that such holders desire to transfer
Warrant Shares issued and issuable hereunder pursuant to a public distribution
(within the meaning of the Securities Act), then the Company shall, reasonably
promptly after receipt of such notice (but in any event within 45 days after
receipt of such notice), file a registration statement on the specified form
pursuant to the Securities Act and cause Warrant Shares to be registered under
the Securities Act and qualified under the securities or blue sky laws of any
state reasonably requested by a prospective seller, to the end that such Warrant
Shares may be sold by the holders thereof under the Securities Act and pursuant
to the securities or blue sky laws of the jurisdictions requested, as promptly
as is reasonably practicable thereafter and the Company will use its
commercially reasonable best efforts to cause any such registration to become
effective and to keep the prospectus included therein current until the
distribution shall have been completed (but in any case not to exceed 90 days
after the effective date of such registration statement); provided that such
holders shall furnish the Company with such appropriate information in
connection therewith as the Company may reasonably request in writing.
Notwithstanding the foregoing, the Company shall not be required to effect any
registration hereunder for less than 50,000 Warrant Shares (subject to
appropriate adjustment in the case of stock dividends, stock splits,
recapitalizations and the like) unless the registration covers all of the
remaining Warrant Shares purchased or purchasable by the holder hereunder. The
managing underwriters, if any, for any offering made pursuant to this Section
6.1(b) shall be selected by the Company, subject to the consent of the holder,
which consent shall not be unreasonably withheld. The Company will not include
in a registration pursuant to this Section 6.1(b) any securities which are not
Warrant Shares without the prior written consent of the parties requiring such
registration hereunder, which consent will not be unreasonably withheld with
respect to any shares to be issued and sold therein by the Company.
(c) Termination of Registration Rights. The registration rights
----------------------------------
contained in this Section 6.1 terminate at such time as all of the Warrant
Shares are either sold pursuant to an effective registration statement under the
Securities Act or are eligible for sale in any period of three consecutive
months pursuant to Rule 144 under the Securities Act (and in any event on the
tenth anniversary of the Original Issue Date).
6.2. Registration and Qualification Procedures. Whenever the Company is
-----------------------------------------
required by the provisions of Section 6.1 to use its commercially reasonable
best efforts to effect the registration of any of its securities under the
Securities Act, the Company will, as expeditiously as is reasonably practicable:
Banyan Inc. Common Stock Purchase Warrant--Page 8
<PAGE>
(a) prepare and file with the Commission a registration statement
with respect to such securities;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
the prospectus current and to comply with the provisions of the Securities Act
with respect to the sale of all securities covered by such registration
statement whenever the seller of such securities shall desire to sell the same;
(c) furnish to each seller such number of copies of the registration
statement, preliminary prospectuses and prospectuses and each supplement or
amendment thereto and such other documents as each seller may reasonably request
in order to facilitate the sale or other disposition of the securities owned by
such seller in conformity with (i) the requirements of the Securities Act and
(ii) the seller's proposed method of distribution;
(d) register or qualify, or utilize an exemption from registration or
qualification with respect to, the securities covered by such registration
statement under the securities or blue sky laws of such jurisdictions within the
United States as each seller shall reasonably request, to the extent possible,
and do such other reasonable and customary acts and things as may be required of
it to enable each seller to consummate the sale or other disposition, in such
jurisdictions, of the securities owned by such seller;
(e) provide and cause to be maintained a transfer agent and registrar
for securities covered by such registration statement from and after a date not
later than the effective date of such registration statement;
(f) if requested by the underwriters for any underwritten offering of
securities pursuant to a registration requested under Section 6.1, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, provisions with respect to indemnities and contribution as
are reasonably satisfactory to such underwriters and the sellers; and the
sellers on whose behalf securities are to be distributed by such underwriters
will be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, will also be made to and for the benefit of
such sellers;
(g) use its commercially reasonable best efforts to furnish, at the
request of any seller, on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, covering such legal matters with respect
to the registration in respect of which such opinion is being given as are
reasonable and customarily included in such opinion and (ii) letters, dated,
respectively, (1) the effective date of the registration statement and (2) the
date such securities are delivered to the underwriters, if any, for sale
pursuant to such registration, from a firm of independent certified public
accountants of recognized standing selected by the Company, addressed to the
underwriters, if any, covering such financial, statistical and accounting
matters with respect to the registration in respect of which such letters are
being given as are customarily included in such letters;
(h) otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders not later than 16 months after the effective date of the
registration statement an earnings statement covering a period of at least 12
months beginning after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 10(a) of the
Securities Act;
(i) make available for inspection by the sellers, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by the sellers or underwriter,
to the extent reasonably requested, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to
Banyan Inc. Common Stock Purchase Warrant--Page 9
<PAGE>
supply all information reasonably requested by the sellers, underwriter,
attorney, accountant or agent in connection with such registration statement;
(j) keep each seller advised in writing as to the initiation and
progress of any registration under Section 6.1, as the case may be; and
(k) during the period when the registration statement is required to
be effective, notify each seller of the happening of any event as a result of
which the prospectus included in the registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(l) Holder covenants and agrees that it will provide customary
representations and warranties and opinion of counsel, if requested by the
underwriters, if any, in any registered offering effected pursuant to Section
6.1.
6.3 Allocation of Expenses. If the Company is required by the provision
----------------------
of Section 6.1 to use its commercially reasonable best efforts to effect the
registration or qualification under the Securities Act or any state securities
or blue sky laws of any Common Stock issued or issuable upon the exercise of
this Warrant, the Company will pay all expenses (other than underwriters'
discounts and commissions with respect to such shares and legal fees and
expenses of the holders, and other than with respect to any registration that is
withdrawn at the request of a holder) in connection therewith, including,
without limitation, (a) all expenses incident to filing with the National
Association of Securities Dealers, Inc., (b) registration fees, (c) printing
expenses, (d) accounting and legal fees and expenses, (e) expenses of any
special audits incident to or required by any such registration or qualification
of the Company, (f) expenses of complying with the securities or blue sky laws
of any states in connection with such registration or qualification and (g) all
listing and other stock exchange or NASDAQ fees.
6.4 Indemnification. In connection with any registration or qualification
---------------
of securities under Section 6.1, the Company hereby agrees to indemnify the
holder hereof and the holders of any Warrant Shares, including each person, if
any, who controls the holder hereof or such stockholder within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation in the
defense thereof) caused by any (i) breach of any representation, warranty or
covenant of the Company contained in any underwriting agreement relating to such
offering and (ii) untrue, or alleged untrue, statement of a material fact
contained in any registration statement, preliminary prospectus, prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or caused by any
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except with respect to any holder hereof or holder of Warrant Shares insofar as
such losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon, or in conformity with, information furnished in writing to the
Company by such holder. The holder hereof and the holders of Warrant Shares
hereby severally agree to indemnify the Company and each officer, director and
controlling person of the Company within the meaning of Section 14 of the
Securities Act against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) caused by any (i) breach of any
representation, warranty, covenant or agreement of such holder contained in any
underwriting agreement relating to such offering and (ii) untrue, or alleged
untrue, statement of a material fact contained in any registration statement,
preliminary prospectus or notification or offering circular (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or caused by any omission, or alleged omission, to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon, or in conformity with, information furnished in writing to the Company by
such holder contemplated for use therein.
Any person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that failure to give or delay giving such
Banyan Inc. Common Stock Purchase Warrant--Page 10
<PAGE>
notice shall not relieve the indemnifying party of any indemnification
obligation hereunder or otherwise except to the extent that the indemnifying
party is prejudiced by such failure or delay), and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with one
counsel reasonably satisfactory to the indemnified parties. If such defense is
assumed, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld).
The indemnification provided for under this Agreement will remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling person or such
indemnified party and will survive the transfer of securities.
6.5 Limitations.
-----------
(a) If the Company has delivered preliminary or final prospectuses to the
selling holders and after having done so the prospectus is required to be
amended to comply with the provisions of the Securities Act, the Company shall
notify the selling holders in writing and, if requested by the Company, the
selling holders shall immediately cease utilizing such prospectus and making
offers of securities thereunder.
(b) Any other provision of this Warrant notwithstanding, upon receipt by a
holder of a written notice from the Company to the effect set forth below (a
"Suspension Notice"), the Company shall not be obligated during a reasonable
period of time thereafter to effect any registrations pursuant to this Warrant,
and the holders agree that they will immediately suspend all sales of securities
under an effective registration statement for a reasonable period of time, in
either case not to exceed 120 days, at any time at which, in the Company's good
faith judgment, (i) there is a development involving the Company or any of its
subsidiaries that is material to the Company on a consolidated basis but has not
yet been publicly disclosed, (ii) registration requires a special audit or (iii)
the Company is engaged or has plans to engage in a registered public offering or
any other activity which, in the Company's good faith judgment, would be
adversely affected by the requested registration; provided, that the Company may
send a Suspension Notice no more frequently than one time in any period of
twelve consecutive months. The Company shall not be required to commence any
demand registration within six months of any other registration statement of the
Company.
(c) Any other provision of this Warrant notwithstanding, the Company shall
not be required to qualify any sale under the securities or blue sky laws of any
jurisdiction if such qualification would require the Company to consent to a
general service of process or qualify to do business in such jurisdiction.
(d) Any other provision of this Warrant notwithstanding, the Company shall
not be required to register any shares that are then eligible for sale under the
provisions of Rule 144(k) under the Securities Act.
(e) The registration rights granted herein are in all respects subject to
the registration rights set forth on Schedule 2.4 to the Warrant Purchase
Agreement (the "Existing Registration Rights"). In the event of any conflict
between the Existing Registration Rights and the rights granted hereby, the
Existing Registration Rights shall govern, and the provisions of this Agreement
shall be deemed to be so modified; provided that the provisions of Section 8.11
of the Preferred Stock and Warrant Purchase Agreement dated March 5, 1998
between the Company and HarbourVest Partners V-Direct Fund, L.P. shall not apply
to or modify the provisions of this Warrant.
(f) Each holder agrees not to sell, offer, agree to sell, grant any option
for the sale of, pledge, make any short sale, transfer or otherwise dispose of
any shares of Common Stock or other securities of the Company (including
securities distributed as a dividend on the Common Stock) for a period of three
(3) years from the Original Issue Date; provided that the provisions of this
Section 6.5(f) shall terminate and be of no further force or effect upon the
termination of the Alliance Agreement between the Company and Microsoft dated
the Original Issue Date (the "Alliance Agreement") pursuant to the provisions of
Section 13.2 thereof. The Company may impose "stop-transfer" instructions to
enforce the foregoing limitation and covenants and agrees to promptly remove any
such instructions upon termination of the provisions of this Section 6.5(f).
Banyan Inc. Common Stock Purchase Warrant--Page 11
<PAGE>
(g) Any holder receiving any notice from the Company regarding the
Company's plans to file a registration statement or to engage in any other
transaction shall treat such notice confidentially and shall not disclose such
information to any person other than as necessary to exercise its rights
hereunder.
7. Company Information.
-------------------
Until the termination of the registration rights set forth in Section 6.1,
in the event the Company no longer files periodic reports with the SEC pursuant
to Section 13 of the Securities Exchange Act of 1934, as amended, the Company
shall deliver to each holder hereof or of Warrant Shares one copy of each of the
following items:
(i) as soon as available, and in any event within forty-five (45)
days after the end of each fiscal quarter of the Company, its unaudited
interim consolidated balance sheets of the Company and its subsidiaries as
at the end of such quarter and the related consolidated statements of
income, cash flow and stockholders' equity of the Company and its
subsidiaries for the period from the beginning of the current fiscal year
to the end of such quarter, all in reasonable detail and certified by a
principal financial officer of the Company, as prepared in accordance with
GAAP consistently applied (subject to year end adjustments and the absence
of footnotes), and fairly presenting the consolidated financial position
and results of operations of the Company and its subsidiaries for such
periods;
(ii) within one hundred and twenty (120) days after the end of each
fiscal year of the Company, its consolidated balance sheets of the Company
and its subsidiaries as at the end of such year and the related
consolidated statements of income, cash flow and stockholders' equity of
the Company and its subsidiaries for such fiscal year, setting forth in
each case in comparative form the consolidated figures for the previous
fiscal year, all in reasonable detail and accompanied by a report thereon
of independent public accountants of recognized national standing selected
by the Company, which report shall state that such consolidated financial
statements present fairly the financial position of the Company and its
subsidiaries as at the dates indicated and the results of their operations
and changes in their financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (except
as otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards; and
(iii) promptly upon their becoming available, copies of all financial
statements, reports, proxy statements, notices, documents or other
communications sent or made available generally by the Company to any class
of its security holders or by any subsidiary of the Company to any class of
its security holders.
8. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered personally,
or mailed by registered or certified mail, return receipt requested, or
telecopied or telexed and confirmed in writing and delivered personally or
mailed by registered or certified mail, return receipt requested:
(a) If to the holder of this Warrant, to the address of such holder
as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 1 of this
Warrant;
or at such other address as the holder or the Company may hereafter have advised
the other.
9. Successors.
----------
All the covenants, agreements, representations and warranties contained in
this Warrant shall bind the parties hereto and their respective heirs,
executors, administrators, distributees, successors, assigns and transferees.
Banyan Inc. Common Stock Purchase Warrant--Page 12
<PAGE>
10. Law Governing.
-------------
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts (not including the
choice of law rules thereof) regardless of the jurisdiction of creation or
domicile of the Company or its successors or of the holder at any time hereof.
11. Entire Agreement; Amendments and Waivers.
----------------------------------------
This Warrant sets forth the entire understanding of the parties with
respect to the transactions contemplated hereby. The failure of any party to
seek redress for the violation or to insist upon the strict performance of any
term of this Warrant shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Warrant may be amended, and any breach of or compliance with any covenant,
agreement, warranty or representation may be waived, only if the Company has
obtained the written consent or written waiver of the holder, and then such
consent or waiver shall be effective only in the specific instance and for the
specific purpose for which given.
12. Severability; Headings.
----------------------
If any term of this Warrant as applied to any person or to any circumstance
is prohibited, void, invalid or unenforceable in any jurisdiction, such term
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or invalidity without in any way affecting any other term of this Warrant or
affecting the validity or enforceability of this Warrant or of such provision in
any other jurisdiction. The Section headings in this Warrant have been inserted
for purposes of convenience only and shall have no substantive effect.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed as of the date first written above.
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
--------------------------------
Richard M. Spaulding
Vice President, Chief Financial Officer
Accepted and agreed:
MICROSOFT CORPORATION
By: /s/ Gregory B. Maffei
-------------------------------
Gregory B. Maffei
Vice President, Finance; Chief Financial Officer
Banyan Inc. Common Stock Purchase Warrant--Page 13
<PAGE>
ANNEX A
-------
NOTICE OF EXERCISE
(TO BE EXECUTED UPON PARTIAL OR FULL
EXERCISE OF THE WITHIN WARRANT)
The undersigned hereby irrevocably elects to exercise the right to purchase
___________ shares of Common Stock of Banyan Systems Incorporated covered by the
within Warrant according to the conditions hereof and herewith makes payment of
the Exercise Price of such shares in full in the amount of
$____________________.
By:________________________________
(Signature of Registered Holder)
Dated:_______________
<PAGE>
ANNEX B
-------
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- ---------------------------- --------------
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of Banyan Systems
Incorporated maintained for the purpose, with full power of substitution in the
premises.
Dated:_______________________________ Print Name:_____________________________
Signature:______________________________
Witness:________________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT 10.4
Mr. Scott G. Silk January 15, 1999
30 Partridge Lane
Boxford, MA 01921
Dear Scott:
It is my pleasure to offer you the position of Sr. Vice President, Marketing and
Business Development and Corporate Officer of Banyan Systems Incorporated
("Banyan" or "Company") reporting to me. The Executive Team and Board members at
Banyan believe your expertise will contribute significantly to Banyan's ability
to attain our goals and realize our full potential.
The following items comprise the details of the offer:
A. Compensation
The base salary will be $7,692.31 biweekly, or $200,000 annually.
B. Executive Bonus
You will be eligible to participate in an Executive Performance Bonus
Plan that is targeted at an annualized rate of $75,000 at 100%
achievement and prorated from your date of hire. You will also be
eligible to earn up to an additional $25,000 in annual bonus payments
upon achievement of goals which exceed the 100% performance levels.
Payment of these bonuses will be based upon a combination of Company
performance and your achievement of your individual objectives that
will be discussed and defined with you during your first 60 days of
employment.
C. First Year Guarantee
During your first year of employment you will be guaranteed 50% of your
target bonus, i.e. $37,500 paid in equal quarterly installments of
$9,375 and within 30 days of the quarter end. In the event of an
involuntary separation during your first year of employment, you will
receive your First Year Guarantee on a prorated basis as of the
effective date of the termination. You must be employed for 30 days
after the end of a quarter in order to receive that quarter's bonus
payment.
<PAGE>
Mr. Scott G. Silk Page 2 January 15, 1999
D. Stock
Non-Qualified Stock Options - you will receive 150,000 total shares of
---------------------------
Banyan non-qualified stock options in accordance with the applicable
terms and conditions of Banyan's 1992 Stock Incentive Plan. These
options will be priced at $12.00 per share and will vest in accordance
with the following schedule:
. 80,000 non-qualified stock options with a two (2) year
vesting schedule (i.e. 40,000 shares will vest after one
year of employment and 40,000 shares will vest after two
years of employment) and
. 70,000 non-qualified stock options with a four (4) year
vesting schedule (i.e. 17,500 shares will vest after years
one, two, three and four of employment).
Incentive Stock Options - you will be eligible to participate in the
-----------------------
annual Executive stock program scheduled for April 2000 in the amount
of 40,000 shares, subject to approval of the Executive stock program by
the Board of Directors.
In the event of a Change in Control, (defined below), 50% of your
issued but unvested non-qualified and incentive stock options in a
given vesting schedule will become fully vested and immediately
available for exercise in accordance with the applicable terms and
conditions of Banyan's 1992 Stock Incentive Plan.
E. Benefits
--------
You will be eligible for group medical, dental, disability and life
insurance through the Company. Coverage for you and your dependents
will commence on your first day of employment, subject to any insurers'
eligibility requirements and the payment of any applicable employee
contributions.
F. Protection in the Event of Termination
---------------------------------------
If your employment is terminated by Banyan for any reason, except in
the event of a Change in Control or For Cause, Banyan will provide you
the following payments and benefits:
. Banyan will pay you on a biweekly basis your base salary
until you have obtained other employment to a maximum of six
months from the effective date of your termination.
. Banyan will pay you all bonuses guaranteed in accordance
with the provisions outlined for base salary above.
<PAGE>
Mr. Scott G. Silk Page 3 January 15, 1999
. Banyan will provide up to six months of continued medical
and dental insurance for you and your family from the
effective date of your termination, subject to the payment
of any applicable employee contributions.
G. Termination after a Change in Control
-------------------------------------
If your employment is terminated within 12 months following a Change in
Control, you will receive 12 months of base annual salary plus your
annual bonus at the 100% performance level per your Executive bonus
plan in effect at the time of termination.
H. Other
-----
You will receive individual term life insurance equal to five (5) times
your annual base salary at no cost to you, subject to any insurer's
eligibility requirements.
For purposes of this letter, the following terms shall have the following
respective meanings:
(1) Termination of employment for cause ("For Cause") shall mean
termination by reason of
(a) any act or omission involving dishonesty, gross negligence or
serious misconduct, or (b) your conviction of, or the entry of a
pleading guilty or nolo contendere by you to, any crime involving
sexual harassment or any felony.
Termination of employment For Cause will be presented in writing,
accompanied by a written statement of reasons. A process of
binding arbitration will resolve disagreements.
(2) A change in control ("Change in Control") of the Company shall
be deemed to occur if and only if (a) any person or entity (other
than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of
the Company is substantially the same proportion as their
ownership of stock of the Company) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities and Exchange
of 1934, as amended), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of
the Company's then outstanding voting securities (b) a merger or
consolidation of the Company following which the voting securities
of the Company outstanding immediately prior thereto do not
continue to represent more than 50% of the combined voting power
of the voting securities of the Company or the entity outstanding
immediately after such merger or consolidation, or (c) a sale of
all or substantially all of the assets of the Company.
<PAGE>
Mr. Scott G. Silk Page 4 January 15, 1999
I. Contract Term
-------------
This contract is valid for the duration of your employment subject to a
60-day notice period of cancellation by either party.
Please confirm your acceptance of this offer for employment by signing this
letter and providing your start date where indicated below, and by signing the
enclosed Employee Patent and Confidential Information Agreement. Please return
both documents to me at your earliest convenience.
In addition, you will be required to provide proof of eligibility to work in the
United States per federal legislation. A listing of required documentation (Form
I-9) is also enclosed.
Scott, I look forward with great expectation to you joining our team and leading
Banyan's Marketing and Business Development effort. I am confident you will be
highly successful.
Sincerely,
/s/ William P. Ferry
---------------------------
William P. Ferry
Chairman and
Chief Executive Officer
cc: Anthony J. Bellantuoni, Vice President of Human Resources
Attachments: Employee Patent and Confidential Information Agreement
Form I-9
Accepted:
/s/ Scott G. Silk February 1, 1999
- ----------------- ----------------
Scott G. Silk start date
<PAGE>
EXHIBIT 10.5
BANYAN SYSTEMS INCORPORATED
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
1. Grant of Options. Banyan Systems Incorporated, a Massachusetts
----------------
corporation (the "Company"), hereby grants to William P. Ferry (the
"Optionee"), an option to purchase an aggregate of 1,000,000 shares of
Common Stock ("Common Stock") of the Company at a price of $4.00 per
share, purchasable as set forth in and subject to the terms and
conditions of this option. The date of grant of this option is
February 4, 1997. 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").
2. Non-Qualified Stock Option. This option is not intended to qualify as
--------------------------
an incentive stock option within the meaning of Section 422 of the
Code.
3. Exercise of Option and Provisions for Termination.
-------------------------------------------------
a. Vesting Schedule. Except as otherwise provided in this
----------------
Agreement, this option may be exercised prior to the tenth
anniversary of the date of grant (hereinafter the "Expiration
Date"), in whole or in part, from time to time, as to an
aggregate number of shares equal to 1,000,000 multiplied by a
fraction, the numerator of which is the number of full months
during which the Optionee has been employed by the Company (but
not more than 48) and the denominator of which is 48; provided
--------
that that period from the commencement of employment until
February 28, 1997 shall be considered a full month and the number
of additional shares as to which this option shall become
exercisable upon completion of the 48th month of employment shall
be 20,849.
b. Change in Control. Upon the occurrence of a Change in Control,
-----------------
as defined in the Employment Agreement of even date herewith
between the Company and the Employee (the "Employment
Agreement"), this option shall become vested and exercisable as
to 50% of the number of shares covered thereby that would not
otherwise then be vested and
<PAGE>
exercisable (in reverse order of vesting), as provided for in
Section 3.3(b) of the Employment Agreement.
c. Certain Events. The vesting of this option shall also be subject
--------------
to continuation and/or acceleration in accordance with the
provisions of Section 5 of the Employment Agreement.
d. Exercise Procedure. Subject to the conditions set forth in this
------------------
Agreement, this option shall be exercised by the Optionee's
delivery of written notice of exercise to the Treasurer of the
Company, specifying the number of shares to be purchased and the
purchase price to be paid therefor and accompanied by payment in
full in accordance with Section 4.
e. Continuous Employment Required. Except as otherwise provided in
------------------------------
this Section 3, this option may not be exercised unless Optionee,
at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee of
the Company. For all purposes of this option, (i) "employment"
shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations or any successor
regulations, and (ii) if this option shall be assumed or a new
option substituted therefor in a transaction to which Section
424(a) of the Code applies, employment by such assuming or
substituting corporation (hereinafter called the "Successor
Corporation") shall be considered for all purposes of this option
to be employment by the Company.
f. Exercise Period Upon Termination of Employment. If the Optionee
----------------------------------------------
ceases to be employed by the Company for any reason, then, except
as provided in paragraphs (g) and (h) below, the right to
exercise this option shall terminate three months after the later
of cessation of employment or cessation of vesting (but in no
event after the Expiration Date), provided that this option shall
-------------
be exercisable only to the extent that the Optionee was entitled
to exercise this option on the date of such cessation. The
Company's obligation to deliver shares upon the exercise of this
option shall be subject to the satisfaction of all applicable
federal,
<PAGE>
state and local income and employment tax withholding
requirements, arising by reason of this option being treated as
a non-statutory option or otherwise.
g. Exercise Period Upon Death or Disability. If the Optionee dies
----------------------------------------
or becomes disabled (within the meaning of Section 22(e)(3) of
the Code) prior to the Expiration Date while he is an employee of
the Company, or if the Optionee dies within three months after
the ptionee ceases to be an employee of the Company (other than
as a result of a discharge for "cause" as specified in paragraph
(h) below), this option shall become exercisable, within the
period of one year following the date of death or disability of
the Optionee (but in no event after the Expiration Date), by the
Optionee or by the person to whom this option is transferred by
will or the laws of descent and distribution, provided that this
-------------
option shall be exercisable only to the extent that this option
was exercisable by the Optionee on the date of his death or
disability. Except as otherwise indicated by the context, the
term "Optionee", as used in this option, shall be deemed to
include the estate of the Optionee or any person who acquires the
right to exercise this option by bequest or inheritance or
otherwise by reason of the death of the Optionee.
h. Discharge for Cause. If the Optionee, prior to the Expiration
-------------------
Date, ceases his employment with the Company because he is
discharged for "cause" (as defined in the Employment Agreement),
the right to exercise this option shall terminate 30 days after
such cessation of employment.
4. Payment of Purchase Price.
-------------------------
a. Method of Payment. Payment of the purchase price for shares
-----------------
purchased upon exercise of this option shall be made by delivery
of cash or check in the amount equal to the exercise price of
such options or, with the prior consent of the Company (which may
be withheld in its sole discretion), by (A) delivery of shares of
Common Stock owned by the Optionee for at least six months,
valued at their fair market value, as determined in (b) below,
(B) delivery of a promissory note of the Optionee to the Company
on terms determined by the Board, (C) delivery of an irrevocable
<PAGE>
undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or delivery of
irrevocable instructions to a broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price, (D)
payment of such other lawful consideration as the Board may
determine, or (E) any combination of the foregoing.
b. Valuation of Shares or Other Non-Cash Consideration Tendered in
---------------------------------------------------------------
Payment of Purchase Price. For the purposes hereof, the fair
-------------------------
market value of any share of the Company's Common Stock or other
non-cash consideration which may be delivered to the Company in
exercise of this option shall be determined in good faith or in
the manner determined by the Board of Directors of the Company
from time to time.
c. Delivery of Shares Tendered in Payment of Purchase Price. If the
--------------------------------------------------------
Optionee exercises options by delivery of shares of Common stock
of the Company, the certificate or certificates representing the
shares of Common Stock of the Company to be delivered shall be
duly executed in blank by the Optionee or shall be accompanied by
a stock power duly executed in blank suitable for purposes of
transferring such shares to the Company. Fractional shares of
Common Stock of the Company will not be accepted in payment of
the purchase price of shares acquired upon exercise of this
option.
d. Restrictions on Use of Option Stock. Notwithstanding the
-----------------------------------
foregoing, no shares of Common Stock of the Company may be
tendered in payment of the purchase price of shares purchased
upon exercise of this option if the shares to be so tendered were
acquired within six months before the date of such tender through
the exercise of this option or any other stock option or
restricted stock agreement.
5. Delivery of Shares; Compliance with Securities Laws, etc. The Company
---------------------------------------------------------
will not be obligated to deliver any shares of Common Stock or to
remove restriction from shares previously delivered (i) until all
conditions of the option have been satisfied or removed, (ii) until,
in the opinion of Company's counsel, all applicable federal and state
laws and regulations have been complied with, (iii) if the outstanding
Common Stock is at the time listed on any
<PAGE>
stock exchange, until the shares to be delivered have been listed or
authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in
connection with the issuance and delivery of such shares have been
approved by the Company's counsel.
6. Non-transferability of Option. This option is personal and no rights
-----------------------------
granted hereunder may be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) nor
shall any such rights be subject to execution, attachment or similar
process, except that this option may be transferred (i) by will or the
laws of descent and distribution or (ii) pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Code.
Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of this option or of such rights contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon
this option or such rights, this option and such rights shall, at the
election of the Company, become null and void.
7. No Special Employment or Similar Rights. Nothing contained in this
---------------------------------------
option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of Optionee with the Company for the period within which
this option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares which may be purchased by
exercise of this option (including, without limitation, any rights to
receive dividends or non-cash distributions with respect to such
shares) unless and until a certificate representing such shares is
duly issued and delivered to the Optionee. 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.
9. Adjustment Provisions. In the event that the Board, in its sole
---------------------
discretion, determines that any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidate,
split-up, spin-off, combination or other similar transaction affects
the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board shall equitably adjust either
or both (i) the number and kind of shares subject to this
<PAGE>
option, and (ii) the award, exercise or conversion price with respect
to the foregoing, and if considered appropriate, the Board may make
provision for a cash payment with respect to this option, provided
that the number of shares subject to this option shall always be a
whole number.
10. Mergers, Consolidation, Distributions, Liquidations, etc. Subject to
---------------------------------------------------------
the provisions of Section 3(b) above, in the event of a consolidation,
merger or other reorganization in which all of the outstanding shares
of Common Stock are exchanged for securities, cash or other property
of any other corporation or business entity (an "Acquisition") 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 this option: (i) provide that this
option shall be assumed, or a substantially equivalent option shall be
substituted by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be
appropriate, (ii) upon written notice to the Optionee, provide that if
unexercised, this option will terminate immediately prior to the
consummation of such transaction unless exercised by the Optionee
within a specific period following the date of such notice, (iii) in
the event of an Acquisition 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 Acquisition (the
"Acquisition Price"), make or provide for a cash payment to the
Optionee equal to the difference between (A) the Acquisition Price
times the number of shares of Common Stock subject to outstanding
options (to the extent then exercisable at prices not in excess of the
Acquisition 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 part of this option shall become
exercisable or realizable in full prior to the effective date of such
Acquisition.
11. Withholding Taxes. The Company's obligation to deliver shares upon
-----------------
the exercise of this option shall be subject to the Optionee's
satisfaction to all applicable federal, state and local income and
employment tax withholding requirements. The Optionee shall pay to
the Company, or make provision satisfactory to the Board for payment
of, any taxes required by law to be withheld in respect of options
under the Plan no later than the date of the event
<PAGE>
creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may
be paid in whole or in part in shares of Common Stock, including
shares retained from the option creating the tax obligation, valued at
their fair market value. The Company may, to the extent permitted by
law, deduct any such tax obligations from any payment of any kind
otherwise due to the Optionee.
12. Miscellaneous.
-------------
a. If any terms of this Option Agreement are contrary to or
otherwise conflict with the terms of the Employment Agreement,
the terms of the Employment Agreement shall control.
b. All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth
beneath their names below or at such other address as may be
designated in writing by either of the parties to one another.
c. This option shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
BANYAN SYSTEMS INCORPORATED
BY: /s/ John F. Burton
--------------------------------
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions hereof.
OPTIONEE: /s/ William P. Ferry
-------------------------------------
Address:
-------------------------------------
<PAGE>
EXHIBIT 10.6
BANYAN SYSTEMS INCORPORATED
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
1. Grant of Option. Banyan Systems Incorporated, a Massachusetts
----------------
corporation (the "Company"), hereby grants to Robert Burke (the "Optionee") an
------------
option, pursuant to the terms (which such terms to the extent not inconsistent
with the terms hereof, are incorporated herein) of, but not under, Company's
1992 Stock Incentive Plan (the "Plan"), to purchase an aggregate of 120,000
-------
shares of Common Stock ("Common Stock") of the Company at a price of $2.688 per
------
share, purchasable as set forth in and subject to the terms and conditions of
this option and the Plan. The date of grant of this option is March 20, 1997.
--------------
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").
2. Non-Statutory Stock Option. This option is not intended to qualify as
---------------------------
an incentive stock option within the meaning of Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
--------------------------------------------------
a. Vesting Schedule. Except as otherwise provided in this Agreement,
-----------------
this option may be exercised prior to the tenth anniversary of the date of grant
(hereinafter the "Expiration Date"), in installments as to not more than the
number of shares set forth in the table below during the respective installment
periods set forth in the table below.
Number of Shares as to
Exercise Period which Option is Exercisable
--------------- ---------------------------
From Date of Grant 20,000
but prior to the Expiration Date.
From and after 12 months
after the date of grant but 37,500
prior to the Expiration Date
From and after 24 months
after the date of grant but 37,500
prior to the Expiration Date
From and after 36 months
after the date of grant but 12,500
prior to the Expiration Date
From and after 48 months
after the date of grant but 12,500
prior to the Expiration Date.
<PAGE>
b. Change in Control. Upon the occurrence of a Change in Control, as
------------------
defined in the Employment Agreement dated March 19, 1997 herewith between the
Company and the Employee (the "Employment Agreement"), 50% of the unvested non-
qualified stock options will become fully vested and immediately available for
exercise in accordance with the applicable terms and conditions of Banyan's 1992
Stock Incentive Plan.
c. Termination by the Company. If the Optionee is terminated by the
---------------------------
Company for any reason, except For Cause, there will be an accelerated vesting
of those unvested non-qualified stock options which would have become fully
vested within the nine month period following the effective date of termination,
which would be available for exercise in accordance with the applicable terms
and conditions of Banyan's Stock Incentive Plan. (Termination of employment For
Cause shall mean termination by reason of (a) any act involving dishonesty,
gross negligence or serious misconduct, or (b) your conviction of, or the entry
of a pleading of guilty or nolo contendere by you to, any crime involving moral
turpitude or any felony.)
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Expiration Date or the earlier termination of this option.
This option may not be exercised at any time on or after the Expiration Date,
except as otherwise provided in Section 3 (e) below.
d. Exercise Procedure. Subject to the conditions set forth in this
-------------------
Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company, specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanies by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase less than
the number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
e. Continuous Relationship with the Company Required. Except as
--------------------------------------------------
otherwise provided in this Section 3, this option may not be exercised unless
the Optionee, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company (an "Eligible Optionee").
f. Termination of Relationship with the Company. If the Optionee
---------------------------------------------
ceases to be an Eligible Optionee for any reason, then, except as provided in
paragraphs (e) and (f) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Expiration Date),
provided that this option shall be exercisable only to the extent that the
- -------------
Optionee was entitled to exercise this option on the date of such cessation. If
the Optionee terminates due to an occurence of any "Change or Material Reduction
of Responsibilities" and upon 30 days prior written notice to Banyan vesting of
unvested non-qualified stock options will continue for nine months from the
effective date of termination. Notwithstanding the foregoing, if the Optionee,
prior to the Expiration Date, materially violates the non-competition or
confidentiality provisions of any employment contract, confidentiality and
nondisclosure agreement or other agreement between the Optionee and the Company,
the right to exercise this option shall terminate immediately upon written
notice to the Optionee from the Company describing such violation.
Page 2
<PAGE>
g. Exercise Period Upon Death or Disability. If the Optionee dies or
----------------------------------------
becomes disabled (within the meaning of Section 22 (e) (3) of the Code) prior to
the Expiration Date while he or she is an Eligible Employee, or if the Optionee
dies within three months after the Optionee ceases to be an Eligible Optionee
(other than as the result of a termination of such relationship by the Company
for "cause" as specified in paragraph (f) below, this option shall be
exercisable, within the period of one year following the date of death or
disability of the Optionee (whether or not such exercise occurs before the
Expiration Date), by the Optionee or by the person to whom this option is
transferred by will or the laws of descent and distribution, provided that this
-------------
option shall be exercisable only to the extent that this option was exercisable
by the Optionee on the date of his or her death or disability. Except as
otherwise indicated by the context, the term "Optionee", as used in this option,
shall be deemed to include the estate of the Optionee or any person who acquires
the right to exercise this option by bequest or inheritance or otherwise by
reason of the death of the Optionee.
h. Discharge for Cause. If the Optionee, prior to the Expiration Date,
--------------------
ceases his or her relationship with the Company because such relationship is
terminated by the Company for "cause" (as defined below), the right to exercise
this option shall terminate immediately upon such cessation. "Cause" shall mean
willful misconduct by the Optionee or willful failure to perform his or her
responsibilities in the best interests of the Company (including, without
limitation, breach by the Optionee of any provision of any employment,
consulting, advisory, nondisclosure, non-competition or other similar agreement
between the Optionee and the Company), as determined by the Company, which
determination shall be conclusive.
4. Payment of Purchase Price.
--------------------------
a. Method of Payment. Payment of the purchase price for shares
------------------
purchase upon exercise of this option shall be made by delivery of cash or check
in an amount equal to the exercise price of such options or, with the prior
consent of the Company (which may be withheld in its sole discretion), by (A)
delivery of shares of Common Stock owned by the Optionee for at least six
months, valued at their fair market value, as determined pursuant to (b) below,
(B) delivery of a promissory note of the Optionee to the Company on terms
determined by the Board, (C) delivery of an irrevocable undertaking by a broker
to deliver promptly to the Company sufficient funds to pay the exercise price or
delivery of irrevocable instructions to a broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price, (D) payment of
such other lawful consideration as the Board may determine, or (E) any
combination of the foregoing.
b. Valuation of Shares or Other Non-Cash Consideration Tendered in
---------------------------------------------------------------
Payment of Purchase Price. For the purchase hereof, the fair market value of
- --------------------------
any share of the Company's Common Stock or other non-cash consideration which
may be delivered to the Company in exercise of this option shall be determined
in good faith or in the manner determined by the Board of Directors of the
Company from time to time.
c. Delivery of Shares Tendered in Payment of Purchase Price. If the
---------------------------------------------------------
Optionee exercises this option by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanies by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of
Common Stock
Page 3
<PAGE>
of the Company will not be accepted in payment of the purchase price of shares
acquired upon exercise of this option.
d. Restrictions on Use of Option Stock. Notwithstanding the foregoing,
------------------------------------
no shares of Common Stock of the Company may be tendered in payment of the
purchase price of shares purchased upon exercise of this option is the shares to
be so tendered were acquired within six months before the date of such tender.
5. Delivery of Shares; Compliance with Securities Laws, etc.
---------------------------------------------------------
a. General. The Company will not be obligated to deliver any shares of
-------
Stock pursuant to the Plan or to remove restriction from shares previously
delivered under the Plan (i) until all conditions of the option have been
satisfied or removed, (ii) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (iii)
if the outstanding Stock is at the time listed on any stock exchange, until the
shares to be delivered have been listed or authorized to be listed on such
exchange upon official notice of notice of issuance, and (iv) until all other
legal matters in connection with the issuance and delivery of such shares have
been approved by the Company's counsel.
b. Listing, Qualification, etc. This option shall be subject to the
----------------------------
requirements that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject hereto upon any
securities exchange or under any state or federal law, or the consent of
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
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification or disclosure, or to satisfy such other condition.
6. Non transferability of Option. This option is personal and no rights
------------------------------
granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process, except that this option may
be transferred (i) by will or the laws of descent and distribution or (ii)
pursuant to a qualified domestic relations order as defined in Section 414 (p)
of the Code. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option or of such rights contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon this option
or such rights, this option and such rights shall, at the election of the
Company, become null and void.
7. No Special Employment or Similar Rights. Nothing contained in the Plan
----------------------------------------
or this Option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of the Optionee with the Company for the period within which this
option may be exercised. The Company expressly reserves the right at any time
to dismiss the Optionee free from any liability or claim under the Plan, except
as otherwise expressly provided in this Agreement.
Page 4
<PAGE>
8. Rights as a Shareholder. The Optionee shall have no rights as a
------------------------
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. 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.
9. Adjustment Provisions. In the event that the Board, in its sole
----------------------
discretion, determines that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination or other similar transaction affects the Common Stock such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made available under the Plan, then the Board shall equitably
adjust either or both (i) the number and kind of shares subject to this option,
and (iii) the award, exercise or conversion price with respect to the foregoing,
and if considered appropriate, the Board may make provision for a cash payment
with respect to this option, provided that the number of shares subject to this
option shall always be a whole number.
10. Mergers, Consolidation, Distributions, Liquidations, etc. Subject to
---------------------------------------------------------
the provisions of Section 3(b) above, in the event of a consolidation, merger or
other reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (as "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, of 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 this option: (i) provide
that this option shall be assumed, or a substantially equivalent option shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) on such terms as the Board determines to be appropriate, (ii) upon
written notice to the Optionee, provide that if unexercised, this option 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 an Acquisition 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 Acquisition (the "Acquisition Price"),
make or provide for a cash payment to the Optionee equal to the difference
between (A) the Acquisition Price times the number of shares of Common Stock
subject to outstanding options (to the extent then exercisable at prices not in
excess of the Acquisition 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 or
realizable in full prior to the effective date of such Acquisition.
11. Withholding Taxes. The Company's obligation to deliver shares upon the
------------------
exercise of this option shall be subject to the Optionee's satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements. The Optionee shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of options under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
option creating the tax obligation, valued at their fair market value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Optionee.
Page 5
<PAGE>
12. Miscellaneous.
--------------
(a) The Board may amend, modify or terminate any outstanding option,
including substituting therefor another option of the same or a different type,
changing the date of exercise or realization, provided that the Optionee's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Optionee. The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
(b) All notices under this option shall be mailed or delivered by hand to
the parties at their respective addresses set forth beneath their names below or
at such other address as may be designated in writing by either of the parties
to one another.
(c) This option shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
-----------------------
Richard M. Spaulding
Title: Vice President Finance and Treasurer
Address: 120 Flanders Road
Westboro, Massachusetts 01581
Page 6
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 1992 Stock Incentive Plan.
OPTIONEE
/s/ Robert D. Burke
-------------------
Address: _________________________
_________________________
Page 7
<PAGE>
EXHIBIT 10.7
BANYAN SYSTEMS INCORPORATED
Non-Qualified Stock Option
NON-STATUTORY STOCK OPTION AGREEMENT
------------------------------------
1. Grant of Option. Banyan Systems Incorporated, a Massachusetts
----------------
corporation (the "Company"), hereby grants to Anthony J. Bellantuoni (the
----------------------
"Optionee") an option, pursuant to the terms (which such terms to the extent not
inconsistent with the terms hereof, are incorporated herein) of, but not under,
Company's 1992 Stock Incentive Plan (the "Plan"), to purchase an aggregate of
50,000 shares of Common Stock ("Common Stock") of the Company at a price of
- ------
$2.25 per share, purchasable as set forth in and subject to the terms and
- -----
conditions of this option and the Plan. The date of grant of this option is July
----
11, 1997. 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").
2. Non-Statutory Stock Option. This option is not intended to qualify as
---------------------------
an incentive stock option within the meaning of Section 422 of the Code.
3. Exercise of Option and Provisions for Termination.
--------------------------------------------------
a. Vesting Schedule. Except as otherwise provided in this Agreement,
----------------
this option may be exercised prior to the tenth anniversary of the date of grant
(hereinafter the "Expiration Date") in installments as to not more than the
number of shares set forth in the table below during the respective installment
periods set forth in the table below.
Number of Shares as to
Exercise Period which Option is Exercisable
--------------- ---------------------------
From Date of Grant but
prior to the Expiration Date. 10,000
From and after 12 months
after the date of grant but 15,000
prior to the Expiration Date.
From and after 24 months
after the date of grant but 15,000
prior to the Expiration Date.
From and after 36 months
after the date of grant but 5,000
prior to the Expiration Date.
From and after 48 months
after the date of grant but 5,000
prior to the Expiration Date.
<PAGE>
b. Change in Control. Upon the occurrence of a Change in Control, as
------------------
defined in the Employment Agreement dated June 26, 1997 herewith between the
Company and the Employee (the "Employment Agreement"), 50% of the unvested non-
qualified stock options in a given vesting schedule will become fully vested and
immediately available for exercise in accordance with the applicable terms and
conditions of Banyan's 1992 Stock Incentive Plan.
The right of exercise shall be cumulative so that if the option is not exercised
to the maximum extent permissible during any exercise period, it shall be
exercisable, in whole or in part, with respect to all shares not so purchased at
any time prior to the Expiration Date or the earlier termination of this option.
This option may not be exercised at any time on or after the Expiration Date,
except as otherwise provided in Section 3 (e) below.
b. Exercise Procedure. Subject to the conditions set forth in this
-------------------
Agreement, this option shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company, specifying the number of
shares to be purchased and the purchase price to be paid therefor and
accompanies by payment in full in accordance with Section 4. Such exercise
shall be effective upon receipt by the Treasurer of the Company of such written
notice together with the required payment. The Optionee may purchase less than
the number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
c. Continuous Relationship with the Company Required. Except as
--------------------------------------------------
otherwise provided in this Section 3, this option may not be exercised unless
the Optionee, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company (an "Eligible Optionee").
d. Termination of Relationship with the Company. If the Optionee
---------------------------------------------
ceases to be an Eligible Optionee for any reason, then, except as provided in
paragraphs (e) and (f) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Expiration Date),
provided that this option shall be exercisable only to the extent that the
- -------------
Optionee was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Optionee, prior to the Expiration Date,
materially violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Optionee and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Optionee from the
Company describing such violation.
e. Exercise Period Upon Death or Disability. If the Optionee dies or
----------------------------------------
becomes disabled (within the meaning of Section 22 (e) (3) of the Code) prior to
the Expiration Date while he or she is an Eligible Employee, or if the Optionee
dies within three months after the Optionee ceases to be an Eligible Optionee
(other than as the result of a termination of such relationship by the Company
for "cause" as specified in paragraph (f) below, this option shall be
exercisable, within the period of one year following the date of death or
disability of the Optionee (whether or not such exercise occurs before the
Expiration Date), by the Optionee or by the person to whom this option is
transferred by will or the laws of descent and distribution, provided that this
-------------
option shall be exercisable only to the extent that this option was exercisable
by the Optionee on the date of his or her death or disability. Except as
otherwise indicated by the
Page 2
<PAGE>
context, the term "Optionee", as used in this option, shall be deemed to include
the estate of the Optionee or any person who acquires the right to exercise this
option by bequest or inheritance or otherwise by reason of the death of the
Optionee.
f. Discharge for Cause. If the Optionee, prior to the Expiration Date,
--------------------
ceases his or her relationship with the Company because such relationship is
terminated by the Company for "cause" (as defined below), the right to exercise
this option shall terminate immediately upon such cessation. "Cause" shall mean
willful misconduct by the Optionee or willful failure to perform his or her
responsibilities in the best interests of the Company (including, without
limitation, breach by the Optionee of any provision of any employment,
consulting, advisory, nondisclosure, non-competition or other similar agreement
between the Optionee and the Company), as determined by the Company, which
determination shall be conclusive. The Optionee shall be considered to have
been discharged "for cause" if the Company determines, within 30 days after the
Optionee's resignation, that discharge for cause was warranted.
4. Payment of Purchase Price.
--------------------------
a. Method of Payment. Payment of the purchase price for shares
------------------
purchase upon exercise of this option shall be made by delivery of cash or check
in an amount equal to the exercise price of such options or, with the prior
consent of the Company (which may be withheld in its sole discretion), by (A)
delivery of shares of Common Stock owned by the Optionee for at least six
months, valued at their fair market value, as determined pursuant to (b) below,
(B) delivery of a promissory note of the Optionee to the Company on terms
determined by the Board, (C) delivery of an irrevocable undertaking by a broker
to deliver promptly to the Company sufficient funds to pay the exercise price or
delivery of irrevocable instructions to a broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price, (D) payment of
such other lawful consideration as the Board may determine, or (E) any
combination of the foregoing.
b. Valuation of Shares or Other Non-Cash Consideration Tendered in
---------------------------------------------------------------
Payment of Purchase Price. For the purchase hereof, the fair market value of
- --------------------------
any share of the Company's Common Stock or other non-cash consideration which
may be delivered to the Company in exercise of this option shall be determined
in good faith by the Board of Directors of the Company.
c. Delivery of Shares Tendered in Payment of Purchase Price. If the
---------------------------------------------------------
Optionee exercises this option by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanies by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of
Common Stock of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
d. Restrictions on Use of Option Stock. Notwithstanding the foregoing,
------------------------------------
no shares of Common Stock of the Company may be tendered in payment of the
purchase price of shares purchased upon exercise of this option is the shares to
be so tendered were acquired within six months before the date of such tender,
through the exercise of an option granted under the Plan or any other stock
option or restricted stock plan of the Company.
Page 3
<PAGE>
5. Delivery of Shares; Compliance with Securities Laws, etc.
---------------------------------------------------------
a. General. The Company shall, upon payment of the option price for
-------
the number of shares purchased and paid for, make prompt delivery of such shares
to the Optionee, provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.
b. Compliance with Securities Laws, etc. The Company will not be
-------------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restriction from shares previously delivered under the Plan (i) until all
conditions of the option have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulation have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
issuance, and (iv) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel.
6. Non-transferability of Option. This option is personal and no rights
------------------------------
granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process, except that this option may
be transferred (i) by will or the laws of descent and distribution or (ii)
pursuant to a qualified domestic relations order as defined in Section 414 (p)
of the Code. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option or of such rights contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon this option
or such rights, this option and such rights shall, at the election of the
Company, become null and void.
7. No Special Employment or Similar Rights. Nothing contained in the Plan
----------------------------------------
or this Option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment or other
relationship of the Optionee with the Company for the period within which this
option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
------------------------
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. 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.
9. Adjustment Provisions.
----------------------
(a) General. In the event of a consolidation, merger or other
--------
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") 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 this option: (i) provide
that this option shall be assumed, or a substantially equivalent option shall be
substituted by the acquiring or succeeding corporation (or an affiliate thereof)
on such terms as the Board determines to be appropriate, (ii) upon written
Page 4
<PAGE>
notice to the Optionee, provide that if unexercised, this option 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 an Acquisition 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 Acquisition (the "Acquisition Price", make or
provide for a cash payment to the Optionee equal to the difference between (A)
the Acquisition Price times the number of shares of Common Stock subject to
outstanding options (to the extent then exercisable at prices not in excess of
the Acquisition Price) and (B) the aggregate exercise price of all outstanding
options in exchange for the termination of such options, and (iv) provide that
all or any outstanding options shall become exercisable or realizable in full
prior to the effective date of such Acquisition.
(b) Board Authority to Make Adjustments. Any adjustments under this
------------------------------------
Section 9 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 pursuant to this option on
account of any such adjustments.
10. Withholding Taxes. The Company's obligation to deliver shares upon
------------------
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
11. Miscellaneous.
--------------
(a) The Board may amend, modify or terminate any outstanding option,
including substituting therefor another option of the same or a different type,
changing the date of exercise or realization, provided that the Optionee's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Optionee. The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
b) All notices under this option shall be mailed or delivered by hand to
the parties at their respective addresses set forth beneath their names below or
at such other address as may be designated in writing by either of the parties
to one another.
(c) This option shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
BANYAN SYSTEMS INCORPORATED
By: /s/ Richard M. Spaulding
--------------------------
Richard M. Spaulding
Title: Vice President Finance and
Chief Financial Officer
Address: 120 Flanders Road
Westboro, Massachusetts 01581
Page 5
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 1992 Stock Incentive Plan and the Prospectus for such plan.
OPTIONEE
/s/ Anthony J. Bellantuoni
---------------------------
Address: _________________________
_________________________
Page 6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 21,648 15,160
<SECURITIES> 9,239 7,128
<RECEIVABLES> 19,088 24,309
<ALLOWANCES> 2,885 2,917
<INVENTORY> 935 890
<CURRENT-ASSETS> 46,485 45,302
<PP&E> 40,568 40,559
<DEPRECIATION> 35,894 35,609
<TOTAL-ASSETS> 59,717 56,210
<CURRENT-LIABILITIES> 33,413 35,053
<BONDS> 0 0
0 0
3 3
<COMMON> 213 208
<OTHER-SE> 23,438 18,188
<TOTAL-LIABILITY-AND-EQUITY> 59,717 56,210
<SALES> 9,873 12,798
<TOTAL-REVENUES> 19,026 17,753
<CGS> 1,854 1,759
<TOTAL-COSTS> 18,508 17,416
<OTHER-EXPENSES> 105 129
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30 22
<INCOME-PRETAX> 593 444
<INCOME-TAX> 136 67
<INCOME-CONTINUING> 457 377
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 457 377
<EPS-PRIMARY> 0.02 0.02
<EPS-DILUTED> 0.02 0.02
</TABLE>
