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REGISTRATION NO. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VOXWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7373 36-3934824
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD
OFINCORPORATION OR INDUSTRIALCLASSIFI- (I.R.S. EMPLOYER
ORGANIZATION) CATION CODE NUMBER) IDENTIFICATION NO.)
305 COLLEGE ROAD EAST
PRINCETON, NEW JERSEY 08540
(609) 514-4100
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL GOLDSTEIN
VOXWARE, INC.
305 COLLEGE ROAD EAST
PRINCETON, NEW JERSEY 08540
(609) 514-4100
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
PAUL JACOBS, ESQ. GREGORY D. SHEEHAN, ESQ.
FULBRIGHT & JAWORSKI L.L.P. ROPES & GRAY
666 FIFTH AVENUE ONE INTERNATIONAL PLACE
NEW YORK, NEW YORK 10103 BOSTON, MASSACHUSETTS 02110
TEL.: 212-318-3000 TEL.: 617-951-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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Proposed
Proposed Maximum Amount of
Title of Each Class of Securities Amount to be Maximum Offering Aggregate Registration
to be Registered Registered(1) Price Per Share(2) Offering Price(1)(2) Fee
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Common Stock, $.001 par value.... 4,600,000 shares $8.00 $36,800,000 $12,690.00
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(1) Includes 600,000 shares of Common Stock which the Underwriters have the
option to acquire solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 18, 1996
4,000,000 SHARES
[LOGO APPEARS HERE]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently anticipated that the initial public
offering price of the Common Stock will be between $7.00 and $8.00 per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. It is anticipated that the
Common Stock will be included on the Nasdaq National Market under the symbol
VOXW.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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Per Share........................ $ $ $
Total(3)......................... $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $750,000.
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to 600,000
additional shares of Common Stock solely to cover over-allotments, if any.
If the Underwriters exercise this option in full, the Price to Public will
total $ , the Underwriting Discount will total $ , the Proceeds to
Company will total $ and the Proceeds to Selling Stockholders will
total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
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MONTGOMERY SECURITIES
ALEX. BROWN & SONS
INCORPORATED
OPPENHEIMER & CO., INC.
, 1996
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[PICTURES OR DIAGRAMS APPEAR HERE]
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the financial statements and notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated,
all information in this Prospectus (i) gives effect to the automatic conversion
of all outstanding shares of the Company's Series A Convertible Preferred Stock
(the "Series A Preferred Stock") into 6,000,000 shares of Common Stock
effective upon the closing of this offering and (ii) assumes no exercise of the
over-allotment option.
THE COMPANY
Voxware, Inc. (the "Company" or "Voxware") develops, markets, licenses and
supports a comprehensive, integrated set of digital speech processing
technologies which provide the ability to compress, model and transform speech.
MetaVoice(TM), the Company's innovative coding technology, is designed to
reproduce high quality speech while requiring very low communications bandwidth
and processing power. In addition to efficiently compressing speech, MetaVoice
enables a broad array of voice transformation capabilities. Voxware's
technologies enable its customers to create a new generation of speech-enhanced
communications and interactive products for the Internet and other bandwidth-
constrained environments. The Company licenses its technologies, including
speech coder/decoders ("codecs") and application programming interfaces, to
software, computing and communications companies and distributes its end-user
application software to consumers and businesses.
Digital speech technologies are increasingly being integrated into a variety
of applications including voice-enabled Web pages, Internet telephony and
conferencing, Internet broadcasting, interactive games, voice messaging,
wireless and satellite communications, multimedia computing and voice-enabled
devices. Speech applications on the Internet and in other environments in which
these speech applications are implemented are often constrained by a
combination of low bandwidth, low processing power, network congestion and
inconsistent data delivery. Voxware's speech coding and transmission quality
management technologies are designed to address these challenges and deliver
superior speech quality for a wide variety of applications.
To accelerate adoption of its technologies, the Company seeks to broadly
license its products and establish strategic relationships with market leaders.
The Company has established a strategic relationship with Netscape
Communications Corporation ("Netscape"). Netscape uses Voxware's speech coding
technology as a part of its LiveMedia(TM) multimedia framework to provide low
bandwidth speech functions with version 3.0 of Netscape Navigator(TM),
currently in beta release. Navigator is the most widely used software
application for the World Wide Web. Netscape has also made a minority equity
investment in the Company.
In addition to Netscape, the Company has licensed its products to America
Online, Inc., Andrea Electronics Corporation, Apple Computer, Inc., Catapult
Entertainment, Inc., Farallon Computing, Inc., InterVoice, Inc., Microsoft
Corporation, Mpath Interactive, Inc., Tribal Voice and VDOnet Corporation Ltd.,
among others.
Intel Corporation ("Intel") has made a minority equity investment in the
Company. Intel provides consulting support to Voxware for the optimization of
the Company's technologies on Intel processor platforms, consults with Voxware
on standards issues of mutual interest and supplies the Company with pre-
release versions of its advanced processors for development of the Company's
products.
Voxware was incorporated in Delaware in 1993. Its executive offices are
located at 305 College Road East, Princeton, New Jersey 08540, and its
telephone number is (609) 514-4100. Voxware's home page is located at
www.voxware.com on the World Wide Web.
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THE OFFERING
Common Stock offered by the Company... 4,000,000 shares
Common Stock to be outstanding after
the Offering......................... 21,895,000 shares(1)
Use of proceeds....................... For general corporate purposes,
including working capital and capital
expenditures.
Proposed Nasdaq National Market
symbol............................... VOXW
SUMMARY FINANCIAL DATA
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<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1993) YEAR ENDED JUNE 30,
TO JUNE 30, -----------------------
1994 1995 1996
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STATEMENT OF OPERATIONS DATA:
Total revenues..................... $ -- $ -- $ 1,607,038
Gross profit....................... -- -- 1,561,624
Total operating expenses........... 215,508 1,233,720 4,560,793
Operating loss..................... (215,508) (1,233,720) (2,999,169)
Net loss........................... (215,508) (1,168,780) (2,867,312)
Pro forma net loss per share....... $ (0.16)
Shares used in computing pro forma
net loss per share(2)............. 17,583,980
</TABLE>
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<CAPTION>
JUNE 30, 1996
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PRO FORMA
PRO FORMA(3) AS ADJUSTED(4)
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BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 3,836,836 $30,986,836
Working capital.................................... 3,887,338 31,037,338
Total assets....................................... 5,336,453 32,486,453
Stockholders' equity............................... 4,862,847 32,012,847
</TABLE>
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(1) Based on shares outstanding as of June 30, 1996. Excludes (i) 1,770,000
shares of Common Stock reserved for issuance upon the exercise of
outstanding warrants at an exercise price of $0.75 per share, (ii)
2,522,300 shares of Common Stock issuable upon exercise of outstanding
options and (iii) 2,197,700 shares reserved for future grants under the
Company's 1994 Stock Option Plan. See "Management--1994 Stock Option Plan"
and "Description of Securities--Warrants."
(2) See Note 1 of "Notes to Financial Statements" for an explanation of the
determination of the number of shares and share equivalents used in
computing the pro forma per share amount.
(3) Reflects the conversion of all the outstanding shares of the Company's
Series A Preferred Stock into Common Stock upon the closing of this
offering.
(4) Represents the pro forma data as adjusted to give effect to the sale of
4,000,000 shares of Common Stock offered by the Company at an assumed
initial public offering price of $7.50 per share (after deducting
underwriting discounts and commissions and estimated offering expenses) and
the application of the estimated net proceeds therefrom. See
"Capitalization" and "Use of Proceeds."
Voxware(TM), the Voxware logo, MetaVoice(TM), ToolVox(TM), TeleVox(TM) and
VoiceFonts(TM) are trademarks of Voxware, Inc. This Prospectus also contains
trademarks and tradenames of other companies.
4
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business before
purchasing the Common Stock hereby. This Prospectus contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed below as well as those discussed elsewhere in this
Prospectus.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; EARLY STAGE OF DEVELOPMENT
The Company was founded in August 1993 and commenced shipment of its initial
products in July 1995. Accordingly, the Company has only a limited operating
history upon which an evaluation of the Company and its prospects can be
based. As of June 30, 1996, the Company had an accumulated deficit of
$4,258,563. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in an early
stage of development, particularly companies in new and rapidly evolving
industries. To address these risks and achieve profitability and increased
sales levels, the Company must, among other things, establish and increase
market acceptance of its products, respond effectively to competitive
pressures, introduce on a timely basis products incorporating its technologies
and enhancements to its products and successfully market and support its
products and enhancements. There can be no assurance that the Company will
achieve or sustain significant sales or profitability in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNCERTAINTY OF PRODUCT ACCEPTANCE IN DEVELOPING MARKETS; NEW PRODUCT
DEVELOPMENT RISKS
The markets for the Company's products have only recently begun to develop,
are rapidly evolving and are characterized by an increasing number of market
entrants who have introduced or developed products for enhancing and
facilitating the use of speech in new and existing applications, particularly
for the Internet. In addition, the Company's products are new and based on
novel technologies. As is typical in the case of new and rapidly evolving
industries, demand and market acceptance for recently introduced products are
subject to a high level of uncertainty. Virtually all of the Company's
products are based upon MetaVoice, its core speech compression technology.
Broad acceptance of the Company's products by customers and end users is
critical to the Company's success and ability to generate revenues. Acceptance
of the Company's products will be highly dependent on the functionality and
performance of the products and particularly on the success of the initial
implementation of its products. In addition, the Company's products must be
adapted in certain instances to meet the specific requirements of the customer
hardware or software in which it is to be integrated. The adaptation process
can be time consuming and costly to both the Company and its customers and the
acceptance of the end product may depend, to a substantial extent, on the
success of the adaptation. The Company is in the process of porting its
technologies to different platforms to meet customer needs and, in certain of
its license agreements, successful porting is a condition to the continuation
of the agreement and the receipt of fees and royalties. There can be no
assurance that the Company will be successful in obtaining market acceptance
of its products. Failure to successfully port products to desired platforms
for customers or to otherwise gain market acceptance of its products would
have a material adverse effect on the Company's business, operating results
and financial condition.
Furthermore, products offered by the Company may contain undetected errors
or defects when first introduced or as new versions are released. Introduction
by the Company of products with reliability, quality or compatibility problems
could result in reduced revenues, uncollectible accounts receivable, delays in
collecting accounts receivable and additional costs. There can be no assurance
that, despite testing by the Company or by its customers, errors will not be
found in the Company's products after commencement of commercial deployment,
resulting in product redevelopment costs and loss of, or delay in, market
acceptance. In addition, there can be no assurance that the Company will not
experience significant product returns in the future. Any
5
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such event could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business--Products" and "--
Research and Future Product Development."
DEPENDENCE ON NETSCAPE
The Company is substantially dependent on its relationship with Netscape to
achieve widespread distribution and acceptance of its products and
technologies. During the year ended June 30, 1996, Netscape accounted for 31%
of the Company's revenues. Although the Company has entered into a software
license agreement with Netscape (the "Netscape License Agreement") in which it
has licensed certain of its products and technologies for use in Netscape's
products, Netscape is not obligated to use the Company's products or
technologies in Netscape's products and, therefore, there can be no assurance
that Netscape will include the Company's products and technologies in its
products in the future. Further, there can be no assurance that Netscape will
not choose to use other speech processing technologies, available either from
the Company's competitors or in the public domain, in its products. The
Netscape License Agreement may be terminated by Netscape for any reason at any
time prior to July 31, 1996 on 180 days notice and after July 31, 1996 on 90
days notice. In addition, Netscape has the right to terminate the Netscape
License Agreement upon a material default by the Company of its material
obligations under the Netscape License Agreement unless the default is
remedied within 30 days after notice of the default. If Netscape terminates
the Netscape license agreement or does not incorporate and distribute the
Company's products and technologies in its own products, the Company's
business, operating results and financial condition will be materially
adversely affected. The success of the Company is dependent on Netscape's
ability to continue to achieve widespread distribution and acceptance of
Netscape's products in the Internet market. Any failure by Netscape to
continue to achieve widespread distribution and acceptance of its products, or
any material decrease in Netscape's market share in the Internet market, may
have a material adverse effect on the Company's business, operating results
and financial condition. See "Business--Strategic Relationships and
Licensees."
UNCERTAIN ADOPTION OF INTERNET AS A MEDIUM FOR VOICE COMMUNICATIONS
The Company has targeted development of products and technologies for the
Internet as a strategic focus. Critical issues concerning the commercial use
of the Internet (including reliability, cost, security, ease of use and access
and quality of service) remain unresolved and may impact the growth of
Internet use. While the Company believes that its products potentially offer
significant advantages for voice communication over the Internet, it is
difficult to predict the future growth rate, if any, and size of this market.
There can be no assurance that the markets for the Company's products will
develop, that the Company's products will be adopted, or that personal
computer users in business or at home will use the Internet for voice
communication. In addition, the adoption of the Internet for telephony and
teleconferencing will require the acceptance by users of a new way of
conducting telephonic communications. If the market fails to develop, develops
more slowly than expected or becomes saturated with competitors, the Company's
business, operating results and financial condition will be materially
adversely affected. See "Business--Industry Background."
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
Significant annual and quarterly fluctuations in the Company's results of
operations may be caused by, among other factors, the timing and structure of
license agreements entered into with the Company's customers, the volume of
sales and revenue of the Company's licensees from sales of products
incorporating the Company's products and technologies, the mix of distribution
channels used by the Company, the timing of new product announcements and
releases by the Company and its competitors, and general economic conditions.
There can be no assurance that the level of sales and gross profits, if any,
achieved by the Company in any particular fiscal period will not be
significantly lower than in other, including comparable, fiscal periods. The
Company's expense levels are based, in part, on its expectations as to future
revenues. As a result, if future revenues are below expectations, net income
or loss may be disproportionately affected by a reduction in revenues as any
corresponding reduction in expenses may not be proportionate to the reduction
in revenues. As a result, the
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Company believes that period-to-period comparisons of its results of
operations may not necessarily be meaningful and should not be relied upon as
indications of future performance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ABILITY TO MANAGE GROWTH
The Company has been rapidly expanding and expects to continue to expand its
management, research and development, testing, quality control, marketing,
sales and customer service and support operations, as well as its financial
and accounting controls, all of which has and is expected to continue to place
a significant strain on the Company. The Company has grown from 12 employees
at June 30, 1995 to 58 employees at June 30, 1996. Failure to integrate new
personnel on a timely basis could have an adverse effect on the Company's
operations. Furthermore, the expenses associated with expanding the Company's
management team and hiring new employees have been and are being incurred
prior to the generation of any significant revenues. If the Company's
management is unable to manage growth effectively, the quality of the
Company's products, its ability to retain key personnel and its business,
operating results and financial condition could be materially adversely
affected.
RELIANCE ON THIRD PARTIES TO GENERATE RECURRING REVENUES
The Company's products are licensed primarily to software, computing and
communications companies which incorporate the Company's products and
technologies into their products. The Company's revenues derived from these
licensing arrangements will be based in large part upon the sale of these
products. The success of the Company will therefore be dependent to a
substantial degree on the efforts of these third parties in developing and
marketing products incorporating the Company's products and technologies. The
Company has entered into approximately 15 license agreements through June 30,
1996 which provide for recurring payments. Although the Company's revenues for
the year ended June 30, 1996 include a significant amount of recurring revenue
from these agreements, to date the Company has not received any royalty fees
based upon sales of its licensees' products. There can be no assurance that
any product incorporating the Company's products and technologies will be
marketed successfully by the Company's licensees. In addition, none of the
Company's licensees are contractually obligated to use the Company's products.
Furthermore, licensees of the Company may develop their own speech processing
products or technologies that compete with the Company's products and
technologies. There can be no assurance that these licensees will not replace
the Company's products with, or give higher priority to the sales of these
competitive products or technologies. See "Business--Competition."
HIGHLY COMPETITIVE INDUSTRY
The market for innovative voice processing software products and services is
intensely competitive. The Company expects competition to persist, intensify
and increase in the future. Many of the Company's current and potential
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than the Company. The Company's competition for voice processing
products is primarily emerging from two sources: developers of speech
compression algorithms and developers of software applications that
incorporate speech. Direct competitors include DSP Group, Inc., Lucent
Technologies Inc. and Lernout & Hauspie Speech Products N.V. in the speech
coding market and VocalTec, Ltd., Quarterdeck Corporation, Progressive
Networks, Inc. and Xing Technology Corporation in the Internet applications
market. Companies that have developed low bit note parametric speech
compression technologies but do not currently compete with the Company
directly include Texas Instruments, Incorporated, and Digital Voice Services,
Inc., and the Company expects that additional companies will eventually
compete in the voice market. In the future, the Company may also develop and
introduce products with new or additional capabilities or services which could
result in the Company competing directly with companies in other industries
such as telecommunications, media, publishing and cable television. The
ability of certain of the Company's competitors to bundle other services and
products with voice products could put the Company at a competitive
disadvantage.
NECESSITY TO DEVELOP AND INTRODUCE NEW AND ENHANCED PRODUCTS; RISKS OF RAPID
TECHNOLOGICAL CHANGE
The markets for the Company's products are characterized by rapidly changing
technology. The introduction of products incorporating new technologies could
render the Company's products obsolete and
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unmarketable and could exert price pressures on existing products. Further,
the markets for the Company's products and, in particular, the market for
voice and multimedia over the Internet, are characterized by evolving industry
standards and specifications. As new standards or specifications are adopted,
the Company may be required to devote substantial time and expense in order to
adapt its products. The Company's ability to anticipate changes in technology
and industry standards and successfully develop and introduce new and enhanced
products, as well as additional applications for existing products, in each
case in a cost effective and timely manner, will be a critical factor in the
Company's ability to grow and be competitive. There can be no assurance that
the Company will successfully develop new or enhanced products, that any new
or enhanced products will achieve market acceptance, that the Company will be
able to adapt its products to comply with new standards or specifications, or
that the introduction of new products or technologies by others will not
render the Company's products obsolete. See "Business--Products" and "--
Research and Product Development."
The Company's technology and products have been developed and optimized to
operate in environments with low point-to-point bandwidth such as the
Internet. Current and potential Internet service providers ("ISPs"), including
telecommunications companies, cable companies, traditional ISPs and others,
are seeking to substantially increase the bandwidth of Internet access
connections and network infrastructure. Companies building network
infrastructure in other markets, such as wireless communications, are also
seeking to substantially increase available bandwidth. As the bandwidth of the
Internet and other communications networks increases, demand for the Company's
technologies and products may decrease substantially, which could have a
material adverse effect on the Company's business, operating results and
financial condition.
RISK OF GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
In the United States, there are currently few laws or regulations directly
applicable to communications and speech on the Internet or to access to, or
commerce on, the Internet generally. However, changes in the regulatory
environment, particularly in regulations relating to the telecommunications
industry, could have an adverse effect on the Company's business. Increased
acceptance of speech communications over the Internet could result in
intervention by governmental regulatory agencies in the United States or
elsewhere in the world under existing or newly enacted legislation and in the
imposition of fees or charges on users and providers of products and services
in this area. There can be no assurance that government intervention or
imposition of fees or charges would not have a material adverse impact upon
the acceptance of and growth in the market for Internet voice communications.
Additionally, legislative proposals from international, federal and state
government bodies could impose additional regulations and obligations upon
online service providers. The growing popularity and use of the Internet has
generally led to increased public awareness and could lead to increased
pressure on legislatures to impose regulations and fees. For example, several
states and municipalities have imposed taxes on Internet access services.
A Petition for Declaratory Ruling, Special Relief and Institution of a
Rulemaking (the "Petition") was filed by America's Carriers Telecommunications
Association with the Federal Communications Commission (the "FCC"). The
Petition alleges that providers of Internet telephone software are operating
as telecommunications carriers and, as such, should be subject to the FCC
regulatory framework applicable to traditional telecommunications companies.
The Petition seeks a declaratory ruling establishing the FCC's authority over
interstate and international communications using the Internet and an order
directing that persons providing Internet phone software comply with the
regulatory requirements of The Communication Act of 1934. Finally, the
Petition urges the FCC to initiate a rulemaking proceeding to consider rules
governing the use of the Internet for the provision of telecommunications
services. The FCC issued a public notice seeking comments with respect to the
Petition. There can be no assurance that, given the substantial investment by
telecommunications providers in traditional telephony infrastructure and
services, these providers will not pursue other avenues to regulate, restrict
or increase the cost of Internet telephony and other applications of voice on
the Internet. The Company cannot predict the likelihood that any future
legislation will be enacted or that the FCC or any other regulatory agency
will not issue regulations directly affecting the Company's business. There
can be no assurance that any such future regulations will not have a material
adverse effect upon the Company's business, operating results and financial
condition.
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RISKS OF INTERNET DISTRIBUTION
The Company distributes products through, among other channels, the
Internet. Distributing the Company's products through the Internet makes the
Company's software products more susceptible to unauthorized copying and use
than distribution through conventional means. The Company has allowed, and
currently intends to continue to allow, potential customers to electronically
download basic versions of its software for free over the Internet, in order
for them to become familiar with the Company's products and subsequently order
enhanced and other existing or future products. There can be no assurance
that, upon receiving orders for its enhanced products, the Company will be
able to collect payment from users that retain a copy of the Company's
enhanced and other existing or future products.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees, particularly Michael Goldstein, the
Company's President and Chief Executive Officer, and J. Gerard Aguilar, the
Company's Vice President, Research and Development. Given the Company's early
stage of development, the Company is dependent on its ability to retain and
motivate high quality personnel, especially its management and skilled
development teams. The loss of the services of any of its executive officers
or other key employees could have a material adverse effect on the Company's
business, operating results and financial condition. The Company's future
success also depends on its continuing ability to attract and retain
additional highly qualified technical personnel, in particular, speech coding
personnel. Competition for qualified personnel is intense and there can be no
assurance that the Company will be able to attract, assimilate or retain
qualified personnel in the future. The inability to attract and retain the
necessary technical and other personnel could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Business--Research and Product Development," "--Employees" and "Management."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain patent
protection for its products, preserve its trade secrets and operate without
infringing the proprietary rights of other parties. There can be no assurance
that patent applications to which the Company holds rights will result in the
issuance of patents, or that any issued patents will provide commercially
significant protection to the Company's technology and products. In addition,
there can be no assurance that others will not independently develop
substantially equivalent proprietary information not covered by patents to
which the Company owns rights or obtain access to the Company's know-how, or
that others will not claim to have or will not be issued patents which may
prevent the sale of one or more of the Company's products. In particular, Elk
Industries, Inc. ("Elk Industries") has asserted that Voxware's "Internet-
based streaming audio systems" infringe U.S. Patent No. 4,124,773 owned by Elk
Industries, and Elk Industries offered Voxware the opportunity to purchase a
license. The Company does not believe that its products infringe Elk
Industries' patent. Litigation, which could be costly and time consuming, may
be necessary to determine the scope and validity of others' proprietary
rights, including Elk Industries', or to enforce any patents issued to the
Company, in either case, in judicial or administrative proceedings. An adverse
outcome could subject the Company to significant liabilities to third parties,
require the Company to obtain licenses from third parties or require the
Company to cease any related research and development activities or product
sales. There can be no assurance that a license from Elk Industries or any
licenses required under any other third-party patents or proprietary rights
would be made available on acceptable terms, if at all. In addition, the laws
of certain countries may not protect the Company's intellectual property.
The software market has traditionally experienced widespread unauthorized
reproduction of products in violation of manufacturers' intellectual property
rights. Such activity is difficult to detect and legal proceedings to enforce
manufacturers' intellectual property rights are often burdensome and involve a
high degree of uncertainty and costs. The Company's success is also dependent
upon unpatented trade secrets which are difficult to protect. To help protect
its rights, the Company requires employees and consultants to enter into
confidentiality agreements that prohibit disclosure of the Company's
proprietary information and require the assignment to the Company of their
ideas, developments, discoveries and inventions. There can be no assurance
that these
9
<PAGE>
agreements will provide adequate protection for the Company's trade secrets,
know-how, or other proprietary information in the event of any unauthorized
use or disclosures. See "Business--Patents and Property Information."
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, the present directors, executive officers
and their respective affiliates will beneficially own approximately 49.2% of
the outstanding Common Stock. As a result, these stockholders will be able to
exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. The concentration of ownership may also have the
effect of delaying or preventing a change in control of the Company. See
"Principal Stockholders."
POTENTIAL ISSUANCE OF PREFERRED STOCK
After this offering, the Board of Directors will have the authority to issue
up to 10,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights of those
shares without any further vote or action by the stockholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue shares of Preferred Stock. See "Description of
Securities--Preferred Stock."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for
the Common Stock will develop or be sustained after the offering. The initial
public offering price will be determined by negotiation between the Company
and the Representatives of the Underwriters based upon several factors. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The market price of the Company's Common
Stock is likely to be highly volatile and could be subject to wide
fluctuations in response to quarterly variations in operating results, losses
of significant customers, announcements of technological innovations or new
products by the Company or its competitors, changes in financial estimates by
securities analysts, or other events or factors, including the risk factors
described herein. In addition, the stock market has experienced significant
price and volume fluctuations that have particularly affected the market
prices of equity securities of many high technology companies and that often
have been unrelated to the operating performance of such companies. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted
against such a company. Such litigation could result in substantial costs and
a diversion of management's attention and resources, which would have a
material adverse effect on the Company's business, operating results and
financial condition. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Company's Common Stock could
have the effect of depressing the prevailing market price of its Common Stock.
Upon completion of this offering, the Company will have a total of 21,895,000
shares of Common Stock outstanding, assuming no exercise of stock options or
warrants after June 30, 1996. Of these shares, the 4,000,000 shares of Common
Stock offered hereby will be freely tradeable without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), by persons other
than "affiliates" of the Company, as defined under the Securities Act. The
remaining 17,895,000 shares of Common Stock outstanding are "restricted
shares" as that term is defined by Rule 144 and Rule 701 as promulgated under
the Securities Act. All but 7,000 of these 17,895,000 shares will not be
immediately saleable in the public market following the date of this
Prospectus. Beginning 90 days after the date of this Prospectus, 180,000
shares of Common Stock will become eligible for sale pursuant to Rule 701; and
beginning
10
<PAGE>
180 days after the date of this Prospectus (or earlier with the written consent
of Montgomery Securities, on behalf of the Underwriters), shares of Common
Stock will become eligible for sale upon the expiration of lock-up agreements
between the Underwriters and the holders of such shares, subject to compliance
with Rule 144 or Rule 701 of the Securities Act. See "Shares Eligible for
Future Sale."
As of June 30, 1996, options to purchase a total of 2,522,300 shares of
Common Stock were outstanding. Following the completion of this offering, there
will be 2,197,700 shares of Common Stock available for future option grants
under the Company's 1994 Stock Option Plan. of the shares issuable pursuant
to outstanding options are subject to lock-up restrictions for a period of 180
days as described above. In addition, the Company has warrants outstanding as
of June 30, 1996 to purchase an aggregate of 1,770,000 shares of Common Stock
for $0.75 per share, of which shares are subject to the lock-up
restrictions for a period of 180 days as described above. See "Management--1994
Stock Option Plan," "Description of Securities--Warrants," "Underwriting" and
"Note 4 of "Notes to Financial Statements."'
MANAGEMENT DISCRETION IN APPLICATION OF PROCEEDS
The Company has not designated any specific use for the net proceeds from the
sale by the Company of Common Stock, offered hereby. Rather, the Company
intends to use the net proceeds primarily for general corporate purposes,
including working capital and potential acquisitions and strategic investments.
See "Use of Proceeds."
DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate and
substantial dilution, in the amount of $6.04 per share, in the pro forma as
adjusted net tangible book value per share as of June 30, 1996, from the
initial public offering price. To the extent outstanding options and warrants
to purchase Common Stock are exercised, there will be further dilution. See
"Dilution."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 4,000,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering
price of $7.50 per share hereby are estimated to be $27,150,000 after
deducting the estimated underwriting discount and estimated offering expenses.
The Company currently anticipates that its available cash resources combined
with the net proceeds of the offering and funds from operations will be
sufficient to meet its working capital and capital expenditure requirements
for at least the next 18 months.
The principal purposes of the offering are to increase the Company's equity
capital, to create a public market for the Company's Common Stock, to
facilitate future access by the Company to public equity markets and to
enhance the ability of the Company to use its Common Stock as a means of
attracting and retaining key employees.
The Company currently intends to use the net proceeds of this offering for
working capital and other general corporate purposes, including expanding its
sales and marketing operations and funding greater levels of research and
product development and capital expenditure. Furthermore, from time to time
the Company expects to evaluate possible acquisitions of or investments in
businesses, products and technologies that are complementary to those of the
Company, for which a portion of the net proceeds from this offering may be
used. While the Company engages from time to time in discussions with respect
to potential investments or acquisitions, the Company has no plans,
commitments, or agreements with respect to any such investments or
acquisitions. Pending the foregoing uses, the Company intends to invest the
net proceeds of this offering in investment grade, interest-bearing
instruments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has not paid any cash or stock dividends and does not expect to
declare or pay any cash or stock dividends in the foreseeable future, but
instead intends to retain all earnings, if any, to invest in the Company's
operations. The payment of future dividends is within the discretion of the
Board of Directors and will depend upon the Company's future earnings, if any,
its capital requirements, financial condition and other relevant factors.
12
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1996 (i) the actual
capitalization of the Company; (ii) the pro forma capitalization after giving
effect to the automatic conversion of all outstanding shares of the Company's
Series A Preferred Stock into Common Stock upon the closing of this offering;
and (iii) the pro forma capitalization as adjusted to give effect to the sale
of 4,000,000 shares of Common Stock offered by the Company (at an assumed
initial public offering price of $7.50 per share and after deducting the
underwriting discount and estimated offering expenses) and the application of
the net proceeds therefrom. The table should be read in conjunction with the
financial statements and the related notes appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Redeemable Series A Convertible Pre-
ferred Stock........................... $ 5,938,325 $ -- $ --
----------- ----------- -----------
Stockholders' equity (deficit):
Preferred Stock, $.001 par value,
10,000,000 shares authorized;
6,000,000 Redeemable Series A
Convertible shares (actual); no
shares (pro forma); no shares (pro
forma as adjusted) issued and
outstanding.......................... -- -- --
Common Stock, $.001 par value,
40,000,000 shares authorized;
11,895,000 shares (actual);
17,895,000 shares (pro forma);
21,895,000 shares (pro forma as
adjusted) issued and outstanding(1).. 11,895 17,895 21,895
Additional paid-in capital............ 3,171,190 9,103,515 36,249,515
Accumulated deficit................... (4,258,563) (4,258,563) (4,258,563)
----------- ----------- -----------
Total stockholders' equity (defi-
cit)............................... (1,075,478) 4,862,847 32,012,847
----------- ----------- -----------
Total capitalization.............. $ 4,862,847 $ 4,862,847 $32,012,847
=========== =========== ===========
</TABLE>
- --------
(1) Based on shares outstanding as of June 30, 1996. Excludes (i) 1,770,000
shares of Common Stock reserved for issuance upon the exercise of
outstanding warrants at an exercise price of $0.75 per share, (ii)
2,522,300 shares of Common Stock issuable upon exercise of outstanding
stock options and (iii) 2,197,700 shares reserved for future grants under
the Company's 1994 Stock Option Plan. The weighted average exercise price
of all outstanding options is $1.33 per share.
13
<PAGE>
DILUTION
At June 30, 1996, the pro forma net tangible book value of the Common Stock
was $4,862,847 or $0.27 per share after giving effect to the automatic
conversion of the Company's Series A Preferred Stock into Common Stock upon
the closing of this offering. Pro forma net tangible book value per share is
equal to the Company's total tangible assets less total liabilities divided by
the total number of shares of Common Stock outstanding on a pro forma basis.
After giving effect to the sale of the 4,000,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price of
$7.50 per share and after deducting the underwriting discount and estimated
offering expenses) and the application of the estimated net proceeds
therefrom, the pro forma as adjusted net tangible book value of the Common
Stock at June 30, 1996 would have been $32,012,847, or $1.46 per share. This
represents an immediate increase in the pro forma net tangible book value of
$1.19 per share to existing stockholders and an immediate dilution of $6.04
per share to purchasers in this offering. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.............................. $7.50
Pro forma net tangible book value before the offering............ $0.27
Increase per share attributable to new investors................. 1.19
-----
Pro forma as adjusted net tangible book value per share after the
offering.......................................................... 1.46
-----
Dilution per share to new investors(1)............................. $6.04
=====
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
cash consideration paid to the Company and the average price per share paid by
existing stockholders and by new investors in this offering based on an
assumed initial public offering price of $7.50 per share.
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)........ 17,895,000 81.7% $ 9,121,410 23.3% $0.51
New investors................... 4,000,000 18.3 30,000,000 76.7 7.50
---------- ----- ----------- -----
Total......................... 21,895,000 100.0% $39,121,410 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) If all exercisable options and warrants to purchase Common Stock
outstanding as of June 30, 1996 with exercise prices less than the assumed
initial public offering price of $7.50 per share were to be exercised, the
pro forma net tangible book value per share after this offering would be
$34,185,936 and dilution per share to new investors in this offering would
be $6.12.
(2) Includes 6,000,000 shares of Common Stock issuable upon conversion of
outstanding shares of the Company's Series A Preferred Stock which will be
converted upon the closing of this offering.
14
<PAGE>
SELECTED FINANCIAL DATA
The selected statement of operations data for the period from Inception
(August 20, 1993) to June 30, 1994 and the two years ended June 30, 1996 and
the selected balance sheet data as of June 30, 1995 and 1996 have been derived
from the financial statements of the Company, which have been audited by
Arthur Andersen LLP, independent public accountants, included elsewhere in
this Prospectus. The selected balance sheet data as of June 30, 1994 has been
derived from the Company's audited financial statements not included herein.
The selected statement of operations data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1993) YEAR ENDED JUNE 30,
TO JUNE 30, ------------------------
1994 1995 1996
----------------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product revenues................ $ -- $ -- $ 1,494,075
Service revenues................ -- -- 112,963
--------- ----------- -----------
Total revenues............... -- -- 1,607,038
--------- ----------- -----------
Cost of revenues:
Cost of product revenues........ -- -- 17,285
Cost of service revenues........ -- -- 28,129
--------- ----------- -----------
Total cost of revenues....... -- -- 45,414
--------- ----------- -----------
Gross profit................. -- -- 1,561,624
--------- ----------- -----------
Operating expenses:
Research and development........ 93,372 536,581 2,496,717
Sales and marketing............. 9,158 331,728 1,084,280
General and administrative...... 112,978 365,411 979,796
--------- ----------- -----------
Total operating expenses..... 215,508 1,233,720 4,560,793
--------- ----------- -----------
Operating loss............... (215,508) (1,233,720) (2,999,169)
Interest income................... -- 64,940 131,857
--------- ----------- -----------
Net loss.......................... $(215,508) $(1,168,780) $(2,867,312)
========= =========== ===========
Pro forma net loss per share...... $ (0.16)
===========
Shares used in computing pro forma
net loss per share(1)............ 17,583,980
===========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------
1996
----------------------
PRO
1994 1995 ACTUAL FORMA(2)
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $307,297 $1,523,054 $3,836,836 $3,836,836
Working capital.................... 254,828 1,417,964 3,887,338 3,887,338
Total assets....................... 358,700 1,666,827 5,336,453 5,336,453
Redeemable Series A Convertible
Preferred Stock................... -- -- 5,938,325 --
Stockholders' equity (deficit)..... 306,231 1,556,297 (1,075,478) 4,862,847
</TABLE>
- --------
(1) See Note 1 of "Notes to Financial Statements" for an explanation of the
determination of the number of shares and share equivalents used in
computing the pro forma per share amount.
(2) Reflects the conversion of all the outstanding shares of the Company's
Series A Preferred Stock into Common Stock upon the closing of this
offering.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
From Inception (August 20, 1993) to June 30, 1995, the Company's operating
activities related primarily to performing research and development,
recruiting personnel, raising capital and purchasing operating assets. The
Company commenced product releases in July 1995 and, for accounting purposes,
emerged from development stage commencing in July 1995. Since Inception, the
Company has raised an aggregate of $8,838,440, net of offering costs, through
private placements.
The Company generates revenues from two sources: fees from product licenses
and fees for services provided. Product revenues account for a majority of the
Company's revenues. The Company's products are licensed primarily to software,
computing and communications companies who incorporate the Company's products
and technologies into their products. The Company generally negotiates
contract terms with customers on a case by case basis, with arrangements that
have historically included a combination of initial license fees, annual
license fees or royalties. The Company expects a significant portion of its
future revenues to be in the form of royalties or other recurring payments
based on the sale by licensees of products that incorporate the Company's
products. To date, the Company has entered into approximately 15 license
agreements which provide for recurring payments. It is the intention of the
Company to continue to pursue license opportunities that include a recurring
revenue component. Service revenues consist of customer support and
engineering fees. Customer support services include providing updates and
technical support to licensees of the Company's products. Engineering services
include providing technical resources to support customer specific development
efforts or porting the Company's technologies to specific customer platforms.
Software product revenues are generally recognized upon shipment, provided
that there are no significant post-delivery obligations and that payment is
due within one year. If an acceptance period is required, revenues are
recognized upon customer acceptance. Royalty revenues are recognized in the
period of customer shipment. To date, no royalty revenues have been
recognized. Customer support revenues, including amounts bundled with license
fees, are recognized over the term of the support period, which is typically
one year. Engineering fees are recognized upon customer acceptance or over the
period in which services are provided if customer acceptance is not required.
All research and development costs expended to date for development of new
software products and enhancements to existing software products have been
expensed as incurred. As a result, cost of product revenues do not include
amortization of capitalized software development costs. See Note 1 of "Notes
to Financial Statements."
The Company has only a limited operating history upon which an evaluation of
the Company and its prospects can be based. As of June 30, 1996, the Company
had an accumulated deficit of $4,258,563. Although the Company has experienced
revenue growth in recent periods, the limited operating history of the Company
makes the prediction of future results of operations impossible and,
therefore, the Company's recent revenue growth should not be taken as
indicative of the rate of revenue growth, if any, that can be expected in the
future. In addition, the Company's operating results may fluctuate
significantly in the future as a result of a variety of factors, including the
level of usage of the Internet, the budgeting cycles of potential customers,
the volume of, and revenues derived from, sales of products by the Company's
licensees that incorporate the Company's products, the amount and timing of
capital expenditures and other costs relating to the expansion of the
Company's operations, the introduction of new products or services by the
Company or its competitors, pricing changes in the industry, technical
difficulties with respect to the use of products developed by the Company and
general economic conditions. See "Risk Factors--Limited Operating History;
Accumulated Deficit; Early Stage of Development," "--Dependence on Netscape,"
"--Uncertain Adoption of Internet as a Medium for Voice Communications," "--
Potential Fluctuations in Operating Results," "--Highly Competitive Industry,"
"--Risks of Internet Distribution" and "--Reliance on Third Parties to
Generate Recurring Revenues."
16
<PAGE>
PERIOD TO PERIOD COMPARISONS
The following table presents selected financial information for the periods
indicated. This information has been derived from the Company's unaudited
financial statements which, in the opinion of management, reflect all
adjustments necessary to fairly present this information when read in
conjunction with the financial statements and notes thereto included elsewhere
in this Prospectus. The results of operations for any period are not
necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS ENDED
(AUGUST 20, 1993) -----------------------------------------------------------------
TO JUNE 30, 1995 SEPTEMBER 30, 1995 DECEMBER 31, 1995 MARCH 31, 1996 JUNE 30, 1996
----------------- ------------------ ----------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Product revenues...... $ -- $ 92,616 $ 107,705 $ 503,761 $ 789,993
Service revenues...... -- 91 681 2,335 109,856
----------- --------- --------- --------- -----------
Total revenues....... -- 92,707 108,386 506,096 899,849
----------- --------- --------- --------- -----------
Cost of Revenues:
Cost of product reve-
nues................. -- 3,109 3,109 3,397 7,670
Cost of service reve-
nues................. -- 1,655 3,310 4,508 18,656
----------- --------- --------- --------- -----------
Total cost of reve-
nues................ -- 4,764 6,419 7,905 26,326
----------- --------- --------- --------- -----------
Gross profit......... -- 87,943 101,967 498,191 873,523
----------- --------- --------- --------- -----------
Operating Expenses:
Research and develop-
ment................. 629,953 248,749 324,140 630,184 1,293,644
Sales and marketing... 340,886 107,449 198,801 331,489 446,541
General and adminis-
trative.............. 478,389 74,205 165,496 298,014 442,081
----------- --------- --------- --------- -----------
Total operating
expenses............ 1,449,228 430,403 688,437 1,259,687 2,182,266
----------- --------- --------- --------- -----------
Operating loss....... (1,449,228) (342,460) (586,470) (761,496) (1,308,743)
Interest income........ 64,940 17,330 16,342 50,782 47,403
----------- --------- --------- --------- -----------
Net loss............... $(1,384,288) $(325,130) $(570,128) $(710,714) $(1,261,340)
=========== ========= ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------
SEPTEMBER 30, 1995 DECEMBER 31, 1995 MARCH 31, 1996 JUNE 30, 1996
------------------ ----------------- -------------- -------------
<S> <C> <C> <C> <C>
AS A PERCENTAGE OF
REVENUES:
Revenues:
Product revenues...... 100% 99% 99% 88%
Service revenues...... -- 1 1 12
---- ---- ---- ----
Total revenues....... 100 100 100 100
---- ---- ---- ----
Cost of Revenues:
Cost of product reve-
nues................. 3 3 1 1
Cost of service reve-
nues................. 2 3 1 2
---- ---- ---- ----
Total cost of reve-
nues................ 5 6 2 3
---- ---- ---- ----
Gross profit......... 95 94 98 97
---- ---- ---- ----
Operating Expenses:
Research and develop-
ment................. 268 299 124 143
Sales and marketing... 116 183 65 50
General and adminis-
trative.............. 80 153 59 49
---- ---- ---- ----
Total operating ex-
penses.............. 464 635 248 242
---- ---- ---- ----
Operating loss....... (369) (541) (150) (145)
Interest income........ 18 15 10 5
---- ---- ---- ----
Net loss............... (351)% (526)% (140)% (140)%
==== ==== ==== ====
</TABLE>
17
<PAGE>
RESULTS OF OPERATIONS
Revenues
The Company had no revenues during the period from Inception to June 30,
1995. Total revenues for the year ended June 30, 1996 were $1,607,038,
consisting of $92,707, $108,386, $506,096 and $899,849 for the quarters ended
September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996,
respectively. The quarter ended September 30, 1995 was the first full quarter
in which the Company's products and services were made commercially available.
The Company's largest customer accounted for 31% of total revenues in the year
ended June 30, 1996. Revenues increased each quarter from the quarter ended
September 30, 1995 through the quarter ended June 30, 1996 as the Company
entered into license agreements providing customers with the right to use the
Company's products and related services.
Product revenues accounted for 93% of total revenues in the year ended June
30, 1996, consisting of $92,616, $107,705, $503,761 and $789,993 for the
quarters ended September 30, 1995, December 31, 1995, March 31, 1996 and June
30, 1996, respectively. Product revenues increased each quarter from the
quarter ended September 30, 1995 through the quarter ended June 30, 1996
primarily due to the increased volume of licenses of the Company's products to
new customers.
Service revenues accounted for 7% of total revenues in the year ended June
30, 1996, consisting of $91, $681, $2,335 and $109,856 for the quarters ended
September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996,
respectively. Services revenues were primarily attributable to customer
support and fees for engineering services.
Cost of Revenues
Cost of product revenues consists primarily of the cost of product media and
duplication, manuals and packaging materials. Cost of product revenues was
$17,285 in the year ended June 30, 1996, consisting of $3,109, $3,109, $3,397
and $7,670 for the quarters ended September 30, 1995, December 31, 1995, March
31, 1996 and June 30, 1996, respectively. For the year ended June 30, 1996,
cost of product revenues was 1% of product revenues.
Cost of service revenues consists primarily of the expenses associated with
the staffing of a customer support group and engineering services, which
consist primarily of employee compensation and equipment depreciation. Cost of
service revenues was $28,129 in the year ended June 30, 1996, consisting of
$1,655, $3,310, $4,508 and $18,656 for the quarters ended September 30, 1995,
December 31, 1995, March 31, 1996 and June 30, 1996, respectively. For the
year ended June 30, 1996, cost of service revenues was 25% of service
revenues. The dollar increase in cost of service revenues from the quarter
ended September 30, 1995 to the quarter ended June 30, 1996 was primarily
attributable to increased staffing of the Company's customer support and
engineering groups.
Operating Expenses
The Company's operating expenses have increased significantly since
Inception. This trend reflects the costs associated with the development of
infrastructure, rapid growth and increased efforts to commercialize the
Company's products and services. The Company believes that continued expansion
of its operations is essential to enhance the Company's products and services
and distribute them in targeted markets and expand the Company's installed
user base. As a consequence, the Company intends to continue to increase
expenditures in all operating areas.
Research and development expenses primarily consist of employee compensation
and equipment depreciation. Research and development expenses were $629,953
for the period from Inception to June 30, 1995 and $2,496,717 for the year
ended June 30, 1996, consisting of $248,749, $324,140, $630,184 and $1,293,644
for the quarters ended September 30, 1995, December 31, 1995, March 31, 1996
and June 30, 1996, respectively.
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The dollar increase in research and development expenses for the period from
Inception to June 30, 1995 compared to the year ended June 30, 1996 and from
quarter to quarter in fiscal 1996 was primarily due to increasing the research
and development staff from 6 at June 30, 1995 to 33 at June 30, 1996 and the
costs associated with developing and enhancing the functionality of the
Company's family of products. All research and development costs have been
expensed as incurred. The Company believes that significant investments in
research and development are required to establish and maintain competitive
advantage. As a consequence, the Company intends to increase the absolute
dollar level of research and development expenditures in future periods.
Sales and marketing expenses consist primarily of employee compensation
(including direct sales commissions), travel expenses, trade shows and costs
of promotional materials. Sales and marketing expenses were $340,886 for the
period from Inception to June 30, 1995 and $1,084,280 for the year ended June
30, 1996, consisting of $107,449, $198,801, $331,489 and $446,541 for the
quarters ended September 30, 1995, December 31, 1995, March 31, 1996 and June
30, 1996, respectively. The dollar increase in sales and marketing expenses
for the period from Inception to June 30, 1995 compared to the year ended June
30, 1996 and from quarter to quarter in fiscal 1996 was primarily due to the
creation and expansion of the Company's direct sales force from 3 at June 30,
1995 to 8 at June 30, 1996 and increased expenses associated with the
promotion and marketing of the Company's products and services. The Company
intends to continue to intensify and expand its direct and tele-sales efforts
and, as a result, intends to increase the absolute dollar level of sales and
marketing expenses in future periods.
General and administrative expenses consist primarily of employee
compensation and fees for insurance, rent, office expenses and professional
services. General and administrative expenses were $478,389 for the period
from Inception to June 30, 1995 and $979,796 for the year ended June 30, 1996,
consisting of $74,205, $165,496, $298,014 and $442,081 for the quarters ended
September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996,
respectively. The Company intends to increase the absolute dollar level of
general and administrative expenses in future periods.
Income Taxes
As of June 30, 1996, the Company had approximately $3,500,000 of federal net
operating loss carryforwards which will begin to expire in 2009 if not
utilized. Under the Tax Reform Act of 1986, the amounts of and the benefits
from net operating loss carryforwards may be impaired in certain
circumstances. Events which may cause such limitations in the amount of net
operating losses that the Company may utilize in any one year include, but are
not limited to, a cumulative ownership change of more than 50% over a three
year period. As of June 30, 1996, the effect of any limitation, if imposed, is
not expected to be material. As of June 30, 1996, the Company has provided a
full valuation allowance on the deferred tax asset because of the uncertainty
regarding realizability of these deferred assets, primarily as a result of
considering such factors as the Company's limited operating history, the
volatility of the market in which it competes, the operating losses incurred
to date and the operating losses anticipated in future periods. See Note 5 of
"Notes to Financial Statements."
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had $3,836,836 in cash and cash
equivalents. Since Inception, the Company has primarily financed its
operations through the sale of equity securities. Cash of $1,268,152 and
$3,273,714 was used to fund operations for the period from Inception to June
30, 1995 and the year ended June 30, 1996, respectively. For the period from
Inception to June 30, 1995 and the year ended June 30, 1996, cash used in
investing activities was $149,379 and $586,366, respectively, and was
primarily related to purchases of office equipment. For the period from
Inception to June 30, 1995, cash provided by financing activities of
$2,940,585 was primarily attributable to two separate private placements of
equity securities. For the year ended June 30, 1996, cash provided by
financing activities of $6,173,862 was primarily attributable to the sale of
Series A Preferred Stock. All Series A Preferred Stock will convert into
Common Stock upon the closing of the offering.
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The Company has no material commitments other than those under normal
building and equipment operating leases. The Company anticipates a substantial
increase in its capital expenditures and operating lease arrangements in the
year ending June 30, 1997 consistent with its anticipated growth. The Company
anticipates major capital expenditures in the year ending June 30, 1997
primarily for additions to the Company's internal networking and computing
infrastructure. The Company believes that the net proceeds from this offering
and current cash balances will be sufficient to fund its working capital and
capital expenditures requirements, exclusive of cash required for possible
acquisitions of or investments in businesses, products and technologies, for
at least the next 18 months. For a discussion of factors that could cause
actual results to vary from this forward-looking statement, see "Risk
Factors."
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") which established financial accounting and
reporting standards for stock based employee compensation plans. Companies are
encouraged, rather than required, to adopt a new method that accounts for
stock compensation awards based on their fair value using an option pricing
model. Companies that do not adopt this new standard will have to make pro
forma disclosures of net income (loss) as if the fair value based method of
accounting established by this standard had been applied. The Company will
adopt SFAS No. 123 effective July 1, 1996. The Company has elected to adopt
the disclosure requirement of this pronouncement. The adoption of the
pronouncement is expected to have no impact on the Company's financial
position or results of operations.
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BUSINESS
OVERVIEW
Voxware develops, markets, licenses and supports a comprehensive, integrated
set of digital speech processing technologies which provide the ability to
compress, model and transform speech. MetaVoice, the Company's innovative
coding technology, is designed to reproduce high quality speech while
requiring very low communications bandwidth and processing power. In addition
to efficiently compressing speech, MetaVoice enables a broad array of voice
transformation capabilities. Voxware's technologies enable its customers to
create a new generation of speech-enhanced communications and interactive
products for the Internet and other bandwidth-constrained environments. The
Company licenses its technologies, including speech codecs and application
programming interfaces, to software, computing and communications companies
and distributes its end-user application software to consumers and businesses.
To accelerate adoption of its technologies, the Company seeks to broadly
license its products and establish strategic relationships with market
leaders. The Company has established a strategic relationship with Netscape.
Netscape uses Voxware's speech coding technology as a part of its LiveMedia
multimedia framework to provide low bandwidth speech functions with version
3.0 of Netscape Navigator, currently in beta release. Navigator is the most
widely used software application for the World Wide Web. Netscape has also
made a minority equity investment in the Company.
In addition to Netscape, the Company has licensed its products to America
Online, Inc., Andrea Electronics Corporation, Apple Computer, Inc., Catapult
Entertainment, Inc., Farallon Computing, Inc., InterVoice, Inc., Microsoft
Corporation, Mpath Interactive, Inc., Tribal Voice and VDOnet Corporation
Ltd., among others.
Intel Corporation has made a minority equity investment in the Company.
Intel provides consulting support to Voxware for the optimization of the
Company's technologies on Intel processor platforms, consults with Voxware on
standards issues of mutual interest and supplies the Company with pre-release
versions of its advanced processors for development of the Company's products.
INDUSTRY BACKGROUND
Due to the emergence of powerful low-cost processors and the growth of the
Internet and other digital networks, the markets for digital speech
technologies are rapidly expanding beyond conventional telephony. Digital
speech technologies are increasingly being integrated into a variety of
applications, including voice-enabled Web pages, Internet telephony and
conferencing, Internet broadcasting, interactive games, voice messaging,
wireless and satellite communications, multimedia computing and voice-enabled
devices.
Voice on the Internet
The Internet is a collection of thousands of computer networks and millions
of computer connections that enables individuals, businesses and institutions
worldwide to communicate and to access and share information. Any computer
using the open standard Internet Protocol can communicate with any other
computer on the Internet. The universal, open connectivity of the Internet
enables computer users to communicate using a variety of digital data types,
including text, graphics, voice and video.
A combination of significant technological trends has led to the widespread
adoption of the Internet by a growing number of individuals and business
users. The proliferation of communication-enabled multimedia
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personal computers, the availability of intuitive, graphical Web browsers and
an increasingly robust network infrastructure, have allowed widespread access
to the Internet and have increased the use of the World Wide Web (the "Web")
by a large number of users for a broader range of applications. The Web
enables users to find, retrieve and link information on the Internet through a
consistent graphical interface that makes the underlying complexities
transparent to the user. In addition, the Web is an interactive environment,
which facilitates the exchange of multimedia-rich information and
entertainment content among users worldwide. As a result, the Web is changing
the way in which people exchange information and communicate with each other.
International Data Corporation ("IDC") has estimated that the number of
Internet users was approximately 38 million at the end of 1995 and is expected
to reach 199 million by the end of 1999.
The Company believes that adding voice communication capabilities to
existing text and graphic applications for the Internet can broaden and enrich
Internet users' communications. As multimedia and communications capabilities
become standard components of personal computer systems, a market for voice,
audio and video products for the Internet is emerging. Examples of emerging
Internet voice applications are multimedia Web pages incorporating pre-
recorded voice, point-to-point and multi-party telephony, telephony gateways
linking Internet users to public and private telephone networks, broadcasting
of live and pre-recorded content, voice messaging integrated with e-mail and
Web pages and multiplayer games which allow participants to speak to one
another.
The development of voice applications for the Internet is part of a larger
trend resulting in the convergence of standard voice communications and data
networks. Lowering of federal regulatory barriers to competition across
traditionally distinct sectors of the telecommunications industry has opened
new markets for and increased competitive pressures upon traditional
telecommunications companies. In response to these factors, major
telecommunications companies have begun to establish a presence in Internet
services, including online voice services. The Company believes that
telecommunications companies will require advanced digital speech processing
technology in order to provide high quality Internet voice services.
Voice in Other Markets
Given the natural preference for speech as a medium for communication and
expression, voice capabilities are being added to a wide array of products.
The rapidly declining cost and increasing power of digital signal processors
("DSPs") enable high quality voice using a fraction of the memory or bandwidth
historically required at prices that are acceptable for a range of business
and consumer applications.
Multimedia Productions. Multimedia productions involve the use of personal
computers to combine audio playback capabilities with some combination of
text, graphics, animation, video and data. Examples of primary multimedia
applications include packaged software for interactive entertainment and
information (i.e. games, education programs, reference works) and software
tools designed to allow users to create their own multimedia presentations.
Voice-Enabled Devices. The increasing power of low cost DSPs makes it
possible to record and transform voice for a wide variety of products aimed at
the consumer and business markets such as telephone answering machines,
personal electronic organizers and voice-enabled toys.
Wireless Communication. The growth of cellular telephony and improvements in
radio and satellite technology have enabled the development of new wireless
services. These services include voice paging systems, which are designed to
deliver voice messages directly to a paging device without the need for a user
to call in to receive a message, and hand-held satellite telephone systems,
which are designed to allow mobile telephone service to and from remote
locations.
THE CHALLENGE: HIGH QUALITY SPEECH PRODUCTS AND SERVICES
The Internet was originally designed for conventional text data applications
such as e-mail and file transfers. These applications can generally tolerate
the low effective bandwidth, network congestion and inconsistent data
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delivery characteristic of the Internet. By contrast, real-time speech
applications, which consume substantially higher bandwidth and suffer in the
presence of delays or gaps, must address these challenges to deliver high
quality speech over the Internet. Addressing these challenges effectively
requires a high degree of compression. Speech compression approaches, however,
are limited by the constraints of available processing power and represent a
trade-off between speech quality and the bandwidth required.
Effective bandwidth on the Internet is limited to the lowest bandwidth
component of the pathway taken by the data. Most individual users are limited
by the transmission rates of their modems, typically 14.4 kilobits per second
("kbps") or 28.8 kbps. Even on higher capacity connections, the effective
bandwidth is often reduced by the need to share available capacity across many
users. In addition, emerging multimedia applications on the Internet typically
comprise simultaneous voice, video and data streams, which must share the
available capacity, reducing the effective bandwidth available to voice data.
The design of the Internet is fundamentally different from the architecture
of conventional voice networks. The Internet is a "packet-switched" network
which breaks down data into a series of smaller, discrete "packets" for
transmission. Each packet of data travels independently through the network to
the destination address, where application software reassembles the packets to
recreate the original data set. Due to the tremendous growth of Internet usage
and the higher bandwidth demands of multimedia applications, congestion occurs
routinely on the Internet. As currently designed, the Internet handles
congestion by discarding or delaying packets or by sending packets from the
same source along different pathways, which can result in packets sent in
sequence arriving out of order. If the data packets represent a real-time
speech stream, the listener may perceive a gap or "choppiness" as a result of
missing, late-arriving or out-of-sequence packets.
In part, these challenges can be addressed by compressing the speech signal,
which decreases the number of bits required to encode and transmit the signal.
Reducing the effective bandwidth required to transmit the speech data
decreases the impact of congestion and inconsistent packet delivery. However,
speech compression technologies represent a trade-off between the quality of
speech delivered and the amount of bandwidth utilized. On the one hand,
technologies that achieve high speech quality generally require high
bandwidth, which can introduce unacceptable delays in delivery and make the
speech playback vulnerable to choppiness. On the other hand, technologies that
attempt to reduce bandwidth utilized typically offer unacceptable speech
quality or require the use of high power or specialty microprocessors. Speech
compression technologies are also limited by the constraints of the available
processing power, which in the case of typical Internet users consists of
general purpose microprocessors such as Intel's 486 and Pentium platforms.
Although the Internet is one of the fastest growing markets for speech
applications, several other significant markets also demand high-quality, very
low bandwidth speech. Diverse applications such as voice pagers, satellite
communications and low-cost electronic recording devices share many of the
same speech coding challenges as the Internet.
THE VOXWARE SOLUTION
Voxware has developed a comprehensive, integrated set of speech coding
technologies specifically to address the challenges associated with real-time
speech communication over the Internet and other low bandwidth media. The
Company's innovative MetaVoice coding technology is designed to alter the
trade-off between quality and bandwidth. MetaVoice is designed to deliver high
quality speech in a fraction of the bandwidth generally required by
conventional speech compression solutions and within the constraints of
available processing power. These characteristics are designed to make
MetaVoice a preferred solution for speech communications in environments such
as the Internet, wireless telephony and consumer and business products and
devices where transmission bandwidth, processing power and storage capacity
are limited. MetaVoice is designed to easily operate on a broad range of
application platforms and processors. Voxware's technologies enable its
customers to add new speech capabilities to their existing products and to
create a new generation of integrated speech-enabled products.
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TYPICAL COMMUNICATION BANDWIDTH REQUIREMENTS
<TABLE>
<CAPTION>
APPROXIMATE BANDWIDTH
APPLICATION REQUIRED (BPS)
----------- ---------------------
<S> <C>
CD-Quality Audio (16 bits, 44.1 KHz sampling
rate) 706,000
Uncompressed Speech (16 bits, 8 KHz sampling
rate) 128,000
Ordinary Telephone (8 bits, 8 KHz sampling rate) 64,000
Modem Internet Access < 28,800
Voxware MetaVoice (RT24) 2,400
</TABLE>
The MetaVoice codec uses a complex mathematical model that can accurately
reproduce human speech based on a finite number of descriptive parameters.
MetaVoice is currently capable of compressing speech data from a rate of 128
kbps to 2.4 kbps, enabling the creation of very small packets which are
capable of flowing through the network more easily in the presence of
congestion and low bandwidth.
For Internet speech applications, Voxware's technologies exhibit the
following attributes, among others, relative to traditional technologies:
. More graceful handling of lost, delayed or out-of-sequence packets
through the Company's innovative transmission quality management
technologies.
. Enabling teleconferencing and other multiple voice stream applications
in a way that does not require mixing at a central distribution point,
resulting in lower cost and improved quality of service.
. Requiring very low processing power which permits operation on general
purpose microprocessors (e.g. Intel 486).
. Enhancing the ability to combine real-time speech with video and data
streams by permitting more bandwidth to be allocated to non-speech data
transmission.
The Company believes that the low bandwidth and processing requirements of
MetaVoice potentially have significant advantages in a variety of other
markets, such as wireless telephony and certain consumer and business
products. For instance, the efficient compression of MetaVoice could enable
telecommunications providers to expand the capacity of their network systems.
In addition, embedding MetaVoice on a wide variety of DSP chips could expand
memory for digital answering machines, personal data assistants, voice-enabled
toys and other products.
MetaVoice also incorporates powerful capabilities for speech manipulation
and special effects unique to its model of human speech. Based on these
additional characteristics, the Company is developing technologies for
manipulation of voice to modify voice identity, modulate pitch and alter
playback speed.
CORE TECHNOLOGY
MetaVoice Coding Technology
Voxware's innovative approach to speech coding, MetaVoice, is designed to
achieve high speech quality with very low bandwidth and processing power
requirements. The MetaVoice codec uses a mathematical model that can
accurately reproduce human speech based on a finite number of descriptive
parameters. To encode a speaker's voice, MetaVoice uses sophisticated
mathematical algorithms which analyze input speech and extract accurate
estimates of the model parameters. These parameters are converted into
discrete values which can be compressed to relatively few "bits" of
information for transmission. The receiving application converts these bits
back to model parameters which MetaVoice's speech synthesis model uses to
reconstruct a close perceptual
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approximation of the original speech. MetaVoice is currently capable of
compressing speech data from 128 kbps to 2.4 kbps while still maintaining good
quality speech.
Two principal design choices, in combination, underlie MetaVoice's ability
to produce high quality speech at low bandwidth:
. Speech specific vs. general audio coding--MetaVoice is designed
specifically to encode speech signals rather than music or other general
audio signals. Speech signals typically contain only one voice at a
time, whereas music and other general audio signals may contain dozens
of simultaneous "voices"--both human and instrumental. Also, as compared
to music signals, the rate at which speech signals change is limited by
the human vocal apparatus. MetaVoice exploits these characteristics of
speech to achieve greater compression than is generally achievable with
general audio coding technologies.
. Parametric vs. waveform coding--MetaVoice is a parametric codec, whereas
most conventional speech codecs are waveform codecs which use linear
prediction techniques to reduce the amount of information necessary to
represent the input speech signal. When the number of bits used to
represent the waveform is reduced below critical limits as the
compression is increased, the linear prediction approach can no longer
reproduce an accurate waveform, resulting in poor speech quality. At low
bit rates, a properly engineered parametric codec such as MetaVoice is
capable of delivering speech quality superior to that of a waveform
codec.
Despite the above advantages, few companies have developed or marketed a
commercial speech-specific parametric compression system because of the
technical challenge it presents. MetaVoice is designed (i) to operate within
the processing and memory constraints of standard personal computers and
embedded devices, (ii) to address real world challenges including variations
in microphones, sound cards and room acoustics and the presence of background
noise and (iii) to faithfully reproduce the widest possible range of voice
types. The Company believes MetaVoice is the first 2.4 kbps speech codec to
achieve widespread distribution on the Internet.
In addition, MetaVoice technology is highly tolerant of lost data packets,
making it well suited to Internet transmission. The codec is designed to
predict successive information segments. If a packet is lost, the codec
automatically interpolates across the information it has available, reducing
the perceptual impact of the missing information.
Transmission Quality Management
The Company has also developed an application programming interface suitable
for development of applications for transmission of high quality voice over
the Internet. This interface incorporates flow and error control, which
manages the incoming data from the codec, handles lost or late packets and
reorders out of sequence packets. Based on continuously updated measurements
of network performance, Voxware's transmission quality management technologies
adjust how data is "packetized" for transmission and decoded and played back
after reception.
When the Internet is congested and is losing or delaying a relatively high
percentage of packets, these technologies add error correction information
into each outgoing packet. At the point of reception, playback buffers are
dynamically shortened or lengthened and speech synthesis is manipulated to
minimize delay and reduce the perception of choppiness.
VoiceFonts(TM) and Voice Effects Technologies
MetaVoice's proprietary approach to coding the perceptually relevant
attributes of the human voice are being developed for use in transforming
voice attributes including pitch, timbre and timing. The three broad voice-
effects technologies the Company is developing are (i) VoiceFonts, a
technology to create a wide range of
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naturalistic voices, as well as creating "character" or "cartoon" voices; (ii)
technology to shift the pitch of singing or speech, preserving and/or
improving the naturalness, attractiveness and clarity of the original
articulation; and (iii) technology to speed up or slow down recorded speech
without distortion while preserving the original voice pitch and timbre.
THE VOXWARE STRATEGY
The Company's objective is to establish its core technologies as the
preferred solutions for speech communications in its target markets. The
Company's strategy incorporates the following key elements:
Extend Technological Leadership
The Company has been a leader in delivering low bandwidth speech compression
on the Internet. The Company intends to continue to extend the functionality
and uses of its core technologies. By continuing to invest in research and
development, the Company believes that it can further improve its
technologies, allowing it to deliver compression performance that is
meaningfully superior to competing technologies. In addition, the Company
intends to deepen its product offerings for its current applications and to
develop new applications in diverse areas such as voice effects.
Accelerate Adoption of Technology Through Strategic Relationships
The Company plans to establish and extend strategic relationships with
market leaders in order to rapidly achieve market penetration. The Company
believes these strategic relationships broaden the Company's user base and
accelerate adoption of the Company's core technologies. In the Internet
market, the Company has established a strategic relationship with Netscape,
which uses Voxware's RT24 codec as part of its LiveMedia multimedia framework
to provide low bandwidth speech capabilities with version 3.0 of Netscape
Navigator, currently in beta release.
Deepen Market Penetration Through Broad Licensing Program
The Company seeks to broadly license its MetaVoice technology in market
segments where complementary applications incorporating speech can benefit
from MetaVoice's low bandwidth and processing requirements. Markets in which
the Company is licensing its technology include Internet conferencing,
interactive games and consumer chat applications. The Company intends to
leverage the low bandwidth and processing requirements of its technologies to
address a variety of applications beyond the Internet, such as wireless
telephony, voice pagers, digital answering machines, voice-enabled toys,
satellite communications and low-cost electronic recording devices.
Develop High Value-Added Software Applications in Key Market Segments
The Company focuses its internal development resources on developing high
value-added integrated software products for market segments that the Company
believes have significant potential for growth and that leverage its core
speech competencies. The Company has identified voice-enabled Web pages and
Internet telephony as its initial target product segments and has developed
two products, ToolVox and TeleVox, to address these markets.
Build Multiple Distribution Channels
The Company has established multiple channels for the distribution of its
products to a wide variety of targeted market segments. The Company's direct
sales force combines field sales and telemarketing to reach software,
computing and communications companies. Bundling agreements with OEMs serve as
indirect marketing channels. In addition, the Company engages in Internet-
based distribution via its Web site.
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Develop Recurring Revenue Through Royalty-Based Licensing
The Company expects a significant portion of its future revenues to be in
the form of royalties or other recurring payments based upon the sales of
products by the Company's licensees which incorporate the Company's
technologies. The Company has entered into license agreements providing for
recurring payments and it is the intention of the Company to continue to
pursue license opportunities that include a recurring revenue component.
PRODUCTS
The Company has three product groups: MetaVoice codecs, application
programming interfaces ("APIs") and applications.
VOXWARE PRODUCTS
Applications.......ToolVox
.......TeleVox
High Level APIs....VAPI
MetaVoice Codecs...RT24
...RT24HQ
...Multimedia Codec
MetaVoice Codecs
The Company currently offers three codecs incorporating its MetaVoice
technology. These codecs offer differing levels of functionality, as follows:
. RT24--The RT24 codec is a real-time voice codec compressing speech data
to 2.4 kbps. It is Voxware's "entry-level" codec, designed to utilize
minimal processing power, making it suitable for use on low-end personal
computers (e.g. 486 processors) and low-cost electronic devices such as
voice-enabled toys where processing power is limited. Netscape is using
the RT24 codec to provide low bandwidth speech capabilities with the
beta version of Netscape Navigator version 3.0.
. RT24HQ--The RT24HQ codec is Voxware's second generation voice codec.
Based on a more accurate human speech model, the RT24HQ codec compresses
speech data to 2.4 kbps while achieving noticeably higher speech quality
than the RT24 codec. Although it requires a Pentium-level processor to
encode the speech signal, the RT24HQ codec is designed to achieve
playback on a 486 processor. The software developer kits for the RT24HQ
and RT24 codecs are identical, thereby allowing users of the RT24 codec
to upgrade to the RT24HQ codec seamlessly.
. Multimedia Codec--The multimedia codec was Voxware's first product
incorporating the Company's MetaVoice technology. It is optimized for
wideband output (11 KHz and 22 KHz playback) and extremely low playback
processing load. The Company's multimedia codec has been incorporated
into several software applications including Microsoft's Bookshelf 96.
The Company licenses its MetaVoice codecs to third parties for use in their
products. The codecs are generally delivered to licensees in the form of
software developer kits which provide a high level interface that simplifies
integration of the codec into the licensee's application. The licensee of a
codec receives an encoder to convert the audio files into the appropriate
format and a player to reconstruct the original speech.
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Voxware's codecs operate on a wide range of processors, such as Intel's 486,
Pentium, Pentium Pro and MMX; Motorola's PowerPC and 68040; SPARC; Digital's
Alpha; and other general purpose processors. The Company is currently porting
its codecs to popular DSP processors. Voxware's software developer kits provide
a uniform environment for most popular operating systems, including Microsoft
Windows 3.x, 95 and NT, Mac OS and several Unix platforms. The time required
for a licensee to incorporate the Company's codecs into its product varies from
as little as a few minutes in the case of preexisting software applications
using standard interfaces, to several weeks in the case of devices requiring
porting to new platforms or other adaptation of the codecs.
High-Level APIs
The Company is currently developing and has provided to developers of
Internet software the Voxware Application Programming Interface ("VAPI"). VAPI
is an Internet telephone application programmer interface designed to simplify
the development of sophisticated Internet telephony applications. VAPI provides
a standardized programming interface which provides a flexible session
management framework that can be used to implement a comprehensive list of
Internet telephony features. VAPI is being developed to provide the following
benefits to developers of Internet software products:
. Reduces the time required to develop Internet telephony applications by
eliminating the need to create low-level audio and networking code.
These components are pre-packaged in component "building blocks" that
may be combined to implement basic connectivity and advanced telephony
features.
. Provides a migration path to emerging industry communication standards
such as Netscape's LiveMedia specification and the H.323 standard,
eliminating the need for applications developers to build and maintain
their own implementations of these standards.
. Incorporates error and delay handling procedures which maximize the
capabilities of Voxware's MetaVoice technology used in the RT24 and
RT24HQ codecs. These procedures are being designed to provide optimal
speech quality among VAPI-based phones.
The Company licenses VAPI on a limited basis to independent software vendors
who wish to incorporate Internet telephony into their products. The Company
uses VAPI to develop new versions of TeleVox.
Applications
The Company has developed two applications which utilize MetaVoice technology
for communication on the Internet: ToolVox, an application for one-way
streaming audio recording and playback of speech files, and TeleVox, an
Internet telephone application.
TOOLVOX
The ToolVox system consists of an encoder, incorporating either the RT24 or
the RT24HQ codecs, which compresses recorded speech files into the ".vox" file
format and a player which decodes the speech data to reproduce the original
speech. The ToolVox system allows Web content providers to incorporate pre-
recorded voice as part of their multimedia Web pages. The player is designed as
a Netscape plug-in (i.e. an add-in application which supplements the basic
browser functionality). ToolVox operates with Navigator 2.0 or later versions
and will function as a helper application with other Web browsers. When
configured as a plug-in, the player receives streaming audio data from the Web
server and begins playback as soon as a small buffer is received, typically
within a few seconds. In addition, ToolVox can play back music transmitted in
MIDI format. Speech and MIDI data can stream simultaneously, allowing
background music effects with narration.
ToolVox delivers the following benefits to Web content providers and users:
BENEFITS TO CONTENT PROVIDERS
. No special server hardware or software required. Most standard Web
servers are adequate for streaming the low bandwidth data produced by
the RT24 or the RT24HQ codecs.
. Less access bandwidth required. Over a 1.5 Mbps T1 line, ToolVox is
designed to support over 400 simultaneous users, compared with competing
technologies which typically support 70-100 simultaneous listeners.
28
<PAGE>
BENEFITS TO USERS
. Faster start-up of playback and reduced gaps or pauses when used over
international links or in the presence of Internet congestion.
. Increased capacity to receive text, data and graphics simultaneously
with minimal impact on responsiveness.
. Operates through security "firewalls" that often block competing
products.
The Company is distributing version 1.0 of the "Basic" ToolVox encoder,
currently in beta release. The Basic encoder incorporates the RT24 codec and
operates on the Windows 3.x, 95 and NT and Mac OS platforms. The Basic version
of the encoder is currently available for free download from the Company's Web
site.
A "Gold" version (version 2.0) of the ToolVox encoder is currently shipping
in beta and is expected to be generally available in August 1996. The Gold
encoder has all of the capabilities of the Basic version, plus the RT24HQ
codec, voice and sound effects capabilities and the ability to process
multiple audio files automatically. The Company plans to license the Gold
encoder on a per-user basis to Web developers for a one-time fee. The Company
expects to develop further upgrades which would be available for an annual
subscription fee.
The ToolVox 2.0 player will play the output of either the Basic or the Gold
encoder. It is available free of charge from the Company's Web site and the
Company makes it available to licensees for bundling with their products.
TELEVOX
TeleVox, the Company's Internet telephone system, allows users to carry on
real-time, full-duplex audio conversations using their personal computers.
TeleVox, in addition to the benefits inherent in MetaVoice, offers (i) full-
duplex or half-duplex, hands free operation, (ii) directory and connection
services via an easy-to-use "chat" server and (iii) simultaneous file transfer
and text-chat capability. The Company currently distributes a beta version of
TeleVox over the Internet at no charge.
The Company is currently developing a "Gold" version of TeleVox with
additional features to be sold to end users. The Gold version is expected to
incorporate multi-person conferencing capabilities, the advanced RT24HQ codec
and enhanced VoiceFonts technology for voice and sound effects. Pricing has
not yet been determined.
The Company plans to provide interoperability between TeleVox and Netscape's
LiveMedia framework for real-time communication over the Internet. The Company
demonstrated a prototype TeleVox system interoperating with Netscape's
LiveTalk(TM) and Apple's QuickTime Conferencing(TM) based on the LiveMedia
framework in May 1996. The Company currently intends to distribute TeleVox
over the Internet and via bundling agreements with OEMs.
RESEARCH AND PRODUCT DEVELOPMENT
The Company believes that continued timely development and introduction of
new products are essential to establishing, maintaining and increasing its
competitive position. The Company currently conducts most of its product
development effort in-house. The Company also employs independent contractors
to assist with certain product development and testing activities. The Company
has aggressively expanded its Research and Development group from 6 engineers
as of June 30, 1995 to 33 engineers as of June 30, 1996. Total spending on
research and development has grown from $536,581 in fiscal 1995 to $2,496,717
in fiscal 1996. The Company intends to continue to emphasize core research and
development. The Company has several products under development.
Future Codecs
The Company is developing enhanced implementations of its MetaVoice
technology which are designed to achieve speech quality equivalent to its
existing codecs at bandwidth requirements as low as 1,200 bps. The Company is
also developing other implementations that deliver higher speech quality at
slightly higher bandwidth than its existing codecs.
29
<PAGE>
Gateways between the Internet and the Public Switch Telephone Network (PSTN)
The Company believes that as telecommunication service providers enter the
market for voice services via packet-switched networks, there will be a
growing market for connectivity between PC-based Internet telephone software
such as TeleVox and the public telephone network or corporate PBX systems. For
example, a call could be placed from a user on a personal computer connected
to the Internet and complete the long-distance segment of the connection via
the Internet. By connecting through a gateway server, the call could be
connected to any ordinary telephone in the world accessible by such a server
for the price of a local call. The Company has begun a development effort with
hardware and software vendors to develop such systems.
Enhanced VoiceFonts
The Company will be releasing an enhanced implementation of VoiceFonts with
the ToolVox Gold encoder. Future versions of TeleVox will also incorporate
this technology. The Company is investing resources in further enhancing and
extending the VoiceFonts technology and expects to provide increasingly
powerful voice modification tools to consumers, Web developers and audio
engineers.
STRATEGIC RELATIONSHIPS AND LICENSEES
The Company plans to establish and extend strategic relationships with
market leaders in order to rapidly achieve market penetration. The Company
believes these strategic relationships will broaden the Company's user base
and accelerate adoption of the Company's core technologies. The Company
believes that such strategic relationships can provide early insight into and
influence on future industry standards, offer access to leading edge
technology and support optimization of the Company's technology on key
computing platforms.
The Company and Netscape are parties to a software license agreement
pursuant to which Netscape has a license to use and distribute certain of
Voxware's products, including the RT24 codec. Netscape is using Voxware RT24
codec as part of its Livemedia multimedia framework to provide low bandwidth
speech capabilities with Netscape Navigator 3.0, currently in beta release.
The Company believes that its technologies will achieve market penetration
faster than would be possible without the Netscape relationship. The two
companies consult each other on areas of common interest including standards
setting, future product development, enhancements to existing technologies and
joint product development. Netscape has also made a minority equity investment
in the Company and has a representative on the Company's board.
The Netscape License Agreement provides for Netscape to pay quarterly
license fees to the Company for certain "basic" products. The Netscape License
Agreement further provides Netscape with access to certain enhanced products
of the Company. In the event Netscape ships products containing the Company's
enhanced products, Netscape will pay volume-based royalties to the Company.
During the year ended June 30, 1996, license fees paid by Netscape accounted
for 31% of the Company's revenues. The Netscape License Agreement may be
terminated by Netscape at any time prior to July 31, 1996 on 180 days notice
and after July 31, 1996 on 90 days notice. See "Risk Factors--Dependence on
Netscape," "Management" and "Principal Stockholders."
Intel has also made a minority equity investment in the Company. Intel
provides consulting support to Voxware in the optimization of the Company's
technologies on Intel platforms, consults with Voxware on standards issues of
mutual interest and supplies the Company with pre-release versions of its
advanced processors for development. See "Principal Stockholders."
The Company broadly licenses its codecs and bundles its applications with
the products of independent software vendors, computing companies and
communications companies. The Company generally seeks to obtain a combination
of initial payments and recurring revenue payments from licensees. The amount
and structure of these payments are dependent on many factors including the
licensed codec or application, the licensee's intended application and target
market. A majority of the Company's most recent license agreements
30
<PAGE>
provide for a royalty payment or other recurring revenue stream to the Company.
While the Company has derived its revenue principally from initial and annual
licensing fees on software licensing agreements and the Company has not
received any royalties to date, the Company believes that developing a
recurring revenue stream will be a key to the Company's financial success.
Whether a recurring revenue stream develops will depend on many factors,
including the success of the Company's licensees in selling products which
incorporate the Company's technologies.
The following table sets forth certain companies that have entered into
license agreements with Voxware during the last twelve months:
<TABLE>
<S> <C> <C>
America Online, Inc. InterVoice, Inc. Twin Sun, Inc.
Andrea Electronics Corporation LifeCycle Systems, Inc. USFI, Inc.
Apple Computer, Inc. Luckman Interactive, Inc. VDOnet Corporation
Catapult Entertainment, Inc. Microsoft Corporation Velocity, Inc.
Eidos, plc Mpath Interactive, Inc. Vienna Systems Corporation
Farrallon Computing, Inc. PC Roar, Inc. White Pine Software, Inc.
GameTek, Inc. Tribal Voice Zoll Medical Corporation
</TABLE>
SALES, MARKETING AND DISTRIBUTION
The Company sells its codecs and VAPI directly to independent software
vendors and computing and communications companies. The Company's direct sales
force combines field and telemarketing personnel who focus on major Internet
software developers, hardware OEMs, as well as Internet and telecommunication
service providers and semiconductor manufacturers.
As of June 30, 1996, the Company had 11 direct sales and marketing personnel.
Codec licensing is handled primarily through the direct field sales force and
is supported by telemarketing personnel. The Company intends to increase its
direct sales force as part of the expansion of its sales and marketing program.
Sales and marketing activities include, in addition to direct sales calls,
participation in trade shows.
CUSTOMER SUPPORT
The Company believes that customer support and engineering services are
important competitive factors for its business. Customer support services
include providing updates and technical support to licensees of the Company's
products. Engineering services include providing technical resources to support
customer specific development efforts or porting the Company's technologies to
specific customer platforms. The Company provides those services, along with
product demonstration software, evaluation software and application notes via
its customer support group and research and development group located in
Princeton, New Jersey. See "Business--Research and Product Development."
COMPETITION
The market for voice processing software products and services is intensely
competitive. The Company expects competition to persist, intensify and increase
in the future. Many of the Company's current and potential competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than the
Company. The Company's competition for voice processing software products and
services is primarily emerging from two sources; developers of speech
compression algorithms and developers of software application that incorporate
speech. Direct competitors include DSP Group, Inc., Lucent Technologies Inc.
and Lernout & Hauspie Speech Products N.V. in the speech
31
<PAGE>
coding market and VocalTec, Ltd., Quarterdeck Corporation, Progressive
Networks, Inc. and Xing Technology Corporation in the Internet applications
market. Companies that have developed low bandwidth parametric speech
compression technologies but do not currently directly compete with the
Company include Texas Instruments, Incorporated and Digital Voice Systems,
Inc. and the Company expects that additional companies will eventually compete
in the Internet voice market. In the future, the Company may also develop and
introduce other products with new or additional capabilities or services which
could result in the Company competing directly with companies in other
industries such as telephone, media, publishing and cable television. The
ability of some of the Company's competitors to bundle other services and
products with voice products could put the Company at a competitive
disadvantage.
PATENTS AND PROPRIETARY INFORMATION
To date, the Company has applied for three patents relating to the MetaVoice
voice coding technology. Several additional patent applications are being
prepared and the Company expects to routinely file patent applications as
deemed appropriate. The Company's success will depend in part on its ability
to obtain patent protection for its products, preserve its trade secrets and
operate without infringing the proprietary rights of other parties. There can
be no assurance that patent applications to which the Company holds rights
will result in the issuance of patents, or that any issued patents will
provide commercially significant protection to the Company's technology,
products and processes. In addition, there can be no assurance that others
will not independently develop substantially equivalent proprietary
information not covered by patents to which the Company owns rights or obtain
access to the Company's know-how or that others will not claim to have or will
not be issued patents which may prevent the sale of one or more of the
Company's products. In particular, Elk Industries has asserted that Voxware's
"Internet-based streaming audio systems" infringe U.S. Patent No. 4,128,773
owned by Elk Industries, and Elk Industries offered Voxware the opportunity to
purchase a license. The Company does not believe that its products infringe
Elk Industries' patent. Litigation, which could be costly and time consuming,
may be necessary to determine the scope and validity of others' proprietary
rights including Elk Industries', or to enforce any patents issued to the
Company, in either case, in judicial or administrative proceedings. An adverse
outcome could subject the Company to significant liabilities to third-parties,
require the Company to obtain licenses from third-parties, or require the
Company to cease any related research and development activities or product
sales. There can be no assurance that a license for Elk Industries or any
licenses required under any third-party patents or proprietary rights would be
made available on acceptable terms, if at all. In addition, the laws of
certain countries may not protect the Company's intellectual property. The
software market has traditionally experienced widespread unauthorized
reproduction of products in violation of manufacturers' intellectual property
rights. Such activity is difficult to detect and legal proceedings to enforce
the manufacturers' intellectual property rights are often burdensome and
involve a high degree of uncertainty and costs. The Company's success is also
dependent upon unpatented trade secrets which are difficult to protect. To
help protect its rights, the Company requires employees and consultants to
enter into confidentiality agreements that prohibit disclosure of the
Company's proprietary information and requires the assignment to the Company
of their ideas, developments, discoveries and inventions. There can be no
assurance, however, that these agreements will provide adequate protection for
the Company's trade secrets, know-how, or other proprietary information in the
event of any unauthorized use or disclosures.
EMPLOYEES
As of June 30, 1996, the Company had 58 full-time employees consisting of 11
in sales and marketing, 33 in research and development, 3 in customer support
and 11 in administration and finance. None of the Company's employees is
represented by a labor union or is subject to a collective bargaining
agreement. The Company believes that its employee relations are good.
FACILITIES
The Company leases its principal facility, which contains approximately
18,000 square feet of office space in Princeton, NJ. The initial term of the
lease for the Company's current office space will expire on May 31, 2003. The
Company believes that existing facilities are adequate for its current needs
through approximately the next nine months and anticipates that it will likely
need additional space at that time. The Company believes that any such
additional space will be available as needed.
32
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Executive Officers and Directors of the Company and their respective
ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael Goldstein....... 42 President, Chief Executive Officer and Director
Kenneth H. Traub........ 35 Executive Vice President, Chief Financial Officer,
Secretary and Director
J. Gerard Aguilar....... 29 Vice President, Research and Development and
Director
Steven J. Ott........... 36 Vice President, Sales and Marketing
Stuart R. Patterson..... 39 Vice President, Telephony Business Development
Kenneth W. Whittington.. 43 Vice President, Product Development
Nicholas Narlis......... 36 Controller, Chief Accounting Officer and Treasurer
Jordan S. Davis......... 34 Director
Andrew I. Fillat(1)(2).. 48 Director
William J. Geary(1)(2).. 37 Director
David J. Roux(1)........ 39 Director
Richard M. Schell,
Ph.D................... 45 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of Audit Committee.
Michael Goldstein has served as President and Chief Executive Officer and as
a Director of the Company since January 1994. From April 1993 to December
1993, Mr. Goldstein served as Vice President of Business Development of
Donovan Data Systems, Inc., a data processing service provider. From 1986 to
March 1993, Mr. Goldstein was a consultant with McKinsey & Company, Inc.,
where he was an advisor to technology companies. From 1983 to July 1986, Mr.
Goldstein served as Vice President of Macmillan Software Company, a scientific
software publisher and division of Macmillan, Inc. Mr. Goldstein holds an
M.B.A. from the Harvard Graduate School of Business Administration and a Sc.B.
from Brown University.
Kenneth H. Traub is a co-founder of Voxware and has served as Executive Vice
President, Chief Financial Officer and Secretary and as a Director of the
Company since February 1995. From 1989 to January 1995, Mr. Traub held various
management positions, including Corporate Vice President, with Trans-
Resources, Inc., a diversified, multinational company, where Mr. Traub was
responsible for acquisitions, financings and strategic planning. From January
1992 to January 1995, Mr. Traub was also President of Conservation Securities
Corp., an investment company affiliated with Trans-Resources, Inc. Mr. Traub
holds an M.B.A. from the Harvard Graduate School of Business Administration
and a B.A. from Emory University.
J. Gerard Aguilar is a co-founder of Voxware and has served as Vice
President, Research and Development since January 1994 and as a Director of
the Company since its incorporation in August 1993. Mr. Aguilar served as the
Company's President and Secretary from its incorporation through January 1994
and Treasurer from its incorporation in August 1993 through June 1996. Prior
thereto, Mr. Aguilar had been independently developing certain of the
Company's technologies since 1991. Mr. Aguilar holds an M.S.E.E. and a
B.S.E.E. from the Florida Institute of Technology.
Steven J. Ott has served as Vice President, Sales and Marketing of the
Company since October 1994. From 1989 to September 1994, Mr. Ott held various
executive positions with Legent Corporation ("Legent"), a systems management
software company, most recently as Vice President, Corporate Development.
Prior to his appointment as Vice President, Corporate Development, Mr. Ott
served as Director, North American Sales Programs and Regional Manager
Northeast Sales for Legent. From 1987 to 1989, Mr. Ott served as District
Sales Manager for Business Software Technology, Inc., a developer of systems
management software. From 1982 to
33
<PAGE>
1987, Mr. Ott served as Area Sales Manager for DBMS, Inc., a database and data
administration software company. Mr. Ott holds a B.S. from Quinnipiac College.
Stuart R. Patterson has served as Vice President, Telephony Business
Development of the Company since May 1996 and prior to that as a member of the
Company's Board of Advisors since August 1993. From 1987 to May 1996, Mr.
Patterson served as President and Chief Executive Officer of Vicorp
Interactive Systems, Inc. ("VIS"), a software developer for large-scale voice
processing and information gateway services. From 1986 to 1987, Mr. Patterson
served as International Marketing Manager for the Vicorp Groupe Ltd. in
Dusseldorf, Germany. From 1985 to December 1986, Mr. Patterson worked for
Hewlett-Packard Company in Grenoble, France. Mr. Patterson holds an M.P.P.M.
from the Yale School of Management and a B.A. from Harvard College.
Kenneth W. Whittington has served as Vice President, Product Development of
the Company since August 1995. From 1990 to July 1995, Mr. Whittington held
various development management positions at Central Point Software, Inc.
("CPS") and Symantec Corporation ("Symantec") (which acquired CPS in 1994).
From May 1994 to July 1995, Mr. Whittington was a Director of Development at
Symantec responsible for development of client/server and enterprise products.
From 1990 through May 1994, Mr. Whittington served as a Senior Systems
Architect and then Development Manager in charge of CPS's product, PC
Tools.(TM)
Nicholas Narlis has served as Controller and Chief Accounting Officer of the
Company since March 1996 and as Treasurer since June 1996. From 1992 to March
1996, Mr. Narlis served in various capacities at Dendrite International, Inc.,
a sales force automation software and service company, including most recently
as Director of Finance. Previously, from 1983 to May 1992, Mr. Narlis worked
for KPMG Peat Marwick where he served as a Senior Manager from 1989 to May
1992 in the New Jersey Audit Practice Unit. Mr. Narlis holds a B.S. degree
from Rider University and is a Certified Public Accountant.
William J. Geary has served as a Director of the Company since July 1996.
Mr. Geary has been a Principal of North Bridge Venture Partners, L.P. ("North
Bridge") since March 1994 and a General Partner of Hambro International Equity
Partners since 1990. Mr. Geary also serves as a director of several private
technology companies. Mr. Geary holds a B.S. from Boston College and is a
Certified Public Accountant.
Jordan S. Davis is a co-founder of Voxware and has served as a Director of
the Company since August 1993. Since May 1992, Mr. Davis has been employed by
KBL Healthcare, Inc., a private merchant banking and venture capital firm,
most recently serving as a Managing Director. From November 1992 to August
1994, Mr. Davis served as Vice President, Secretary and a director of KBL
Healthcare Acquisition Corp., a publicly held acquisition fund which Mr. Davis
co-founded. From 1991 to May 1992, Mr. Davis served as Corporate Vice
President of D. Blech and Company, Incorporated, a private merchant bank.
Previously, from 1986 to 1990, Mr. Davis held various financial advisory
positions with Morgan Stanley & Co., Incorporated. Mr. Davis holds an M.M.
from the J.L. Kellogg Graduate School of Management at Northwestern University
and a B.A. from the State University of New York at Binghamton.
Andrew I. Fillat has served as a Director of the Company since December
1995. In 1989, Mr. Fillat joined Advent International Corporation ("Advent")
where he currently serves as a Senior Vice President. Mr. Fillat is also a
Director of Advanced Radio Telecom Corp., Interlink Computer Sciences, Inc.,
Lightbridge, Inc. and NetEdge Communications Inc. as well as several other
private companies. Mr. Fillat holds an M.S. and a B.S. from M.I.T. and an
M.B.A. from the Harvard Graduate School of Business Administration.
David J. Roux has served as a Director of the Company since March 1994.
Since March 1996, Mr. Roux has been Executive Vice President and from
September 1994 through February 1996, he was Senior Vice President, in each
case in charge of business development at Oracle Corporation. From April 1992
to June 1994, Mr. Roux was Senior Vice President of Central Point Software.
From 1987 to April 1992, Mr. Roux served in various senior executive
capacities at Lotus Development Corporation ("Lotus"), including most recently
as
34
<PAGE>
Senior Vice President. In 1984, Mr. Roux co-founded Datext, Inc., a CD-Rom
database publishing business, where he served as Chief Executive Officer until
it was sold to Lotus in 1987. Mr. Roux holds an M.B.A. from the Harvard
Graduate School of Business Administration, a M.Phil. from Cambridge
University and an A.B. from Harvard College.
Richard M. Schell, Ph.D. has served as a Director of the Company since
August, 1995. Since October 1994, Dr. Schell has served as Vice President of
Engineering of Netscape. From January 1993 to October 1994, Dr. Schell was a
senior executive of Symantec, most recently serving as Vice President and
General Manager of the Central Point Division (formerly Central Point
Software, Inc.). From March, 1989 to December 1992, Dr. Schell served as Vice
President in charge of Languages and dBase of Borland International, Inc.
Prior thereto, he held various management positions at Sun Microsystems, Inc.
and Intel Corporation. Dr. Schell holds a Ph.D., M.S. and B.A. from the
University of Illinois.
Each of Messrs. Fillat, Geary and Schell serves on the Board of Directors
pursuant to a voting agreement among certain stockholders of the Company. This
agreement will terminate upon consummation of this Offering.
Mr. Davis and Mr. Aguilar are brothers-in-law.
BOARD COMMITTEES
The Audit Committee consists of Messrs. Geary and Fillat and the
Compensation Committee consists of Messrs. Geary, Fillat and Roux. The Audit
Committee reviews the adequacy of the Company's internal control systems and
financial reporting procedures, reviews the general scope of the annual audit,
reviews and monitors the performance of non-audit services by the Company's
independent public accountants and reviews interested transactions between the
Company and any of its affiliates. The Compensation Committee administers the
Company's 1994 Stock Option Plan and makes recommendations to the Board of
Directors concerning salaries and non-stock compensation for the Company's
officers and employees.
BOARD OF ADVISORS
The Board of Advisors advises the Company regarding technological and
commercial issues concerning the Company's areas of interest.
Vladimir Cuperman, Ph.D. is Professor of Electrical Engineering at Simon
Fraser University, Vancouver, B.C., Canada and specializes in the fields of
digital signal processing, speech coding, speech recognition and digital
communications. He was Editor for Speech Processing, IEEE Transactions of
Communications from 1988 to 1991 and has co-edited two books and published
numerous papers on speech coding and recognition. From 1984 to 1986 he was
Managing Director of CALLTALK, Ltd., a precursor company to the DSP Group,
Inc. Previously, Dr. Cuperman had been employed by Tadiran Limited of Tel
Aviv, Israel as Chief Scientist in the Digital Communications Division from
1983 to 1984 and as Project and Group Leader from 1974 to 1980. Dr. Cuperman
holds a Ph.D. and an M.S.E.E. from the University of California, Santa Barbara
("UCSB") and an M.S.E.E. from the Polytechnic of Bucharest.
Francis X. Dzubeck is President and Chief Executive Officer of
Communications Network Architects, Inc. ("CNA"), an international consulting
firm he founded in 1973. CNA's clients include commercial and government
users, communications carriers, computer and communications vendors, the
venture capital and investment banking communities and public relations firms.
Dr. Dzubeck holds an M.S.E.E. from Columbia University and a B.S.E.E. from the
New Jersey Institute of Technology.
Ira Fuchs is Vice President for Computing and Information Technology at
Princeton University, Princeton, New Jersey, where he leads the University's
efforts in academic and administrative computing. Mr. Fuchs has been involved
in the creation of a high speed telecommunications infrastructure for the
University. In 1981, Mr. Fuchs founded the BITNET Network, an academic
telecommunications network. Mr. Fuchs also presently serves as Chief Scientist
for the Journal Storage project (JSTOR), a project designed to create a
digital library for out-of-print scholarly journals, for the Andrew W. Mellon
Foundation. Mr. Fuchs has previously served as Vice Chancellor for University
Systems at The City University of New York. Mr. Fuchs holds an M.S. and B.S.
from Columbia University.
35
<PAGE>
Allen Gersho, Ph.D. has been a Professor of Electrical and Computer
Engineering at UCSB since 1980. Dr. Gersho's work is primarily in the field of
speech coding. Dr. Gersho and his UCSB research staff were pioneers in the
application of vector quantization to signal compression and several of the
coding techniques developed by his group have become widely used in speech
coding algorithms and in national and international standards. Dr. Gersho has
authored or co-authored over 250 research papers, more than a dozen of which
are reprinted in various books of collected benchmark papers in signal
processing, communications and quantization. From 1963 to 1980, Dr. Gersho
served as a member of the technical staff at AT&T Bell Laboratories. Dr.
Gersho holds Ph.D. and M.S.E.E. degrees from Cornell University and a B.S.E.E.
from M.I.T.
Martin Mazner has been Vice President and General Manager of the BookMaker
division of the ForeFront Group, Inc. since June 1996. From June 1992 to June
1996, Mr. Mazner was President and Chief Executive Officer of BookMaker
Corporation. From 1990 to 1992, Mr. Mazner served as Vice President of
Marketing for PowerUp Software Corporation. Prior thereto, from 1986 to 1990,
Mr. Mazner served as Publisher of MacUser Magazine, a division of Ziff Davis
Publishing Company. Mr. Mazner holds a B.A. degree from California State
University, Northridge.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company formed a Compensation Committee in December 1995. The
Compensation Committee currently consists of Messrs. Geary, Fillat and Roux,
none of whom is an employee of the Company. In December 1995, the Company sold
2,000,000 shares of Series A Preferred Stock to certain entities managed by
Advent International Corporation and 2,000,000 shares of Series A Preferred
Stock to certain entities managed by North Bridge for a purchase price of
$1.00 per share. Mr. Geary is a Principal of North Bridge and Mr. Fillat is a
Senior Vice President of Advent. See "Certain Transactions."
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<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning compensation paid to or
earned by the Chief Executive Officer of the Company for the years ended June
30, 1996 and 1995 and the period from Inception (August 20, 1993) to June 30,
1994 and the next four most highly compensated Executive Officers of the
Company for such periods (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD BASE SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ------ ----------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Michael Goldstein ...... 1996 $117,500 $30,000 -- $ 3,567
President and Chief 1995 $101,458 $ -- 40,000 $ 3,317
Executive Officer 1994 $ 33,333 $ -- 625,000 $33,095
Kenneth H. Traub........ 1996 $100,000 $25,000 -- $ 250
Executive Vice
President, Chief 1995 $ 41,667 $ -- 150,000 $17,015
Financial Officer and
Secretary 1994 $ -- $ -- -- $ --
J. Gerard Aguilar....... 1996 $ 70,000 $20,000 -- $ --
Vice President,
Research and 1995 $ 60,833 $15,000 -- $ --
Development 1994 $ 20,000 $ -- -- $ --
Stephen J. Ott ......... 1996 $136,476 $ -- -- $13,766
Vice President, Sales 1995 $ 65,000 $ -- 400,000 $ --
and Marketing 1994 $ -- $ -- -- $ --
Kenneth W. Whittington.. 1996 $ 96,551 $15,000 -- $ --
Vice President, Product 1995 $ -- $ -- 150,000 $ --
Development 1994 $ -- $ -- -- $ --
</TABLE>
- --------
(1) All Other Compensation consists of life and disability insurance premiums
of $3,095, $3,317 and $3,567 paid on behalf of Mr. Goldstein in 1994,
1995, and 1996, respectively, and $250 paid on behalf of Mr. Traub in 1996
and relocation payments of $30,000 paid on behalf of Mr. Goldstein in
1994, $17,015 paid on behalf of Mr. Traub in 1995 and $13,766 paid on
behalf of Mr. Ott in 1996.
EMPLOYMENT AGREEMENTS
Michael Goldstein, President and Chief Executive Officer of the Company, has
a three-year employment agreement with the Company which commenced in January
1994. Mr. Goldstein currently receives an annual base salary of $140,000 and
is entitled to bonuses for each fiscal year if the Company achieves certain
financial and other benchmarks which the Company and Mr. Goldstein will
endeavor to establish each fiscal year.
Kenneth H. Traub, Executive Vice President, Chief Financial Officer and
Secretary of the Company, has a three-year employment agreement with the
Company which commenced in February 1995. Mr. Traub currently receives an
annual base salary of $115,000.
J. Gerard Aguilar, Vice President, Research and Development of the Company,
has a five-year employment agreement with the Company which commenced in
February 1994. Mr. Aguilar currently receives an annual base salary of
$90,000.
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<PAGE>
Steven J. Ott, Vice President, Sales and Marketing of the Company, has a
four-year employment agreement with the Company which commenced in August
1994. Mr. Ott currently receives an annual base salary of $80,000 and
commissions on sales on terms negotiated between the Company and Mr. Ott.
Kenneth W. Whittington, Vice President, Product Development of the Company,
has a three-year employment agreement with the Company which commenced in
April 1995. Mr. Whittington receives an annual base salary of $110,000.
All of the foregoing employment agreements are automatically renewable for
successive one-year terms unless terminated by either party.
1994 STOCK OPTION PLAN
On January 3, 1994, the Board of Directors of the Company adopted and the
stockholders of the Company approved, the 1994 Stock Option Plan (the "1994
Plan"), as amended. The 1994 Plan permits the granting of options to purchase
an aggregate of 4,700,000 shares of the Company's Common Stock to key
employees of, and consultants to, the Company as well as to directors of the
Company whether or not employees. Options granted under the 1994 Plan may be
either incentive stock options ("ISOs") or options which do not qualify as
ISOs ("non-ISOs").
The 1994 Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors, which currently consists of Messrs.
Fillat, Geary and Roux. Subject to the provisions of the 1994 Plan, the Board
of Directors or the Committee has the authority to determine the individuals
to whom stock options will be granted, the number of shares to be covered by
each option, the option price, the type of option, the option period, the
vesting restrictions, if any, with respect to the exercise of the option, the
terms for the payment of the option price and other terms and conditions.
Payment for shares acquired upon exercise of an option may be made in cash
and/or such other form of payment as may be permitted under the applicable
option agreement, including without limitation, previously owned shares of
Common Stock.
The exercise price for shares covered by an ISO may not be less than 100% of
the fair market value of the Common Stock on the date of grant (110% in the
case of a grant to an employee who owns 10% or more of the total combined
voting power of all classes of stock of the Company or any subsidiary (a "10%
Stockholder")). The exercise price for shares covered by a non-ISO may not be
less than the par value of the Common Stock at the date of grant. Unless
otherwise approved by the Board of Directors or the Committee, an option may
not be exercised during the first six months after the date of its grant. All
options must expire no later than ten years (five years in the case of an ISO
granted to a 10% Stockholder) from the date of grant. In general, no option
may be exercised more than three months after the termination of the
optionee's service with the Company and any of its subsidiaries. However, the
three month period is extended to one year if the optionee's service is
terminated by reason of disability or death. No individual may be granted ISOs
that become exercisable for the first time in any calendar year for Common
Stock having a fair market value at the time of grant in excess of $100,000.
Unless otherwise determined by the Committee in an option agreement with
respect to any particular option, if any event constituting a "Change in
Control of the Company" (as defined in the 1994 Plan) shall occur, all options
granted under the 1994 Plan which are outstanding at the time a Change in
Control of the Company shall occur shall immediately become exercisable.
Options may not be transferred during the lifetime of an optionee. Subject
to certain limitations set forth in the Plan and applicable law, the Board of
Directors may amend or terminate the Plan. By its own terms, the Plan will
terminate on January 2, 2004.
Option Exercises and Fiscal Year Values
None of the Named Executive Officers exercised options during the fiscal
year ended June 30, 1996. The following table provides information regarding
the number of shares covered by both exercisable and
38
<PAGE>
unexercisable stock options as of June 30, 1996 and the values of "in-the-
money" options as of that date. An option is "in-the-money" if the per share
fair market value of the underlying stock exceeds the option exercise price
per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
FISCAL YEAR END FISCAL YEAR END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael Goldstein.......... 547,812 117,188 $3,570,778 $ 761,722
Kenneth H. Traub........... 84,375 65,625 $ 569,531 $ 442,969
J. Gerard Aguilar.......... -- -- -- --
Steven J. Ott.............. 203,125 196,875 $1,421,875 $1,378,125
Kenneth W. Whittington..... -- 150,000 -- $1,012,500
</TABLE>
- --------
(1) Based on the difference between the option exercise price and the assumed
initial public offering price of $7.50 share.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company's Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors to the Company or its
stockholders for monetary damages for breach of their fiduciary duty to the
maximum extent permitted by the Delaware Law. The Delaware Law does not permit
liability to be eliminated (i) for any breach of a director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions, as provided in Section 174 of the Delaware Law, or (iv) for any
transaction from which the director derived an improper personal benefit. In
addition, as permitted in Section 145 of the Delaware Law, the Certificate of
Incorporation and By-Laws of the Company provide that the Company shall
indemnify its directors and officers to the fullest extent permitted by the
Delaware Law, including those circumstances in which indemnification would
otherwise be discretionary, subject to certain exceptions. The By-Laws also
provide that the Company shall advance expenses to directors and officers
incurred in connection with an action or proceeding as to which they may be
entitled to indemnification, subject to certain exceptions.
Each of the Employment Agreements with Messrs. Goldstein, Traub, Aguilar,
Ott and Whittington provides for indemnification to the maximum extent
permitted by applicable law. The Company will enter into indemnification
agreements with each of its directors and executive officers that provide the
maximum indemnification allowed to directors and executive officers by the
Delaware Law, subject to certain exceptions, as well as certain additional
procedural protections. In addition, the indemnification agreements will
provide generally that the Company will advance expenses incurred by directors
and executive officers in any action or proceeding as to which they may be
entitled to indemnification, subject to certain exceptions.
The indemnification provisions in the Company's Certificate of
Incorporation, By-Laws, the indemnification agreements to be entered into
between the Company and its directors and executive officers and each of the
Employment Agreements with Messrs. Goldstein, Traub, Aguilar, Ott and
Whittington, may permit indemnification for liabilities arising under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
The Company currently expects to carry director and officer liability
insurance following this offering.
39
<PAGE>
CERTAIN TRANSACTIONS
From August 1993 to January 1994, the Company sold an aggregate of 6,245,000
shares of Common Stock to various officers, directors, advisors and other
persons for an aggregate of $33,507, including 3,480,000 to J. Gerard Aguilar,
840,000 to each of Jordan S. Davis, Mitchell Davis and Kenneth H. Traub,
125,000 shares to Michael Goldstein and 120,000 shares to Dr. Allen Gersho.
In March 1994, the Company sold an aggregate of 2,000,000 units at a price
of $0.25 per unit, each unit consisting of one share of Common Stock and one
warrant to purchase one share of Common Stock at a purchase price of $0.75 per
share. David J. Roux and certain relatives of directors and officers of the
Company purchased units on the same terms as all of the other purchasers of
units. See "Description of Securities--Warrants."
From November 1994 through February 1995, the Company sold an aggregate of
3,300,000 shares of Common Stock at a price of $0.75 per share. Certain
relatives of directors and officers of the Company purchased shares of Common
Stock on the same terms as all of the other purchasers of shares.
In December 1995, the Company sold 2,000,000 shares of Series A Preferred
Stock to entities of which Advent is a general partner and 2,000,000 shares of
Series A Preferred Stock to North Bridge at a price of $1.00 per share. Each
of Messrs. Fillat, a Senior Vice President of Advent, Geary, a general partner
of North Bridge, and Schell serves on the Board of Directors pursuant to a
voting agreement entered into in connection with the sale of the Series A
Preferred Stock. See "Management."
In March 1996, the Company sold 1,000,000 shares of Series A Preferred Stock
to Netscape at a price of $1.00 per share. Richard M. Schell, a Director of
the Company, is Vice President, Engineering of Netscape. Further, the Company
and Netscape are parties to a software license agreement pursuant to which
Netscape has a license to use and distribute certain of Voxware's products,
including the RT24 codec. The Netscape License Agreement provides for Netscape
to pay quarterly license fees to the Company for certain "basic" products. See
"Business--Strategic Relationships and Licensees."
In March 1996, the Company sold 1,000,000 shares of Series A Preferred Stock
to Intel at a price of $1.00 per share.
The Series A Preferred Stock will automatically convert into shares of
Common Stock effective upon the closing of this offering. The holders of
Series A Preferred Stock will, however, be entitled to certain registration
rights with respect to the shares of Common Stock issuable upon the conversion
of the Series A Preferred Stock. See "Description of Securities--Registration
Rights."
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 1996 and as adjusted to
reflect the sale of shares offered hereby, by (i) each person or entity who is
known by the Company to own beneficially more than five percent of the
Company's Common Stock, (ii) each of the Company's directors and (iii) all
executive officers and directors as a group. Unless indicated otherwise, the
address of each of these persons is c/o Voxware, Inc., 305 College Road East,
Princeton, New Jersey 08540.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE OF SHARES
OWNED (1)(2) BENEFICIALLY OWNED
-------------------- ----------------------
PRIOR TO THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OFFERING OFFERING
- ------------------------------------ -------------------- ------------ ---------
<S> <C> <C> <C>
J. Gerard Aguilar.................. 3,005,000 16.8% 13.7%
Advent International 2,000,000 11.2 9.1
Corporation(3)....................
101 Federal Street
Boston, MA 02110
North Bridge Venture Management, 2,000,000 11.2 9.1
L.P.(4)...........................
404 Wyman Street, Suite 365
Waltham, MA 02154
Michael Goldstein(5)............... 1,041,875 5.6 4.6
Netscape Communications Corpora- 1,000,000 5.6 4.6
tion(6)...........................
501 East Middlefield Road
Mountain View, CA 94043
Intel Corporation(6)............... 1,000,000 5.6 4.6
2200 Mission College Boulevard
Santa Clara, CA 95052
Kenneth H. Traub(7)................ 893,750 5.2 4.1
Jordan S. Davis and Maria T. Davis 818,000 4.6 3.7
JTWROS............................
David J. Roux(8)................... 227,486 1.3 1.0
Steven J. Ott(9)................... 225,000 1.2 1.1
Richard M. Schell.................. 60,000 * *
Stuart R. Patterson(10)............ 12,000 * *
Kenneth W. Whittington(11)......... 37,500 * *
Nicholas Narlis.................... -- -- --
All Directors and Executive Offi-
cers as a group (12 persons)...... 11,320,611 59.6 49.2
</TABLE>
- --------
* Less than 1% of outstanding shares of Common Stock.
(1) Number of shares beneficially owned is determined by assuming that
options that are held by such person (but not those held by any other
person) and which are exercisable or convertible within 60 days have been
exercised or converted.
(2) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
(3) Includes 5,000 shares owned by Advent International Investors II Limited
Partnership, 500,000 shares owned by Adtel Limited Partnership, 800,000
shares owned by Advent Crown Fund C.V., 350,000 shares owned by Adwest
Limited Partnership, 27,025 shares owned by Advent Israel (Bermuda)
Limited Partnership, 222,975 shares owned by Advent Israel Limited
Partnership and, 95,000 shares owned by Advent Partners Limited
Partnership all of which are issuable upon the conversion of shares of
Series A Preferred Stock. Advent International Corporation is the general
partner of all of the foregoing entities.
(4) Includes 2,000,000 shares of Common Stock issuable upon the conversion of
shares of Series A Preferred Stock held by North Bridge Venture Partners,
L.P., of which North Bridge Venture Management, L.P. is the general
partner.
41
<PAGE>
(5) Includes 125,000 shares of Common Stock owned by Mr. Goldstein which may
be repurchased by the Company in the event Mr. Goldstein's employment
agreement with the Company shall be terminated at any time prior to
January 3, 1997. Includes 586,875 shares of Common Stock issuable upon
the exercise of stock options.
(6) Consists of 1,000,000 shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock.
(7) Includes 93,750 shares of Common Stock issuable upon the exercise of
stock options.
(8) Includes 67,486 shares of Common Stock issuable upon the exercise of
stock options and 80,000 shares of Common Stock issuable upon the
exercise of warrants.
(9) Includes 225,000 shares of Common Stock issuable upon the exercise of
stock options.
(10) Includes 12,000 shares of Common Stock issuable upon the exercise of
stock options.
(11) Includes 37,500 shares of Common Stock issuable upon the exercise of
stock options.
42
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company includes 40,000,000 shares of
Common Stock, par value $.001 per share. At June 30, 1996, there were
11,895,000 shares of Common Stock outstanding, held by 174 stockholders of
record. Holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Holders of
Common Stock are not entitled to cumulative voting rights. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of outstanding Preferred Stock. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or
sinking fund provisions applicable to the Common Stock. All the outstanding
shares of Common Stock are, and the shares to be sold in this offering will
be, when issued and paid for, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of preferred stock in one or more
series and to fix the relative rights, preferences and limitations of the
shares within each series, including the dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences, conversion
rights and preemptive rights and the number of shares constituting any series.
The issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting and other rights of holders of Common Stock and,
under certain circumstances, make it more difficult or costly for a third
party to acquire, or discourage a third party from attempting to acquire,
control of the Company. The Company has no present plans to issue any shares
of preferred stock.
WARRANTS
The Company has issued warrants to purchase 2,000,000 shares of Common Stock
of the Company, of which 1,770,000 were outstanding as of June 30, 1996. The
Warrants entitle a registered holder thereof to purchase at a price of $0.75,
subject to adjustment in certain circumstances, at any time prior to the close
of business on March 23, 1999, one share of Common Stock. In lieu of paying
cash upon the exercise of the Warrants, the holders of Warrants have the right
to have the Company convert, without the payment of cash, all or a portion of
the Warrants into shares of Common Stock at a rate of two Warrants for each
share of Common Stock. Upon the consummation of this offering, the Warrants
will become redeemable at a price of $0.01 per Warrant at any time on not less
than 30 days prior notice from the Company.
The exercise price of the Warrants and the number and kind of shares of
Common Stock or other securities and property issuable upon exercise of the
Warrants are subject to adjustment in certain circumstances, including a stock
split of, stock dividend on, or subdivision of the Common Stock. Additionally,
except in the case of a Qualified Transaction, an adjustment will be made upon
a merger, consolidation, sale of all or substantially all of the assets of the
Company, or recapitalization or other similar transaction in order to enable
holders of Warrants to purchase the kind and number of shares of stock or
other securities or property (including cash) receivable in such event by a
holder of the number of shares of Common Stock that might otherwise have been
purchased upon exercise of the Warrants.
REGISTRATION RIGHTS
After this offering, the holders of 6,000,000 shares of outstanding Common
Stock will have the right at any time after the six month period following the
closing of the offering to require the Company to register their
43
<PAGE>
shares of Common Stock under the Securities Act. In addition, the holders of
those shares have certain "piggy-back" registration rights and rights to
require the Company to register all or a portion of their shares on Form S-3
to the extent that form is available to the Company for registration of
shares. In addition, the Company has an obligation to register up to 3,300,000
shares of Common Stock (the "Second Placement Shares"), which were sold by the
Company in a private placement between November 1994 and February 1995, within
12 months following the closing of the offering; provided, that the Company
will not be obligated to register Second Placement Shares for any holder who
could then sell all of his, her or its holding of Second Placement Shares
under Rule 144. The Company believes that nearly all holders of Second
Placement Shares will be able to sell all of their shares under Rule 144
within 12 months after the offering and therefore the registration obligation
will apply to few, if any, Second Placement Shares. Registration and sale of
shares of Common Stock could have an adverse effect on the trading price of
the Common Stock.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER PROVISION
Upon the consummation of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware Law (the "Anti-Takeover Law")
regulating corporate takeovers. The Anti-Takeover Law prevents certain
Delaware corporations from engaging, under certain circumstances, in a
"business combination" with any "interested stockholder" (defined generally as
a stockholder who acquired 15% or more of the corporation's outstanding voting
stock without the prior approval of the corporation's board of directors) for
three years following the time that such stockholder became an "interested
stockholder." A Delaware corporation may "opt out" of the Anti-Takeover Law
with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from
a stockholder's amendment approved by at least a majority of the outstanding
voting shares. The Company has not "opted out" of the provisions of the Anti-
Takeover Law. The existence of this provision would be expected to have the
effect of discouraging takeover attempts, including attempts that might result
in a premium over the market price for the shares of Common Stock held by
stockholders. In addition, the Certificate of Incorporation, as amended,
provides that upon the closing of the offering, the stockholders of the
Company may consent in writing to an action in lieu of an annual or special
meeting of stockholders only by the consent of the holders of all of the
outstanding stock of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Company's Common Stock could
have the effect of depressing the prevailing market price of its Common Stock.
Upon completion of this offering, the Company will have a total of 21,895,000
shares of Common Stock outstanding, assuming no exercise of stock options and
warrants after June 30, 1996. The Company believes that substantially all of
the warrants to purchase 1,770,000 shares of Common Stock outstanding as of
June 30, 1996 will be exercised prior to or promptly following the closing of
this offering. Of the 21,895,000 shares outstanding, the 4,000,000 shares of
Common Stock offered hereby will be freely tradeable without restriction under
the Securities Act of 1933, as amended (the "Securities Act"), by persons
other than "affiliates" of the Company, as defined under the Securities Act.
The remaining shares of Common Stock outstanding are "restricted shares"
as that term is defined by Rule 144 as promulgated under the Securities Act.
All but 7,000 of these 17,895,000 shares will not be immediately saleable in
the public market following the date of this Prospectus. Beginning 90 days
after the date of this Prospectus, 180,000 shares of Common Stock will become
eligible for sale pursuant to Rule 701; and beginning 180 days after the date
of this Prospectus (or earlier with the written consent of Montgomery
Securities, on behalf of the Underwriters), shares of Common Stock will
become eligible for sale upon the expiration of lock-up agreements between the
Underwriters and the holders of such shares, subject to compliance with Rule
144 of the Securities Act.
As of June 30, 1996, options to purchase a total of 2,522,300 shares of
Common Stock were outstanding. As of June 30, 1996, there were 2,197,700
shares of Common Stock available for future option grants under the
44
<PAGE>
Company's 1994 Stock Option Plan. of the shares issuable pursuant to
outstanding options are subject to lock-up restrictions for a period of 180
days as described above. In addition, the Company has warrants outstanding to
purchase an aggregate of 1,770,000 shares of Common Stock for $0.75 per share,
of which shares are subject to lock-up restrictions for a period of 180
days as described above. See "Management--1994 Stock Option Plan,"
"Description of Securities--Warrants," "Underwriting" and "Note 4 of "Notes to
Financial Statements."'
Rule 701 under the Securities Act provides that, beginning 90 days after the
date of this Prospectus, shares of Common Stock acquired upon the exercise of
outstanding options may be resold by persons other than affiliates subject
only to the manner of sale provisions of Rule 144 and by affiliates subject to
all provisions of Rule 144 except its two-year minimum holding period. The
Company intends to file a Registration Statement on Form S-8 under the
Securities Act to register shares of Common Stock subject to stock options
which will permit the resale of such shares, subject to the Rule 144 volume
limitations applicable to affiliates, vesting restrictions with the Company
and lock-up agreements between the optionholders and the Underwriters.
Prior to this offering, there has been no public trading market for the
Common Stock. The possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing prices for the
Common Stock and could impair the Company's ability to raise additional
capital through the sale of its equity securities.
45
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by Montgomery
Securities, Alex. Brown & Sons Incorporated and Oppenheimer & Co., Inc. (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters are committed to purchase all
of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Montgomery Securities .............................................
Alex. Brown & Sons Incorporated....................................
Oppenheimer & Co., Inc.............................................
---------
Total............................................................ 4,000,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers
a concession of not more than $ per share; and the Underwriters may allow,
and such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the initial public offering, the offering price
and other selling terms may be changed by the Representatives. The Common
Stock is offered subject to receipt and acceptance by the Underwriters, and to
certain other conditions, including the right to reject orders in whole or in
part.
The Selling Stockholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of 600,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 4,000,000
shares to be purchased by the Underwriters. To the extent that the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
Each director and officer of the Company and certain other holders of Common
Stock prior to this offering have agreed, subject to certain limited
exceptions, not to sell or offer to sell or otherwise dispose of any shares of
Common Stock currently held by them, any right to acquire any shares of Common
Stock or any securities exercisable for or convertible into any shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to these lock-up agreements. In
addition, the Company has agreed that for a period of 180 days after the date
of this Prospectus it will not, without the prior written consent of
Montgomery Securities, issue, offer, sell, grant options to purchase or
otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities except for shares of Common Stock offered
hereby and shares issued pursuant to outstanding options and warrants. See
"Management--1994 Stock Option Plan" and "Description of Securities--
Warrants."
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against liabilities, including civil liabilities under the Securities Act, or
will contribute to payments the Underwriters may be required to make in
respect thereof.
The Representatives have advised the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority
in excess of 5% of the number of shares of Common Stock offered hereby.
46
<PAGE>
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations between the Company and the Representatives. Among the
factors to be considered in such negotiations will be the history of, and
prospects for, the Company and the industry in which it competes, an
assessment of the Company's management, the Company's past and present
operations and financial performance, its past and present earnings and the
trend of such earnings, the prospects for future earnings of the Company, the
present state of the Company's development, the general condition of the
securities markets at the time of the offering and the market prices of
publicly traded common stocks of comparable companies in recent periods.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fulbright & Jaworski L.L.P., New York,
New York. Ropes & Gray, Boston, Massachusetts will pass upon certain legal
matters relating to the offering for the Underwriters. Attorneys at Fulbright
& Jaworski L.L.P. own 140,000 shares of Common Stock of the Company and
warrants to purchase 20,000 shares of Common Stock.
EXPERTS
The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-1
(together with all amendments thereto, the "Registration Statement"), under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed therewith, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference hereby is made to the exhibit for a
more complete description of the matter involved and each such statement shall
be deemed qualified in its entirety by such reference. For further information
with respect to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement and exhibits and schedules thereto. The
Registration Statement filed by the Company, including exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Midwest Regional Office of the
Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material, when filed, may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 upon payment of certain fees prescribed by the Commission. The
Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent public accountants
and quarterly reports containing unaudited financial information for each of
the first three quarters of each fiscal year.
47
<PAGE>
On February 6, 1996, the Company engaged Arthur Andersen LLP as its
independent public accountants and dismissed the Company's former auditors.
The decision to change accountants was recommended by the Audit Committee of
the Board of Directors and approved by the Board of Directors. The financial
statements of the Company as of June 30, 1994, 1995 and 1996 and for the
period from Inception (August 20, 1993) to June 30, 1994 and for the years
ended June 30, 1995 and 1996, have been audited by Arthur Andersen LLP. The
former auditors were retained by the Company since its Inception. The former
auditor's reports for the period from Inception to May 31, 1994 and the year
ended May 31, 1995, did not contain adverse opinions or disclaimer opinions
and were not qualified as to uncertainty, audit scope, or accounting
principles. There were not, during the Company's two most recent fiscal
periods and any subsequent interim period prior to the dismissal, any
disagreements with the former auditors on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures
which, if not resolved to the former auditor's satisfaction, would have caused
them to make reference to the subject matter of the disagreement in connection
with their report. Prior to retaining Arthur Andersen LLP, the Company did not
consult with Arthur Andersen LLP regarding the application of accounting
principles to a specified transaction, the type of audit opinion that might be
rendered on the Company's financial statements or any other matter.
48
<PAGE>
VOXWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)......................................................... F-5
Statements of Cash Flows.................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Voxware, Inc.:
We have audited the accompanying balance sheets of Voxware, Inc. (a Delaware
corporation) as of June 30, 1995 and 1996 and the related statements of
operations, redeemable convertible preferred stock and stockholders' equity
(deficit) and cash flows for the period from Inception (August 20, 1993) to
June 30, 1994 and for the two years ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Voxware, Inc. as of June
30, 1995 and 1996 and the results of its operations and its cash flows for the
period from Inception (August 20, 1993) to June 30, 1994 and for the two years
ended June 30, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
July 12, 1996
F-2
<PAGE>
VOXWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
JUNE 30, EQUITY
------------------------ JUNE 30, 1996
1995 1996 (UNAUDITED)
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 1,523,054 $ 3,836,836
Accounts receivable, net of allowance
for doubtful accounts of $25,000 at
June 30, 1996....................... -- 469,750
Prepaid expenses..................... 5,440 54,358
----------- -----------
Total current assets............... 1,528,494 4,360,944
Property and equipment, net............ 128,769 610,973
Other assets, net...................... 9,564 364,536
----------- -----------
$ 1,666,827 $ 5,336,453
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable..................... $ 110,530 $ 193,944
Accrued compensation and benefits.... -- 109,875
Other accrued expenses............... -- 60,664
Deferred revenues.................... -- 109,123
----------- -----------
Total current liabilities.......... 110,530 473,606
----------- -----------
Redeemable Series A Convertible
Preferred Stock....................... -- 5,938,325 $ --
----------- ----------- -----------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Preferred stock, $.001 par value,
10,000,000 shares authorized;
6,000,000 Redeemable Series A
Convertible shares issued and
outstanding in 1996; no shares
issued and outstanding pro forma.... -- -- --
Common stock, $.001 par value,
40,000,000 shares authorized;
11,545,000 and 11,895,000 shares
issued and outstanding; 17,895,000
shares issued and outstanding pro
forma............................... 11,545 11,895 17,895
Additional paid-in capital........... 2,929,040 3,171,190 9,103,515
Accumulated deficit.................. (1,384,288) (4,258,563) (4,258,563)
----------- ----------- -----------
Total stockholders' equity
(deficit)......................... 1,556,297 (1,075,478) 4,862,847
----------- ----------- -----------
$ 1,666,827 $ 5,336,453 $ 5,336,453
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
VOXWARE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1993) YEAR ENDED JUNE 30,
TO JUNE 30, ------------------------
1994 1995 1996
----------------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Product revenues................ $ -- $ -- $ 1,494,075
Service revenues................ -- -- 112,963
--------- ----------- -----------
Total revenues................ -- -- 1,607,038
--------- ----------- -----------
Cost of revenues:
Cost of product revenues........ -- -- 17,285
Cost of service revenues........ -- -- 28,129
--------- ----------- -----------
Total cost of revenues........ -- -- 45,414
--------- ----------- -----------
Gross profit.................. -- -- 1,561,624
--------- ----------- -----------
Operating expenses:
Research and development........ 93,372 536,581 2,496,717
Sales and marketing............. 9,158 331,728 1,084,280
General and administrative...... 112,978 365,411 979,796
--------- ----------- -----------
Total operating expenses...... 215,508 1,233,720 4,560,793
--------- ----------- -----------
Operating loss................ (215,508) (1,233,720) (2,999,169)
Interest income................... -- 64,940 131,857
--------- ----------- -----------
Net loss.......................... $(215,508) $(1,168,780) $(2,867,312)
========= =========== ===========
Pro forma net loss per share
(unaudited)...................... $ (0.16)
===========
Shares used in computing pro forma
net
loss per share (unaudited)....... 17,583,980
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
VOXWARE, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------
REDEEMABLE
SERIES A COMMON STOCK ADDITIONAL
CONVERTIBLE ------------------ PAID-IN ACCUMULATED
PREFERRED STOCK SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------------- ---------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of common stock
to founding
stockholders......... $ -- 6,000,000 $ 6,000 $ 24,567 $ -- $ 30,567
Sale of common stock.. -- 2,245,000 2,245 488,927 -- 491,172
Net loss.............. -- -- -- -- (215,508) (215,508)
---------- ---------- ------- ---------- ----------- -----------
Balance, June 30, 1994.. -- 8,245,000 8,245 513,494 (215,508) 306,231
Sale of common stock.. -- 3,300,000 3,300 2,415,546 -- 2,418,846
Net loss.............. -- -- -- -- (1,168,780) (1,168,780)
---------- ---------- ------- ---------- ----------- -----------
Balance, June 30, 1995.. -- 11,545,000 11,545 2,929,040 (1,384,288) 1,556,297
Sale of Redeemable
Series A Convertible
Preferred Stock...... 5,931,362 -- -- -- -- --
Exercise of common
stock warrants....... -- 230,000 230 172,270 -- 172,500
Exercise of common
stock options........ -- 120,000 120 69,880 -- 70,000
Accretion of
redemption premium on
Redeemable Series A
Convertible Preferred
Stock................ 6,963 -- -- -- (6,963) (6,963)
Net loss.............. -- -- -- -- (2,867,312) (2,867,312)
---------- ---------- ------- ---------- ----------- -----------
Balance June 30, 1996... $5,938,325 11,895,000 $11,895 $3,171,190 $(4,258,563) $(1,075,478)
========== ========== ======= ========== =========== ===========
Pro forma balance after
conversion of
Redeemable Series A
Convertible Preferred
Stock into common stock
(Note 1) (unaudited)... $ -- 17,895,000 $17,895 $9,103,515 $(4,258,563) $ 4,862,847
========== ========== ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
VOXWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1993) YEAR ENDED JUNE 30,
TO JUNE 30, ------------------------
1994 1995 1996
----------------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss.......................... $(215,508) $(1,168,780) $(2,867,312)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 3,951 16,659 104,162
Provision for doubtful accounts.. -- -- 25,000
Changes in assets and
liabilities:
Accounts receivable............ -- -- (494,750)
Prepaid expenses............... -- (5,440) (48,918)
Other assets................... (6,534) (3,030) (354,972)
Accounts payable............... 52,469 58,061 83,414
Accrued compensation and
benefits...................... -- -- 109,875
Other accrued expenses......... -- -- 60,664
Deferred revenues.............. -- -- 109,123
--------- ----------- -----------
Net cash used in operating
activities.................. (165,622) (1,102,530) (3,273,714)
--------- ----------- -----------
Investing activities:
Purchases of property and
equipment....................... (48,820) (100,559) (586,366)
--------- ----------- -----------
Financing activities:
Sale of Redeemable Series A
Convertible Preferred Stock..... -- -- 5,931,362
Proceeds from exercise of common
stock warrants.................. -- -- 172,500
Proceeds from exercise of common
stock options................... -- -- 70,000
Proceeds from sale of common
stock........................... 521,739 2,418,846 --
--------- ----------- -----------
Net cash provided by
financing activities........ 521,739 2,418,846 6,173,862
--------- ----------- -----------
Increase in cash and cash
equivalents....................... 307,297 1,215,757 2,313,782
Cash and cash equivalents,
beginning of period............... -- 307,297 1,523,054
--------- ----------- -----------
Cash and cash equivalents, end of
period............................ $ 307,297 $ 1,523,054 $ 3,836,836
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
Voxware, Inc. (the "Company") develops, markets, licenses and supports a
comprehensive set of digital speech processing technologies which provide the
ability to compress, model and transform speech. The Company licenses its
products to leading software, computing and communication companies.
The market for the Company's products is characterized by rapidly changing
technology and evolving industry standards. The introduction of products
incorporating new technology and the emergence of new industry standards could
render the Company's products obsolete and unmarketable and could exert price
pressures on existing products. The Company's ability to anticipate changes in
technology and industry standards and successfully develop and introduce new
and enhanced products, as well as additional applications for existing
products, in each case on a timely basis, will be a critical factor in the
Company's ability to grow and to be competitive. The Company has only a
limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
the early stage of development, particularly companies in new and rapidly
evolving markets. As of June 30, 1996, the Company had an accumulated deficit
of $4,258,563. In addition, the Company's operating results may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside the Company's control. These factors include the level of usage of
the Internet, the budgeting cycles of potential customers, the amount and
timing of capital expenditures and other costs relating to the expansion of
the Company's operations, the introduction of new products or services by the
Company or its competitors, pricing changes in the industry, technical
difficulties with respect to the use of products developed by the Company,
general economic conditions and economic conditions specific to the Internet.
However, the Company believes that adequate capital resources will be
available to fund the Company's operations for the year ending June 30, 1997.
The Company was incorporated in the State of Delaware on August 20, 1993 as
Advanced Communication Technologies, Inc. and changed its name to Voxware,
Inc. in May 1994. For accounting purposes, the Company emerged from
development stage commencing July 1995.
Unaudited Pro Forma Stockholders' Equity
In conjunction with the proposed initial public offering of the Company's
common stock (the "Offering"), all of the outstanding shares of Redeemable
Series A Convertible Preferred Stock will convert into common stock effective
upon the closing of the Offering. The unaudited pro forma stockholders' equity
at June 30, 1996 reflects the assumed conversion of the Redeemable Series A
Convertible Preferred Stock into 6,000,000 shares of common stock (see Note
3).
Summary of Significant Accounting Policies
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company generates revenues from two sources: fees from product licenses
and fees for services provided. Product licenses include a combination of
initial license fees, annual license fees or royalties. Service revenues
consist of customer support and engineering fees. Product revenues are
generally recognized upon shipment, provided there are no significant post
delivery obligations, the payment is due within one year and
F-7
<PAGE>
VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
collection of the resulting receivable is deemed probable. Certain agreements
provide for per unit royalties to be paid to the Company based on shipments by
customers of units utilizing the Company's products. Royalty revenues are
recognized at the time of shipment by the customer. No royalty revenues have
been recognized through June 30, 1996. Service revenues from customer support,
including amounts bundled with initial or annual license fees, are recognized
ratably over the term of the support period, which is typically one year.
Revenues from engineering fees are recognized upon customer acceptance or over
the period in which services are provided if customer acceptance is not
required.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Pursuant to Statement of Financial Accounting Standards No. 86, "Accounting
for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed",
development costs incurred in connection with the research and development of
software products and enhancements to existing software products are expensed
when incurred unless technological feasibility has been established. Based on
the Company's product development process, technological feasibility is
established upon completion of a working model. Costs incurred by the Company
between completion of the working model and the point at which the product is
ready for general release have been insignificant. All research and
development costs have been expensed.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share was calculated by dividing net loss by the
weighted average number of common shares outstanding for the respective
periods adjusted for the dilutive effect of common stock equivalents, which
consist of stock options using the treasury stock method. Pursuant to the
requirements of the Securities and Exchange Commission, common stock issued by
the Company during the twelve months immediately preceding the initial public
offering, plus the number of common equivalent shares which became issuable
during the same period pursuant to the grant of common stock options, have
been included in the calculation of the shares used in computing pro forma net
loss per share as if they were outstanding for all periods presented (using
the treasury stock method and the estimated initial public offering price of
$7.50 per share). Pursuant to the policy of the Securities and Exchange
Commission the calculation of shares used in computing pro forma net loss per
share also includes the Redeemable Series A Convertible Preferred Stock which
will convert into 6,000,000 shares of common stock effective upon the closing
of the Offering.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of investments in highly liquid short-term
instruments, with original maturities of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on a
straight-line basis over the useful lives of the assets ranging from three to
seven years. Maintenance, repairs and minor replacements are charged to
expense as incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash balances and trade receivables. The
Company invests its excess cash with highly liquid investments (short-term
bank deposits). The Company's customer base principally comprises companies
within the software, computer and telecommunications industries. The Company
does not require collateral from its customers.
F-8
<PAGE>
VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MAJOR CUSTOMERS
The Company derived approximately 31% of its revenues in the year ended June
30, 1996 from one customer which is a related party (see Note 7).
STOCK BASED COMPENSATION
In October 1995, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") which establishes financial accounting and
reporting standards for stock based employee compensation plans. Companies are
encouraged, rather than required to adopt a new method that accounts for stock
compensation awards based on their fair value using an option pricing model.
Companies that do not adopt this method will have to make pro forma
disclosures of net income as if the fair value based method of accounting
required by this standard had been applied. The Company is required to adopt
SFAS No. 123 effective July 1, 1996. The Company has elected to adopt the
disclosure requirement of the pronouncement.
2. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1995 1996
-------- ---------
<S> <C> <C>
Equipment............................................. $139,817 $ 409,425
Leasehold improvements................................ -- 50,000
Furniture and fixtures................................ 9,562 276,320
-------- ---------
149,379 735,745
Less--Accumulated depreciation........................ (20,610) (124,772)
-------- ---------
$128,769 $ 610,973
======== =========
</TABLE>
Depreciation expense was $3,951, $16,659 and $104,162 for the periods ended
June 30, 1994, 1995 and 1996, respectively.
3. REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK:
As of June 30, 1996, the Company had 10,000,000 shares of preferred stock
authorized of which 6,000,000 were designated, issued and outstanding as
$0.001 par value Redeemable Series A Convertible Preferred Stock ("Series A
Preferred Stock"). The 6,000,000 shares of Series A Preferred Stock were sold
to investors in fiscal 1996 for $1.00 per share resulting in net proceeds to
the Company of $5,931,362.
Each share of Series A Preferred Stock is convertible into one share of the
Company's common stock. In addition, effective upon the closing of an initial
public offering of the Company's common stock, as defined, all shares of the
Series A Preferred Stock will automatically convert into common stock on a
one-for-one basis, subject to certain adjustments. Each preferred stockholder
is entitled to one vote per share, registration rights, as defined, and
dividends when and if declared. No dividends have been declared on the Series
A Preferred Stock.
Subsequent to December 15, 2000, the Series A Preferred Stock is redeemable
at the option of a majority of the holders at $1.00 per share plus accrued but
unpaid dividends, if any, payable in twelve equal quarterly installments. The
Series A Preferred Stock is being accreted to its redemption value.
F-9
<PAGE>
VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. STOCKHOLDERS' EQUITY:
Stock Option Plans
Pursuant to the 1994 Stock Option Plan (the "Plan"), the Company may grant
to eligible individuals incentive stock options as defined in the Internal
Revenue Code and nonqualified stock options. An aggregate of 4,700,000 shares
of common stock have been reserved for issuance under the Plan. The exercise
price for incentive stock options may not be less than 100% (110% for holders
of 10% or more of the combined voting power of all classes of stock of the
Company) of the fair value of the shares on the date of grant and at least par
value for nonqualified stock options. The period during which an option may be
exercised will be fixed by the Board of Directors up to a maximum of ten years
(five years in case of incentive stock options granted to holders of 10% or
more of the combined voting power of all classes of stock of the Company) and
vest at the discretion of the Board of Directors.
The Company has granted a total of 140,000 options at prices ranging from
$0.50 to $1.00 outside of the 1994 Stock Option Plan (Outside Options).
Information relative to the 1994 Stock Option Plan and the Outside Options
is as follows:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Granted......................................... 755,000 $0.25--$1.50
---------
Outstanding at June 30, 1994...................... 755,000 $0.25--$1.50
Granted......................................... 1,168,000 $0.50--$0.75
---------
Outstanding at June 30, 1995...................... 1,923,000 $0.25--$1.50
Granted......................................... 842,300 $0.75--$5.40
Exercised....................................... (120,000) $0.25--$0.75
Canceled........................................ (123,000) $0.75--$1.20
---------
Outstanding at June 30, 1996...................... 2,522,300 $0.25--$5.40
=========
</TABLE>
As of June 30, 1996, there were 1,090,232 options exercisable at an
aggregate price of $845,589. In addition as of June 30, 1996, there were
2,197,700 additional options to purchase common stock available for grant
under the 1994 Stock Option Plan.
Warrants
In March 1994, the Company sold 2,000,000 shares of common stock and
warrants ("Warrants") to purchase an aggregate of 2,000,000 shares of common
stock for $0.75 per share, subject to adjustment in certain circumstances. In
lieu of paying cash upon the exercise of the Warrants, the Warrant holders
have the right to have the Company convert all or a portion of the Warrants
into shares of common stock at a rate of two Warrants for each share of common
stock. Immediately upon the closing of an initial public offering, as defined,
the Warrants will become redeemable at a price of $0.01 per Warrant at any
time on not less than 30 days prior written notice from the Company. In June
1996, warrants to purchase 230,000 shares of Common Stock were exercised.
5. INCOME TAXES:
As of June 30, 1996, the Company had approximately $3,500,000 of federal net
operating loss carryforwards for tax reporting purposes available to offset
future taxable income; such carryforwards begin to expire in 2009. Under the
Tax Reform Act of 1986, the amounts of and benefits from net operating losses
carried forward may be impaired or limited in certain circumstances. Events
which may cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a
cumulative
F-10
<PAGE>
VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
ownership change of more than 50% over a three year period. As of June 30,
1996, the effect of such limitations, if imposed, is not expected to be
material.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. As of June 30, 1996, the Company
had deferred tax assets of approximately $1,645,000 relating primarily to net
operating loss carryforwards. The net deferred tax asset has been fully offset
by a valuation allowance.
6. COMMITMENTS AND CONTINGENCIES:
The Company leases its office facility and certain equipment under operating
leases with remaining noncancelable lease terms generally in excess of one
year. Rent expense was $3,000, $19,500 and $64,182 for the periods ended June
30, 1994, 1995 and 1996, respectively. Future minimum rental payments as of
June 30, 1996 are as follows:
<TABLE>
<S> <C>
Year Ending June 30,
1997.............................. $ 193,525
1998.............................. 322,350
1999.............................. 383,400
2000.............................. 383,400
2001.............................. 383,400
2002 and thereafter............... 734,850
----------
$2,400,925
==========
</TABLE>
The Company has a $300,000 letter of credit outstanding in connection with
the Company's facility lease. Included in other assets as of June 30, 1996 is
a $300,000 certificate of deposit which is required to be held as collateral
for the letter of credit.
From time to time the Company is involved in certain legal actions arising
in the ordinary course of business. In the opinion of management, the outcome
of such actions will not have a material adverse effect on the Company's
financial position or results of operations.
The Company has employment and severance agreements with five officers, the
terms of which range from three to five years. The agreements provide for
minimum salary levels, adjusted annually at the discretion of the board of
directors.
7. RELATED-PARTY TRANSACTIONS:
The Company derived approximately 31% of its revenues for the year ended
June 30, 1996 from Netscape Communications Corporation, which owns 1,000,000
shares of the Series A Preferred Stock (see Note 3).
8. SEGMENT INFORMATION:
The Company conducts its business within one industry segment. For the year
ended June 30, 1996, revenues included $183,989 of sales to customers outside
the United States.
F-11
<PAGE>
==============================================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securi-
ties other than the shares of Common Stock to which it relates or an offer to,
or a solicitation of, any person in any jurisdiction where such offer or so-
licitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company or that the information
contained herein is correct as of any time subsequent to the date hereof.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 21
Management............................................................... 35
Certain Transactions..................................................... 40
Principal Stockholders................................................... 41
Description of Securities................................................ 43
Shares Eligible for Future Sale.......................................... 44
Underwriting............................................................. 46
Legal Matters............................................................ 47
Experts.................................................................. 47
Additional Information................................................... 47
Index to Financial Statements............................................ F-1
</TABLE>
-------------------
Until , 1996 (25 days after the date of this Prospectus), all dealers ef-
fecting transactions in the Common Stock, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as Underwriters
and with respect to their unsold allotments or subscriptions.
===============================================================================
===============================================================================
4,000,000 SHARES
[LOGO APPEARS HERE]
COMMON STOCK
----------------
PROSPECTUS
----------------
MONTGOMERY SECURITIES
ALEX. BROWN & SONS
Incorporated
OPPENHEIMER & CO., INC.
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the Company's estimates (other than the SEC
registration fee and the NASD filing fee) of the expenses in connection with
the issuance and distribution of the shares of Common Stock being registered,
other than underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee............................................... $ 12,690
NASD filing fee.................................................... 4,180
Nasdaq National Market listing fee................................. 50,000
Printing and engraving expenses.................................... 125,000
Legal fees and expenses............................................ 225,000
Accounting fees and expenses....................................... 120,000
Blue sky fees and expenses......................................... 20,000
Transfer agent and registrar fees.................................. 4,000
Directors and officers insurance fees.............................. 180,000
Miscellaneous expenses............................................. 9,130
--------
Total............................................................ $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or
agent in defending such action, provided that the director or officer
undertakes to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation. A corporation may
indemnify such person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses (including attorneys' fees) which he
actually and reasonably incurred in connection therewith. The indemnification
provided is not deemed to be exclusive of any other rights to which an officer
or director may be entitled under any corporation's by-law, agreement, vote or
otherwise.
The Company's Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors to the Company or its
stockholders for monetary damages for breach of their fiduciary duty to the
maximum extent permitted by the DGCL. The DGCL does not permit liability to be
eliminated (i) for any breach of a director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions,
as provided in Section 174 of the DGCL, or (iv) for any transaction
II-1
<PAGE>
from which the director derived an improper personal benefit. In addition, as
permitted in Section 145 of the DGCL, the Certificate of Incorporation and By-
Laws of the Company provide that the Company shall indemnify its directors and
officers to the fullest extent permitted by the DGCL, including those
circumstances in which indemnification would otherwise be discretionary,
subject to certain exceptions. The By-Laws also provide that the Company shall
advance expenses to directors and officers incurred in connection with an
action or proceeding as to which they may be entitled to indemnification,
subject to certain exceptions.
Each of the Employment Agreements with Messrs. Goldstein, Traub, Aguilar,
Ott and Whittington provides for indemnification to the maximum extent
permitted by applicable law. The Company will enter into indemnification
agreements with each of its directors and executive officers that provide the
maximum indemnification allowed to directors and executive officers by the
DGCL, subject to certain exceptions, as well as certain additional procedural
protections. In addition, the indemnification agreements will provide
generally that the Company will advance expenses incurred by directors and
executive officers in any action or proceeding as to which they may be
entitled to indemnification, subject to certain exceptions.
The indemnification provisions in the Company's Certificate of
Incorporation, By-Laws, the indemnification agreements to be entered into
between the Company and its directors and executive officers and each of the
Employment Agreements with Messrs. Goldstein, Traub, Aguilar, Ott and
Whittington, may permit indemnification for liabilities arising under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
The Company currently expects to carry director and officer liability
insurance following this offering.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following shares were sold by the Company
without registration under the Securities Act of 1933, as amended (the "Act").
All references to shares of the Company's Common Stock give effect to a sixty
thousand for one share stock split effected on December 8, 1993.
(a) From August 1993 to January 1994, an aggregate of 6,245,000 shares of
the Company's Common Stock were sold by the Company for an aggregate of
$33,507, as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF SHARES
----------- ----------------
<S> <C>
J. Gerard Aguilar........................................... 3,480,000
Jordan S. and Maria T. Davis ............................... 840,000
Mitchell Davis.............................................. 840,000
Kenneth H. Traub............................................ 840,000
Michael Goldstein........................................... 125,000
Allen Gersho................................................ 120,000
---------
6,245,000
=========
</TABLE>
The Company relied on the exemption from registration set forth in Section
4(2) of the Act. No fees were paid in connection with the foregoing sales of
securities.
II-2
<PAGE>
(b) In March 1994, the Company sold an aggregate of 2,000,000 units, each
unit consisting of one share of Common Stock and one warrant to purchase one
share of Common Stock at a purchase price of $0.75 per share. The Company sold
units to the following persons at a price of $0.25 per unit.
<TABLE>
<CAPTION>
UNITHOLDER NUMBER OF UNITS
---------- ---------------
<S> <C>
Lester Youner........... 40,000
Stuart P. Milsten....... 35,000
William R. Davis and
Sheila Davis........... 35,000
Igor Stenmark........... 40,000
Peter W. Ryan........... 30,000
Arie Genger............. 100,000
Herbert Goldstein....... 60,000
David J. Roux........... 80,000
Paul Jacobs............. 60,000
Lawrence A. Spector..... 20,000
Edward Goldstein........ 60,000
Eric Schreiber.......... 20,000
Mitchell Napack......... 30,000
Peter M. Wood........... 100,000
Steven Bier............. 30,000
Lois B. Hoffner......... 30,000
Voice Tech Ventures..... 280,000
Abel Aguilar............ 80,000
Alec Gindis............. 200,000
Burton and Elaine
Traub.................. 20,000
George Zimmerman........ 10,000
Alan Gelband............ 60,000
Alan Gelband Co. Defined
Contribution Pension
Plan & Trust........... 60,000
Richard W. Kates........ 20,000
John M. McMahon......... 40,000
Terrence L. Mealy....... 20,000
Dr. Gary S. Traub....... 10,000
Paul Traub.............. 10,000
Marvin Haas............. 110,000
John Bendik............. 40,000
Harry Krensky and Linda
Krensky................ 20,000
Michael Bernstein....... 10,000
Bohemond Corp........... 100,000
David Handler........... 20,000
Stanley Davis and Silvia
Davis.................. 10,000
Thomas Hardy............ 110,000
---------
2,000,000
=========
</TABLE>
The Company relied on the exemption from registration set forth in Section
4(2) of the Act. No fees were paid in connection with the foregoing sales of
securities.
II-3
<PAGE>
(c) From November 1994 through February 1995, the Company sold an aggregate
of 3,300,000 shares of Common Stock to the following persons at a price of
$0.75 per share:
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF SHARES
----------- ----------------
<S> <C>
Diego and Irene Alvarez..................................... 20,000
Hormozan Aprin, M.D. and Mahmaz Aprin....................... 100,000
Robert E. and Debra A. Balducci............................. 10,000
John E. Bendik.............................................. 51,000
Ennius E. Bergsman.......................................... 40,000
Steven J. Bier.............................................. 30,000
Mark A. and Maribeth Brostowski............................. 30,000
Joel A. and Karen Ann Budin................................. 50,000
John F. Burton.............................................. 100,000
Capital Express, L.L.C...................................... 100,000
James A. and JoAnn A. Cohen................................. 100,000
Joseph Coler DC............................................. 14,000
Kevin Collins............................................... 10,000
Smith Barney, Inc. IRA Custodian FBO J. Douglas Cox......... 40,000
Kathryn A. and J. Douglas Cox............................... 34,000
Kathryn A. Cox M.D. PC Retirement Trust..................... 26,000
Keith Eisenstark and Mary Beth Walsh........................ 10,000
Leonard G. Epstein.......................................... 35,000
Sheryl Fischer.............................................. 4,000
Mark H. Folit............................................... 20,000
Wayne J. and Deborah R. Friedman............................ 67,000
Jeffrey Garber.............................................. 10,000
David Gardner............................................... 20,000
Scott M. Gibson............................................. 10,000
Louis M. Gidding............................................ 10,000
Alec Gindis................................................. 100,000
Daniel Paul Goldman......................................... 20,000
Michael Goldman............................................. 20,000
Edward Goldstein............................................ 50,000
Steven J. Golub............................................. 50,000
Ira A. Gomberg.............................................. 40,000
Richard L. Green............................................ 14,000
Harlan T. Greenman.......................................... 7,000
Natalie J. Greenman......................................... 7,000
Steven M. Grossman.......................................... 20,000
Eugene and Joan Gyesky...................................... 20,000
Dhananjay Hajela............................................ 60,000
Thomas Hardy................................................ 70,000
Paul D. Harris.............................................. 70,000
Glenn H. Hutchins........................................... 50,000
Darlynn L. Johnson.......................................... 26,000
Beth Kaplan................................................. 50,000
Richard W. Kates............................................ 67,000
Gary H. and Cindy S. Katz................................... 7,000
Edward Klimerman............................................ 42,000
Joseph Korff................................................ 50,000
Carolyn H. Kornblau......................................... 20,000
Harry F. and Linda M. Krensky............................... 51,000
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF SHARES
----------- ----------------
<S> <C>
Charles T. and Nina A. Langpaul............................. 20,000
Alicia Latkovski............................................ 14,000
David A. Leff, D.O.......................................... 10,000
Lengfeld S.A................................................ 15,000
Marc N. and Pamela Levin.................................... 30,000
Fred and Cindi Brandt Levin................................. 8,000
Mark and Rachel Lipschutz................................... 8,000
Gregory G. Mario............................................ 100,000
Mark Mazzonelli............................................. 50,000
Michael L. and Cynthia G. McEachern......................... 30,000
Terrence L. Mealy........................................... 20,000
Edwin L. Miller............................................. 50,000
Stuart P. Milsten........................................... 10,000
Daniel S. Mintz............................................. 100,000
Richard and Maria Molinsky.................................. 33,000
Mario M. Morino............................................. 100,000
Michael Moskowitz........................................... 50,000
James Mossman............................................... 50,000
William J. Murray........................................... 30,000
Guarantee & Trust Co. TTEEFBO Philip Musicant............... 20,000
Fred T. and Elyce L. Perlstadt.............................. 20,000
Richard E. and Selena Lynn Pickering........................ 15,000
Gabriel Politzer............................................ 10,000
John G. Powers.............................................. 10,000
Renwick Alpha Fund.......................................... 100,000
Michael J. Reilly........................................... 40,000
Chris K. Richey............................................. 16,500
Mark Rosenblatt and Sarah M. Stern.......................... 50,000
Joseph and Sydell Roth...................................... 10,000
Andrea R. Ryan.............................................. 10,000
Robert Schiller............................................. 20,000
Geoffrey G. G. Sharp........................................ 10,000
Meyar Sheik................................................. 10,000
Jesse and Rochelle E. Shereff............................... 20,000
Howard Siegel............................................... 10,000
Simon Family Associates..................................... 10,000
Richard L. Smith............................................ 87,500
Bruce Todd Spector.......................................... 10,000
Robin Lee Steinfeld......................................... 10,000
Alan Stupell................................................ 20,000
Sarah Swiatycki............................................. 10,000
Charles and Roseann Terzano................................. 10,000
Burton H. and Elaine Traub.................................. 10,000
Laurence Usdin.............................................. 20,000
Voice Compression Associates................................ 121,000
Lauren S. Youner............................................ 4,000
Lester W. Youner and Sherry Youner.......................... 26,000
Ronald L. Zander............................................ 10,000
---------
3,300,000
=========
</TABLE>
II-5
<PAGE>
The Company relied on the exemption afforded from registration set forth in
Section 4(2) of the Act and Regulation D promulgated thereunder. No fees were
paid in connection with the foregoing sales of securities.
(d) In December 1995, the Company sold a total of 4,000,000 shares of Series
A Preferred Stock. The Company sold the shares of Series A Preferred Stock to
the following persons at a price of $1.00 per share.
<TABLE>
<CAPTION>
SHARES OF SERIES A
SHAREHOLDER PREFERRED STOCK
----------- ------------------
<S> <C>
Advent International Investors II Limited Partnership.... 5,000
Adtel Limited Partnership................................ 500,000
Advent Crown Fund C.V.................................... 800,000
Adwest Limited Partnership............................... 350,000
Advent Israel (Bermuda) Limited Partnership.............. 27,025
Advent Israel Limited Partnership........................ 222,975
Advent Partners Limited Partnership...................... 95,000
North Bridge Venture Partners, L.P....................... 2,000,000
---------
4,000,000
=========
</TABLE>
The Company relied on the exemption from registration set forth in Section
4(2) of the Act. No fees were paid in connection with the foregoing sales of
securities.
(e) In March 1996, the Company sold 1,000,000 shares of Series A Preferred
Stock to Intel Corporation and 1,000,000 shares of Series A Preferred Stock to
Netscape Communications Corporation. The Company relied on the exemption from
registration set forth in Section 4(2) of the Act. No fees were paid in
connection with the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<S> <C>
1. Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
4.1 Specimen Common Stock Certificate.*
4.2 Form of Warrant to Purchase Shares of Common Stock.
5. Opinion of Fulbright & Jaworski L.L.P.*
10.1 Voxware, Inc. 1994 Stock Option Plan.
10.2 Form of Voxware, Inc. Stock Option Agreement.
10.3 Form of Indemnification Agreement.
10.4 Series A Preferred Stock Purchase Agreement, dated December 19, 1995, as amended.
10.5 Employment Agreement dated January 3, 1994, with Michael Goldstein, as amended.
10.6 Employment Agreement dated February 1, 1995, with Kenneth H. Traub.
10.7 Employment Agreement dated August 15, 1995, with Kenneth Whittington.
10.8 Employment Agreement dated February 28, 1994, with J. Gerard Aguilar.
10.9 Employment Agreement dated August 15, 1994, with Steven J. Ott.
10.10 Technology Transfer Agreement Effective May 19, 1995, between Suat Yeldener Ph.D.
and Voxware, Inc.+
10.11 Software License Agreement, dated January 31, 1996, with Netscape Communications
Corporation.+
10.12 License Agreement, dated June 28, 1996 with America Online, Inc.+
10.13 License Agreement, dated September 26, 1995 with Microsoft Corporation.+
10.14 License Agreement, dated June 28, 1996 with USFI, Inc.+
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
10.15 License Agreement, dated March 29, 1996 with VDOnet Corporation Ltd.+
10.16 License Agreement, dated June 28, 1996 with Vienna Systems Corporation.+
Lease, dated April 10, 1996, between College Road Associates, Limited Partnership and
10.17 the Company.
10.18 Acquisition Agreement, dated January 30, 1996, with K & F Software.
10.19 Stockholders Agreement, dated December 19, 1995, as amended*.
11. Computation of Per Share Earnings.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5)*.
24. Power of Attorney (included on signature page).
27. Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ A request for confidential treatment will be made for portions of such
document.
(b) Financial Statement Schedules.
Not Applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PRINCETON
AND STATE OF NEW JERSEY ON THE 17TH DAY OF JULY 1996.
Voxware, Inc.
/s/ Michael Goldstein
By: _________________________________
Michael Goldstein
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints MICHAEL GOLDSTEIN and KENNETH H. TRAUB, or
either of them, his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement and to file the same with
all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent
and each of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or
any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
/s/ Michael Goldstein President and Chief July 17, 1996
- ------------------------------------- Executive Officer
MICHAEL GOLDSTEIN and Director
(principal
executive officer)
/s/ Kenneth H. Traub Executive Vice July 17, 1996
- ------------------------------------- President, Chief
KENNETH H. TRAUB Financial Officer,
Secretary and
Director (principal
financial officer)
/s/ J. Gerard Aguilar Director July 17, 1996
- -------------------------------------
J. GERARD AGUILAR
/s/ William J. Geary Director July 17, 1996
- -------------------------------------
WILLIAM J. GEARY
/s/ Jordan S. Davis Director July 17, 1996
- -------------------------------------
JORDAN S. DAVIS
/s/ Andrew I. Fillat Director July 17, 1996
- -------------------------------------
ANDREW I. FILLAT
/s/ David Roux Director July 17, 1996
- -------------------------------------
DAVID ROUX
/s/ Richard M. Schell Director July 17, 1996
- -------------------------------------
RICHARD M. SCHELL
/s/ Nicholas Narlis Controller Chief
Accounting Officer
and Treasurer
(principal accounting officer)
July 17, 1996
- -------------------------------------
NICHOLAS NARLIS
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBIT DESCRIPTION OF DOCUMENT NUMBER
NUMBER ----------------------- ------
<S> <C> <C>
1. Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
4.1 Specimen Common Stock Certificate.*
4.2 Form of Warrant to Purchase Shares of Common Stock.
5. Opinion of Fulbright & Jaworski L.L.P.*
10.1 Voxware, Inc. 1994 Stock Option Plan.
10.2 Form of Voxware, Inc. Stock Option Agreement.
10.3 Form of Indemnification Agreement.
10.4 Series A Preferred Stock Purchase Agreement, dated December 19, 1995, as amended.
10.5 Employment Agreement dated January 3, 1994, with Michael Goldstein, as amended.
10.6 Employment Agreement dated February 1, 1995, with Kenneth H. Traub.
10.7 Employment Agreement dated August 15, 1995, with Kenneth Whittington.
10.8 Employment Agreement dated February 28, 1994, with J. Gerard Aguilar.
10.9 Employment Agreement dated August 15, 1994, with Steven J. Ott.
10.10 Technology Transfer Agreement Effective May 19, 1995, between Suat Yeldener Ph.D.
and Voxware, Inc.+
10.11 Software License Agreement, dated January 31, 1996, with Netscape Communications
Corporation.+
10.12 License Agreement, dated June 28, 1996 with America Online, Inc.+
10.13 License Agreement, dated September 26, 1995 with Microsoft Corporation.+
10.14 License Agreement, dated June 28, 1996 with USFI, Inc.+
10.15 License Agreement, dated March 29, 1996 with VDOnet Corporation Ltd.+
10.16 License Agreement, dated June 28, 1996 with Vienna Systems Corporation.+
10.17 Lease, dated April 10, 1996, between College Road Associates, Limited Partnership and
the Company.
10.18 Acquisition Agreement, dated January 30, 1996, with K & F Software.
10.19 Stockholders Agreement, dated December 19, 1995, as amended*.
11. Computation of Per Share Earnings.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5)*.
24. Power of Attorney (included on signature page).
27. Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ A request for confidential treatment will be made for portions of such
document.
<PAGE>
Preliminary - Subject to amendment EXHIBIT 1
4,000,000 Shares
VOXWARE, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
___________, 1996
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
OPPENHEIMER & CO., INC.
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. Introductory. Voxware, Inc., a Delaware corporation (the
------------
"Company), proposes to issue and sell 4,000,000 shares of its authorized but
unissued Common Stock (the "Common Stock") to the several underwriters named in
Schedule A annexed hereto (the "Underwriters"), for whom you are acting as
Representatives. Said aggregate of 4,000,000 shares are herein called the "Firm
Common Shares." In addition, the persons named in Schedule B annexed hereto
(the "Selling Stockholders") propose to grant to the Underwriters an option to
purchase up to 600,000 additional shares of Common Stock (the "Optional Common
Shares"), as provided in Section 5 hereof. The Firm Common Shares and, to the
extent such option is exercised, the Optional Common Shares are hereinafter
collectively referred to as the "Common Shares."
You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is advisable.
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:
<PAGE>
SECTION 2. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-___) with respect
to the Common Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you two signed copies of such
registration statement and amendments, together with two copies of each exhibit
filed therewith. Conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested for each of
the Underwriters. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations
or (iii) a term sheet (the "Term Sheet") as described in and in accordance with
Rules 434 and 424(b) of the Rules and Regulations. As filed, the final
prospectus, if one is used, or the Term Sheet and Preliminary Prospectus, if a
final prospectus is not used, shall include all Rule 430A Information and,
except to the extent that you shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to the date and
time that this Agreement was executed and delivered by the parties hereto, or,
to the extent not completed at such date and time, shall contain only such
specific additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously advised you
in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any post-effective amendment thereto becomes effective prior
to the First Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended; provided, however, that such term shall
also include (i) all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A of the Rules and Regulations and (ii) any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations relating to
the Common Shares. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes effective that
omits Rule 430A Information. The term "Prospectus" as used in this Agreement
shall mean either (i) the prospectus relating to the Common Shares in the form
in which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, (ii) if a Term Sheet is not used and no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, shall mean the
form of final prospectus included in the Registration Statement at the time such
registration statement becomes effective or (iii) if a Term Sheet is used, the
Term Sheet in the form in which it is first filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations, together with the Preliminary
Prospectus included in the Registration Statement at the time it becomes
effective. The term "Rule 430A Information" means information with respect to
the Common Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A of the
Rules and Regulations.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed
in all material respects to the requirements
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of the Act and the Rules and Regulations and, as of its date, has not included
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to and
including each Closing Date hereinafter mentioned, the Registration Statement
and the Prospectus, and any amendments or supplements thereto, will contain all
material statements and information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, no representation or warranty
contained in this subsection 2(b) shall be applicable to information contained
in or omitted from any Preliminary Prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter, directly or through the Representatives, specifically for use
in the preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 22 to the Registration Statement. The Company and each of its
subsidiaries have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective jurisdictions
of incorporation, with full power and authority (corporate and other) to own and
lease their properties and conduct their respective businesses as described in
the Prospectus; the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances; the
Company and each of its subsidiaries are in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of their respective businesses, all of which
are valid and in full force and effect; the Company and each of its subsidiaries
are duly qualified to do business and in good standing as foreign corporations
in each jurisdiction in which the ownership or leasing of properties or the
conduct of their respective businesses requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company or the subsidiary; and no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as set
forth under the heading "Capitalization" in the Prospectus; the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities,
and conform to the description thereof contained in the Prospectus. All issued
and outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, neither the Company nor any subsidiary has outstanding any options
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the options
or other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
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(e) The Common Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in the manner set forth in this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or purchase
exist with respect to the issuance and sale of the Common Shares by the Company
pursuant to this Agreement. No stockholder of the Company has any right which
has not been waived to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the transfer and sale of
the Common Shares subject to the option proposed to be granted to the
Underwriters by the Selling Stockholders or the issuance and sale of the Common
Shares to be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company in accordance with its terms. The
making and performance of this Agreement by the Company and the consummation of
the transactions herein contemplated will not violate any provisions of the
certificate of incorporation or bylaws, or other organizational documents, of
the Company or any of its subsidiaries, and will not conflict with, result in
the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of its respective properties may be bound or
affected, any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its subsidiaries or any of
its respective properties. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, except for compliance with
the Act, the Blue Sky laws applicable to the public offering of the Common
Shares by the several Underwriters and the clearance of such offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(g) Arthur Andersen LLP, who have expressed their opinion with respect to
the financial statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus and in the Registration Statement, are
independent accountants as required by the Act and the Rules and Regulations.
(h) The financial statements of the Company, and the related notes
thereto, included in the Registration Statement and the Prospectus present
fairly the financial position of the Company as of the respective dates of such
financial statements, and the results of operations and changes in financial
position of the Company for the respective periods covered thereby. Such
statements and related notes have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis as certified by the
independent accountants named in subsection 2(g). No other financial statements
or schedules are required to be included in the Registration Statement. The
selected financial data set forth in the Prospectus under the captions
"Capitalization" and "Selected Financial Data" fairly present the information
set forth therein on the basis stated in the Registration Statement.
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<PAGE>
(i) Except as disclosed in the Prospectus, and except as to defaults which
individually or in the aggregate would not be material to the Company, neither
the Company nor any of its subsidiaries is in violation or default of any
provision of its certificate of incorporation or bylaws, or other organizational
documents, or is in breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which constitutes an event of default on the part of the Company or any
such subsidiary as defined in such documents or which, with notice or lapse of
time or both, would constitute such an event of default.
(j) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations which have not been
described or filed as required. The contracts so described in the Prospectus
are accurate and complete; all such contracts are in full force and effect on
the date hereof; and neither the Company nor any of its subsidiaries, nor to the
best of the Company's knowledge, any other party is in breach of or default
under any of such contracts.
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or may be a party or of which property owned or leased by the Company or any
of its subsidiaries is or may be the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings might, individually
or in the aggregate, prevent or adversely affect the transactions contemplated
by this Agreement or result in a material adverse change in the condition
(financial or otherwise), properties, business, results of operations or
prospects of the Company and its subsidiaries; and no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent which
might be expected to affect adversely such condition, properties, business,
results of operations or prospects. Neither the Company nor any of its
subsidiaries is a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body.
(l) The Company or the applicable subsidiary has good and marketable title
to all the properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such financial statements (or elsewhere in the Prospectus), or (ii)
those which are not material in amount and do not adversely affect the use made
and proposed to be made of such property by the Company and its subsidiaries.
The Company or the applicable subsidiary holds its leased properties under valid
and binding leases, with such exceptions as are not materially significant in
relation to the business of the Company. Except as disclosed in the Prospectus,
the Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future earnings of the
Company and its subsidiaries; (ii) the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other
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distributions with respect to its capital stock and the Company and its
subsidiaries are not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock (other than upon the sale of the Common Shares hereunder and upon the
exercise of options and warrants described in the Registration Statement) or
indebtedness material to the Company and its subsidiaries (other than in the
ordinary course of business); and (v) there has not been any material adverse
change in the condition (financial or otherwise), business, properties, results
of operations or prospects of the Company and its subsidiaries.
(n) Except as disclosed in or specifically contemplated by the Prospectus,
the Company and its subsidiaries have sufficient trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as now conducted; the expiration of
any trademarks, trade names, patent rights, mask works, copyrights, licenses,
approvals or governmental authorizations would not have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Company or its subsidiaries; and the Company has
no knowledge of any material infringement by it or its subsidiaries of
trademark, trade name rights, patent rights, mask works, copyrights, licenses,
trade secret or other similar rights of others, and there is no claim being made
against the Company or its subsidiaries regarding trademark, trade name, patent,
mask work, copyright, license, trade secret or other infringement which could
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries.
(o) The Company has not been advised, and has no reason to believe, that
either it or any of its subsidiaries is not conducting business in compliance
with all applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including, without limitation, all applicable local,
state and federal environmental laws and regulations; except where failure to be
so in compliance would not materially adversely affect the condition (financial
or otherwise), business, results of operations or prospects of the Company and
its subsidiaries.
(p) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes shown
as due thereon; and the Company has no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Company or its subsidiaries
which could materially and adversely affect the business, operations or
properties of the Company and its subsidiaries.
(q) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior to the
First Closing Date any offering material in connection with the offering and
sale of the Common Shares other than the Prospectus, the Registration Statement
and the other materials permitted by the Act.
(s) Each of the Company and its subsidiaries maintains insurance of the
types and in the amounts generally deemed adequate for its business, including,
but not limited to, insurance covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
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<PAGE>
(t) Neither the Company nor any of its subsidiaries has at any time during
the last five years (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or indirectly,
any action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Common Shares.
SECTION 3. Representations, Warranties and Covenants of the Selling
--------------------------------------------------------
Stockholders.
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(a) Each of the Selling Stockholders represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder has, and on the Second Closing Date
hereinafter mentioned will have, good and marketable title to the Common
Shares subject to the option granted to the Underwriters by such Selling
Stockholder hereunder and full right, power and authority to enter into
this Agreement and to sell, assign, transfer and deliver such Common Shares
hereunder, free and clear of all voting trust arrangements, liens,
encumbrances, equities, security interests, restrictions and claims
whatsoever; and upon delivery of and payment for such Common Shares
hereunder, the Underwriters will acquire good and marketable title thereto,
free and clear of all liens, encumbrances, equities, claims, restrictions,
security interests, voting trusts or other defects of title whatsoever.
(ii) Such Selling Stockholder has executed and delivered a Power of
Attorney and caused to be executed and delivered on his behalf a Custody
Agreement (hereinafter collectively referred to as the "Stockholders
Agreement") and in connection herewith such Selling Stockholder further
represents, warrants and agrees that such Selling Stockholder has deposited
in custody, under the Stockholders Agreement, with the agent named therein
(the "Agent") as custodian, certificates in negotiable form for the Common
Shares subject to the option granted to the Underwriters hereunder by such
Selling Stockholder, for the purpose of further delivery pursuant to this
Agreement. Such Selling Stockholder agrees that the Common Shares subject
to the option granted to the Underwriters by such Selling Stockholder on
deposit with the Agent are subject to the interests of the Company and the
Underwriters, that the arrangements made for such custody are to that
extent irrevocable, and that the obligations of such Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement or
in the Stockholders Agreement, by any act of such Selling Stockholder, by
operation of law, by the death or incapacity of such Selling Stockholder or
by the occurrence of any other event. If the Selling Stockholder should die
or become incapacitated, or if any other event should occur, before the
delivery of the Common Shares hereunder, the documents evidencing Common
Shares then on deposit with the Agent shall be delivered by the Agent in
accordance with the terms and conditions of this Agreement as if such
death, incapacity or other event had not occurred, regardless of whether or
not the Agent shall have received notice thereof. This Agreement and the
Stockholders Agreement have been duly executed and delivered by or on
behalf of such Selling Stockholder and the form of such Stockholders
Agreement has been delivered to you.
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<PAGE>
(iii) The performance of this Agreement and the Stockholders
Agreement and the consummation of the transactions contemplated hereby and
by the Stockholders Agreement will not result in a breach or violation by
such Selling Stockholder of any of the terms or provisions of, or
constitute a default by such Selling Stockholder under, any indenture,
mortgage, deed of trust, trust (constructive or other), loan agreement,
lease, franchise, license or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder or any
of its properties is bound, any statute, or any judgment, decree, order,
rule or regulation of any court or governmental agency or body applicable
to such Selling Stockholder or any of its properties.
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Common Shares.
(v) Each Preliminary Prospectus and the Prospectus, insofar as it
has related to such Selling Stockholder has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and
has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made; and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as it relates to such Selling Stockholder, will include
any 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.
(vi) Such Selling Stockholder is not aware that any of the
representations or warranties set forth in Section 2 above is untrue or
inaccurate in any material respect.
(b) Each of the Selling Stockholders agrees with the Company and the
Underwriters not to offer to sell, sell or contract to sell or otherwise dispose
of any shares of Common Stock or securities convertible into or exercisable or
exchangeable for any shares of Common Stock, for a period of 180 days after the
first date that any of the Common Shares are released by you for sale to the
public, without the prior written consent of Montgomery Securities, which
consent may be withheld at the sole discretion of Montgomery Securities.
SECTION 4. Representations and Warranties of the Underwriters. The
--------------------------------------------------
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company and to the Selling Stockholders that the information set forth (i)
on the cover page of the Prospectus with respect to price, underwriting
discounts and commissions and terms of offering and (ii) under "Underwriting" in
the Prospectus was furnished to the Company by and on behalf of the Underwriters
for use in connection with the preparation of the Registration Statement and the
Prospectus and is correct in all material respects. The Representatives
represent and warrant that they have been authorized by each of the other
Underwriters as the Representatives to enter into this Agreement on its behalf
and to act for it in the manner herein provided.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On the basis of
--------------------------------------------
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein
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set forth, (i) the Company agrees to issue and sell to the Underwriters
4,500,000 of the Firm Common Shares. The Underwriters agree, severally and not
jointly, to purchase from the Company the number of Firm Common Shares set forth
opposite the name of each Underwriter in Schedule A hereto. The purchase price
per share to be paid by the several Underwriters to the Company shall be $___
per share.
Delivery of certificates for the Firm Common Shares to be purchased by the
Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or, if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) under the Securities Exchange Act of 1934, after
4:30 P.M. Washington D.C. time, the fourth) full business day following the
first date that any of the Common Shares are released by you for sale to the
public, as you shall designate by at least 48 hours prior notice to the Company
(or at such other time and date, not later than one week after such third or
fourth, as the case may be, full business day as may be agreed upon by the
Company and the Representatives) (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third or fourth, as the case may be, full business day following the first
date that any of the Common Shares are released by you for sale to the public or
the date that is 48 hours after the date that the Prospectus has been so
recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or on
behalf of the Company to you, for the respective accounts of the Underwriters
against payment by you, for the accounts of the several Underwriters, of the
purchase price therefor by a wire transfer of immediately available funds to an
account designated by the Company. The certificates for the Firm Common Shares
shall be registered in such names and denominations as you shall have requested
at least two full business days prior to the First Closing Date, and shall be
made available for checking and packaging on the business day preceding the
First Closing Date at a location in New York, New York, as may be designated by
you. Time shall be of the essence, and delivery at the time and place specified
in this Agreement is a further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Selling Stockholders hereby grant an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 675,000 Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you for the
accounts of the Underwriters in the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time (but not more
than once) within 30 days after the first date that any of the Common Shares are
released by you for sale to the public, upon notice by you to the Selling
Stockholders setting forth the aggregate number of Optional Common Shares as to
which the Underwriters are exercising the option, the names and denominations in
which the certificates for such shares are to be registered and the time and
place at which such certificates will be delivered. Such time of delivery
(which may not be earlier than the First Closing Date), being herein referred to
as the "Second Closing Date," shall be determined by you, but if at any time
other than the First Closing Date shall not be earlier than three nor later than
five full business days after delivery of such notice of exercise. The number
of Optional Common Shares to be purchased by each Underwriter shall be
determined by multiplying the number of Optional Common Shares to be sold by the
Selling Stockholders pursuant to such notice of exercise by a fraction, the
numerator of which is the number of Firm Common Shares to be purchased by such
Underwriter as set forth opposite its name in Schedule A and the denominator of
which is the maximum number of Firm Common Shares to be purchased by the
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Underwriters hereunder (subject to such adjustments to eliminate any fractional
share purchases as you in your discretion may make). Certificates for the
Optional Common Shares will be made available for checking and packaging on the
business day preceding the Second Closing Date at a location in New York, New
York, as may be designated by you. The manner of payment for and delivery of
the Optional Common Shares shall be the same as for the Firm Common Shares
purchased from the Company as specified in the two preceding paragraphs. At any
time before lapse of the option, you may cancel such option by giving written
notice of such cancellation to the Selling Stockholders. If the option is
canceled or expires unexercised in whole or in part, the Company will deregister
under the Act the number of Optional Common Shares as to which the option has
not been exercised.
You have advised the Company and the Selling Stockholders that each Underwriter
has authorized you to accept delivery of its Common Shares, to make payment and
to receipt therefor. You, individually and not as the Representatives of the
Underwriters, may (but shall not be obligated to) make payment for any Common
Shares to be purchased by any Underwriter whose funds shall not have been
received by you by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose to make a
public offering of their respective portions of the Common Shares as soon after
the effective date of the Registration Statement as in the judgment of the
Representatives is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the final prospectus, if one is
used, or on the first page of the Term Sheet, if one is used.
SECTION 6. Covenants of the Company. The Company covenants and agrees
------------------------
that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or after
it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such
stop order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will not
file any amendment or supplement to the Registration Statement (either before or
after it becomes effective), any Preliminary Prospectus or the Prospectus of
which you have not been furnished with a copy a reasonable time prior to such
filing or to which you reasonably object or which is not in compliance with the
Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or the
Prospectus which in your judgment may
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<PAGE>
be necessary or advisable to enable the several Underwriters to continue the
distribution of the Common Shares and will use its best efforts to cause the
same to become effective as promptly as possible. The Company will fully and
completely comply with the provisions of Rule 430A of the Rules and Regulations
with respect to information omitted from the Registration Statement in reliance
upon such Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would include 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, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
(d) As soon as practicable, but not later than 45 days after the end of
the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the Registration
Statement which will satisfy the provisions of the last paragraph of Section
11(a) of the Act.
(e) During such period as a prospectus is required by law to be delivered
in connection with sales by an Underwriter or dealer, the Company, at its
expense, but only for the nine-month period referred to in Section 10(a)(3) of
the Act, will furnish to you and the Selling Stockholders or mail to your order
copies of the Registration Statement, the Prospectus, the Preliminary Prospectus
and all amendments and supplements to any such documents in each case as soon as
available and in such quantities as you and the Selling Stockholders may
request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.
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<PAGE>
(g) During the period of five years hereafter, the Company will furnish to
the Representatives and, upon request of the Representatives, to each of the
other Underwriters: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.
(h) During the period of 180 days after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of Montgomery Securities, which consent may be withheld at the
sole discretion of Montgomery Securities, the Company will not other than
pursuant to outstanding stock options and warrants disclosed in the Prospectus
issue, offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable with its Common Stock or other equity security.
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the Company's
Common Stock in California), will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.
(k) The Company will use its best efforts to designate the Common Stock
for quotation as a National Market System security on the NASD Automated
Quotation System.
You, on behalf of the Underwriters, may, in your sole discretion, waive in
writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and, unless otherwise paid by the Company, the Selling
Stockholders agree to pay in such proportions as they may agree upon among
themselves all costs, fees and expenses incurred in connection with the
performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limiting the generality of
the foregoing, (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company's counsel and the Company's independent accountants, (v) all costs
and expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial statements)
and all amendments and supplements provided for herein, this Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum,
(vi) all filing fees, attorneys' fees and expenses incurred by the Company
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or the Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the Blue Sky laws, (vii) the filing fee
of the National Association of Securities Dealers, Inc., (viii) all expenses
(including attorneys' fees) incurred by the Underwriters in connection with the
preparation, negotiation, execution and delivery of this Agreement and (ix) all
other fees, costs and expenses referred to in Item 13 of the Registration
Statement. The Underwriters may deem the Company to be the primary obligor with
respect to all costs, fees and expenses to be paid by the Company and by the
Selling Stockholders. Except as provided in this Section 7, Section 9 and
Section 11 hereof, the Underwriters shall pay all of their own expenses,
including the fees and disbursements of their counsel (excluding those relating
to this Agreement, qualification, registration or exemption under the Blue Sky
laws and the Blue Sky memorandum referred to above). This Section 7 shall not
affect any agreements relating to the payment of expenses between the Company
and the Selling Stockholders.
The Selling Stockholders will pay (directly or by reimbursement) all fees
and expenses incident to the performance of their obligations under this
Agreement which are not otherwise specifically provided for herein, including
but not limited to (i) any fees and expenses of counsel for such Selling
Stockholders; (ii) any fees and expenses of the Agent; and (iii) all expenses
and taxes incident to the sale and delivery of the Common Shares subject to the
option proposed to be granted by such Selling Stockholders to the Underwriters
hereunder.
SECTION 8. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein set
forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholders made pursuant to the provisions hereof, to
the performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 P.M. (or, in the case of a registration statement filed pursuant to Rule
462(b) of the Rules and Regulations relating to the Common Shares, not later
than 10 P.M.), Washington, D.C. Time, on the date of this Agreement, or at such
later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company, the Selling Stockholders or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock other than pursuant to the
exercise of outstanding options and warrants disclosed in the Prospectus of the
Company or any of its subsidiaries or any material change in the indebtedness
(other than in the ordinary course of business) of the Company or any of its
subsidiaries, (ii) except as set forth or contemplated by the Registration
Statement or the Prospectus, no material verbal or written agreement or other
transaction
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shall have been entered into by the Company or any of its subsidiaries, which is
not in the ordinary course of business or which could result in a material
reduction in the future earnings of the Company and its subsidiaries, (iii) no
loss or damage (whether or not insured) to the property of the Company or any of
its subsidiaries shall have been sustained which materially and adversely
affects the condition (financial or otherwise), business, results of operations
or prospects of the Company and its subsidiaries, (iv) no legal or governmental
action, suit or proceeding affecting the Company or any of its subsidiaries
which is material to the Company and its subsidiaries or which affects or may
affect the transactions contemplated by this Agreement shall have been
instituted or threatened, and (v) there shall not have been any material change
in the condition (financial or otherwise), business, management, results of
operations or prospects of the Company and its subsidiaries which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance satisfactory to you,
except as otherwise expressly provided below:
(i) An opinion of Fulbright & Jaworski L.L.P., counsel for the
Company and the Selling Stockholders, addressed to the Underwriters and
dated the First Closing Date, or the Second Closing Date (in the latter
case with respect to the Selling Stockholders only), as the case may be, to
the effect that:
(1) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, is duly qualified
to do business as a foreign corporation and is in good standing in all
other jurisdictions where the ownership or leasing of properties or
the conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company and its subsidiaries, and has
full corporate power and authority to own its properties and conduct
its business as described in the Registration Statement;
(2) The authorized, issued and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the
Prospectus; all necessary and proper corporate proceedings have been
taken in order to authorize validly such authorized Common Stock; all
outstanding shares of Common Stock (including the Firm Common Shares
and any Optional Common Shares) have been duly and validly issued, are
fully paid and nonassessable, have been issued in compliance with
federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or
purchase any securities and conform to the description thereof
contained in the Prospectus; without limiting the foregoing, there are
no preemptive or other rights to subscribe for or purchase any of the
Common Shares to be sold by the Company hereunder;
(3) All of the issued and outstanding shares of the Company's
subsidiaries have been duly and validly authorized and issued, are
fully paid and nonassessable and are owned beneficially by the Company
free and clear of all liens, encumbrances, equities, claims, security
interests, voting trusts or other defects of title whatsoever;
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<PAGE>
(4) The certificates evidencing the Common Shares to be
delivered hereunder are in due and proper form under Delaware law, and
when duly countersigned by the Company's transfer agent and registrar,
and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of this
Agreement, the Common Shares represented thereby will be duly
authorized and validly issued, fully paid and nonassessable, will not
have been issued in violation of or subject to any preemptive rights
or other rights to subscribe for or purchase securities and will
conform in all respects to the description thereof contained in the
Prospectus;
(5) Except as disclosed in or specifically contemplated by the
Prospectus, to the best of such counsel's knowledge, there are no
outstanding options, warrants or other rights calling for the issuance
of, and no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company;
(6) (a) The Registration Statement has become effective under
the Act, and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated by the Commission; any required filing of the Prospectus
and any supplement thereto pursuant to Rule 424(b) of the Rules and
Regulations has been made in the manner and within the time period
required by such Rule 424(b);
(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial
statements and schedules included therein as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Rules
and Regulations;
(c) To the best of such counsel's knowledge, there are no
franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration
Statement which are not disclosed or filed, as required; and
(d) To the best of such counsel's knowledge, there are no
legal or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be described
in the Prospectus which are not described as required.
(7) The Company has full right, power and authority to enter
into this Agreement and to sell and deliver the Common Shares to be
sold by it to the several Underwriters; this Agreement has been duly
and validly authorized by all necessary corporate action by the
Company, has been duly and validly executed and delivered by and on
behalf of the Company, and is a valid and binding agreement of the
Company in accordance with its terms, except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and except as to those provisions relating to indemnity or
contribution for liabilities arising
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<PAGE>
under the Act as to which no opinion need be expressed; and no
approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required for the
execution and delivery of this Agreement by the Company or the
consummation of the transactions contemplated by this Agreement,
except such as have been obtained and are in full force and effect
under the Act and such as may be required under applicable Blue Sky
laws in connection with the purchase and distribution of the Common
Shares by the Underwriters and the clearance of such offering with the
NASD;
(8) The execution and performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with, result in the breach of, or constitute, either by itself or upon
notice or the passage of time or both, a default under, any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of its or their property may be bound or affected
which is material to the Company and its subsidiaries, or violate any
of the provisions of the certificate of incorporation or bylaws, or
other organizational documents, of the Company or any of its
subsidiaries or, so far as is known to such counsel, violate any
statute, judgment, decree, order, rule or regulation of any court or
governmental body having jurisdiction over the Company or any of its
subsidiaries or any of its or their property;
(9) Neither the Company nor any subsidiary is in violation of
its certificate of incorporation or bylaws, or other organizational
documents, or to the best of such counsel's knowledge, in breach of or
default with respect to any provision of any agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other
instrument known to such counsel to which the Company or any such
subsidiary is a party or by which it or any of its properties may be
bound or affected, except where such default would not materially
adversely affect the Company and its subsidiaries; and, to the best of
such counsel's knowledge, the Company and its subsidiaries are in
compliance with all laws, rules, regulations, judgments, decrees,
orders and statutes of any court or jurisdiction to which they are
subject, except where noncompliance would not materially adversely
affect the Company and its subsidiaries;
(10) To the best of such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived to
the registration of shares of Common Stock or other securities,
because of the filing of the Registration Statement by the Company or
the offering contemplated hereby;
(11) To the best of such counsel's knowledge, this Agreement and
the Stockholders Agreement have been duly authorized, executed and
delivered by or on behalf of each of the Selling Stockholders; the
Agent has been duly and validly authorized to act as the custodian of
the Common Shares subject to the option proposed to be granted to the
Underwriters by each such Selling Stockholder; and the performance of
this Agreement and the Stockholders Agreement and the consummation of
the transactions herein contemplated by the Selling Stockholders will
not result in a breach of, or constitute a default under, any
indenture, mortgage, deed of trust, trust (constructive or other),
loan
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<PAGE>
agreement, lease, franchise, license or other agreement or instrument
to which any of the Selling Stockholders is a party or by which any of
the Selling Stockholders or any of their properties may be bound, or
violate any statute, judgment, decree, order, rule or regulation known
to such counsel of any court or governmental body having jurisdiction
over any of the Selling Stockholders or any of their properties; and
to the best of such counsel's knowledge, no approval, authorization,
order or consent of any court, regulatory body, administrative agency
or other governmental body is required for the execution and delivery
of this Agreement or the Stockholders Agreement or the consummation by
the Selling Stockholders of the transactions contemplated by this
Agreement, except such as have been obtained and are in full force and
effect under the Act and such as may be required under the rules of
the NASD and applicable Blue Sky laws;
(12) To the best of such counsel's knowledge, the Selling
Stockholders have full right, power and authority to enter into this
Agreement and the Stockholders Agreement and to sell, transfer and
deliver the Common Shares to be sold on such Closing Date by such
Selling Stockholders hereunder and good and marketable title to such
Common Shares so sold, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting trusts, or
other defects of title whatsoever, has been transferred to the
Underwriters (whom counsel may assume to be bona fide purchasers) who
have purchased such Common Shares hereunder; and
(13) To the best of such counsel's knowledge, this Agreement and
the Stockholders Agreement are valid and binding agreements of each of
the Selling Stockholders in accordance with their terms except as
enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except with respect to those
provisions relating to indemnities or contributions for liabilities
under the Act, as to which no opinion need be expressed.
(14) No transfer taxes are required to be paid in connection with
the sale and delivery of the Common Shares to the Underwriters
hereunder.
In rendering such opinion, such counsel may rely as to the matters set forth in
paragraphs (12), (13) and (14), on opinions of other counsel retained by the
Selling Stockholders, as to matters of local law, on opinions of local counsel,
and as to matters of fact, on certificates of the Selling Stockholders and of
officers of the Company and of governmental officials, in which case their
opinion is to state that they are so doing and that the Underwriters are
justified in relying on such opinions or certificates and copies of said
opinions or certificates are to be attached to the opinion. Such counsel shall
also include a statement to the effect that nothing has come to such counsel's
attention that would lead such counsel to believe that either at the effective
date of the Registration Statement or at the applicable Closing Date the
Registration Statement or the Prospectus, or any such amendment or supplement,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading;
(ii) Such opinion or opinions of Ropes & Gray, counsel for the
Underwriters dated the First Closing Date or the Second Closing Date, as
the case may be, with respect to the incorporation of the Company, the
sufficiency of all corporate proceedings and other legal matters
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<PAGE>
relating to this Agreement, the validity of the Common Shares, the Registration
Statement and the Prospectus and other related matters as you may reasonably
require, and the Company and the Selling Stockholders shall have furnished to
such counsel such documents and shall have exhibited to them such papers and
records as they may reasonably request for the purpose of enabling them to pass
upon such matters. In connection with such opinions, such counsel may rely on
representations or certificates of officers of the Company and governmental
officials.
(iii) An opinion of Pennie & Edmonds, counsel for the Company,
addressed to the Underwriters and dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) To the best of such counsel's knowledge, neither the
Registration Statement or the Prospectus contains any untrue statement
of a material fact with respect to the trademark, trade name, patent,
mask work, copyright, license, trade secret and other intellectual
property rights (collectively, the "Intellectual Property") owned or
used by the Company or omits to state any material fact relating to
Intellectual Property owned or used by the Company that is required to
be stated in the Registration Statement or the Prospectus or that is
necessary to make the statements therein not misleading;
(2) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending relating to Intellectual
Property other than prosecution by the Company of its patent
applications before the United States Patent Office and appropriate
foreign government agencies, and to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others;
(3) The Company has duly and properly filed patent
applications and patent cooperation treaty applications, listed or
otherwise referred to in the Prospectus under the caption "Business -
Patents and Proprietary Information";
(4) Such counsel do not know of any contracts or other
documents relating to the Company's Intellectual Property of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or
the Prospectus that are not filed or described as required;
(5) To the best of such counsel's knowledge, the Company is
not infringing or otherwise violating any trademarks, trade names,
patents, mask works, copyrights, licenses, trade secrets or other
intellectual property rights of others and, to the best of such
counsel's knowledge, there are no infringements by others of any of
the Company's Intellectual Property which in the judgement of such
counsel would have a material adverse effect; and
(6) To the best of such counsel's knowledge, the Company owns
or possesses sufficient licenses or other rights to use all
Intellectual Property necessary to conduct the business now being or
proposed to be conducted by the Company as described in the
Prospectus.
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<PAGE>
In rendering such opinion, such counsel may, to the extent stated therein, rely
as to matters of fact on certificates of officers of the Company, copies of
which shall be attached to the opinion. In rendering such opinion, such counsel
need not have conducted any independent investigation or conducted searches to
locate any third party patents, mask works, copyrights or other intellectual
property rights that might impact the Company's activities.
(iv) A certificate of the Company executed by the Chairman of the
Board or President and the chief financial or accounting officer of the
Company, dated the First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) The representations and warranties of the Company set forth
in Section 2 of this Agreement are true and correct as of the date of
this Agreement and as of the First Closing Date or the Second Closing
Date, as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best of the
knowledge of the respective signers, no proceedings for that purpose
have been instituted or are pending or contemplated under the Act;
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus; in
his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements thereto
contain all statements required to be stated therein regarding the
Company and its subsidiaries; and neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto includes
any 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;
(4) Since the initial date on which the Registration Statement
was filed, no agreement, written or oral, transaction or event has
occurred which should have been set forth in an amendment to the
Registration Statement or in a supplement to or amendment of any
prospectus which has not been disclosed in such a supplement or
amendment;
(5) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, there has not been any
material adverse change or a development involving a material adverse
change in the condition (financial or otherwise), business,
properties, results of operations, management or prospects of the
Company and its subsidiaries; and no legal or governmental action,
suit or proceeding is pending or threatened against the Company or any
of its subsidiaries which is material to the Company and its
subsidiaries, whether or not arising from transactions in the ordinary
course of business, or which may adversely affect the transactions
contemplated by this Agreement; since such dates and except as so
disclosed, neither the Company nor any of its subsidiaries has entered
into any
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<PAGE>
verbal or written agreement or other transaction which is not in
the ordinary course of business or which could result in a
material reduction in the future earnings of the Company or
incurred any material liability or obligation, direct, contingent
or indirect, made any change in its capital stock, made any
material change in its short-term debt or funded debt or
repurchased or otherwise acquired any of the Company's capital
stock; and the Company has not declared or paid any dividend, or
made any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the First
Closing Date or Second Closing Date; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, the Company
and its subsidiaries have not sustained a material loss or damage
by strike, fire, flood, windstorm, accident or other calamity
(whether or not insured).
(v) On the Second Closing Date a certificate, dated such Closing Date
and addressed to you, signed by or on behalf of each of the Selling
Stockholders to the effect that the representations and warranties of such
Selling Stockholder in this Agreement are true and correct, as if made at
and as of the Second Closing Date, and such Selling Stockholder has
complied with all the agreements and satisfied all the conditions on his
part to be performed or satisfied prior to the Second Closing Date.
(vi) On the date before this Agreement is executed and also on the First
Closing Date and the Second Closing Date a letter addressed to you, as
Representatives of the Underwriters, from Arthur Andersen LLP, independent
accountants, the first one to be dated the day before the date of this
Agreement, the second one to be dated the First Closing Date and the third
one (in the event of a Second Closing) to be dated the Second Closing Date,
in form and substance satisfactory to you.
(vii) On or before the First Closing Date, letters from each of the
Selling Stockholders, each holder of 5 percent or more of the Company's
Common Stock and each director and officer of the Company, in form and
substance satisfactory to you, confirming that for a period of 180 days
after the first date that any of the Common Shares are released by you for
sale to the public, such person will not directly or indirectly sell or
offer to sell or otherwise dispose of any shares of Common Stock or any
right to acquire such shares without the prior written consent of either
Montgomery Securities or each of the Representatives, which consent may be
withheld at the sole discretion of Montgomery Securities or each of the
Representatives, as the case may be.
All such opinions, certificates, letters and documents shall be in compliance
with the provisions hereof only if they are satisfactory to you and to Ropes &
Gray, counsel for the Underwriters. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request. Any certificate signed by any officer of the Company
and delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification by you as Representatives to the
Company and the Selling Stockholders without liability on the part of any
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<PAGE>
Underwriter, the Company or the Selling Stockholders except for the expenses to
be paid or reimbursed by the Company and by the Selling Stockholders pursuant to
Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding any
---------------------------------------
other provisions hereof, if this Agreement shall be terminated by you pursuant
to Section 8, or if the sale to the Underwriters of the Common Shares at the
First Closing is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse you and the other Underwriters
upon demand for all out-of-pocket expenses that shall have been reasonably
incurred by you and them in connection with the proposed purchase and the sale
of the Common Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, telegraph charges and
telephone charges relating directly to the offering contemplated by the
Prospectus. Any such termination shall be without liability of any party to any
other party except that the provisions of this Section, Section 7 and Section 11
shall at all times be effective and shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the Company and
---------------------------------------
the Selling Stockholders will use your, its and their best efforts to cause the
Registration Statement to become effective, to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification. (a) The Company and each of the Selling
---------------
Stockholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act against any losses, claims, damages, liabilities or expenses,
joint or several, to which such Underwriter or such controlling person may
become subject, under the Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company or the Selling Stockholders contained herein or any
failure of the Company or the Selling Stockholders to perform their respective
obligations hereunder or under law; and will reimburse each Underwriter and each
such controlling person for any legal and other expenses as such expenses are
reasonably incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that neither
the Company nor the Selling Stockholders will be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with the information furnished to the Company pursuant to Section 4
hereof. The Company and the Selling Stockholders may agree, as among themselves
and without limiting the rights of the Underwriters under this Agreement, as to
the respective amounts of such liability for which they each shall be
responsible. In addition to their other obligations under this Section 11(a),
the Company and the Selling
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<PAGE>
Stockholders agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, or any
inaccuracy in the representations and warranties of the Company or the Selling
Stockholders herein or failure to perform their obligations hereunder, all as
described in this Section 11(a), they will reimburse each Underwriter on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or the Selling Stockholders' obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any
such interim reimbursement payments which are not made to an Underwriter within
30 days of a request for reimbursement, shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement will be in addition to
any liability which the Company or the Selling Stockholders may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, the Selling Stockholders and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act, against any
losses, claims, damages, liabilities or expenses to which the Company, or any
such director, officer, Selling Stockholder or controlling person may become
subject, under the Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and will reimburse the
Company, or any such director, officer, Selling Stockholder or controlling
person for any legal and other expense reasonably incurred by the Company, or
any such director, officer, Selling Stockholder or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. In addition to its
other obligations under this Section 11(b), each Underwriter severally agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 11(b) which relates to information furnished to the Company pursuant to
Section 4 hereof, it will reimburse the Company (and, to the extent applicable,
each officer, director, controlling person or Selling Stockholder) on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or Selling Stockholder)
for such expenses and the possibility that such
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<PAGE>
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Stockholder) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Stockholder) within 30 days of
a request for reimbursement, shall bear interest at the Prime Rate from the date
of such request. This indemnity agreement will be in addition to any liability
which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a),
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Common Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the
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<PAGE>
Company, the Selling Stockholders and the Underwriters in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The respective relative
benefits received by the Company, the Selling Stockholders and the Underwriters
shall be deemed to be in the same proportion, in the case of the Company and the
Selling Stockholders as the total price paid to the Company and to the Selling
Stockholders, respectively, for the Common Shares sold by them to the
Underwriters (net of underwriting commissions but before deducting expenses)
bears to the total price to the public set forth on the cover of the Prospectus,
and in the case of the Underwriters as the underwriting commissions received by
them bears to the total price to the public set forth on the cover of the
Prospectus. The relative fault of the Company, the Selling Stockholders and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact or the inaccurate or the alleged
inaccurate representation and/or warranty relates to information supplied by the
Company, the Selling Stockholders or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in subparagraph (c)
of this Section 11, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The provisions set forth in subparagraph (c) of this Section 11 with respect to
notice of commencement of any action shall apply if a claim for contribution is
to be made under this subparagraph (d); provided, however, that no additional
notice shall be required with respect to any action for which notice has been
given under subparagraph (c) for purposes of indemnification. The Company, the
Selling Stockholders and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined solely by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this subsection. Notwithstanding
the provisions of this Section 11, no Underwriter shall be required to
contribute any amount in excess of the amount of the total underwriting
commissions received by such Underwriter in connection with the Common Shares
underwritten by it and distributed to the public. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 11 are several in proportion to their respective
underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Sections 11(a) and 11(b) hereof,
including the amounts of any requested reimbursement payments and the method of
determining such amounts, shall be settled by arbitration conducted under the
provisions of the Constitution and Rules of the Board of Governors of the New
York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of
the NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to said demand or notice is authorized to do so. Such an
arbitration would be limited to the operation of the interim reimbursement
provisions contained in Sections 11(a) and 11(b) hereof and would not resolve
the ultimate propriety or enforceability of the obligation to reimburse expenses
which is created by the provisions of such Sections 11(a) and 11(b) hereof.
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<PAGE>
SECTION 12. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company and the Selling Stockholders to sell
and deliver the Common Shares hereunder, and of each Underwriter to purchase the
Common Shares in the manner as described herein, that, except as hereinafter in
this paragraph provided, each of the Underwriters shall purchase and pay for all
the Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representatives of all such shares in accordance with the terms
hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First or Second Closing Date and
the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date does not exceed
10% of the total number of Common Shares which the Underwriters are obligated to
purchase on such Closing Date, the non-defaulting Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Common Shares which such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company or the Selling Stockholders except for the expenses to be paid by the
Company and the Selling Stockholders pursuant to Section 7 hereof and except to
the extent provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 7, 9, 11, 14 and 15 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 13, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering,
or (ii) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 14. Termination. Without limiting the right to terminate this
-----------
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you and
the Selling Stockholders or by you by notice to the Company and the Selling
Stockholders at any time prior to the time
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<PAGE>
this Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company or the Selling
Stockholders to any Underwriter (except for the expenses to be paid or
reimbursed by the Company and the Selling Stockholders pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company or the Selling Stockholders (except to the extent
provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
Exchange or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Representatives, to affect
adversely the marketability of the Common Shares, (iii) if any adverse event
shall have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the Registration
Statement or Prospectus or which is not reflected in the Registration Statement
or Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv) if
there shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall without liability on the part of any Underwriter to
the Company or the Selling Stockholders or on the part of the Company or the
Selling Stockholders to any Underwriter (except for expenses to be paid or
reimbursed by the Company and the Selling Stockholders pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof.
(c) This Agreement shall also terminate at 5:00 P.M., California time, on
the tenth full business day after the Registration Statement shall have become
effective if the initial public offering price of the Common Shares shall not
then as yet have been determined as provided in Section 5 hereof. Any
termination pursuant to this subsection (c) shall without liability on the part
of any Underwriter to the Company or the Selling Stockholders or on the part of
the Company or the Selling Stockholders to any Underwriter (except for expenses
to be paid or reimbursed by the Company and the Selling Stockholders pursuant to
Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof.
SECTION 15. Representations and Indemnities to Survive Delivery. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Stockholders, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
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<PAGE>
SECTION 16. Notices. All communications hereunder shall be in writing
-------
and, if sent to the Representatives shall be mailed, delivered or telegraphed
and confirmed to you at 600 Montgomery Street, San Francisco, California 94111,
Attention: __________, with a copy to Gregory D. Sheehan, Esq., Ropes & Gray,
One International Place, Boston, MA 02110; and if sent to the Company or the
Selling Stockholders shall be mailed, delivered or telegraphed and confirmed to
the Company at 305 College Road East, Princeton, NJ 08540 with a copy to Paul
Jacobs, Esq., Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, NY 10103.
The Company, the Selling Stockholders or you may change the address for receipt
of communications hereunder by giving notice to the others.
SECTION 17. Successors. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 18. Representation of Underwriters. You will act as
------------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representative(s), will be binding upon
all the Underwriters.
SECTION 19. Partial Unenforceability. The invalidity or unenforceability
------------------------
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 20. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 21. General. This Agreement constitutes the entire agreement of
-------
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document. In this Agreement, the masculine,
feminine and neuter genders and the singular and the plural include one another.
The section headings in this Agreement are for the convenience of the parties
only and will not affect the construction or interpretation of this Agreement.
This Agreement may be amended or modified, and the observance of any term of
this Agreement may be waived, only by a writing signed by the Company, the
Selling Stockholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact for the
Selling Stockholders represents by so doing that he has been duly appointed as
Attorney-in-fact by such Selling Stockholders pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-fact to take such
action. Any action taken under this Agreement by any of the Attorneys-in-fact
will be binding on all the Selling Stockholders.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon it will
become a binding agreement among the Company, the Selling Stockholders and the
several Underwriters including you, all in accordance with its terms.
Very truly yours,
VOXWARE, INC.
By:__________________________
President
SELLING STOCKHOLDERS
By:__________________________
(Attorney-in-fact)
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
OPPENHEIMER & CO., INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By MONTGOMERY SECURITIES
By:_________________________
Partner
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<PAGE>
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to be Purchased
------------------- ---------------
Montgomery Securities....................
Alex. Brown & Sons Incorporated..........
Oppenheimer & Co., Inc...................
TOTAL.............................. ______________
==============
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<PAGE>
SCHEDULE B
Number of Optional
Common Shares Subject
to Sale by Selling
Name of Selling Stockholders Stockholders
---------------------------- ---------------------
TOTAL............................ _____________________
=====================
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ADVANCED COMMUNICATION TECHNOLOGIES, INC.
________________________
Under Section 102 of the
General Corporation Law
_________________________
The undersigned, for the purpose of forming a corporation pursuant to the
provisions of the General Corporation Law of the State of Delaware (the "GCL"),
does hereby certify as follows:
FIRST: The name of the corporation is Advanced Communication Technologies,
Inc.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the GCL.
THIRD: The name and address in the State of Delaware of this corporation's
agent for service of process is: The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware, County of New Castle.
FOURTH: The name and mailing address of the sole incorporator is:
Lawrence A. Spector
c/o Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
FIFTH: The total number of shares which the corporation has authority to
issue is two hundred (200) shares of Common Stock, par value $.01 per share.
SIXTH: In the furtherance and not in limitation of the objects, purposes
and powers conferred by statute, the Board of Directors is expressly authorized
to make, alter or repeal the By-laws of the corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the corporation under the
provisions of section 291 of Title 8 of the
<PAGE>
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for the corporation under the provisions of
section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, upon a plea of nolo contendere or equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
NINTH: The directors of the corporation shall incur no personal liability
to the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director; provided, however, that the directors of the
corporation shall continue to be subject to liability (i) for any breach of
their duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL or (iv) for any transaction
from which the directors derived an improper benefit. If the GCL is amended
after the date of incorporation of the corporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the GCL, as so amended. Any repeal or modification
of the foregoing paragraph by the stockholders of the corporation shall be
-2-
<PAGE>
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the corporation existing at the time of such repeal
or modification.
TENTH: The corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 20th
day of August, 1993.
/s/ Lawrence A. Spector
------------------------------
Lawrence A. Spector
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
ADVANCED COMMUNICATION TECHNOLOGIES, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: The Sole Director of the Corporation by written consent has duly
adopted the amendment to the Corporation's Certificate of Incorporation set
forth below.
SECOND: Said amendment amends Article FIFTH of the Corporation's
Certificate of Incorporation to read in its entirety as follows:
"FIFTH: The total number of shares of stock which the
Corporation has authority to issue is twelve million (12,000,000)
shares of Common Stock, par value $.001 per share."
THIRD: Upon the effective time of this amendment to the Certificate
of Incorporation whereby Article FIFTH is amended to read as set forth herein,
each share of the Common Stock of the Corporation issued and outstanding or held
by the Corporation shall be automatically reclassified and converted (without
further action on the part of the Corporation) into sixty thousand (60,000)
fully paid and non-assessable shares of New Common Stock.
FOURTH: That in lieu of a meeting and vote of stockholders entitled
to vote thereon, such stockholders have given written consent to said amendment
in accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware, and written notice of the adoption of the amendment
has been given
<PAGE>
as provided in Section 228 of the General Corporation Law of the State of
Delaware to every stockholder entitled to such notice.
FIFTH: The aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 228 and 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, Advanced Communication Technologies, Inc. has
caused this Certificate to be signed by its President and Secretary, this 8th
day of December, 1993.
ADVANCED COMMUNICATION
TECHNOLOGIES, INC.
By: /s/ J. Gerard Aguilar
-----------------------------------
J. Gerard Aguilar
President
Attest:
By: /s/ J. Gerard Aguilar
-----------------------------------
J. Gerard Aguilar
Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
ADVANCED COMMUNICATION TECHNOLOGIES, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, acting by unanimous
written consent, has duly adopted the amendment to the Corporation's Certificate
of Incorporation set forth below.
SECOND: Said amendment amends Article FIFTH of the Corporation's
Certificate of Incorporation to read in its entirety as follows:
"FIFTH: The total number of shares of stock which the
Corporation has authority to issue is twenty million (20,000,000)
shares of Common Stock, par value $.001 per share."
THIRD: That in lieu of a meeting and vote of stockholders entitled to
vote thereon, such stockholders have given written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware, and written notice of the adoption of the amendment has
been given as provided in Section 228 of the General Corporation Law of the
State of Delaware to every stockholder entitled to such notice.
FOURTH: The aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, Advanced Communications Technologies, Inc. has
caused this Certificate to be signed by its President and Secretary, this 25 day
of February, 1994.
ADVANCED COMMUNICATION
TECHNOLOGIES, INC.
By: /s/ Michael Goldstein
-----------------------
Michael Goldstein
President
Attest:
By: /s/ J. Gerard Aguilar
--------------------------
J. Gerard Aguilar
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
ADVANCED COMMUNICATION TECHNOLOGIES, INC.
Advanced Communication Technologies, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That by unanimous written consent pursuant to Section 141 of
the General Corporation Law of the State of Delaware, the Board of Directors of
Advanced Communication Technologies, Inc. duly adopted resolutions setting forth
a proposed amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and directing that the proposed
amendment be placed before the stockholders of the corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by restating Article FIRST thereof to read in its entirety as
follows:
FIRST: The name of the corporation is Voxware, Inc.
SECOND: That thereafter, the stockholders of said corporation, by written
consent of the holders of a majority of the outstanding stock entitled to vote
thereon, in accordance with Section 228 of the General Corporation Law of the
State of Delaware, approved said amendment to the Certificate of Incorporation.
THIRD: That thereafter, written notice of the foregoing action was given
in accordance with Section 228 of the General Corporation Law of the State of
Delaware to those stockholders who have not consented in writing to the
foregoing action.
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury that the Certificate is the act and deed of
the Corporation and the facts stated herein are true.
Date: 5/23/94 /s/ Michael Goldstein
--------------- ------------------------------
Michael Goldstein
President
ATTEST:
/s/ Gerard Aguilar
- --------------------------
J. Gerard Aguilar
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
VOXWARE, INC.
(Pursuant to Section 242 of the General
Corporation Law of Delaware)
VOXWARE, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Corporation's Board of Directors on
December 7, 1994, the Board of Directors of the Corporation duly adopted a
resolution setting forth the proposed amendment to the Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable and
directing that the proposed amendment be placed before the stockholders of the
Corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by restating Article FIFTH thereof to read in its entirety as
follows:
"FIFTH: The total number of shares of all classes of stock which
the Corporation has authority to issue is Forty million (40,000,000)
shares, consisting of Thirty million (30,000,000) shares of Common
Stock, par value $.001 per share (the "Common Stock"), and Ten million
(10,000,000) shares of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), which Preferred Stock shall have such
designations, powers, preferences and rights as may be authorized by
the Board of Directors from time to time.
The Board of Directors is hereby authorized, subject to the
provisions contained in this Article FIFTH, to issue the Preferred
Stock from time to time in one or more series, which Preferred Stock
shall be preferred to the Common Stock as to dividends and
distribution of assets
<PAGE>
of the Corporation upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, as hereinafter provided,
and shall have such designations as may be stated in the resolution or
resolutions providing for the issuance of such stock adopted by the
Board of Directors. In such resolution or resolutions providing for
the issuance of shares of each particular series, the Board of
Directors is hereby expressly authorized and empowered to fix the
number of shares constituting such series and to fix the designations
and any of the preferences, powers or rights of the shares of the
series so established to the full extent allowable by law except
insofar as such designations, preferences, powers or rights are fixed
herein. Such authorization in the Board of Directors shall expressly
include the authority to fix and determine the designations,
preferences, powers or rights of such shares in all respects
including, without limitation, the following:
(i) the rate of dividend;
(ii) whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of redemption
or call;
(iii) the amount payable upon shares in the event of dissolution,
voluntary and involuntary liquidation or winding up of the
affairs of the Corporation;
(iv) purchase, retirement or sinking fund provisions, if any, for
the call, redemption or purchase of shares;
(v) the terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
(vi) whether or not shares have voting rights, and the extent of
such voting rights, if any; and
(vii) whether shares shall be cumulative, noncumulative, or partially
cumulative as to dividends and the dates from which any
cumulative dividends are to accumulate.
COMMON STOCK
------------
Section 1. Voting Rights. The holders of shares of Common Stock
--------- -------------
shall be entitled to one vote for each share so held with respect to
all matters voted on by the stockholders of the Corporation, subject
in all cases to the rights of the Preferred Stock, if any.
-2-
<PAGE>
Section 2. Dividends. Subject to the rights of the Preferred
--------- ---------
Stock, if any, dividends may be paid on the Common Stock as and when
declared by the Board of Directors.
Section 3. Liquidation Rights. Subject to the prior and
--------- ------------------
superior right of the Preferred Stock, if any, upon any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, the holders of Common Stock shall be entitled to
receive that portion of the remaining funds to be distributed in
accordance with the provisions of this Certificate of Incorporation,
as it may from time to time be amended or supplemented, including
without limitation any supplement effected pursuant to a certificate
of designations, setting forth such prior and superior rights. Such
funds shall be paid to the holders of Common Stock pro rata on the
basis of the number of shares of Common Stock held by each of them.
Section 4. Merger, Consolidation, Sale of Assets. Subject to
--------- -------------------------------------
the prior and superior rights of the Preferred Stock, if any, in the
event of any merger or consolidation of the Corporation with or into
another corporation in which the Corporation shall not survive, or the
sale or transfer of all or substantially all of the assets of the
Corporation to another entity, or a merger or consolidation in which
the Corporation shall be the surviving entity but its Common Stock is
exchanged for stock, securities or property of another entity, the
holders of Common Stock shall be entitled to receive all cash,
securities and other property received by the Corporation pro rata on
the basis of the number of shares of Common Stock held by each of
them.
Section 5. Residual Rights. All rights accruing to the
--------- ---------------
outstanding shares of the Corporation not expressly provided for to
the contrary in this Certificate of Incorporation, as it may from time
to time be amended or supplemented, including without limitation any
supplement effected pursuant to a certificate of designations, shall
be vested in the Common Stock."
SECOND: That pursuant to resolution of the Board of Directors, the
proposed amendment was submitted to the stockholders of the Corporation and was
duly adopted by the stockholders of the Corporation pursuant to a written
consent in accordance with the applicable provisions of Section 228 of the
General Corporation Law of Delaware, and in accordance with such Section 228
written notice has been given to those stockholders who have not consented in
writing.
-3-
<PAGE>
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury that the Certificate is the act and deed of
the corporation and the facts stated herein are true.
/s/ Michael Goldstein
-------------------------------
Date: December 9, 1995 Michael Goldstein
---------------- President
ATTEST
/s/ Kenneth H. Traub
- --------------------
Kenneth H. Traub
Secretary
-4-
<PAGE>
CERTIFICATE OF DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
Series A CONVERTIBLE PREFERRED STOCK
(Par Value $0.001 Per Share)
OF
VOXWARE, INC.
---------------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
---------------------------------
VOXWARE, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company") by its President and
Secretary, DOES HEREBY CERTIFY:
FIRST: That pursuant to the authority expressly vested in the Board
of Directors of said Company by the provisions of its Certificate of
Incorporation, as amended, the said Board of Directors duly adopted the
following resolution providing for the designation and issuance of four million
(4,000,000) shares of Series A Preferred Stock, $.001 par value:
RESOLVED, that this Board of Directors, pursuant to authority
expressly granted to and vested in it by the Certificate of Incorporation of the
Company, hereby authorizes the issue from time to time a series of Preferred
Stock of the Company and hereby fixes the designation, preferences and the
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, in addition to those set forth in said
Certificate of Incorporation, to be in their entirety as follows:
1. Designation. The series of 4,000,000 shares of Series A
-----------
Convertible Preferred Stock, par value $.001 per share, shall be designated the
"Series A Preferred Stock." The Series A Preferred Stock, which is referred to
herein as the "Series A Preferred Stock" or the "Preferred Stock," shall have
the following rights, terms and privileges:
2. Dividends.
---------
(a) Dividends. The holders of the then outstanding Preferred
---------
Stock shall be entitled to receive, out of funds legally available therefor,
dividends when and as may be declared from time to time by the Board of
Directors of the Company, on each share of Preferred Stock at the same rate on
the same basis as are paid with
<PAGE>
respect to the Company's Common Stock, par value $.001 per share ("Common
Stock") (including fractions of a share) into which it is convertible.
(b) Dividends in Kind. In the event the Company shall make or
-----------------
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution (other than a
distribution made pursuant to the provisions of Section 3) with respect to the
Common Stock payable in (i) securities of the Company other than shares of
Common Stock or (ii) assets, then and in each such event the holders of
Preferred Stock shall receive, at the same time such distribution is made with
respect to Common Stock, the number of securities or such other assets of the
Company which they would have received had their Preferred Stock been converted
into Common Stock immediately prior to the record date for determining holders
of Common Stock entitled to receive such distribution.
3. Liquidation, Dissolution or Winding Up
--------------------------------------
(a) Treatment at Liquidation, Dissolution or Winding Up. In the
---------------------------------------------------
event of any Reorganization (as defined in Section 5(g) and if an election is
made as described in Section 5(g)), liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, holders of Preferred Stock and
holders of the Common Stock shall be entitled to be paid out of the assets of
the Company available for distribution to holders of the Company's capital stock
of all classes, whether such assets are capital, surplus, or capital earnings,
as follows:
(i) First, the holders of the Preferred Stock, as a class,
and the holders of the Common Stock, as a class, will each receive 50% of the
first $8,000,000 of assets available for distribution to the stockholders (the
"Initial Distribution"). The proceeds of the Initial Distribution paid to the
holders of the Preferred Stock as a class shall be paid pro rata to such holders
and the proceeds of the Initial Distribution paid to the holders of the Common
Stock as a class shall be paid pro rata to such holders.
(ii) Second, after the Initial Distribution has been made in
full to the holders of the Preferred Stock and the holders of the Common Stock
or funds necessary from such payment shall have been set aside by the Company in
trust for the accounts of the holders of Preferred Stock and the holders of
Common Stock, the remaining assets of the Company shall be distributed to the
holders of the Preferred Stock and the holders of the Common Stock then
outstanding, collectively as a class. Such distribution shall be made to the
holders of the Preferred Stock and Common Stock on a pro rata basis, based on
the number of shares of Common Stock into which shares of the Preferred Stock
are then convertible and the number of shares of Common Stock held.
(b) Distributions in Cash. All distributions made pursuant to this
---------------------
Section 3 shall in all events be paid in cash. Wherever a distribution provided
for in this Section 3 is payable in property other than cash, the value of such
distribution shall be
-2-
<PAGE>
the fair market value of such property as determined in good faith by the
Company's Board of Directors.
4. Voting Power. Except as otherwise expressly provided in Section 8
------------
hereof, or as required by law, each holder of Preferred Stock shall be entitled
to vote on all matters and shall be entitled to that number of votes equal to
the largest number of whole shares of Common Stock into which such holder's
shares of Preferred Stock could be converted, pursuant to the provisions of
Section 5 hereof, at the record date for the determination of shareholders
entitled to vote on such matter or, if no such record date is established, at
the date such vote is taken or any written consent of shareholders is solicited.
Except as otherwise expressly provided herein or as required by law, the holders
of shares of Preferred Stock and Common Stock shall vote together as a single
class on all matters.
5. Conversion Rights for the Preferred Stock. The holders of the
-----------------------------------------
Preferred Stock shall have the following rights with respect to the conversion
of the Preferred Stock into shares of Common Stock:
(a) General. Subject to and in compliance with the provisions of
-------
this Section 5, any share of the Preferred Stock may, at the option of the
holder, be converted at any time into fully-paid and non-assessable shares of
Common Stock. The numbers of shares of Common Stock to which a holder of
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as provided in Section
5(b)) by the number of shares of Preferred Stock being converted.
(b) Applicable Conversion Rate. The conversion rate in effect at
--------------------------
any time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing (i) 1.00 by the Applicable Conversion Value, calculated as provided in
Section 5(c).
(c) Applicable Conversion Value. The Applicable Conversion Value
---------------------------
shall be $1.00, except that such amounts shall be adjusted from time to time in
accordance with this Section 5.
(d) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) (A) Upon Sale of Common Stock. If the Company shall,
-------------------------
while there are any shares of Preferred Stock outstanding, issue or sell shares
of its Common Stock without consideration or at a price per share less than the
Applicable Conversion Value in effect immediately prior to such issuance or
sale, then in each such case such Applicable Conversion Value for the Preferred
Stock, upon each such issuance or sale, except as hereinafter provided, shall be
lowered so as to be equal to the lowest net price per share at which such Common
Stock has been issued or sold or has been deemed to have been issued or sold.
-3-
<PAGE>
(B) Upon Issuance of Warrants. Options and Rights to
------------------------------------------------
Common Stock.
------------
(1) For the purposes of this Section 5(d)(i), the
issuance of any warrants, options, subscriptions, or purchase rights with
respect to shares of Common Stock and the issuance of any securities convertible
into or exchangeable for shares of Common Stock (or the issuance of any
warrants, options or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance of such Common Stock at such time if the
Net Consideration Per Share (as hereinafter determined) which may be received by
the Company for such Common Stock shall be less than the Applicable Conversion
Value at the time of such issuance. Any obligation, agreement, or undertaking to
issue warrants, options, subscriptions, or purchase rights at any time in the
future shall be deemed to be an issuance at the time such obligation, agreement
or undertaking is made or arises. No adjustment of the Applicable Conversion
Value shall be made under this Section 5(d)(i) upon the issuance of any shares
of Common Stock which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any convertible securities if any adjustment
shall previously have been made or deemed not required hereunder, upon the
issuance of any such warrants, options, or subscription or purchase rights or
upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided.
Should the Net Consideration Per Share of any such warrants, options,
subscriptions, or purchase rights or convertible securities be decreased from
time to time, then, upon the effectiveness of each such change, the Applicable
Conversion Value shall be adjusted to such Applicable Conversion Value as would
have obtained (1) had the adjustments made upon the issuance of such warrants,
options, rights, or convertible securities been made upon the basis of the
decreased Net Consideration Per Share of such securities, and (2) had
adjustments made to the Applicable Conversion Value since the date of issuance
of such securities been made to the Applicable Conversion Value as adjusted
pursuant to (1) above. Any adjustment of the Applicable Conversion Value with
respect to this paragraph which relates to warrants, options, subscriptions,
purchase rights or convertible securities with respect to shares of Common Stock
shall be disregarded if, as, when and to the extent such warrants, options,
subscriptions, purchase rights or convertible securities expire or are cancelled
without being exercised or converted, so that the Applicable Conversion Value
effective immediately upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect at the time of the issuance of the expired
or cancelled warrants, options, subscriptions, purchase rights, or convertible
securities with such additional adjustments as would have been made to that
Applicable Conversion Value had the expired or cancelled warrants, options,
subscriptions, purchase rights or convertible securities not been issued.
-4-
<PAGE>
(2) For purposes of this paragraph, the "Net
Consideration Per Share" which may be received by the Company shall be
determined as follows:
(a) The "Net Consideration Per Share" shall mean
the amount equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, subscriptions, or other
purchase rights or convertible or exchangeable securities, plus the minimum
amount of consideration, if any, payable to the Company upon exercise or
conversion thereof, divided by the aggregate number of shares of Common Stock
that would be issued if all such warrants, options, subscriptions, or other
purchase rights or convertible or exchangeable securities were exercised,
exchanged, or converted.
(b) The "Net Consideration Per Share" which may
be received by the Company shall be determined in each instance as of the date
of issuance of warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities without giving effect to any possible
future upward price adjustments or rate adjustments which may be applicable with
respect to such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities.
(C) Consideration Other than Cash. For purposes of this
-----------------------------
Section 5(d), if a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or the issuance of
any of the securities described in this Section 5(d) consists of property other
than cash, such consideration shall be deemed to have a fair market value as is
reasonably determined in good faith by the Board of Directors of the Company.
(D) Exceptions. This Section 5(d)(i) shall not apply
----------
under any of the circumstances which would constitute an Extraordinary Common
Stock Event (as hereinafter defined in Section 5(d)(ii)). Further, the
provisions of this Section 5(d) shall not apply to (i) shares issued upon
conversion of the Preferred Stock, (ii) options (and the shares issuable upon
exercise thereof) to purchase up to an aggregate of 2,290,000 shares of Common
Stock (including options outstanding on the date hereof) issued to employees of
the Company, as provided in Section 4.5 of the Series B Preferred Stock Purchase
Agreement by and among the Company, certain Shareholders listed therein and the
Purchasers listed therein, dated December 15, 1995 (the "Purchase Agreement"),
(iii) shares issued upon exercise of 2,000,000 warrants to purchase Common Stock
outstanding on the date hereof and as set forth on Schedule 2.4 of the Purchase
------------
Agreement, (iv) securities issued by the Company in connection with
the acquisition of another corporation by merger, purchase of substantially all
the assets or other reorganization, (v) securities issued by the Company in
connection with the acquisition of any patent or other rights to technology,
including licenses, and (vi) securities issued by the Company in connection with
a corporate collaboration, joint venture, partnership, or marketing,
manufacturing, research, licensing or other arrangement; provided, however, that
-------- -------
the issuance of any securities by the Company
-5-
<PAGE>
as described under Clauses (iv), (v) and (vi) of this Subsection (D) shall be
approved by the affirmative vote of a majority of the Board of Directors (which
majority must include a majority of the directors designated by the holders of
Preferred Stock). The number of shares in this Section (D) shall be
proportionately adjusted to reflect any stock dividend, stock split or other
form of recapitalization occurring after the date hereof.
(E) Termination of Anti-dilution Adjustments. If at any
----------------------------------------
time the Company shall affect a Private Placement (as hereinafter defined), then
effective immediately after the closing of such Private Placement, the
provisions of this Section 5(d)(i) shall no longer apply and shall be of no
further force or effect. For purposes hereof, the term "Private Placement" shall
mean the sale and issuance of shares of any equity security of the Company which
is priced by financial investor (provided, that, such Private Placement may
include a strategic investor as well as a financial investor) in which the
aggregate proceeds received by the Company equal at least $2,000,000 and in
which the price per share of such equity security exceeds $1.00 (as adjusted to
reflect any stock split, stock dividend or other form of recapitalization
occurring after the date hereof).
(ii) Upon Extraordinary Common Stock Event. Upon the happening of
-------------------------------------
an Extraordinary Common Stock Event (as hereinafter defined), the Applicable
Conversion Value for the Preferred Stock shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the then effective Applicable Conversion Value with respect to the Preferred
Stock by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock Event, and the
product so obtained shall thereafter be the Applicable Conversion Value. The
Applicable Conversion Value for the Preferred Stock shall be readjusted in the
same manner upon the happening of any successive Extraordinary Common Stock
Event or Events.
"Extraordinary Common Stock Event" shall mean (A) the issue of
additional shares of Common Stock as a dividend or other distribution
on outstanding Common Stock or on any class or series of preferred
stock, unless made pro rata to holders of Preferred Stock, (B) a
--- ----
subdivision of outstanding shares of Common Stock into a greater
number of shares of Common Stock, or (C) a combination of outstanding
shares of the Common Stock into a smaller number of shares of Common
Stock.
(e) Dividends. In the event the Company shall make or issue, or shall
---------
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution with respect to the Common Stock
payable in (i) securities of the Company other than shares of Common Stock or
(ii) assets, then
-6-
<PAGE>
and in each such event the holders of Preferred Stock shall receive, at the same
time such distribution is made with respect to Common Stock, the number of
securities or such other assets of the Company which they would have received
had their Preferred Stock been converted into Common Stock immediately prior to
the date of such distribution.
(f) Capital Reorganization or Reclassification. If the Common Stock
------------------------------------------
issuable upon the conversion of the Preferred Stock shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than an
Extraordinary Common Stock Event or other subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5 or by a
Reorganization), then and in each such event, the holder of each share of
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such capital reorganization, reclassification or other change by holders of
the number of shares of Common Stock into which such shares of Preferred Stock
might have been converted immediately prior to such capital reorganization,
reclassification or other change.
(g) Capital Reorganization, Merger or Sale of Assets. If at any time
------------------------------------------------
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties and assets to any other person, or the sale of a
majority of the voting securities of the Company in one transaction or in a
series of related transactions, any of which events is herein referred to as a
"Reorganization"), then as a part of such Reorganization, provision shall be
made so that the holders of the Preferred Stock shall thereafter be entitled to
receive upon conversion of the Preferred Stock, the number of shares of stock or
other securities or property of the Company, or of the successor corporation
resulting from such Reorganization, to which such holder would have been
entitled if such holder had converted its shares of Preferred Stock immediately
prior to such Reorganization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 5 with respect to the
rights of the holders of the Preferred Stock after the Reorganization, to the
end that the provisions of this Section 5 (including adjustment of the
Applicable Conversion Value then in effect and the number of shares issuable
upon conversion of the Preferred Stock) shall be applicable after that event in
as nearly equivalent a manner as may be practicable.
Except as otherwise provided in Section 3(b), upon the occurrence of a
Reorganization, under circumstances which make the preceding paragraph
applicable, each holder of Preferred Stock shall have the option of electing
treatment for his shares of Preferred Stock under either this Section 5(g) or
Section 3 hereof, notice of which election shall be submitted in writing to the
Company at its principal offices no later than thirty (30) business days before
the effective date of such event, provided that the
-7-
<PAGE>
holders of Preferred Stock shall have been given sixty (60) days prior notice of
the proposed date of such event.
(h) Certificate as to Adjustments; Notice by Company. In each case of
------------------------------------------------
an adjustment or readjustment of the Applicable Conversion Rate, the Company at
its expense will furnish each holder of Preferred Stock with a certificate,
executed by the president and chief financial officer (or in the absence of a
person designated as the chief financial officer, by the treasurer) showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(i) Exercise of Conversion Privilege. To exercise its conversion
--------------------------------
privilege, a holder of Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at that office
that such holder elects to convert such shares. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. The date when such written notice is received by the
Company, together with the certificate or certificates representing the shares
of Preferred Stock being converted, shall be the "Conversion Date." As promptly
as practicable after the Conversion Date, the Company shall issue and shall
deliver to the holder of the shares of Preferred Stock being converted, or on
its written order, such certificate or certificates as it may request for the
number of whole shares of Common Stock issuable upon the conversion of such
shares of Preferred Stock in accordance with the provisions of this Section 5,
and cash, as provided in Section 5(j), in respect of any fraction of a share of
Common Stock issuable upon such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the Conversion
Date, and at such time the rights of the holder as holder of the converted
shares of Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby. The Company
shall pay any taxes payable with respect to the issuance of Common Stock upon
conversion of the Preferred Stock, other than any taxes payable with respect to
income by the holders thereof.
(j) Cash in Lieu of Fractional Shares. The Company may, if it so
---------------------------------
elects, issue fractional shares of Common Stock or scrip representing fractional
shares upon the conversion of shares of Preferred Stock. If the Company does not
elect to issue fractional shares, the Company shall pay to the holder of the
shares of Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the total number
-8-
<PAGE>
of shares of Preferred Stock being converted at any one time by any holder
thereof, not upon each share of Preferred Stock being converted.
(k) Partial Conversion. In the event some but not all of the shares of
------------------
Preferred Stock represented by a certificate or certificates surrendered by a
holder are converted, the Company shall execute and deliver to or on the order
of the holder, at the expense of the Company, a new certificate representing the
number of shares of Preferred Stock which were not converted.
(l) Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Company shall take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
(m) Minimum Adjustment. Any provision of this Section 5 to the
------------------
contrary notwithstanding, no adjustment in the Applicable Conversion Value shall
be made if the amount of such adjustment would be less than 1% of the Applicable
Conversion Value then in effect, but any such amount shall be carried forward
and an adjustment with respect thereto shall be made at the time of and together
with any subsequent adjustment which, together with all amounts so carried
forward, aggregates 1% or more of the Applicable Conversion Value then in
effect.
6. Mandatory Conversion. If at any time the Company shall effect a
--------------------
Qualified Public Offering (as herein after defined), then effective upon the
closing of such Qualified Public Offering, all outstanding shares of Preferred
Stock shall automatically convert into shares of Common Stock on the basis set
forth in Section 5 hereof. For purposes hereof, the term "Qualified Public
Offering" shall mean an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of Common Stock for the account of the Company in
which the aggregate net proceeds to the Company equal at least $10,000,000 and
in which the price per share of Common Stock is at least two (2) times the then
Applicable Conversion Value of the Preferred Stock. Holders of shares subject to
conversion shall deliver to the Company at its principal office (or such other
office or agency as the Company may designate by notice in writing) during its
usual business hours, the certificates or certificates for shares of Preferred
Stock being converted, and the Company shall issue and deliver to such holders
certificates for the number of shares of Common Stock to which such holders are
entitled. Until such time as holders of shares of Preferred Stock shall
surrender those certificates therefor as provided above, such certificates shall
be deemed to represent the shares of Common Stock which the holders shall be
entitled upon the surrender thereof.
-9-
<PAGE>
7. No Reissuance of Preferred Stock. No share or shares of Preferred Stock
--------------------------------
acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of the Preferred Stock
accordingly.
8. Redemption. At any time on or after December 15, 2000, upon the
----------
written request (such request to be called the "Redemption Notice") of the
holders of at least a majority of the then outstanding Preferred Stock, to the
extent the Company has funds legally available therefor, the Company shall
redeem all the shares of Preferred Stock at the Redemption Price (as defined
below) in twelve equal quarterly installments, with the first payment being due
on the last business day of the calendar month immediately following the date of
the Redemption Notice and, thereafter, on the last business day of each of the
next eleven successive calendar quarters. Notwithstanding the foregoing, the
Company may, in its discretion, accelerate the payment of the Redemption Price
and the redemption of the Preferred Stock. In the event shares of Preferred
Stock scheduled for redemption are not redeemed because of a prohibition under
applicable law, such shares shall be redeemed as soon as such prohibition no
longer exists. The number of shares to be redeemed at the end of any quarter
shall be cumulative, so that any shares subject to redemption at the end of one
quarter and not so redeemed shall be carried forward to the subsequent quarter
and shall be subject to redemption in addition to the shares otherwise
redeemable at the end of such quarter. The Preferred Stock that has not been
redeemed shall remain issued and outstanding until the Redemption Price has been
paid in full and entitled to all rights and preferences provided herein. Shares
of Preferred Stock required to be redeemed shall be redeemed pro rata from all
--------
holders of Preferred Stock. Nothing contained herein shall restrict the right of
the holders of the Preferred Stock to convert their Preferred Stock pursuant to
Section 5. The Company will, 10 days prior to the date of redemption, mail to
each holder of Preferred Stock a notice setting forth the date and place of
redemption and the number of shares and the certificate numbers thereof which
are to be redeemed. Upon the exercise of any redemption right under this Section
8, the holder of the Preferred Stock being redeemed shall deliver certificates
representing such shares to the Company in exchange for the Redemption Price.
Such shares shall no longer be deemed to be outstanding after such date of
redemption and payment of the Redemption Price has been made in full to the
holders of those shares scheduled for redemption. In case less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares without cost to the holder thereof.
The redemption price (the "Redemption Price") for each share of Preferred
Stock redeemed pursuant to this Section 8 shall be equal to $1.00 (subject to
adjustment to reflect any stock dividend, stock split or other form of
recapitalization occurring after the date hereof).
-10-
<PAGE>
9. Restrictions and Limitations.
----------------------------
(a) Corporate Action. Except as expressly provided herein or as
----------------
required by law, so long as at least 10% of the shares of Preferred Stock sold
pursuant to the Purchase Agreement remain outstanding, the Company shall not,
and shall not permit any subsidiary (which shall mean any corporation,
association or other business entity which the Company and/or any of its other
subsidiaries directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of such corporation or trust, other than
directors' qualifying shares) to, without the approval by vote or written
consent by the holders of at least 51% of the then outstanding shares of
Preferred Stock, voting as a separate class:
(i) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose), or declare and pay or
set aside funds for the payment of any dividend with respect to, any share or
shares of capital stock, except as required or permitted hereunder or under the
terms of Section 4.2 of the Purchase Agreement;
(ii) authorize or issue, or obligate itself to authorize or
issue, additional shares of Preferred Stock;
(iii) authorize or issue, or obligate itself to authorize or
issue, any equity security senior to or on parity with the Preferred Stock as to
liquidation preferences, dividend rights, or voting rights;
(iv) merge or consolidate with any other corporation, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) all, or
substantially all, of its equity or its assets (whether now owned or hereinafter
acquired), or consent to any liquidation, dissolution or winding up of the
Company, or permit any subsidiary to do any of the foregoing, except for (1) any
------
wholly-owned subsidiary may merge into or consolidate with or transfer
assets to any other wholly-owned subsidiary, (2) any wholly-owned subsidiary may
merge into or transfer assets to the Company; or
(v) amend, restate, modify or alter the by-laws of the Company
in any way which adversely affects the rights of the holders of the Preferred
Stock.
(b) Amendments to Charter. The Company shall not amend its Certificate
---------------------
of Incorporation without the approval, by vote or written consent, by the
holders of at least fifty-one percent (51%) of the then outstanding shares of
Preferred Stock, if such amendment would amend any of the rights, preferences,
privileges of or limitations provided for herein for the benefit of any shares
of Preferred Stock. Without limiting the generality of the preceding sentence,
the Company will not amend its Certificate of Incorporation without the approval
by the holders of at least fifty-one percent (51%) of the then outstanding
shares of Preferred Stock if such amendment would:
-11-
<PAGE>
(i) change the relative seniority rights of the holders of
Preferred Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Company, or create any other class or series of
capital stock entitled to seniority as to the payment of dividends in relation
to the holders of Preferred Stock;
(ii) reduce the amount payable to the holders of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company, or change the relative seniority of the liquidation preferences
of the holders of Preferred Stock to the rights upon liquidation of the holders
of other capital stock of the Company, or change the dividend rights of the
holders of Preferred Stock;
(iii) cancel or modify the conversion rights of the holders of
Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of the
Preferred Stock provided for in this Section 9.
10. No Dilution or Impairment. The Company will not, by amendment of its
-------------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Preferred Stock set forth herein, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
holders of the Preferred Stock against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on the conversion of the Preferred
Stock above the amount payable therefor on such conversion, (b) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock on the
conversion of all Preferred Stock from time to time outstanding, or (c) will not
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all of the terms of the Preferred Stock set forth herein.
11. Notices of Record Date. In the event of
----------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger of the Company,
or
-12-
<PAGE>
any transfer of all or substantially all of the assets of the Company to any
other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company,
then and in each such event the Company shall mail or cause to be mailed to each
holder of Preferred Stock a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and a description of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least ten (10) business days prior to the date specified in such
notice on which such action is to be taken.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed in
its name and on its behalf and by the President and attested to this 18 of
December, 1995.
VOXWARE, INC.
By: /s/ Michael Goldstein
----------------------------------
Michael Goldstein
President and Chief Executive
Officer
Attest By: /s/ Kenneth H. Traub
-------------------------------
Name: /s/ Kenneth H. Traub
Title: Executive Vice President
and Chief Financial Officer
15779-3
-13-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
(Par Value $.001 Per Share)
of
VOXWARE, INC.
VOXWARE, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
FIRST: That by unanimous written consent pursuant to Section 141 of
the General Corporation Law of the State of Delaware, the Board of Directors of
the Corporation declared advisable and duly adopted resolutions setting forth
proposed amendments of the Certificate of Designations, Powers, Preferences and
Rights (the "Certificate of Designations") of the Corporation's Series A
Convertible Preferred Stock, par value $.001 per share (the "Series A Preferred
Stock"), and directing that the proposed amendments be placed before the holders
of the Series A Preferred Stock and the holders of the Corporation's Common
Stock, par value $.001 per share (the "Common Stock"), for consideration
thereof. The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that, subject to the approval of the holders of the
Corporation's Series A Convertible Preferred Stock, par value $.001 per
share (the "Series A Preferred Stock"), and the holders of the
Corporation's Common Stock, par value $.001 per share (the "Common Stock"),
the Certificate of Designations, Powers, Preferences and Rights of the
Series A Preferred Stock (the "Certificate of Designations") be amended by
restating Section 1 thereof to read in its entirety as follows:
1. Designation. The series of 6,000,000 shares of Series A
-----------
Convertible Preferred Stock, par value $.001 per share, shall be
designated the "Series A Preferred Stock." The Series A Preferred
Stock, which is referred to herein as the "Series A Preferred Stock"
or the "Preferred Stock," shall have the following rights, terms and
privileges:
; and it is further
RESOLVED, that, subject to the approval of the holders of the Series A
Preferred Stock, and the holders of the Common Stock, the Certificate of
Designations be amended by restating the first sentence of Section 3(a)(i)
thereof to read in its entirety as follows:
<PAGE>
(i) First, the holders of the Preferred Stock, as a class, and the
holders of the Common Stock, as a class, will each receive 50% of the
first $13,000,000 of assets available for distribution to the
stockholders (the "Initial Distribution").
SECOND: That thereafter, the holders of the Series A Preferred Stock, by
written consent of the holders of a majority of the outstanding shares of Series
A Preferred Stock entitled to vote thereon in accordance with Section 228 of the
General Corporation Law of the State of Delaware and the Certificate of
Designations, approved said amendment to the Certificate of Designations
THIRD: That thereafter, the holders of the Common Stock, by written
consent of the holders of a majority of the outstanding shares of Common Stock
entitled to vote thereon in accordance with Section 228 of the General
Corporation Law of the State of Delaware, approved said amendment to the
Certificate of Designations.
FOURTH: That thereafter, written notice of the foregoing actions was
given in accordance with Section 228 of the General Corporation Law of the State
of Delaware to those holders of the Series A Preferred Stock and the Common
Stock who have not consented in writing to the foregoing action.
FIFTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury that the Certificate is the act and deed of
the Corporation and the facts stated herein are true.
Date: March 12, 1996 /s/ Michael Goldstein
---------------------- ------------------------------
Michael Goldstein
President and Chief Executive Officer
ATTEST:
/s/ Kenneth H. Traub
- ----------------------------------
Kenneth H. Traub
Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
VOXWARE, INC.
(Pursuant to Section 242 of the General
Corporation Law of Delaware)
VOXWARE, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Corporation's Board of Directors on
June 26, 1996, the Board of Directors of the Corporation duly adopted
resolutions setting forth proposed amendments to the Certificate of
Incorporation of the Corporation, declaring said amendments to be advisable and
directing that the proposed amendments be placed before the stockholders of the
Corporation for consideration thereof. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by restating Article FIFTH thereof to read in its entirety as
follows:
"FIFTH: The total number of shares of all classes of stock which
the Corporation has authority to issue is Fifty million (50,000,000)
shares, consisting of Forty million (40,000,000) shares of Common
Stock, par value $.001 per share (the "Common Stock"), and Ten million
(10,000,000) shares of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), which Preferred Stock shall have such
designations, powers, preferences and rights as may be authorized by
the Board of Directors from time to time.
The Board of Directors is hereby authorized, subject to the
provisions contained in this Article FIFTH, to issue the Preferred
Stock from time to time in one or more series, which Preferred Stock
shall be preferred to the Common Stock as to dividends and
distribution of assets of the Corporation upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
as hereinafter provided, and shall have such designations as may be
stated in the resolution or
<PAGE>
resolutions providing for the issuance of such stock adopted by the
Board of Directors. In such resolution or resolutions providing for
the issuance of shares of each particular series, the Board of
Directors is hereby expressly authorized and empowered to fix the
number of shares constituting such series and to fix the designations
and any of the preferences, powers or rights of the shares of the
series so established to the full extent allowable by law except
insofar as such designations, preferences, powers or rights are fixed
herein. Such authorization in the Board of Directors shall expressly
include the authority to fix and determine the designations,
preferences, powers or rights of such shares in all respects
including, without limitation, the following:
(i) the rate of dividend;
(ii) whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of redemption
or call;
(iii) the amount payable upon shares in the event of dissolution,
voluntary and involuntary liquidation or winding up of the
affairs of the Corporation;
(iv) purchase, retirement or sinking fund provisions, if any, for
the call, redemption or purchase of shares;
(v) the terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
(vi) whether or not shares have voting rights, and the extent of
such voting rights, if any; and
(vii) whether shares shall be cumulative, noncumulative, or partially
cumulative as to dividends and the dates from which any
cumulative dividends are to accumulate.
COMMON STOCK
------------
Section 1. Voting Rights. The holders of shares of Common Stock
--------- -------------
shall be entitled to one vote for each share so held with respect to
all matters voted on by the stockholders of the Corporation, subject
in all cases to the rights of the Preferred Stock, if any.
Section 2. Dividends. Subject to the rights of the Preferred
--------- ---------
Stock, if any, dividends may be paid on the Common Stock as and when
declared by the Board of Directors.
<PAGE>
Section 3. Liquidation Rights. Subject to the prior and
--------- ------------------
superior right of the Preferred Stock, if any, upon any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, the holders of Common Stock shall be entitled to
receive that portion of the remaining funds to be distributed in
accordance with the provisions of this Certificate of Incorporation,
as it may from time to time be amended or supplemented, including
without limitation any supplement effected pursuant to a certificate
of designations, setting forth such prior and superior rights. Such
funds shall be paid to the holders of Common Stock pro rata on the
basis of the number of shares of Common Stock held by each of them.
Section 4. Merger, Consolidation, Sale of Assets. Subject to
--------- -------------------------------------
the prior and superior rights of the Preferred Stock, if any, in the
event of any merger or consolidation of the Corporation with or into
another corporation in which the Corporation shall not survive, or the
sale or transfer of all or substantially all of the assets of the
Corporation to another entity, or a merger or consolidation in which
the Corporation shall be the surviving entity but its Common Stock is
exchanged for stock, securities or property of another entity, the
holders of Common Stock shall be entitled to receive all cash,
securities and other property received by the Corporation pro rata on
the basis of the number of shares of Common Stock held by each of
them.
Section 5. Residual Rights. All rights accruing to the
--------- ---------------
outstanding shares of the Corporation not expressly provided for to
the contrary in this Certificate of Incorporation, as it may from time
to time be amended or supplemented, including without limitation any
supplement effected pursuant to a certificate of designations, shall
be vested in the Common Stock."
; and it is further
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by restating Article EIGHTH thereof to read in its entirety as
follows:
"EIGHTH: The corporation shall indemnify any director or officer
of the corporation and may indemnify any other person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgment, fines and amounts paid in
<PAGE>
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceedings, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, upon a plea of nolo
contendere or equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful."
; and it is further
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by adding a new Article ELEVENTH thereto which shall read in its
entirety as follows:
"ELEVENTH: From and after the closing of an underwritten public
offering of the Company's securities, any action required to be taken
at any annual or special meeting of stockholders of the Corporation,
or any action which may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of all the outstanding
stock entitled to vote thereon at a meeting of stockholders."
SECOND: That pursuant to resolution of the Board of Directors, the
proposed amendment was submitted to the stockholders of the Corporation and was
duly adopted by the stockholders of the Corporation pursuant to a written
consent in accordance with the applicable provisions of Section 228 of the
General Corporation Law of Delaware, and in accordance with such Section 228
written notice has been given to those stockholders who have not consented in
writing.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm, under penalties of perjury that the Certificate is the act and deed of
the corporation and the facts stated herein are true.
Date: July 1, 1996 /s/ Michael Goldstein
------------ ------------------------
Michael Goldstein
President
ATTEST
/s/ Kenny Traub
________________________
<PAGE>
EXHIBIT 3.2
B Y - L A W S
OF
VOXWARE, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in such place, either within or without the State of
Delaware, at such place as may be fixed from time to time by the board of
directors and as shall be designated from time to time by the board of directors
and stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date
and time as shall be designated from time to time by the board of directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
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meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning not less than
fifty percent in amount of the entire capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on or
after three years from its date, unless the proxy provides for a longer period.
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Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be one or more, as determined from time to time by resolution of the
board of directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders, residents of Delaware or citizens of the
United States.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the Corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
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Section 4. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
upon such notice, or without notice at such time and at such place as shall from
time to time be determined by the board.
Section 7. Special meetings of the full board may be called by the
president on three days' notice to each director, given as set forth in these
by-laws; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors.
Section 8. Notice of a meeting need not be given to any director who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the board of directors need be specified
in the notice or a waiver of notice of such meeting.
Section 9. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
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Section 11. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES
Section 12. The board of directors may, by resolution passed by a
majority of the whole board, designate an executive committee and other
committees, each committee to consist of one or more directors of the
Corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the by-laws of the Corporation; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 13. Each committee shall keep regular minutes of
its meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. Nothing herein shall preclude any director from serving the
Corporation in any other capacity and receiving
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compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the certificate of
incorporation or by-laws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors at a special meeting of stockholders called
for that purpose.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, telex or telecopy with
receipt confirmed by telecopy.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. A person entitled to notice of any meeting of the board of
directors or stockholders, as the case may be, waives such notice if he or she
appears in person or, in the case of a stockholder, by proxy at such meeting,
except when the person attends a meeting for the express purposes of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
board of directors and shall be a president, a secretary and a treasurer. The
board of directors may also choose a chairman of the board, vice chairman of the
board, controller, one or more vice presidents, one or more assistant
secretaries and assistant treasurers. Any such officers shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board. Any number of offices may
be held by the same person, unless the certificate of incorporation or these by-
laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a secretary and a
treasurer.
Section 3. The board of directors may appoint such other officers and
agents, as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the board of directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time with or without cause by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the Corporation shall be filled by the board of directors.
PRESIDENT
Section 6. The President shall be the chief executive officer of the
Corporation and shall have general direction and supervision over day-to-day
matters relating to the business and affairs of the Corporation, shall implement
or supervise the implementation of corporate policies as established by the
board of directors, shall preside at all meetings of the stockholders and the
board of directors and shall be in charge of stockholder relations. He or she
shall have such other powers and perform such other duties as the board of
directors may from time to time prescribe.
Section 7. He or she shall execute bonds, mortgages and other
contracts requiring a seal under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the board of
directors to some other officer or agent of the Corporation.
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THE VICE PRESIDENTS
Section 8. The vice president, if any, or, if there shall be more
than one, the vice presidents in the order determined by the board of directors
(or, in the absence of any designation, then in the order of their election)
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or person serving as chief executive officer, under whose supervision he or she
shall be. He or she shall have custody of the corporate seal of the Corporation
and he or she, or an assistant secretary, shall have authority to affix the same
to any instrument requiring it and, when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
Section 10. The assistant secretary or, if there be more than one,
the assistant secretaries in the order determined by the board of directors (or,
in the absence of any designation, then in the order of their election), shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the board of directors.
Section 12. He or she shall disburse the funds of the Corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the person serving as chief executive
officer, the president and board of directors at its regular meetings, or when
the board of directors so requires,
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an account of all his or her transactions as treasurer and of the financial
condition of the Corporation.
Section 13. If required by the board of directors, he or she shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his or her control belonging to the Corporation.
Section 14. The assistant treasurer, or, if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or, in the absence of any designation, then in the order of their election),
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the Corporation, certifying the
number of shares owned by him or her in the Corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give
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the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meetings, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. The Corporation shall indemnify any director or officer of
the corporation and may indemnify any other person who was or is a party or is
threatened
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to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
or she is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. The Corporation shall indemnify any director or officer of
the corporation and may indemnify any other person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interest of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 or 2 of this Article
VII or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 or 2 of this Article
VII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee
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or agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Sections 1 or 2 or this Article VII. Such
determination shall be made (a) by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceedings, or (b) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (c) by the stockholders.
Section 5. Expenses (including attorneys' fees) incurred by an
officer or director of the Corporation in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
Section 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions of
this Article.
Section 8. For purposes of Article VII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
Article VII.
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ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
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FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed, and
shall be subject to change, by the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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EXHIBIT 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS,
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF ADVANCED COMMUNICATION TECHNOLOGIES, INC.
Warrant Certificate No. _____ March __, 1994
This certifies that, for value received, Advanced Communication
Technologies, Inc., a Delaware corporation (the "COMPANY"), hereby grants to
___________________ (the "HOLDER") the right to purchase, subject to adjustment
and the other terms and conditions set forth herein, _________ fully paid and
nonassessable shares of the Company's common stock, par value $.001 per share
(the "STOCK"), at a price per share, subject to adjustment as set forth below,
of $0.75 (the "WARRANT EXERCISE PRICE") at any time or from time to time after
the date hereof and prior to 5:00 P.M. (Eastern Time) March __, 1999 (the
"WARRANT EXPIRATION DATE"). The Company may redeem this Warrant on not less
than 30 days' notice for a price of $.01 if (i) the Company closes a sale or
sales of its securities with an aggregate offering price per share of at least
$1.50, as adjusted for stock splits, stock dividends, recapitalizations and
other similar transactions, and with aggregate net proceeds to the Company of
not less than $1,000,000, (ii) the last sale price of the Common Stock has been
at least $1.50 as adjusted for stock splits, stock dividends, recapitalizations
and other similar transactions, for at least 20 consecutive trading days ending
on the third trading day prior to the date on which the notice of redemption is
given or (iii) the Company closes a Transaction (as defined below) in which the
aggregate consideration per share of Stock (on a fully-diluted basis) is at
least $1.50, as adjusted for stock splits, stock dividends, recapitalizations
and other similar transactions. This Warrant and all warrants hereafter issued
in exchange or substitution of this Warrant, are hereinafter referred to as the
"WARRANTS." THIS WARRANT, TO THE EXTENT NOT REPURCHASED BY THE COMPANY OR
EXERCISED OR CONVERTED IN THE MANNER SET FORTH HEREIN, SHALL TERMINATE AND
BECOME NULL AND VOID AT 5:00 P.M. (EASTERN TIME) ON THE WARRANT EXPIRATION DATE.
This Warrant is subject to the following terms and conditions.
<PAGE>
1. Exercise; Conversion; Issuance of Certificates; Payment of Shares.
-----------------------------------------------------------------
(a) This Warrant may be exercised, at the option of the Holder, in whole at
any time, or in part from time to time prior to 5:00 P.M. (Eastern Time) on the
Warrant Expiration Date, by surrender to the Company of this Warrant Certificate
properly endorsed together with the Form of Subscription attached hereto duly
filled in, signed and with proper payment of the Warrant Exercise Price
multiplied by the number of shares of Stock for which the Warrant is being
exercised. Payment shall be in cash, certified check or official bank check,
payable to the order of the Company.
(b) In lieu of the payment of the Warrant Exercise Price, the Holder shall
have the right (but not the obligation) to require the Company to convert this
Warrant, in whole or in part, into Stock ("Conversion Right") as provided in
this paragraph (b). Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any of the Warrant
Exercise Price) that number of shares of Stock which shall be determined by
dividing (i) the value (as defined below) of the Warrants being converted by
(ii) $1.50, as adjusted for stock splits, stock dividends, recapitalizations and
other similar transactions. "Value" for the purposes of the foregoing
calculation shall mean the aggregate difference between (i) the product obtained
by multiplying the then Warrant Exercise Price by the number of Warrants to be
converted and (ii) $1.50, as adjusted for stock splits, stock dividends,
recapitalizations and other similar transactions, multiplied by the number of
Warrants being converted. The Conversion Right may be exercised at any time
prior to 5:00 P.M. (Eastern Time) on the Warrant Expiration Date, by surrender
to the Company of this Warrant Certificate properly endorsed together with the
Form of Subscription attached hereto duly filled in and signed.
(c) The Company agrees that the shares of Stock purchased on the exercise
or issued on conversion of each Warrant shall be deemed to be issued as of the
close of business on the date on which this Warrant Certificate shall have been
surrendered and, in the case of exercise, payment made for such shares of Stock.
Issuance of the shares of Stock shall be subject to compliance with all
provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the
Securities Exchange Act of 1934 and any relevant state securities law. Subject
to the provisions of Section 2 hereof, certificates for the largest whole number
of shares of Stock so purchased or issuable upon conversion, together with any
other securities or property to which the Holder is entitled upon such exercise
or conversion, shall be delivered to the Holder by the Company within a
reasonable time after this Warrant has been exercised or presented for
conversion. No fractional shares of Stock shall be issued upon exercise or
conversion of this Warrant. Each Stock Certificate so delivered shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder, subject to the provisions of Sections 6 and 8 hereof. If prior
to the Warrant Expiration Date, this Warrant is exercised or converted in part,
one or more new Warrants substantially in the form of, and on the terms
contained in, this Warrant Certificate will be issued for the remaining number
of shares of Stock in respect of which this Warrant has not been exercised or
converted.
-2-
<PAGE>
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all shares of Stock which may be issued upon the exercise or
conversion of this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable. The Company further covenants and agrees
that during the period within which this Warrant may be exercised or converted,
the Company will at all times have authorized and reserved, and will keep
available solely for issuance upon exercise or conversion of this Warrant, a
sufficient number of shares of Stock or other securities and properties as from
time to time shall be receivable upon the exercise or conversion of this
Warrant. As a condition to the consummation of any Transaction (as defined in
Section 3.5 hereof), the Company shall provide that any successor corporation
will reserve a sufficient number of shares of authorized but unissued stock or
other securities, or set aside sufficient other property as the case may be, as
provided for in this Section 2.
3. Adjustment of Warrant Exercise Price and Number of Shares; Events
-----------------------------------------------------------------
Requiring Notice; Changes in Stock.
- ----------------------------------
3.1 Method of Adjustment. The Warrant Exercise Price and the number of
--------------------
shares of Stock purchasable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of the events described in
Section 3.2. Upon each adjustment of the Warrant Exercise Price, the Holder
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares of Stock obtained by
multiplying the Warrant Exercise price in effect immediately prior to such
adjustment by the number of shares of Stock purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.
3.2 Subdivision or Combination of Stock and Stock Dividend. In case the
------------------------------------------------------
Company shall at any time subdivide its outstanding shares of Stock into a
greater number of shares of Stock or declare a dividend upon its Stock payable
solely in shares of Stock, the Warrant Exercise Price in effect immediately
prior to such subdivision or dividend shall be proportionately reduced, and
conversely, in case the outstanding shares of Stock of the Company shall be
combined into a smaller number of shares of Stock, the Warrant Exercise Price in
effect immediately prior to such combination shall be proportionately increased.
3.3 Notice of Adjustment. Upon any adjustment of the Warrant Exercise
--------------------
Price and any increase or decrease in the number of shares of Stock purchasable
upon the exercise of this Warrant or following consummation of a Transaction (as
defined in Section 3.5 hereof), the Company promptly shall give written notice
thereof to the Holder, which shall state the Warrant Exercise Price resulting
from such adjustment, the increase or decrease, if any, in the number of shares
of Stock purchasable at such price upon the exercise of this Warrant, and any
change pursuant to Section 3.5, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
-3-
<PAGE>
3.4 Other Notices. If at any time:
-------------
(a) the Company shall declare any cash dividend upon its Stock;
(b) the Company shall declare any dividend upon its Stock payable in stock
(other than a dividend payable solely in shares of Stock) or make any special
dividend or other distribution to the holders of its Stock;
(c) there shall be any consolidation or merger of the Company with another
corporation, or a sale of all or substantially all of the Company's assets to
another corporation ; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more of said cases, the Company shall give the Holder (i) at
least twelve (12) calendar days' prior written notice of the date on which the
books of the Company shall close or a record date shall have occurred for such
dividend or distribution or for determining rights to vote in respect of any
such consolidation, merger, sale, dissolution, liquidation or winding-up, and
(ii) in the case of any such consolidation, merger, sale, dissolution,
liquidation or winding-up, at least twelve (12) calendar days' written notice of
the date when the same shall take place. Any notice given in accordance with
clause (i) above shall also specify, in the case of any such dividend or
distribution, the date on which the holders of Stock shall be entitled thereof.
Any notice given in accordance with clause (ii) above shall also specify the
date on which the holders of Stock shall be entitled to exchange their Stock for
securities or other property deliverable upon such consolidation, merger, sale,
dissolution, liquidation or winding-up, as the case may be. Notwithstanding
anything contained herein to the contrary, if the Holder does not exercise or
convert this Warrant prior to a record date or the occurrence of an event
described above, as applicable, except as provided in Sections 3.2 and 3.5, the
Holder shall not be entitled to receive the benefits accruing to existing
holders of the Stock in such event.
3.5 Changes in Stock. In case at any time after the date hereof, the
----------------
Company shall be a party to any transaction (including, without limitation, a
merger, consolidation, sale of all or substantially all of the Company's assets
or recapitalization of the Stock) in which the previously outstanding Stock
shall be converted into different securities of the Company, common stock or
other securities of another corporation, interests in a non-corporate entity or
other property (including cash) or any combination of any of the foregoing (each
such transaction being herein called a "TRANSACTION" and the date of
consummation of a Transaction being herein called a "CONSUMMATION DATE"), then,
except in the case of a Qualified Transaction as defined in and set forth in
Section 4 below, as a condition of the consummation of such Transaction, lawful
and adequate provision shall be made so that the Holder shall be entitled to
receive, and this Warrant shall thereafter represent the right to receive, upon
the exercise or conversion hereof at any time after the Consummation Date of
-4-
<PAGE>
such Transaction and prior to the Warrant Expiration Date, in lieu of the Stock
issuable upon such exercise prior to such Consummation Date, the securities or
other property to which the Holder actually have been entitled as a stockholder
upon the Consummation Date as nearly thereto (subject to adjustments from and
after the Consummation Date as nearly equivalent as possible to the adjustments
provided for in this Section 3). The provisions of this Section 3.5 shall
similarly apply to successive Transactions.
4. Redemption Rights. The Company shall be entitled to redeem this
-----------------
Warrant on not less than 30 calendar days' prior notice to the Holder, for $.01
if (i) the Company closes a sale or sales of its securities with an aggregate
offering price per share of at least $1.50 (provided that, for purposes of the
foregoing calculation, if the sale is of units consisting of shares of Common
Stock and warrants, no value shall be attributable to the warrants), as adjusted
for stock splits, stock dividends, recapitalizations and other similar
transactions, and with aggregate net proceeds to the Company of not less than
$1,000,000, (ii) the average closing bid price of a share of Stock (if then
traded on the over-the-counter market) or the closing price of a share of Stock
(if then traded on a national securities exchange) has been at least $1.50 as
adjusted for stock splits, stock dividends, recapitalizations and other similar
transactions, for at least 20 consecutive trading days ending on the third
trading day prior to the date on which the notice of redemption is given or
(iii) the Company closes a Transaction in which the aggregate consideration per
share of Stock (on a fully-diluted basis) is at least $1.50, as adjusted for
stock splits, stock dividends, recapitalizations and other similar transactions
(a "Qualified Transaction"). Any notice of repurchase shall specify the date
for such repurchase (the "REPURCHASE DATE"). In the case of a Qualified
Transaction, provided that the Company gives the required notice as set forth
above, and provided that such notice sets forth the type and amount of
consideration to be paid to the holders of the Stock and the holders of Warrants
in the Transaction, the date of the closing of the Qualified Transaction may be
the Repurchase Date. To the extent that the consideration to be paid to holders
of Stock in a Transaction is other than cash, the value of such consideration
for purposes of determining whether the Transaction is a Qualified Transaction
will be determined in good faith by the Board of Directors of the Company.
Prior to the Repurchase Date, the Holder shall continue to be entitled to
exercise or convert this Warrant pursuant to the terms hereof. Following the
Repurchase Date, the Holder's rights under this Warrant shall expire and become
null and void.
5. Issue Tax. The issuance of certificates for shares of Stock upon the
---------
exercise or conversion of this Warrant shall be made without charge to the
Holder for any issue tax in respect thereof; provided, however, that the Company
-------- -------
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the Holder.
6. No Voting or Dividend Rights. This Warrant does not confer upon the
----------------------------
Holder the right to vote or to consent or to receive notice as a stockholder of
the Company, in respect of meetings of stockholders for the election of
directors of the
-5-
<PAGE>
Company or any other matters or any rights whatsoever as a stockholder of the
Company prior to the exercise or conversion hereof. No cash dividends shall be
payable or accrued in respect of this Warrant or the shares of Stock purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised or converted.
7. Restrictions on Transferability of Securities; Compliance with
--------------------------------------------------------------
Securities Act.
- --------------
7.1 Restrictions on Transferability. In no event shall the Company be
-------------------------------
obligated to effect any transfer of this Warrant or the Stock issuable upon
exercise or conversion hereof (collectively, the "SECURITIES") unless:
(a) a registration statement is in effect with respect thereto under
applicable state and Federal securities laws or the Company has received an
opinion in substance reasonably satisfactory to it from counsel reasonably
satisfactory to it that such registration is not required; and
(b) this Warrant is surrendered to the Company at its principal office
together with the Assignment Form annexed hereto, duly completed and executed,
and sufficient funds to pay any transfer tax.
7.2 Restrictive Legend. Each certificate representing the Securities or
------------------
any other securities issued in respect of the Securities upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FORM REGISTRATION UNDER SUCH ACT AND SUCH LAWS, WHICH, IN THE
OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
7.3 Ownership. The Company and any agent of the Company may
---------
treat the person in whose name this Warrant Certificate is registered on the
register which the Company shall cause to be maintained for such purpose as the
owner and holder thereof for all purposes. This Warrant Certificate, if
properly assigned, may be exercised or converted by a new holder without first
having a new Warrant Certificate issued.
-6-
<PAGE>
8. Modification and Waiver. This Warrant and any provision hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
9. Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the Holder or the Company shall be
personally delivered or shall be sent by certified or registered mail, postage
prepaid, if to the Holder at its address as shown on the books of the Company,
or if to the Company at its principal office at 115 West 18th Street, New York,
New York 10001, Attention: President. Any notice, request or other document
shall be deemed to have been given upon receipt if personally delivered, or on
the fifth day after being mailed if mailed, registered or certified mail. The
Company shall notify the Holder in writing of any change of address of the
Company within a reasonable time following such change of address.
10. Descriptive Headings and Governing Law. The descriptive headings
--------------------------------------
of the several sections and paragraphs of this Warrant Certificate are inserted
for convenience only and do not constitute a part of this Warrant Certificate.
This Warrant Certificate shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Delaware.
11. Lost Warrant Certificates or Stock Certificates. Upon receipt of
-----------------------------------------------
evidence reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant Certificate or any stock certificate deliverable
upon the exercise or conversion hereof and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity and, if requested, bond reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of this Warrant Certificate or such stock
certificate, the Company at its expense shall make and deliver a new Warrant
Certificate or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant Certificate or stock certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its officer, thereunder duly authorized this 24th day of March,
1994.
ADVANCED COMMUNICATION TECHNOLOGIES, INC.
By:__________________________________________
President and Chief Executive Officer
ATTEST:
By:_________________________________
Assistant Treasurer
-7-
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise or conversion of Warrant)
TO: ADVANCED COMMUNICATION TECHNOLOGIES, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _______________
shares of Common Stock of ADVANCED COMMUNICATION TECHNOLOGIES, INC. and herewith
makes payment of $____________ therefore, and requests that the certificates for
such shares be issued in the name of, and delivered to ____________________,
whose address is ___________________________________________.
OR
--
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to convert this Warrant into _______________ shares of Common Stock of
ADVANCED COMMUNICATION TECHNOLOGIES, INC., and requests that the certificates
for such shares be issued in the name of, and delivered to ____________________,
whose address is ___________________________________________.
Dated: ______________, 19__
___________________________________
(Signature must conform to name of
Holder as specified on the face of
the Warrant)
___________________________________
(Addressed)
-8-
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant
in accordance with the provisions of
Section 7 of the Warrant Certificate)
For value received, the undersigned hereby sells, assigns, and
transfer unto _____________________ the right represented by the written Warrant
to purchase shares of Common Stock of ADVANCED COMMUNICATION TECHNOLOGIES, INC.
to which the within Warrant relates, and appoints Attorney to transfer such
rights on the books of ADVANCED COMMUNICATION TECHNOLOGIES, INC. with full power
of substitution in the premises.
Dated: _____________, 19__
___________________________________
(Signature must conform to name of
Holder as specified on the face of
the Warrant)
-9-
<PAGE>
EXHIBIT 10.1
VOXWARE, INC.
1994 STOCK OPTION PLAN
----------------------
1. PURPOSE. The purpose of the Voxware, Inc. 1994 Stock Option Plan (the
-------
"Plan") is to enable Voxware, Inc. (the "Company") and its stockholders to
secure the benefits of common stock ownership by key personnel of the Company
and its subsidiaries. The Board of Directors of the Company (the "Board")
believes that the granting of options under the Plan will foster the Company's
ability to attract, retain and motivate those individuals who will be largely
responsible for the profitability and long-term future growth of the Company.
2. STOCK SUBJECT TO THE PLAN. The Company may issue and sell a total of
-------------------------
4,700,000 shares of its common stock (the "Common Stock") pursuant to the Plan.
Such shares may be either authorized and unissued or held by the Company in its
treasury. New options may be granted under the Plan with respect to shares of
Common Stock which are covered by the unexercised portion of an option which has
terminated or expired by its terms, by cancellation or otherwise.
3. ADMINISTRATION. The Plan will be administered by the Board or a
--------------
committee (the "Committee") consisting of at least two directors appointed by
and serving at the pleasure of the Board (or, if there is only one director, the
Committee shall consist of the sole director). After the Company's Common Stock
is registered under Section 12 of the Securities Exchange Act of 1934, the
members of the Committee shall be "disinterested directors" within the meaning
and for the purposes of Rule 16(b)-3 under the Securities Exchange Act of 1934.
Subject to the provisions of the Plan, the Board or the Committee, as the case
may be, acting in its sole and absolute discretion, will have full power and
authority to grant options under the Plan,
<PAGE>
to interpret the provisions of the Plan, to fix and interpret the provisions of
option agreements made under the Plan, to supervise the administration of the
Plan, and to take such other action as may be necessary or desirable in order to
carry out the provisions of the Plan. A majority of the members of the
Committee will constitute a quorum. The Committee may act by the vote of a
majority of its members present at a meeting at which there is a quorum or by
unanimous written consent. The decision of the Board or the Committee, as the
case may be, as to any disputed question, including questions of construction,
interpretation and administration, will be final and conclusive on all persons.
The Committee will keep a record of its proceedings and acts and will keep or
cause to be kept such books and records as may be necessary in connection with
the proper administration of the Plan.
4. ELIGIBILITY. Options may be granted under the Plan to present or
-----------
future key employees of the Company or a subsidiary of the Company (a
"Subsidiary") within the meaning of Section 424(f) of the Internal Revenue Code
of 1986 (the "Code"), and to directors of and consultants to the Company or a
Subsidiary who are not employees. Subject to the provisions of the Plan, the
Board or the Committee, as the case may be, may from time to time select the
persons to whom options will be granted, and will fix the number of shares
covered by each such option and establish the terms and conditions thereof
(including, without limitation, the exercise price, restrictions on
exercisability of the option and/or on the disposition of the shares of Common
Stock issued upon exercise thereof, and whether or not the option is to be
treated as an incentive stock option within the meaning of Section 422 of the
Code (an "Incentive Stock Option").
5. TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan
-------------------------------
will be evidenced by a written agreement in a form approved by the Board or the
-2-
<PAGE>
Committee. Each such option will be subject to the terms and conditions set
forth in this paragraph and such additional terms and conditions not
inconsistent with the Plan as the Board or the Committee deems appropriate.
A. OPTION EXERCISE PRICE. In the case of an option which is not treated
---------------------
as an Incentive Stock Option, the exercise price per share may not be less than
the par value of a share of Common Stock on the date the option is granted; and,
in the case of an Incentive Stock Option, the exercise price per share may not
be less than 100% of the fair market value of a share of Common Stock on the
date the option is granted (110% in the case of an optionee who, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary (a "ten
percent shareholder")). For purposes hereof, the fair market value of a share
of Common Stock on any date will be equal to the closing sale price per share as
published by a national securities exchange on which shares of the Common Stock
are traded on such date or, if there is no sale of Common Stock on such date,
the average of the bid and asked prices on such exchange at the closing of
trading on such date or, if shares of the Common Stock are not listed on a
national securities exchange on such date, the closing price or, if none, the
average of the bid and asked prices in the over the counter market at the close
of trading on such date, or if the Common Stock is not traded on a national
securities exchange or the over the counter market, the fair market value of a
share of the Common Stock on such date as determined in good faith by the Board
or the Committee.
B. OPTION PERIOD. The period during which an option may be exercised will
-------------
be fixed by the Board or the Committee and will not exceed ten years from the
date the option is granted (five years in the case of an Incentive Stock Option
granted to a "ten percent shareholder").
-3-
<PAGE>
C. EXERCISE OF OPTIONS. Except as otherwise determined by the Board or
-------------------
the Committee, no option will become exercisable unless the person to whom the
option was granted remains in the continuous employ or service of the Company or
a Subsidiary for at least six months from the date the option is granted. The
Board or the Committee may determine and set forth in the option agreement any
vesting or other restrictions on the exercisability of an option, subject to
earlier termination of the option as provided herein. All or part of the
exercisable portion of an option may be exercised at any time during the option
period. An option may be exercised by transmitting to the Company (a) a written
notice specifying the number of shares to be purchased, and (b) payment of the
exercise price (or, if applicable, delivery of a secured obligation therefor),
together with the amount, if any, deemed necessary by the Board or the Committee
to enable the Company to satisfy its income tax withholding obligations with
respect to such exercise (unless other arrangements acceptable to the Company
are made with respect to the satisfaction of such withholding obligations).
D. PAYMENT OF EXERCISE PRICE. The purchase price of shares of Common
-------------------------
Stock acquired pursuant to the exercise of an option granted under the Plan may
be paid in cash and/or such other form of payment as may be permitted under the
option agreement, including, without limitation, previously-owned shares of
Common Stock. The Board or the Committee may permit the payment of all or a
portion of the purchase price in installments (together with interest) over a
period of not more than five years.
E. RIGHTS AS A STOCKHOLDER. No shares of Common Stock will be issued in
-----------------------
respect of the exercise of an option granted under the Plan until full payment
therefor has been made (and/or provided for where all or a portion of the
purchase price is being paid in installments). The holder of an option will
have no
-4-
<PAGE>
rights as a stockholder with respect to any shares covered by an option until
the date a stock certificate for such shares is issued to him or her. Except as
otherwise provided herein, no adjustments shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
F. NONTRANSFERABILITY OF OPTIONS. No option shall be assignable or
-----------------------------
transferrable except upon the optionee's death to a beneficiary designated by
the optionee in accordance with procedures established by the Committee or, if
no designated beneficiary shall survive the optionee, pursuant to the optionee's
will or by the laws of descent and distribution. During an optionee's lifetime,
options may be exercised only by the optionee or the optionee's guardian or
legal representative.
G. TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless otherwise
------------------------------------------
determined by the Board or the Committee, if an optionee ceases to be employed
by or to perform services for the Company and any Subsidiary for any reason
other than death or disability (defined below), then each outstanding option
granted to him or her under the Plan will terminate on the date three months
after the date of such termination of employment or service, provided, however,
that, if the optionee's employment or service is terminated by the Company for
cause (defined below), then the option will terminate upon the date of such
termination of employment or service. If an optionee's employment or service is
terminated by reason of the optionee's death or disability (or if the optionee's
employment or service is terminated by reason of his or her disability and the
optionee dies within one year after such termination of employment or service),
then each outstanding option granted to the optionee under the Plan will
terminate on the date one year after the date of such termination of employment
or service (or one year after the later death of a disabled optionee) or, if
earlier, the date specified in the option agreement. For purposes hereof,
unless
-5-
<PAGE>
otherwise agreed by the Board or the Committee in an option agreement, the term
"disability" means the inability of an optionee to perform the customary duties
of his or her employment or other service for the Company or a Subsidiary by
reason of a physical or mental incapacity which is expected to result in death
or be of indefinite duration; and, unless otherwise agreed by the Board or the
Committee in an option agreement, the term "cause" means (1) failure or refusal
by optionee to perform the duties of his or her employment with the Company, (2)
commission by the optionee of a crime involving moral turpitude, or (3) the
optionee's dishonesty or willful engagement in conduct which is injurious to the
business or reputation of the Company, all as determined by the Board in its
sole discretion.
H. OTHER PROVISIONS. The Board or the Committee may impose such other
----------------
conditions with respect to the exercise of options, including, without
limitation, any conditions relating to the application of federal or state
securities laws, as it may deem necessary or advisable.
6. CHANGE IN CONTROL; CAPITAL CHANGES.
----------------------------------
a. Unless otherwise determined by the Board in an option agreement with
respect to any particular option, if any event constituting a "Change in Control
of the Company" shall occur, all options granted under the Plan which are
outstanding at the time a Change of Control of the Company shall occur shall
immediately become exercisable. Unless otherwise determined by the Board in an
option agreement with respect to any particular option, a "Change in Control of
the Company" shall be deemed to occur if (i) there shall be consummated (x) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a merger of the
-6-
<PAGE>
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; provided, however, that stock ownership changes and
changes in the composition of the Board will not constitute a "change in
control" for purposes hereunder if and to the extent any such change occurs as a
result of or in connection with a public offering of the Company's stock.
b. In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Common Stock,
appropriate adjustment shall be made by the Board to the number and option
exercise price per share of Common Stock which may be purchased under any
outstanding options. In the case of a merger, consolidation or similar
transaction which results in a replacement of the Company's Common Stock with
stock of another
-7-
<PAGE>
corporation but does not constitute Change in Control of the Company, the
Company will make a reasonable effort, but shall not be required, to replace any
outstanding options granted under the Plan with comparable options to purchase
the stock of such other corporation, or will, unless otherwise determined by the
Committee or the Board in an option agreement with respect to any particular
option, the Company will provide for immediate maturity of all outstanding
options, with all options not being exercised within the time period specified
by the Board being terminated.
c. In the event of any adjustment in the number of shares covered by any
option pursuant to the provisions hereof, any fractional shares resulting from
such adjustment will be disregarded and each such option will cover only the
number of full shares resulting from the adjustment.
d. All adjustments under this paragraph 6 shall be made by the Board, and
its determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
7. AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend or
-------------------------------------
terminate the Plan. Except as otherwise provided in the Plan with respect to
equity changes, any amendment which would increase the aggregate number of
shares of Common Stock as to which options may be granted under the Plan, change
the minimum option price for options, materially increase the benefits under the
Plan, or modify the class of persons eligible to receive options under the Plan
shall be subject to the approval of the Company's stockholders. No amendment or
termination may affect adversely any outstanding option without the written
consent of the optionee.
8. NO RIGHTS CONFERRED. Nothing contained herein will be deemed to give
-------------------
any individual any right to receive an option under the Plan or to be retained
in the employ or service of the Company or any Subsidiary.
-8-
<PAGE>
9. GOVERNING LAW. The Plan and each option agreement shall be governed by
-------------
the laws of the State of Delaware.
10. DECISIONS AND DETERMINATIONS OF COMMITTEE TO BE FINAL. Except to the
-----------------------------------------------------
extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.
11. TERM OF THE PLAN. The Plan shall be effective as of the date on which
----------------
it is adopted by the Board, subject to the approval of the stockholders of the
Company within one year from the date of adoption by the Board. The Plan will
terminate on the date ten years after the date of adoption by the Board, unless
sooner terminated by the Board. The rights of optionees under options
outstanding at the time of the termination of the Plan shall not be affected
solely by reason of the termination and shall continue in accordance with the
terms of the option (as then in effect or thereafter amended).
-9-
<PAGE>
EXHIBIT 10.2
VOXWARE, INC.
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
AGREEMENT made as of the ___ day of _______, 199__, by and between
VOXWARE, INC., a Delaware corporation (the "Company"), and ____________________
(the "Optionee").
W I T N E S S E T H
-------------------
WHEREAS, pursuant to the Voxware, Inc. 1994 Stock Option Plan (the
"Plan"), the Company desires to grant to the Optionee and the Optionee desires
to accept an option to purchase shares of common stock, $.001 par value, of the
Company (the "Common Stock") upon the terms and conditions set forth in this
agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. The Company hereby grants to the Optionee an option to
-----
purchase ______ shares of Common Stock, at a purchase price per share of $____.
This option is intended to be treated as an option which qualifies as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Restrictions on Exercisability. Except as specifically provided
------------------------------
otherwise herein, the option will become exercisable in accordance with the
following schedule based upon the period of the Optionee's continuous employment
or service with the Company or a subsidiary thereof following _________, 199__:
<TABLE>
<CAPTION>
Period Incremental Cumulative
of Continuous Percentage of Percentage of
Employment/ Option Option
Service Exercisable Exercisable
---------------- ------------- --------------
<S> <C> <C>
Less than 1 year 0% 0%
1 year 25% 25%
2 years 25% 50%
3 years 25% 75%
4 years or more 25% 100%
</TABLE>
<PAGE>
No shares of Common Stock may be purchased hereunder if the Optionee shall not
have remained in the continuous employ or service of the Company or a subsidiary
from the date hereof through _________, 199__. If the Optionee performs
services for the Company or a subsidiary thereof in a capacity other than as a
director or employee, then, for purposes hereof, those services will be deemed
to be continuous until they are terminated, and they will be deemed to be
terminated at the time provided therefor in the consulting or other agreement
governing the performance of such services or, if there is no such agreement, at
the time the Company or such subsidiary notifies the Optionee that it no longer
contemplates the utilization of such services. Unless sooner terminated, the
option will expire if and to the extent it is not exercised within ten years
from the date hereof.
3. Exercise. The option may be exercised in whole or in part in
--------
accordance with the above schedule by delivering to the Secretary of the Company
(a) a written notice specifying the number of shares to be purchased, and (b)
payment in full of the exercise price, together with the amount, if any, deemed
necessary by the Company to enable it to satisfy any income tax withholding
obligations with respect to the exercise (unless other arrangements acceptable
to the Company are made for the satisfaction of such withholding obligations).
The exercise price shall be payable in cash or by bank or certified check. The
Company may (in its sole and absolute discretion) permit all or part of the
exercise price to be paid with previously-owned shares of Common Stock, or in
installments (together with interest) evidenced by the Optionee's secured
promissory note.
4. Rights as Stockholder. No shares of Common Stock shall be sold or
---------------------
delivered hereunder until full payment for such shares has been made (or, to the
-2-
<PAGE>
extent payable in installments, provided for). The Optionee shall have no
rights as a stockholder with respect to any shares covered by the option until a
stock certificate for such shares is issued to the Optionee. Except as
otherwise provided herein, no adjustment shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
5. Nontransferability. The option is not assignable or transferable
------------------
except upon the Optionee's death to a beneficiary designated by the Optionee or,
if no designated beneficiary shall survive the Optionee, pursuant to the
Optionee's will and/or the laws of descent and distribution. During an
Optionee's lifetime, the option may be exercised only by the Optionee or the
Optionee's guardian or legal representative.
6. Termination of Service, Disability or Death. If the Optionee
-------------------------------------------
ceases to be employed by or to perform services for the Company and any
subsidiary for any reason other than death or disability, then, unless sooner
terminated under the terms hereof, the option will terminate three months after
the date of the Optionee's termination of employment or service, or if the
Optionee's employment or service is terminated by the Company for cause, as
defined below, then the option will terminate on the date of the Optionee's
termination of employment or service. If the Optionee's employment or service
is terminated by reason of the Optionee's death or disability (or if the
Optionee's employment or service is terminated by reason of his or her
disability and the Optionee dies within one year after such termination of
employment or service), then, unless sooner terminated under the terms hereof,
the option will terminate on the date one year after the date of such
termination of employment or service (or one year after the Optionee's later
death). For the purposes hereof, the
-3-
<PAGE>
term "disability" means the inability of the Optionee to perform the customary
duties of his or her employment or other service for the Company or a subsidiary
by reason of a physical or mental incapacity which is expected to result in
death or to last indefinitely; and the term "cause" shall include "Cause" as
defined in the Employment Agreement, dated _________, 199__, by and between the
Optionee and the Company, and shall also mean (a) failure or refusal by the
Optionee to perform the duties of his or her employment with the Company, (b)
commission by the Optionee of a crime involving moral turpitude, or (c) the
Optionee's dishonesty or willful engagement in conduct which is injurious to the
business or reputation of the Company, all as determined by the Board in its
sole discretion.
7. Change in Control; Capital Changes.
----------------------------------
(a) If any event constituting a "Change in Control of the Company"
shall occur, the options shall, unless sooner terminated under the terms hereof,
immediately become exercisable. A "Change in Control of the Company" shall be
deemed to occur if (i) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term
-4-
<PAGE>
is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; provided, however, that stock
ownership changes and changes in the composition of the Board will not
constitute a "Change in Control of the Company" for all purposes hereunder if
and to the extent any such change occurs as a result of or in connection with a
public offering of the Company's stock.
(b) In the event of any stock split, stock dividend or similar
transaction which increases or decreases the number of outstanding shares of
Common Stock, appropriate adjustment shall be made by the Board of Directors of
the Company to the number and option exercise price per share of Common Stock
which may be purchased under the option. In the case of a merger, consolidation
or similar transaction which results in a replacement of the Company's Common
Stock and stock of another corporation but does not constitute Change in Control
of the Company, the Company will make a reasonable effort, but shall not be
required, to replace the option granted hereunder with comparable options to
purchase the stock of such other corporation, or will provide for immediate
maturity of the option, with the option being
-5-
<PAGE>
terminated if not exercised within the time period specified by the Board of
Directors of the Company.
(c) In the event of any adjustment in the number of shares covered by
any option pursuant to the provisions hereof, any fractional shares resulting
from such adjustment will be disregarded and each such option will cover only
the number of full shares resulting from the adjustment.
(d) All adjustments under this Section 7 shall be made by the Board of
Directors of the Company, and its determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.
8. No Employment Rights. Nothing in this agreement shall give the
--------------------
Optionee any right to continue in the employ or service of the Company or a
subsidiary thereof, or interfere in any way with the right of the Company or a
subsidiary thereof to terminate the employment or service of the Optionee.
9. Provisions of Plan. The provisions of the Plan shall govern if
------------------
and to the extent that there are inconsistencies between those provisions and
the provisions hereof. The Optionee acknowledges receipt of a copy of the Plan
prior to the execution of this agreement.
10. Administration. The committee appointed by the Board of
--------------
Directors of the Company to administer the Plan will have full power and
authority to interpret and apply the provisions of this agreement and act on
behalf of the Company in connection with this agreement, and the decision of
said committee as to any matter arising under this agreement shall be binding
and conclusive as to all persons.
-6-
<PAGE>
11. Miscellaneous.
-------------
(a) This agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(b) This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware. This agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and may
not be modified except by written instrument executed by the parties.
IN WITNESS WHEREOF, this agreement has been executed as of the date
first above written.
VOXWARE, INC.
-------------
By:
------------------------
________________________
Optionee
-7-
<PAGE>
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
-------------------------
This INDEMNIFICATION AGREEMENT is made as of __________ __, 1996,
between Voxware, Inc., a Delaware corporation ("Voxware"), and
_____________________ (collectively with such person's heirs, executors,
administrators and other personal representatives, the "Indemnitee"), an officer
or director of Voxware.
WHEREAS, the Board of Directors has concluded that Voxware's officers,
directors, employees and agents should be provided with reasonable and
appropriate protection against inordinate risks in order to insure that the most
capable persons will be attracted to such positions; and, therefore, has
determined to contractually obligate itself to indemnify in a reasonable and
adequate manner its officers and directors, and to assume for itself liability
for expenses and damages in connection with claims lodged against such persons
as a result of their service to Voxware;
WHEREAS, applicable law empowers corporations to indemnify a person
who serves as a director, officer, employee or agent of a corporation or a
person who serves at the request of a corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise; and
WHEREAS, the parties believe it appropriate to memorialize and
reaffirm Voxware's indemnification obligations to Indemnitee and, in addition,
to set forth the agreements contained herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. Indemnification. Indemnitee shall be indemnified and held
---------------
harmless by Voxware against any judgments, penalties, fines, amounts paid in
settlement and Expenses (as hereinafter defined) incurred in connection with any
actual or threatened Proceeding (as hereinafter defined) to the fullest extent
permitted by Voxware's Certificate of Incorporation (the "Certificate"), By-Laws
and the General Corporation Law of the State of Delaware ("Delaware Law") as in
effect on the date hereof and to such greater extent as Delaware Law may
hereafter from time to time permit. In addition, Voxware agrees to advance to
Indemnitee Expenses incurred in connection with the foregoing. "Proceeding"
includes, without limitation, any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other actual,
threatened or contemplated proceeding, whether civil, criminal, administrative
or investigative, whether by a third party, by or in the right of Voxware or by
Indemnitee to enforce any rights under this Agreement or otherwise against
Voxware or its affiliates.
2. Interim Expenses. Expenses (including attorneys' fees) incurred
----------------
by Indemnitee in defending any civil, criminal, administrative, or investigative
action, suit or proceeding for which Indemnitee may be entitled to
indemnification hereunder shall be paid by Voxware in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of Indemnitee to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by
<PAGE>
Voxware hereunder. "Expenses" means all attorneys' fees and expenses,
retainers, court costs, transcript costs, duplicating costs, fees of experts,
fees of witnesses, travel expenses, printing and binding costs, telephone
charges, postage and delivery fees, service fees, all other costs and expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating or being or preparing to be a
witness in a Proceeding, and per diem payments to Indemnitee in an amount equal
to the last annual salary payable under any employment agreement between the
Company and Indemnitee divided by 365 for each day spent by Indemnitee in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating or being or preparing to be a witness in a Proceeding.
3. Exceptions to Indemnifications. Notwithstanding the foregoing, no
------------------------------
indemnity pursuant to Sections 1 or 2 shall be paid by Voxware:
(a) on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by
Indemnitee of securities of Voxware pursuant to the provisions of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
(b) on account of Indemnitee's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(c) on account of Indemnitee's conduct which is finally adjudged to
have constituted a breach of Indemnitee's duty of loyalty to Voxware or resulted
in any personal profit or advantage to which Indemnitee was not legally
entitled;
(d) for which payment is actually made to Indemnitee under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreements;
(e) if a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(f) in connection with any proceeding (or part thereof) initiated by
Indemnitee, or any proceeding by Indemnitee against Voxware or its directors,
officers, employees or other indemnitees, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of Voxware, (iii) such indemnification is provided by
Voxware, in its sole discretion, pursuant to the powers vested in Voxware under
applicable law, or (iv) the proceeding is initiated pursuant to Section 4
hereof.
4. Failure to Indemnify. (a) If a claim under this Agreement,
--------------------
under any statute, or under any provision of the Certificate or By-Laws
providing for
-2-
<PAGE>
indemnification, is not paid in full by Voxware within 45 days after a written
request for payment thereof has first been received by Voxware, Indemnitee may,
but need not, at any time thereafter bring an action against Voxware to recover
the unpaid amount of the claim and, if successful in whole or in part,
Indemnitee shall also be entitled to be paid for Indemnitee's reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with successfully establishing the right to indemnification, in whole
or in part, in any such action shall also be indemnified by Voxware.
(b) It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for Voxware to indemnify Indemnitee for
the amount claimed, but the burden of proving such defense shall be on Voxware
and Indemnitee shall be entitled to receive interim payments of Interim Expenses
pursuant to Paragraph 2 unless and until such defense may be finally adjudicated
by court order or judgment from which no further right of appeal exists.
5. Certain Agreements of Indemnitee.
--------------------------------
(i) Indemnitee agrees to do all things reasonably requested by the
Board of Directors of Voxware to enable Voxware to coordinate Indemnitee's
defense with, if applicable, Voxware's defense, provided, however, that
Indemnitee shall not be required to take any action that would in any way
prejudice his or her defense or waive any defense or position available to him
or her in connection with any action;
(ii) Indemnitee agrees to do all things reasonably requested by the
Board of Directors of Voxware to subrogate to Voxware any rights of recovery
(including rights to insurance or indemnification from persons other than
Voxware) which Indemnitee may have with respect to any action;
(iii) Indemnitee agrees to be represented in any action by a law firm
mutually acceptable to Voxware and Indemnitee; and
(iv) Indemnitee agrees to cooperate with Voxware and its counsel and
maintain any confidences revealed to him or her by Voxware in connection with
Voxware's defense of any action. Voxware agrees to cooperate with Indemnitee
and his or her counsel and maintain any confidences revealed to it by Indemnitee
in connection with Indemnitee's defense of any action.
6. Successors. This Agreement establishes contract rights which
----------
shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
-3-
<PAGE>
7. Contract Rights Not Exclusive. The contract rights conferred by
-----------------------------
this Agreement shall be in addition to, but not exclusive of, any other right
which Indemnitee may have or may hereafter acquire under any statute, provision
of the Certificate or By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
8. Indemnitee's Obligations. Indemnitee shall advise Voxware in
------------------------
writing of the institution of any investigation, claim, action, suit, or
proceeding which is or may be subject to this Agreement and generally keep
Voxware informed of, and consult with Voxware with respect to, the status of any
such investigation, claim action, suit or proceeding.
9. Severability. Should any provision or paragraph of this
------------
Agreement, or any clause hereof, be held to be invalid, illegal or
unenforceable, in whole or in part, the remaining provisions, paragraphs and
clauses of this Agreement shall remain fully enforceable and binding on the
parties.
10. Choice of Law. The validity, interpretation, performance and
-------------
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
11. Continuation of Indemnification. The indemnification under this
-------------------------------
Agreement shall continue as to Indemnitee even though he or she may have ceased
to be a director, officer, employee and/or agent of Voxware and shall inure to
the benefit of the heirs and personal representatives of Indemnitee. Voxware
acknowledges that, in providing services to Voxware, Indemnitee is relying on
this Agreement. Accordingly, Voxware agrees that its obligations hereunder will
survive (i) any actual or purported termination of this Agreement by Voxware or
its successors or assigns whether by operation of law or otherwise, (ii) any
change in the Certificate or By-Laws and (iii) termination of the Indemnitee's
services to Voxware (whether such services were terminated by Voxware or the
Indemnitee), whether or not a claim is made or an action or Proceeding is
threatened or commenced before or after the actual or purported termination of
this Agreement, change in the Certificate or By-Laws or termination of
Indemnitee's services.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the day and year first above written.
_____________________________________________
Name:
VOXWARE, INC.
By:__________________________________________
-4-
<PAGE>
EXHIBIT 10.4
VOXWARE, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of December 19, 1995
<PAGE>
VOXWARE, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of December 19, 1995
INDEX
-----
Page
----
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE I PURCHASE AND SALE OF SHARES..................................... 1
1.1 Purchase and Sale of Series A Preferred Stock at Closing........ 1
1.2 The Conversion Shares........................................... 1
1.3 Closing......................................................... 2
1.4 Use of Proceeds................................................. 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE COMPANY..................................................... 2
2.1 Organization and Corporate Power................................ 2
2.2 Authorization................................................... 2
2.3 Government Approvals............................................ 3
2.4 Authorized and Outstanding Stock................................ 3
2.5 Subsidiaries.................................................... 4
2.6 Financial Information; Business Plan............................ 4
2.7 Events Subsequent to the Date of the Financial Statements....... 4
2.8 Litigation...................................................... 5
2.9 Compliance with Laws and Other Instruments...................... 5
2.10 Taxes........................................................... 5
2.11 Real Property................................................... 6
2.12 Personal Property............................................... 6
2.13 Patents, Trademarks, etc........................................ 6
2.14 Agreements of Directors, Officers and Employees................. 7
2.15 Governmental and Industrial Approvals........................... 8
2.16 Federal Reserve Regulations..................................... 8
2.17 Contracts and Commitments....................................... 8
2.18 Securities Act.................................................. 8
2.19 Registration Rights............................................. 8
2.20 Insurance Coverage.............................................. 8
2.21 Employee Matters................................................ 9
2.22 No Brokers or Finders........................................... 9
2.23 Transactions with Affiliates.................................... 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
2.24 Assumptions, Guarantees, etc. of Indebtedness
of Other Persons................................................ 9
2.25 Disclosures..................................................... 10
2.26 Software Development............................................ 10
ARTICLE IIA REPRESENTATIONS AND WARRANTIES OF
THE MANAGERS.................................................... 10
ARTICLE III AFFIRMATIVE COVENANTS OF THE COMPANY............................ 13
3.1 Accounts and Reports............................................ 13
3.2 Payment of Taxes................................................ 14
3.3 Maintenance of Key Man Insurance................................ 14
3.4 Compliance with Laws, etc....................................... 14
3.5 Inspection...................................................... 15
3.6 Corporate Existence; Ownership of Subsidiaries.................. 15
3.7 Compliance with ERISA........................................... 15
3.8 Board Approval.................................................. 16
3.9 Financings...................................................... 16
3.10 Meetings of the Board of Directors.............................. 16
3.11 Regular Course of Business...................................... 16
3.12 Change in Nature of Business.................................... 16
3.13 Common Stock Holders............................................ 16
ARTICLE IV NEGATIVE COVENANTS OF THE COMPANY............................... 16
4.1 Investments in Other Persons.................................... 17
4.2 Distributions................................................... 17
4.3 Dealings with Affiliates........................................ 18
4.4 Merger, Consolidation, Sale of Assets, Acquisition, and Other
Actions......................................................... 18
4.5 Awards and Option Shares........................................ 18
4.6 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions................................................... 19
4.7 No Conflicting Agreements....................................... 19
4.8 Compensation.................................................... 19
4.9 Fiscal Year..................................................... 19
4.10 Restricted Activities........................................... 19
4.11 List of Common Stock Holders.................................... 19
ARTICLE V PREEMPTIVE RIGHT................................................ 19
5.1 Right of Purchase............................................... 19
5.2 Definition of New Securities.................................... 20
5.3 Notice from the Company......................................... 20
5.4 Sale by the Company............................................. 21
</TABLE>
-ii-
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<TABLE>
<CAPTION>
<C> <S> <C>
5.5 Termination of Rights........................................... 21
ARTICLE VI INVESTMENT REPRESENTATIONS...................................... 21
6.1 Representations and Warranties.................................. 21
6.2 Permitted Sales; Legends........................................ 22
6.3 Strategic Relationships......................................... 22
ARTICLE VII REGISTRATION RIGHTS............................................. 23
7.1 Certain Definitions............................................. 23
7.2 Requested Registrations......................................... 23
7.3 "Piggy Back" Registrations...................................... 25
7.4 Expenses of Registration........................................ 25
7.5 Registration on Form S-3........................................ 26
7.6 Registration Procedures......................................... 26
7.7 Indemnification................................................. 27
7.8 Information by Holder........................................... 29
7.9 Limitations on Registration Rights.............................. 29
7.10 Exception to Registration....................................... 29
7.11 Rule 144 Reporting.............................................. 30
7.12 Listing Application............................................. 30
7.13 Damages......................................................... 30
ARTICLE VIII CONDITIONS OF PURCHASERS' OBLIGATION......................... 31
8.1 Effect of Conditions............................................ 31
8.2 Representations and Warranties.................................. 31
8.3 Performance..................................................... 31
8.4 Opinions of Counsel............................................. 31
8.5 Certified Documents, etc........................................ 31
8.6 No Material Adverse Change...................................... 32
8.7 Shareholders' Agreement......................................... 32
8.8 Amendment to Certificate of Incorporation....................... 32
8.9 Board Election.................................................. 32
8.10 Operations Committee............................................ 32
8.11 Compensation Committee.......................................... 32
8.12 Consents and Waivers............................................ 32
ARTICLE IX CONDITIONS OF THE COMPANY'S OBLIGATION.......................... 33
ARTICLE X CERTAIN DEFINITIONS............................................. 33
ARTICLE XI TERMINATION..................................................... 35
11.1 Termination by Mutual Written Consent........................... 35
</TABLE>
-iii-
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<TABLE>
<CAPTION>
<C> <S> <C>
11.2 Termination for Breach.......................................... 35
11.3 Termination for Delay........................................... 35
11.4 Rights After Termination........................................ 35
ARTICLE XII MISCELLANEOUS................................................... 36
12.1 Survival of Representations..................................... 36
12.2 Parties in Interest............................................. 36
12.3 Shares Owned by Affiliates...................................... 36
12.4 Amendments and Waivers.......................................... 36
12.5 Notices......................................................... 36
12.6 Expenses........................................................ 37
12.7 Counterparts.................................................... 37
12.8 Effect of Headings.............................................. 37
12.9 Adjustments..................................................... 37
12.10 Governing Law................................................... 37
</TABLE>
-iv-
<PAGE>
December 19, 1995
To: The Persons listed on
Schedule 1.1 attached hereto:
------------
Re: Series A Preferred Stock
------------------------
Gentlemen:
VOXWARE, INC., a Delaware corporation (the "Company"), and Michael
Goldstein, J. Gerard Aguilar, and Kenneth H. Traub (individually, a "Manager"
and collectively, the "Managers") hereby agree with you as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
1.1 Purchase and Sale of Series A Preferred Stock at Closing. At the
--------------------------------------------------------
Closing (as herein defined), the Company will sell to those persons listed on
Schedule 1.1 (the "Purchasers") an aggregate of 4,000,000 shares of the
- ------------
Company's Series A Preferred Stock, par value $.001 per share (the "Series A
Preferred Stock" or "Preferred Stock"), at a price of $ 1.00 per share, for an
aggregate purchase price of $4,000,000 payable as provided in Section 1.3. The
Series A Preferred Stock shall have the rights, terms and privileges set forth
in the Certificate of the Designations, Powers, Preferences and Rights of the
Series A Preferred Stock attached as Exhibit A hereto (the "Certificate of
---------
Designation"). The shares of Series A Preferred Stock purchased pursuant to
this Section 1.1 are referred to herein as the "Purchased Shares." The
Purchased Shares to be sold by the Company at the Closing to each Purchaser is
set forth in Schedule 1.1.
-------------
1.2 The Conversion Shares. The Company has authorized and reserved and
---------------------
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of common stock, par value $.001 per share (the "Common Stock"), to
satisfy the rights of conversion of the holders of the Purchased Shares. The
shares of Common Stock issued or issuable upon conversion of the Purchased
Shares are referred to herein as the "Conversion Shares."
<PAGE>
1.3 Closing. Subject to the satisfaction or waiver of the conditions set
-------
forth in Articles VIII and IX hereof, the purchase of the Purchased Shares
pursuant to Section 1.1 shall be made at a closing (the "Closing") to be held at
the offices of Hutchins, Wheeler & Dittmar, A Professional Corporation, 101
Federal Street, Boston, Massachusetts, at 10:00 A.M. on (i) December 19, 1995,
or (ii) at such other time and on such other date as the Purchasers and the
Company may mutually agree. Payment at the Closing for the Purchased Shares
shall be by wire transfer payable in immediately available federal funds. Each
Purchaser shall pay that amount for the Purchased Shares being acquired by it at
the Closing as described on Schedule 1.1 hereof. At the Closing, the Company
------------
will deliver to each Purchaser one or more certificates representing the
Purchased Shares purchased by such Purchaser, in such denominations and issued
in such names as may be requested by such Purchaser.
1.4 Use of Proceeds. As an integral part of the purpose and structure of
---------------
the financing contemplated herein, the Company shall use the proceeds received
upon the sale of the Purchased Shares at the Closing to (i) fund general working
capital, and (ii) pay all fees, costs and expenses incurred by the Company in
connection with the transactions contemplated by this Agreement, including,
without limitation, the costs and expenses of special counsel to the Purchasers
which the Company is obligated to pay pursuant to Section 12.6 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE COMPANY
-----------
In order to induce the Purchasers to purchase the Purchased Shares, the
Company, makes the following representations and warranties which shall be true,
correct and complete in all respects on the date hereof and shall be true,
correct and complete in all respects as of the Closing:
2.1 Organization and Corporate Power. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and to carry on its business as presently conducted. The Company is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction wherein the character of its property, or the nature of the
activities presently conducted by it, makes such qualification necessary.
2.2 Authorization. The Company has all necessary corporate power and has
-------------
taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement and the
Shareholders' Agreement referred to in Section 8.7 and any other agreements or
instruments executed by the Company in connection herewith or therewith
(collectively, the "Related Agreements"), and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Purchased Shares
-2-
<PAGE>
and the Conversion Shares issuable upon conversion of the Purchased Shares.
Sufficient shares of authorized but unissued Common Stock have been reserved for
issuance upon conversion of the Purchased Shares. The issuance of the Purchased
Shares does not, and the Conversion Shares upon conversion of the Purchased
Shares will not, require any further corporate action and is not and will not be
subject to any preemptive right, right of first refusal or the like. This
Agreement, the Related Agreements and the other agreements and instruments
executed by the Company in connection herewith or therewith will each be a valid
and binding obligation of the Company enforceable in accordance with its
respective terms.
2.3 Government Approvals. No consent, approval, license or authorization
--------------------
of, or designation, declaration or filing with, any court or governmental
authority is or will be required on the part of the Company in connection with
the execution, delivery and performance by the Company of this Agreement, any of
the Related Agreements and any other agreements or instruments executed by the
Company in connection herewith or therewith, or in connection with the issuance
of the Purchased Shares or the Conversion Shares upon conversion of the
Purchased Shares, except for (i) those which have already been made or granted
and (ii) and those required under federal and applicable state securities laws
in order to comply with Article VII hereof.
2.4 Authorized and Outstanding Stock. At the Closing, before giving
--------------------------------
effect to the transactions to be effected at the Closing, the authorized capital
stock of the Company will consist of (i) 30,000,000 shares of Common Stock, of
which 11,545,000 shares are validly issued and outstanding and held of record
and owned beneficially as set forth in Schedule 2.4 attached hereto; and (ii)
------------
10,000,000 shares of Preferred Stock, of which 4,000,000 shares will have been
designated as Series A Preferred Stock with the rights, terms and privileges set
forth in Exhibit A, and of which no shares will be issued or outstanding.
---------
Immediately prior to the Closing, (i) 2,200,000 shares of Common Stock will be
reserved for issuance to officers, directors, employees and consultants of the
Company under the 1994 Stock Option Plan (of which, options for 1,929,000 shares
of common stock have been granted and outstanding); (ii) 90,000 shares of Common
Stock will be reserved for issuance upon exercise of options to purchase Common
Stock held and owned beneficially as set forth on Schedule 2.4; and (iii)
------------
2,000,000 shares of Common Stock will be reserved for issuance upon exercise of
warrants held and owned beneficially as set forth on Schedule 2.4. There are no
------------
treasury shares held by the Company. All issued and outstanding shares of
capital stock are, and when issued in accordance with the terms hereof and the
Certificate of Designation, all Purchased Shares and Conversion Shares issued
upon conversion of the Purchased Shares will be, duly and validly authorized,
validly issued and fully paid and non-assessable and free from any restrictions
on transfer, except for restrictions imposed by federal or state securities or
"blue-sky" laws and except for those imposed pursuant to this Agreement or any
Related Agreement. Except as set forth on Schedule 2.4, there are no
------------
outstanding warrants, options, commitments, preemptive rights, rights to acquire
or purchase, conversion rights or demands of any character relating to the
capital stock or other securities of the Company. All issued and outstanding
shares of capital stock of the Company were issued (i) in transactions exempt
from the
-3-
<PAGE>
registration provisions of the Act, and (ii) in compliance with or in
transactions exempt from the registration provisions of applicable state
securities or "blue-sky" laws.
2.5 Subsidiaries. The Company has no Subsidiaries nor any investment or
------------
other interest in, or any outstanding loan or advance to or from, any Person,
including, without limitation, any officer, director or shareholder.
2.6 Financial Information; Business Plan. The Company has previously
------------------------------------
delivered to the Purchasers (i) the Company's Business Plan, dated as of October
1995, together with certain written projections (collectively, the "Business
Plan"); (ii) the financial statements of the Company for each of the fiscal
years ended May 31, 1995 and May 31, 1994, audited by Ernst & Young L.L.P., the
Company's certified public accountants (collectively, the "Financial
Statements"), and (iii) the unaudited balance sheet of the Company at August 31,
1995, and the related statements of earnings, shareholders' equity and changes
in financial condition for the three (3) months then ended (the "Unaudited
Financial Statements"). The Financial Statements and the Unaudited Financial
Statements are complete and correct, are in accordance with the books and
records of the Company and present fairly in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods the
financial condition and results of operations of the Company as of the dates and
for the periods shown. The Company has no liability, contingent or otherwise,
which is not adequately reflected in or reserved against in the Financial
Statements or the Unaudited Financial Statements that could materially and
adversely affect the financial condition of the Company. Since the date of the
Unaudited Financial Statements, (i) there has been no change in the business,
assets, liabilities, condition (financial or otherwise) or operations of the
Company except for changes in the ordinary course of business which,
individually or in the aggregate, have not been materially adverse, and (ii)
none of the business, prospects, condition (financial or otherwise), operations,
property or affairs of the Company have been materially adversely affected by
any occurrence or development, individually or in the aggregate, whether or not
insured against.
2.7 Events Subsequent to the Date of the Financial Statements. Except as
---------------------------------------------------------
set forth on Schedule 2.7, since May 31, 1995, the Company has not (i) issued
------------
any stock, bond or other corporate security, (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Unaudited Financial Statements and current
liabilities incurred since May 31, 1995, in the ordinary course of business,
(iv) declared or made any payment or distribution to stockholders or purchased
or redeemed any shares of its capital stock or other securities, (v) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, other
than liens of current real property taxes not yet due and payable, (vi) sold,
assigned or transferred any of its tangible assets except in the ordinary course
of business, or canceled any debt or claim, except in the ordinary course of
business, (vii) sold, assigned, transferred or
-4-
<PAGE>
granted any license with respect to any patent, trademark, trade name, service
mark, copyright, trade secret or other intangible asset, except pursuant to
license or other agreements entered into in the ordinary course of business,
(viii) suffered any loss of property or waived any right of substantial value
whether or not in the ordinary course of business, (ix) made any change in
officer compensation, (x) made any material change in the manner of business or
operations of the Company, (xi) entered into any transaction except in the
ordinary course of business or as otherwise contemplated hereby or (xii) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8, there is
---------- ------------
no litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened, against the Company or affecting any of
the Company's properties or assets, or against any officer, key employee or
Current Shareholder (as defined in the Shareholders' Agreement) of the Company
in his capacity as such, nor, to the knowledge of the Company, has there
occurred any event or does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted with any
substantial chance of recovery where such recovery would likely have a material
adverse effect on the Company or current shareholder. Neither the Company, nor
any officer, key employee or Current Shareholder of the Company in his capacity
as such is, to the knowledge of the Company, in default with respect to any
order, writ, injunction, decree, ruling or decision of any court, commission,
board or other government agency which may materially and adversely affect the
business or assets of the Company.
2.9 Compliance with Laws and Other Instruments. The Company is in
------------------------------------------
compliance with all of the provisions of this Agreement and of its charter and
by-laws, and in all material respects with the provisions of each mortgage,
indenture, lease, license, other agreement or instrument, judgment, decree,
judicial order, statute, and regulation by which it is bound or to which it or
to which any of its properties is subject. Neither the execution, delivery or
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Purchased Shares or the Conversion Shares upon
conversion of the Purchased Shares, with or without the giving of notice or
passage of time, or both, will violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company pursuant to any provision of the Company's charter or
by-laws, or any statute, rule or regulation, contract, lease, judgment, decree
or other document or instrument by which the Company is bound or to which the
Company or any of its properties are subject, or, to the knowledge of the
Company, will cause the Company to lose the benefit of any right or privilege it
presently enjoys.
2.10 Taxes. The Company has filed all tax returns (including statements
-----
of estimated taxes owed) required to be filed within the applicable periods for
such filings and has paid all taxes required to be paid, and has established
adequate reserves (net of estimated tax payments already made) for the payment
of all taxes payable in respect to the period subsequent to the last periods
covered by such returns. No deficiencies
-5-
<PAGE>
for any tax are currently assessed against the Company, and no tax returns of
the Company have ever been audited, and, to the knowledge of the Company, there
is no such audit pending or contemplated. There is no tax lien, whether imposed
by any federal, state or local taxing authority, outstanding against the assets,
properties or business of the Company. For the purposes of this Agreement, the
term "tax" shall include all federal, state and local taxes, including income,
franchise, property, sales, withholding, payroll and employment taxes.
2.11 Real Property.
-------------
(a) Schedule 2.11 sets forth the addresses and uses of all real
-------------
property that the Company owns, leases or subleases, and any lien or encumbrance
on any such owned real property or the Company's leasehold interest therein,
specifying in the case of each such lease or sublease, the name of the lessor or
sublessor, as the case may be, the lease term and the obligations of the lessee
thereunder.
(b) Except as set forth on Schedule 2.11, the Company has good and
-------------
marketable title to, and owns free and clear of all liens and encumbrances, all
property listed as owned by the Company on Schedule 2.11, and there is no
-------------
material violation of any law, regulation or ordinance (including without
limitation laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company.
(c) There are no defaults by the Company or, to the knowledge of the
Company, by any other party thereto, which might curtail in any material respect
the present use of the Company's property listed on Schedule 2.11. The
-------------
performance by the Company of this Agreement and the Related Agreements will not
result in the termination of, or in any increase of any amounts payable under,
any lease listed on Schedule 2.11.
-------------
2.12 Personal Property. Except as set forth on Schedule 2.12 and except
----------------- -------------
for property sold or otherwise disposed of in the ordinary course of business
since May 31, 1995, the Company owns free and clear of any liens or
encumbrances, all of the personal property reflected as owned by the Company in
the balance sheet contained in the Unaudited Financial Statements, and all other
material items of personal property acquired by the Company through the date
hereof. All material items of such personal property are in good operating
condition, normal wear and tear excepted.
2.13 Patents, Trademarks, etc. set forth on Schedule 2.13 is a list and
------------------------- -------------
brief description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company, or
of which the Company is a licensor or licensee or in which the Company has any
right, and in each case a brief description of the nature of such right. The
Company believes it owns or possesses adequate licenses or other rights to use
all patents, patent applications, trademarks,
-6-
<PAGE>
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") necessary to the conduct of its business
as conducted. The Company knows of know reason today that it will not be able
to obtain adequate licenses or other rights to use the Intellectual Property
necessary to the conduct of its business as proposed to be conducted in the
Business Plan, and no claim is pending or, to the knowledge of the Company,
threatened against the Company to the effect that the operations of the Company
infringe upon or conflict with the asserted rights of any other person under any
Intellectual Property, and there is no known basis for any such claim (whether
or not pending or threatened). No claim is pending or, to the knowledge of the
Company, threatened against the Company to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and there is no
known basis for any such claim (whether, or not pending or threatened). The
Company has not granted or assigned to any other person or entity any right to
assemble or sell the products or proposed products or to provide the services or
proposed services of the Company except for subcontractors, distributors or
other agents retained in the ordinary course of business. Neither the Managers
nor any other current or former stockholder, employee, officer or director of
the Company has (directly or indirectly) any right, title or interest in any of
the rights described on Schedule 2.13 other than such right which such Person
-------------
may enjoy as a stockholder of the Company.
2.14 Agreements of Directors, Officers and Employees. To the knowledge of
-----------------------------------------------
the Company, no third party has claimed or has reason to claim that any of the
Managers, directors, key employees, officers or key consultants of the Company
(collectively, "Key Employees") has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or non-disclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company or its
subsidiaries which suggests that such a claim might be contemplated. To the
knowledge of the Company, no Key Employee has employed or proposes to employ any
trade secret or any information or documentation proprietary to any former
employee, and to the knowledge of the Company, no Key Employee has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company and its subsidiaries, and the Company has no reason to believe
there will be any such employment or violation. To the knowledge of the
Company, none of the execution or delivery of or performance under this
Agreement or the Related Agreements, or the carrying on of the business of the
Company officers, employees or agents by any officer, director or Key Employee
of the Company or a subsidiary, or the conduct or proposed conduct of the
business of the Company or a subsidiary, will conflict with or result in
-7-
<PAGE>
a breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any such person is obligated.
2.15 Governmental and Industrial Approvals. The Company has all the
-------------------------------------
material permits, licenses, orders, franchises and other rights and privileges
of all federal, state, local or foreign governmental or regulatory bodies
necessary for the Company to conduct its business as presently conducted. All
such permits, licenses, orders, franchises and other rights and privileges are
in full force and effect and, to the knowledge of the Company, no suspension or
cancellation of any of them is threatened, and none of such permits, licenses,
orders, franchises or other rights and privileges will be affected by the
consummation of the transactions contemplated in this Agreement and the Related
Agreements.
2.16 Federal Reserve Regulations. Neither the Company nor any of its
---------------------------
Subsidiaries has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the sale of the Purchased Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
2.17 Contracts and Commitments. Except as set forth on Schedule 2.17
------------------------- -------------
attached hereto, the Company has no contract, obligation or commitment which is
material or which involves a potential material commitment or any stock
redemption or stock purchase agreement, financing agreement, license, lease, or
stock option plan. For purposes of this Section 2.17, a contract, obligation or
commitment shall be deemed material if it requires future expenditures by the
Company in excess of $25,000 or might result in payments to the Company in
excess of $25,000.
2.18 Securities Act. Based in part on the truth and accuracy of the
--------------
representations and warranties of the Purchasers set forth in Section 6.1
hereof, the Company has complied and will comply with all applicable federal or
state securities laws in connection with the issuance and sale of the Purchased
Shares and the issuance of the Conversion Shares upon conversion of the
Purchased Shares. Neither the Company nor anyone acting on its behalf has
offered any of the Purchased Shares, or similar securities, or solicited any
offers to purchase any of such securities, so as to bring the issuance and sale
of the Purchased Shares under the registration provisions of the Act.
2.19 Registration Rights. Except as set forth on Schedule 2.19, the
------------------- -------------
Company has not granted any rights relating to registration of its capital stock
under the Act or state securities laws other than those contained in this
Agreement.
2.20 Insurance Coverage. Schedule 2.20 hereto contains an accurate
------------------ -------------
summary of the insurance policies currently maintained by the Company and its
Subsidiaries.
-8-
<PAGE>
Except as described on Schedule 2.20, there are currently no claims pending
-------------
against the Company or any Subsidiary under any insurance policies currently in
effect and covering the property, business or employees of the Company and its
Subsidiaries, and all premiums due and payable with respect to the policies
maintained by the Company and its Subsidiaries has been paid to date.
2.21 Employee Matters. Except as set forth on Schedule 2.21, neither the
---------------- -------------
Company nor any Subsidiary has in effect any employment agreements, consulting
agreements, deferred compensation, pension or retirement agreements or
arrangements, bonus, incentive or profit-sharing plans or arrangements, or labor
or collective bargaining agreements, written or oral. The Company has no
knowledge that any of the officers or other key employees of the Company or any
Subsidiary presently intends to terminate his employment. The Company and its
Subsidiaries are in compliance in all material respects with all applicable laws
and regulations relating to labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. The Company and each
Subsidiary is in material compliance with the terms of all plans, programs and
agreements listed on Schedule 2.21, and each such plan, program or agreement is
-------------
in compliance with all of the requirements and provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). No such plan or
program has engaged in any "prohibited transaction" as defined in Section 4975
of the Internal Revenue Code of 1986 (the "Code"), or has incurred any
"accumulated funding deficiency" as defined in Section 302 of ERISA, nor has any
reportable event as defined in Section 4043(b) of ERISA occurred with respect to
any such plan or program. Neither the Company nor any Subsidiary has or has
maintained any group health plan subject to Section 4980B of the Code or Section
162(i) or (k) of the Code as amended by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended by the Technical and Miscellaneous
Revenue Act of 1988. With respect to each plan listed on Schedule 2.21, all
-------------
required filings, including all filings required to be made with the United
States Department of Labor and Internal Revenue Service, have been timely filed.
2.22 No Brokers or Finders. No person has or will have, as a result of
---------------------
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or any of its Subsidiaries.
2.23 Transactions with Affiliates. Except as set forth on Schedule 2.23,
---------------------------- -------------
there are no loans, leases or other continuing transactions between the Company
or any Subsidiary on the one hand, and any officer or director of the Company or
any Subsidiary or any person owning five percent (5%) or more of the Common
Stock of the Company or any respective family member or affiliate of such
officer, director or shareholder on the other hand.
2.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
Neither the Company nor any Subsidiary has assumed, guaranteed, endorsed
-9-
<PAGE>
or otherwise become directly or contingently liable on or for any indebtedness
of any other Person, except guarantees by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
2.25 Disclosures. Neither this Agreement, any Schedule or Exhibit to this
-----------
Agreement, the Related Agreements, the Financial Statements, the Unaudited
Financial Statements, nor any other agreement, document or written statement
made by or on behalf of the Company and furnished by or on behalf of the Company
to the Purchasers or the Purchasers' special counsel in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or omits to state any material fact necessary to make the statements contained
herein or therein not misleading. There is no fact known to the Company that has
not been disclosed herein or in any other agreement, document, oral or written
statement furnished by the Company to the Purchasers or their special counsel in
connection with the transactions contemplated hereby which materially adversely
affects or could materially and adversely affect the business, properties,
assets or financial condition of the Company.
2.26 Software Development. The Company acknowledges that the Company's
--------------------
previous disclosures and representations concerning its digital speech
technologies are integral to the Purchaser's investment in the Company and that
the Purchasers have relied on such representations and disclosures. The
Company's progress and development of software products relating to digital
speech technologies is as described to the Purchasers in the Business Plan and
the Company and the Managers have no knowledge or reason to believe that any
software developed to date for digital speech technologies has any material
technical flaw that would render such technologies unusable for any of the
businesses described in the Business Plan. The Purchasers recognize that, with
respect to the Company's unreleased software products, additional development
work is necessary in order to make certain of the technologies usable for
commercial purposes and such additional development work is subject to normal
technical risks.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF THE MANAGERS
----------------------------------------------
Each Manager severally represents and warrants to the Purchasers that the
following representations and warranties are true, complete and correct in all
respects as of the date hereof and shall be true, complete and correct in all
respects as of the date of the Closing:
(a) To the best of his knowledge, no third party has claimed or has
reason to claim that any of his activities in connection with the Company or his
employment with the Company, or the activities of any of the other Managers,
directors, key employees, officers or key consultant of the Company
(collectively "Key Employees") has (i) violated or may be violating any of the
terms or conditions of his employment, non-competition or non-disclosure
agreement with such third party, (ii)
-10-
<PAGE>
disclosed or may be disclosing or utilized or may be utilizing any trade secret
or proprietary information or documentation of such third party or (iii)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Manager which suggests that such a claim might be
contemplated. The Manager has not employed or proposed to employ any trade
secret or any information or documentation proprietary to any former employer,
and has not violated any confidential relationship which the Manager may have
had with any third party, in connection with the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Manager has no reason to
believe there will be any such employment or violation. To the knowledge of the
Manager, no Key Employee has employed or proposes to employ any trade secret or
any information or documentation proprietary to any former employee, and to the
knowledge of the Manager, no Key Employee has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Company, and
the Manager has no reason to believe there will be any such employment or
violation. None of the execution, delivery or performance of this Agreement, or
the carrying on of the business of the Company as officer, employee or agent by
any Manager, or the conduct or proposed conduct of the Manager in connection
with the business of the Company, will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which the Manager is obligated. Neither
such Manager or any associate (as defined in Rule 14a-1 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) owns or holds, directly
or indirectly, any interest in any trade secrets, trade names, trademarks,
software programs, copyrights, patents (including applications therefor) used or
proposed to be used by the Company or any subsidiary. There is no physical or
mental condition or impairment affecting the Manager that could prevent or
materially interfere with the performance by the Manager of his duties on behalf
of the Company.
(b) While employed by the Company, such Manager will devote his full
business time and best efforts to the performance of his duties to the Company
and will not engage in any other business activity, either on a full-time or
part-time basis, as an employee, a consultant or in any other capacity and
whether or not he receives any compensation therefor; provided, however, that
nothing herein shall prohibit such Manager from making and managing investments,
which activities do not, in the aggregate, materially interfere with such
Manager's performance of his duties to the Company.
(c) To the best of his knowledge, there is no action, suit or
proceeding, or governmental inquiry or investigation pending or threatened
against such Manager in his individual capacity which might materially and
adversely affect the Company's business or reputation, and there is no basis for
any such action, suit, proceeding or governmental inquiry or investigation.
-11-
<PAGE>
(d) Based in part on the truth and accuracy of the representations and
warranties of the Purchasers set forth in Section 6.1 hereof, such Manager has
complied and will comply with all applicable federal or state securities laws in
connection with the issuance and sale of the Purchased Shares and the issuance
of the Conversion Shares upon conversion of the Purchased Shares. Neither the
Manager nor anyone acting on his behalf has offered any of the Purchased Shares,
or similar securities, or solicited any offers to purchase any of such
securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Act.
(e) Such Manager acknowledges that his and the Company's previous
disclosures and representations concerning its digital speech technologies are
integral to the Purchaser's investment in the Company and that the Purchasers
have relied on such representations and disclosures. The Company's progress and
development of software products relating to digital speech technologies is as
described to the Purchasers in the Business Plan and such Manager has no
knowledge or reason to believe that any software developed to date for digital
speech technologies has any material technical flaw that would render such
technologies unusable for any of the businesses described in the Business Plan.
The Purchasers recognize that, with respect to the Company's unreleased software
products, additional development work is necessary in order to make certain of
the technologies usable for commercial purposes and such additional development
work is subject to normal technical risks.
(f) Such Manager believes that the Company owns or possesses adequate
licenses or other rights to use all Intellectual Property necessary to the
conduct of its business as conducted. The Manager knows of know reason today
that the Company will not be able to obtain adequate licenses or other rights to
use the Intellectual Property necessary to the conduct of its business as
proposed to be conducted in the business plan, and no claim is pending or, to
the knowledge of such Manager, threatened against the Company to the effect that
the operations of the Company infringe upon or conflict with the asserted rights
of any other person under any Intellectual Property, and there is no known basis
for any such claim (whether or not pending or threatened). No claim is pending
or, to the knowledge of such Manager, threatened against the Company to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no known basis for any such claim (whether, or not
pending or threatened). The Company has not granted or assigned to any other
person or entity any right to assemble or sell the products or proposed products
or to provide the services or proposed services of the Company except for
subcontractors, distributors or other agents retained in the ordinary course of
business. Neither the Managers nor any other current or former stockholder,
employee, officer or director of the Company has (directly or indirectly) any
right, title or interest in any of the rights described on Schedule 2.13 other
-------------
than such right which such Person may enjoy as a stockholder of the Company.
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ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
------------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering:
3.1 Accounts and Reports. The Company will, and will cause each of its
--------------------
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to each Purchaser the information
set forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a copy
of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by an independent public accountant of
national recognition selected by the Board of Directors of the Company and
reasonably acceptable to Purchasers.
(b) Within thirty (30) days after the end of each calendar month, a
preliminary consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders' equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
(c) At the time of delivery of each monthly and annual statement, a
certificate, executed by the either the president or chief financial officer of
the Company stating (i) that such officer has caused this Agreement and the
terms of the Preferred Stock to be reviewed and has no knowledge of any default
by the Company or any Subsidiary in the performance or observance of any of the
provisions of this Agreement or such Preferred Stock or, if such officer has
such knowledge, specifying such default, and (ii) with respect to the delivery
of annual statements, a statement as to the then Applicable Conversion Value of
the Preferred Stock and the number of Conversion Shares into which each share of
Preferred Stock may then be converted.
(d) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 3.8, in form
consistent with good business practice.
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<PAGE>
(e) Promptly upon receipt thereof, any written report, so called
"management letter", and any other communication submitted to the Company or any
Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
(g) Promptly upon sending, making available, or filing the same, all
reports and financial statements as the Company (or any Subsidiary) shall send
or make available generally to the shareholders of the Company as such or to the
Commission; and
(h) Such other information with regard to the business, properties or
the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
----------------
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
--------------------------------
use its best efforts to obtain within sixty (60) days of the date hereof and
thereafter maintain a life insurance policy with a responsible and reputable
insurance company payable to the Company on (i) the life of Gerard Aguilar in
the face amount of $1,500,000 and (ii) the life of Michael Goldstein in the face
amount of $1,000,000. The Company will maintain such policy and will not cause
or permit any assignment of the proceeds of such policy and will not borrow
against such policy. The Company will add one designee of the Purchasers as a
notice party to such policy, and will request that the issuer of such policy
provide such designee with ten (10) days' notice before such policy is
terminated (for failure to pay premium or otherwise) or assigned, or before any
change is made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause each
--------------------------
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of
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<PAGE>
any governmental authority, the noncompliance with which could materially
adversely affect the business or condition, financial or otherwise, of the
Company and its Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours and
----------
from time to time, but not more frequently than once per calendar quarter for
all Purchasers and transferees of Purchasers as a group, upon five (5) days
written notice, the Company (and each of its Subsidiaries) will permit any one
or more of the Purchasers (any transferee of a Purchaser) who then owns, of
record or beneficially, or has the right to acquire, at least fifteen percent
(15%) of the then outstanding Preferred Shares or Conversion Shares (determined
on an as-converted basis) purchased pursuant to this Agreement, or any of the
agents or representatives of the foregoing Persons, to examine and make copies
of and extracts from the records and books of account of and visit the
properties of the Company (and any of its Subsidiaries) and to discuss the
Company's affairs, finances and accounts with any of its officers or directors;
provided that any Person or Persons exercising rights under this Section 3.5
shall (i) use all reasonable efforts to ensure that any such examination or
visit results in a minimum of disruption to the operations of the Company and
(ii) shall agree in writing to keep any proprietary information of the Company
disclosed to him in the course of such inspection confidential in a manner
consistent with prudent business practices and treatment of such Person's or
Persons' own confidential information and not use such proprietary information
for any purpose in competition with the Company's business. The rights granted
under this Section 3.5 shall be in addition to any rights which any Purchaser
may have under applicable law in its capacity as a shareholder of the Company.
3.6 Corporate Existence; Ownership of Subsidiaries. The Company will,
----------------------------------------------
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole.
The Company shall at all times own of record and beneficially, free and clear of
all liens, charges, restrictions, claims and encumbrances of any nature, all of
the issued and outstanding capital stock of each of its Subsidiaries.
3.7 Compliance with ERISA. The Company will comply, (and cause each of
---------------------
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which cause the lien provided for
in Section 3068 of ERISA to attach to the assets of the Company or any of its
Subsidiaries.
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<PAGE>
3.8 Board Approval. Prior to the end of each fiscal year, the Company
--------------
will prepare and submit to its Board of Directors for its approval prior to such
year end an operating plan and budget, cash flow projections and profit and loss
projections, all itemized in reasonable detail for the immediately following
year.
3.9 Financings. The Company will promptly provide to the Board of
----------
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
3.10 Meetings of the Board of Directors. The Directors shall schedule
----------------------------------
regular meetings not less frequently than once every ninety (90) days. The
Company shall reimburse the Purchasers for all reasonable travel expenses
incurred by any director designee of the Purchasers in attending such meetings.
3.11 Regular Course of Business. The Company agrees that on and after the
--------------------------
date hereof and prior to the Closing that it will carry on its business
diligently and in the ordinary course and substantially in the same manner as
heretofore carried on and will use its best efforts to preserve its present
business organization intact, except as otherwise affirmatively voted upon by a
majority of the Board of Directors (which majority must include a majority of
the directors designated by the holders of the Series A Preferred Stock), and
shall use its best efforts to keep available the services of its present
officers.
3.12 Change in Nature of Business. The Company shall not make, or permit
----------------------------
any subsidiary to make, any material change in the nature of its business as set
forth in the Business Plan without the affirmative vote of a majority of the
Board of Directors (which majority must include a majority of the directors
designated by the holders of the Series A Preferred Stock).
3.13 Common Stock Holders. The Company shall, within a reasonable time
--------------------
following the Closing, send a letter to each person listed as a holder of Common
Stock on Schedule 2.4 attached hereto (a "Common Stock Holder") requesting (but
------------
not requiring) that such Common Stock Holder provide the Company with ten (10 )
days prior notice before selling or otherwise transferring more than ten percent
(10%) of the shares of Common Stock held by such person pursuant to an offer by
a third party so that the Company shall have the opportunity to match or better
such offer.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
---------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that, subject to Section 12.4 hereof, it will comply (and
will cause each Subsidiary to comply) with each of the provisions of this
Article IV on and after
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<PAGE>
the date hereof and until the consummation of the first Qualified Public
Offering; provided, however, that subject to Section 12.4 hereof, the provisions
-------- -------
of Section 4.2 shall continue in force only so long as there are Purchased
Shares outstanding.
4.1 Investments in Other Persons. The Company will not make or permit
----------------------------
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
------
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and undivided
profits of at least $50,000,000;
(iii) loans or advances from a Subsidiary to the Company or from a
Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or better
commercial paper having a maturity of not more than one year from the date
of acquisition;
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other financial
institutions, provided that such "money market" fund or "money market"
accounts invest principally in investments of the types described in
clauses (i), (ii) or (iv) of this subsection 4.1; and
(vi) investments in other Persons and entities in connection with
the acquisition (of businesses, technologies, and other rights and assets)
approved by the affirmative vote of the Board of Directors (which majority
must include a majority of the directors designated by the holders of the
Series A Preferred Stock).
4.2 Distributions. The Company will not declare or pay any dividends,
-------------
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends, return
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<PAGE>
capital and make distributions of assets to the Company and except that nothing
herein contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of shares
of such class of capital stock; or
(ii) complying with any specific provision of the terms of the
Preferred Stock as contained in Exhibit A attached hereto relating to the
---------
payment of dividends, liquidation preferences or redemption payments on or
with respect to the Preferred Stock or redemption of the Preferred Stock;
or
(iii) permitting liquidation payments to be made to the holders of
Common Stock as described in Exhibit A.
---------
4.3 Dealings with Affiliates. The Company will not enter into any
------------------------
transaction including, without limitation, any loans or extensions of credit or
royalty agreements with any officer or director of the Company or any Subsidiary
or holder of any class of capital stock of the Company, or any member of their
respective immediate families or any corporation or other entity directly or
indirectly controlled by one or more of such officers, directors or shareholders
or members of their immediate families, except for advances in reasonable
amounts made to employees of the Company or any Subsidiary for valid business
purposes, provided that such advances are repaid to the Company within 90 days.
4.4 Merger, Consolidation, Sale of Assets, Acquisition, and Other
-------------------------------------------------------------
Actions. The Company will not: (a) sell, lease, or otherwise dispose of
- -------
(whether in one transaction or a series of related transactions) all or
substantially all of its assets, (b) merge with or into or consolidate with
another entity (except into or with a wholly-owned Subsidiary of the Company
with the requisite shareholder approval), (c) voluntarily liquidate or wind up
its operations, (d) issue any shares of its capital stock which are senior to or
on a parity with the Purchased Shares with respect to dividends liquidation or
redemptions or with any special voting rights, or (e) amend its Articles of
Incorporation or By-laws in a manner that directly or indirectly adversely
affects the rights of the holders of the Purchased Shares.
4.5 Awards and Option Shares. The Company shall not issue more than
------------------------
2,290,000 shares of its capital stock (as adjusted for stock splits, stock
dividends, recapitalizations and similar events), or grant options, rights or
warrants exercisable therefor, (including 2,019,000 options to purchase Common
Stock outstanding on the date of this Agreement and new options in respect to
such shares issued after the date of this Agreement) to employees and directors
of, and consultants to, the Company (except for the issuance of Common Stock
upon the exercise of the warrants outstanding on the date hereof whether
acquired by any such persons prior to or after the date hereof) without the
affirmative vote of a majority of the Board of Directors (which majority must
include the directors designated by the Purchasers).
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<PAGE>
4.6 Limitation on Restrictions on Subsidiary Dividends and Other
------------------------------------------------------------
Distributions. The Company shall not permit any of its Subsidiaries, directly
- -------------
or indirectly, to create or suffer to exist or become effective any encumbrances
or restrictions on the ability of any of its Subsidiaries to (i) pay dividends
or make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
4.7 No Conflicting Agreements. The Company agrees that neither it nor
-------------------------
any Subsidiary will enter into or amend any agreement, contract, commitment or
understanding which would restrict or prohibit the exercise by the Purchasers of
any of their rights under this Agreement or any of the Related Agreements.
4.8 Compensation. Without the consent of the Compensation Committee of
------------
the Board of Directors, the Company shall not pay to its management or
consultants compensation in excess of that compensation customarily paid to
management and consultants in companies of similar size, of similar maturity,
and in similar business, all as determined by the Compensation Committee of the
Board of Directors.
4.9 Fiscal Year. Without the consent of the Board of Directors and the
-----------
Audit Committee of the Board of Directors, the Company shall not change its
fiscal year from the twelve month period ending May 31 in each year.
4.10 Restricted Activities. The Company agrees that on and after the date
---------------------
hereof and prior to the Closing it will not take any action that would require
disclosure under Section 2.7 of this Agreement.
4.11 List of Common Stock Holders. Without the prior written consent of
----------------------------
the majority of the holders of the Preferred Stock, the Company will not reveal
to a third party any information regarding the Company's Common Stock Holders
except: (i) such information which, in the opinion of the Company's counsel, is
- ------
required to be disclosed under applicable law and (ii) such information which,
as determined by the Board of Directors, is required to be disclosed in
connection with the potential acquisition of capital stock of the Company or
with a potential transaction with a strategic partner.
ARTICLE V
PREEMPTIVE RIGHT
----------------
5.1 Right of Purchase. The Company hereby grants to each Purchaser so
-----------------
long as it shall own, of record or beneficially, or have the right to acquire
from the Company, any Purchased Shares, Conversion Shares or Common Stock, the
right to purchase all or part of its pro rata share of New Securities (as
defined in Section 5.2) which the Company, from time to time, proposes to sell
and issue. A Purchaser's pro rata share, for purposes of this preemptive right,
is the ratio of the number of
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Purchased Shares, Conversion Shares and shares of Common Stock which such
Purchaser owns or has the right to acquire from the Company to the total number
of Purchased Shares, Conversion Shares and shares of Common Stock then
outstanding. The Purchasers shall have a right of over-allotment pursuant to
this Article V such that to the extent a Purchaser does not exercise its
preemptive right in full hereunder, such additional shares of New Securities
which such Purchaser did not purchase may be purchased by the other Purchasers
in proportion to the total number of Purchased Shares, Conversion Shares or
other shares of Common Stock which each such other Purchaser owns or has the
right to acquire from the Company compared to the total number of Purchased
Shares, Conversion Shares or other shares of Common Stock which all such other
Purchasers own or have the right to acquire from the Company.
5.2 Definition of New Securities. "New Securities" shall mean any
----------------------------
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
--------
not include (i) securities purchased under this Agreement or Conversion Shares
issuable upon conversion of the Purchased Shares,(ii) Common Stock issued as a
stock dividend to holders of Common Stock or upon any stock split, subdivision
or combination of shares of Common Stock, (iii) Preferred Stock issued as a
dividend to holders of Preferred Stock or upon any stock split, subdivision or
combination of Preferred Stock, and (v) the aggregate number of shares of Common
Stock issuable upon exercise of options permitted under Section 4.5 hereof, (vi)
securities issued upon the exercise of warrants outstanding on the date hereof,
and (vii) securities issued by the Company in connection with the acquisition of
another corporation by merger, purchase of substantially all the assets or other
reorganization, (viii) securities issued by the Company in connection with the
acquisition of any patent or other rights to technology, including licenses, and
(ix) securities issued by the Company in connection with a corporate
collaboration, joint venture, partnership, or marketing, manufacturing,
research, licensing or other arrangement provided, however, that the Company may
-------- -------
take no action described in clauses (vii), (viii) and (ix) of this Section 5.2
without the prior affirmative vote of a majority of the Board of Directors in
approving such action (which majority must include the directors designated by
the Purchasers).
5.3 Notice from the Company. In the event the Company proposes to
-----------------------
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. Each Purchaser
shall have 20 business days from the date of receipt of any such notice to agree
to purchase up to the Purchaser's pro rata share of such New Securities (and any
over-allotment amount pursuant to the operation of Section 5.1 hereof) for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
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<PAGE>
5.4 Sale by the Company. In the event any Purchaser fails to exercise in
-------------------
full its preemptive right (after giving effect to the over-allotment provision
of Section 5.1 hereof), the Company shall have 120 days thereafter to sell the
New Securities with respect to which the Purchaser's option was not exercised,
at a price and upon terms no more favorable to the purchasers thereof than
specified in the Company's notice. To the extent the Company does not sell all
the New Securities offered within said 120 day period, the Company shall not
thereafter issue or sell such New Securities without first again offering such
securities to the Purchasers in the manner provided above.
5.5 Termination of Rights. The rights granted to the Purchasers under
---------------------
this Article V shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering.
ARTICLE VI
INVESTMENT REPRESENTATIONS
--------------------------
6.1 Representations and Warranties. Each Purchaser hereby represents and
------------------------------
warrants to the Company as follows:
(a) Assuming due execution and delivery by the Company of the
Agreement and the Related Agreements, this Agreement and the Related Agreements
to which such Purchaser is a party constitute legal, valid and binding
obligations of such Purchaser, enforceable against such Purchaser in accordance
with their respective terms;
(b) Such Purchaser has been advised and understands that the Purchased
Shares have not been registered under the Act, on the grounds that no
distribution or public offering of the Purchased Shares is to be effected, and
that in this connection, the Company is relying in part on the representations
of such Purchasers set forth in this Article VI;
(c) Such Purchaser has been further advised and understands that no
public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Purchased Shares or Conversion
Shares;
(d) Such Purchaser is purchasing the Purchased Shares for investment
purposes, for its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of Federal or state securities laws;
(e) Such Purchaser is an "accredited investor" under Regulation D of
the Act and by reason of its business or financial experience, such Purchaser
has the capacity to protect its own interest in connection with the transactions
contemplated hereunder;
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(f) Such Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
and has had an opportunity to meet with management of the Company to reach an
informed and knowledgeable decision to acquire the Purchased Shares; provided,
however, that nothing in this Section 6.1 shall be deemed to vitiate or limit
the representations, warranties and covenants of the Company and the Managers
contained in this Agreement; and
(g) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Company or any of its Subsidiaries for any commission, fee or other compensation
as a finder or broker because of any act or omission by such Purchaser.
6.2 Permitted Sales; Legends. Notwithstanding the foregoing
------------------------
representations, the Company agrees that it will permit (i) a distribution of
Purchased Shares or Conversion Shares by a partnership to one or more of its
partners, where no consideration is exchanged therefor by such partners, or to a
retired or withdrawn partner who retires or withdraws after the date hereof in
full or partial distribution of his interest in such partnership, or to the
estate of any such partner or the transfer by gift, will or intestate succession
of any partner to his spouse or to the siblings, lineal descendants or ancestors
of such partner or his spouse, or to a trust created for the benefit of one or
more of the foregoing, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if it were an original Purchaser hereunder
and (ii) a sale or other transfer of any of the Purchased Shares or Conversion
Shares upon obtaining assurance satisfactory to the Company that such
transaction is exempt from the registration requirements of, or is covered by an
effective registration statement under, the Act and applicable state securities
or "blue-sky" laws, including, without limitation, receipt of an unqualified
opinion to such effect of counsel reasonably satisfactory to the Company. The
certificates representing the Purchased Shares and any Conversion Shares
issuable upon conversion thereof shall bear a legend evidencing such restriction
on transfer substantially in the following form:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933
(the "Act") or the securities laws of any state. The shares may not be
transferred by sale, assignment, pledge or otherwise unless (i) a
registration statement for the shares under the Act is in effect or (ii)
the corporation has received an opinion of counsel, which opinion is
reasonably satisfactory to the corporation, to the effect that such
registration is not required under the Act."
6.3 Strategic Relationships. Those persons listed on Schedule 6.3
----------------------- ------------
(collectively the "Advent Group") covenant and agree that each shall use its
best efforts to form meaningful strategic relationships between the Company and
the Advent Group's corporate partners and/or international network affiliates.
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ARTICLE VII
REGISTRATION RIGHTS
-------------------
7.1 Certain Definitions. As used in this Article VII, the following
-------------------
terms shall have the following respective meanings:
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Initiating Holders" means any Purchaser or its assignees who in the
aggregate are holders of at least ten percent (10%) of the sum of (i) the
Conversion Shares now owned or hereafter acquired by the Purchasers, (ii) all
other shares of Common Stock owned by the Purchasers, and (iii) all shares of
Common Stock issuable with respect to securities of the Company convertible into
or exercisable for shares of Common Stock now or hereafter acquired by any
Purchaser.
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchasers, (ii) all other shares of Common Stock now owned or hereafter
acquired by any Purchaser; (iii) all shares of Common Stock issuable with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by any Purchaser; and (iv) any
Common Stock issued in respect of the shares described in clauses (i) through
(iii) upon any stock split, stock dividend, recapitalization or other similar
event.
The terms "register" means to register under the Act and applicable state
securities laws for the purpose of effecting a public sale of securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 or 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration.
"Selling Expenses" means all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities and the expenses of counsel to
any Holder (except as specifically contemplated in the definition of
Registration Expenses above).
7.2 Requested Registrations.
-----------------------
(a) If on any two occasions after the end of the six month period
following the closing of an initial public offering by the Company pursuant to a
registration statement filed and declared effective under the Act covering the
offer and sale of Common Stock for the account of the Company, the Company shall
receive from
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one or more Initiating Holders a written request that the Company effect the
registration of Registrable Securities representing at least twenty-five percent
(25%) of the Registrable Securities then outstanding or issuable (or any lesser
percentage if the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed $5
million), in connection with a firm commitment underwriting managed by a
nationally recognized underwriter, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use all commercially reasonable efforts
to effect such registration as may be so requested and as would permit or
facilitate the sale and distribution of such portion of such Registrable
Securities as are specified in such request, together with such portion of
the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request given within thirty days after
receipt of such written notice from the Company. If the underwriter
managing the offering advises the Holders who have requested inclusion of
their Registrable Securities in such registration that marketing
considerations require a limitation on the number of shares offered, such
limitation shall be imposed pro rata among such Holders who requested
--------
inclusion of Registrable Securities in such registration according to the
number of Registrable Securities each such Holder requested to be included
in such registration. Neither the Company nor any other shareholder may
include shares in a registration effected under this Section 7.2 without
the consent of the Holders holding a majority of the Registrable Securities
sought to be included in such registration if the inclusion of shares by
the Company or the other shareholders would limit the number of Registrable
Securities sought to be included by the Holders or reduce the offering
price thereof. No registration initiated by Initiating Holders hereunder
shall count as a registration under this Section 7.2 unless and until it
shall have been declared effective.
(b) Selection of Underwriter. If the Initiating Holders intend to
------------------------
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 7.2 and the Company shall include such information in the
written notice referred to in Section 7.2(a)(i) above. The right of any Holder
to registration pursuant to Section 7.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of certain of such Holder's
Registrable Securities in the underwriting. The underwriter of any underwriting
requested under this Section 7.2 shall be selected by the Holders holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be reasonably acceptable to the Company.
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<PAGE>
7.3 "Piggy Back" Registrations.
--------------------------
(a) If the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders
exercising their registration rights, other than a registration relating solely
to employee benefit plans, or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and
(ii) Use its best efforts to include in such registration all the
Registrable Securities specified in a written request or requests, made by
any Holder within twenty (20) days after the date of delivery of the
written notice from the Company described in clause (i) above. If the
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant to any registration
statement, then the Company may offer all of the securities it proposes to
register for its own account or the maximum amount that the underwriter
considers saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed pro rata
--- ----
among all shareholders who are entitled to include shares in such
registration statement according to the number of Registrable Securities
each such shareholder requested to be included in such registration
statement.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
7.3(a)(i). In such event the right of any Holder to registration pursuant to
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of certain of such Holder's Registrable
Securities in the underwriting. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company and the
other stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters. The Company shall select the underwriter
for an offering made pursuant to this Section 7.3; provided that such
underwriter must be reasonably acceptable to the Holders of a majority of the
Registrable Securities being registered in such offering.
7.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to
Section 7.2, 7.3 or 7.5 shall be paid by the Company. All Selling Expenses
incurred in connection
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<PAGE>
with any such registration, qualification or compliance shall be borne by the
holders of the securities registered, pro rata on the basis of the number of
their shares so registered.
7.5 Registration on Form S-3. The Company shall use reasonable
------------------------
commercial efforts to qualify for registration on Form S-3 or any comparable or
successor form; and to that end the Company shall register (whether or not
required by law to do so) the Common Stock under the Securities Exchange Act of
1934 (the "Exchange Act") in accordance with the provisions of the Exchange Act
following the effective date of the first registration of any securities of the
Company on Form S-1 or any comparable or successor form. After the Company has
qualified for the use of Form S-3, in addition to the rights contained in the
foregoing provisions of this Article VII, the Holders of Registrable Securities
shall have the right to request no more than two (2) registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Holder or Holders), provided that in no event shall the
Company be required to register shares with an aggregate market value of less
than $500,000.
7.6 Registration Procedures. In the case of each registration effected
-----------------------
by the Company pursuant to this Article VII, the Company will keep each Holder
of Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will do the following for the benefit of such Holders:
(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs, and amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply with the
Act and applicable state securities laws;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 7.2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of
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<PAGE>
Common Stock, provided such underwriting agreement contains customary
underwriting provisions and is entered into by the Holder and provided further
that, if the underwriter so requests, the underwriting agreement will contain
customary contribution provisions on the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders; and
(f) Subject to entering into an appropriate Confidentiality
Agreement, permit the counsel to the selling shareholders whose expenses are
being paid pursuant to Section 7.4 hereof to inspect and copy such corporate
documents as he may reasonably request.
7.7 Indemnification.
---------------
(a) The Company will, and hereby does, indemnify each Holder, each of
its officers, directors and partners, and each person controlling such Holder
within the meaning of the Act, with respect to which registration, qualification
or compliance has been effected pursuant to this Article VII, and each
underwriter, if any, and each person who controls such underwriter within the
meaning of the Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Act or the Exchange Act or securities act of any state or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of its officers, directors
and partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, whether or not resulting in any
liability, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement (or alleged untrue statement) or omission (or
alleged omission) based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein.
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<PAGE>
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each other such Holder and each of their officers, directors and
partners, and each person controlling such Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holder's
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, whether or not
resulting in liability, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each Holder hereunder shall
be limited to an amount equal to the net proceeds received by such Holder upon
sale of his securities.
(c) Each party entitled to indemnification under this Section 7.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnifying Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7.7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof).
The Indemnifying Party will be entitled to participate in, and to the extent
that it may elect by written notice delivered to the Indemnified Party promptly
after receiving the aforesaid notice from such Indemnified Party, at its expense
to assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of
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<PAGE>
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
(i) furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom and (ii) shall reasonably assist the Indemnifying Party in any such
defense, provided that the Indemnified Party shall not be required to expend its
funds in connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 7.2 or 7.3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 7.2 or 7.3 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
7.8 Information by Holder. Each Holder of Registrable Securities
---------------------
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Article VII or otherwise required by applicable state or federal securities
laws.
7.9 Limitations on Registration Rights. From and after the date of this
----------------------------------
Agreement, the Company shall not enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company without the consent of one of the directors designated by the
Purchasers.
7.10 Exception to Registration. The Company shall not be required to
-------------------------
effect a registration under this Article VII if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of Registrable Securities, such Holders may
sell without registration under the Act all Registrable Securities for which
they requested registration under the provisions of the Act and in the manner
and in the quantity in which the Registrable Securities were proposed to be
sold, or (ii) the Company shall have obtained from the Commission a "no-action"
letter to that effect; provided that this Section 7.10 shall not
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<PAGE>
apply to sales made under Rule 144(k) or any successor rule promulgated by the
Commission until after the effective date of the Company's initial registration
of shares under the Act. Notwithstanding the foregoing, in no event shall the
provisions of this Section 7.10 be construed to preclude a Holder of Registrable
Securities from exercising rights under Section 7.3 for a period of three years
after the effective date of the Company's initial registration of shares under
the Act.
7.11 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times from and after
ninety days following the effective date of the first registration under the Act
filed by the Company for an offering of its securities to the general public;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Purchaser owns any restricted securities, furnish to
the Purchaser forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after ninety days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Act and Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Purchaser to sell any such securities
without registration.
7.12 Listing Application. If shares of any class of stock of the Company
-------------------
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Purchaser.
7.13 Damages. The Company recognizes and agrees that the holder of
-------
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article VII, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance.
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<PAGE>
ARTICLE VIII
CONDITIONS OF PURCHASERS' OBLIGATION
------------------------------------
8.1 Effect of Conditions. The obligation of the Purchasers to purchase
--------------------
and pay for the Purchased Shares at the Closing shall be subject at their
election to the satisfaction of each of the conditions stated in the following
Sections of this Article.
8.2 Representations and Warranties. The representations and warranties
------------------------------
of the Company and each of the Managers contained in this Agreement shall be
true and correct on the date of the Closing with the same effect as though made
on and as of that date, and the Purchasers shall have received a certificate
dated as of such Closing and signed on behalf of the Company and each of the
Managers to that effect.
8.3 Performance. The Company and each of the Managers shall have
-----------
performed and complied with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it and
him at or prior to the Closing, and the Purchasers shall have received a
certificate dated as of such Closing and signed on behalf of the Company and by
each of the Managers to that effect.
8.4 Opinions of Counsel. The Purchasers shall have received an opinion,
-------------------
dated the date of the Closing, from Fulbright & Jaworski, L.L.P. counsel to the
Company, in the form attached as Exhibit B.
---------
8.5 Certified Documents, etc. The Purchasers and their counsel shall
------------------------
have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the
Secretary of State of the State of Delaware, (B) a certificate of said Secretary
dated as of a recent date as to the due incorporation and good standing of the
Company, the payment of all excise taxes by the Company and listing all
documents of the Company on file with said Secretary, and a certificate of the
Secretary of State of any jurisdiction in which the Company is qualified to do
business as a foreign corporation dated as of a recent date as to the
qualification and good standing of the Company;
(ii) a certificate of the Secretary of the Company dated the
Closing Date and certifying: (A) that attached thereto is a true and complete
copy of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement and the
Related Agreements, the issuance, sale and delivery of the Purchased Shares and
the reservation, issuance and delivery of the Conversion Shares, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement and
the Related Agreements; (C) that the Charter has not been amended
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<PAGE>
since the date of the last amendment referred to in the certificate of the
Secretary delivered pursuant to clause (i)(B) above; and (D) to the incumbency
and specimen signature of each officer of the Company executing this Agreement
and the Related Agreements, the stock certificates representing the Purchased
Shares and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate of the Secretary referred to in
this clause (ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Purchasers or
their counsel reasonably may request.
8.6 No Material Adverse Change. The business, properties, assets or
--------------------------
condition (financial or otherwise) of the Company and its Subsidiaries shall not
have been materially adversely affected since the date of this Agreement,
whether by fire, casualty, act of God or otherwise, and there shall have been no
other changes in the business, properties, assets, condition (financial or
otherwise), management or prospects of the Company or any of its Subsidiaries
that would have a material adverse effect on their respective businesses or
assets.
8.7 Shareholders' Agreement. A Shareholders' Agreement in the form of
-----------------------
Exhibit C attached hereto shall have been executed by each Purchaser, the
- ---------
Company and the shareholders named therein.
8.8 Amendment to Certificate of Incorporation. The Certificate of
-----------------------------------------
Incorporation of the Company shall have been amended to provide for the
authorization of the Preferred Stock with the terms set forth in Exhibit A
---------
hereto.
8.9 Board Election. Concurrently with the Closing, the Board of
--------------
Directors of the Company shall have been fixed at eight members designated as
provided in the Shareholders' Agreement.
8.10 Operations Committee. Concurrently with the Closing, there shall be
--------------------
established an Operations Committee of the Board of Directors of the Company as
provided in the Shareholders' Agreement.
8.11 Compensation Committee. Concurrently with the Closing, there shall
----------------------
be established a Compensation Committee of the Board of Directors of the Company
as provided in the Shareholders' Agreement.
8.12 Consents and Waivers. The Company shall have obtained all consents
--------------------
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Purchased Shares and the Conversion
Shares, and to carry out the transactions contemplated hereby and thereby. All
corporate and other action and governmental filings necessary to effectuate the
terms of this Agreement, the Related Agreements, the Purchased Shares, the
Conversion
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<PAGE>
Shares and other agreements and instruments executed and delivered by the
Company in connection herewith shall have been made or taken.
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
The Company's obligation to sell the Purchased Shares shall be subject to
the accuracy on the date of the Closing of the representations and warranties of
the Purchasers contained in this Agreement.
(a) Performance. Each of the Purchasers shall have performed and complied
-----------
with all of the agreements, covenants and conditions contained in this Agreement
required to be performed or complied with by it at or prior to the Closing.
(b) Consents and Waivers. Each Purchaser shall have obtained all consents
--------------------
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein and to carry out the transactions contemplated
hereby and thereby.
ARTICLE X
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Series A Preferred Stock Purchase Agreement as from
time to time amended and in effect between the parties.
"Applicable Conversion Value" shall mean the Applicable Conversion Value of
the Preferred Stock under Section 5(c) of Exhibit A.
---------
"Closing" shall have the meaning set forth in Section 1.3.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock as authorized on
the date of this Agreement, (b) any other capital stock of any class or classes
of the Company authorized on or after the date hereof, the holders of which
shall have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
(c) any other securities of the
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<PAGE>
Company into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Company" means and shall include Voxware, Inc., a Delaware corporation,
and its successors and assigns.
"Conversion Shares" shall have the meaning set forth in Section 1.2.
"Holders" shall have the meaning set forth in Section 7.1.
"Indebtedness" means all obligations, contingent and otherwise, for
borrowed money which are required to be reflected as indebtedness on a balance
sheet prepared in accordance with generally accepted accounting principles
including, without limitation, any current portion of long-term indebtedness and
all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
"Indemnified Party" shall have the meaning set forth in Section 7.7.
"Indemnifying Party" shall have the meaning set forth in Section 7.7.
"Initiating Holders" shall have the meaning set forth in Section 7.1.
"New Securities" shall have the meaning set forth in Section 5.2.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 1.1.
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company equal
at least $10,000,000 and in which the price per share of Common Stock equals or
exceeds two (2) times the then Applicable Conversion Value of the Series A
Preferred Stock under Section 5(c) of Exhibit A.
---------
"Registrable Securities" shall have the meaning set forth in Section 7.1.
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<PAGE>
"Registration Expense" shall have the meaning set forth in Section 7.1.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Selling Expenses" shall have the meaning set forth in Section 7.1.
"Series A Preferred Stock" shall have the meaning set forth in Section 1.1.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE XI
TERMINATION
11.1 Termination by Mutual Written Consent. This Agreement may be
-------------------------------------
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Closing by the written agreement of the Company and the Purchasers.
11.2 Termination for Breach. This Agreement may be terminated and the
----------------------
transactions contemplated hereby may be abandoned at any time before the Closing
(or any date to which such Closing may have been extended by the written
agreement of the parties obligated to perform on such Closing) by any party
obligated to perform on such Closing if the conditions for its benefit set forth
in Article VIII or IX, as the case may be, have not been satisfied on or prior
to such Closing and if the conditions for the benefit of the other parties have
been satisfied or waived, and if such performing party shall have given written
notice of termination to the non-performing party.
11.3 Termination for Delay. Unless earlier terminated in accordance with
---------------------
Section 11.1 or 11.2, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned by the Company or the Purchasers if the
Closing does not occur by January 31, 1995; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 11.3 shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date.
11.4 Rights After Termination. Upon termination of this Agreement under
------------------------
this Article XI, the parties shall be released from all obligations arising
hereunder, except as to any liability for misrepresentations, breach or default
in connection with any warranty, representation, covenant, duty or obligation
given, occurring or arising prior to the date of termination and except as to
the Company's obligations under Section 12.6 hereof.
-35-
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
12.2 Parties in Interest. Except as otherwise set forth herein, all
-------------------
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares, or Conversion Shares). The parties agree to
maintain in confidence the terms of the purchase of the Purchased Shares
hereunder, except that the Purchasers may disclose such terms to their investors
in the ordinary course and except that the Company may disclose such terms to
its shareholders in the ordinary course.
12.3 Shares Owned by Affiliates. For the purposes of applying all
--------------------------
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of
this Agreement, the term "affiliate" shall mean any Person controlling,
controlled by or under common control with, a Purchaser and any general or
limited partner of a Purchaser. Without limiting the foregoing, each Purchaser
shall be considered an affiliate of each other Purchaser.
12.4 Amendments and Waivers. Amendments or additions to this Agreement
----------------------
may be made, agreements with any decision of the Company may be made, and
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively) upon the written consent of the
Company and the holders of a majority of the issued and issuable Conversion
Shares. Prompt notice of any such amendment or waiver shall be given to any
Person who did not consent thereto. This Agreement (including the Schedules and
Exhibits annexed hereto, which are an integral part of this Agreement)
constitutes the full and complete agreement of the parties with respect to the
subject matter hereof.
12.5 Notices. All notices, requests, consents, reports and demands shall
-------
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchasers at the
address set forth below or to such other address as may be furnished in writing
to the other parties hereto:
-36-
<PAGE>
The Company: Voxware, Inc.
172 Tamarack Circle
Skillman, NJ 08558
Attention: Kenneth H. Traub, Chief Financial
Officer
with copy to: Fulbright & Jaworski, L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Paul Jacobs, Esq.
The Purchasers: The address set forth opposite the Purchaser's
name on Schedule 1.1 attached hereto.
------------
with copy to: Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02120
Attention: Anthony J. Medaglia, Jr., Esquire
12.6 Expenses. Each party hereto will pay its own expenses in connection
--------
with the transactions contemplated hereby, provided, however, that the Company
-------- -------
shall pay all reasonable costs and expenses of special counsel to the Purchasers
in connection with the investigation, preparation, execution and delivery of
this Agreement (and due diligence related thereto) and the other instruments and
documents to be delivered hereunder and the transactions contemplated hereby and
thereby, including without limitation, the reasonable fees and disbursements of
Hutchins, Wheeler & Dittmar, P.C., special counsel to the Purchasers, and Lahive
& Cockfield, special patent counsel the Purchasers; provided, however, that the
-------- -------
expenses and costs to be paid by the Company under this Section 12.6 shall not
exceed $20,000.00.
12.7 Counterparts. This Agreement and any exhibit hereto may be executed
------------
by telecopier in multiple counterparts, each of which shall constitute an
original but all of which shall constitute but one and the same instrument. One
or more counterparts of this Agreement or any exhibit hereto may be delivered
via telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
12.8 Effect of Headings. The article and section headings herein are for
------------------
convenience only and shall not affect the construction hereof.
12.9 Adjustments. All provisions of this Agreement shall be automatically
-----------
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
12.10 Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the Commonwealth of Massachusetts and together with the rights and
-37-
<PAGE>
obligations of the parties hereunder, shall be construed under and governed by
the laws of such Commonwealth.
* * * * * * * *
-38-
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
VOXWARE, INC.
By: /s/ Kenneth H. Traub
---------------------------------
Name: Kenneth H. Traub
Title: Executive Vice President and
Chief Financial Officer
MANAGERS:
/s/ Michael Goldstein
------------------------------------
Michael Goldstein
/s/ J. Gerard Aguilar
------------------------------------
J. Gerard Aguilar
/s/ Kenneth H. Traub
------------------------------------
Kenneth H. Traub
PURCHASERS:
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
-39-
<PAGE>
ADTEL LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
ADVENT GROWN FUND C.V.
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
ADWEST LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
-40-
<PAGE>
ADVENT ISRAEL (BERMUDA) LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
ADVENT ISRAEL LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
NORTH BRIDGE VENTURE PARTNERS, L.P.
By: North Bridge Venture Management, L.P.,
its General Partner
By: /s/ Richard D'Amore
---------------------------------
Name: Richard D'Amore,
Title: General Partner
-41-
<PAGE>
ADVENT PARTNERS LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Andrew I. Fillat
---------------------------------
Name: Andrew I. Fillat
Title: Senior Vice President
-42-
<PAGE>
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 (this "Amendment"), entered into this 19th day of
March, 1996, between VOXWARE, INC., a Delaware corporation with its principal
place of business at 172 Tamarack Circle, Skillman, New Jersey 08558 (the
"Company"), NETSCAPE COMMUNICATIONS CORPORATION, a Delaware corporation
("Netscape"), and INTEL CORPORATION, a Delaware corporation ("Intel" and,
together with Netscape, the "New Purchasers"), relating to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement"), dated December
19, 1995, by and among the Company, the Managers and the Purchasers named
therein (such Purchasers being sometimes hereinafter referred to as the "Series
A Preferred Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Purchase Agreement, the Series A Preferred
Stockholders purchased an aggregate of 4,000,000 shares of the Company's Series
A Preferred Stock, $.001 par value per share (the "Series A Preferred Stock");
and
WHEREAS, the Company desires to issue and sell to each of Netscape and
Intel, and each of Netscape and Intel desires to purchase, 1,000,000 shares of
Series A Preferred Stock upon substantially the same terms and conditions set
forth in the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the New Purchasers
agree as follows:
ARTICLE 1
INCORPORATION BY REFERENCE; DEFINITIONS
1.1 Incorporation by Reference. The Purchase Agreement (other than
--------------------------
the representations and warranties of the Purchasers), including, without
limitation, the representations and warranties of the Company and the Managers,
the affirmative and negative covenants of the Company, and the conditions of the
Purchasers' and the Company's obligations, along with all the Schedules and the
Exhibits to the Purchase Agreement are, except as otherwise expressly set forth
in this Amendment and the Schedules and Exhibits hereto, expressly incorporated
herein in their entirety by reference.
1.2 Definitions. All capitalized terms used herein and not otherwise
-----------
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
<PAGE>
1.3 "Agreement". Any reference in the Purchase Agreement or this
---------
Amendment or any other document or agreement delivered in connection herewith or
therewith to "the Agreement" shall mean the Purchase Agreement as amended
hereby.
1.4 "Certificate of Designation". Any reference in the Purchase
----------------------------
Agreement or this Amendment or any other document or agreement delivered in
connection herewith or therewith, to "the Certificate of Designation" shall be
deemed to include the Company's Certificate of Designations, Powers, Preferences
and Rights of the Series A Convertible Preferred Stock, as amended by the
Certificate of Amendment to the Certificate of Designations, Powers, Preferences
and Rights of the Series A Convertible Preferred Stock attached to this
Amendment as Exhibit A (the "Certificate of Amendment").
---------
1.5 "Purchased Shares". Any reference in the Purchase Agreement or
------------------
this Amendment or any other document or agreement delivered in connection
herewith or therewith to "the Purchased Shares" shall be deemed to include the
Purchased Shares and the Additional Shares (as defined below).
1.6 "Shareholders' Agreement". Any reference in the Purchase
-------------------------
Agreement or this Amendment or any other document or agreement delivered in
connection herewith or therewith, to "the Shareholders' Agreement" shall be
deemed to mean the Shareholders' Agreement, dated December 19, 1995, by and
among the Company, and the Investors and the Current Stockholders (in each case,
as defined in the Shareholders' Agreement and collectively referred to herein as
the "Original Parties to the Shareholders' Agreement"), as amended by the First
Amendment to, and Agreement to be Bound by, the Shareholders' Agreement attached
to this Amendment as Exhibit B (the "First Amendment to Shareholders'
---------
Agreement").
1.7 Deemed Purchaser. Upon the execution hereof, each of the New
----------------
Purchasers shall be deemed a "Purchaser" for all purposes under the Purchase
Agreement and, except as specifically otherwise set forth herein, shall be
entitled to all the rights and subject to all the obligations of the Purchasers
under the Purchase Agreement. Notwithstanding anything in this Amendment, the
Purchase Agreement, the Certificate of Designation or the Shareholders'
Agreement to the contrary, Netscape's designee to the Company's Board of
Directors as contemplated by the Shareholders' Agreement shall not be deemed "a
director designated by the Purchasers" or "a director designated by the holders
of the Series A Preferred Stock" for any purpose under the Agreement, or "a
director designated by the holders of the Preferred Stock" for any purpose under
the Certificate of Designation.
ARTICLE 2
AUTHORIZATION AND SALE OF THE SHARES
2.1 Authorization of the Additional Shares. The Company has, or
--------------------------------------
before the Closing (as hereinafter defined) will have, authorized the sale and
issuance
-2-
<PAGE>
of 2,000,000 additional shares (the "Additional Shares") of its Series A
Preferred Stock, which Additional Shares have the rights, restrictions,
privileges and preferences as set forth in the Certificate of Amendment.
2.2 Sale of the Additional Shares. Subject to the terms and
-----------------------------
conditions hereof and in reliance upon the representations, warranties and
agreements contained (or incorporated by reference) herein, the Company will
issue and sell to each New Purchaser, and each New Purchaser will purchase from
the Company at the Closing, 1,000,000 of the Additional Shares at a purchase
price of One Dollar ($1.00) per Share.
ARTICLE 3
CLOSING DATE; DELIVERY
3.1 Closing Date. The closing of the purchase and sale of the
------------
Additional Shares hereunder (the "Closing") shall be held immediately following
the execution and delivery of this Amendment (the "Closing Date") at a place
determined pursuant to Section 3.3 hereof or at such other time and place as
shall be mutually agreed upon by the Company and the New Purchasers.
3.2 Delivery. At the Closing, the Company will deliver to each New
--------
Purchaser certificates, in such denominations and registered in such names as
each such New Purchaser may reasonably request, representing the Additional
Shares to be purchased by such New Purchaser, respectively, from the Company,
against payment of the purchase price therefor by check, wire transfer or such
other form of payment as shall be mutually agreed upon by the New Purchasers and
the Company, payable to the order of the Company.
3.3 Place of Closing. The place of Closing (including the place of
----------------
delivery to the New Purchasers by the Company of the certificates evidencing all
Additional Shares being purchased and the place of payment to the Company by the
New Purchasers of the purchase price therefor) shall be at the offices of
Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, or such
other place as the New Purchasers and the Company shall mutually agree.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Amendment. For purposes of this Amendment, the representation and
---------
warranty of the Company contained in Section 2.4 of the Purchase Agreement is
amended in its entirety to read as follows:
2.4 Authorized and Outstanding Stock. At the Closing, before giving
--------------------------------
effect to the transactions to be effected at the Closing, the authorized
capital stock of the Company will consist of (i) 30,000,000
-3-
<PAGE>
shares of Common Stock, of which 11,545,000 shares are validly issued and
outstanding and held of record and owned beneficially as set forth in
Schedule 2.4 attached hereto; and (ii) 10,000,000 shares of Preferred
------------
Stock, of which 6,000,000 shares will have been designated as Series A
Preferred Stock with the rights, terms and privileges set forth in Exhibit
-------
A, and of which 4,000,000 shares will be issued or outstanding.
-
Immediately prior to the Closing, (i) 2,200,000 shares of Common Stock will
be reserved for issuance to officers, directors, employees and consultants
of the Company under the 1994 Stock Option Plan (of which, options for
2,035,000 shares of common stock have been granted and outstanding); (ii)
140,000 shares of Common Stock will be reserved for issuance upon exercise
of options to purchase Common Stock held and owned beneficially as set
forth on Schedule 2.4 to the Agreement, as amended; (iii) 2,000,000 shares
------------
of Common Stock will be reserved for issuance upon exercise of warrants;
and (iv) 4,000,000 shares of Common Stock will be reserved for issuance
upon the conversion of outstanding shares of Series A Preferred Stock.
There are no treasury shares held by the Company. All issued and
outstanding shares of capital stock are, and when issued in accordance with
the terms hereof and the Certificate of Designation, all Purchased Shares
and Conversion Shares issued upon conversion of the Purchased Shares will
be, duly and validly authorized, validly issued and fully paid and non-
assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to this Agreement or any Related
Agreement. Except (i) as set forth on Schedule 2.4 and (ii) as set forth
------------
in the Agreement, there are no outstanding warrants, options, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or
demands of any character relating to the capital stock or other securities
of the Company. All issued and outstanding shares of capital stock of the
Company were issued (i) in transactions exempt from the registration
provisions of the Act, and (ii) in compliance with or in transactions
exempt from the registration provisions of applicable state securities or
"blue-sky" laws.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE NEW PURCHASERS
5.1 Representations, Warranties and Covenants of the New Purchasers.
---------------------------------------------------------------
Each New Purchaser, severally and not jointly, hereby expressly makes the
representations and warranties set forth in Section 6.1 of the Purchase
Agreement (and incorporated by reference pursuant to Section 1.1 of this
Amendment as if fully set forth herein).
-4-
<PAGE>
ARTICLE 6
CONDITIONS TO CLOSING OF COMPANY
6.1 Waiver. On or prior to the Closing Date, the Series A Preferred
------
Stockholders shall have executed and delivered the waiver (the "Waiver")
substantially in the form attached hereto as Exhibit C, waiving, among other
---------
things, their preemptive right with respect to the Additional Shares and
consenting to the filing of the Certificate of Amendment and to the offer and
sale of the Additional Shares as contemplated hereby in accordance with the
Purchase Agreement, the Certificate of Designation and applicable law.
6.2 Certificate of Amendment. On or prior to the Closing Date, the
------------------------
Company will have filed the Certificate of Amendment, and the holders of the
Company's Common Stock will have consented to such filing in accordance with
applicable law.
6.3 First Amendment to Shareholders' Agreement. On or prior to the
------------------------------------------
Closing Date, the First Amendment to Shareholders' Agreement shall have been
executed by the New Purchasers, the Company and the Original Parties to the
Shareholders' Agreement
ARTICLE 7
CONDITIONS TO CLOSING OF THE NEW PURCHASERS
7.1 Waiver. On or prior to the Closing Date, the Series A Preferred
------
Stockholders shall have executed and delivered the Waiver in accordance with the
Purchase Agreement, the Certificate of Designation and applicable law.
7.2 Disclosure Schedules. As of the Closing Date, except as described
--------------------
in the Schedules to this Amendment, there shall have been no material adverse
change in, or addition to, the information set forth in the Disclosure Schedules
to the Purchase Agreement and the Company shall have delivered to the New
Purchasers a certificate of the President of the Company, dated the Closing
Date, to such effect.
7.3 Certificate of Amendment. On or prior to the Closing Date, the
------------------------
Company will have filed the Certificate of Amendment, and the holders of the
Company's Common Stock will have consented to such filing in accordance with
applicable law.
7.4 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in the Purchase Agreement, as amended by
this Amendment, shall be true and correct on the date of the Closing with the
same effect as though made on and as of that date, and the New Purchasers shall
have received a certificate dated as of such Closing and signed on behalf of the
Company to that effect.
-5-
<PAGE>
7.5 Performance. The Company shall have performed and complied with
-----------
all of the agreements, covenants and conditions contained in this Amendment
required to be performed or complied with by it at or prior to the Closing, and
the New Purchasers shall have received a certificate dated as of such Closing
and signed on behalf of the Company to that effect.
7.6 Amendment of Shareholders' Agreement. It shall be a condition to
------------------------------------
Netscape's obligations hereunder that on or prior to the Closing Date, the
Shareholders' Agreement shall have been amended to allow Netscape to designate
one nominee to the Company's Board of Directors for so long as Netscape owns at
least 1,000,000 shares of Series A Preferred Stock (as adjusted to reflect any
stock dividend, stock split or other form of recapitalization occurring after
the date hereof); and it shall be a condition to Intel's obligations hereunder
that on or prior to the Closing Date, the Shareholders' Agreement shall have
been amended to allow Intel to designate one individual to attend meetings of
the Company's Board of Directors as an observer for so long as Intel owns at
least 1,000,000 shares of Series A Preferred Stock (as adjusted to reflect any
stock dividend, stock split or other form of recapitalization occurring after
the date hereof).
ARTICLE 8
MISCELLANEOUS
8.1 Amendment. For purposes of this Amendment, Section 12.6 of the
---------
Purchase Agreement is amended in its entirety to read as follows:
12.6 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby.
8.2 Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.3 Notices. All notices, requests, consents, reports and demands
-------
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the New
Purchasers at their respective addresses set forth below or to such other
address as may be furnished in writing to the other parties hereto:
The Company: Voxware, Inc.
-----------
172 Tamarack Circle
Skillman, NJ 08558
Attention: Kenneth H. Traub,
Chief Financial Officer
-6-
<PAGE>
with copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attention: Paul Jacobs, Esq.
The New Purchasers: Netscape Communications Corporation
------------------
501 East Middlefield Road
Mountain View, CA 94043
Attention: Roberta R. Katz, Esq., General Counsel
with copy to: James Strawbridge, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Intel Corporation
2200 Mission College Blvd.
Santa Clara, California 95052
Attention:
with copy to: Suzan Miller, Esq.
Intel Corporation
Mail Stop SC4-203
2200 Mission College Blvd.
Santa Clara, California 95052
8.4 Confidentiality. Except as set forth below, without the prior
---------------
written consent of Intel, the Company shall not issue any press release relating
to this Amendment and the transactions contemplated hereby solely as they
relates to Intel. Notwithstanding the foregoing, without the prior consent of
Intel, the Company will have the right to disclose information with respect to
Intel's investment hereunder to current investors, to potential investors in
connection with any public offering of the Company's capital stock in accordance
with applicable law and to the public in accordance with applicable law if and
at such time as the Company's securities are registered under the Securities
Exchange Act of 1934, as amended, and in accordance with any listing agreement
if and at such time as the Company's securities are listed on any national
securities exchange or quoted on any national securities quotation system. In
addition, the Company will have the right to disclose information with respect
to Intel's investment hereunder to potential investors in connection with any
private offering of the Company's capital stock and to potential OEM partners
(i) if such persons are subject to nondisclosure obligations with respect to
such information or (ii) with the prior consent of Intel, which consent will not
be unreasonably withheld, and which consent will be deemed given if Intel does
not respond within seven days of any Company request for such consent.
-7-
<PAGE>
As between the Company and Netscape, it is the intent of the Company
and Netscape to issue a press release as promptly as practicable after and with
respect to the transactions contemplated by this Amendment as they relate to
Netscape. Such press release will be mutually acceptable to the Company and
Netscape.
IN WITNESS WHEREOF, the parties have duly executed this Purchase
Agreement as of the date and year first written above.
VOXWARE, INC.
By: /s/ Michael Goldstein
---------------------------------------
President
NETSCAPE COMMUNICATIONS
CORPORATION
By: /s/ Peter Curry
---------------------------------------
INTEL CORPORATION
By: /s/ Arvind Sodhani
---------------------------------------
-8-
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") dated as of January 3, 1994, by and
between Advanced Communication Technologies, Inc., a Delaware corporation (the
"Company"), and Michael Goldstein ("Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company wishes to employ Executive in an executive capacity
and Executive is desirous of being so employed;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
---------------------------------
(a) The Company hereby employs Executive for the Term (as hereinafter
defined) to render services to the Company as President and Chief Executive
Officer ("CEO"), and to perform such duties commensurate with such office as he
shall reasonably be directed by the Board of Directors (the "Board") of the
Company to perform, which duties shall be consistent with the provisions of the
By-laws in effect on the date hereof that relate to the duties of the CEO and
President. Without limiting the foregoing, the President and CEO shall be
responsible for the management of all activities of the Company, including
implementation of the Company's business plan, dated January 1994 (the "Business
Plan"), as amended from time to time by the Board of the Company (whether or not
such amendments are written). Unless otherwise determined by the Board or as
required by the By-laws of the Company, all employees and executives of the
Company will report directly or indirectly to the President and CEO.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and its Affiliates;
and Executive shall not, directly or indirectly, alone or as a member of any
partnership or other organization, or as an officer, director or employee of any
other corporation, partnership or other organization, be actively engaged in or
concerned with any other duties or pursuits which materially interfere with the
performance of his duties hereunder, or which, even if non-interfering, may be
inimical, or contrary, to the best interests of the Company and its Affiliates,
except those duties or pursuits specifically authorized by the Board.
(c) Executive further agrees to accept election and to serve during all
or any part of the Term as a director of the Company without any compensation
therefor other than that specified in this Agreement, if elected to such
position by the shareholders of the Company. The Company shall use its best
efforts to cause
<PAGE>
Executive to be elected as a director during the Term and shall include him in
the management slate for election as a director at every shareholders meeting
during the Term at which his term as a director would otherwise expire.
(d) The principal place of employment of Executive hereunder shall at
all times during the Term be in the greater New York, New York area, Princeton,
New Jersey or other locations mutually acceptable to Executive and the Company.
(e) Executive hereby accepts such employment and agrees to render the
services described above.
2. Term of Employment.
------------------
The term of Executive's employment under this Agreement will commence
as of the date hereof (the "Effective Date") and shall end on the third
anniversary hereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement; provided that this Agreement shall automatically be renewed on the
same terms for successive one-year terms (the initial three-year Term and, if
the period of employment is so renewed such additional period(s) of employment
are collectively referred to herein as the "Term") unless terminated by written
notice given by either party to the other at least 90 days prior to the end of
the applicable Term.
3. Compensation and Benefits.
-------------------------
(a) As full compensation for all services to be rendered pursuant to
this Agreement, commencing March 1, 1994, the Company agrees to pay Executive
during the Term a base salary at an annual rate of $100,000, payable in such
installments as is the policy of the Company with respect to executive employees
of the Company (the "Salary"). The Salary shall be increased to $125,000 per
annum upon the closing of a sale or sales of the Company's securities pursuant
to private placements or pursuant to registration statements filed under the
Securities Act of 1933, as amended, with, and declared effective by, the
Securities and Exchange Commission, in either case, with an aggregate offering
price per share of at least $.50, as adjusted for stock splits, stock dividends,
recapitalizations and other similar transactions, and with aggregate net
proceeds to the Company of not less than $700,000. The Salary shall be increased
to $165,000 per annum upon the earlier to occur of (i) the Company having
achieved a positive net income (net of development revenues and excluding any
extraordinary items of income and loss) for any calendar quarter as determined
in accordance with generally accepted accounting principles or (ii) the closing
of a sale or sales of the Company's securities pursuant to private placements or
pursuant to registration statements filed under the Securities Act of 1933, as
amended, with, and declared effective by, the Securities and Exchange
Commission, in either case, with an aggregate offering price per share of at
least $1.50, as adjusted for stock splits, stock dividends, recapitalizations
and other similar transactions, and with aggregate net proceeds to the Company
of not less than $1,000,000.
-2-
<PAGE>
(b) Executive will be entitled to bonuses for each fiscal year of the
Company during the Term if the Company achieves certain financial and other
benchmarks which the Company and Executive will endeavor to establish each
fiscal year. In addition, Executive may receive bonuses on such dates, in such
amounts and on such other terms as may be determined by the Board in its sole
discretion.
(c) In order to reimburse Executive for the expenses associated with
his relocation in connection with his employment by the Company ("Relocation
Expenses"), the Company shall pay to Executive a one-time non-accountable
expense allowance of $30,000 out of which Executive will pay all such Relocation
Expenses. Payment of Relocation Expenses shall be made at such times and in such
installments as may be determined by the Board of Directors in consultation with
Executive, but in any event, no later than June 30, 1994, subject to extension
by Executive in his sole discretion.
(d) The Company shall pay or reimburse Executive for all reasonable
expenses, other than Relocation Expenses as defined above, actually incurred or
paid by him during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as it reasonably may require.
(e) Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
pension, group insurance or other so-called "fringe" benefits, if any, which the
Company generally provides for its executives.
(f) The Company shall provide to Executive, at the Company's expense,
medical insurance with coverage reasonably satisfactory to Executive and the
Company.
(g) The Company will obtain, at the Company's expense, $1 million of
life insurance, and disability insurance, covering Executive and naming
Executive's spouse as beneficiary, with coverage reasonably satisfactory to
Executive and the Company. In the event that the Company obtains group life
and/or disability insurance covering its executives generally, the insurance
provided to Executive hereunder may be provided by the Company under such group
plans.
(h) Executive shall be entitled to vacation time of 15 days per year
taken, subject to fulfillment of his duties hereunder, in accordance with the
vacation policy of the Company, and three personal days per year, during the
Term.
4. Confidentiality.
---------------
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than (i) as is reasonably required in the regular
course of his duties, including disclosures to the Company's advisors and
consultants, (ii) as required by law
-3-
<PAGE>
(in which case Executive shall give the Company prior written notice of such
required disclosure) or (iii) with the prior written consent of the Board of
Directors), to any person, firm or corporation, any confidential information
acquired by him during the course of, or as an incident to, his employment or
the rendering of services hereunder, relating to the Company or any of its
subsidiaries, any client, investor, corporate partner, or joint venturer of the
Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by the Company or its
subsidiaries or, to the knowledge of Executive, by any of the other persons or
entities listed above, or in which the Company or any of its subsidiaries or, to
the knowledge of Executive, any of the other persons or entities listed above,
has a beneficial interest. Such confidential information shall include, but
shall not be limited to, business affairs, proprietary technology, trade
secrets, patented processes, research and development data, know-how, market
studies and forecasts, competitive analyses, pricing policies, employee lists,
personnel policies, the substance of agreements with customers, suppliers and
others, marketing or dealership arrangements, servicing and training programs
and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to
any confidential information which becomes publicly available other than
pursuant to a breach of this Section 4 by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company and upon termination of Executive's employment with the Company, all
documents, records, reports, writings and other similar documents containing
confidential information, including copies thereof, then in Executive's
possession or control shall be returned and left with the Company.
5. Non-Competition.
---------------
Executive agrees that during the Term of his employment by the Company
and (i) in the event Executive's employment is terminated pursuant to Section
7(a)(2) hereof, during the Severance Period (as defined in such Section);
provided that the Company makes the payments to Executive described in such
Section or (ii) in the event Executive's employment is terminated for Cause
pursuant to Section 7(a)(1), or Executive terminates his employment for any
reason other than those set forth in Section 8 hereof, during the period of one
year following the termination of Executive's employment hereunder, (in any
case, the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with (collectively, a "Relationship"), any business which is engaged
in development and commercialization of any technologies or products which are
competitive with any technologies or products designed, marketed, licensed or
sold by the Company or any of its subsidiaries, in any geographic area where,
during the time of his employment, the business of the Company or any of its
subsidiaries is being, had been or was
-4-
<PAGE>
actually planned to be, conducted in any manner whatsoever; provided, however,
that Executive may own any securities of any corporation which is engaged in
such business and is publicly owned and traded but in an amount not to exceed at
any one time one percent (1%) of any class of stock or securities of such
company and; provided, further, that Executive shall not be prohibited from
having a Relationship (after termination of Executive's employment) with any
subsidiary or division of any entity which does not engage or propose to engage
in any of the activities from which Executive is precluded as set forth above,
notwithstanding that subsidiaries or divisions of such entity may be engaged in
such activities (subject to Executive's continued compliance with his
confidentiality obligations contained in Section 4). In addition, Executive
shall not, directly or indirectly, during the Non-Competitive Period, request or
cause any suppliers or customers with whom the Company or any of its
subsidiaries has a business relationship to cancel or terminate any such
business relationship with the Company or any of its subsidiaries or solicit,
interfere with or entice from the Company any employee (or former employee) of
the Company.
6. Injunction and Enforceability of Covenants.
------------------------------------------
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Section 4, 5 or 9 hereof, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.
(b) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5 and 9 hereof upon the courts of
any state within the geographical scope of such covenants. In the event that the
courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such other covenants, as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
-5-
<PAGE>
(e) The existence of any claim or cause of action by Executive against
the Company or any Affiliate of the Company shall not constitute a defense to
the enforcement by the Company of the covenants contained in Sections 4, 5 and 9
hereof, but such claim or cause of action shall be litigated separately.
7. Termination by the Company.
--------------------------
(a) The Company may terminate this Agreement upon written notice to
Executive if any one or more of the following shall occur:
(1) Executive acts, or fails to act, in a manner that provides
Cause for termination. For purposes of this Agreement, the term "Cause" means
(a) the willful and continual neglect by Executive of his duties or obligations
hereunder (other than breaches of the covenants set forth in Sections 4, 5 and 9
hereof which events are governed by clause (f) below); provided such neglect
remains uncured for a period of 30 days after written notice describing the same
is given to the Executive; provided, that isolated or insubstantial failures
shall not constitute Cause hereunder, (b) Executive's conviction (which, through
lapse of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries, (c)
Executive's performance of any act or his failure to act, for which if Executive
were prosecuted and convicted, a crime or offense involving money or property of
the Company or any of its subsidiaries, or which would constitute a felony in
the jurisdiction involved, would have occurred, (d) any attempt by Executive to
improperly secure any personal profit in connection with the business of the
Company or any of its subsidiaries, (e) chronic alcoholism or drug addiction or
(f) any breach by Executive of the terms of Section 4, 5 or 9 of this Agreement;
provided such breach continues uncured for 10 days after written notice of such
- --------
breach is given by the Company to Executive
(2) The Board of Directors shall determine that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute Cause (as defined above) (and other than disability or
death) upon thirty (30) days' prior written notice to Executive.
In the event that Executive's employment is terminated by the Company
at any time (other than at the end of any Term) under this paragraph 7(a)(2),
the Company shall pay Executive for a period equal to the shorter of (i) nine
months or (ii) the remainder of the then current Term (such period being
hereinafter referred to as the "Severance Period"), his Salary at the then
current rate, payable in such installments as the Company customarily pays
Executive, which amount shall be in lieu of any and all other payments due and
owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 3(d)
hereof), and (ii) continue to allow Executive to participate, at the Company's
expense, in the Company's health insurance and disability insurance programs, if
any, to the extent permitted under such programs, during the Severance Period.
-6-
<PAGE>
(b) Executive's employment shall terminate upon:
(1) Executive's death during the Term; provided, however, that
-------- -------
Executive'slegal representatives shall be entitled to receive his Salary through
the last day of the month in which his death occurs.
(2) Executive shall become physically or mentally disabled so that
he is unable substantially to perform his services hereunder for (a) a period of
60 consecutive days, or (b) for shorter periods aggregating 120 days during any
twelve-month period during the Term. Notwithstanding such disability the Company
shall continue to pay Executive his Salary through the date of such termination.
(c) Upon any termination of Executive's employment hereunder for any
reason, with or without Cause, whether by the Company or by Executive, Executive
shall be deemed to have resigned from all positions as an officer and/or
director of the Company and any of its subsidiaries.
(d) All determinations of Cause, termination or nonrenewal pursuant to
Section 2 hereof or this Section 7 shall be made by the vote of a majority of
the entire Board of Directors.
8. Termination by Executive.
------------------------
Executive may terminate this Agreement on written notice to the Company
if any one or more of the following shall occur:
(1) a material breach of the terms of this Agreement by the Company
and such breach continues uncured for 30 days after written notice of such
breach is first given;
(2) a material breach by the Company of any other material
agreement with Executive and such breach continues for 30 days after written
notice of such breach is first given.
9. Inventions Discovered by Executive.
----------------------------------
Executive shall promptly disclose to the Company any invention,
improvement, discovery, process, formula, or method or other intellectual
property, whether or not patentable, whether or not copyrightable, in the
Company's Field of Interest (collectively, "Inventions") made, conceived or
first reduced to practice by the Executive, either alone or jointly with others,
while performing service hereunder. Executive hereby assigns to the Company all
of his right, title and interest in and to any such Inventions. During and
after the Term, Executive shall execute any documents necessary to perfect the
assignment of such Inventions to the Company and to enable the Company to apply
for, obtain, and enforce patents and copyrights in any and all countries on such
Inventions. Executive hereby irrevocably designates the
-7-
<PAGE>
Counsel to the Company as his agent and attorney-in-fact to execute and file any
such document and to do all lawful acts necessary to apply for and obtain
patents and copyrights and to enforce the Company's rights under this Section.
This Section 9 shall survive the termination of this Agreement.
10. Indemnification.
---------------
The Company shall indemnify Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.
11. Stock Purchase Option and Stock Purchase.
----------------------------------------
In connection with Executive's employment hereunder, Executive shall
be entitled to purchase shares of Common Stock of the Company upon the terms and
subject to the conditions set forth in the Stock Option Agreements attached
hereto as Exhibit A, and the Stock Purchase Agreement attached hereto as
---------
Exhibit B.
- ---------
12. Representations and Agreements of Executive.
-------------------------------------------
(a) Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Company's obtaining life insurance
on the life of Executive, if the Company so desires, and any other type of
insurance or fringe benefit as the Company shall determine from time to time to
obtain.
13. Definitions.
-----------
As used herein, the following terms have the following meanings:
(1) "Affiliate" means and includes any person, corporation or other
entity controlling, controlled by or under common control with the corporation
in question.
(2) "Company's Field of Interest" means the businesses of the Company
as described in the Business Plan, and as determined from time to time by the
Board of Directors and in subsequent disclosures during the Executive's
employment hereunder.
-8-
<PAGE>
14. Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (other than disputes with respect to alleged violations of
the covenants contained in Sections 4, 5 and 9 hereof, and the Company's pursuit
of the remedies described in Section 6 hereof in connection therewith) shall be
settled by arbitration in the City of New York, in accordance with the rules
then existing of the American Arbitration Association (three arbitrators), and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall be free to pursue any remedy before the arbitration
tribunal that they shall be otherwise permitted to pursue in a court of
competent jurisdiction. The award of the arbitrators shall be final and binding.
15. Notices.
-------
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):
If to the Company:
Advanced Communication Technologies, Inc.
11112 South Halsted
Chicago, Illinois 60628
Attention: J. Gerard Aguilar
Telephone: (312) 928-1004
Fax: (312) 928-7010
If to Executive:
Michael Goldstein
44 Park Place
Brooklyn, New York 11217
Telephone: (718) 230-8110
Fax: (718) 230-3057
16. General.
-------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in New York.
-9-
<PAGE>
(b) This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise or inducement not so
set forth.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of a party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by a party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
or any one or more or continuing waivers of any such breach, shall constitute a
waiver of the breach of any other term or covenant contained in this Agreement.
(d) This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCED COMMUNICATION TECHNOLOGIES, INC.
By: /s/ J. Gerard Aguilar
---------------------------------------
/s/ Michael Goldstein
--------------------------------------
Michael Goldstein
-10-
<PAGE>
[Letterhead of Voxware, Inc.]
July 18, 1995
Mr. Michael Goldstein
c/o Voxware, Inc.
172 Tamarack Circle
Skillman, New Jersey 08558
Dear Michael:
This letter sets forth certain agreements and understandings between you
and Voxware, Inc. (the "Company") regarding the terms of your Employment
Agreement, dated as of January 3, 1994 (the "Employment Agreement").
Paragraph 3(a) of the Employment Agreement is amended by deleting the
second and third sentences thereof (the "Deleted Sentences") relating to
increases in the Salary (as defined in the Employment Agreement) in their
entirety, and replacing the Deleted Sentences with the following:
"The Salary will be increased to $117,500 per annum commencing
on and as of June 1, 1995. At or around the beginning of each
fiscal year of the Company, the Board of Directors in
consultation with Executive will establish financial and other
objectives for the Company in order to measure Executive's
performance in the fiscal year. The Salary will be subject to
increase in each fiscal year in a manner determined by the Board
of Directors in consultation with the Executive based on the
Company meeting such objectives."
You hereby waive any rights which you may have had under the Deleted Sentences
or otherwise to any increase in the Salary from $100,000 except as set forth in
the Employment Agreement amended as set forth above.
Section 7 of the Employment Agreement is amended by (i) deleting the
second paragraph of Paragraph 7(a)(2) in its entirety and (ii) inserting a new
Paragraph 7(e) which shall read in its entirety as follows:
<PAGE>
Michael Goldstein
July 18, 1995
Page 2
"(e) In the event that Executive's employment is
terminated by the Company at any time under paragraph 7(a)(2)
above or at the end of any Term solely due to the Company's
determination not to renew this agreement at the end of the
Term under paragraph 2 above, the Company (i) shall pay
Executive for a period of nine months following the date of
termination of employment (such period being hereinafter
referred to as the "Severance Period") his Salary at the
then current rate, payable in such installments as the
Company customarily pays Executive, which amount shall be in
lieu of any and all other payments due and owing to the
Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to
Section 3(d) hereof), and (ii) continue to allow Executive to
participate during the Severance Period, at the Company's
expense (except to the extent that Executive shared such
expense prior to termination of employment), in the Company's
health insurance and disability insurance programs, if any,
to the extent permitted under such programs. Any payments
received by Executive during the Severance Period from
employment with another employer or from any consulting
position taken (including, without limitation, salaries,
fees, commissions and bonuses) shall reduce, but not below
zero, the amount payable by the Company to Executive pursuant
to this paragraph 7(e); provided, that, in no event shall
Executive be required to return to the Company any amounts
previously paid to Executive pursuant to this paragraph
7(e)."
In return for you agreement to the foregoing changes to the
Employment Agreement, the Company will grant you, subject to stockholder
approval of the amendment to the Company's 1994 Stock Option Plan (the "Plan")
to increase the number of shares reserved for issuance upon the exercise of
options granted under the Plan, incentive stock options (the "Options") under
the Plan to purchase an aggregate of 40,000 shares of the Company's Common
Stock. The Options will have terms and conditions (including an exercise price,
vesting provisions and an expiration date) set forth in the Plan and an option
agreement to be executed in the form attached hereto as Exhibit A.
---------
<PAGE>
Michael Goldstein
July 18, 1995
Page 3
The terms and conditions of the Employment Agreement, as amended
hereby, remain in full force and effect, and are hereby confirmed and ratified
in all respects.
If the foregoing correctly sets forth your understanding of the
agreement between you and the Company relating to the Employment Agreement and
the matters set forth herein, please sign below and return an originally
executed copy of this letter to the Company.
Very truly yours,
VOXWARE, INC.
By: /s/ Kenneth H. Traub
----------------------------
Kenneth H. Traub
Executive Vice President
ACKNOWLEDGED AND ACCEPTED AS OF
THE 23RD DAY OF JULY, 1995:
/s/ Michael Goldstein
- ---------------------------------
Michael Goldstein
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") dated as of February 1, 1995,
by and between Voxware, Inc., a Delaware corporation (the "Company"), and
Kenneth H. Traub ("Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company wishes to employ Executive in an executive
capacity and Executive is desirous of being so employed;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
---------------------------------
(a) The Company hereby employs Executive for the Term (as hereinafter
defined) to render services to the Company as Executive Vice President and Chief
Financial Officer, and to perform such duties commensurate with such office as
he shall reasonably be directed by the Board of Directors (the "Board") and
President of the Company to perform. Without limiting the foregoing, Executive
may report to such other senior executives of the Company as the Board or the
President may direct.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and its Affiliates
(as defined below); and Executive shall not, directly or indirectly, alone or as
a member of any partnership or other organization, or as an officer, director or
employee of any other corporation, partnership or other organization, be
actively engaged in or concerned with any other duties or pursuits which
materially interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be inimical, or contrary, to the best interests of
the Company and its Affiliates, except those duties or pursuits specifically
authorized by the Board. As used herein, the term "Affiliate" means and
includes any person, corporation or other entity controlling, controlled by or
under common control with the corporation in question.
(c) Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company without any
compensation therefor other than that specified in this Agreement, if elected to
such position by the shareholders or directors of the Company. The Company
shall use its best efforts to cause Executive to be elected as a director during
the Term and shall include him in the management slate for election as a
director at every shareholders meeting during the Term at which his term as a
director would otherwise expire.
(d) The principal place of employment of Executive hereunder shall at
all times during the Term be in Princeton, New Jersey or such other locations
mutually acceptable to Executive and the Company.
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(e) Executive hereby accepts such employment and agrees to render the
services described above.
2. Term of Employment.
------------------
The term of Executive's employment under this Agreement will commence
as of the date hereof (the "Effective Date") and shall end on the third
anniversary hereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement; provided that this Agreement shall automatically be renewed on the
same terms for successive one-year terms (the initial three-year Term and, if
the period of employment is so renewed such additional period(s) of employment
are collectively referred to herein as the "Term") unless terminated by written
notice given by either party to the other at least 90 days prior to the end of
the applicable Term.
3. Compensation and Benefits.
-------------------------
(a) As full compensation for all services to be rendered pursuant to
this Agreement, the Company agrees to pay Executive during the Term a base
salary starting at an annual rate of $100,000, payable in such installments as
is the policy of the Company with respect to executive employees of the Company
(the "Salary"). The President and Chief Executive Officer of the Company and
the Board of Directors will review Executive's performance and Salary annually,
commencing on the six month anniversary of this Agreement. The Salary will be
subject to increase at the discretion of the Board of Directors.
(b) Executive will also be entitled to a one-time bonus of $12,375
upon the execution of this Agreement. In addition, Executive may receive
bonuses on such dates, in such amounts and on such other terms as may be
determined by the Board in its sole discretion.
(c) In order to reimburse Executive for the expenses associated with
his relocation in connection with his employment by the Company ("Relocation
Expenses"), the Company shall pay to Executive a one-time non-accountable
expense allowance of $10,000 out of which Executive will pay all such Relocation
Expenses. Payment of Relocation Expenses shall be made upon the request of
Executive; provided that such request is made no later than December 31, 1995.
(d) The Company shall pay or reimburse Executive for all reasonable
expenses, other than Relocation Expenses as defined above, actually incurred or
paid by him during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as it reasonably may require.
(e) Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
pension, group
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<PAGE>
insurance or other so-called "fringe" benefits, if any, which the Company
generally provides for its executives.
(f) The Company shall provide to Executive, at the Company's expense,
medical insurance with coverage reasonably satisfactory to Executive and the
Company. In the event that the Company obtains group medical insurance covering
its executives generally, the insurance provided to Executive hereunder may be
provided by the Company under such group plan.
(g) The Company will obtain, at the Company's expense, $1 million of
life insurance, and disability insurance comparable to that provided to other
executives of the Company generally, covering Executive and naming Executive's
spouse as beneficiary, with coverage reasonably satisfactory to Executive and
the Company. In the event that the Company obtains group life and/or disability
insurance covering its executives generally, the insurance provided to Executive
hereunder may be provided by the Company under such group plans.
(h) Executive shall be entitled to vacation time of 15 days per year
taken, subject to fulfillment of his duties hereunder, in accordance with the
vacation policy of the Company, and three personal days per year, during the
Term.
4. Confidentiality.
---------------
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than (i) as is reasonably required in the regular
course of his duties, including disclosures to the Company's advisors and
consultants, (ii) as required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or (iii) with the
prior written consent of the Board of Directors), to any person, firm or
corporation, any confidential information acquired by him during the course of,
or as an incident to, his employment or the rendering of services hereunder,
relating to the Company or any of its subsidiaries, any client, investor,
corporate partner, or joint venturer of the Company or any of its subsidiaries,
or any corporation, partnership or other entity owned or controlled, directly or
indirectly, by the Company or its subsidiaries or, to the knowledge of
Executive, by any of the other persons or entities listed above, or in which the
Company or any of its subsidiaries or, to the knowledge of Executive, any of the
other persons or entities listed above, has a beneficial interest. Such
confidential information shall include, but shall not be limited to, business
affairs, proprietary technology, trade secrets, patented processes, research and
development data, know-how, market studies and forecasts, competitive analyses,
pricing policies, employee lists, personnel policies, the substance of
agreements with customers, suppliers and others, marketing or dealership
arrangements, servicing and training programs and arrangements, customer lists
and any other documents embodying such confidential information. This
confidentiality obligation shall not apply to any confidential information which
becomes publicly available other than pursuant to a breach of this Section 4 by
Executive.
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(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company and upon termination of Executive's employment with the Company, all
documents, records, reports, writings and other similar documents containing
confidential information, including copies thereof, then in Executive's
possession or control shall be returned and left with the Company.
5. Non-Competition.
---------------
Executive agrees that during the Term of his employment by the Company
and for a period of two years following the termination of Executive's
employment hereunder, (the "Non-Competitive Period"), Executive shall not,
directly or indirectly, as owner, partner, joint venturer, stockholder,
employee, broker, agent, principal, trustee, corporate officer, director,
licensor, or in any capacity whatsoever engage in, become financially interested
in, be employed by, render any consultation or business advice with respect to,
or have any connection with (collectively, a "Relationship"), any business which
is engaged in development and commercialization of any technologies or products
which are competitive with, or an emulation of, any technology or application
thereof or products based thereon designed, marketed, announced, leased or sold
by the Company or any of its subsidiaries, in any geographic area where, during
the time of his employment, the business of the Company or any of its
subsidiaries is being, had been or was proposed to be, conducted in any manner
whatsoever; provided, however, that Executive may own any securities of any
corporation which is engaged in such business and is publicly owned and traded
but in an amount not to exceed at any one time one percent (1%) of any class of
stock or securities of such company and; provided, further, that Executive shall
not be prohibited from having a Relationship (during the Non-Competitive Period
and after termination of Executive's employment for any reason other than (i)
for Cause, (ii) Executive's voluntary termination of employment or (iii)
Executive's termination of employment in violation of this Agreement) with any
subsidiary or division of any entity which does not engage or propose to engage
in any of the activities from which Executive is precluded as set forth above,
notwithstanding that other subsidiaries or divisions of such entity may be
engaged in such activities (subject to Executive's continued compliance with his
confidentiality obligations contained in Section 4). In addition, Executive
shall not, directly or indirectly, during the Non-Competitive Period, request or
cause any suppliers or customers with whom the Company or any of its
subsidiaries has a business relationship to cancel or terminate any such
business relationship with the Company or any of its subsidiaries or solicit,
interfere with or entice from the Company any employee (or former employee) of
the Company.
6. Injunction and Enforceability of Covenants.
------------------------------------------
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Section 4, 5 or 9 hereof, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or
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<PAGE>
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
(b) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5 and 9 hereof upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such other covenants, as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
(e) The existence of any claim or cause of action by Executive against
the Company or any Affiliate of the Company shall not constitute a defense to
the enforcement by the Company of the covenants contained in Sections 4, 5 and 9
hereof, but such claim or cause of action shall be litigated separately.
7. Termination by the Company.
--------------------------
(a) The Company may terminate this Agreement upon written notice to
Executive if any one or more of the following shall occur:
(1) Executive acts, or fails to act, in a manner that provides
Cause for termination. For purposes of this Agreement, the term "Cause" means
(a) the willful and continual neglect by Executive of his duties or obligations
hereunder (other than breaches of the covenants set forth in Sections 4, 5 and 9
hereof which events are governed by clause (f) below); provided such neglect
remains uncured for a period of 30 days after written notice describing the same
is given to the Executive; provided, that isolated or insubstantial failures
shall not constitute Cause hereunder, (b) Executive's conviction (which, through
lapse of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries, (c)
Executive's performance of any act or his failure to act, for which if Executive
were prosecuted and convicted, a crime or offense involving money
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<PAGE>
or property of the Company or any of its subsidiaries, or which would constitute
a felony in the jurisdiction involved, would have occurred, (d) any attempt by
Executive to improperly secure any personal profit in connection with the
business of the Company or any of its subsidiaries, (e) chronic alcoholism or
drug addiction or (f) any breach by Executive of the terms of Section 4, 5 or 9
of this Agreement; provided such breach continues uncured for 10 days after
--------
written notice of such breach is given by the Company to Executive
(2) The Board of Directors shall determine that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute Cause (as defined above) (and other than disability or
death) upon thirty (30) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(1) Executive's death during the Term; provided, however, that
-------- -------
Executive's legal representatives shall be entitled to receive his Salary
through the last day of the month in which his death occurs.
(2) Executive shall become physically or mentally disabled so that
he is unable substantially to perform his services hereunder for (a) a period of
60 consecutive days, or (b) for shorter periods aggregating 120 days during any
twelve-month period during the Term. Notwithstanding such disability the Company
shall continue to pay Executive his Salary through the date of such termination.
(c) Upon any termination of Executive's employment hereunder for any
reason, with or without Cause, whether by the Company or by Executive, Executive
shall be deemed to have resigned from all positions as an officer and/or
director of the Company and any of its subsidiaries.
(d) All determinations of Cause, termination or nonrenewal pursuant to
Section 2 hereof or this Section 7 shall be made by the vote of a majority of
the entire Board of Directors.
(e) In the event that Executive's employment is terminated by the
Company at any time under paragraph 7(a)(2) above or at the end of any Term
solely due to the Company's determination not to renew this agreement at the end
of the Term under paragraph 2 above, the Company (i) shall pay Executive for a
period of nine months following the date of termination of employment (such
period being hereinafter referred to as the "Severance Period") his Salary at
the then current rate, payable in such installments as the Company customarily
pays Executive, which amount shall be in lieu of any and all other payments due
and owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 3(d)
hereof), and (ii) continue to allow Executive to participate during the
Severance Period, at the Company's expense (except to the extent that Executive
shared such expense prior to termination of employment),
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<PAGE>
in the Company's health insurance and disability insurance programs, if any, to
the extent permitted under such programs. Any payments received by Executive
during the Severance Period from employment with another employer or from any
consulting position taken (including, without limitation, salaries, fees,
commissions and bonuses) shall reduce, but not below zero, the amount payable by
the Company to Executive pursuant to this paragraph 7(e); provided, that, in no
event shall Executive be required to return to the Company any amounts
previously paid to Executive pursuant to this paragraph 7(e).
8. Termination by Executive.
------------------------
Executive may terminate this Agreement on written notice to the
Company if any one or more of the following shall occur:
(1) a material breach of the terms of this Agreement by the
Company and such breach continues uncured for 30 days after written notice of
such breach is first given;
(2) a material breach by the Company of any other material
agreement with Executive and such breach continues for 30 days after written
notice of such breach is first given.
9. Inventions Discovered by Executive.
----------------------------------
Executive shall promptly disclose to the Company or any persons
designated by it all improvements, inventions, formulae, processes, techniques,
know-how, data, discoveries, or methods or other intellectual property, whether
or not patentable, whether or not copyrightable, in the Company's Field of
Interest (collectively, "Inventions") made, conceived, reduced to practice or
learned by Executive, either alone or jointly with others, while performing
service hereunder which are related to or useful in the business of the Company,
or result from tasks assigned Executive by the Company, or result from use of
premises or equipment owned, leased or contracted for by the Company. Executive
hereby assigns to the Company all of his right, title and interest in and to any
such Inventions. During and after the Term, Executive shall execute any
documents necessary to perfect the assignment of such Inventions to the Company
and to enable the Company to apply for, obtain, and enforce patents and
copyrights in any and all countries on such Inventions. Executive hereby
irrevocably designates the Counsel to the Company as his agent and attorney-in-
fact to execute and file any such document and to do all lawful acts necessary
to apply for and obtain patents and copyrights and to enforce the Company's
rights under this Section. As used herein, the term "Company's Field of
Interest" means the businesses of the Company as described in the Company's
Confidential Private Placement Memorandum, dated September 8, 1994, and as
determined from time to time by the Board of Directors and in subsequent
disclosures during the Executive's employment hereunder. This Section 9 shall
survive the termination of this Agreement.
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<PAGE>
10. Indemnification.
---------------
The Company shall indemnify Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.
11. Representations and Agreements of Executive.
-------------------------------------------
(a) Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Company's obtaining life insurance
on the life of Executive, if the Company so desires, and any other type of
insurance or fringe benefit as the Company shall determine from time to time to
obtain.
12. Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (other than disputes with respect to alleged violations of
the covenants contained in Sections 4, 5 and 9 hereof, and the Company's pursuit
of the remedies described in Section 6 hereof in connection therewith) shall be
settled by arbitration in the City of New York, in accordance with the rules
then existing of the American Arbitration Association (three arbitrators), and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall be free to pursue any remedy before the arbitration
tribunal that they shall be otherwise permitted to pursue in a court of
competent jurisdiction. The award of the arbitrators shall be final and
binding.
13. Notices.
-------
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):
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<PAGE>
If to the Company:
Voxware, Inc.
172 Tamarack Circle
Skillman, New Jersey 08558
Attention: President
Telephone: (609) 497-1711
Fax: (609) 497-2490
If to Executive:
Kenneth H. Traub
12 Hampstead Court
Princeton, New Jersey 08540
Telephone: (609) 987-2339
Fax: (609) 497-2490
14. General.
-------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in New York.
(b) This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and neither party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of a party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by a party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
or any one or more or continuing waivers of any such breach, shall constitute a
waiver of the breach of any other term or covenant contained in this Agreement.
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<PAGE>
(d) This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VOXWARE, INC.
By: /s/ Michael Goldstein
-------------------------------------
/s/ Kenneth H. Traub
-------------------------------------
Kenneth H. Traub
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<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of August 15, 1995,
by and between Voxware, Inc., a Delaware corporation (the "Company"), and
Kenneth Whittington ("Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company wishes to employ Executive in an executive
capacity and Executive is desirous of being so employed;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
---------------------------------
(a) The Company hereby employs Executive for the Term (as hereinafter
defined) to render services to the Company as Vice President of Product
Development, and to perform such duties commensurate with such office as he
shall reasonably be directed by the Board of Directors (the "Board") and
President of the Company to perform. Without limiting the foregoing, Executive
may report to such other senior executives of the Company as the Board or the
President may direct.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and its Affiliates
(as defined below); and Executive shall not, directly or indirectly, alone or as
a member of any partnership or other organization, or as an officer, director or
employee of any other corporation, partnership or other organization, be
actively engaged in or concerned with any other duties or pursuits which
materially interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be inimical, or contrary, to the best interests of
the Company and its Affiliates, except those duties or pursuits specifically
authorized by the Board. As used herein, the term "Affiliate" means and
includes any person, corporation or other entity controlling, controlled by or
under common control with the corporation in question.
(c) The principal place of employment of Executive hereunder shall at
all times during the Term be in the Princeton, New Jersey area or such other
locations mutually acceptable to Executive and the Company.
(d) Executive hereby accepts such employment and agrees to render the
services described above.
<PAGE>
2. Term of Employment.
------------------
The term of Executive's employment under this Agreement will commence
as of the date hereof (the "Effective Date") and shall end on the third
anniversary hereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement; provided that this Agreement shall automatically be renewed on the
same terms for successive one-year terms (the initial three-year Term and, if
the period of employment is so renewed such additional period(s) of employment
are collectively referred to herein as the "Term") unless terminated by written
notice given by either party to the other at least 90 days prior to the end of
the applicable Term.
3. Compensation and Benefits.
-------------------------
(a) As full compensation for all services to be rendered pursuant to
this Agreement, the Company agrees to pay Executive during the Term a base
salary starting at an annual rate of $110,000, payable in such installments as
is the policy of the Company with respect to executive employees of the Company
(the "Salary"). The President and Chief Executive Officer of the Company and
the Board of Directors will review Executive's performance and Salary annually.
The Salary will be subject to increase at the discretion of the Board of
Directors.
(b) Upon execution of this Agreement, the Company will grant to
Executive, subject to stockholder approval of the amendment to the Company's
1994 Stock Option Plan (the "Plan") to increase the number of shares reserved
for issuance upon the exercise of options granted under the Plan, incentive
stock options (the "Options") under the Plan to purchase an aggregate of 150,000
shares of the Company's Common Stock, which Options will have terms and
conditions (including an exercise price, vesting provisions and an expiration
date) set forth in the Plan and an option agreement to be executed
simultaneously with the execution of this Agreement.
(c) Executive may receive bonuses on such dates, in such amounts and
on such other terms as may be determined by the Board in its sole discretion.
(d) In order to reimburse Executive for the reasonable expenses
associated with his relocation in connection with his employment by the Company
("Relocation Expenses"), the Company shall pay Executive's Relocation Expenses
up to $23,500. Payment of Relocation Expenses shall be made upon presentation
of expense statements or vouchers or such other supporting information as the
Company reasonably may require.
(e) The Company shall pay or reimburse Executive for all reasonable
expenses, other than Relocation Expenses as defined above, actually incurred or
paid by him during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as it reasonably may require.
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<PAGE>
(f) Executive shall be eligible under any group life, medical and/or
disability insurance covering its employees generally.
(g) Executive shall be entitled to vacation time of up to 15 days per
year taken, subject to fulfillment of his duties hereunder, in accordance with
the vacation policy of the Company.
4. Confidentiality.
---------------
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than (i) as is reasonably required in the regular
course of his duties, including disclosures to the Company's advisors and
consultants, (ii) as required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or (iii) with the
prior written consent of the Board of Directors), to any person, firm or
corporation, any confidential information acquired by him during the course of,
or as an incident to, his employment or the rendering of services hereunder,
relating to the Company or any of its subsidiaries, any client, investor,
corporate partner, or joint venturer of the Company or any of its subsidiaries,
or any corporation, partnership or other entity owned or controlled, directly or
indirectly, by the Company or its subsidiaries or, to the knowledge of
Executive, by any of the other persons or entities listed above, or in which the
Company or any of its subsidiaries or, to the knowledge of Executive, any of the
other persons or entities listed above, has a beneficial interest. Such
confidential information shall include, but shall not be limited to, business
affairs, proprietary technology, trade secrets, patented processes, research and
development data, know-how, market studies and forecasts, competitive analyses,
pricing policies, employee lists, personnel policies, the substance of
agreements with customers, suppliers and others, marketing or dealership
arrangements, servicing and training programs and arrangements, customer lists
and any other documents embodying such confidential information. This
confidentiality obligation shall not apply to any confidential information which
becomes publicly available other than pursuant to a breach of this Section 4 by
Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company and upon termination of Executive's employment with the Company, all
documents, records, reports, writings and other similar documents containing
confidential information, including copies thereof, then in Executive's
possession or control shall be returned and left with the Company.
5. Non-Competition.
---------------
Executive agrees that during the Term of his employment by the Company
and for a period of two years following the termination of Executive's
employment hereunder, (the "Non-Competitive Period"), Executive shall not,
directly or indirectly, as owner, partner, joint venturer, stockholder,
employee, broker, agent, principal,
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<PAGE>
trustee, corporate officer, director, licensor, or in any capacity whatsoever
engage in, become financially interested in, be employed by, render any
consultation or business advice with respect to, or have any connection with
(collectively, a "Relationship"), any business which is engaged in development
and commercialization of any technologies or products which are competitive
with, or an emulation of, any technology or application thereof or products
based thereon designed, marketed, announced, leased or sold by the Company or
any of its subsidiaries, in any geographic area where, during the time of his
employment, the business of the Company or any of its subsidiaries is being, had
been or was proposed to be, conducted in any manner whatsoever; provided,
however, that Executive may own any securities of any corporation which is
engaged in such business and is publicly owned and traded but in an amount not
to exceed at any one time one percent (1%) of any class of stock or securities
of such company and; provided, further, that Executive shall not be prohibited
from having a Relationship (during the Non-Competitive Period and after
termination of Executive's employment for any reason other than (i) for Cause,
(ii) Executive's voluntary termination of employment or (iii) Executive's
termination of employment in violation of this Agreement) with any subsidiary or
division of any entity which does not engage or propose to engage in any of the
activities from which Executive is precluded as set forth above, notwithstanding
that other subsidiaries or divisions of such entity may be engaged in such
activities (subject to Executive's continued compliance with his confidentiality
obligations contained in Section 4). In addition, Executive shall not, directly
or indirectly, during the Non-Competitive Period, request or cause any suppliers
or customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
6. Injunction and Enforceability of Covenants.
------------------------------------------
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Section 4, 5 or 9 hereof, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.
(b) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
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<PAGE>
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5 and 9 hereof upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such other covenants, as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
(e) The existence of any claim or cause of action by Executive against
the Company or any Affiliate of the Company shall not constitute a defense to
the enforcement by the Company of the covenants contained in Sections 4, 5 and 9
hereof, but such claim or cause of action shall be litigated separately.
7. Termination by the Company.
--------------------------
(a) The Company may terminate this Agreement upon written notice to
Executive if any one or more of the following shall occur:
(1) Executive acts, or fails to act, in a manner that provides
Cause for termination. For purposes of this Agreement, the term "Cause" means
(a) the willful and continual neglect by Executive of his duties or obligations
hereunder (other than breaches of the covenants set forth in Sections 4, 5 and 9
hereof which events are governed by clause (f) below); provided such neglect
remains uncured for a period of 30 days after written notice describing the same
is given to the Executive; provided, that isolated or insubstantial failures
shall not constitute Cause hereunder, (b) Executive's conviction (which, through
lapse of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries, (c)
Executive's performance of any act or his failure to act, for which if Executive
were prosecuted and convicted, a crime or offense involving money or property of
the Company or any of its subsidiaries, or which would constitute a felony in
the jurisdiction involved, would have occurred, (d) any attempt by Executive to
improperly secure any personal profit in connection with the business of the
Company or any of its subsidiaries, (e) chronic alcoholism or drug addiction or
(f) any breach by Executive of the terms of Section 4, 5 or 9 of this Agreement;
provided such breach continues uncured for 10 days after written notice of such
- --------
breach is given by the Company to Executive.
(2) The Board of Directors shall determine that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute Cause (as defined above) (and other than disability or
death) upon thirty (30) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
-5-
<PAGE>
(1) Executive's death during the Term; provided, however, that
-------- -------
Executive's legal representatives shall be entitled to receive his Salary
through the last day of the month in which his death occurs.
(2) Executive shall become physically or mentally disabled so that
he is unable substantially to perform his services hereunder for (a) a period of
60 consecutive days, or (b) for shorter periods aggregating 120 days during any
twelve-month period during the Term. Notwithstanding such disability the Company
shall continue to pay Executive his Salary through the date of such termination.
(c) Upon any termination of Executive's employment hereunder for any
reason, with or without Cause, whether by the Company or by Executive, Executive
shall be deemed to have resigned from all positions as an officer and/or
director of the Company and any of its subsidiaries.
(d) All determinations of Cause, termination or nonrenewal pursuant to
Section 2 hereof or this Section 7 shall be made by the vote of a majority of
the entire Board of Directors.
(e) In the event that Executive's employment is terminated by the
Company at any time under paragraph 7(a)(2) above, the Company (i) shall pay
Executive for a period of nine months following the date of termination of
employment (such period being hereinafter referred to as the "Severance Period")
his Salary at the then current rate, payable in such installments as the Company
customarily pays Executive, which amount shall be in lieu of any and all other
payments due and owing to the Executive under the terms of this Agreement (other
than any payments constituting reimbursement of expenses pursuant to Section
3(d) hereof), and (ii) continue to allow Executive to participate during the
Severance Period, at the Company's expense (except to the extent that Executive
shared such expense prior to termination of employment), in the Company's health
insurance and disability insurance programs, if any, to the extent permitted
under such programs. Any payments received by Executive during the Severance
Period from employment with another employer or from any consulting position
taken (including, without limitation, salaries, fees, commissions and bonuses)
shall reduce, but not below zero, the amount payable by the Company to Executive
pursuant to this paragraph 7(e); provided, that, in no event shall Executive be
required to return to the Company any amounts previously paid to Executive
pursuant to this paragraph 7(e).
8. Termination by Executive.
------------------------
Executive may terminate this Agreement on written notice to the Company if
any one or more of the following shall occur:
(1) a material breach of the terms of this Agreement by the Company
and such breach continues uncured for 30 days after written notice of such
breach is first given;
-6-
<PAGE>
(2) a material breach by the Company of any other material agreement
with Executive and such breach continues for 30 days after written notice of
such breach is first given.
9. Inventions Discovered by Executive.
----------------------------------
Executive shall promptly disclose to the Company or any persons
designated by it all improvements, inventions, formulae, processes, techniques,
know-how, data, discoveries, or methods or other intellectual property, whether
or not patentable, whether or not copyrightable, in the Company's Field of
Interest (collectively, "Inventions") made, conceived, reduced to practice or
learned by Executive, either alone or jointly with others, while performing
service hereunder which are related to or useful in the business of the Company,
or result from tasks assigned Executive by the Company, or result from use of
premises or equipment owned, leased or contracted for by the Company. Executive
hereby assigns to the Company all of his right, title and interest in and to any
such Inventions. During and after the Term, Executive shall execute any
documents necessary to perfect the assignment of such Inventions to the Company
and to enable the Company to apply for, obtain, and enforce patents and
copyrights in any and all countries on such Inventions. Executive hereby
irrevocably designates the Counsel to the Company as his agent and attorney-in-
fact to execute and file any such document and to do all lawful acts necessary
to apply for and obtain patents and copyrights and to enforce the Company's
rights under this Section. As used herein, the term "Company's Field of
Interest" means the businesses of the Company as described in the Company's
Confidential Private Placement Memorandum, dated September 8, 1994, and as
determined from time to time by the Board of Directors and in subsequent
disclosures during the Executive's employment hereunder. This Section 9 shall
survive the termination of this Agreement.
10. Indemnification.
---------------
The Company shall indemnify Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.
11. Representations and Agreements of Executive.
-------------------------------------------
(a) Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Company's obtaining life insurance
on the life of
-7-
<PAGE>
Executive, if the Company so desires, and any other type of insurance or fringe
benefit as the Company shall determine from time to time to obtain.
12. Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (other than disputes with respect to alleged violations of
the covenants contained in Sections 4, 5 and 9 hereof, and the Company's pursuit
of the remedies described in Section 6 hereof in connection therewith) shall be
settled by arbitration in the City of New York, in accordance with the rules
then existing of the American Arbitration Association (three arbitrators), and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall be free to pursue any remedy before the arbitration
tribunal that they shall be otherwise permitted to pursue in a court of
competent jurisdiction. The award of the arbitrators shall be final and
binding.
13. Notices.
-------
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):
If to the Company: Voxware, Inc.
172 Tamarack Circle
Skillman, New Jersey 08558
Attention: Chief Financial Officer
Telephone: (609) 497-1711
Fax: (609) 497-2490
If to Executive: Kenneth Whittington
172 Tamarack Circle
Skillman, New Jersey
Telephone: (609) 497-1212
Fax: (609) 497-2490
14. General.
-------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey applicable to agreements
made and to be performed entirely in New Jersey.
-8-
<PAGE>
(b) This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and neither party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of a party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by a party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
or any one or more or continuing waivers of any such breach, shall constitute a
waiver of the breach of any other term or covenant contained in this Agreement.
(d) This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties hereto.
IN WITNESS WHEREOF,the parties have executed this Agreement as of
the date first above written.
VOXWARE, INC.
By: /s/ Kenneth H. Traub
-----------------------------------------
/s/ Kenneth Whittington
-------------------------------------
Kenneth Whittington
-9-
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") dated as of February 28, 1994,
by and between Advanced Communication Technologies, Inc., a Delaware corporation
(the "Company"), and J. Gerard Aguilar ("Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company wishes to employ Executive in an executive
capacity and Executive is desirous of being so employed;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
---------------------------------
(a) The Company hereby employs Executive for the Term (as hereinafter
defined) to render services to the Company as Vice President of Research and
Development, and to perform such duties commensurate with such office as he
shall reasonably be directed by the Board of Directors (the "Board") and
President of the Company to perform. Without limiting the foregoing, Executive
may report to such other senior executives of the Company as the Board or the
President may direct.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and its Affiliates
(as defined below); and Executive shall not, directly or indirectly, alone or as
a member of any partnership or other organization, or as an officer, director or
employee of any other corporation, partnership or other organization, be
actively engaged in or concerned with any other duties or pursuits which
materially interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be inimical, or contrary, to the best interests of
the Company and its Affiliates, except those duties or pursuits specifically
authorized by the Board. As used herein, the term "Affiliate" means and
includes any person, corporation or other entity controlling, controlled by or
under common control with the corporation in question.
(c) Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company without any
compensation therefor other than that specified in this Agreement, if elected to
such position by the shareholders of the Company. The Company shall use its
best efforts to cause Executive to be elected as a director during the Term and
shall include him in the management slate for election as a director at every
shareholders meeting during the Term at which his term as a director would
otherwise expire.
(d) The principal place of employment of Executive hereunder shall at
all times during the Term be in the greater New York, New York area, Princeton,
New Jersey or other locations mutually acceptable to Executive and the Company.
<PAGE>
(e) Executive hereby accepts such employment and agrees to render the
services described above.
2. Term of Employment.
------------------
The term of Executive's employment under this Agreement will commence
as of the date hereof (the "Effective Date") and shall end on the fifth
anniversary hereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement; provided that this Agreement shall automatically be renewed on the
same terms for successive one-year terms (the initial three-year Term and, if
the period of employment is so renewed such additional period(s) of employment
are collectively referred to herein as the "Term") unless terminated by written
notice given by either party to the other at least 90 days prior to the end of
the applicable Term.
3. Compensation and Benefits.
-------------------------
(a) As full compensation for all services to be rendered pursuant to
this Agreement, commencing March 1, 1994, the Company agrees to pay Executive
during the Term a base salary at an annual rate of $60,000, payable in such
installments as is the policy of the Company with respect to executive employees
of the Company (the "Salary"). The President and Chief Executive Officer of the
Company (the "CEO") and the Board of Directors will review Executive's
performance and Salary annually, commencing on the first anniversary of this
Agreement. The Salary will be subject to increase at the discretion of the
Board of Directors.
(b) Executive will be entitled to a one-time milestone bonus of
$15,000 if the Company completes a multimedia compression prototype and a
VoiceFX prototype reasonably satisfactory to the CEO of the Company prior to
December 31, 1994. In addition, Executive may receive bonuses on such dates, in
such amounts and on such other terms as may be determined by the Board in its
sole discretion.
(c) The Company shall pay or reimburse Executive for all reasonable
expenses actually incurred or paid by him during the Term in the performance of
his services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as it reasonably may require.
(d) Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
pension, group insurance or other so-called "fringe" benefits, if any, which the
Company generally provides for its executives.
(e) The Company shall provide to Executive, at the Company's expense,
medical insurance with coverage reasonably satisfactory to Executive and the
Company.
(f) Executive shall be eligible under any group life and/or disability
insurance covering its executives generally.
-2-
<PAGE>
(g) Executive shall be entitled to vacation time of 15 days per year
taken, subject to fulfillment of his duties hereunder, in accordance with the
vacation policy of the Company, and three personal days per year, during the
Term.
4. Confidentiality.
---------------
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than (i) as is reasonably required in the regular
course of his duties, including disclosures to the Company's advisors and
consultants, (ii) as required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or (iii) with the
prior written consent of the Board of Directors), to any person, firm or
corporation, any confidential information acquired by him during the course of,
or as an incident to, his employment or the rendering of services hereunder,
relating to the Company or any of its subsidiaries, any client, investor,
corporate partner, or joint venturer of the Company or any of its subsidiaries,
or any corporation, partnership or other entity owned or controlled, directly or
indirectly, by the Company or its subsidiaries or, to the knowledge of
Executive, by any of the other persons or entities listed above, or in which the
Company or any of its subsidiaries or, to the knowledge of Executive, any of the
other persons or entities listed above, has a beneficial interest. Such
confidential information shall include, but shall not be limited to, business
affairs, proprietary technology, trade secrets, patented processes, research and
development data, know-how, market studies and forecasts, competitive analyses,
pricing policies, employee lists, personnel policies, the substance of
agreements with customers, suppliers and others, marketing or dealership
arrangements, servicing and training programs and arrangements, customer lists
and any other documents embodying such confidential information. This
confidentiality obligation shall not apply to any confidential information which
becomes publicly available other than pursuant to a breach of this Section 4 by
Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company and upon termination of Executive's employment with the Company, all
documents, records, reports, writings and other similar documents containing
confidential information, including copies thereof, then in Executive's
possession or control shall be returned and left with the Company.
5. Non-Competition.
---------------
Executive agrees that during the Term of his employment by the Company
and for a period of two years following the termination of Executive's
employment hereunder, (the "Non-Competitive Period"), Executive shall not,
directly or indirectly, as owner, partner, joint venturer, stockholder,
employee, broker, agent, principal, trustee, corporate officer, director,
licensor, or in any capacity whatsoever engage in, become financially interested
in, be employed by, render any consultation or business advice with respect to,
or have any connection with (collectively, a "Relationship"), any
-3-
<PAGE>
business which is engaged in development and commercialization of any
technologies or products which are competitive with, or an emulation of, any
technology or application thereof or products based thereon designed, marketed,
announced, leased or sold by the Company or any of its subsidiaries, in any
geographic area where, during the time of his employment, the business of the
Company or any of its subsidiaries is being, had been or was proposed to be,
conducted in any manner whatsoever; provided, however, that Executive may own
any securities of any corporation which is engaged in such business and is
publicly owned and traded but in an amount not to exceed at any one time one
percent (1%) of any class of stock or securities of such company and; provided,
further, that Executive shall not be prohibited from having a Relationship
(during the Non-Competitive Period and after termination of Executive's
employment for any reason other than (i) for Cause, (ii) Executive's voluntary
termination of employment or (iii) Executive's termination of employment in
violation of this Agreement) with any subsidiary or division of any entity which
does not engage or propose to engage in any of the activities from which
Executive is precluded as set forth above, notwithstanding that other
subsidiaries or divisions of such entity may be engaged in such activities
(subject to Executive's continued compliance with his confidentiality
obligations contained in Section 4). In addition, Executive shall not, directly
or indirectly, during the Non-Competitive Period, request or cause any suppliers
or customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
6. Injunction and Enforceability of Covenants.
------------------------------------------
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Section 4, 5 or 9 hereof, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company.
(b) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5 and 9 hereof upon the courts of
any
-4-
<PAGE>
state within the geographical scope of such covenants. In the event that the
courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such other covenants, as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
(e) The existence of any claim or cause of action by Executive against
the Company or any Affiliate of the Company shall not constitute a defense to
the enforcement by the Company of the covenants contained in Sections 4, 5 and 9
hereof, but such claim or cause of action shall be litigated separately.
7. Termination by the Company.
--------------------------
(a) The Company may terminate this Agreement upon written notice to
Executive if any one or more of the following shall occur:
(1) Executive acts, or fails to act, in a manner that provides
Cause for termination. For purposes of this Agreement, the term "Cause" means
(a) the willful and continual neglect by Executive of his duties or obligations
hereunder (other than breaches of the covenants set forth in Sections 4, 5 and 9
hereof which events are governed by clause (f) below); provided such neglect
remains uncured for a period of 30 days after written notice describing the same
is given to the Executive; provided, that isolated or insubstantial failures
shall not constitute Cause hereunder, (b) Executive's conviction (which, through
lapse of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries, (c)
Executive's performance of any act or his failure to act, for which if Executive
were prosecuted and convicted, a crime or offense involving money or property of
the Company or any of its subsidiaries, or which would constitute a felony in
the jurisdiction involved, would have occurred, (d) any attempt by Executive to
improperly secure any personal profit in connection with the business of the
Company or any of its subsidiaries, (e) chronic alcoholism or drug addiction or
(f) any breach by Executive of the terms of Section 4, 5 or 9 of this Agreement;
provided such breach continues uncured for 10 days after written notice of such
- --------
breach is given by the Company to Executive.
(2) The Board of Directors shall determine that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute Cause (as defined above) (and other than disability or
death) upon thirty (30) days' prior written notice to Executive.
In the event that Executive's employment is terminated by the Company
at any time (other than at the end of any Term) under this paragraph 7(a)(2),
the Company shall pay Executive for a period equal to the shorter of (i) nine
months or (ii)
-5-
<PAGE>
the remainder of the then current Term (such period being hereinafter referred
to as the "Severance Period"), his Salary at the then current rate, payable in
such installments as the Company customarily pays Executive, which amount shall
be in lieu of any and all other payments due and owing to the Executive under
the terms of this Agreement (other than any payments constituting reimbursement
of expenses pursuant to Section 3(d) hereof), and (ii) continue to allow
Executive to participate, at the Company's expense, in the Company's health
insurance and disability insurance programs, if any, to the extent permitted
under such programs, during the Severance Period.
(b) Executive's employment shall terminate upon:
(1) Executive's death during the Term; provided, however, that
-------- -------
Executive's legal representatives shall be entitled to receive his Salary
through the last day of the month in which his death occurs.
(2) Executive shall become physically or mentally disabled so that
he is unable substantially to perform his services hereunder for (a) a period of
60 consecutive days, or (b) for shorter periods aggregating 120 days during any
twelve-month period during the Term. Notwithstanding such disability the Company
shall continue to pay Executive his Salary through the date of such termination.
(c) Upon any termination of Executive's employment hereunder for any
reason, with or without Cause, whether by the Company or by Executive, Executive
shall be deemed to have resigned from all positions as an officer and/or
director of the Company and any of its subsidiaries.
(d) All determinations of Cause, termination or nonrenewal pursuant to
Section 2 hereof or this Section 7 shall be made by the vote of a majority of
the entire Board of Directors.
8. Termination by Executive.
------------------------
Executive may terminate this Agreement on written notice to the
Company if any one or more of the following shall occur:
(1) a material breach of the terms of this Agreement by the
Company and such breach continues uncured for 30 days after written notice of
such breach is first given;
(2) a material breach by the Company of any other material
agreement with Executive and such breach continues for 30 days after written
notice of such breach is first given.
-6-
<PAGE>
9. Inventions Discovered by Executive.
----------------------------------
Executive shall promptly disclose to the Company or any persons
designated by it all improvements, inventions, formulae, processes, techniques,
know-how, data, discoveries, or methods or other intellectual property, whether
or not patentable, whether or not copyrightable (collectively, "Inventions")
made, conceived, reduced to practice or learned by Executive, either alone or
jointly with others, while performing service hereunder which are related to or
useful in the business of the Company, or result from tasks assigned Executive
by the Company, or result from use of premises or equipment owned, leased or
contracted for by the Company. Executive hereby assigns to the Company all of
his right, title and interest in and to any such Inventions. During and after
the Term, Executive shall execute any documents necessary to perfect the
assignment of such Inventions to the Company and to enable the Company to apply
for, obtain, and enforce patents and copyrights in any and all countries on such
Inventions. Executive hereby irrevocably designates the Counsel to the Company
as his agent and attorney-in-fact to execute and file any such document and to
do all lawful acts necessary to apply for and obtain patents and copyrights and
to enforce the Company's rights under this Section. This Section 9 shall
survive the termination of this Agreement.
10. Indemnification.
---------------
The Company shall indemnify Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.
11. Representations and Agreements of Executive.
-------------------------------------------
(a) Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Company's obtaining life insurance
on the life of Executive, if the Company so desires, and any other type of
insurance or fringe benefit as the Company shall determine from time to time to
obtain.
12. Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (other than disputes with respect to alleged violations of
the covenants contained in Sections 4, 5 and 9 hereof, and the Company's pursuit
of the
-7-
<PAGE>
remedies described in Section 6 hereof in connection therewith) shall be settled
by arbitration in the City of New York, in accordance with the rules then
existing of the American Arbitration Association (three arbitrators), and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall be free to pursue any remedy before the arbitration
tribunal that they shall be otherwise permitted to pursue in a court of
competent jurisdiction. The award of the arbitrators shall be final and
binding.
13. Notices.
-------
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):
If to the Company:
Advanced Communication Technologies, Inc.
115 West 18th Street
New York, New York 10011
Attention: President
Telephone: (212) 633-5550
Fax: (212) 633-5558
If to Executive:
Advanced Communication Technologies, Inc.
115 West 18th Street
New York, New York 10011
Telephone: (212) 633-5550
Fax: (212) 633-5558
14. General.
-------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in New York.
(b) This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and neither party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth.
-8-
<PAGE>
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of a party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by a party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
or any one or more or continuing waivers of any such breach, shall constitute a
waiver of the breach of any other term or covenant contained in this Agreement.
(d) This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCED COMMUNICATION TECHNOLOGIES, INC.
By: /s/ Michael Goldstein
-------------------------------------------
/s/ J. Gerard Aguilar
-------------------------------------------
J. Gerard Aguilar
-9-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 15, 1994, by
and between Voxware Inc., a Delaware corporation (the "Company"), and Steven J.
Ott ("Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company wishes to employ Executive in an executive
capacity and Executive is desirous of being so employed;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment, Duties and Acceptance.
---------------------------------
(a) The Company hereby employs Executive for the Term (as hereinafter
defined) to render services to the Company as Vice President, Sales and
Marketing, and to perform such duties commensurate with such office as he shall
reasonably be directed by the Board of Directors (the "Board") and President of
the Company to perform. Without limiting the foregoing, Executive may report to
such other senior executives of the Company as the Board or the President may
direct.
(b) Except as set forth below, Executive agrees to devote his entire
working time, attention and energies to the performance of the business of the
Company and its Affiliates (as defined below); and Executive shall not, directly
or indirectly, alone or as a member of any partnership or other organization, or
as an officer, director or employee of any other corporation, partnership or
other organization, be actively engaged in or concerned with any other duties or
pursuits which materially interfere with the performance of his duties
hereunder, or which, even if non-interfering, may be inimical, or contrary, to
the best interests of the Company and its Affiliates, except those duties or
pursuits specifically authorized by the Board. Notwithstanding the foregoing,
until October 1, 1994, Executive shall be deemed to be fulfilling his
obligations to the Company hereunder if he devotes at least 50% of his working
time, attention and efforts to the business of the Company and its Affiliates;
provided that any other activities engaged in by Executive are not inimical, or
contrary to the best interests of the Company and its Affiliates. As used
herein, the term "Affiliate" means and includes any person, corporation or other
entity controlling, controlled by or under common control with the corporation
in question.
(c) The principal place of employment of Executive hereunder shall at
all times during the Term be in the greater New York, New York area, Princeton,
New Jersey, the East or West Coast of the United States or other locations
mutually acceptable to Executive and the Company.
<PAGE>
(d) Executive hereby accepts such employment and agrees to render the
services described above.
2. Term of Employment.
------------------
The term of Executive's employment under this Agreement will commence
as of the date hereof (the "Effective Date") and shall end on the fourth
anniversary hereof unless sooner terminated pursuant to Section 7 or 8 of this
Agreement; provided that this Agreement shall automatically be renewed on the
same terms for successive one-year terms (the initial four-year Term and, if the
period of employment is so renewed such additional period(s) of employment are
collectively referred to herein as the "Term") unless terminated by written
notice given by either party to the other at least 90 days prior to the end of
the applicable Term.
3. Compensation and Benefits.
-------------------------
(a) As full compensation for all services to be rendered pursuant to
this Agreement, commencing on the earlier of (i) the closing of a sale or sales
of the Company's securities pursuant to private placements or pursuant to
registration statements filed under the Securities Act of 1933, as amended,
with, and declared effective by, the Securities and Exchange Commission, in
either case, with aggregate gross proceeds to the Company of not less than
$1,000,000 or (ii) December 1, 1994 (the "Salary Commencement Date"), the
Company agrees to pay Executive during the Term a base salary at an annual rate
of $80,000, payable in such installments as is the policy of the Company with
respect to executive employees of the Company (the "Salary"). The President and
Chief Executive Officer of the Company (the "CEO") and the Board of Directors
will review Executive's performance and Salary annually at the beginning of each
fiscal year during the Term. The Salary will be subject to increase at the
discretion of the Board of Directors.
(b) Executive may receive bonuses on such dates, in such amounts and
on such other terms as may be determined by the Board in its sole discretion.
(c) In order to reimburse Executive for the expenses associated with
his relocation in connection with his employment by the Company ("Relocation
Expenses"), the Company shall pay to Executive a one-time non-accountable
expense allowance of $20,000 out of which Executive will pay all such Relocation
Expenses. Payment of Relocation Expenses shall be made at such times and in
such installments as may be determined by the Board of Directors in consultation
with Executive.
(d) The Company shall pay or reimburse Executive for all reasonable
expenses, other than Relocation Expenses as defined above and any automobile
expenses other than those described in Section 3(i) below, actually incurred or
paid by him during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as it reasonably may require.
-2-
<PAGE>
(e) Executive shall be eligible under any incentive plan, stock option
plan, stock award plan, bonus, participation or extra compensation plan,
pension, group insurance or other so-called "fringe" benefits, if any, which the
Company generally provides for its executives.
(f) The Company shall provide to Executive, at the Company's expense,
family medical insurance, under the plan covering its executives generally, with
coverage reasonably satisfactory to Executive and the Company. In the event
that a "pre-existing condition" of Executive or a member of Executive's family
would not be covered under the medical insurance provided by the Company, the
Company will reimburse Executive's premiums under COBRA for Executive's existing
medical insurance until the earlier of such time as the pre-existing condition
is no longer an issue or the end of the COBRA period.
(g) Executive shall be eligible under any group life and/or disability
insurance covering its executives generally. The Company will pay up to $150
per month toward the premiums on a policy of disability insurance, covering
Executive, with coverage and at a cost reasonably acceptable to Executive and
the Company. In the event that the Company obtains group disability insurance
covering its executives generally, the insurance provided to Executive hereunder
may be provided by the Company under such group plan.
(h) Executive shall be entitled to vacation time of three weeks per
year during the Term taken, subject to fulfillment of his duties hereunder, in
accordance with the vacation policy of the Company.
(i) During the first twelve months of the Term, the Company will make
available to Executive an automobile for Executive's business use to assist
Executive in the performance of his duties hereunder at a cost not to exceed
$500 per month in the aggregate. Thereafter, the Company may continue to do so
if, in its sole discretion, it continues to be required for the performance of
the Executive's duties.
(j) Executive shall be entitled to commissions ("Commissions") on
Sales (as defined below) for the period from the Effective Date through May 31,
1995 (the "Initial Period") as follows:
Amount of Sales ("Sales Thresholds") Commissions
- ------------------------------------ -----------
If Sales are less than $500,000 None
If Sales are greater than $500,000 and Commissions will be equal to 7% less
than $770,000 of the amount of Sales over $500,000
If Sales are greater than $770,000 Commissions will be equal to
$18,900 plus 12% of the amount
of Sales over $770,000
-3-
<PAGE>
For purposes of calculating the Commissions due for any period hereunder, Sales
for such period shall mean the sum of (1) product revenues (including licensing
fees) and (2) net cash advances (cash advances received less cash advances
returned) against future revenues, actually received during the period.
Commissions for any calendar month (or part thereof) during the Term for which
Commissions are payable shall be paid within 30 days after the end of such
month. The Sales Thresholds and Commissions for each fiscal year (or part
thereof) during the Term other than the Initial Period shall be determined by
good faith negotiations between Executive and the Company, it being understood
and agreed that the current targeted level of Sales for fiscal 1996 is
$6,500,000 and at that level of Sales, if achieved, it is anticipated that
Executive's aggregate cash compensation (Salary and Commissions) would be
approximately $250,000.
Executive shall be entitled to $2,000 per month (the "Monthly Draw")
as a draw against future Commissions for each of the first five full calendar
months following the Salary Commencement Date. The Monthly Draw shall be paid
on the first day of each such month. To the extent that commissions for the
Initial Period do not equal or exceed the aggregate of the Monthly Draws, the
Company may, at its option, offset amounts drawn and not earned against future
Commissions earned.
4. Confidentiality.
---------------
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than (i) as required by law (in which case
Executive shall give the Company prior written notice of such required
disclosure) or (ii) with the prior written consent of the Board of Directors),
to any person, firm or corporation, any confidential information acquired by him
during the course of, or as an incident to, his employment or the rendering of
services hereunder, relating to the Company or any of its subsidiaries, any
client, investor, corporate partner, or joint venturer of the Company or any of
its subsidiaries, or any corporation, partnership or other entity owned or
controlled, directly or indirectly, by the Company or its subsidiaries or, to
the knowledge of Executive, by any of the other persons or entities listed
above, or in which the Company or any of its subsidiaries or, to the knowledge
of Executive, any of the other persons or entities listed above, has a
beneficial interest. Such confidential information shall include, but shall not
be limited to, business affairs, proprietary technology, trade secrets, patented
processes, research and development data, know-how, market studies and
forecasts, competitive analyses, pricing policies, employee lists, personnel
policies, the substance of agreements with customers, suppliers and others,
marketing or dealership arrangements, servicing and training programs and
arrangements, customer lists and any other documents embodying such confidential
information. This confidentiality obligation shall not apply to any
confidential information which becomes publicly available other than pursuant to
a breach of this Section 4 by Executive.
-4-
<PAGE>
(b) All information and documents relating to the Company and its
Affiliates as hereinabove described shall be the exclusive property of the
Company and upon termination of Executive's employment with the Company, all
documents, records, reports, writings and other similar documents containing
confidential information, including copies thereof, then in Executive's
possession or control shall be returned and left with the Company.
5. Non-Competition.
---------------
Executive agrees that during the Term of his employment by the Company
and for a period of one year following the termination of Executive's employment
hereunder, (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with (collectively, a "Relationship"), any business which is engaged
in development and commercialization of any technologies or products which are
competitive with, or an emulation of, any technology or application thereof or
products based thereon designed, marketed, announced, leased or sold by the
Company or any of its subsidiaries, in any geographic area where, during the
time of his employment, the business of the Company or any of its subsidiaries
is being, had been or was proposed to be, conducted in any manner whatsoever;
provided, however, that Executive may own any securities of any corporation
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such company and; provided, further, that Executive shall not be
prohibited from having a Relationship (during the Non-Competitive Period and
after termination of Executive's employment for any reason other than (i) for
Cause, (ii) Executive's voluntary termination of employment or (iii) Executive's
termination of employment in violation of this Agreement) with any subsidiary or
division of any entity which does not engage or propose to engage in any of the
activities from which Executive is precluded as set forth above, notwithstanding
that other subsidiaries or divisions of such entity may be engaged in such
activities (subject to Executive's continued compliance with his confidentiality
obligations contained in Section 4). In addition, Executive shall not, directly
or indirectly, during the Non-Competitive Period, request or cause any suppliers
or customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
6. Injunction and Enforceability of Covenants.
------------------------------------------
(a) If Executive commits a breach, or threatens to commit a breach, of
any of the provisions of Section 4, 5 or 9 hereof, the Company shall have the
right and remedy to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach or
-5-
<PAGE>
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
(b) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Section 4, 5 or 9 hereof, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, such provision shall then be
enforceable.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5 and 9 hereof upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such other covenants, as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
(e) The existence of any claim or cause of action by Executive against
the Company or any Affiliate of the Company shall not constitute a defense to
the enforcement by the Company of the covenants contained in Sections 4, 5 and 9
hereof, but such claim or cause of action shall be litigated separately.
7. Termination by the Company.
--------------------------
(a) The Company may terminate this Agreement upon written notice to
Executive if any one or more of the following shall occur:
(1) Executive acts, or fails to act, in a manner that provides
Cause for termination. For purposes of this Agreement, the term "Cause" means
(a) the willful and continual neglect by Executive of his duties or obligations
hereunder (other than breaches of the covenants set forth in Sections 4, 5 and 9
hereof which events are governed by clause (f) below); provided such neglect
remains uncured for a period of 30 days after written notice describing the same
is given to the Executive; provided, that isolated or insubstantial failures
shall not constitute Cause hereunder, (b) Executive's conviction (which, through
lapse of time or otherwise, is not subject to appeal) of any crime or offense
involving money or other property of the Company or any of its subsidiaries, (c)
Executive's performance of any act or his failure to act, for which if Executive
were prosecuted and convicted, a crime or offense involving money
-6-
<PAGE>
or property of the Company or any of its subsidiaries, or which would constitute
a felony in the jurisdiction involved, would have occurred, (d) any attempt by
Executive to improperly secure any personal profit in connection with the
business of the Company or any of its subsidiaries, (e) chronic alcoholism or
drug addiction or (f) any breach by Executive of the terms of Section 4, 5 or 9
of this Agreement.
(2) The Board of Directors shall determine that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute Cause (as defined above) (and other than disability or
death) upon thirty (30) days' prior written notice to Executive.
In the event that Executive's employment is terminated by the Company
(other than at the end of any Term) under this paragraph 7(a)(2), the Company
shall pay Executive for a period equal to (i) three months if such termination
occurs during the first year of the Term or (ii) six months if such termination
occurs after the first year of the Term (the applicable period being hereinafter
referred to as the "Severance Period"), his Salary at the then current rate,
payable in such installments as the Company customarily pays Executive, which
amount shall be in lieu of any and all other payments due and owing to the
Executive under the terms of this Agreement (other than any payments
constituting reimbursement of expenses pursuant to Section 3(d) hereof), and
(ii) continue to allow Executive to participate, at the Company's expense, in
the Company's health insurance and disability insurance programs, if any, to the
extent permitted under such programs, during the Severance Period. In addition,
within 90 days of termination of Executive's employment for any reason, the
Company will pay Executive the amount of any unpaid Commissions earned through
the date of termination.
(b) Executive's employment shall terminate upon:
(1) Executive's death during the Term; provided, however, that
-------- -------
Executive's legal representatives shall be entitled to receive his Salary
through the last day of the month in which his death occurs.
(2) Executive shall become physically or mentally disabled so that
he is unable substantially to perform his services hereunder for (a) a period of
60 consecutive days, or (b) for shorter periods aggregating 120 days during any
twelve-month period during the Term. Notwithstanding such disability the Company
shall continue to pay Executive his Salary through the date of such termination.
(c) Upon any termination of Executive's employment hereunder for any
reason, with or without Cause, whether by the Company or by Executive, Executive
shall be deemed to have resigned from all positions as an officer and/or
director of the Company and any of its subsidiaries.
-7-
<PAGE>
(d) All determinations of Cause, termination or nonrenewal pursuant to
Section 2 hereof or this Section 7 shall be made by the vote of a majority of
the entire Board of Directors.
8. Termination by Executive.
------------------------
Executive may terminate this Agreement on written notice to the
Company if any one or more of the following shall occur:
(1) a material breach of the terms of this Agreement by the
Company and such breach continues uncured for 30 days after written notice of
such breach is first given;
(2) a material breach by the Company of any other material
agreement with Executive and such breach continues for 30 days after written
notice of such breach is first given.
9. Inventions Discovered by Executive.
----------------------------------
Executive shall promptly disclose to the Company or any persons
designated by it all improvements, inventions, formulae, processes, techniques,
know-how, data, discoveries, or methods or other intellectual property, whether
or not patentable, whether or not copyrightable (collectively, "Inventions")
made, conceived, reduced to practice or learned by Executive, either alone or
jointly with others, while performing service hereunder which are related to or
useful in the business of the Company, or result from tasks assigned Executive
by the Company, or result from use of premises or equipment owned, leased or
contracted for by the Company. Executive hereby assigns to the Company all of
his right, title and interest in and to any such Inventions. During and after
the Term, Executive shall execute any documents necessary to perfect the
assignment of such Inventions to the Company and to enable the Company to apply
for, obtain, and enforce patents and copyrights in any and all countries on such
Inventions. Executive hereby irrevocably designates the Counsel to the Company
as his agent and attorney-in-fact to execute and file any such document and to
do all lawful acts necessary to apply for and obtain patents and copyrights and
to enforce the Company's rights under this Section. This Section 9 shall
survive the termination of this Agreement.
10. Indemnification.
---------------
The Company shall indemnify Executive, to the maximum extent permitted
by applicable law, against all costs, charges and expenses incurred or sustained
by him in connection with any action, suit or proceeding to which he may be made
a party by reason of his being an officer, director or employee of the Company
or of any subsidiary or affiliate of the Company.
-8-
<PAGE>
11. Stock Purchase Options.
----------------------
In connection with Executive's employment hereunder, Executive shall
be entitled to purchase shares of Common Stock of the Company upon the terms and
subject to the conditions set forth in the Stock Option Agreement attached
hereto as Exhibit A.
---------
12. Representations and Agreements of Executive.
-------------------------------------------
(a) Executive represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Company's obtaining life insurance
on the life of Executive, if the Company so desires, and any other type of
insurance or fringe benefit as the Company shall determine from time to time to
obtain.
13. Arbitration.
-----------
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (other than disputes with respect to alleged violations of
the covenants contained in Sections 4, 5 and 9 hereof, and the Company's pursuit
of the remedies described in Section 6 hereof in connection therewith) shall be
settled by arbitration in the City of New York, in accordance with the rules
then existing of the American Arbitration Association (three arbitrators), and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall be free to pursue any remedy before the arbitration
tribunal that they shall be otherwise permitted to pursue in a court of
competent jurisdiction. The award of the arbitrators shall be final and
binding.
14. Notices.
-------
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if sent by private overnight mail service (delivery confirmed by
such service), registered or certified mail (return receipt requested and
received), telecopy (confirmed receipt by return fax from the receiving party)
or delivered personally, as follows (or to such other address as either party
shall designate by notice in writing to the other in accordance herewith):
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<PAGE>
If to the Company: Voxware, Inc.
172 Tamarack Circle
Skillman, N.J. 08558
Attention: President
Telephone: (609) 497-1212
Fax: (609) 497-2490
If to Executive:
Telephone:
Fax:
15. General.
-------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in New York.
(b) This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and neither party shall
be bound by or liable for any alleged representation, promise or inducement not
so set forth.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. The failure of a party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by a party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
or any one or more or continuing waivers of any such breach, shall constitute a
waiver of the breach of any other term or covenant contained in this Agreement.
(d) This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VOXWARE, INC.
By: /s/ Michael Goldstein
--------------------------------------------
/s/ Steven J. Ott
-----------------------------------------------
Steven J. Ott
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<PAGE>
EXHIBIT 10.10
[Confidential treatment has been requested for portions of this exhibit, the
confidential portions have been redacted and are denoted by [**]. The
confidential portions have been separately filed with the commission.]
TECHNOLOGY TRANSFER AGREEMENT
THIS TECHNOLOGY TRANSFER AGREEMENT (the "Agreement") is made and
entered into, effective May 19, 1995 ("Effective Date"), by and between Suat
Yeldener Ph.D. ("Yeldener"), who resides at 58 - 14 Fox Run Drive, Plainsboro,
New Jersey 08536, and Voxware, Inc. ("Voxware") a Delaware corporation having
its principal place of business at 172 Tamarack Circle, Skillman, N.J. 08558.
WITNESSETH
WHEREAS, Yeldener is the inventor, developer, and owner of the
Technology as that term is defined and described on Schedule 1; and
----------
WHEREAS, Yeldener wishes to assign to Voxware and Voxware wishes to
acquire all right, title and interest in and to the Technology;
NOW, THEREFORE, in consideration of the mutual promises and
obligations set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by this
Agreement, Voxware and Yeldener agree as follows:
ARTICLE 1
Definitions
-----------
1.1 "Agreement" has the meaning given that term in the first paragraph
of this Technology Transfer Agreement.
1.2 "Bonus Date" shall mean the later of (i) the Ownership Date and
(ii) the date Voxware notifies Yeldener that it has finished its due diligence
and has, in its sole discretion, determined that the Technology does not
infringe any third party's intellectual property rights.
1.3 "Bonus Options" has the meaning given that term in Section 3.2.
1.4 "Effective Date" has the meaning given that term in the first
paragraph of this Agreement.
1.5 "Ownership Date" shall mean the date on which counsel for Voxware
determines that Yeldener has provided evidence satisfactory to counsel for
Voxware that Yeldener has title to and owns the Technology.
1.6 "Purchase Option" has the meaning given that term in Section 3.1.
1.7 "Technology" has the meaning given to that term in Schedule 1.
----------
<PAGE>
1.8 "Voxware" has the meaning given that term in the first paragraph
of this Agreement.
1.9 "Yeldener" has the meaning given that term in the first paragraph
of this Agreement.
ARTICLE 2
Conveyance of Technology
------------------------
2.1 Effective as of the Effective Date, Yeldener hereby assigns,
transfers and conveys to Voxware all of his right, title and interest throughout
the world in and to the Technology.
2.2 At the request of Yeldener, Voxware in its sole discretion, and
on terms satisfactory to Voxware, may grant Yeldener a limited, non-exclusive
license to use the Technology for research purposes only; it being understood by
Yeldener that any such license shall prevent him from using the Technology for
commercial purposes.
ARTICLE 3
Consideration
-------------
3.1 Subject to the terms and conditions set forth in this Agreement
and if Yeldener provides evidence satisfactory to counsel for Voxware that
Yeldener owns the Technology, Voxware shall issue to Yeldener on the Ownership
Date, options (the "Purchase Options") to purchase an aggregate of 25,000 shares
of common stock, $.001 par value, of Voxware. The agreement for the Purchase
Options is attached hereto as Exhibit A. Subject to the terms of the option
---------
agreement, the Purchase Options shall be exercisable for a ten-year period
commencing on the Effective Date and shall have an exercise price of $0.75
(U.S.) per share.
3.2 Subject to the terms and conditions of this Agreement and if: (i)
Yeldener provides evidence satisfactory to counsel for Voxware that Yeldener
owns the Technology, and (ii) patent counsel for Voxware renders an opinion that
the principal components of the Technology do not infringe any third party's
intellectual property rights, and (iii) Voxware reasonably believes it can use
the principal components of the Technology without infringing third parties
rights; then Voxware shall issue to Yeldener on the Bonus Date, options (the
"Bonus Options") to purchase an aggregate of 25,000 shares of common stock,
$.001 par value, of Voxware. The agreement for the Bonus Options shall be
substantially the same as the agreement attached hereto as Exhibit A (except for
---------
the period during which the Bonus Options are exercisable). Subject to the
terms of the option agreement, the Bonus Options shall be exercisable for the
period commencing on the Bonus Date and ending on the date which is ten years
from the Effective Date, and shall have an exercise price of $0.75 (U.S.) per
share.
-2-
<PAGE>
ARTICLE 4
Termination
-----------
4.1 Voxware may terminate this Agreement at any time prior to the
Ownership Date by giving Yeldener written notice of termination.
ARTICLE 5
Warranties and Representations
------------------------------
5.1 Yeldener represents and warrants to Voxware that:
(a) Other than the potential claims of Surrey University, he is
the owner and inventor of the Technology and that he has not
taken the proprietary or confidential ideas or concepts from
any third person or party, that he is entitled to enter this
Agreement and convey the rights granted hereunder;
(b) Other than the potential claims of Surrey University and the
assignments set forth herein, the Technology is free and
clear of all liens, encumbrances, pledges, options,
restrictions or licenses;
(c) The use of the Technology does not infringe any patent,
trademark or copyright belonging to Yeldener (other than
those assigned hereunder) nor has it been misappropriated nor
is there any misuse by Yeldener of trade secret, know-how or
confidential information of another.
5.2 Voxware represents and warrants to Yeldener that:
(a) It is a corporation duly organized under the laws of the
State of Delaware;
(b) It is qualified to do business in good standing in New
Jersey;
(c) Its execution, delivery and performance of this Agreement
and the consideration herein set forth have been duly
authorized by all necessary corporate action; and
(d) The shares have been duly authorized and upon issuance
pursuant to the terms hereof and for the consideration
herein set forth will be validly issued, fully paid and non-
assessable.
-3-
<PAGE>
ARTICLE 6
Indemnity
---------
6.1 Voxware agrees to indemnify and hold Yeldener harmless from any
liabilities, costs and expenses (including attorney's fees and expenses),
obligations or causes of action arising out of or related to any breach of the
representations and warranties made by Voxware herein.
6.2 Yeldener agrees to indemnify and hold Voxware and its officers,
trustees, employees, agents and representatives harmless from any liabilities,
costs and expenses (including attorney's fees and expenses), obligations or
causes of action arising out of or related to any breach of the representations
and warranties made by Yeldener herein.
ARTICLE 7
Protection of Technology Rights
-------------------------------
7.1 Yeldener shall cooperate with Voxware to whatever extent
necessary to secure the protection of Voxware's rights in the Technology,
including providing any necessary assistance to secure copyright, trademark or
patent protection.
7.2 Yeldener shall use all reasonable efforts to keep confidential
the Technology and any documentation, representation, or manifestation of the
Technology. This confidentiality requirement shall not apply to information
which:
(a) Is disclosed in a publicly available document or is or
becomes part of the public domain through no fault of
Yeldener; or
(b) Is disclosed to Yeldener by an unrelated third party not
subject to an obligation of confidentiality to Voxware; or
(c) Is required by law or court or governmental order to be
disclosed; provided that Yeldener shall not disclose such
information prior to giving Voxware reasonable notice to
afford Voxware an opportunity to object to such disclosure.
ARTICLE 8
Independent Contractor Status
-----------------------------
8.1 Yeldener and Voxware acknowledge and agree that Yeldener is a full
time employee of Voxware, that Yeldener developed the Technology as an
independent contractor prior to his employment with Voxware, that nothing in the
relationship between Yeldener and Voxware related to the Technology shall be
construed to create
-4-
<PAGE>
now or in the future any other relationship, including any joint venture,
partnership, fiduciary relationship, or similar relationship between the
parties. Nothing herein contained shall be construed to grant Yeldener any
right to continued employment or to determine Yeldener's wages or salary or any
other benefits of employment.
ARTICLE 9
Miscellaneous Terms
-------------------
9.1 At any time upon the request of Voxware and Without further
consideration, Yeldener shall, and shall cause his trustees, employees, agents,
and affiliates to, execute and deliver any and all papers, including
assignments, and such other instruments of conveyance and transfer, and do any
and all other lawful acts that may be desirable in the opinion of Voxware to
secure, establish and maintain title in Voxware, its successors and assigns, to
the Technology, and give Voxware, its successors and assigns, the full benefit
of the assignments set forth herein, including cooperation and execution of all
papers and doing all other acts that may be necessary to prepare, procure or
enforce any United States or foreign patent or copyright registration on any of
the Technology.
9.2 This Agreement is binding upon and shall inure to the benefit of
Voxware's and Yeldener's legal representatives, administrators and successors.
9.3 Each party is responsible for its own expenses related to the
execution of this Agreement.
9.4 This Agreement is governed by and shall be construed according to the
laws of the State of New Jersey.
9.5 The terms of this Agreement including the attached schedules
constitute the entire agreement between the parties and supersede all previous
communications, written or oral, related to the subject matter of this document.
Neither Yeldener nor Voxware is bound by any previous agreement or understanding
related to the subject matter of this Agreement.
9.6 No amendment or modification to this Agreement is effective unless in
writing and signed by authorized representatives of Yeldener and Voxware.
9.7 Any notice required under this Agreement to be given by Yeldener to
Voxware or by Voxware to Yeldener shall be by registered or certified mail to
the address indicated below or to such other address as that party may designate
by such notice.
-5-
<PAGE>
IN WITNESS OF THIS AGREEMENT, Yeldener and Voxware have executed this
Agreement in multiple originals by their authorized officers and
representatives.
SUAT YELDENER VOXWARE, INC.
/s/ Suat Yeldener By /s/ Kenneth H. Traub
- ----------------------------- -----------------------------
Suat Yeldener Kenneth H. Traub
Executive Vice President and
Chief Financial Officer
-6-
<PAGE>
Schedule 1.
Description of the Technology
-----------------------------
[**]
S-1
<PAGE>
Appendix A
STOCK OPTION AGREEMENT
A-1
<PAGE>
VOXWARE, INC.
STOCK OPTION AGREEMENT
----------------------
This AGREEMENT is made and entered into, effective May 19,1995, by and
between VOXWARE, INC., a Delaware corporation (the "Company") and Suat Yeldener
Ph.D. (the "Optionee").
W I T N E S S E T H
-------------------
WHEREAS, the Company desires to grant to the Optionee and the Optionee
desires to accept an option to purchase shares of common stock, $.001 par value,
of the Company (the "Common Stock") upon the terms and conditions set forth in
this agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. The Company hereby grants to the Optionee an option to
-----
purchase 25,000 shares of Common Stock, at a purchase price per share of $0.75.
This option is intended to be treated as an option which does not qualify as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Exercise. Except as specifically provided otherwise herein, the
--------
Option will be exercisable at any time after the date hereof until termination.
The option may be exercised in whole or in part by delivering to the Secretary
of the Company (a) a written notice specifying the number of shares to be
purchased, and (b) payment in full of the exercise price, together with the
amount, if any, deemed necessary by the Company to enable it to satisfy any
income tax withholding obligations with respect to the exercise (unless other
arrangements acceptable to the Company are made for the satisfaction of such
withholding obligations). The exercise price shall be payable in cash or by bank
or certified check. The Company may (in its sole and absolute discretion) permit
all or part of the exercise price to be paid with previously-owned shares of
Common Stock, or in installments (together with interest) evidenced by the
Optionee's secured promissory note.
3. Termination. Unless sooner terminated, to the extent not sooner
-----------
exercised, the Option will terminate on May 19, 2005 and may not be exercised
under any circumstances thereafter.
4. Rights as Stockholder. No shares of Common Stock shall be sold
---------------------
or delivered hereunder until full payment for such shares has been made (or, to
the extent payable in installments, provided for). The Optionee shall have no
rights as a stockholder with respect to any shares covered by the option until a
stock certificate for such shares is issued to the Optionee. Except as otherwise
provided herein, no
A-2
<PAGE>
adjustment shall be made for dividends or distributions of other rights for
which the record date is prior to the date such stock certificate is issued.
5. Nontransferability. The option is not assignable or transferable
------------------
except upon the Optionee's death to a beneficiary designated by the Optionee or,
if no designated beneficiary shall survive the Optionee, pursuant to the
Optionee's will and/or the laws of descent and distribution. During an
Optionee's lifetime, the option may be exercised only by the Optionee or the
Optionee's guardian or legal representative.
6. Securities Registration Required. Notwithstanding anything
--------------------------------
herein to the contrary, the option may not be exercised unless and until such
time, if at all, as a registration statement covering the shares of Common Stock
issuable upon exercise of the option granted hereunder is filed with and
declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
7. Change in Control; Capital Changes.
----------------------------------
(a) In the event of any stock split, stock dividend or similar
transaction which increases or decreases the number of outstanding shares of
Common Stock, appropriate adjustment shall be made by the Board of Directors of
the Company to the number and option exercise price per share of Common Stock
which may be purchased under the option. In the case of a merger, consolidation
or similar transaction which results in a replacement of the Company's Common
Stock and stock of another corporation, the Company will make a reasonable
effort, but shall not be required, to replace the option granted hereunder with
comparable options to purchase the stock of such other corporation.
(b) In the event of any adjustment in the number of shares
covered by any option pursuant to the provisions hereof, any fractional shares
resulting from such adjustment will be disregarded and each such option will
cover only the number of full shares resulting from the adjustment.
(c) All adjustments under this Section 7 shall be made by the
Board of Directors of the Company, and its determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
8. No Employment Rights. Nothing in this agreement shall give the
Optionee any right to continue in the employ or service of the Company or a
subsidiary thereof, or interfere in any way with the right of the Company or a
subsidiary thereof to terminate the employment or service of the Optionee.
9. Miscellaneous.
-------------
A-3
<PAGE>
(a) This agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(b) This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. This agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and may not be modified except by written instrument executed by the
parties.
IN WITNESS WHEREOF, this agreement has been executed as of the
date first above written.
SUAT YELDENER VOXWARE, INC.
/s/ Suat Yeldener By /s/ Kenneth H. Traub
- ----------------------------- -----------------------------
Suat Yeldener Kenneth H. Traub
Executive Vice President and
Chief Financial Officer
A-4
<PAGE>
EXHIBIT 10.11
[Confidential treatment has been requested for portions of this exhibit. The
confidential portions have been redacted and denoted by [**]. The confidential
portions have been separately filed with the commission.]
SOFTWARE LICENSE AGREEMENT
This Software License Agreement is entered into on January 31, 1996
("Effective Date") between Voxware, Inc., a Delaware corporation located at 172
Tamarack Circle, Skillman, NJ, ("Licensor"), and Netscape Communications
Corporation, a California corporation located at 501 East Middlefield Road,
Mountain View, CA 94043 ("Netscape"), under which Licensor grants Netscape
certain rights in the software products developed or licensed by Licensor that
are more particularly described below.
Netscape and Licensor hereby agree to the following:
I. OEM Licensing
1. Subject to the terms and conditions of this Agreement, Licensor
grants to Netscape a worldwide, nonexclusive license to use, reproduce,
adapt and distribute (by any means, including electronic distribution), and
promote certain Voxware Products (as defined below) and any related Licensor
end-user documentation, and grant third parties the right to do the same.
Netscape may grant to its distribution channels (including original equipment
manufacturers) the rights set forth above; provided that any such channel
members shall be subject to written agreements containing restrictions,
limitations and conditions on use and distribution of the Voxware Products
necessary to implements those contained in this Agreement. Netscape and its
channels will distribute the Voxware Products under terms not materially less
protective of Voxware Products or Licensor than those Netscape uses for
similar elements of its other commercially available products. Netscape is
responsible for using at least the same level of diligence and take the same
measures to enforce its sublicensees' obligations with respect to the Voxware
Products that it applies for its own valuable products that are bundled or
integrated with other products and generate substantial revenue for Netscape.
All payments will be made through Netscape.
a. "Basic Products" shall initially be Licensor's RT24 codec,
two "teaser" Voice Fonts/TM/, basic transport interface, client phone
application ("TeleVox") and Licensor's product currently known as ToolVox
for the Web and the basic encoding applications. Enhanced Products shall
initially be Licensor's RT24hq codec and an enhanced version of TeleVox
containing the RT24hq codec and/or n-way calling. The Basic Products
together with the Enhanced Products are collectively known as the "Voxware
Products" and are listed in Appendix A (which may be amended only by
mutual consent). All generally available Voxware Products are provided
and licensed to Netscape only in object code form, except for the
interface/support routine source code defining the API wrapper contained
in Licensor's standard Software Developer's Kit ("SDK"). All versions for
conventional computing platforms supported by Licensor are included.
b. The Voxware Products may only be sold by Netscape and its
distribution channel in an integrated bundle where the Netscape product
delivers a majority of the value of the bundle and intended to be used in
support of the Netscape
<PAGE>
product. In addition to obligation to include proprietary notices
described in Section I 8. below, Netscape will give Licensor reasonable
credit (but shall not be required to compel its sublicensees to do so) in
all documentation for such a bundle.
c. Netscape prepays quarterly lump-sum license fees for the
Basic Products as follows: each of 4 quarters in 1996: [**]. Each of
4 quarters in 1997: [**]. Each of 4 quarters in 1998 and each quarter
beyond: [**]. Such payments will be made at the beginning of each
calendar quarter except that the first payment will be made on the date of
acceptance of the Deliverables (defined below). Within 7 days after
execution of this Agreement, Netscape shall have received the following
items from Licensor: beta versions of the RT24-SDK; ToolVox for the Web
player; and ToolVox for the Web encoder, and a list of known bugs in such
products and Licensor's plans for correcting such bugs and adding any
additional functionality into the general release version of such products
(the "Deliverables"). Netscape will accept or reject the Deliverables
within 5 business days after delivery; Netscape will not unreasonably
reject any of the Deliverables, and failure to give notice of acceptance
or rejection within that 5 business day period will constitute acceptance.
A rejection notice will be effective only if it provides a detailed
description of any such failures in a manner sufficient to allow Licensor
to reproduce them. Licensor shall exercise best commercial efforts to
deliver the general release versions of the Voxware Products in accordance
with general industry practices and in a timely manner; the parties
mutually agree to cooperate in good faith to remedy problems that may
arise in such products. If after the second minimum quarterly payment
Netscape does not receive the general release versions of the Basic
Products that are of general commercial quality, Netscape shall be
entitled to suspend such future minimum quarterly payment until it
receives the general release versions and/or cancels the Agreement.
d. Netscape will ship the Enhanced Products in free Netscape
products only with Licensor's consent (given on a Netscape product-by-
Netscape product basis), which consent shall not be revoked during the
term of this Agreement. However, Netscape may ship (i) the Enhanced
Products in beta versions of Netscape products to Netscape beta sites,
provided that (A) the beta version of the Netscape product does not permit
the user to use such product for more than a limited period of time (which
time period shall be consistent with customary Netscape practices for beta
versions of internet consumer products) after delivery to such user, and
(B) in any event, Netscape shall only distribute beta versions of Enhanced
Products in good faith for the purpose of testing such product, and (ii)
the Decode Only portion of Enhanced Products in free Netscape products.
For the Enhanced Products, Netscape will pay Licensor a royalty on units
for which Netscape is paid as follows:
2
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------
Decode Only Encode/Decode
- --------------------------------------------------------------------------------
<S> <C> <C>
Client [**] [**]
application
- --------------------------------------------------------------------------------
Server [**] [**]
application
- --------------------------------------------------------------------------------
</TABLE>
Netscape and Licensor will review market conditions on a quarterly basis. If it
is mutually agreed that the Enhanced Products are necessary to keep the Basic
Products offering competitive, Licensor will license the Enhanced Products as
part of the Basic Product offering. At Licensor's option, and with Netscape's
consent, Licensor may define new products as "Enhanced Products" on equivalent
terms to the current license to replace these offerings. All royalty payments
will be due within forty-five (45) days of the end of each calendar quarter with
respect to amounts received in such period. With each such payment, Netscape
shall provide Licensor with a report accurately delineating: (a) the number and
types of Enhanced Products distributed (other than the beta versions and other
free copies authorized by Licensor) during the applicable period, (b) the
revenue collected with respect to such products, and (c) the calculation of the
amount due ("Payment Report"). Licensor shall have the right from time to time
(but no more than once annually) upon ten (10) days notice to Netscape to review
and audit Netscape's books and records to verify the accuracy of the Payment
Reports. Such audits shall be conducted during normal business hours, by
auditors of a "Big Six" accounting firm. Such audits shall be at Licensor's
expense; provided, however, that should the audit show that Licensor has been
underpaid by more than five percent (5%), Netscape will bear the costs of the
audit. Any payment adjustment indicated as a result of such audit shall be made
within thirty (30) days of receipt of the audit report. The third party auditor
shall maintain the confidentiality of the information obtained from Netscape,
and shall disclose to Licensor only such information as is reasonably necessary
for Licensor to verify the accuracy of the Payment Reports, or the nature and
extent of any inaccuracies in such reports. All information learned by Licensor
from such audit shall be treated as Netscape confidential information and
governed by Section IV below.
e. For the avoidance of doubt, the parties agree that, except
for the interface/support routine source code defining the API wrapper
contained in Licensor's standard SDK, and except for Netscape's right to
obtain source code pursuant to Section V 1. below, Netscape is not
licensed to and shall not possess,
3
<PAGE>
disclose, distribute, license or convey (or permit others to do the same)
any source licensed to Netscape hereunder.
2. Netscape will pay Licensor time (currently, [**] per hour for
each senior engineer; [**] per hour for each speech engineer; and [**] for
program management by Licensor; Licensor agrees that it will not increase
such rates in any calendar year by more than the percentage increase in the
United States Department of Labor, Bureau of Labor Statistics Revised
Consumer Price Index for all Urban Consumers, U.S. City Average for the
preceding calendar year) and materials for ports of the Voxware Products to
other platforms, or for mutually agreed modifications and enhancements to the
Voxware Products for use with Netscape products. Licensor shall use best
commercial efforts to undertake ports requested by Netscape, and Netscape
shall use best commercial efforts to provide Licensor with sufficient prior
notice of its anticipated porting projects as well as assistance with respect
to defining such ports. The Section I 1. license to such ports,
modifications, or enhancements will be exclusive to Netscape. Licensor may,
at its sole discretion, refund to Netscape 50% of Netscape's time and
materials payments to Licensor at any time to eliminate this special
exclusivity. Bug fixes or enhancements, modifications offered without
additional charge to all other customers under normal maintenance agreements
are free to Netscape.
3. Licensor shall use its best efforts to provide back-end support
to Netscape to enable Netscape to fulfill its support obligations to its
customers, which obligations are generally set forth in Exhibit A hereto, but
shall not be required to provide front-line support to end users of the
Voxware Products (which support shall be provided by Netscape).
4. For any new product that Licensor offers for internet client
applications for which a web browser is a primary function, or internet
server products, where a web server, mail server or NNTP server is a primary
function, Licensor will make reasonable commercial efforts to offer Netscape
the opportunity to license such products.
5. [**]
4
<PAGE>
6. Insofar as Licensor develops compatible extensions or
enhancements to the Voxware Products which do not compete with Netscape
browser or server products (but which are capable of use in conjunction with
such products), Netscape agrees to include at least one link from Netscape's
web site to Licensor's web site in a manner similar to Netscape's other
licensors. Any product which reasonably extends the value of Netscape
through the use of published interfaces will not be considered a competitive
product.
7. Netscape may terminate at any time during the first six months
after the Effective Date with 180 days notice, and with 90 days notice
thereafter. No unused pre-paids will be returned by Licensor. Licensor may
terminate any time after 36 months after the Effective Date with 180 days
notice. Either party shall have the right to terminate this Agreement upon a
material default by the other party of any of its material obligations under
this Agreement, unless within thirty (30) calendar days after written notice
of such default such party remedies such default. Upon termination of this
Agreement, for any reason, Netscape shall cease its use, reproduction,
translation, sublicensing, marketing and promotion of the Voxware Products
except as expressly permitted herein. After the termination date, Netscape
will not release any new version of a Netscape product incorporating any
portion or derivative of the Voxware Products, but (i) Netscape may include
such items in new versions of any such Netscape product until the later of
(A) 180 days after the date of termination, or (B) immediately following the
first release of a version after the date of termination that would be
normally deemed a major commercial release, and (ii) Netscape and its
distribution channels may continue to license and distribute the versions of
Netscape products existing and in commercial distribution on the termination
date (including releases pursuant to (A) and (B) above) which incorporate the
Basic and Enhanced Products. Insofar as Netscape is paid for Voxware
Products licensed after the termination date, Netscape will remit to Licensor
an amount calculated as follows: a) for the Basic Product, [**] per unit for
which Netscape is paid, and b) for the Enhanced Product, an amount equal to
the fees outlined in Section I 1.d. unless otherwise amended. Subject to the
limitations set forth in this Section regarding incorporation of the Voxware
Products into Netscape products, all sublicenses which are properly granted
shall survive any termination or expiration of this Agreement. Sections I
7., II 1., 2a., II 3., II 4., III, IV and V shall survive the termination of
this Agreement for any reason.
8. Insofar as Netscape may embed the Licensor codec component of
the Voxware Products identified as items 1 and 2 on Appendix A (the "Licensor
codecs") in 2-way voice products not developed by Licensor, Netscape shall
produce, document and make available for all versions of such products
appropriate APIs and/or file formats compatible
5
<PAGE>
with the application that will enable Licensor to develop add-ons and
enhanced codecs (including future codecs not licensed to Netscape) to operate
with the application, and shall document the transmission and control
protocols to enable Licensor to develop telephones to communicate with any
Netscape telephone using the Licensor codecs and Licensor is licensed
throughout the world to use such materials in connection with development of
Licensor telephones that are compatible with such Netscape products, to
commercialize and exploit the results thereof and allow others to do so
without charge. Such documentation will be made available to Licensor for a
charge commensurate with Netscape's practices with other development kit (but
in no event will such charge exceed [**]) no later than, and otherwise on
terms no less favorable than terms provided to any other company. Netscape
will provide this document in a timely fashion. At its option, Licensor may
provide a royalty free, paid up license to selected Licensor protocols which
Netscape may sublicense to its phone application provider and may publish as
an industry standard.
9. Selection menus for different codecs will identify Licensor
by name: e.g. "Voxware RT24 Codec", or a mutually-agreeable nomenclature.
Licensor's patent and copyright notices will appear in the software (i.e., at
least in the "about" box or readme file) and user manuals, and trademarks
shall appear in the applicable user manuals and electronic data sheets of
each copy of the Voxware Products distributed by Netscape, but not its
sublicensees (all in the form reasonably provided by Licensor or which may be
reasonably required by Licensor at any time). However, in any country in
which a Licensor trademark is claimed by a third party to infringe such
third party's rights, Netscape shall be entitled to suspend use of such
trademark until Licensor can demonstrate to Netscape's satisfaction that the
alleged infringement has been resolved in such a manner as to terminate any
ongoing liability.
10. The parties agree to use all reasonable commercial efforts to
ensure that during the initial announcement of their partnership that: a) the
timing of such announcements will be compatible with each parties' overall PR
strategy, b) each will review and approve the other party's relevant press
releases and other PR materials, c) executives from each company shall be
reasonably available for other PR activities. A copy of a mutually agreed
upon press release will be attached hereto. Each party may disseminate the
information contained in such press release in whole or in part (subject to
the limitations set forth in Section 11) and from time to time without the
consent of the other party.
11. Licensor to have the right to mention Netscape is a licensee of
the Voxware Products and Netscape has the right to mention that Licensor is
a licensor of the Voxware Products in all collateral, advertising, PR, and
marketing materials. During the initial announcement and for a period of
three months thereafter, Licensor will have the right to describe the Voxware
RT24 codec as "the Netscape-endorsed technology for low bandwidth speech
transmission with Netscape Navigator." Additional language may be used or
other on-going promotional activities arranged with the other party's
consent.
6
<PAGE>
12. By mutual consent, Netscape may resell future Licensor products
(e.g. a VoiceFont extension to the basic telephone product in Navigator).
The parties intend to explore such resale opportunities as appropriate.
II. WARRANTIES, INDEMNIFICATION AND LIABILITY LIMITATIONS
1. By Licensor.
a. Title.
(i) Licensor warrants that it has the right to grant the
licenses as set forth in this Agreement, and that such licenses do not
infringe on any third parties' (A) copyright or trade secret, U.S. patent,
or U.S. trademark (B) non U.S. patent, or (C) non-U.S. trademark.
(ii) Licensor further warrants that there are no pending or, to
its knowledge threatened lawsuits against it concerning any aspect of the
Voxware Products. If Licensor becomes aware of any pending or threatened
lawsuit concerning any aspect of the Voxware Products, Licensor shall
notify Netscape and provide Netscape with all information reasonably
related thereto.
b. Non-Infringement. Should a Voxware Product become,
or in Licensor's opinion be likely to become, the subject of any third
party infringement claim or suit, Licensor shall, at its option:
(i) procure for Netscape the right to continue distributing
such Voxware Product, as well as the right for Netscape and its
customers to continue use of such Voxware Product, while maintaining
its functionality; or,
(ii) settle the claim or suit; or,
(iii) modify the Voxware Product so that it no longer infringes
the third party product but continues to provide substantially the
same functionality.
c. Limitations. The foregoing representations and warranties
of Licensor do not apply with respect to Voxware Products, or portions or
components thereof (i) made in whole or in part in accordance to
Netscape's specifications to the extent that such claim is based upon or a
result of such specifications or changes to such specifications, (ii)
which are modified after delivery by Licensor, if the alleged infringement
relates to such modification, (iii) combined with other products,
processes or materials where the alleged infringement relates to such
combination, unless such combination is expressly authorized or specified
in the applicable end-user documentation prepared by Licensor for such
Voxware Product, (iv) to the extent that Netscape continues allegedly
infringing activity 15 days after being notified thereof after being
informed of and provided with modifications that would avoid the alleged
infringement but continue to provide substantially the same functionality,
or (vi) to the extent that Netscape's use or distribution of a Voxware
Product is not in accordance with the licenses granted hereunder.
7
<PAGE>
d. Performance. With respect to each Voxware Product, Licensor
warrants that, for a period of one year from first delivery by Licensor
to Netscape (i) the media on which the Voxware Product is delivered will
be free of defects in material and workmanship; (ii) the Voxware Product
will function substantially in accordance with the specifications for such
Voxware Product in applicable documentation, and (iii) the documentation
will be correct in all material respects. In the case of a breach of the
warranties in this Section II 1.d., Licensor shall use all diligent
efforts to (and Netscape's sole remedy shall be to) repair or replace the
nonconforming, unsuitable or inaccurate Voxware Products within a
reasonable period of time (not to exceed ten (10) days) of notice of such
condition.
e. DISCLAIMER. THE WARRANTIES PROVIDED BY LICENSOR HEREIN ARE
THE ONLY WARRANTIES PROVIDED BY LICENSOR WITH RESPECT TO THE PRODUCTS,
LICENSES, SERVICES, DOCUMENTATION AND OTHER SUBJECT MATTER OF THIS
AGREEMENT. SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES BY
LICENSOR, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
2. By Netscape. Except as expressly and unambiguously provided
herein and as conditions of Netscape's license hereunder, Netscape covenants
and agrees:
a. not to reverse assemble, decompile (except to the extent
that decompilation occurs through use of a commercially generally
available debugging program employed by Netscape only for the purposes of
debugging code including a Voxware Product), reverse engineer (except to
the extent permitted under prevailing analysis under U.S. copyright law)
or otherwise attempt to derive source code (or the underlying ideas,
algorithms, structure or organization) from the Voxware Products.
b. to use its commercially reasonable efforts to market,
distribute and support (including installation, training and other
support) the Voxware Products on a continuing basis and to comply with
good business practices and all laws and regulations relevant to this
Agreement or the subject matter hereof. Netscape will not contest the use
by or authorized by Licensor of any trademark or application or
registration therefor identified in Appendix D hereto (to which Licensor
may from time to time add or delete trademarks with the prior written
consent of Netscape, which shall not be unreasonably withheld. Netscape's
obligations with respect to the trademarks for which Netscape has given
consent at the time of termination shall continue to survive.
c. in its reasonable discretion and from time to time, to keep
Licensor informed as to any problems encountered with the Voxware Products
and any resolutions arrived at for those problems, and to communicate
promptly to Licensor modifications, design changes or improvements of the
Voxware Products suggested by customers, employees and agents.
8
<PAGE>
d. to comply with all export laws and restrictions and
regulations of the Department of Commerce or other United States or
foreign agency or authority, and not to export, or allow the export or re-
export of any confidential information of Licensor or Voxware Products or
any direct product thereof in violation of any such restrictions, laws or
regulations.
3. Liability Limitation.
a. EXCEPT FOR A BREACH OF THE CONFIDENTIALITY OBLIGATIONS
AGREED TO PURSUANT TO SECTION IV BELOW, UNDER NO CIRCUMSTANCES SHALL
LICENSOR OR NETSCAPE BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL OR
INCIDENTAL DAMAGES ARISING OUT OF OR RELATED TO ANY LICENSE, USE,
REPRODUCTION OR DISTRIBUTION OF THE VOXWARE PRODUCTS OR ANY BREACH OF ANY
WARRANTIES HEREUNDER.
b. EXCEPT FOR CLAIMS ARISING FROM (A) A BREACH OF SECTIONS II
1.a.(i)(A), TO WHICH THE LIMITATIONS SET FORTH IN CLAUSE (I) BELOW DO NOT
APPLY, NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE,
LICENSOR WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL
OR EQUITABLE THEORY (I) FOR: (A) WITH RESPECT TO CLAIMS ARISING FROM A
BREACH OF SECTION II 1.a.(i)(B), THE GREATER OF $1,000,000 OR THE
AGGREGATE FEES PAID LICENSOR HEREUNDER DURING THE TERM OF THIS AGREEMENT;
AND (B) WITH RESPECT TO A BREACH OF SECTION II 1.a.(i)(C) AND ANY OTHER
CLAIMS, LIABILITY OR DAMAGE OF ANY KIND, THE AGGREGATE OF THE FEES PAID TO
LICENSOR HEREUNDER DURING THE TERM OF THIS AGREEMENT OR (II) FOR COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
4. Indemnity. Each party (the "Indemnifying Party") will defend
the other party (the "Indemnified Party") and pay costs, damages and legal
fees finally awarded against the Indemnified Party arising from a breach of
the representations and warranties set forth in Section II 1.a. and the
covenant set forth in Section II 2.d. For the indemnification obligations
above to be applicable, the Indemnified Party must (a) promptly notify the
Indemnifying Party in writing of any such claim and grant the Indemnifying
Party sole control of the defense and all related settlement negotiations,
and (b) cooperate with the Indemnifying Party, at the Indemnifying Party's
expense, in defending or settling such claim.
III. PROPRIETARY RIGHTS
1. Title. Except to the extent of the licenses expressly and
unambiguously granted hereunder, Licensor retains all rights, title and
interest in and to the Voxware
9
<PAGE>
Products. Licensor shall have no ownership interest in Netscape's products,
other than the rights in the Voxware Products described in the preceding
sentence.
IV. CONFIDENTIALITY
1. Confidential Information. All disclosures of proprietary and/or
confidential information in connection with this Agreement shall be governed
by the terms of the Mutual Confidential Disclosure Agreement entered into by
the parties, a copy of which is attached hereto as Exhibit B.
V. GENERAL
1. Escrow. Within 60 days after request by Netscape, Licensor
shall add Netscape as a beneficiary to that certain Sourceflex Software
Source Code Escrow Agreement, dated as of December 4, 1995 (the "Escrow
Agreement"), between Licensor and FileSafe, Inc., which Escrow Agreement
shall provide for the release of the source code of a Voxware Product to
Netscape for the purposes and upon the occurrence of the release conditions
described therein. Licensor and Netscape further agree to modify such Escrow
Agreement (as it relates to Netscape) to provide for release terms and
dispute resolution terms substantially similar to clauses (i),(ii) and (iii)
below:
(i) Upon notice to the escrow agent by Netscape (in the form of an
affidavit or declaration by an officer of Netscape) of the
occurrence of a release condition as defined in the Escrow
Agreement, the escrow holder shall so notify Licensor by
certified mail with a copy of the notice from Netscape. If
Licensor provides contrary instruction within ten (10) days of
the mailing of the notice to Licensor, the escrow holder shall
not deliver the deposited source code to Netscape except as
provided below.
(ii) "Contrary instruction" means the filing of an affidavit or
declaration with the escrow agent by an officer of Licensor
stating that a release condition has not occurred, or has been
cured. The escrow agent will send a copy of the affidavit or
declaration by certified mail to Netscape. Upon receipt of
contrary instruction, the escrow agent shall not deliver a copy
of the deposited source code and shall continue to store the
deposited source code until otherwise directed by Licensor and
Netscape jointly, or until resolution of the dispute pursuant to
clause (iii) below.
(iii) In the event of a dispute as to which this Section applies, the
escrow agent shall so notify Licensor and Netscape in writing.
Such dispute will be settled by arbitration (which arbitration
shall be binding for purposes of this Agreement only) in
accordance with the rules of the American Arbitration
Association (AAA). The parties shall conduct the arbitration as
follows: (a) the parties shall each select one independent
arbitrator within ten (10) days, (b) such arbitrators shall
select in good faith a third arbitrator within five (5) days,
(c) each party will have one (1) day to present its case
(presentation shall
10
<PAGE>
be made on a date selected by the arbitrators which shall be at
least five (5) and no more than fifteen (15) days after
selection of the third arbitrator), (d) the arbitrators shall
have ten (10) days from completion of such presentation to
render their decision (the decision of a majority of the
arbitrators will be deemed the decision of the arbitrators), and
(e) if one party fails to timely appoint an arbitrator, the
arbitration shall be conducted solely by the other party's
arbitrator.
2. Governing Law. This Agreement shall be subject to and governed
in all respects by the statutes and laws of the State of California without
regard to the conflicts of laws principles thereof. The prevailing party in
any dispute regarding the interpretation or enforcement of the terms of this
Agreement shall be entitled to its attorneys fees, costs and expenses.
3. Entire Agreement. This Agreement, including Exhibits,
constitutes the entire Agreement and understanding between the parties and
integrates all prior discussions between them related to its subject matter.
No modification of any of the terms of this Agreement shall be valid unless
in writing and signed by an authorized representative of each party.
4. Assignment. This Agreement is not assignable by either party
without the prior written consent of the other party, except that a party may
assign this Agreement in connection with any merger, acquisition, sale of
substantially all of its assets or similar event without the other party's
consent. This Agreement shall apply to and bind any successor or assigns of
the parties hereto.
5. Notices. All notices required or permitted hereunder shall be
given in writing addressed to the respective parties as set forth below and
shall either be (a) personally delivered; (b) transmitted by postage prepaid
certified mail, return receipt requested; or (c) transmitted by nationally-
recognized private express courier, and shall be deemed to have been given on
the date of receipt if delivered personally, or two (2) days after deposit in
mail or express courier. Either party may change its address for purposes
hereof by written notice to the other in accordance with the provisions of
this Subsection. The addresses for the parties are as follows:
Licensor Netscape Communications Corporation
Voxware, Inc. 501 East Middlefield Road
172 Tamarack Circle Mountain View, CA 94043
Skillman, NJ 08558 Fax: (415) 528-4123
Attn: Chief Financial Officer Attn: Legal Dept.
6. Force Majeure. Neither party will be responsible for any
failure to perform its obligations under this Agreement due to causes beyond
its reasonable control, including but not limited to acts of God, war, riot,
embargoes, acts of civil or military authorities, fire, floods or accidents.
11
<PAGE>
7. Waiver. A waiver, expressed or implied, by either party of any
default by the other in the observance and performance of any of the
conditions, covenants of duties set forth herein shall not constitute or be
construed as a waiver of any subsequent or other default.
8. Headings. The headings to the Sections and Subsections of this
Agreement are included merely for convenience of reference and shall not
affect the meaning of the language included therein.
9. Independent Contractors. The parties acknowledge and agree that
they are dealing with each other hereunder as independent contractors.
Nothing contained in this Agreement shall be interpreted as constituting
either party the joint venturer or partner of the other party or as
conferring upon either party the power of authority to bind the other party
in any transaction with third parties.
10. Severability. Except as otherwise set forth in this
Agreement, the provisions of this Agreement are severable, and if any one or
more such provisions shall be determined to be invalid, illegal or
unenforceable, in whole or in part, the validity, legality and enforceability
of any of the remaining provisions or portions thereof shall not in any way
be affected thereby and shall nevertheless be binding between the parties
hereto. Any such invalid, illegal or unenforceable provision or portion
thereof shall be changed and interpreted so as to best accomplish the
objectives of such provision or portion thereof within the limits of
applicable law.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For purposes hereof, a
facsimile copy of this Agreement, including the signature pages hereto shall
be deemed to be an original. Notwithstanding the foregoing, the parties shall
deliver original execution copies of this Agreement to one another as soon as
practicable following execution thereof.
LICENSOR NETSCAPE
COMMUNICATIONS CORPORATION
By: By:
------------------------------ ------------------------------
Print Name: Print Name:
---------------------- ----------------------
Title: Title:
--------------------------- ---------------------------
12
<PAGE>
APPENDIX A
1. RT24SDK (excluding features for time scaling, pitch
manipulation, and personality transformation, except for two
built in voice fonts) - Basic Product
2. RT24hq SDK (excluding features for time scaling, pitch
manipulation, and personality transformation, except for two
built in voice fonts) - Enhanced Product
3. ToolVox for the Web player - Basic Product
4. ToolVox for the Web basic encoder application (contains
RT24)- Basic Product
5. Basic TeleVox application (includes transport interfaces) -
Basic Product
6. Control and transmission protocols for n-way calling -
Enhanced Product
7. Enhanced TeleVox application -- including N-way calling when
available and the RT24hq codec - Enhanced Product
<PAGE>
APPENDIX B:
COMPANIES TO WHICH EXCLUSIVITY APPLIES
--------------------------------------
[**]
<PAGE>
APPENDIX C - EXCLUSIONS FROM EXCLUSIVITY
[**]
<PAGE>
APPENDIX D TRADEMARKS
Trademark applications filed:
1. Voxware
2. Voxware logo and design
3. VoiceFonts
4. Perfect Pitch
5. Warp-It
6. Morph-It
7. ToolVox
8. The Voice in Software
9. TeleVox
10. ToolVox for the Web
<PAGE>
EXHIBIT A
---------
SUPPORT
SECTION 1: Definitions.
-----------
For purposes of this Support Exhibit, the following terms shall have the
following meanings:
1.1 "End User" means any user authorized according to the End User
License Agreement, to use, but not to further distribute, the Voxware
Products.
1.2 "Updates" mean updates, if any, that Licensor makes commercially
generally available as a major or minor update to the Voxware
Products.
1.3 "Voxware Product(s)" means the executable version (but not the source
code version) of the computer software products licensed by End User
as Licensor may update and provide hereunder from time to time.
1.4 "Program Errors" means one or more reproducible deviations in the
Voxware Products from the applicable specification shown in the
documentation.
1.5 "Netscape" means the corporate entity responsible for the End Users
and the entity paying the applicable maintenance and support fees to
Licensor.
SECTION 2. Maintenance/Updates.
-------------------
Licensor will provide to Netscape any Updates made generally available during
the term of this Agreement. Netscape, and not Licensor, will be responsible
for, and pay all expenses associated with providing front-line support and
Updates to its End Users. Netscape and Licensor will favorably consider
electronic or alternative dissemination methods of such Updates to the extent
consistent with both companies than current policies.
SECTION 3. Technical Support.
-----------------
Also, in consideration of the maintenance and support fee paid by Netscape,
Licensor will provide Netscape with Licensor's technical support services, as
further described herein.
a. Back-line Support. Licensor will provide back-line support to Netscape
for Program Errors not resolved by Netscape pursuant to Netscape's support
policies and in accordance with subsection b below. This support includes
efforts to identify defective source code and to provide corrections,
workarounds and/or patches to correct Program Errors. Licensor will
provide Netscape with the telephone number and an e-mail address which
Netscape may use to report Program Errors during Licensor's local
California business hours (Monday through Friday, 5:00 a.m. to 5:00 p.m.
Pacific Standard Time). Licensor will also provide Netscape with an
emergency telephone pager number which Netscape may use to report only
Priority 1 and 2 Program Errors 24 hours a day, 7 days a week. For all
priority 1 or 2 failures, Netscape agrees to notify Licensor via both
telephone and e-mail. Netscape agrees to use reasonable commercial efforts
to answer its
<PAGE>
End User's support questions. Netscape will identify and one (1) member of
its customer support staff and one (1) alternate to act as the primary
technical liaisons responsible for all communications with Licensor's
technical support representatives. Such liaisons will have sufficient
technical expertise, training and/or experience, for Netscape to perform
its obligations hereunder. Netscape will designate, in writing and/or
e-mail to Licensor, its liaison(s) within one (1) week after the Effective
Date, and may substitute contacts at any time by providing one (1) week's
prior written and/or electronic notice thereof to Licensor.
Licensor will make reasonable efforts to correct significant Program Errors that
Netscape identifies, classifies and reports to Licensor and the Licensor
substantiates. Licensor may reclassify Program Errors if it reasonably believes
that Netscape's classification is incorrect. Netscape will provide sufficient
information for Licensor to enable Licensor to duplicate the Program Error
before Licensor's response obligations will commence. Licensor will not be
required to correct any Program Error caused by (a) incorporation, attachment of
a feature, program, or device to the Voxware Products, or any part thereof;
(b) any nonconformance caused by accident, transportation, neglect, misuse,
alteration, modification, or enhancement of the Voxware Products; (c) the
failure to provide a suitable installation environment; (d) use of the Voxware
Products for other than the specific purpose for which the Voxware Products are
designed; (e) use of the Voxware Products on any systems other than the
specified hardware platform for such Licensor products; (f) use of defective
media or defective duplication of the Voxware Products; or (g) failure to
incorporate any Update previously released by Licensor which corrects such
Program Errors.
Licensor will use its best commercial efforts to communicate with the Netscape
about the Program Error, via telephone or e-mail within the following targeted
response times:
<TABLE>
<CAPTION>
================================================================================
Priority Failure Description Response Time
================================================================================
<C> <S> <C>
1 Fatal (no useful work can be done) 6 working hours
- --------------------------------------------------------------------------------
2 Severe Impact (Functionality 10 working hours
disabled): Errors which result in a
lack of application functionality or
cause intermittent system failure.
- --------------------------------------------------------------------------------
3 Degraded Operations: Errors 1 working day
causing malfunction of non-critical
functions.
- --------------------------------------------------------------------------------
4 Minimal Impact: attributes and/or future release, on a
options to utility programs do not business justifiable basis
operate as stated.
- --------------------------------------------------------------------------------
5 Enhancement Request. when applicable
================================================================================
</TABLE>
2
<PAGE>
Licensor will use reasonable commercial efforts to resolve each significant
Program Error by providing either a reasonable workaround, an object code patch
or a specific action plan for how Licensor will address the problem and an
estimate of how long it will take to rectify the defect. Licensor reserves the
right to charge Netscape additional fees as its then standard rates for services
performed in connection with reported Program Errors which are later determined
to have been due to hardware or software not supplied by Licensor.
b. Front-line Support. Netscape, and not Licensor, will provide front-
line technical support to its End Users. Such support includes but is not
limited to, call receipt, entitlement verification, call screening,
installation assistance, problem identification and diagnosis, product
defect determination, efforts to create a repeatable demonstration of the
Program Error and, if applicable, the distribution of any replacement media
or Updates. Netscape agrees that any documentation distributed by Netscape
to its End Users will clearly and conspicuously state the End Users should
call Netscape for technical support for the Voxware Products. Licensor
will have no obligation to furnish any assistance, information or
documentation with respect to the Voxware Products, directly to End Users.
If Licensor customer support representatives are being contacted by a
significant number of Netscape's End Users then, upon Licensor's request,
Netscape and Licensor will cooperate to minimize such contact.
3
<PAGE>
EXHIBIT B
Mutual Confidential Disclosure Agreement
WHEREAS, Voxware, Inc. ("Company") has developed unique and proprietary
computer programs; and
WHEREAS, Netscape Communications Corporation ("Netscape") and Company have
entered into the Software License Agreement dated as of even date herewith (the
"Software License Agreement").
NOW, THEREFORE:
Each party (the "Receiving Party") understands that the other party (the
"Disclosing Party") has disclosed or may disclose information (including,
without limitation, computer programs, code, algorithms, names and expertise of
employees and consultants, know-how, formulas, processes, ideas, inventions
(whether patentable or not), schematics and other technical, business, financial
and product development plans, forecasts, strategies and information), which to
the extent previously, presently, or subsequently disclosed to the Receiving
Party is hereinafter referred to as "Proprietary Information" of the Disclosing
Party. All Proprietary Information disclosed in tangible form by the Disclosing
Party shall be marked "confidential" or "proprietary" and all Proprietary
Information disclosed orally or otherwise in intangible form by the Disclosing
Party shall be designated as confidential or proprietary at the time of
disclosure and shall be reduced to writing and delivered to the Receiving Party
within thirty (30) days following the date of disclosure.
In consideration of the parties' discussions and any access the Receiving
Party may have to Proprietary Information of the Disclosing Party and other
valuable consideration, the receipt of which is hereby acknowledged. The
parties hereby agree as follows:
1. The Receiving Party agrees (i) to hold the Disclosing Party's
Proprietary Information in confidence and to take all necessary precautions to
protect such Proprietary Information (including, without limitation, all
precautions the Receiving Party employs with respect to its own confidential
materials), (ii) not to divulge any such Proprietary Information or any
information derived therefrom to any third person, (iii) not to make any use
whatsoever at any time of such Proprietary Information except as expressly
permitted in writing by the Disclosing Party, (iv) not to remove or export any
such Proprietary Information from the country of the Receiving Party, and (v)
not to copy or reverse engineer, reverse compile or attempt to derive the
composition or underlying information of any such Proprietary Information. The
Receiving Party shall limit the use of and access to the Disclosing Party's
Proprietary Information to the Receiving Party's employees who need to know such
Proprietary Information for the purpose of such internal evaluation and shall
cause such employees to comply with the obligations set forth herein. The
Receiving Party shall treat the Proprietary Information with at least the same
degree of care and protection as it would use with respect to its own
proprietary
<PAGE>
information. Without granting any right or license, the Disclosing Party agrees
that the foregoing shall not apply with respect to information that (i) is in
the public domain and is available at the time of disclosure or which thereafter
enters the public domain and is available, through no improper action or
inaction by the Receiving Party or any affiliate, agent or employee, or (ii) was
in its possession or known by it prior to receipt from the Disclosing Party, or
(iii) was rightfully disclosed to it by another person without restriction, or
(iv) is independently developed by the Receiving Party without access to such
Proprietary Information, or (v) is required to be disclosed pursuant to any
statutory or regulatory authority, provided the Disclosing Party is given prompt
notice of such requirement and the scope of such disclosure is limited to the
extent possible, or is required to be disclosed by a court order, provided the
Disclosing Party is given prompt notice of such order and provided the
opportunity to contest it.
2. Immediately upon (i) the decision by either party not to enter
into a business relationship as contemplated by paragraph 1, or (ii) a request
by the Disclosing Party at any time, the Receiving Party will turn over to the
Disclosing Party all Proprietary Information of the Disclosing Party and all
documents or media containing any such Proprietary Information and any and all
copies or extracts thereof. The Receiving Party understands that nothing herein
(i) requires the disclosure of any Proprietary Information of the Disclosing
Party, which shall be disclosed, if at all, solely at the option of the
Disclosing Party, or (ii) requires the Disclosing Party to proceed with any
proposed transaction or relationship in connection with which Proprietary
Information may be disclosed.
3. Except to the extent required by law or as set forth in the
Agreement, neither party shall disclose the existence or subject matter of the
negotiations or business relationship contemplated by this Agreement.
4. The Receiving Party acknowledges and agrees that due to the unique
nature of the Disclosing Party's Proprietary Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party shall be entitled to seek appropriate equitable relief in addition to
whatever remedies it might have at law. The Receiving Party will notify the
Disclosing Party in writing immediately upon the occurrence of any such
unauthorized release or other breach. In the event that any of the provisions of
this Agreement shall be held by a court or other tribunal of competent
jurisdiction to be unenforceable, the remaining portions hereof shall remain in
full force and effect.
5. Neither party acquires any intellectual property rights under this
Agreement or any disclosure hereunder, except the limited right to use such
Proprietary Information in accordance with this Agreement. No warranties of any
kind are given with respect to the Proprietary Information disclosed under this
Agreement or any use thereof, except as may be otherwise agreed to in writing.
6. This Agreement supersedes all prior discussions and writings with
respect to the subject matter hereof, and together with the Software License
Agreement, constitutes the
<PAGE>
entire agreement between the parties with respect to the subject matter hereof.
No waiver or modification of this agreement will be binding upon either party
unless made in writing and signed by a duly authorized representative of such
party and no failure or delay in enforcing any right will be deemed a waiver.
VOXWARE, INC.
NETSCAPE COMMUNICATIONS CORPORATION
By: By:
----------------------------------- ----------------------------------
Print Name: Print Name:
--------------------------- --------------------------
Title: Title:
-------------------------------- -------------------------------
Date: Date:
--------------------------------- --------------------------------
<PAGE>
[Confidential treatment has been requested for portions of this exhibit. The
Confidential portions have been redacted and are denoted by [**]. The
Confidential portions have been separately filed with the commission.]
EXHIBIT 10.12
VOXWARE, INC. AND AMERICA ONLINE, INC.
SOFTWARE LICENSE AGREEMENT
--------------------------
This Software License Agreement (the "Agreement") is entered into as
of June 28, 1996, by and between Voxware, Inc. ("Licensor"), a Delaware
corporation, with its principal place of business at 305 College Road East,
Princeton, New Jersey 08540 and America Online, Inc. ("Licensee"), a
Delaware corporation, with its principal place of business at 8619 Westwood
Center Dr., Vienna, VA 22182.
1. GRANT OF LICENSE:
----------------
(a) Licensor hereby grants to Licensee, on the terms and subject to the
conditions and limitations hereinafter set forth, a worldwide non-
exclusive, non-transferable license to Use the Licensed Programs in (and
only in) the software products described in Schedule A hereto (Such
----------
products when merged with or incorporating the Licensed Programs shall be
referred to as the "Software Products"). Use of the Licensed Programs in
any product other than the Software Products is hereby prohibited, unless
prior written consent is obtained from Licensor. The license granted
hereunder shall not be deemed to authorize Licensee to change or modify in
any way any Licensed Program.
(b) For purposes of this Agreement, "Licensed Programs" means those
computer software programs listed in Schedule B hereto (as well as any
----------
Updates thereof furnished by Licensor pursuant to the terms of this
Agreement), in machine readable binary image format, as well as any related
material, whether in machine readable, printed or other form, including but
not limited to instructional and operations manuals. The term Licensed
Program includes all or any portion of a Licensed Program incorporated in
another program, whether in machine readable, printed or other form. The
term Licensed Program does not include source code in any form.
(c) For purposes of this Agreement, "Use" means (i) transferring any
portion of any Licensed Program from storage units or media into equipment
for processing, whether by electronic, mechanical or other means; (ii)
utilizing any portion of any Licensed Programs in the course of developing
the Software Products; (iii) merging and/or incorporating any Licensed
Programs
<PAGE>
in machine readable form into the Software Products; or (iv) developing,
improving, manufacturing, reproducing, marketing and licensing to third
parties, directly and through authorized resellers, OEMs and licensees of
Licensee the Software Products containing the Licensed Programs. "Use" also
means referring to any instructional or operational manual included in the
definition of Licensed Programs for the purpose of understanding or
operating the Licensed Programs.
(d) For purposes of this Agreement, Licensee is restricted to the
specific corporation, Licensee affiliate, subsidiary, joint venture
providing internet access or other online services or division thereof,
designated as "Licensee" at the outset of this Agreement. If the designated
Licensee is a division of a corporation, Licensee does not include any
other division or part of the said corporation.
2. CONDITIONS OF LICENSE:
---------------------
(a) The license granted hereunder shall expire or terminate upon the
expiration or termination of this Agreement as set forth in, and subject to
the terms of, Section 14 hereof.
(b) The license granted hereunder may under no circumstances be
transferred, assigned or sublicensed by Licensee (except to sublicensees of
the Software Products as contemplated hereby).
(c) Under no circumstances shall Licensee be deemed the owner of a copy
of the Licensed Programs within the meaning of Section 117 of the Copyright
Act of 1976 (as amended).
3. PRICE:
-----
(a) The license fee and royalties for the Licensed Programs for the
initial term and for each renewal term, if any, hereof shall be as set
forth in Schedule C hereto.
-----------
(b) Any applicable sales, use, personal property, excise or other taxes
(other than income or corporate franchise taxes) will be added to the
license fee.
4. TERMS OF PAYMENT; RECORDS AND AUDITS:
------------------------------------
<PAGE>
(a) Unless otherwise set forth on Schedule C hereto or in Section 4(c)
----------
below, Licensor will invoice Licensee for the license fee. Payment is due
within thirty (30) days of the date of the invoice.
(b) No later than the last day of each calendar quarter, Licensee shall
remit payment to Licensor in accordance with Schedule C hereof, and
Licensee will deliver to Licensor a report itemizing the number of paid
subscribers of Licensee's online service as of the 15/th/ day of the third
month of such calendar quarter and the royalties and/or license fees (if
any) due. Licensor shall be entitled to receive copies of all ongoing
shipping reports from Licensee.
(c) For at least two (2) years after the relevant shipments or
termination of this agreement, Licensee will retain records adequate for
Licensor to verify the accuracy of Licensee's reports and payments. Not
more frequently than once per year, Licensor shall have the right to audit
and copy such records upon not less than fourteen (14) days prior notice to
Licensee, such audit to be performed by mutually agreeable, independent
auditors under non-disclosure obligations. In the event that any such audit
shall reveal a deficiency in royalty payments, then Licensee shall
immediately pay to Licensor the total amount of said deficiency plus
interest at the rate set forth in paragraph 4(d) below. In the event such
deficiency is equal to five percent (5%) or more of the royalties set forth
in the most recent royalty report, or if Licensee is in default hereunder,
then Licensee shall also pay to Licensor the cost of such audit. The
provisions of this paragraph 4(c) shall survive expiration or termination
of this License Agreement.
(d) Interest shall accrue on all amounts past due hereunder, including
royalties, at the monthly rate of one and one-half percent (1-1/2%) or at
the maximum legal rate, whichever is less. Nothing contained in this
paragraph shall be deemed a waiver of the termination provisions of this
License Agreement in the event of Licensee's default hereunder.
5. INSTALLATION:
------------
(a) It is the Licensee's responsibility, without charge to Licensor, to
incorporate the Licensed Programs, defined in Schedule B, into the Software
Products in accordance with documentation supplied by Licensor.
(b) It shall be the responsibility of Licensee to install the Licensed
Programs at its own expense.
6. ACCEPTANCE:
----------
<PAGE>
Licensee has evaluated the Licensed Programs prior to the date
hereof. The execution of this Agreement is evidence of Licensee's
acceptance of the Licensed Programs.
7. PROPRIETARY RIGHTS:
------------------
(a) Title to the Licensed Programs shall at all times remain exclusively
with Licensor. Licensee acknowledges that it is Licensor's position that
the Licensed Programs, and the original and any copies thereof, in whole or
in part, and all copyright, patent, trade secret, trademark and other
intellectual property and proprietary rights which now or hereafter may
exist therein, are owned by and remain the exclusive valuable property of
Licensor and embody substantial creative efforts, ideas and expressions.
Under no circumstances shall Licensee attempt, or permit others to attempt,
to decompile, disassemble or otherwise reverse engineer the Licensed
Programs.
(b) Licensee shall include, and shall not alter or remove, any applicable
copyright, patent, trade secret, trademark or other proprietary notices on
all copies (in whatever form) of the Licensed Programs and the packaging in
which they may be contained.
(c) The parties hereby acknowledge that this Agreement establishes a
relationship of confidentiality between them, and Licensee acknowledges
that the Licensed Programs are furnished by Licensor on a confidential
basis. Unless otherwise agreed to in writing by Licensor, Licensee shall
limit access to the Licensed Programs to its employees and agents and
subcontractors under commitments of non-disclosure and on a need-to-know
basis only. Such access shall be solely for the purpose of enabling
Licensee to Use the Licensed Programs for the limited purposes set forth
in this Agreement.
(d) Licensee shall take all reasonable steps to safeguard the Licensed
Programs to assure that no unauthorized persons have access to them and
that no person authorized to have access to any of them takes any action
with respect thereto which is herein prohibited. Licensee shall promptly
report to Licensor the taking of any prohibited action with respect to any
Licensed Program of which Licensee becomes aware and shall take such
further steps as may reasonably be requested by Licensor to prevent such
action.
8. EXCLUSIVE LIMITED WARRANTY AND REMEDY:
-------------------------------------
(a) Licensor warrants that the Licensed Programs will for six (6) months
following initial delivery substantially conform to the description thereof
set
<PAGE>
forth in the pertinent user manuals. Licensee, however, acknowledges
that Licensed Programs are of such complexity that they may contain
inherent defects and the mere existence thereof shall not constitute a
breach of this warranty.
(b) As the sole and exclusive remedy for breach of the warranty contained
in the preceding subparagraph, Licensor will provide the support services
set forth in paragraph 12 hereof.
(c) Licensor's exclusive limited warranty provided for in this Section 8
shall not apply to damage or deficiencies to the Licensed Programs
resulting from accident, alteration, modification, foreign attachments,
misuse, tampering, negligence, improper maintenance, abuse or failure to
implement any Updates furnished pursuant to this Agreement.
(d) Licensor reserves the right to make substitutions and modifications
in the specification of the Licensed Programs, provided that such
substitutions or modifications will, in Licensor's sole opinion, improve
performance of the Licensed Programs.
9. DISCLAIMER OF ALL OTHER WARRANTIES:
----------------------------------
EXCEPT FOR THE EXPRESS WARRANTY STATED IN PARAGRAPH 8 ABOVE,
------------------------------------------------------------
LICENSOR GRANTS NO WARRANTIES WITH RESPECT TO THE LICENSED PROGRAMS, EITHER
---------------------------------------------------------------------------
EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
--------------------------------------------------------------------------
FITNESS FOR A PARTICULAR PURPOSE. THE STATED EXPRESS WARRANTY, AND THE
--------------------------------
REMEDY PROVIDED FOR BREACH THEREOF, ARE IN LIEU OF ALL OTHER LIABILITIES OR
OBLIGATIONS OF LICENSOR (WHETHER SUCH LIABILITIES OR OBLIGATIONS WOULD
ARISE UNDER THIS AGREEMENT OR OTHERWISE BY OPERATION OF LAW) FOR ANY
DAMAGES WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY,
INSTALLATION, USE OR PERFORMANCE OF THE LICENSED PROGRAMS.
10. LIMITATION OF LIABILITY:
-----------------------
(a) EXCEPT IN THE CASE OF INFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF THE OTHER PARTY IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER
ANY LEGAL THEORY (INCLUDING BUT NOT LIMITED TO CONTRACT, NEGLIGENCE,
MISREPRESENTATION, STRICT LIABILITY IN TORT OR WARRANTY OF ANY KIND) FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT
NOT LIMITED TO LOST
<PAGE>
PROFITS), EVEN IF THE OTHER PARTY HAS NOTICE OF THE POSSIBILITY OF SUCH
DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY DETERMINATION THAT
THE EXCLUSIVE REMEDY REFERRED TO IN SUBPARAGRAPH 8(b) ABOVE FAILED OF ITS
ESSENTIAL PURPOSE.
(b) Without limiting the effect of the preceding subparagraph, except
with regard to its obligations under Section 11 below, either Party's
maximum liability, if any, for damages (including but not limited to
liability arising out of contract, negligence, misrepresentation, strict
liability in tort or warranty of any kind) shall not exceed the allocable
portion of the fees paid by the Licensee for the Licensed Program(s)
involved during the preceding twelve (12) months.
(c) Licensor shall under no circumstances be liable to Licensee for
damages arising out of any claim not related to the Licensed Programs
(including, but not limited to, a claim for personal injury or property
damage) made against Licensee by any other person or party arising out of
Licensee's activities.
(d) Licensee shall, at its cost and expense, defend, indemnify and
hold Licensor harmless from and against any claim (including, but not
limited to, a claim for personal injury or property damage) by any other
person or party arising out of or in connection with the use of the
Licensed Programs to perform Licensee's applications, regardless of whether
such claim is founded in contract, tort or warranty. The foregoing sentence
shall not be applicable to the extent the Licensed Programs are the only
subject of such claim.
11. PATENTS AND COPYRIGHTS:
----------------------
(a) Licensor will defend and indemnify Licensee against any claim that
Licensed Programs delivered hereunder, or the use thereof, constitute an
infringement of a worldwide patent, copyright, trade secret or other
intellectual property right. Licensor's obligations hereunder will only
apply if Licensee notifies Licensor promptly in writing as to any such
claim; gives Licensor the right to control and direct the investigation,
preparation, defense, trial and settlement of each such claim; and provides
Licensor with information deemed necessary by Licensor or its counsel in
connection with the foregoing. Licensee agrees to cooperate fully with
Licensor in the defenses and/or settlement of each such claim. If Licensor
receives notice of an alleged infringement or if the use of Licensed
Programs is prevented based on an alleged infringement, Licensor will have
the right, at its option, to obtain for Licensee the right to continued use
of any such Licensed Programs; substitute other comparable programs that
deliver equivalent or better functionality and performance; or replace or
modify such Licensed Programs
<PAGE>
or their design so that they are no longer infringing. If, in Licensor's
opinion, none of the foregoing alternatives is reasonably available to
Licensor, then Licensor may remove such Licensed Programs and refund any
license fees paid by Licensee for the current term of this Agreement on a
prorated basis. The foregoing states the entire liability of Licensor with
respect to infringement of any patents, copyrights or other intellectual
property rights by Licensed Programs.
(b) Licensor's obligation contained in the preceding subparagraph
does not extend to any suit or proceeding which is based upon a patent
claim covering a combination of which any Licensed Program licensed under
this Agreement is merely an element of the claim combined with other
devices or elements not acquired hereunder unless (and only to the extent)
Licensor is a contributory infringer, nor does it extend to use of any
Licensed Program in a manner not permitted or contemplated in Licensor's
published documentation.
12. SUPPORT SERVICES:
----------------
(a) Licensor may, at such time as Licensor deems appropriate,
distribute Updates to Licensee. Updates consist of such corrections and
modifications of Licensed Programs or portions thereof, in machine readable
binary image format, as Licensor deems appropriate and which Licensor
distributes generally to its other licensees and which perform the same or
substantially similar functions as the Licensed Programs. Licensee shall
use reasonable commercial efforts, within 12 months receipt of any Update,
to implement its use such that it replaces entirely any previous version of
the Licensed Programs or portion thereof to which the Update applies. Upon
implementation, an Update shall constitute a Licensed Program and shall be
subject to all the terms, conditions and limitations of this Agreement. If
Licensee fails to implement the use of any Update, Licensor will be under
no obligation to furnish any further support services under this Agreement,
and if Licensor chooses to honor Licensee's request for such services, any
and all costs incurred to correct errors in any previous version of
Licensed Programs will be borne by Licensee.
(b) Licensor will use reasonable commercial efforts to correct any error
in Licensed Programs identified by Licensee in writing. An error will be
deemed to exist if, and only if, the Licensed Program substantially
deviates from the description thereof in the pertinent user manual.
Licensee, however, acknowledges that Licensed Programs are of such
complexity that it may be impossible or impracticable to effectuate the
correction of an error. If an error is, in the opinion of Licensor, not
reasonably capable of correction, Licensor will use reasonable commercial
efforts to advise Licensee on methods of avoiding or overcoming the error.
Licensor does not guarantee the results of
<PAGE>
any services provided under this subparagraph or that all or any
errors will be corrected, overcome or avoided.
(c) Licensor will use reasonable commercial efforts to answer
Licensee's questions relating to the use, application and functioning of
Licensed Programs. Licensor makes no representations or guarantees with
respect to the results to be achieved by virtue of the services described
in this paragraph.
13. EXCLUSIONS:
----------
(a) Licensor's obligation to provide support services hereunder is
conditioned upon the proper use of the Licensed Programs and does not cover
Licensed Programs that have been (i) modified without Licensor's approval,
(ii) used contrary to Licensor's instructions or (iii) serviced by anyone
other than Licensor (other than installation and any other services
Licensee is required to perform hereunder). Licensor will not be obligated
to furnish service hereunder if the need for such service arises from
hardware malfunction, user error, conditions correctable by reference to
available documentation or malfunction of programs not furnished by
Licensor.
(b) If service is requested by Licensee and furnished by Licensor
as a result of any of the causes specified in the preceding subparagraph,
Licensee will be obligated to pay for such service at Licensor's standard
rates then in effect for time, materials and pre-authorized travel, if any.
14. TERM:
----
(a) This Agreement shall have an initial term of 2 years commencing on
the date first set forth above in this Agreement and shall automatically
renew for successive terms of 1 year each unless Licensee provides written
notice of non-renewal to Licensor at least ninety (90) days prior to the
expiration of the then current term. Licensee may terminate this Agreement
at any time upon 30 days written notice to Licensor.
(b) Either party may terminate this Agreement, 30 days after delivering
written notice to the other party, in the event the other party breaches
any of its material obligations under this Agreement unless such breach is
cured within said 30 day period.
(c) Licensee's obligation to pay Licensor amounts due hereunder shall
survive any expiration or termination of this Agreement.
<PAGE>
(d) Upon the termination, or expiration of this Agreement, Paragraph 11
shall survive. Additionally, Licensee shall permanently discontinue the Use
of the Licensed Programs and the Software Products containing the Licensed
Programs. Within thirty (30) days after Licensee has permanently
discontinued the use of any Licensed Programs or immediately upon the
termination or expiration of this Agreement, Licensee shall return to
Licensor the original and all copies (whether whole or partial) of the
Licensed Programs in any form (other than copies incorporated in the
Software Products already produced and existing, and one additional copy
for support purposes only) and shall certify in writing to Licensor that it
has done so.
15. ATTRIBUTION AND LEGENDS:
-----------------------
Licensee agrees to display Licensor's logo and trademarks in
context appropriate places within the Software Products, such as the "About
Box" and any other areas that Licensee normally displays for similar
Licensed Programs within Software Products. Further, Licensee agrees to
place notice of any copyright and patent protection or other proprietary
legend requested by Licensor within the Software Products.
16. ADVERTISING:
-----------
Licensee agrees that Licensor may mention this License
Agreement in sales presentations. Licensor also may mention this License
Agreement in collateral materials consisting of sell sheets, brochures,
packaging and related marketing materials with the prior consent of
Licensee, which consent will not be unreasonably withheld. Licensor shall,
in connection with its activities under this paragraph 16, ensure that all
trademarks and copyrights pertaining to Licensee will be observed. Licensee
recognizes the great value of the good will associated with Licensor's
trademarks and the identification of the Software Products with the
trademarks. At Licensor's reasonable request, Licensee shall submit to
Licensor for prior approval (a) samples of all Software Products which
Licensee proposes to offer for sale under Licensor's trademarks and (b)
samples which bear Licensor's trademarks and which are to be used in
connection with the Software Products.
Both parties may issue a press release subject to the approval of the
other party announcing the relationship and intended benefits and Use of
the Licensed Programs within the Software Products defined herein.
<PAGE>
17. GENERAL:
-------
(a) This Agreement will not be binding upon either party until
signed by Licensee and an authorized officer of Licensor.
(b) Licensee may not assign this Agreement without the prior written
consent of Licensor, which consent will not be unreasonably withheld.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey. Without limiting the foregoing, this
Agreement shall be governed by the Uniform Commercial Code. The transaction
which is the subject matter of this Agreement shall be deemed to be a
"transaction in goods" and the Licensed Programs shall be deemed to be
"goods" within the meaning of the said statute, notwithstanding that this
Agreement grants a license, that no sale of Licensed Programs is
contemplated and that title to the Licensed Programs is retained by
Licensor. To the extent, if any, that services are provided in connection
with this Agreement, such services shall be deemed incidental to the
provisions of "goods".
(d) No failure or delay on the part of either party in exercising
any right or remedy provided in this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of or failure to exercise
any such right or remedy preclude any other or further exercise thereof or
the exercise of any other right or remedy under this Agreement.
(e) Any notice required or permitted under this Agreement shall be in
writing and shall be sent to the appropriate address shown on the first
page hereof (unless notice of a changed address has been given) by
telecopier, telegram, private overnight courier service or registered or
certified airmail, return receipt requested, with postage prepaid.
(f) Licensor's performance hereunder is subject to force majeure,
including but not limited to wars, riots, failure of contractors and
subcontractors to perform, strikes, labor disturbances, acts of God, fires,
floods, explosions, civil disturbances, inability to obtain required
material or transportation, and acts of governmental authorities.
(g) Licensee acknowledges that the Licensed Programs are subject to the
export control laws and regulations of the U.S.A., and any amendments
thereof. Licensee confirms that it will not knowingly export or re-export
the Licensed Programs, directly or indirectly, in violation of any
applicable law or regulation of the United States or any other country.
<PAGE>
(h) Paragraph headings herein are for convenience only and do not control
or affect the meaning or interpretation of any terms or provisions of this
Agreement.
(i) This Agreement (including any schedule hereto) supersedes all prior
agreements and understandings between the parties, whether written or oral,
related to the subject matter and is intended by the parties as the
complete and exclusive statement of the terms of their
(j) No modification, addition to, or waiver of any of the terms of this
Agreement (including any schedule hereto) shall be effective unless in
writing and signed by an authorized officer of Licensor. Under no
circumstances shall the terms of any purchase order submitted by Licensee
to Licensor, whether before or after the execution of this Agreement, be
deemed binding upon Licensor. If any of the provisions of this Agreement
are invalid under any applicable statute or rule of law, they are, to that
extent, deemed omitted.
(k) No action to enforce any claim arising out of or in connection with
the transaction which is the subject matter of this Agreement shall be
brought by either party against the other more than three (3) years after
the cause of action has occurred.
<PAGE>
(l) Licensor may, in its discretion, delegate all or any portion of its
obligation to perform services hereunder to an agent or subcontractor. In
the event Licensor does so, references to Licensor in this Agreement shall
be deemed to refer, in the alternative, to such agent or subcontractor.
Agreed to and accepted by:
VOXWARE, INC. (Licensor)
By: __________________________
Name: __________________________
Title: __________________________
Agreed to and accepted by:
Licensee
By: __________________________
Name: __________________________
Title: __________________________
<PAGE>
SCHEDULE A
----------
Software Products
-----------------
Licensor's player integrated with the core Licensee client software or
integrated browser.
<PAGE>
SCHEDULE B
----------
Licensed Programs
-----------------
[**]
<PAGE>
SCHEDULE C
----------
Price
-----
Royalty: [**]
The first non-refundable payment shall be made on or before June 30, 1996
based on the number of paid subscribers as of June 15, 1996.
Thereafter, the next non-refundable quarterly payment shall be made 3
months following the earlier of the Preview release of the Software
Programs or December 1, 1996. Thereafter, subsequent payments will be made
on or before the last day of each calendar quarter based on the number of
paid subscribers as of the 15/th/ day of the third month of each respective
quarter.
<PAGE>
EXHIBIT 10.13
ORIGINAL
[Confidential treatment has been requested for portions of this exhibit. The
Confidential portions have been redacted and are denoted by [**]. The
Confidential portions have been separately filed with the commission.]
Agreement No. ______
SOFTWARE LICENSE AGREEMENT
--------------------------
This Agreement including the attached Schedules requires execution by
Licensee and must be received by Licensor on or before SEPTEMBER 26, 1995 to be
valid.
Agreement dated as of September 26, 1995, between Voxware, Inc., a
Delaware corporation, 172 Tamarack Circle, Skillman, New Jersey 08558
("Licensor") and Microsoft Corporation, a Washington corporation, One Microsoft
Way, Redmond, WA 98052-6399 ("Licensee")
1. GRANT OF LICENSE:
-----------------
(a) Licensor hereby grants to Licensee, on the terms and conditions hereinafter
set forth, a non-exclusive, non-transferable worldwide license to Use the
Licensed Programs in the software products described in Schedule A hereto
----------
(the "Software Products"). Use of the Licensed Programs in any product other
than the Software Products is hereby prohibited, unless prior written consent is
obtained from Licensor. The license granted hereunder shall not be deemed to
authorize Licensee to change or modify in any way any Licensed Program.
(b) For purposes of this Agreement, "Licensed Programs" means those computer
software programs listed in Schedule B hereto (as well as any Updates
----------
thereof furnished by Licensor pursuant to the terms of this Agreement), in
machine readable binary format, as well as any related material, whether in
machine readable, printed or other form, including but not limited to
instructional and operations manuals. The term Licensed Program includes all or
any portion of a Licensed Program incorporated in another program, whether in
machine readable, printed or other form. The term Licensed Program does not
include source code in any form.
(c) For purposes of this Agreement, "Use" means (i) transferring any portion of
any Licensed Program from storage units or media into equipment for processing,
whether by electronic, mechanical or other means; (ii) utilizing any portion of
any Licensed Programs in the course of the operation of any equipment or in
support of the use of any equipment or program; or (iii) merging and/or
incorporating any Licensed Programs in machine readable form into another
program, including the Software Products. "Use" also means referring to any
instructional or operational manual included in the definition of Licensed
Programs for the purpose of understanding or operating the Licensed Programs.
Without limiting the foregoing, Licensee's license rights granted hereunder
shall include the right to: (i) internally use the Licensed Programs to create
the Software Products; (ii) incorporate into the Software Products the portions
of the Licensed Programs identified as "redistributables" in Schedule B herein;
and
-1-
<PAGE>
(iii) to reproduce, manufacture, market, transmit, display, broadcast,
distribute, sell, license, rent, or lease or otherwise transfer, either directly
or indirectly through third parties, the Software Products containing such
Licensed Programs.
(d) For purposes of this Agreement, Licensee is restricted to the specific
corporation, or division thereof, designated as "Licensee" at the outset of this
Agreement. Licensee does not include any affiliate of Licensee (i.e., any person
which controls, is controlled by or under common control with Licensee);
provided, however, that "Licensee" shall include Licensee's wholly owned
subsidiaries.
2. CONDITIONS OF LICENSE:
---------------------
(a) The license granted hereunder shall expire upon the expiration of this
Agreement as set forth in, and subject to the terms of, Section 13 hereof.
(b) The license granted hereunder may under no circumstances be transferred,
assigned or sublicensed by Licensee except as provided in Section 16(b) herein.
(c) Under no circumstances shall Licensee be deemed the owner of a copy of the
Licensed Programs within the meaning of Section 117 of the Copyright Act of 1976
(as amended).
3. PRICE:
-----
(a) The License Fees for the Licensed Programs shall be set forth in Schedule C
----------
hereto.
(b) Licensor may from time to time issue new releases of the Licensed Programs.
Licensee may, at its option, license such new releases of the Licensed Program
by paying the applicable Upgrade Fee(s) to Licensor as specified in Schedule C
----------
hereof. At Licensee's option, Licensee may license multiple new releases of the
Licensed Program for the same title. If Licensee licenses such new release(s)
from Licensor, such new release(s) shall constitute a Licensed Program and shall
be subject to all the same terms and conditions of this Agreement.
(c) Any applicable sales, use, personal property, excise or other taxes (other
than income or corporate franchise taxes) will be added to the license fee.
4. TERMS OF PAYMENT; RECORDS:
-------------------------
(a) Licensor shall invoice Licensee for Licensee Fees and Upgrade Fees (if
any). Payment is due within thirty (30) days of the date of the invoice.
(b) Interest shall accrue on all amounts past due hereunder, including
royalties, at the monthly rate of one and one-half percent (1-1/2%) or at the
maximum legal rate, whichever is less.
-2-
<PAGE>
5. INSTALLATION:
------------
(a) It is the Licensee's responsibility, without charge to Licensor, to
incorporate the Licensed Programs into the Software Products in accordance with
documentation supplied by Licensor.
(b) It shall be the responsibility of Licensee to install the Licensed Programs
at its own expense.
6. PROPRIETARY RIGHTS:
------------------
(a) Title to the Licensed Programs shall at all times remain exclusively with
Licensor. Licensee acknowledges that the Licensed Programs, and the original and
any copies thereof, in whole or in part, and all copyright, patent, trade
secret, trademark and other intellectual property and proprietary rights which
now or hereafter may exist therein, are owned by and remain the exclusive
valuable property of Licensor and embody substantial creative efforts, ideas and
expressions. Under no circumstances shall Licensee attempt, or license others to
attempt to decompile, disassemble or otherwise reverse engineer the Licensed
Programs.
(b) Licensee shall include, and shall not alter or remove, any applicable
copyright, patent, trade secret, trademark or other proprietary notices on all
copies (in whatever form) of the Licensed Programs.
(c) The parties hereby acknowledge that this Agreement establishes a
relationship of confidentiality between them, and Licensee acknowledges that the
Licensed Programs are furnished by Licensor on a confidential basis. Unless
otherwise agreed to in writing by Licensor, Licensee shall limit access to the
Licensed Programs to its employees or contractors employed by Licensee. Such
access shall be solely for the purpose of enabling Licensee to use the Licensed
Programs as permitted by the terms of this Agreement.
(d) Licensee shall take all reasonable steps to safeguard the Licensed Programs
to assure that no unauthorized persons have access to them and that no person
authorized to have access to any of them takes any action with respect thereto
which is herein prohibited. Licensee shall promptly report to Licensor the
taking of any prohibited action with respect to any Licensed Program of which
Licensee becomes aware and shall take such further steps as may reasonably be
requested by Licensor to prevent such action.
(e) Except as provided in Section 6(a) herein, nothing in this Agreement shall
be construed as restricting MS' ability or right to acquire, license, develop,
create, manufacture or distribute for itself, or have others acquire, license,
develop, create, manufacture or distribute for MS, similar technology performing
the same or similar functions as the technology contemplated by this Agreement,
or to market and distribute such similar technology in addition to, or in lieu
of, the technology contemplated by this Agreement.
7. EXCLUSIVE WARRANTY AND REMEDY:
-----------------------------
(a) Licensor warrants that the Licensed Programs (excluding, for purposes of
this subparagraph, any Updates furnished pursuant to this Agreement) will upon
delivery substantially conform to the description thereof set forth in the
pertinent user manuals. Licensee, however, acknowledges that
-3-
<PAGE>
Licensed Programs are of such complexity that they may contain inherent defects
and the mere existence thereof shall not constitute a breach of this warranty.
(b) As the sole and exclusive remedy for breach of the warranty contained in
the Section 7(a) herein, Licensor shall provide the support services set forth
in Section 11 hereof.
(c) Licensor's exclusive warranty and the remedy provided for breach thereof
shall not apply to damage or deficiencies resulting from accident, alteration,
modification, foreign attachments, misuse, tampering, negligence, improper
maintenance, abuse or failure to implement any Updates furnished pursuant to
this Agreement.
(d) Licensor reserves the right to make substitutions and modifications in the
specification of the Licensed Programs, provided that such substitutions or
modifications will in Licensor's reasonable opinion, improve performance of the
Licensed Programs.
8. DISCLAIMER OF ALL OTHER WARRANTIES:
----------------------------------
EXCEPT FOR THE EXPRESS WARRANTY STATED IN PARAGRAPH 7 ABOVE, LICENSOR
GRANTS NO WARRANTIES WITH RESPECT TO THE LICENSED PROGRAMS, EITHER EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. THE STATED EXPRESS WARRANTY, AND THE REMEDY PROVIDED FOR
BREACH THEREOF, ARE IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF LICENSOR
(WHETHER SUCH LIABILITIES OR OBLIGATIONS WOULD ARISE UNDER THIS AGREEMENT OR
OTHERWISE BY OPERATION OF LAW) FOR ANY DAMAGES WHATSOEVER ARISING OUT OF OR IN
CONNECTION WITH THE DELIVERY, INSTALLATION, USE OR PERFORMANCE OF THE LICENSED
PROGRAMS.
9. LIMITATION OF LIABILITY:
-----------------------
(a) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER UNDER ANY LEGAL
THEORY (INCLUDING BUT NOT LIMITED TO CONTRACT, NEGLIGENCE, MISREPRESENTATION,
STRICT LIABILITY IN TORT OR WARRANTY OF ANY KIND) FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST PROFITS),
EVEN IF NOTICE EXISTS OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL
APPLY NOTWITHSTANDING ANY DETERMINATION THAT THE EXCLUSIVE REMEDY REFERRED TO IN
SUBPARAGRAPH 7(b) ABOVE FAILED OF ITS ESSENTIAL PURPOSE.
(b) Without limiting the effect of the preceding subparagraph, Licensor's
maximum liability, if any, for damages (including but not limited to liability
arising out of contract, negligence, misrepresentation, strict liability in tort
or warranty of any kind) shall not exceed the allocable portion of the fees paid
by the Licensee for the Licensed Programs(s) involved during the preceding
twelve (12) months. Nothing in this Section 9 shall apply to Licensor's
obligations under Section 10 of this Agreement.
(c) Except as provided in Section 10 herein, Licensor shall under no
circumstances be liable to Licensee for damages arising out of any claim
(including, but not limited to, a claim for personal injury or property damage)
made against Licensee by any other person or party.
-4-
<PAGE>
(d) Licensee shall, at its cost and expense, defend, indemnify and hold
Licensor harmless from and against any claim brought against Licensor
(including, but not limited to, a claim for personal injury or property damage)
by any third person or party arising out of or in connection with Licensee's use
of the Licensed Programs to perform Licensee's applications, regardless of
whether such claim is founded in contract, tort or warranty; provided, however,
that Licensee's obligations under this Section 9(d) shall not apply to any
claims for which Licensor is required to indemnify Licensee under Section 10
herein.
10. PATENTS AND COPYRIGHTS:
----------------------
(a) Licensor shall defend, indemnify and hold harmless Licensee against any
claim or action which alleges that Licensed Programs delivered hereunder, or the
use thereof, constitute an infringement of any copyright, trade secret or other
intellectual property right other than patent rights. Licensor's obligations
hereunder will only apply if Licensee notifies Licensor promptly in writing as
to any such claim; gives Licensor the right to control and direct the
investigation, preparation, defense, trial and settlement of each such claim;
and provides Licensor with information reasonably deemed necessary by Licensor
or its counsel in connection with the foregoing. Licensee agrees to cooperate
fully with Licensor in the defenses and/or settlement of each such claim. If
Licensor receives notice of an alleged infringement or if the use of Licensed
Programs is prevented based on an alleged infringement, Licensor shall, at its
option, obtain for Licensee the right to continued use of any such Licensed
Programs; substitute other comparable programs; or replace or modify such
Licensed Programs or their design so that they are no longer infringing. The
foregoing states the entire liability of Licensor with respect to infringement
of any copyrights, trade secrets, or other intellectual property rights by
Licensed Programs other than patents.
(b) Subject to the limit set forth below, Licensor shall defend, indemnify and
hold harmless Licensee against any claim or action which alleges that Licensed
Programs delivered hereunder, or the use thereof, constitute an infringement of
any United States patent right. Licensor's obligations hereunder will only apply
if Licensee notifies Licensor promptly in writing as to any such claim; gives
Licensor the right to control and direct the investigation, preparation,
defense, trial and settlement of each such claim; and provides Licensor with
information reasonably deemed necessary by Licensor or its counsel in connection
with the foregoing. Licensee agrees to cooperate fully with Licensor in the
defenses and/or settlement of each such claim. If Licensor receives notice of an
alleged infringement or if the use of Licensed Programs is prevented based on an
alleged infringement, Licensor shall, at its option, obtain for Licensee the
right to continued use of any such Licensed Programs; substitute other
comparable programs; or replace or modify such Licensed Programs or their design
so that they are no longer infringing. Licensor's total liability pursuant to
this Section 10(b) shall in no event exceed the sum of Two Hundred Fifty
Thousand Dollars (US $250,000.00). The foregoing states the entire liability of
Licensor with respect to infringement of any patent rights. Licensor's
obligation contained in this Section 10(b) does not extend to any suit or
proceeding which is based upon a patent claim covering a combination of which
any Licensed Program licensed under this Agreement is merely an element of the
claim combined with other devices or elements not acquired hereunder unless
Licensor is a contributory infringer or unless the infringement would not have
occurred but for the inclusion of the Licensed Programs.
11. SUPPORT SERVICES:
----------------
(a) Licensor shall, at such intervals as Licensor deems appropriate, distribute
Updates to Licensee. Updates will consist of such corrections, modifications and
minor improvements of Licensed Programs
-5-
<PAGE>
or portions thereof, in machine readable binary image format, as Licensor deems
appropriate and which Licensor distributes generally to its other licensees. The
determination of what features and functions shall be included in any Update and
when to release such Updates will be at the sole discretion of Licensor.
Licensee shall, upon receipt and acceptance of any Update, implement its use
such that it replaces entirely any previous version of the Licensed Programs or
portion thereof to which the Update applies. Upon implementation, an Update
shall constitute a Licensed Program and shall be subject to all the terms and
conditions of this Agreement. If Licensee declines to implement the use of any
Update, Licensor will be under no obligation to furnish any further support
services under this Agreement, and if Licensor chooses to honor Licensee's
request for such services, any and all costs incurred to correct errors in any
previous version of Licensed Programs will be borne by Licensee.
(b) Licensor shall use its best efforts to correct any Errors in Licensed
Programs identified by Licensee in writing. Licensee acknowledges that the
Licensed Programs are of such complexity that it may be impossible or
impracticable to effectuate the correction of an Error. If an error is, in the
opinion of Licensor, not reasonably capable of correction, Licensor will use its
best efforts to advise Licensee on methods of avoiding or overcoming the Error.
Licensor does not guarantee the results of any services provided under this
section or that all or any Errors will be corrected, overcome or avoided. As
used herein, and "Error" shall mean a defect(s) in the Licensed Programs which
prevent them from performing in accordance with its specifications or
documentation, and/or a Severity Level 1, 2, or 3 Error. (A Severity Level 1
Error is a problem which prevents or seriously impairs the performance of
substantially all major functions; a Severity Level 2 Error is a problem which
prevents or seriously impairs the performance of a major function; and a
Severity Level 3 Error is a problem which disables or impairs the performance of
a minor function.)
(c) Licensor shall appoint a designated contact through which Licensor shall
provide Licensee with technical support, and where appropriate in Licensor's
judgment, access to Licensor's developers. Telephone conferences with Licensor's
designated support contact shall be scheduled at such times as MS may reasonably
select. Licensor may name successor contacts upon notice to Licensee.
12. EXCLUSIONS:
----------
(a) Licensor's obligation to provide support services hereunder is conditioned
upon the proper use of the Licensed Programs and does not cover Licensed
Programs that have been (i) modified without Licensor's approval, (ii) used
contrary to Licensor's instructions or (iii) serviced by anyone other than
Licensor. Licensor will not be obligated to furnish service hereunder if the
need for such service arises from hardware malfunction, user error, conditions
correctable by reference to available documentation or malfunction of programs
not furnished by Licensor.
(b) If service is requested by Licensee and furnished by Licensor as a result
be obligated to pay for such service at Licensor's standard rates then in effect
for time, travel and materials, but only if Licensee was advised in writing of
such obligation prior to Licensor's commencement of such work.
13. TERM:
----
(a) This Agreement shall have a term of ten (10) years from date of this
Agreement.
(b) Prior to expiration of the term of this Agreement, neither Licensor nor
Licensee shall be entitled to terminate this Agreement, either with or without
cause, provided, however, that such limitation shall
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<PAGE>
not be deemed to restrict either party from exercising such legal or equitable
rights or remedies, including rights to injunctive remedies such as specific
performance, that such party may have available at law or under this Agreement
in order to enforce such party's rights hereunder.
(c) Licensee's obligation to pay Licensor amounts due hereunder shall survive
any expiration of this Agreement.
(d) Within thirty (30) days after Licensee has permanently discontinued the use
of any Licensed Program or immediately upon the expiration of this Agreement,
Licensee shall using its best efforts, return to Licensor the original and all
copies (whether whole or partial) of the Licensed Programs in any form (other
than copies incorporated in the Software Products already produced and existing)
and shall certify in writing to Licensor that it has done so.
(e) Following expiration of this Agreement, Licensee shall have a six (6) month
period in which to sell off all existing inventory of the Software Products.
14. ATTRIBUTION AND LEGENDS:
-----------------------
Licensee agrees to place Licensor's relevant trademark(s) on the package of any
Software Products, on the reverse side where third party credits are customarily
made. Licensee also agrees to place Licensor's name within the name in the
customary credit screen within the Software Products, consistent with
attributions made to other third parties. Further, Licensee agrees to place
notice of any copyright or patent protection and any other proprietary legend
reasonably requested by Licensor within such credit screen within the Software
Products.
15. ADVERTISING:
-----------
(a) Upon Licensor's request, Licensee shall provide Mr. Anthony Chor (or a
successor or designee) as a reference regarding the Licensed Programs to
prospective customers of Licensor, subject to Mr. Chor's availability. Licensee
agrees that Licensor may orally mention this License Agreement in sales
presentations. Licensor also may mention this License Agreement in collateral
materials consisting of sell sheets, brochures, packaging and related marketing
materials subject to Licensee's prior written consent, which consent shall not
be unreasonably withheld. Licensee may, at its discretion, provide quotes
attesting to the quality of the Licensed Program for attribution in Licensor's
marketing materials. Licensor shall, in connection with its activities under
this section, ensure that all trademarks and copyrights pertaining to Licensee
will be observed.
(b) The parties agree to issue a joint press release announcing the execution
of this Agreement.
(c) Licensor shall use commercially reasonable efforts to assist Licensor in
promoting its products to Licensee's software developer network, subject to
Licensee's then-current policies.
16. GENERAL:
-------
(a) This Agreement will not be binding upon Licensor until signed by Licensee
and Licensor.
(b) Neither party may assign this Agreement without the prior written consent
of other party.
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<PAGE>
(c) This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
(d) No failure or delay on the part of either party in exercising any right or
remedy provided in this Agreement shall operate as a waiver thereof; nor shall
any single or partial exercise of or failure to exercise any such right or
remedy preclude any other or further exercise thereof or the exercise of any
other right or remedy under this Agreement.
(e) Any notice required or permitted under this Agreement shall be in writing
and shall be sent to the appropriate address shown on the first page hereof
(unless notice of a changed address has been given) by telecopier, telegram,
private overnight courier service or registered or certified airmail, return
receipt requested, with postage prepaid.
(f) Licensor's performance hereunder is subject to force majeure, including but
not limited to wars, riots, failure of contractors and subcontractors to
perform, strikes, labor disturbances, acts of God, fires, floods, explosions,
civil disturbances, inability to obtain required material or transportation, and
acts of governmental authorities.
(g) Licensee hereby acknowledges that the Licensed Programs may be subject to
United States government export control restrictions. In the event Licensee
requires to use the Tools portion of the Licensed Programs at one of its
development sites outside the United States (other than at Licensee's Japan and
Ireland offices), Licensee will notify Licensor in writing and provide Licensor
with the contact's name, exact street address, and include the phone and fax
numbers to the primary contact receiving the Licensed Programs.
(h) Paragraph headings herein are for convenience only and do not control or
affect the meaning or interpretation of any terms or provisions of this
Agreement.
(i) This Agreement (including any schedule hereto) supersedes all prior
agreements and understandings between the parties, whether written or oral,
related to the subject matter and is intended by the parties as the complete and
exclusive statement of the terms of their Agreement.
(j) No modification, addition to, or waiver of any of the terms of this
Agreement (including any schedule hereto) shall be effective unless in writing
and signed by an authorized officer of Licensor. Under no circumstances shall
the terms of any purchase order submitted by Licensee to Licensor, whether
before or after the execution of this Agreement, be deemed binding upon
Licensor. If any of the provisions of this Agreement are invalid under any
applicable statute or rule of law, they are, to that extent, deemed omitted.
(k) No action to enforce any claim arising out of or in connection with the
transaction which is the subject matter of this Agreement shall be brought by
either party against the other more than one (1) year after the cause of action
has been discovered.
(l) Promptly after Licensee's acceptance of the final version of the Licensed
Programs, Licensor shall deposit the complete source code of the Licensed
Programs together with all necessary tools and documentation to allow such
source code to be recompiled, with a reputable and independent third party
software escrow company, and the parties shall execute a software escrow
agreement therefor. In the event that Licensor fails to make such deposit,
Licensor shall deliver all such source code, tools, and documentation in a
sealed container to Licensee' Legal Department, and Licensee hereby covenants
not
-8-
<PAGE>
to open such container unless Licensor becomes bankrupt or otherwise fails to
respond to Licensee's requests for support. In such event, Licensee shall be
deemed to have all necessary license rights to make, reproduce, use, distribute,
license, and sell derivative works of such source code, tools, and documentation
in connection with Licensee's distribution of the Software Products.
Agreed to and accepted by:
VOXWARE, INC. (Licensor)
By: /s/ Kenneth H. Traub
------------------------
Authorized Signature
Name: Kenneth H. Traub
Title: Executive Vice President and Chief Financial Officer
Date: September 26, 1995
Agreed to and accepted by:
Microsoft Corporation (Licensee)
By: /s/ Craig S. Bartholomew
------------------------
Authorized Signature
Name: Craig S. Bartholomew
Title: Business Unit General Manager
Date: September 26, 1995
------------------
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<PAGE>
Agreement No. ___________
SCHEDULE A
----------
Software Products
-----------------
The "Software Products" shall mean any and all current and future software
products and/or services distributed by or for Licensee within the "Bookshelf"
line of products/services, including all future versions thereof whether
distributed on fixed storage media, in firmware, via the Internet or other
online delivery systems, or by any other means or mechanism of distribution or
use now know or hereafter invented. "Software Products" shall include all
current and future foreign language editions of Bookshelf, whether distributed
by or for Licensee or its partners under the "Bookshelf" name or any foreign
language equivalent or substitute name (e.g., "LexiROM" in Germany). In the
event that Licensee changes the name of the entire line of Bookshelf products,
then "Software Products" shall include all successor reference products
containing a dictionary, thesaurus, and other such reference works.
Licensee may, at its option, and subject to payment of the License Fees set out
in Schedule C, expand the definition of Software Products by adding any number
of additional products. If Licensee elects to use the Licensed Programs in any
additional products, Licensee will promptly notify Licensor of its intended use
prior to the publication of such additional products.
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<PAGE>
Agreement No.________
SCHEDULE B
----------
Licensed Programs
-----------------
The Licensed Programs shall be as follows:
Tools: ToolVox/TM/ 1.0 Developer Toolkit "Compress/Decompress" and
-----
"Warp-It".
Redistributables: ToolVox/TM/ 1.0 "Decompressor" and "Warp-It" for
----------------
playback only.
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<PAGE>
Agreement No.__________
SCHEDULE C
----------
Price
-----
Price of ten (10) copies of ToolVox [**]
License Fee (Initial Software Product) [**]
Total Initial Payment [**]
Acceptance and Payment Terms for the Initial Software Product
-------------------------------------------------------------
[**] of the Total Initial Payment ([**]) is due upon execution of the
Agreement, for which Licensor shall invoice Licensee. Upon Licensee's
acceptance of the version of the Licensed Programs incorporating the
following functionality, Licensee shall immediately pay the balance of the
Total Initial Payment owed to Licensor as indicated above (i.e., the
remaining ([**]). Licensee shall have ten (10) business days following
receipt in which to reject such version of the Licensed Programs in
writing, which rejection shall be accompanied by a description of
Licensee's reasons therefor. Failure to so reject within the 10 day period
shall be deemed acceptance. Licensor shall deliver a version of the
Licensed Programs containing the following functionality on or before
November 15, 1995.:
1. A feature which enables the user to define multiple "Selects"
of ".wav" files for Batch Compression into the Compressor of
the Licensed Program.
2. A multiple load input list function which allows at least 1000
files to be sequenced for Batch Compression processing.
3. A feature which displays file properties or characteristics
when a file name is selected from either an input (.WAV) or
output (.VOX) list. These properties include format, length,
sampling rate, bit rate and size information.
Price of Additional Products
----------------------------
If Licensee elects to include additional products under the definition of
Software Product pursuant to Schedule A, the following discounted pricing
schedule shall apply:
<TABLE>
<CAPTION>
<S> <C>
License Fee for Second title published by Licensee [**]
License Fee for Third title published by Licensee [**]
License Fee for Fourth title published by Licensee [**]
License Fee for Fifth title published by Licensee [**]
License Fee for Sixth or greater title published by Licensee [**]
</TABLE>
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<PAGE>
Agreement No._________
SCHEDULE C (Continued)
----------------------
Upgrade Fee for New Releases of the Licensed Program
----------------------------------------------------
If Licensee elects to upgrade by licensing a new release of the Licensed
Program for any title to be published by Licensee pursuant to Paragraph
3(b) of this Agreement, Licensee shall pay an Upgrade Fee equal to [**] of
the License Fee that Licensee had paid for that particular title. For
instance, if Licensee licenses a new release of the Licensed Program for
the Initial Software Product, the Upgrade Fee shall be [**] and if
Licensee licenses a new release of the Licensed Program for the fourth
title, the Upgrade Fee shall be [**].
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<PAGE>
EXHIBIT 10.14
[Confidential treatment has been requested for portions of this exhibit. The
confidential portions have been redacted and are denoted by [**]. The
confidential portions have been separately filed with the commission.]
VOXWARE, INC. AND USFI, INC.
SOFTWARE LICENSE AGREEMENT
--------------------------
This Software License Agreement (the "Agreement") is entered into as
of June 28, 1996, by and between Voxware, Inc. ("Licensor"), a Delaware
corporation, with its principal place of business at 305 College Road East,
Princeton, NJ 08540 and USFI, Inc. ("Licensee"), a New York corporation,
with its principal place of business at 1212 Avenue of the Americas, NY, NY
10036.
1. GRANT OF LICENSE:
-----------------
(a) Licensor hereby grants to Licensee, on the terms and subject to the
conditions and limitations hereinafter set forth, a non-exclusive, non-
transferable (except as otherwise provided herein) license to Use the
Licensed Programs in (and only in) the service ("Service") described in
Schedule A hereto. Use of the Licensed Programs in any product other than
----------
the Service is hereby prohibited, unless prior written consent is obtained
from Licensor. The license granted hereunder shall not be deemed to
authorize Licensee to change or modify in any way any Licensed Program.
(b) For purposes of this Agreement, "Licensed Programs" means those
computer software programs listed in Schedule B hereto (as well as any
----------
Updates thereof furnished by Licensor pursuant to the terms of this
Agreement), in machine readable binary image format, as well as any related
material, whether in machine readable, printed or other form, including but
not limited to instructional and operations manuals. The term Licensed
Program includes all or any portion of a Licensed Program incorporated in
another program, whether in machine readable, printed or other form. The
term Licensed Program does not include source code in any form.
(c) For purposes of this Agreement, "Use" means (i) transferring any
portion of any Licensed Program from storage units or media into equipment
for processing, whether by electronic, mechanical or other means; (ii)
utilizing any portion of any Licensed Programs in the course of developing
the Service; (iii) merging and/or incorporating any Licensed Programs in
machine
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readable form into the Service; or (iv) developing, improving,
manufacturing, reproducing, marketing and licensing to third parties,
directly and through authorized resellers, OEMs and licensees of Licensee
the Service containing the Licensed Programs. "Use" also means referring to
any instructional or operational manual included in the definition of
Licensed Programs for the purpose of understanding or operating the
Licensed Programs.
(d) For purposes of this Agreement, Licensee is restricted to the specific
corporation designated as "Licensee" at the outset of this Agreement but
shall be deemed to include its affiliates (i.e., any person which controls,
is controlled by or under common control with Licensee, or any person which
is controlled by Marty Ruben, James Pearson, or Steve Myers either together
or individually).
2. CONDITIONS OF LICENSE:
---------------------
(a) The license granted hereunder shall expire or terminate upon the
expiration or termination of this Agreement as set forth in, and subject to
the terms of, Section 14 hereof.
(b) The license granted hereunder may under no circumstances be
transferred, or assigned by Licensee except as provided herein. Licensee
shall have the right to sub-license the Licensed Programs only in
connection with the Service provided however, that no sublicensee shall
have the right to further sublicense the Licensed Programs.
(c) Under no circumstances shall Licensee be deemed the owner of a copy of
the Licensed Programs within the meaning of Section 117 of the Copyright
Act of 1976 (as amended).
3. PRICE:
-----
(a) The license fee and royalties for the Licensed Programs shall be as
set forth in Schedule C hereto.
(b) Any applicable sales, use, personal property, excise or other taxes
(other than income or corporate franchise taxes) will be added to the
license fee.
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<PAGE>
4. TERMS OF PAYMENT; RECORDS AND AUDITS:
------------------------------------
(a) The Initial License Fee set forth in Schedule C shall be due upon
execution of this Agreement.
(b) No later than the 30th day of the month following each calendar
quarter, Licensee will deliver to Licensor a report itemizing the Sales
Receipts generated by the Service during the previous quarter and the
royalties (if any) due. Sales Receipts shall be defined as actual cash
receipts (including any and all sub-license fees and royalties) from the
sale of the Service (exclusive of sales, use, excise and other taxes) less
the amount of any credits or refunds for returns, regardless of whether
such Sales Receipts are collected by Licensee during the term of this
Agreement or after its expiration or termination. In the event such report
shows a credit balance in Licensee's favor, Licensee shall deduct such
amount from future royalties. With respect to any payments received by
Licensee from its customers in currency other than U.S. Dollars, the
exchange rate as published in the Wall Street Journal on the date each such
payment is received by Licensee shall be used in calculating the royalties
payable to Licensor hereunder. Licensor shall be entitled to receive
copies of all ongoing shipping reports from Licensee.
(c) No later than the 45th day of the month following each calendar
quarter, Licensee shall remit payment in U.S. Dollars for all royalties
accrued during that quarter.
(d) For at least two (2) years after the relevant shipments, Licensee will
retain records adequate for Licensor to verify the accuracy of Licensee's
reports and payments. Licensor shall have the right to audit and copy such
records upon not less than five (5) days prior notice to Licensee, such
audit to be performed by one of the big six independent certified public
accounting firms designated by Licensor.. In the event that such audit
determines that there has been a deficiency in royalty payments, then
Licensee shall immediately pay to Licensor the total amount of said
deficiency plus interest at the rate set forth in paragraph 4(e) below. In
the event such deficiency is equal to five percent (5%) or more of the
royalties set forth in the most recent royalty report, or if Licensee is in
default hereunder, then Licensee shall also pay to Licensor the cost of
such audit. The provisions of this paragraph 4(d) shall survive expiration
or termination of this License Agreement.
(e) Interest shall accrue on all amounts past due hereunder, including
royalties, at the monthly rate of one and one-half percent (1-1/2%) or at
the maximum legal rate, whichever is less. Nothing contained in this
paragraph shall be deemed a
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<PAGE>
waiver of the termination provisions of this License Agreement in the event
of Licensee's default hereunder.
5. INSTALLATION:
------------
(a) It is the Licensee's responsibility, without charge to Licensor, to
incorporate the Licensed Programs, defined in Schedule B, into the Service
in accordance with documentation supplied by Licensor.
(b) It shall be the responsibility of Licensee to install the Licensed
Programs at its own expense.
6. ACCEPTANCE:
----------
Licensee has evaluated the Licensed Programs prior to the date hereof.
The execution of this Agreement is evidence of Licensee's acceptance of the
Licensed Programs.
7. PROPRIETARY RIGHTS:
------------------
(a) Title to the Licensed Programs shall at all times remain exclusively
with Licensor. Licensee acknowledges that the Licensed Programs, and the
original and any copies thereof, in whole or in part, and all copyright,
patent, trade secret, trademark and other intellectual property and
proprietary rights which now or hereafter may exist therein, are owned by
and remain the exclusive valuable property of Licensor and embody
substantial creative efforts, ideas and expressions. Under no
circumstances shall Licensee attempt, or permit others under Licensee
control to attempt, to decompile, disassemble or otherwise reverse engineer
the Licensed Programs.
(b) Licensee shall include, and shall not alter or remove, any applicable
copyright, patent, trade secret, trademark or other proprietary notices on
all copies (in whatever form) of the Licensed Programs and the packaging in
which they may be contained.
(c) The parties hereby acknowledge that this Agreement establishes a
relationship of confidentiality between them, and Licensee acknowledges
that the Licensed Programs are furnished by Licensor on a confidential
basis. Unless otherwise agreed to in writing by Licensor, Licensee shall
limit access to the Licensed Programs to its employees, agents,
subcontractors and sub-licensees under commitments of non-disclosure and on
a need-to-know basis only. Such access shall be solely for the purpose of
enabling Licensee to
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<PAGE>
Use the Licensed Programs for the limited purposes set forth in this
Agreement.
(d) Licensee shall take all reasonable steps to safeguard the Licensed
Programs to assure that no unauthorized persons have access to them and
that no person authorized to have access to any of them takes any action
with respect thereto which is herein prohibited. Licensee shall promptly
report to Licensor the taking of any prohibited action with respect to any
Licensed Program of which Licensee becomes aware and shall take such
further steps as may reasonably be requested by Licensor to prevent such
action.
8. EXCLUSIVE LIMITED WARRANTY AND REMEDY:
-------------------------------------
(a) Licensor warrants that the Licensed Programs will upon delivery
substantially conform to the description thereof set forth in the pertinent
user manuals. Licensee, however, acknowledges that Licensed Programs are
of such complexity that they may contain inherent defects and the mere
existence thereof shall not constitute a breach of this warranty.
(b) As the sole and exclusive remedy for breach of the warranty contained
in the preceding subparagraph, Licensor will provide the support services
set forth in paragraph 12 hereof.
(c) Licensor's exclusive limited warranty provided for in this Section 8
shall not apply to damage or deficiencies to the Licensed Programs
resulting from accident, alteration, modification, foreign attachments,
misuse, tampering, negligence, improper maintenance, or abuse while in
Licensee's possession or failure of Licensee to implement any Updates
furnished pursuant to this Agreement.
(d) Licensor reserves the right to make substitutions and modifications in
the specification of the Licensed Programs, provided that such
substitutions or modifications will, in Licensor's sole opinion, improve
performance of the Licensed Programs.
8.1 RIGHT TO LICENSE
----------------
Licensor hereby represents that it has the right to grant the license
provided for herein. Licensor hereby further represents that, to the best
of its current knowledge and belief, the Licensed Programs do not infringe
any patent, copyright, trade secret or other intellectual property right of
any third party.
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<PAGE>
9. DISCLAIMER OF ALL OTHER WARRANTIES:
----------------------------------
EXCEPT FOR THE EXPRESS WARRANTY STATED IN PARAGRAPH 8 ABOVE,
------------------------------------------------------------
LICENSOR GRANTS NO WARRANTIES WITH RESPECT TO THE LICENSED PROGRAMS, EITHER
---------------------------------------------------------------------------
EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
--------------------------------------------------------------------------
FITNESS FOR A PARTICULAR PURPOSE. THE STATED EXPRESS WARRANTY, AND THE
--------------------------------
REMEDY PROVIDED FOR BREACH THEREOF, ARE IN LIEU OF ALL OTHER LIABILITIES OR
OBLIGATIONS OF LICENSOR (WHETHER SUCH LIABILITIES OR OBLIGATIONS WOULD
ARISE UNDER THIS AGREEMENT OR OTHERWISE BY OPERATION OF LAW) FOR ANY
DAMAGES WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY,
INSTALLATION, USE OR PERFORMANCE OF THE LICENSED PROGRAMS.
10. LIMITATION OF LIABILITY:
-----------------------
(a) IN NO EVENT SHALL LICENSOR BE LIABLE UNDER ANY LEGAL THEORY (INCLUDING
BUT NOT LIMITED TO CONTRACT, NEGLIGENCE, MISREPRESENTATION, STRICT
LIABILITY IN TORT OR WARRANTY OF ANY KIND) FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS), EVEN IF LICENSOR HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY DETERMINATION THAT THE
EXCLUSIVE REMEDY REFERRED TO IN SUBPARAGRAPH 8(b) ABOVE FAILED OF ITS
ESSENTIAL PURPOSE.
(b) Without limiting the effect of the preceding subparagraph, except with
regard to its obligations under Section 11 below, Licensor's maximum
liability, if any, for damages (including but not limited to liability
arising out of contract, negligence, misrepresentation, strict liability in
tort or warranty of any kind) shall not exceed the allocable portion of the
fees paid by the Licensee for the Licensed Program(s) involved during the
preceding twelve (12) months.
(c) Licensor shall under no circumstances be liable to Licensee for
damages arising out of any claim (including, but not limited to, a claim
for personal injury or property damage) made against Licensee by any other
person or party arising out of Licensee's activities.
(d) Licensee shall, at its cost and expense, defend, indemnify and hold
Licensor harmless from and against any claim (including, but not limited
to, a claim for personal injury or property damage) by any other person or
party
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<PAGE>
arising out of or in connection with the use of the Licensed Programs
to perform Licensee's applications, regardless of whether such claim is
founded in contract, tort or warranty. The foregoing sentence shall not be
applicable to the extent the Licensed Programs are the only subject of such
claim.
11. PATENTS AND COPYRIGHTS:
----------------------
(a) Licensor will defend and indemnify Licensee against any claim that
Licensed Programs delivered hereunder, or the use thereof, constitute an
infringement of a currently effective United States patent, copyright,
trade secret or other intellectual property right. Licensor's obligations
hereunder will only apply if Licensee notifies Licensor promptly in writing
as to any such claim; gives Licensor the right to control and direct the
investigation, preparation, defense, trial and settlement of each such
claim; and provides Licensor with information in Licensee's possession
deemed necessary by Licensor or its counsel in connection with the
foregoing. Licensee agrees to cooperate fully with Licensor in the
defenses and/or settlement of each such claim. If Licensor receives notice
of an alleged infringement or if the use of Licensed Programs is prevented
based on an alleged infringement, Licensor will have the right, at its
option, to obtain for Licensee the right to continued use of any such
Licensed Programs; substitute other comparable programs that deliver
equivalent or better functionality and performance; or replace or modify
such Licensed Programs or their design so that they are no longer
infringing. If, in Licensor's opinion, none of the foregoing alternatives
is reasonably available to Licensor, then Licensor may remove such Licensed
Programs and refund any license fees paid by Licensee for the current term
of this Agreement on a prorated basis. In no event shall Licensor's
liability under this paragraph (excluding Licensor's outside counsel fees
and internal costs) exceed the allocable amount paid by Licensee to
Licensor for the Licensed Program(s) which includes the alleged
infringement. The foregoing states the entire liability of Licensor with
respect to infringement of any patents, copyrights or other intellectual
property rights by Licensed Programs.
(b) Licensor's obligation contained in the preceding subparagraph does not
extend to any suit or proceeding which is based upon a patent claim
covering a combination of which any Licensed Program licensed under this
Agreement is merely an element of the claim combined with other devices or
elements not acquired hereunder unless (and only to the extent) Licensor is
a contributory infringer, nor does it extend to use of any Licensed Program
in a manner not permitted or contemplated in Licensor's published
documentation.
-7-
<PAGE>
(c) In the event that Licensor fails to fulfill its obligation under this
Section to defend Licensee, then Licensee may retain its own counsel to
defend the claim and may recover the reasonable costs of such defense from
Licensor.
12. SUPPORT SERVICES:
----------------
(a) Licensor shall, without unreasonable delay, and without any
additional fee or charge, distribute such Updates to Licensee as Licensor
makes available to other licensees of the Licensed Programs. Updates
consist of such corrections and modifications of Licensed Programs or
portions thereof, in machine readable binary image format, as Licensor
deems appropriate and which Licensor distributes generally to its other
licensees and which perform the same or substantially similar functions as
the Licensed Programs. Licensee shall use reasonable commercial efforts,
upon receipt of any Update, to implement its use such that it replaces
entirely any previous version of the Licensed Programs or portion thereof
to which the Update applies. Upon implementation, an Update shall
constitute a Licensed Program and shall be subject to all the terms,
conditions and limitations of this Agreement. If Licensee fails to
implement the use of any Update, Licensor will be under no obligation to
furnish any further support services under this Agreement, and if Licensor
chooses to honor Licensee's request for such services, any and all costs
incurred to correct errors in any previous version of Licensed Programs
will be borne by Licensee.
(b) Licensor will use reasonable commercial efforts to correct any error
in Licensed Programs identified by Licensee in writing. An error will be
deemed to exist if, and only if, the Licensed Program substantially
deviates from the description thereof in the pertinent user manual.
Licensee, however, acknowledges that Licensed Programs are of such
complexity that it may be impossible or impracticable to effectuate the
correction of an error. If an error is, in the opinion of Licensor, not
reasonably capable of correction, Licensor will use reasonable commercial
efforts to advise Licensee on methods of avoiding or overcoming the error.
Licensor does not guarantee the results of any services provided under this
subparagraph or that all or any errors will be corrected, overcome or
avoided.
(c) Licensor will use reasonable commercial efforts to answer Licensee's
questions relating to the use, application and functioning of Licensed
Programs. Licensor makes no representations or guarantees with respect to
the results to be achieved by virtue of the services described in this
paragraph.
-8-
<PAGE>
13. EXCLUSIONS:
----------
(a) Licensor's obligation to provide support services hereunder is
conditioned upon the proper use of the Licensed Programs and does not cover
Licensed Programs that have been (i) modified without Licensor's approval,
(ii) used contrary to Licensor's instructions or (iii) serviced by anyone
other than Licensor (other than installation and any other services
Licensee or its sub-licensee is required to perform hereunder). Licensor
will not be obligated to furnish service hereunder if the need for such
service arises from hardware malfunction, user error, conditions
correctable by reference to available documentation or malfunction of
programs not furnished by Licensor.
(b) If service is requested by Licensee and furnished by Licensor as a
result of any of the causes specified in the preceding subparagraph,
Licensee will be obligated to pay for such service at Licensor's standard
rates then in effect for time, materials and pre-authorized travel, if any.
14. TERM:
----
(a) This Agreement shall have an initial term of 2 years commencing on the
date first set forth above in this Agreement and shall automatically renew
for successive terms of 1 year each unless Licensee provides written notice
of non-renewal to Licensor at least ninety (90) days prior to the
expiration of the then current term.
(b) Either party may terminate this Agreement, 30 days after delivering
written notice to the other party, in the event the other party breaches
any of its material obligations under this Agreement unless such breach is
cured within said 30 day period.
(c) Licensee's obligation to pay Licensor amounts due hereunder shall
survive any expiration or termination of this Agreement.
(d) Upon the termination or expiration of this Agreement, Licensee shall
permanently discontinue the Use of the Licensed Programs and the Service
containing the Licensed Programs, provided, however, that any sub-license
theretofore granted by Licensee shall not be affected insofar as the sub-
licensee's right to use the Licensed Programs other than in connection with
the Service is concerned. Within thirty (30) days after Licensee has
permanently discontinued the use of any Licensed Programs or immediately
upon the termination or expiration of this Agreement, Licensee shall return
to Licensor the original and all copies (whether whole or partial) of the
Licensed
-9-
<PAGE>
Programs in any form (other than, if there are any outstanding sub-
licenses, one (1) copy for support purposes only) and shall certify in
writing to Licensor that it has done so.
15. ATTRIBUTION AND LEGENDS:
-----------------------
Licensee agrees to display Licensor's logo and trademarks in context
appropriate places within the Service. Further, Licensee agrees to place
notice of any copyright and patent protection or other proprietary legend
requested by Licensor within the Service.
16. ADVERTISING:
-----------
Licensee agrees that Licensor may mention this License Agreement in
sales presentations. Licensor also may mention this License Agreement in
collateral materials consisting of sell sheets, brochures, packaging and
related marketing materials with the prior consent of Licensee, which
consent will not be unreasonably withheld. Licensor shall, in connection
with its activities under this paragraph 16, ensure that all trademarks and
copyrights pertaining to Licensee will be observed. Licensee recognizes
the great value of the good will associated with Licensor's trademarks and
the identification of the Service with the trademarks.
Both parties may issue a press release subject to the approval of the other
party announcing the relationship and intended benefits and Use of the
Licensed Programs within the Service defined herein.
17. MOST FAVORED NATION STATUS:
--------------------------
[**]
-10-
<PAGE>
18. GENERAL:
-------
(a) This Agreement will not be binding upon either party until signed by
Licensee and an authorized officer of Licensor.
(b) Licensee may not assign this Agreement without the prior written
consent of Licensor except to an affiliate as defined in paragraph 1(d) or
to a purchaser of all or substantially all of Licensee's assets or of
Licensee's division that provides the Service.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey. Without limiting the foregoing, this
Agreement shall be governed by the Uniform Commercial Code. The
transaction which is the subject matter of this Agreement shall be deemed
to be a "transaction in goods" and the Licensed Programs shall be deemed to
be "goods" within the meaning of the said statute, notwithstanding that
this Agreement grants a license, that no sale of Licensed Programs is
contemplated and that title to the Licensed Programs is retained by
Licensor. To the extent, if any, that services are provided in connection
with this Agreement, such services shall be deemed incidental to the
provisions of "goods".
(d) No failure or delay on the part of either party in exercising any
right or remedy provided in this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of or failure to exercise
any such right or remedy preclude any other or further exercise thereof or
the exercise of any other right or remedy under this Agreement.
(e) Any notice required or permitted under this Agreement shall be in
writing and shall be sent to the appropriate address shown on the first
page hereof (unless notice of a changed address has been given) by
telegram, private overnight courier service or registered or certified
airmail, return receipt requested, with postage prepaid.
(f) Licensor's performance hereunder is subject to force majeure,
including but not limited to wars, riots, failure of contractors and
subcontractors to perform, strikes, labor disturbances, acts of God, fires,
floods, explosions, civil disturbances, inability to obtain required
material or transportation, and acts of governmental authorities. Licensee
acknowledges that the Licensed Programs licensed hereunder are subject to
the export control laws and regulations of the U.S.A., and any amendments
thereof. Licensee confirms that with respect to the Licensed Programs, it
will not export or re-export it, directly or indirectly, either to (i) any
countries that are subject to U.S.A. export restrictions (currently
including, but not necessarily limited to, Cuba, the Federal Republic of
Yugoslavia (Serbia and Montenegro), Haiti, Iran, Iraq, Libya, North Korea,
(military and police entities), and Syria); (ii) any end user who Licensee
knows or has reason to know will utilize them in the design, development or
production of nuclear, chemical or biological weapons; or (iii) any end
user who has been prohibited from participating in the U.S.A. transactions
by any federal agency of the U.S.A. government.
-11-
<PAGE>
(g) Paragraph headings herein are for convenience only and do not control
or affect the meaning or interpretation of any terms or provisions of this
Agreement.
(h) This Agreement (including any schedule hereto) supersedes all prior
agreements and understandings between the parties, whether written or oral,
related to the subject matter and is intended by the parties as the
complete and exclusive statement of the terms of their Agreement.
(i) No modification, addition to, or waiver of any of the terms of this
Agreement (including any schedule hereto) shall be effective unless in
writing and signed by an authorized officer of Licensor. Under no
circumstances shall the terms of any purchase order submitted by Licensee
to Licensor, whether before or after the execution of this Agreement, be
deemed binding upon Licensor. If any of the provisions of this Agreement
are invalid under any applicable statute or rule of law, they are, to that
extent, deemed omitted.
(j) No action to enforce any claim arising out of or in connection with
the transaction which is the subject matter of this Agreement shall be
brought by either party against the other more than three (3) years after
the cause of action has occurred.
(k) Licensor may, in its discretion, delegate all or any portion of its
obligation to perform services hereunder to an agent or subcontractor,
provided, however that Licensor shall not thereby be relieved of any of its
obligations hereunder. In the event Licensor does so, references to
Licensor in this Agreement shall be deemed to refer, in the alternative, to
such agent or subcontractor.
(l) Licensor agrees to list Licensee as a beneficiary to the SourceFlex
Software Source Code Agreement dated December 4, 1995 and attached hereto.
Licensor represents to Licensee that the source codes of the Licensed
Programs have been deposited in escrow pursuant to such agreement.
-12-
<PAGE>
(m) At no additional charge, Licensor will provide Licensee with the
Licensed Programs ported to any platform that Licensor currently supports.
If Licensee wants the Licensed Programs ported to a mutually agreeable chip
that Licensor does not presently support, then Licensee will bear the
responsibility and the cost of such port.
Agreed to and accepted by:
VOXWARE, INC. (Licensor)
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Agreed to and accepted by:
Licensee
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-13-
<PAGE>
SCHEDULE A
----------
Service
-------
The "Service" shall consist of one or more international telephony
services provided by Licensee, including either or both voice and data,
which Use the Licensed Programs. The Service shall also include the sub-
license of Licensed Programs to customers of Licensee's international
telephony services.
-14-
<PAGE>
SCHEDULE B
----------
Licensed Programs
-----------------
RT24HQ - Embodied in the ToolVox Software Development Kit for Real Time
speech compression. It shall consist of the release version of Voxware's
2,400bps codec, known as RT24HQ. Delivery for Intel platform shall be
delivered in the form of Windows dynamic link libraries. Licensee is
licensed to Use the RT24 Basic Codec for speech compression and
decompression only. Other features of Licensor's technology such as time
scaling, pitch shifting and personality transformation are not included in
this license. Further the RT24HQ is licensed only in conjunction with and
in support of the Voxware API as described below.
Voxware API (VAPI) - Provides an application programming interface suitable
for development of applications for transmission of voice over the Internet
(i.e. Internet Telephony). The functionality included in this interface
allows session, flow and error control. Session control functionality
includes initiating and processing incoming and outgoing calls as well as a
means for users of Licensor or third party applications based on VAPI to
locate each other in a phone directory. Flow and error control seek to
manage the Basic Codec bit stream, handling lost and/or late packets, and
packet resequencing.
-15-
<PAGE>
SCHEDULE C
----------
Price
-----
Initial License Fee: [**] due upon execution of the License Agreement
Royalty:
If either caller or recipient is using a device that is directly (i.e. not
--------------------------------------------------------------------------
switched) connected to the Internet:
------------------------------------
[**] of all Sales Receipts from the Service.
In all other cases:
------------------
[**]
-16-
<PAGE>
EXHIBIT 10.15
[Confidential treatment has been requested for portions of this exhibit. The
confidential portions have been redacted and are denoted by [* *]. The
confidential portions have been separately filed with the commission.]
VOXWARE, INC. AND VDOnet Corporation Ltd.
SOFTWARE LICENSE AGREEMENT
--------------------------
This Software License Agreement (the "Agreement") is entered into as
of March 29, 1996, by and between Voxware, Inc. ("Licensor"), a Delaware
corporation, with its principal place of business at 172 Tamarack Circle,
Skillman, New Jersey 08558 (fax: 609-497-2490) and VDOnet Corporation Ltd.
("Licensee"), an Israeli corporation, with its principal place of business
at 2 Levi Eschol Street, Raanana, Israel 43703 (fax: 972-9-917903).
1. GRANT OF LICENSE:
-----------------
(a) Licensor hereby grants to Licensee, on the terms and subject to the
conditions and limitations hereinafter set forth, a non-exclusive,
worldwide license, with the right to sublicense as hereinafter provided, to
Use the Licensed Programs in (and only in) the software products described
in Schedule A hereto (the "Software Products"). Use of the Licensed
----------
Programs in any product other than the Software Product is hereby
prohibited, unless prior written consent is obtained from Licensor.
Anything herein to the contrary notwithstanding, Licensee shall have the
full right and authority to sublicense such rights to Licensee's
distributors, resellers, VARs, OEMs and other customers (collectively,
"Distributors") in connection with the Software Products, provided that
such Distributors will be bound by the terms of this Agreement, and all
revenue received by Licensee in connection with sublicenses to such
Distributors will be considered Sales Receipts for the purposes of
Paragraph 4(b) hereof. The license granted hereunder shall not be deemed
to authorize Licensee to change or modify in any way any Licensed Program.
(b) For purposes of this Agreement, "Licensed Programs" means those
computer software programs listed in Schedule B hereto (as well as any
----------
Updates thereof furnished by Licensor pursuant to the terms of this
Agreement), in machine readable binary image format, as well as any related
material, whether in machine readable, printed or other form, including but
not limited to instructional and operations manuals. The term Licensed
Program includes all or any portion of a Licensed Program incorporated in
another program, whether in machine readable, printed or other form. The
term Licensed Program does not include source code in any form.
-1-
<PAGE>
(c) For purposes of this Agreement, "Use" means (i) transferring any
portion of any Licensed Program from storage units or media into equipment
for processing, whether by electronic, mechanical or other means; (ii)
utilizing any portion of any Licensed Programs in the course of developing
the Software Products; (iii) merging and/or incorporating any Licensed
Programs in machine readable form into the Software Products; and/or (iv)
reproducing, manufacturing and/or distributing the Licensed Programs in
connection with the commercialization of the Software Products. "Use" also
means referring to any instructional or operational manual included in the
definition of Licensed Programs for the purpose of understanding or
operating the Licensed Programs.
(d) For purposes of this Agreement, Licensee is restricted to the specific
corporation, or division thereof, designated as "Licensee" at the outset of
this Agreement, except that, for purposes hereof, the term Licensee shall
include all subsidiaries of which Licensee owns more than 50% of the voting
power. Except for such aforementioned subsidiaries, Licensee does not
include any affiliate of Licensee (i.e., any person which controls, is
controlled by or under common control with Licensee). If the designated
Licensee is a division of a corporation, Licensee does not include any
other division or part of the said corporation.
2. CONDITIONS OF LICENSE:
---------------------
(a) Except as otherwise set forth in this Agreement, the license granted
hereunder shall expire or terminate upon the expiration or termination of
this Agreement as set forth in, and subject to the terms of, Section 14
hereof. Anything herein to the contrary notwithstanding, Licensor hereby
grants Licensee a perpetual, free of charge, worldwide license to the
decoder portion of any Licensed Program (the "Decoder"), such right to so
use the Decoder to survive the termination or expiration of this Agreement
for whatever reason, provided that from and after the termination or
expiration hereof, Licensor shall not be obligated to support Decoders
installed after such termination or expiration.
(b) Except for the right to sublicense to Distributors pursuant to Section
1(a) above, the license granted hereunder may under no circumstances be
transferred, assigned or sublicensed by Licensee.
(c) Under no circumstances shall Licensee be deemed the owner of a copy of
the Licensed Programs within the meaning of Section 117 of the Copyright
Act of 1976 (as amended).
-2-
<PAGE>
3. PRICE:
-----
(a) The license fee and royalties for the Licensed Programs for the
initial term and for each renewal term, if any, hereof shall be as set
forth in Schedule C hereto.
----------
(b) Each party shall be responsible for, shall pay and shall hold the
other party hereto harmless from the payment of any applicable sales, use,
personal property, excise, income, corporate, franchise or other tax
payable by the first mentioned party.
4. TERMS OF PAYMENT; RECORDS AND AUDITS:
------------------------------------
(a) Unless otherwise set forth on Schedule C hereto or in Section 4(b)
----------
below, Licensor will invoice Licensee for the license fee. Payment is due
within thirty (30) days of the date of the invoice.
(b) No later than the 30th day of the month following each calendar
quarter, Licensee will deliver to Licensor a report itemizing the Sales
Receipts and number of units of the Software Products sold to customers
during the previous quarter and the royalties and/or license fees (if any)
due. Sales Receipts shall be defined as actual cash receipts from the sale
of the Software Product (exclusive of sales, use, excise and other taxes)
less the amount of any credits, rebates or refunds for returns. Each
report will be accompanied by payment in U.S. Dollars for all royalties
accrued during that quarter. In the event such report shows a credit
balance in Licensee's favor, Licensee shall deduct such amount from future
royalties. With respect to any payments received by Licensee from its
customers in currency other than U.S. Dollars, the exchange rate as
published in the Wall Street Journal on the date each such payment is
received by Licensee shall be used in calculating the royalties payable to
Licensor hereunder.
(c) For at least one (1) year after the relevant shipments, Licensee will
retain records adequate for Licensor to verify the accuracy of Licensee's
reports and payments. At reasonable times during the term of this
Agreement, upon reasonable prior notice and during regular business hours
at Licensee's regular location for maintenance of such records, Licensor,
at its sole cost and expense, shall have the right to conduct an audit of
the relevant portions of Licensee's books of account to verify compliance
with this Agreement, such audit to be performed by such independent
auditors as Licensor shall determine, subject to the reasonable approval
of Licensee. Such audits may not be conducted more often than once every
12 months. In the event that any such audit shall reveal a deficiency in
royalty payments, then Licensee shall immediately pay to Licensor
-3-
<PAGE>
the total amount of said deficiency plus interest at the rate set forth in
paragraph 4(d) below. In the event such deficiency is equal to five percent
(5%) or more of the total amount of royalties payable for the preceding 12
months period , then Licensee shall also pay to Licensor the cost of such
audit. The provisions of this paragraph 4(c) shall remain in effect for 12
months following expiration or termination of this License Agreement.
(d) Interest shall accrue on all amounts past due hereunder, including
royalties, at the monthly rate of one and one-half percent (1-1/2%) or at
the maximum legal rate, whichever is less. Nothing contained in this
paragraph shall be deemed a waiver of the termination provisions of this
License Agreement in the event of Licensee's default hereunder.
5. INSTALLATION:
------------
(a) It is the Licensee's responsibility, without charge to Licensor, to
incorporate the Licensed Programs, defined in Schedule B, into the Software
Product in accordance with documentation supplied by Licensor.
(b) It shall be the responsibility of Licensee to install the Licensed
Programs at its own expense.
6. EVALUATION AND ACCEPTANCE:
-------------------------
Licensee has commenced its evaluation of the Licensed Programs prior to the
execution of this Agreement. Licensee may Use the Licensed Programs for the
purposes of a Beta test of the Software Products and to continue its
evaluation of the Licensed Programs.
If Licensee wishes to accept the Licensed Program it shall so notify
Licensor in writing within 45 days after the date of this Agreement, in
which event the Licensed Programs shall be deemed accepted by Licensee as
of the date of such notice (the "Acceptance"). If the Licensed Programs are
not so accepted by Licensee, the license granted hereunder shall be
terminated and Licensee shall comply with the terms of paragraph 14(d)
hereof.
7. PROPRIETARY RIGHTS:
------------------
(a) Title to the Licensed Programs shall at all times remain exclusively
with Licensor. Licensee acknowledges that the Licensed Programs, and the
original and any copies thereof, in whole or in part, and all copyright,
patent, trade secret, trademark and other intellectual property and
proprietary rights which now or hereafter may exist therein, are owned by
and remain the exclusive valuable property of Licensor and embody
substantial creative
-4-
<PAGE>
efforts, ideas and expressions. Under no circumstances shall Licensee
attempt, or permit others to attempt, to decompile, disassemble or
otherwise reverse engineer the Licensed Programs.
(b) From and after the Acceptance of the Licensed Program, Licensee shall
include, and shall not alter or remove, any applicable copyright, patent,
trade secret, trademark or other proprietary notices on all binary files
of the Licensed Programs and the packaging in which they may be contained,
but shall not be so required to include the same on the documentation or
the GUI program of Licensee.
(c) The parties hereby acknowledge that this Agreement establishes a
relationship of confidentiality between them, and Licensee acknowledges
that the Licensed Programs are furnished by Licensor on a confidential
basis. Unless otherwise agreed to in writing by Licensor, Licensee shall
limit access to the Licensed Programs to its employees and Distributors
only. Such access shall be solely for the purpose of enabling Licensee to
Use the Licensed Programs in accordance with the terms of this Agreement.
(d) Licensee shall take all reasonable steps to safeguard the Licensed
Programs to assure that no unauthorized persons have access to them and
that no person authorized to have access to any of them takes any action
with respect thereto which is herein prohibited. Licensee shall promptly
report to Licensor the taking of any prohibited action with respect to any
Licensed Program of which Licensee becomes aware and shall take such
further steps as may reasonably be requested by Licensor to prevent such
action.
8. EXCLUSIVE LIMITED WARRANTY AND REMEDY:
-------------------------------------
(a) Licensor warrants that the Licensed Programs will upon delivery
substantially conform to the description thereof set forth in the pertinent
user manuals. Licensee, however, acknowledges that Licensed Programs are
of such complexity that they may contain inherent defects and the mere
existence thereof shall not constitute a breach of this warranty.
(b) As the sole and exclusive remedy for breach of the warranty contained
in the preceding subparagraph, Licensor will provide the support services
set forth in paragraph 12 hereof.
(c) Licensor's exclusive limited warranty provided for in this Section 8
shall not apply to damage or deficiencies to the Licensed Programs
resulting from accident, alteration, modification, foreign attachments,
misuse, tampering, negligence, improper maintenance, abuse or failure to
implement any Updates furnished pursuant to this Agreement.
-5-
<PAGE>
(d) Licensor reserves the right to make substitutions and modifications in
the specification of the Licensed Programs, provided that such
substitutions or modifications will, in fact , improve performance of the
Licensed Programs.
9. DISCLAIMER OF ALL OTHER WARRANTIES:
----------------------------------
EXCEPT FOR THE EXPRESS WARRANTY STATED IN PARAGRAPH 8 ABOVE,
------------------------------------------------------------
LICENSOR GRANTS NO WARRANTIES WITH RESPECT TO THE PERFORMANCE OF THE
---------------------------------------------------------------------
LICENSED PROGRAMS, EITHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED
-------------------------------------------------------------------
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE
-----------------------------------------------------------------
STATED EXPRESS WARRANTY SET FORTH ABOVE, AND THE REMEDY PROVIDED FOR BREACH
THEREOF, ARE IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF LICENSOR IN
CONNECTION WITH THE PERFORMANCE OF THE LICENSED PROGRAMS (WHETHER SUCH
LIABILITIES OR OBLIGATIONS WOULD ARISE UNDER THIS AGREEMENT OR OTHERWISE BY
OPERATION OF LAW) FOR ANY DAMAGES WHATSOEVER ARISING OUT OF OR IN
CONNECTION WITH THE DELIVERY, INSTALLATION, USE OR PERFORMANCE OF THE
LICENSED PROGRAMS.
10. LIMITATION OF LIABILITY:
-----------------------
(a) IN NO EVENT SHALL LICENSOR BE LIABLE UNDER ANY LEGAL THEORY (INCLUDING
BUT NOT LIMITED TO CONTRACT, NEGLIGENCE, MISREPRESENTATION, STRICT
LIABILITY IN TORT OR WARRANTY OF ANY KIND) FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS), EVEN IF LICENSOR HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY DETERMINATION THAT THE
EXCLUSIVE REMEDY REFERRED TO IN SUBPARAGRAPH 8(b) ABOVE FAILED OF ITS
ESSENTIAL PURPOSE.
(b) Without limiting the effect of the preceding subparagraph, Licensor's
maximum liability, if any, for damages resulting from or relating to the
performance of the Licensed Programs (including but not limited to
liability arising out of contract, negligence, misrepresentation, strict
liability in tort or warranty of any kind) shall not exceed the allocable
portion of the fees paid by the Licensee for the Licensed Program(s)
during the preceding twelve (12) months.
-6-
<PAGE>
(c) Licensor shall under no circumstances be liable to Licensee for
damages arising out of any claim relating to the performance or the lack
thereof of the Licensed Programs (including, but not limited to, a claim
for personal injury or property damage) made against Licensee by any other
person or party.
(d) Licensee shall, at its cost and expense, defend, indemnify and hold
Licensor harmless from and against any claim (including, but not limited
to, a claim for personal injury or property damage) by any other person or
party arising out of or in connection with the use of the Software
Products, regardless of whether such claim is founded in contract, tort or
warranty. The foregoing sentence shall not be applicable if principally
such claim relates to, or results from, the Licensed Programs.
11. PATENTS AND COPYRIGHTS:
----------------------
(a) Licensor represents and warrants that Licensor is either the author of
the Licensed Programs or has obtained and currently holds all rights
necessary to grant the licenses and rights granted herein and that no other
party, has any rights in or to the Licensed Programs. Licensor further
represents and warrants that no claim or action relating to the
infringement of any copyright, patent, trademark, trade secret or other
intellectual property right has been made or is pending against Licensor,
or any entity from which Licensor has obtained rights, with respect to the
Licensed Programs. Licensor further represents and warrants that to the
best of its knowledge, the Licensed Programs do not infringe any copyright,
patent, trademark, trade secret or other intellectual property right of any
third party. Licensor will defend and indemnify Licensee against, and hold
it harmless from, any loss, expense (including reasonable attorneys'
fees), damage or liability arising out of any claim, demand, suit or
action that alleges that the Licensed Programs delivered hereunder, or the
use thereof, infringe upon any patent, copyright, trade mark, trade
secret or other intellectual property right of any third party. Licensor's
obligations hereunder will only apply if (i) Licensee notifies Licensor
promptly in writing as to any such claim; (ii) Licensee gives Licensor the
right to control and direct the investigation, preparation, defense, trial
and settlement of each such claim at Licensor's sole cost and expense; and
(iii) Licensee provides Licensor with information reasonably deemed
necessary by Licensor or its counsel in connection with the foregoing;
provided that with respect to clause (i) above, Licensor shall be relieved
from its obligations to so indemnify Licensee only to the extent that such
failure to so promptly notify Licensor adversely prejudiced the ability of
Licensor to properly defend against such claim, demand action or suit.
Licensee agrees to cooperate fully with Licensor in the defenses and/or
settlement of each such claim, at no cost and/or expense to Licensee. If
Licensor receives notice of an alleged infringement or if the use of
Licensed
-7-
<PAGE>
Programs is prevented based on an alleged infringement, Licensor, at its
sole cost and expense, will at its option, either obtain for Licensee the
right to continued use of any such Licensed Programs; or substitute other
comparable programs; or replace or modify such Licensed Programs or their
design so that they are no longer infringing, provided that the Licensed
Programs as so substituted, replaced or modified shall continue to meet the
intended use thereof by Licensee pursuant to this Agreement. The foregoing
states the entire liability of Licensor with respect to infringement of any
patents, copyrights or other intellectual property rights by Licensed
Programs.
(b) Licensor's obligation contained in the preceding subparagraph does not
extend to any suit or proceeding which is based upon a patent claim
covering a combination of which any Licensed Program licensed under this
Agreement is merely an element of the claim combined with other devices or
elements not acquired hereunder unless (and only to the extent) Licensor is
a contributory infringer, nor does it extend to use of any Licensed Program
in a manner for which the same was not designed.
12. SUPPORT SERVICES:
----------------
(a) Licensor may, at such time as Licensor deems appropriate, distribute
Updates to Licensee. Updates may consist of such corrections and
modifications of Licensed Programs or portions thereof, in machine
readable binary image format, as Licensor deems appropriate and which
Licensor distributes generally to its other licensees. Licensee shall use
reasonable commercial efforts, upon receipt of any Update, to implement its
use such that it replaces entirely any previous version of the Licensed
Programs or portion thereof to which the Update applies. Upon
implementation, an Update shall constitute a Licensed Program and shall be
subject to all the terms, conditions and limitations of this Agreement. If
Licensee fails to implement the use of any Update, Licensor will continue
to support the earlier version of such Licensed Program for 90 days after
Licensee receives such Update.
(b) Licensor will use reasonable commercial efforts to correct any error
in Licensed Programs identified by Licensee in writing. An error will be
deemed to exist if the Licensed Program substantially fails to perform in
accordance with its intended Use hereunder. Licensee, however,
acknowledges that Licensed Programs are of such complexity that it may be
impossible or impracticable to effectuate the correction of an error. If
an error is, in the reasonable opinion of Licensor after consultations with
Licensee, not reasonably capable of correction, Licensor will use all
diligent efforts to advise Licensee on methods of avoiding or overcoming
the error. Licensor does not
-8-
<PAGE>
guarantee the results of any services provided under this subparagraph or
that all or any errors will be corrected, overcome or avoided.
(c) Licensor will use reasonable commercial efforts to answer Licensee's
questions relating to the use, application and functioning of Licensed
Programs. Licensor makes no representations or guarantees with respect to
the results to be achieved by virtue of the services described in this
paragraph.
13. EXCLUSIONS:
----------
(a) Licensor's obligation to provide support services hereunder is
conditioned upon the proper use of the Licensed Programs and does not cover
Licensed Programs that have been (i) modified without Licensor's approval,
or (ii) used contrary to Licensor's instructions . Licensor will not be
obligated to furnish service hereunder if the need for such service arises
from hardware malfunction, user error, conditions correctable by reference
to available documentation or malfunction of programs not furnished by
Licensor.
(b) If service is requested by Licensee and furnished by Licensor as a
result of any of the causes specified in the preceding subparagraph,
Licensee will be obligated to pay for such service at Licensor's standard
rates then in effect for time, travel and materials.
14. TERM:
----
(a) Subject to the right of Licensee not to accept the Licensed Program
(as set forth in Section 6 above), this Agreement shall have an initial
term of 1 year commencing on the date first set forth above in this
Agreement and shall automatically renew for successive terms of 1 year each
unless Licensee provides written notice of non-renewal to Licensor at least
ninety (90) days prior to the expiration of the then current term.
(b) Either party may terminate this Agreement, effective upon sending
notice, in the event the other party breaches any of its material
obligations under this Agreement and such breach is not cured within 15
days after the first mentioned party delivers to the second party prior
written notice thereof.
(c) Licensee's obligation to pay Licensor amounts due hereunder shall
survive any expiration or termination of this Agreement.
(d) Except with respect to the rights of the Licensee to the Decoder as
set forth in Section 2(a) above, upon the termination, or expiration of
this
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<PAGE>
Agreement, Licensee shall permanently discontinue the Use of the Licensed
Programs and the Software Products containing the Licensed Programs.
Except with respect to the Decoder and the rights of Licensee thereunder
pursuant to Section 2(a) above, within thirty (30) days after Licensee has
permanently discontinued the use of any Licensed Programs or immediately
upon the termination or expiration of this Agreement, Licensee shall return
to Licensor the original and all copies (whether whole or partial) of the
Licensed Programs in any form (other than copies incorporated in the
Software Products already produced and existing, and one additional copy
for support purposes only) and shall certify in writing to Licensor that it
has done so.
15. ATTRIBUTION AND LEGENDS:
-----------------------
Licensee shall display Licensor's logo and trademarks, and shall also
place notice of any copyright and patent protection or other proprietary
legend, within the Software Products, in such context, wording and format
as Licensee, together with Licensor, shall reasonably determine.
16. ADVERTISING:
-----------
From and after the Acceptance of the Licensed Programs by Licensee,
each of the parties hereto agrees that the other party may mention this
License Agreement in sales presentations. After such Acceptance, each
party also may mention this License Agreement in collateral materials
consisting of sell sheets, brochures, packaging and related marketing
materials with the prior consent of the other party, which consent will
not be unreasonably withheld. Licensor shall, in connection with its
activities under this paragraph 16, ensure that all trademarks and
copyrights pertaining to Licensee will be observed. Licensee recognizes
the value of the good will associated with Licensor's trademarks and the
identification of the Software Products with the trademarks. Therefore,
Licensee shall submit to Licensor for prior approval (a) samples of all
Software Products which Licensee proposes to offer for sale under
Licensor's trademarks and (b) samples which bear Licensor's trademarks and
which are to be used in connection with the Software Products. Both
parties may issue a press release announcing the relationship and intended
benefits and Use of the Licensed programs within the Software Products
defined herein.
17. GENERAL:
-------
(a) This Agreement will not be binding upon either party until signed by
Licensee and an authorized officer of Licensor.
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<PAGE>
(b) Licensee may not assign this Agreement without the prior written
consent of Licensor.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey. Without limiting the foregoing, this
Agreement shall be governed by the Uniform Commercial Code. The
transaction which is the subject matter of this Agreement shall be deemed
to be a "transaction in goods" and the Licensed Programs shall be deemed to
be "goods" within the meaning of the said statute, notwithstanding that
this Agreement grants a license, that no sale of Licensed Programs is
contemplated and that title to the Licensed Programs is retained by
Licensor. To the extent, if any, that services are provided in connection
with this Agreement, such services shall be deemed incidental to the
provisions of "goods".
(d) No failure or delay on the part of either party in exercising any
right or remedy provided in this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of or failure to exercise
any such right or remedy preclude any other or further exercise thereof or
the exercise of any other right or remedy under this Agreement.
(e) Any notice required or permitted under this Agreement shall be in
writing and shall be sent to the appropriate address shown on the first
page hereof (unless notice of a changed address has been given) by
telecopier, telegram, private overnight courier service or registered or
certified airmail, return receipt requested, with postage prepaid.
(f) Performance by either party hereunder is subject to force majeure,
including but not limited to wars, riots, failure of contractors and
subcontractors to perform, strikes, labor disturbances, acts of God, fires,
floods, explosions, civil disturbances, inability to obtain required
material or transportation, and acts of governmental authorities.
(g) Licensee acknowledges that the Licensed Programs are subject to the
export control laws and regulations of the U.S.A., and any amendments
thereof. Licensee confirms that it will not knowingly export or re-export
the Licensed Programs, directly or indirectly, either to (I) any countries
that are subject to the U.S.A. export restrictions (currently including,
but not limited to, Cuba, the Federal Republic of Yugoslavia, Haiti, Iran,
Iraq, Libya, North Korea, and Syria); (II) any user who Licensee knows or
has reason to know will utilize them in the design, development or
production of nuclear, chemical, or biological weapons; or (III) any user
who Licensee knows or has reason to know has been prohibited from
participating in transactions in the U.S.A. by any agency of the U.S.A.
Government.
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<PAGE>
(h) Paragraph headings herein are for convenience only and do not control
or affect the meaning or interpretation of any terms or provisions of this
Agreement.
(i) This Agreement (including any schedule hereto) supersedes all prior
agreements and understandings between the parties, whether written or oral,
related to the subject matter and is intended by the parties as the
complete and exclusive statement of the terms of their Agreement.
(j) No modification, addition to, or waiver of any of the terms of this
Agreement (including any schedule hereto) shall be effective unless in
writing and signed by an authorized officer of Licensor. Under no
circumstances shall the terms of any purchase order submitted by Licensee
to Licensor, whether before or after the execution of this Agreement, be
deemed binding upon Licensor. If any of the provisions of this Agreement
are invalid under any applicable statute or rule of law, they are, to that
extent, deemed omitted.
(k) No action to enforce any claim arising out of or in connection with
the transaction which is the subject matter of this Agreement shall be
brought by Licensee against Licensor more than three (3) years after the
cause of action has occurred.
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<PAGE>
(l) Licensor may, in its discretion, delegate all or any portion of its
obligation to perform services hereunder to an agent or subcontractor,
provided that regardless of such delegation Licensor and not such agent or
subcontractor shall remain liable to Licensee hereunder.
Agreed to and accepted by:
VOXWARE, INC. (Licensor)
By:
--------------------------
Authorized Signature
Name:
------------------------
Title:
-----------------------
Agreed to and accepted by:
VDOnet Corporation Ltd.
By:
--------------------------
Authorized Signature
Name:
------------------------
Title:
-----------------------
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<PAGE>
Agreement No. __________
SCHEDULE A
----------
Software Products
------------------
The Software Products are VDOLive and VDOPhone and all other products
intended or applicable to Internet video broadcasting and conferencing.
Licensee is licensed to Use the encode functions of the Licensed Programs
only in products that include video encoding. If Licensee wishes to Use
the encode functions of the Licensed Programs in products that do not
include video encoding, Licensee must first obtain the prior written
approval of Licensor.
Licensee is licensed to Use the decode functions of the Licensed Programs
at no charge in any products distributed by Licensee.
-14-
<PAGE>
Agreement No. __________
SCHEDULE B
----------
Licensed Programs
-----------------
The "Initial Licensed Programs" shall initially be as follows:
RT24 Speech Codec - Embodied in the ToolVox Software Development Kit for
-----------------
Real Time speech compression. It shall consist of the release version of
Voxware's 2,400bps codec, known as RT24. Delivery for Intel platform shall
be delivered in the form of Windows dynamic link libraries. Delivery for
Macintosh platform shall be in the form of static libraries compiled for
the Power PC CPU using the latest Metrowerks compiler. Licensee is
licensed to Use the RT24 Speech Codec for speech compression and
decompression only and only in conjunction with and in support of the
Voxware API as described below. Other features of Licensor's technology
such as time scaling, pitch shifting and personality transformation are not
included in this license.
Voxware API (VAPI) - Provides an application programming interface suitable
------------------
for development of applications for transmission of voice over the Internet
(i.e. Internet Telephony). The functionality included in this interface
allows session, flow and error control. Session control functionality
includes initiating and processing incoming and outgoing calls as well as a
means for users of Voxware or third party applications based on VAPI to
locate each other in a phone directory. Flow and error control seek to
manage the Voxware codec bit stream, handling lost and/or late packets, and
packet resequencing.
[**]
If Licensee Uses any component of the above Licensed Programs, it shall be
deemed that Licensee has Used the Licensed Programs.
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<PAGE>
Agreement No. __________
SCHEDULE C
----------
Price
-----
Initial License Fee: [* *] due upon acceptance of the Licensed Programs
--------------------
within 45 days of execution of this Agreement.
Royalty:
--------
Initial Licensed Programs set forth in Schedule B: [* *]
New Licensed Programs: [* *]
The above royalty schedule applies to each New Licensed Program Used by
Licensee in the Software Products. [* *]
In the event multiple Licensed Programs are Used in the Software Product
simultaneously, then the above royalty rates are additive, [* *]
As more fully set forth in the Agreement, [* *] From and after the
termination or expiration hereof, Licensor has no obligation to support
these Decoders.
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<PAGE>
EXHIBIT 10.16
[Confidential treatment has been requested for portions of this exhibit. The
confidential portions have been redacted and are denoted by [**]. The
confidential portions have been separately filed with the commission.]
VOXWARE, INC. AND VIENNA SYSTEMS CORPORATION
SOFTWARE LICENSE AGREEMENT
This Software License Agreement is entered into on June 28, 1996
("Effective Date") between Voxware, Inc., a Delaware corporation located at 305
College Road East Princeton, NJ 08540 ("Voxware"), and Vienna Systems
Corporation, a Canadian corporation located at 350 Terry Fox Drive, P.O. Box
72089, Kanata, Ontario, Canada K2K 2W5 ("Vienna").
Vienna and Voxware hereby agree to the following:
I. Grant of License
1. Subject to the terms and conditions of this Agreement, Voxware grants
to Vienna a worldwide, non-exclusive, non-transferable license to use, reproduce
and adapt the Licensed Programs (as defined below) for development of, and
incorporation into, the products described on Appendix A hereto which are being
----------
developed by Vienna (collectively, the "Vienna Products") and to distribute and
sublicense the Licensed Programs as incorporated in the Vienna Products. Vienna
may grant to its distribution channels (including original equipment
manufacturers) the distribution rights set forth above solely for the purpose of
the distribution of the Vienna Products. Vienna is responsible for using at
least the same level of diligence and taking the same measures to enforce its
distributors' obligations with respect to the Licensed Programs that it applies
for its own valuable products that are bundled or integrated with other products
and generate substantial revenue for Vienna.
2. For purposes of this Agreement, "Licensed Programs" means those
computer software programs listed and described in Appendix B hereto (as well as
----------
any Updates, as such term is defined below, furnished by Voxware pursuant to the
terms of this Agreement), in object code format, as well as any related
material, whether in machine readable, printed or other form, including but not
limited to instructional and operations manuals. The term Licensed Program
includes all or any portion of a Licensed Program incorporated in another
program, whether in machine readable, printed or other form. The term "Licensed
Programs" includes (without limitation) Voxware's RT24HQ codec, a fixed-rate
2,400 bps VOCODER ("RT24HQ").
3. The Licensed Programs may only be distributed to end users by Vienna
and its distribution channels in an integrated bundle where the Vienna Product
delivers a majority of the value of the bundle and the Licensed Programs are
intended to be used in support of the Vienna Product and where at least one side
of the end user is a private network. Subject to the foregoing, Vienna may
explore solutions in which both sides of a network are public and in such cases,
it is the intent of Vienna and Voxware to work together on mutually acceptable
terms to provide such solutions. In addition to the obligation to include
proprietary notices described in Section IX below, Vienna will give
<PAGE>
Voxware reasonable recognition for its contribution to the Vienna Products in
all documentation for such a bundle.
4. Vienna may ship the Licensed Programs incorporated in free Vienna
Products for demo and evaluation purposes with Voxware's prior written consent
(given on a Vienna Product-by-Product basis) and only to the extent set forth in
such consent.
II. Price; Terms of Payment; Audit
1. The fees for the Licensed Programs shall be those fees and royalties
set forth in Appendix C hereto. Any applicable sales, use, personal property,
----------
excise or other taxes (other than income or corporate franchise taxes) will be
added to the fees and royalties.
2. All royalty payments will be due within forty-five (45) days of the
end of each calendar quarter with respect to units shipped with respect to the
Basic Server Fee (as defined in Appendix C) and revenue received with respect to
----------
the royalties referred to in Appendix C in such period. With each such payment,
----------
Vienna shall provide Voxware with a report (a "Royalty Payment Report")
accurately delineating the calculation of the amount due based on Appendix C.
----------
Not more than once per calendar year, Voxware shall have the right upon not
less than two weeks prior writtennotice to Vienna at a date and time to be
agreed to review and audit Vienna's books and records only to the extent
necessary to verify the accuracy of the Royalty Payment Reports. Such audits
shall be conducted during normal business hours by auditors of a "Big Six"
accounting firm. Such audits shall be at Voxware's expense; provided, however,
that should the audit show that Voxware has been underpaid by more than five
percent (5%) in any one quarter, Vienna will bear the costs of the audit and the
limitation of one audit per year shall be removed. Any payment adjustment
indicated as a result of such audit shall be made within 30 days of receipt of
the audit report. The third party auditor shall maintain the confidentiality of
the information obtained from Vienna, and shall disclose to Voxware only such
information as is reasonably necessary for Voxware to verify the accuracy of the
Royalty Payment Reports, or the nature and extent of any inaccuracies in such
Reports. All information learned by Voxware from such audit shall be treated as
Vienna confidential information and governed by Section VIII below.
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<PAGE>
III. Delivery, Installation and Acceptance of Licensed Programs
1. Voxware shall deliver the Licensed Programs to Vienna in accordance
with the schedule set forth in Appendix D hereto. It is Voxware's
----------
responsibility in return for the Porting Fee (as defined in Appendix C) to
----------
perform all necessary porting of the Licensed Programs to the [**] platform and
it is Vienna's responsibility, at no cost to Voxware, to incorporate the
Licensed Programs into the Vienna Products. Vienna will provide to Voxware upon
request, at no cost to Voxware, technical assistance in connection with the
porting of the Licensed Programs to the [**].
2. .Vienna has evaluated the Licensed Programs running under Windows 95
prior to the execution of this Agreement. The execution of this Agreement is
evidence of Vienna's acceptance of the Licensed Programs. The parties will work
together in good faith to achieve acceptance of the port of the Licensed
Programs to the [**]. Acceptance of the port of the Licensed Programs shall be
deemed to have occurred upon completion of the Licensed Programs successfully
functioning on the [**]. Or in the event that the port of the Licensed Programs
do not meet the requirements of this acceptance, despite the Technical Support
(as defined below) provided by Voxware and the good faith assistance of Vienna
as set forth in paragraph 1, of this Section III, within 30 days after delivery
of the port of the Licensed Programs to Vienna, either party may terminate this
Agreement upon notice to the other party, and neither party shall have any
liability or further obligation to the other party. If no such notice is given
within such time period, the port of the Licensed Programs will be deemed
accepted by Vienna. In any such event, no fees theretofore paid to Voxware shall
be refunded. If this Agreement is terminated and the port of the Licensed
Programs are not accepted by Vienna, the Licensed Programs and all other Voxware
proprietary information shall be returned to Voxware in accordance with
paragraph 2 of Section V.
IV. Updates and Support Services
1. Voxware will, at such intervals as Voxware deems appropriate,
distribute Updates to Vienna. Updates will consist of such corrections,
modifications and minor improvements of the Licensed Programs or portions
thereof, in machine readable binary image format, as Voxware deems appropriate
and which Voxware distributes generally to its other licensees of the Licensed
Programs. Vienna shall, immediately upon receipt of any Update, use its best
efforts to implement its use such that it replaces entirely any previous version
of the Licensed Programs or portion thereof to which the Update applies. Upon
implementation, an Update shall constitute part of the Licensed Programs and
shall be subject to all the terms and conditions of this Agreement.
2. During the term of this License Agreement, Voxware will provide
technical
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<PAGE>
support ("Technical Support") to Vienna at no cost, which shall consist of using
reasonable commercial efforts to correct and/or providing services necessary to
remedy or avoid any programming error in the Licensed Programs which
significantly affects the use of the Licensed Programs by Vienna in the
development, manufacture and sale of the Vienna Products.
V. Termination
1. This Agreement shall have an initial term of 2 years commencing on the
date first set forth above in this Agreement and shall automatically renew for
successive terms of 1 year each unless Vienna provides written notice of non-
renewal to Voxware at least ninety (90) days prior to the expiration of the then
current term.
2. Either party hereto shall have the right to terminate this Agreement
upon a material default by the other party of any of its material obligations
under this Agreement, unless within thirty (30) calendar days after reciept of
written notice of such default such party remedies such default. Upon
termination of this Agreement, for any reason, Vienna shall cease use,
reproduction, translation, marketing, distribution and promotion of the Licensed
Programs in connection with the Vienna Products, except as expressly permitted
herein. After the termination date, Vienna will not release any new version of
a Vienna Product incorporating any portion or derivative of the Licensed
Programs. Notwithstanding the foregoing, after termination of this Agreement,
Vienna and its distributors shall have the right to sell its existing inventory
of Vienna Products which incorporate the Licensed Programs, provided that, prior
-------- ----
to selling such inventory, Vienna shall provide Voxware with an itemized
statement of such inventory. Royalties shall be due on all sales of such
inventory of Vienna Products in accordance with the terms of this Agreement.
3. Notwithstanding anything herein to the contrary, termination of this
Agreement by either party for any reason shall not relieve Vienna of its
obligation to pay royalties with respect to any Vienna Products sold theretofore
or thereafter. Upon termination, each party shall forthwith return to the other
(or destroy in accordance with written instructions) any technology or other
proprietary information belonging to the other party.
4. The parties expressly agree that termination of this Agreement shall
not affect the rights of Vienna's end users who were granted rights to use the
Licensed Programs prior to termination.
VI. Publicity
1. The parties agree to use reasonable commercial efforts to ensure that
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<PAGE>
during the initial announcement of their relationship that: (a) the timing of
such announcements will be compatible with each parties' overall public
relations strategy, (b) each will review and approve the other party's relevant
press releases and other public relations materials, (c) executives from each
company shall be reasonably available for other public relations activities.
Each party may disseminate the information contained in such press release in
whole or in part and from time to time without the consent of the other party.
2. Voxware will have the right to mention that Vienna is a licensee of
the Licensed Programs and Vienna has the right to mention that Voxware is a
licensor of the Licensed Programs in all advertising, public relations, and
marketing materials.
VII. Warranties, Indemnification, Exclusive Remedy and Liability Limitations
1. Voxware warrants that (i) the Licensed Programs shall function
substantially in accordance with the specifications and documentation for a
period of 12 months from the date of this Agreement, (ii) the media on which the
Licensed Programs are contained shall be free from defects in material and
workmanship, (iii) all services provided by Voxware shall be of a professional
and workman-like quality, (iv) it possesses full right, power and authority to
enter into this Agreement; (v) the making of this Agreement by Voxware does not
violate any other agreement existing between Voxware and any other party; (vi)
it is the sole author and owner of the Licensed Programs; (vii) to the knowledge
of Voxware, the Licensed Programs are not in the public domain; and (viii) to
the knowledge of Voxware, the Licensed Programs do not infringe on any existing
patent, copyright, trade secret or other intellectual property rights of others.
Voxware shall use its best efforts to maintain interoperability with Netscape's
Live Media Framework when available.
2. EXCEPT AS EXPRESSLY SET FORTH IN PARAGRAPH 1 OF THIS SECTION VII, AND
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, SECTIONS IV AND VII HEREOF, VOXWARE (I) GRANTS NO WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING A WARRANTY WITH RESPECT TO THE
MERCHANTABILITY OF THE LICENSED PROGRAMS OR THE FITNESS OF THE LICENSED PROGRAMS
FOR A PARTICULAR PURPOSE OR (II) MAKES ANY GUARANTEE THAT ANY OF THE TECHNICAL
SUPPORT, OR OTHER EFFORTS OF VOXWARE HEREUNDER WILL ACHIEVE THE DESIRED RESULT.
EXCEPT FOR THE RIGHT TO TERMINATE AS PROVIDED IN SECTION V, AND EXCEPT IN THE
CASE OF CLAIMS OF INFRINGEMENT OF ANY PATENT OR PROPRIETARY RIGHTS BY THIRD
PARTIES ARISING FROM THE LICENSED PROGRAMS, VOXWARE'S PROVISION OF TECHNICAL
SUPPORT SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF VIENNA HEREUNDER WITH RESPECT
TO THE PERFORMANCE OR FAILURE TO
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PERFORM OF THE LICENSED PROGRAMS ;PROVIDED, THAT THE SOLE AND EXCLUSIVE REMEDY
FOR A BREACH OF THE REPRESENTATION SET FORTH IN CLAUSE (ii) SECTION VII,1,
ABOVE, SHALL BE REPLACEMENT OF THE MEDIA, AND THE SOLE AND EXCLUSIVE REMEDY FOR
A BREACH OF THE REPRESENTATION SET FORTH IN CLAUSE (iii) SECTION VII,1, ABOVE
SHALL BE RE-PERFORMANCE OF THE SERVICES.
EXCEPT IN THE CASE OF INFRINGEMENT BY ONE PARTY OF THE INTELLECTUAL PROPERTY
RIGHTS OF THE OTHER PARTY,IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER ANY
LEGAL THEORY (INCLUDING BUT NOT LIMITED TO CONTRACT, NEGLIGENCE, UNINTENTIONAL
MISREPRESENTATION, STRICT LIABILITY IN TORT OR WARRANTY OF ANY KIND) FOR ANY
INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT
LIMITED TO LOST PROFITS), EVEN IF THAT PARTY HAS NOTICE OF THE POSSIBILITY OF
SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY DETERMINATION
THAT THE EXCLUSIVE REMEDY REFERRED TO ABOVE FAILED OF ITS ESSENTIAL PURPOSE.
3. Voxware agrees to defend and indemnify Vienna for and against all
claims arising from the alleged breach of any warranty given herein, and against
all claims of infringement of any patent or proprietary rights by third parties
arising from the Licensed Programs; provided that Vienna gives Voxware prompt
written notice of any such claim; provided, however, that, Voxware's liability
-------- -------
to Vienna pursuant to this paragraph 3 of Section VII (except in the case of a
claim of infringement of any patent or proprietary right by a third party
arising from the Licensed Programs) shall not exceed the aggregate amount of
fees and royalties received by Voxware from Vienna pursuant to this Agreement.
Vienna agrees to defend and indemnify Voxware for and against all claims arising
from (i) the Vienna Products or their use, manufacture, packaging, distribution,
promotion, sale or exploitation, including, without limitation, any claims of
product liability, and (ii) the breach of any representation, warranty or
covenant by Vienna hereunder, provided that Voxware gives Vienna prompt written
notice of any such claim. Notwithstanding the above, Vienna shall have no
obligation to defend or indemnify Voxware to the extent than any such claim
results from or is based upon the Licensed Programs, and Voxware shall have no
obligation to defend or indemnify Vienna to the extent that any such claim
results from or is based upon Vienna Products.
-6-
<PAGE>
4. In the event that during the term of this Agreement, Voxware or Vienna
becomes aware that the Licensed Programs or any portion thereof infringes or may
infringe any patent, copyright or other intellectual property right of a third
party, Voxware or Vienna, as the case may be, shall provide prompt notice
thereof to the other party. Thereafter, Voxware shall be entitled either to (i)
obtain rights from such third party for Vienna to continue to use the Licensed
Programs or (ii) modify the Licensed Programs or any portion thereof, as
appropriate, to avoid such infringement or such possible infringement, provided
that the modification does not adversely affect the Licensed Programs'
functionality. Any such modification to the Licensed Programs shall be deemed
an Update hereunder. In the event that Voxware after employing all reasonable
efforts is not able to avoid such infringement or such possible infringement
either (a) by agreement with such third party under terms acceptable to Voxware
or (b) by using reasonable commercial efforts to modify the Licensed Programs or
any portion thereof, as appropriate, Voxware shall be entitled to terminate this
Agreement upon written notice to Vienna and Voxware's liability to Vienna, if
any, shall be limited to the lesser of (i) the amount of royalties paid by
Vienna to Voxware hereunder and (ii) $500,000.
VIII. Proprietary Information
1. Voxware and Vienna each acknowledge that they may be furnished with or
may otherwise receive or have access to information which relates to past,
present or future products, software, research, development, inventions,
processes, techniques, designs or other technical information and data,
marketing plans, etc. of Vienna or Voxware as the case may be ("Vienna
Proprietary Information" or "Voxware Proprietary Information", as the case may
be). All proprietary information to be protected under this Section VIII shall
be clearly marked as confidential or proprietary to Vienna or Voxware as
appropriate. Voxware Proprietary Information includes, without limitation, the
Licensed Programs.
2. Except as permitted under this Agreement, Voxware agrees to preserve
and protect the confidentiality of the Vienna Proprietary Information and all
physical forms thereof, whether disclosed to Voxware before this Agreement is
signed or afterward, including the terms of this Agreement. In addition,
Voxware shall not disclose or disseminate the Vienna Proprietary Information for
its own benefit or for the benefit of any third party. Voxware shall not take
nor cause to be taken any physical or electronic forms of Vienna Proprietary
Information from Vienna's offices (nor make copies of same) without Vienna's
written permission. Within three (3) business days after the termination of
this Agreement (or any other time at Vienna's request), Voxware shall return to
Vienna all copies of Vienna Proprietary Information in tangible form.
3. Except as permitted under this Agreement, Vienna agrees to preserve
and
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<PAGE>
protect the confidentiality of the Voxware Proprietary Information and all
physical forms thereof, whether disclosed to Vienna before this Agreement is
signed or afterward, including the terms of this Agreement. In addition, Vienna
shall not disclose or disseminate the Voxware Proprietary Information for its
own benefit or for the benefit of any third party. Vienna shall not take nor
cause to be taken any physical or electronic forms of Voxware Proprietary
Information from Voxware's offices (nor make copies of same) without Voxware's
written permission. Within three (3) business days after the termination of
this Agreement for any reason (or any other time at Voxware's request), Voxware
shall return to Voxware all copies of Voxware Proprietary Information in
tangible form. The information contained in the Licensed Programs (and all
other material that Voxware may provide as part of Technical Support) is
considered a trade secret and shall be treated as such by Vienna.
4. The foregoing obligations shall not apply to any information which (i)
is publicly known; (ii) is given to Voxware or Vienna, as the case may be, by
someone else who is not obligated to maintain confidentiality; or (iii) Voxware
or Vienna, as the case may be, had already developed prior to the day this
Agreement is signed, as evidenced by documents. Notwithstanding any other
provisions of this Agreement, the requirements of this Section VIII shall
survive any termination of this Agreement. Both parties shall make a reasonable
effort to protect all copyrights and trade secrets related to the Licensed
Programs and the Vienna Products. Both parties shall be obligated to this
confidentiality for a period of five (5) years from the later of (i) the
termination of this Agreement and (ii) the termination of any license granted
hereunder.
5. During the term of this Agreement, (i) Vienna agrees that it will not
solicit for employment, employ or otherwise hire any executive employee of
Voxware or any employee of Voxware involved in development of the Licensed
Programs or the Licensed Programs and (ii) Voxware agrees that it will not
solicit for employment, employ or otherwise hire any executive employee of
Vienna or any employee of Vienna involved in software development or development
of the Vienna Products.
6. If Vienna or Voxware, as the case may be, commits a breach, or
threatens to commit a breach, of any of the provisions of this Section VIII,
Voxware or Vienna, as the case may be, shall have the right and remedy to have
the provisions of this Section VIII specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Voxware or Vienna and that
money damages will not provide an adequate remedy to Voxware or Vienna. If any
portion of this Section VIII is for any reason declared invalid or
unenforceable, the validity of the remaining portions shall not be affected and
the court considering this Section shall have the power to modify same so that
the Section as modified may be enforced.
-8-
<PAGE>
7. Except as expressly and unambiguously provided herein and as
conditions of Vienna's license hereunder, Vienna covenants and agrees (i) not to
disassemble, decompile or otherwise reverse engineer or attempt to derive source
code (or the underlying ideas, algorithms, structure or organization) from the
Licensed Programs, (b) to use its commercially reasonable efforts to market,
distribute and support (including installation, training and other support) the
Vienna Products on a continuing basis and to comply with good business practices
and all laws and regulations relevant to this Agreement or the subject matter
hereof, (c) to keep Voxware informed as to any problems encountered with the
Licensed Programs and any resolutions arrived at for those problems, and to
communicate promptly to Voxware modifications, design changes or improvements of
the Licensed Programs suggested by customers, employees and agents and (d) to
comply with all export laws and restrictions and regulations of the Department
of Commerce or other United States or foreign agency or authority, and not to
export, or allow the export or re-export of any confidential information of
Voxware or the Licensed Programs or any direct product thereof in violation of
any such restrictions, laws or regulations.
IX. Proprietary Rights
1. Except to the extent of the licenses expressly and unambiguously
granted hereunder, Voxware retains all rights, title and interest in and to the
Licensed Programs. Voxware shall have no ownership in the Vienna Products,
other than the rights in the Licensed Programs described in the preceding
sentence, and Vienna retains all rights, title and interest in and to the Vienna
Products(other than the Licensed Programs incorporated therein.) Under no
circumstances shall Vienna be deemed the owner of a copy of the Licensed
Programs within the meaning of Section 117 of the Copyright Act of 1976 (as
amended).
2. Vienna shall include, and shall not alter or remove, any applicable
copyright, patent, trade secret, trademark or other proprietary notices or
legends on all copies (in whatever form) of the Licensed Programs and the
packaging in which it may be contained.
3. End users of a Vienna Product shall be required to sign a license
agreement in form and substance reasonably acceptable to Voxware.
4. Vienna hereby agrees (i) to place Voxware's logo and display Voxware's
relevant trademark(s) on any software packaging relating to Vienna Products
incorporating the Licensed Programs, and Vienna shall place Voxware's name or
logo on the title page of the user's manual, if any, and (ii) to place notice of
any copyright or patent protection and any other proprietary legend reasonably
requested by Voxware on the packaging relating to the Vienna Products
incorporating the Licensed Programs.
-9-
<PAGE>
5. Vienna recognizes the great value of the goodwill associated with
Voxware's trademarks and the identification of the Vienna Products with the
trademarks. Therefore, all packaging materials which Vienna proposes to use
which bear Voxware's trademarks and which are to be used in connection with the
Vienna Products shall be reasonably acceptable to Voxware.
X. Distribution Arrangement
1. In further consideration of Voxware's grant herein, Vienna shall grant
back to Voxware a nonexclusive, worldwide right to sell and distribute, on terms
(except with respect to the price as set forth below) equivalent to those
contained in Vienna's most-favorable distribution or value added reseller
arrangements, the Vienna Products as described in Appendix A. [**]
----------
XI. Miscellaneous
1. Governing Law; Arbitration. This Agreement shall be subject to and
governed in all respects by the statutes and laws of the State of New Jersey
without regard to the conflicts of laws principles thereof. The prevailing
party in any dispute regarding the interpretation or enforcement of the terms of
this Agreement shall be entitled to its reasonable attorneys' fees, costs and
expenses from the other party. Any dispute between the parties arising out of
this Agreement (other than as set forth in paragraph 6 of Section VIII) shall be
submitted to binding arbitration before a panel of three neutral arbitrators in
New York, New York in accordance with the commercial rules of the American
Arbitration Association. The terms of the United Nations Convention on contracts
for the International Sale of Goods (the "Vienna Convention") are hereby
expressly excluded.
2. Entire Agreement. This Agreement, including Exhibits and Appendices,
constitutes the entire Agreement and understanding between the parties and
supersedes all prior discussions between them related to its subject matter. No
modification of any of the terms of this Agreement shall be valid unless in
writing and signed by an authorized representative of each party.
3. Assignment. This Agreement is not assignable by either party without
the prior written consent of the other party, except that a party may assign
this Agreement in connection with any merger, acquisition, sale of substantially
all of its assets or similar event without the other party's consent. This
Agreement shall apply to and bind any
-10-
<PAGE>
successor or assigns of the parties hereto.
4. Notices. All notices required or permitted hereunder shall be given
in writing addressed to the respective parties as set forth below and shall
either be (a) personally delivered; (b) transmitted by postage prepaid certified
mail, return receipt requested; or (c) transmitted by nationally-recognized
private express courier, and shall be deemed to have been given on the date of
receipt if delivered personally, or two (2) days after deposit in mail or
express courier. Either party may change its address for purposes hereof by
written notice to the other in accordance with the provisions of this
Subsection. The address for the parties are as follows:
Voxware, Inc. Vienna Systems Corporation
305 College Road East 350 Terry Fox Drive
Princeton, NJ 08540 P.O. Box 72089
Attn: Chief Financial Officer Kanata, Ontario
Canada K2K 2W5
5. Force Majeure. Neither party will be responsible for any failure to
perform its obligations under this Agreement due to causes beyond its reasonable
control, including but not limited to acts of God, war, riot, embargoes, acts of
civil or military authorities, fire, floods or accidents.
6. Waiver. A waiver, expressed or implied, by either party of any
default by the other in the observance and performance of any of the conditions,
covenants of duties set forth herein shall not constitute or be construed as a
waiver of any subsequent or other default.
7. Headings. The headings to the Sections and Subsections of this
Agreement are included merely for convenience of reference and shall not affect
the meaning of the language included therein.
8. Independent Contractors. The parties acknowledge and agree that they
are dealing with each other hereunder as independent contractors. Nothing
contained in this Agreement shall be interpreted as constituting either party
the joint venturer or partner of the other party or as conferring upon either
party the power of authority to bind the other party in any transaction with
third parties.
9. Severability. Except as otherwise set forth in this Agreement, the
provisions of this Agreement are severable, and if any one or more such
provisions shall be determined to be invalid, illegal or unenforceable, in whole
or in part, the validity, legality and enforceability of any of the remaining
provisions or portions thereof shall not in any way be affected thereby and
shall nevertheless be binding between the parties
-11-
<PAGE>
hereto. Any such invalid, illegal or unenforceable provision or portion thereof
shall be changed and interpreted so as to best accomplish the objectives of such
provision or portion thereof within the limits of applicable law.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For purposes hereof, a
facsimile copy of this Agreement, including the signature pages hereto shall be
deemed to be an original. Notwithstanding the foregoing, the parties shall
deliver original execution copies of this Agreement to one another as soon as
practicable following execution thereof.
VOXWARE, INC. VIENNA SYSTEMS CORPORATION
By:___________________________________ By:_____________________________________
Print Name:___________________________ Print Name:_____________________________
Title:________________________________ Title:__________________________________
-12-
<PAGE>
APPENDIX A
VIENNA PRODUCTS
[**]
<PAGE>
APPENDIX B
THE LICENSED PROGRAMS
1. RT24HQ. a fixed-rate, 2,400 bps (54 bits/22.5 msec) voice coder, with an
-------
approximate complexity in 16 bit fixed point MIPS of <10 MIPS for encoder
and <5 MIPS for decoder. Assuming a 22.5 msec frame rate, the encoder
delay is 26.25 msec and the decoder delay is 11.25 msec for an end to end
delay of 37.5 msec.
2. Voxware API ("VAPI"). VAPI provides an application programming interface
---------------------
suitable for development of applications for transmission of voice over the
Internet (i.e. Internet Telephony). The functionality included in this
interface allows session, flow and error control. Session control
functionality includes initiating and processing incoming and outgoing
calls as well as a means for users of Voxware or third party applications
based on VAPI to locate each other in a phone directory. Flow and error
control seek to manage the Voxware codec bit stream, handling lost and/or
late packets, and packet re-sequencing.
<PAGE>
APPENDIX C
FEES AND ROYALTIES
In consideration of Voxware's grant herein, Vienna shall pay to
Voxware the following fees(all fees are based on United States $):
(a) For Item (1) on Appendix D, a non-refundable Annual License Fee
[**] payable upon execution of this Agreement, and again on each anniversary of
the date of this Agreement for the term of this Agreement;
(b) For Items (2) and (3) on Appendix D, a non-refundable one-time
[**] payable within 30 days of the date of this Agreement (the "Porting Fee");
(c) [**]
(d) [**]
<PAGE>
APPENDIX D
DELIVERY SCHEDULE AND FORM OF DELIVERY
(1) RT24, RT24HQ SDK running under Win95 upon execution of this Agreement
(2) RT24, RT24HQ SDK running under Solaris July 15, 1996
(3) RT24HQ [**] delivery August 23, 1996
<PAGE>
EXHIBIT 10.17
THIS LEASE is made this 10th day of April, 1996, between COLLEGE ROAD
ASSOCIATES, LIMITED PARTNERSHIP, having an office at 2 Research Way, Princeton
NJ 08540, hereinafter called "Landlord", and Voxware, Inc. with an office
located at 305 College Road East, Princeton, New Jersey 08540, hereinafter
called "Tenant".
LEASE OF PREMISES
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord,
subject to all of the terms and conditions hereinafter set forth, those certain
premises (the "Premises") as set forth in Items 1 of the Basic Lease Provisions
and as shown in the drawings attached hereto as Exhibit "A" being located on the
floor indicated in that certain office building (the "Building") and on that
certain lot (the "Parcel") together hereinafter referred to as (the "Project")
being located at 305 College Road East, Township of Plainsboro, County of
Middlesex, State of New Jersey.
BASIC LEASE PROVISIONS
1. Location of Premises: 305 College Road East
Princeton, New Jersey 08540
2. Rentable Area of Premises: 18,000 rentable square feet
3. Tenant's Percentage Share: 34.26% (18,000/52,544)
4. Base Project Operating Expenses: Those incurred in 1996
5. Base Project Property Taxes: Those incurred in 1996
6. Basic Annual Rent: Year 1 @ $83,125.00 (Based on
full rental abatement for months
1-3, and $18.00 x 6,157 sf months
4-12)
Year 2 @ $216,000.00 (Based on
$18.00 x 12,000 sf)
Years 3-7 @ $383,400.00 per year
(Based on $21.30 x 18,000 sf)
7. Basic Monthly Rental Installments: Months 1-3 - Free
Months 4-12 @ $9,236.11 per month
Months 13-24 @ $18,000.00 per
month
Months 25-84 @ $31,950.00 per
month
8. Term: Seven (7) years
9. Commencement Date: Upon issuance of Temporary Certificate
Occupancy (T.C.O.)
10. Security Deposit: $54,000.00 to be deposited at
Lease signing; plus a Letter of
Credit in the amount of
$300,000.00 (see Paragraph 4)
11. Parking Spaces: 72 (based on four spaces per
1,000 rentable square feet
leased)
12. Broker(s): Commercial Property Network, Inc.
13. Permitted Use: General Office
14. Addresses for Notices:
LANDLORD TENANT
College Road Associates, Voxware, Inc.
Limited Partnership 305 College Road East
1
<PAGE>
2 Research Way Princeton, NJ 08540
Princeton, NJ 08540
A copy of all notices to Landlord shall also be sent to the address above.
15. All payments under this Lease shall be payable and sent to:
College Road Associates
Lock Box P.O. 19503
Newark, NJ 07195-0503
or such other payee or address as Landlord may designate.
IN WITNESS WHEREOF, the parties hereto have executed this Lease, consisting
of the foregoing and Paragraphs 1 through 47 which follow, together with
Exhibits A through E, inclusive, incorporated herein by this reference as of the
date first above written.
College Road Associates,
Limited Partnership
By: Z Forrestal Center, L.P.,
Managing General Partner
By: Z Forrestal Corp.,
General Partner
By:
-----------------------------
Name: John Zirinsky
Title: President
Voxware, Inc.
2
<PAGE>
By:
-----------------------------
Name:
Title:
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PARAGRAPH PAGE
<C> <S> <C>
1. Commencement Date and Term 5
2. Basic Annual Rent 5
3. Additional Rent 6-11
4. Security Deposit 11-12
5. Repairs 12
6. Improvements and Alterations 13-14
7. Liens 14
8. Use of Premises 14-16
9. Utilities and Services 16-18
10. Rules and Regulations 19
11. Taxes on Tenant's Property 19
12. Substituted Premises 19-20
13. Fire and Casualty 20
14. Eminent Domain 20-21
15. Assignment and Subletting 21-23
16. Landlord's Access to Premises 23
17. Subordination; Attornment; Estoppel Certificates 23-24
18. Sale by Landlord 24
19. Indemnification of Landlord and Insurance 24-26
20. Waiver of Subrogation 26
21. No Waiver 26-27
22. Default 27-29
23. Right of Landlord to Cure Tenant's Default 29-30
24. Notices 30
25. Insolvency or Bankruptcy 30
26. Surrender and Holdover 30-31
27. Condition of Premises 31
28. Quiet Enjoyment 31
29. Limitation of Landlord's Liability 31-32
30. Governing Law 32
31. Common Facilities 32
32. Successors and Assigns 32
33. Brokers 33
</TABLE>
3
<PAGE>
<TABLE>
<C> <S> <C>
34. Name 33
35. Examination of Lease 33
36. Additional Charges 34
37. Marginal Headings 34
38. Prior Agreements; Severability 34
39. Parking 34
40. Authority 35
41. No Light, Air or View Easement 35
42. Force Majeure 35
43. Attornment 35
44. Common Area Maintenance Cost 36
45. Notice Regarding Tenant's Move In or Out 36
46. First Option to Renew 36
47. Second Option to Renew 36-37
48. Expansion 37-38
</TABLE>
<TABLE>
<C> <S>
Exhibit "A" Floor Plan(s)
Exhibit "B1" Landlord's Work Letter
Exhibit "B2" Building Standard Work Letter
Exhibit "C" Commencement Date Memorandum
Exhibit "D" Rules and Regulations
Exhibit "E" Janitorial Specifications
Exhibit "F" Letter of Credit
</TABLE>
4
<PAGE>
COMMENCEMENT DATE AND TERM
PARAGRAPH 1
(A) The term of this Lease shall be as shown in Item 8 of the Basic Lease
Provisions and shall commence upon the issuance of a Temporary Certificate of
Occupancy (T.C.O.) or such earlier date as Tenant takes possession or commences
use of the Premises for the conduct of Tenant's business. Such date of
commencement, hereinafter the "Commencement Date", shall be confirmed by
Landlord and Tenant by execution of a "Commencement Date Memorandum" in a form
substantially similar to Exhibit "C".
(B) Notwithstanding the Commencement Date, if for any reason Landlord
cannot deliver possession of the Demised Premises to Tenant on said Commencement
Date, then Landlord shall not be subject to any liability therefor; nor shall
such failure affect the validity of this Lease or the obligations of Tenant
hereunder, provided that Tenant shall not be obligated to pay Rent (except a sum
equal to the first Basic Monthly Rental Installment) until possession of the
Premises is rendered to Tenant.
Provided that this Lease has been signed by both Landlord and Tenant by
April 1, 1996, Tenant may terminate this Lease and have no liability pursuant to
this Lease if the Commencement Date has not occurred by October 31, 1996; except
if the reason the Commencement Date has not occurred is Tenant's fault or has
been caused by Force Majeure as defined in Paragraph 42.
If the Lease is so terminated, Landlord will refund to Tenant any sums
Tenant has paid to Landlord on account of this Lease.
BASIC ANNUAL RENT
PARAGRAPH 2
(A) Tenant agrees to pay as Basic Annual Rent for the Premises the initial
sum shown in Item 6 of the Basic Lease Provisions. Except for months when this
Lease is not in effect for the full calendar month (partial month), the Basic
Annual Rent shall be payable in U.S. currency in equal monthly installments,
hereinafter sometimes referred to as "Basic Monthly Rental Installments", in
advance without notice, deduction, demand, offset, or abatement. Basic Monthly
Rental Installments shall be in the initial sum shown in Item 7 of the Basic
Lease Provisions. Payment of Basic Annual Rent shall commence on the
Commencement Date (except that the first month's rent shall be due upon the
signing of this Lease), and continue on the first day of each calendar month
thereafter except that Basic Rent for any partial month during the term hereof
shall be prorated in the proportion that the number of days this lease is in
effect during such partial month bears to the number of days in that calendar
month, and shall be paid at the commencement of such partial month, and except
further that the Basic Monthly Rental Installment for the first full calendar
month of this Lease for which an installment of Basic Annual Rent is due will be
paid on execution hereof.
(B) In addition to the Basic Annual Rent stipulated herein, Tenant
covenants and agrees to pay Landlord without offset or deduction as additional
Rent, hereinafter "Additional Rent", all other sums and charges which are to be
paid by Tenant pursuant to the terms of this Lease. Except as otherwise
provided in this Lease, Additional Rent shall be due and payable on the first
day of the month following the date on which Tenant is given notice that
Additional Rent is due. Rent means Basic Annual Rent and Additional Rent.
5
<PAGE>
ADDITIONAL RENT
PARAGRAPH 3
(A) For each calendar year during the term of this Lease, Tenant agrees to
pay as items of Additional Rent for the Premises, Tenant's "Percentage Share"
(being the percentage indicated in Item 3 of Basic Lease Provisions) of all
increases in "Project Operating Expenses" and "Project Property Taxes" (as
hereinafter defined) incurred by Landlord in the operation of the Building or
Project over the Base Project Operating Expenses and Base Project Property Taxes
as stipulated in Items 4 and 5 respectively in the Basic Lease Provisions,
except that Tenant shall not pay any increases over the Base Project Operating
Expenses and the Base Project Property Taxes until the thirteenth (13th) month
of the term of this Lease.
(B) The items of Additional Rent contemplated under subparagraph 3(A) shall
be calculated in accordance with the following procedures:
(i) Except for during the first twelve (12) months of the term of
this Lease, each December during the term hereof or as soon
thereafter as practical, Landlord shall give Tenant written
notice of Landlord's estimate of any amounts payable under
subparagraph 3(A) above for the ensuing calendar year. On or
before the first day of each month during the ensuing calendar
year, Tenant shall pay Landlord without further notice 1/12 (One-
twelfth) of such estimated amounts, provided that if such notice
is not given in December, Tenant shall continue to pay on the
basis of the then applicable rental until the month after such
notice is given. If at any time or times it appears to Landlord
that the adjusted amounts payable under subparagraph 3(A) for the
current calendar year will exceed its estimate, Landlord may, by
notice to Tenant, revise its estimate for such year. Subsequent
payments by Tenant for such year shall be based upon such revised
estimate.
(ii) Except for during the first twelve (12) months of the term of
this Lease, within ninety (90) days after the close of each
calendar year or as soon thereafter as is practical, Landlord
shall deliver to Tenant a statement of the annual adjustment of
those Additional Rent items made pursuant to subparagraph 3(A)
for such calendar year. If on the basis of such statement Tenant
owes an amount that is less than the estimated payments for such
calendar year previously made by Tenant, Landlord shall refund or
credit such excess to Tenant. If on the basis of such statement
Tenant owes an amount that is more than the estimated payment for
such calendar year previously made by Tenant, Tenant shall pay
the deficiency to Landlord within thirty (30) days after delivery
of the statement.
(iii) The Additional Rent due under the terms and conditions of this
Paragraph 3 shall survive termination of this Lease for a period
of two (2) years, shall be payable by Tenant without any setoff
or deduction, and shall be computed by Landlord on a prorated
basis for any period less than a full calendar year.
(iv) Anything to the contrary contained in this Paragraph 3
notwithstanding, if the average occupancy of the Building is less
than ninety-five (95%) percent
6
<PAGE>
during the Base Year hereinafter defined, then Landlord shall
make a determination ("Landlord's Determination") of what the
Project Operating Expenses for such year would have been if
during the entire year the average tenant occupancy of the
Building were ninety-five (95%) percent. Landlord's Determination
shall be binding and conclusive upon Tenant and shall for all
purposes of this Lease be deemed to be the Project Operating
Expenses for the Base Year. Landlord shall notify Tenant of
Landlord's Determination within ninety (90) days following the
last day of the Base Year. Thereafter, if for any subsequent
Lease Year the average tenant occupancy of the Building is below
ninety-five (95%) percent, the Project Operating Expenses for any
such year shall be adjusted by Landlord to the amount that such
Project Operating Expenses would have been if the average tenant
occupancy during that year had been ninety-five (95%) percent.
The term Base Year means the twelve (12) month period during
which Base Project Operating expenses are calculated.
(C) Definitions:
(i) The term "Project Operating Expenses" as used herein shall
include all costs of operation and maintenance of the Project for
each calendar year as determined by generally accepted accounting
principles consistently applied. Project Operating Expenses
shall, by way of illustration but not limitation, include water
and sewer charges, insurance premiums, license, permit, and
inspection fees, fuel, heat, light, power (except for electricity
charged directly to the Premises and other rental space on the
Project), steam, janitorial and security services, labor,
salaries, air conditioning, landscaping maintenance and repair of
the Building and driveways, parking structures and surface
parking areas, ice and snow removal, supplies, materials,
equipment, tools, property management fees, office costs, and the
cost incurred in contesting the validity of Project Property
Taxes. Landlord agrees to limit the profit it charges on Project
Operating Expenses to an amount not to exceed ten percent (10%)
for its overhead and ten percent (10%) for profit. Project
Operating Expenses shall also include but not be limited to the
cost of any capital improvements made to the Building by Landlord
that reduce Project Operating Expenses or that are required under
any governmental law or regulation not previously applicable to
the Building or not in effect at the time it was constructed.
Such capital cost shall be amortized over the useful life of such
items with a return on capital at the then current prime interest
rate of the largest national bank in New York City or at such
higher rate as may have been paid by Landlord on the funds
borrowed for the purpose of purchasing such capital improvements.
In no event shall Project Operating Expenses ever be less than
Base Project Operating Expenses stipulated in Item 4 of Basic
Lease Provisions.
(a) Notwithstanding anything to the contrary in the definition
of Operating Expenses set forth above, Operating Expenses shall
not include the following:
7
<PAGE>
(i) Costs, incurred with respect to the installation of other
occupants' improvements in the Building or incurred in
renovating, decorating, painting or redecorating vacant space for
other occupants in the Building;
(ii) Leasing commissions and attorneys' fees in connection with
the negotiation and preparation of leases, subleases or
assignments with present or prospective tenants or other
occupants of the Building;
(iii) Costs (including in connection therewith all
attorneys' fees and costs of settlement judgements and
payments in lieu thereof) arising from claims, disputes or
potential disputes in connection with potential or actual
claims litigation or arbitrations pertaining to Landlord
and/or the Building;
(iv) Advertising and promotional expenditures and marketing
costs;
(v) Interest, principal, points and fees on debts or any
mortgage encumbering the Building;
(vi) Costs incurred by Landlord for the repair of damage to
the Building, to the extent that Landlord is reimbursed by
insurance proceeds;
(vii) Costs arising from the negligence or fault of other
tenants or Landlord or its agents, or any vendors,
contractors, or providers or materials or services selected,
hired or engaged by Landlord or its agents including,
without limitation, the selection of Building materials;
(viii) Costs incurred by Landlord due to the violation by
Landlord or any tenant other than Voxware of the terms and
conditions of any lease of space in the Building;
(ix) Items considered capital improvements, repairs,
replacements, and equipment under generally accepted
accounting principles consistently applied or otherwise
("Capital Improvements"), except for (1) the annual
amortization (amortized over the useful life) of costs,
including financings costs, if any, incurred by Landlord
after the Commencement Date for any Capital Improvements
installed or paid for by
8
<PAGE>
Landlord and required by any new (or change in) laws, rules or
regulations of any governmental or quasi-governmental authority
which are enacted after the Commencement Date; (2) the annual
amortization (amortized over the useful life) of costs,
including financing costs, if any, or any equipment, device
or Capital Improvements purchased or incurred as a labor-
saving measure.
(x) Costs incurred to comply with disability, life, fire and
safety codes, ordinances, statutes, or other laws in effect
prior to the Commencement Date, including, without
limitation, the ADA, including penalties or damages incurred
due to such non-compliance;
(xi) Costs incurred in connection with any environmental
clean-up, response action, or remediation on, in, under or
about the Premises or the Building, including but not
limited to, costs and expenses associated with the defense,
administration, settlement, monitoring or management
thereof, unless caused by Tenant;
(xii) The cost of electric power used by any other tenant
or occupant in the Building;
(xiii) Rentals and other related expenses incurred in
leasing HVAC systems or elevators ordinarily considered to
be Capital Improvements, except for (1) expenses in
connection with making minor repairs on or keeping Building
systems in operation while minor repairs are being made, and
(2) costs of equipment not affixed to the Building which is
used in providing janitorial or similar service;
(xiv) Costs arising from latent defects in the base, shell
or core of the Building or improvements installed by
Landlord or repair thereof;
(xv) Tax penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments
and/or to file any tax or informational returns when due;
(xvi) Services and utilities provided, taxes attributable
to, and costs incurred in connection with the operation of
any retail and restaurant operations in the Building, except
to the extent the square footage of such operations are
included in the rentable square feet of the Building and do
not exceed the services, utility and tax costs which would
have been incurred had the retail and/or restaurant space been
used for general office purposes;
9
<PAGE>
(xvii) Depreciation, amortization and interest payments,
except as provided herein and except on materials, tools,
supplies and vendor-type equipment purchased by Landlord to
enable Landlord to supply services Landlord might otherwise
contract for with a third party where such depreciation,
amortization and interest payments would otherwise have been
included in the charge for such third party's services, all
as determined in accordance with generally accepted
accounting principles, consistently applied, and when
depreciation or amortization is permitted or required, the
item shall be amortized over its reasonably anticipated
useful life;
(xviii) Any ground lease rental(it is understood that
Tenant pays its share of the common area maintenance cost
referred to in Paragraph 44 of this Lease);
(xix) Costs for which Landlord has been compensated by a
management fees in excess of those management fees which are
normally and customarily charged by comparable landlords of
comparable buildings;
(xx) Costs arising from Landlord's charitable or political
contributions; and
(xxi) Costs incurred in the sale or refinancing of the
Building.
(b) Each time Landlord provides Tenant with an actual and/or estimated
statement of Operating Expenses, such statement shall be itemized on a line item
by line item basis, showing the applicable expenses for the applicable year.
(c) In the event any facilities, services or utilities used in
connection with the Building are provided from another building owned or
operated by Landlord or vice versa, the costs incurred by Landlord in connection
therewith shall be allocated to Operating Expenses by Landlord on a reasonably
equitable basis.
(ii) The term "Project Property Taxes" as used herein shall include
all real estate taxes or personal property taxes and other taxes,
charges and assessments, unforeseen as well as foreseen, which
are levied with respect to the Project and any improvements,
fixtures and equipment and other property of Landlord, real or
personal, located in the Building or on the Project and used in
connection with the operation of the Project for each calendar
year and shall include any tax, surcharge or assessment which
shall be levied in addition to or in lieu of real estate or
personal property taxes, other than taxes covered in Paragraph
11, and shall also include any rental, excise, sales,
transaction, privilege, or other tax or levy, however,
denominated, imposed upon or measured by the rental reserved
hereunder or on Landlord's business of leasing the Premises and
Project, excepting only net income
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taxes. In no event shall Project Property Taxes ever be less
than Base Project Property taxes stipulated in Item 5 of Basic
Lease Provisions.
(D) Unless Tenant takes written exception to any item in the statement
referred to in subparagraph 3(B)(ii) within forty-five (45) days after the
furnishing of the statement, such statement shall be considered as final and
accepted by Tenant. Any amount due Landlord as shown on any such statement
shall be paid by Tenant within thirty (30) days after it is furnished to Tenant.
If Tenant shall dispute in writing any specific item, or items in the statement
of Project Operating Expenses and Project Property Taxes, and such dispute is
not resolved between Landlord and Tenant within sixty (60) days after the date
the statement was rendered, either party may, during the thirty (30) days next
following the expiration of the sixty (60) days, refer such disputed item or
items to any independent certified public accountant selected by Landlord, for a
determination. Pending the determination of any dispute with respect to the
statement submitted by Landlord, Tenant shall pay when due the sums shown as due
on such statement. If it shall be determined that any portion of such sums were
not properly chargeable to Tenant, then Landlord shall credit or refund the
appropriate sum to Tenant. The costs for the accountant's review and
determination will be borne by Landlord if it is determined that Landlord's
original calculation of both Project Property Taxes and Project Operating
Expenses was in error by more than five (5%) percent, otherwise such costs will
be borne by Tenant.
(E) As one of the items of Additional Rent, payable monthly, Tenant shall
also pay to Landlord the full cost of Tenant's consumption of electricity,
except for heating and air conditioning as provided in subparagraph 9(A)(ii), as
determined in accordance with Paragraph 9.
(F) The Basic Annual Rent plus Additional Rent are sometimes collectively
referred to as "Rent".
SECURITY DEPOSIT
PARAGRAPH 4
Tenant has paid or agrees to pay Landlord such sum(s) as are set forth in
Item 10 of the Basic Lease Provisions as security for the performance of the
terms hereof by Tenant. Unless required by law, Landlord shall not be required
to keep said Security Deposit separate from its general funds and Tenant shall
not be entitled to receive interest thereon. In no instance shall the amount of
such Security Deposit be considered a measure of liquidated damages. If Tenant
defaults with respect to any provision of this Lease, including but not limited
to, the provisions relating to the payment of Rent or the surrender of the
Premises in accordance with the terms hereof upon the termination of the Lease,
Landlord may, but shall not be required to use, apply or retain all or any part
of this Security Deposit for the payment of any Rent or any other sum in
default, or for the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default including, without limitation, costs and attorneys' fees
incurred by Landlord. If any portion of said deposit is so used or applied,
Tenant shall, upon demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount and Tenant's
failure to do so shall constitute a default hereunder by Tenant. If Tenant shall
fully and faithfully perform every provision of this Lease to be performed by
it, the
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Security Deposit, or any balance thereof, shall be returned to Tenant (or at
Landlord's option, to the permitted assignee of Tenant's interest hereunder)
within thirty (30) days following the expiration of the Lease term and after
Tenant has vacated and delivered possession of the Premises to Landlord in
accordance with the provisions of this Lease. In the event of bankruptcy or
other debtor-creditor proceeding against Tenant, such Security Deposit shall be
deemed to have been applied first to the payment of Rent and other charges due
Landlord for all periods prior to filing of such proceedings. In addition to the
fifty-four thousand dollar ($54,000.00) Security Deposit set forth in Item 10 of
the Basic Lease Provisions, Tenant shall post a Letter of Credit in the form of
Exhibit "F" in the amount of $300,000.00. Beginning on the fourth year(thirty-
seventh month) of this Lease, and at the beginning of each successive year
thereafter, Tenant shall deliver to Landlord a revised Letter of Credit with the
face amount of each such Letter adjusted such that for the fourth year of this
Lease the amount shall be $225,000.00, the beginning of the fifth year the
amount shall be $150,000.00, and for years six (6) and seven (7) the amount
shall be $75,000.00. The Irrevocable Letter of Credit must be renewed sixty (60)
days prior to its expiration date for each year of this Lease.
REPAIRS
PARAGRAPH 5
(A) Subject to Paragraph 5(B), Landlord shall cause all necessary repairs
to be made to the exterior doors, windows, corridors and other common areas of
the Building and the Project and Landlord shall cause the Building and the
Project to be kept in a safe, clean and neat condition and shall use reasonable
efforts to keep all equipment used in common with other tenants (such as
elevators, plumbing, heating, air conditioning and similar equipment) in good
condition and repair. Except as provided in Paragraph 13 hereof, there shall be
no abatement of Rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Project
or in or to fixtures, appurtenances and equipment therein or thereon.
(B) Tenant agrees that all repairs to the Premises not required above to
be made by Landlord and all decorating, remodeling, alteration and painting
required by Tenant during the term of this Lease, if approved by Landlord, shall
be made by Landlord at the sole cost and expense of Tenant; provided however,
that the cost of Landlord's contractors must be competitive with contractors of
similar size and reputation doing work in the Princeton Forrestal Center.
Tenant will pay for any repairs to the Premises, the Building or the Project
made necessary by any negligence or willful acts or omissions of Tenant or its
assignees, subtenants, employees or their respective agents or other persons
permitted in the Building or on the Project by Tenant, or any of them (except to
the extent that proceeds from insurance carried by Landlord provide funds to pay
for such repairs), and Tenant will maintain the Premises, and, upon termination
of this Lease, will leave the Premises in a safe, clean, neat and sanitary
condition (normal wear and tear excepted).
IMPROVEMENTS AND ALTERATIONS
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PARAGRAPH 6
(A) Landlord's sole construction obligation under this Lease is as set
forth in the Work Letter attached hereto as Exhibit "B-1" and incorporated
herein by reference.
(B) Landlord shall have the right at any time to change the arrangement
and/or location of entrances or passageways, doors and doorways, and corridors,
elevators, stairs, toilets, or other public parts of the Building or Project,
and upon giving Tenant reasonable notice thereof, to change the name, number or
designation by which the Building or the Project is commonly known, provided
that Landlord shall minimize interference with Tenant's use of the Premises.
(C) The alterations, additions or improvements to or of the Premises
or any part thereof referred to in this subparagraph (6) do not include the
initial tenant improvements. Tenant shall not make or cause to be made any
alterations, additions or improvements to or of the Premises or any part
thereof, or attach any fixtures or equipment thereto, without first obtaining
Landlord's prior written consent. Any such alterations, additions or
improvements to the Premises consented to by Landlord shall at Landlord's option
be made by Landlord for Tenant's account and Tenant shall pay Landlord for the
costs thereof (including a charge of ten percent (10%) for overhead and ten
percent (10%) for profit) within ten (10) days after receipt of Landlord's
statement. All such alterations, additions and improvements shall (without
compensation to Tenant) at Landlord's option become Landlord's property (except
movable furniture and trade fixtures) and at the end of the term hereof, shall
remain on the Premises unless Landlord elects by notice to Tenant to have Tenant
remove same, in which event Tenant shall promptly restore the Premises to their
condition prior to the installation of (i) such alterations, additions and
improvements, and (ii) equipment of any nature. Further, Landlord may elect by
notice to Tenant to have Tenant remove not only Tenant's alterations, additions
and improvements, but also any items of Tenant's equipment including but not
limited to movable furniture, trade fixtures, office equipment and any cafeteria
equipment. Any such equipment not removed from the Premises at the end of the
term hereof shall at the option of the Landlord become Landlord's property
without payment of any consideration therefor. The removal of any such
equipment and any alterations, additions and improvements which Landlord elects
Tenant to remove will be accomplished by Tenant prior to the expiration of the
term of this Lease and if not done, Tenant will be deemed a tenant at sufferance
pursuant to Paragraph 26. If Tenant does not perform such removal, Landlord may
remove, destroy, store or otherwise dispose of such alterations, additions,
improvements and equipment, whether or not Landlord takes title thereto. In
addition, Tenant will pay (i) all Landlord's costs of removing, disposing or
destroying any such alterations, additions, improvements and equipment whether
or not Landlord takes title thereto, that Tenant is supposed to remove, which
Tenant does not remove, and (ii) Landlord's cost to restore the Premises to
their condition prior to the installation of any alterations, additions,
improvements and equipment of any nature referred to in subdivision (i) of this
sentence. Such costs will include Landlord's fees and expenses in collecting
such costs and interest on such costs at the rate of fourteen (14%) percent per
annum. Tenant will pay to Landlord Landlord's costs of storage of any equipment
which Tenant is supposed to remove pursuant to this paragraph that Tenant does
not remove. Further, Landlord reserves and shall have right of access to the
Premises at any time within ninety (90) days prior to any projected termination
of this Lease to inspect the Premises to determine alterations, additions,
improvements and equipment Landlord desires Tenant to remove. This right of
access is in addition to Landlord's right of access set forth in Paragraph 16
hereof.
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LIENS
PARAGRAPH 7
Tenant shall keep the Premises free from any liens arising out of any work
performed, materials furnished, or obligations incurred by or for Tenant. In the
event that Tenant shall not, within thirty (30) days following the imposition of
any such lien, cause the same to be released of record by payment or posting of
a proper bond, Landlord shall have, in addition to all other remedies provided
herein or by law, the right but not the obligation, to cause the same to be
released by such means as it shall deem proper, including payment of or defense
against the claim giving rise to such lien. All sums paid by Landlord and all
expenses incurred by it in connection therewith, shall create automatically an
obligation of Tenant to pay an equivalent amount as Additional Rent, which
Additional Rent shall be payable by Tenant on Landlord's demand with interest at
the rate of twelve percent (12%) per annum until paid. For purposes of this
Paragraph 7, "liens" shall include, but not be limited to, lien claims filed
under the "Construction Lien Law".
USE OF PREMISES
PARAGRAPH 8
Landlord represents and warrants that on the Commencement Date the
Premises shall be in compliance with all applicable laws and codes. Tenant
shall use the Premises only as set forth in Item 13 of the Basic Lease
Provisions and shall not use or permit the Premises to be used for any other
purpose without the prior written consent of Landlord. Tenant shall comply with
all laws and covenants and restrictions of record affecting use of the Premises,
and shall not use or occupy the Premises in violation of law or of the
certificate of occupancy issued for the Building, and shall immediately
discontinue any use of the Premises which is declared by any governmental
authority having jurisdiction to be a violation of law or of said certificate of
occupancy. Tenant shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Tenant's use or
occupancy of the Premises impose any duty upon Tenant or Landlord with respect
to the Premises or with respect to the use or occupancy thereof. Tenant shall
not do or permit to be done anything which will invalidate or increase the cost
of any fire, extended coverage or any other insurance policy covering the
Building, the Project and/or property located therein and shall comply with all
rules, orders, regulations and requirements of the appropriate fire rating
bureau or any other organization performing a similar function. Tenant shall
upon demand reimburse Landlord for the full amount of any additional premium
charged for such policy by reason of Tenant's failure to comply with the
provisions of this paragraph. Such reimbursement shall not be Landlord's
exclusive remedy. Tenant shall not in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or the Project or injure or
annoy them, or use or allow the Premises to be used for any improper, unlawful,
or objectionable purpose, nor shall Tenant cause, maintain, or permit any
nuisance in, on, or about the Premises. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises.
Upon the expiration, or early termination of the Term of this Lease or the
permanent assignment of this Lease, or subletting of the Premises, or cessation
or transferring of Tenant's operations at the Premises, or upon any action or
non-action of Landlord including a sale of the Building in which the Premises
are located, Tenant, if its operations are subject to the Environmental Clean-up
Laws hereinafter defined, shall comply, at Tenant's own expense, except
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as hereinafter stated, and with diligence, with the Industrial Site Recovery
Act, 1993 N.J. Law's Chapter 139, the regulations promulgated thereunder and any
successor legislation and regulations(collectively "Environmental Clean-up
Laws"). Tenant, if its operations are subject to the Environmental Clean-up
Laws shall, at Tenant's own expense, except as hereinafter stated, make prompt
submissions to, provide all information to and comply with all requirements of
the Industrial Site Evaluation Element ("ISEE") or its successor of the New
Jersey Department of Environmental Protection or its successor ("NJDEP") arising
out of the expiration, termination, assignment, subletting or transferring of
Tenant's operation at the Premises or arising out of any action or non-action of
the Landlord including the sale of the Building in which the Premises are
located. If Landlord's actions or non-actions including a sale of the Building
in which the Premises are located necessitate compliance with Environmental
Clean-up Laws, Landlord, at its expense, will make the submissions to NJDEP or
any of its elements in order to obtain a statement of non-applicability or
negative declaration, but Tenant whether or not it is subject to Environmental
Clean-up Laws, will cooperate with Landlord to aid in the making of Landlord's
submission by providing information and signing such documents as are necessary
for Landlord to make its submission. Clean-up expenses or the making up of any
clean-up plan or remedial action work plan, or sampling plan or the taking of
any corrective action to comply with Environmental Clean-up Laws and expenses
therefore, will be borne by the party whose actions or failure to act
necessitated the clean-up.
Each party shall, within a reasonable time and receipt of same, furnish to
the other party true and complete copies of all documents, submissions,
correspondence and oral or written reports, directives, correspondence and oral
or written communications by ISEE to the recipient party. Each party shall also
promptly furnish to the other party true and complete copies of all sampling and
test results and reports obtained and prepared from samples and tests taken at
and around the Premises that is obtained by the party first obtaining the
results and reports.
Tenant shall immediately and diligently cause any and all Hazardous
Materials it, its agents, employees, invitees or licensees released in, onto or
under or disposed from the Premises during the Term of the Lease to be removed
in compliance with all applicable laws, rules, ordinances and regulations and
all conditions resulting therefrom to be remediated in compliance with all
applicable laws, rules, ordinances and regulations and the Premises restored to
their condition without said Hazardous Materials as quickly as possible.
Tenant shall indemnify, defend and save harmless Landlord from all fines,
suits, procedures, claims and actions of any kind arising out of or in any way
connected with any release or discharge of Hazardous Materials at the Premises
which occur during the term of the Lease as a result of the acts of Tenant, its
invitees or licensees; and from all fines, suits, procedures, claims and actions
of any kind arising out of Tenant's failure to provide all information to NJDEP
or the Landlord as appropriate make all submissions other than those Landlord is
required to make as provided herein, and take all actions required by the NJDEP
or any of its divisions.
Landlord hereby agrees to defend, indemnify and hold Tenant harmless from
and against any and all claims, lawsuits, liabilities, losses, damages and
expenses (including, but not limited to, reasonable attorneys' fees arising by
reason of any of the aforesaid or any action against the Landlord under this
indemnity) arising directly or indirectly from, out of or by reason of (i) any
spills or discharges of toxic or Hazardous Materials at the Premises or Project
which occur prior to
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or during the term of this Lease caused by Landlord, its employees, agents or
invitees; or (ii) any pre-existing conditions including underground tanks, which
are the subject of federal, state or local environmental laws.
Tenant's obligations and liabilities under this Paragraph shall continue so
long as Landlord remains responsible for any releases or discharges of Hazardous
Materials at the Premises which occur as a result of the acts of Tenant, its
invitees or licensees. Tenant's failure to abide by the terms of this Paragraph
shall be restrainable by injunction.
UTILITIES AND SERVICES
PARAGRAPH 9
(A) Provided there has not occurred a material default and breach as
defined in Paragraph 22 that is continuing, Landlord agrees to furnish or cause
to be furnished to the Premises the following utilities and services, subject to
the conditions and standards set forth below:
(i) Landlord shall provide automatic elevator facilities from 8 A.M.
to 6 P.M., Monday through Friday (legal holidays excepted) and
shall have at least one elevator available for use at all other
times.
(ii) From 8 A.M. to 6 P.M., Monday through Friday (legal holidays
excepted), Landlord shall ventilate the Premises and furnish
heat or air conditioning when it is required for the
comfortable occupancy of the Premises during such days and
hours, subject to any governmental requirements or standards
relating to, among other things, energy conservation. Upon
request and reasonable notice, Landlord shall make available at
Tenant's expense after-hours heat or air conditioning. Overtime
use of the HVAC system(s) to be controlled by Tenant via
override timer and running hour meter, and the cost thereof
shall be $16.13 per hour, based upon the current utility rates.
(iii) Landlord shall furnish to the Premises at all times, subject to
interruptions beyond Landlord's control and subject to
subparagraph 3(E), electric current in accordance with the
Building Standard office lighting and receptacle. At no time
shall Tenant's use of electric current exceed the capacity of
the feeders to the Building or the risers or wiring
installation. Except for the initial Tenant Improvements, Tenant
shall not install or use or permit the installation or use of
any mainframe computer in the Premises without the prior written
consent of Landlord.
(iv) Landlord shall furnish the Premises with water for drinking and
lavatory purposes only.
(v) Landlord shall provide janitorial services to the Premises,
comparable to such services provided in other first class office
buildings in the vicinity, provided that the said other office
buildings are used exclusively as offices, and provided further
that the Premises are kept in good order by Tenant. Tenant shall
pay to Landlord the cost
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of removal of any of Tenant's refuse and rubbish to the extent
that the same exceeds the refuse and rubbish usually attendant
upon the use of the Premises as offices (one waste paper basket
at each desk per day).
(vi) Landlord shall replace, as necessary, the fluorescent tubes in
the standard lighting fixtures installed by Landlord. Tenant
agrees to reimburse Landlord upon demand for the cost at
commercially reasonable rates of such fluorescent tubes and
ballast and the labor and overhead for their installation.
Initial installation of fixtures will be warranteed for one year
for lamps and ballast.
(B) Landlord may impose a reasonable charge for any utilities and services,
including without limitation, air conditioning, electric current (except for
electricity paid under subparagraph (E) Paragraph 3 and water), provided by
Landlord by reason of any use of the Premises at any time other than the hours
of 8 A.M. to 6 P.M. Monday through Friday (excluding legal holidays) or any use
beyond that which Landlord agrees to furnish as described above. The following
clauses (i) through (iv) apply to electrical consumption, electric energy and
the public utility rate schedule for the supply of electric current to the
Building.
(i) All electric consumption for the sole use of the Tenant shall be
separately sub-metered (the cost of such sub-meter to be part of
the initial Tenant Improvement Installation).
(ii) Landlord shall not be liable in any way to Tenant for any
failure or defect in the supply or character of electric energy
furnished to the Premises by reason of any requirement, act or
omission of the public utility serving the Building with
electricity or for any other reason not attributable to
Landlord.
(iii) Tenant's use of electric energy in the Premises shall not at any
time exceed the capacity of any of the electrical conductors and
equipment serving the Premises. If Tenant requires capacity in
excess of the capacity of the electrical conductors and
equipment serving the Premises, Tenant must notify Landlord in
writing of its requirement. Thereafter, Landlord shall review
such requirement and inform Tenant of the associated costs which
shall be borne solely by Tenant. Landlord shall furnish Premises
with five (5) watts connected load per square foot at the time
of the Commencement of this Lease. In order to insure that such
capacity is not exceeded and to avert possible adverse effect
upon the Building's electric service, Tenant shall not, without
Landlord's prior written consent in each instance (which shall
not be unreasonably withheld), connect any additional fixtures,
appliances or equipment to the Building's electric distribution
system or make any alteration or addition to the electric system
of the Premises existing on the Commencement Date. Should
Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and
the cost thereof shall be paid by Tenant upon Landlord's demand.
As a condition to granting such consent, Landlord, at Tenant's
sole
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expense, may cause a new survey to be made of the use of
electric energy (other than for heating and air conditioning) in
order to calculate the potential additional electric energy to
be made available to Tenant based upon the estimated additional
capacity of such additional risers or other equipment. When the
amount of such increase is so determined, and the estimated cost
thereof is calculated, the amount of monthly Additional Rent
payable pursuant to Paragraph 3 hereof shall be adjusted to
reflect the additional cost, and shall be payable as therein
provided.
(iv) If the public utility rate schedule for the supply of electric
current to the Building shall be increased during the term of
this Lease, the Additional Rent payable pursuant to Paragraph 3
hereof shall be equitably adjusted to reflect the resulting
increase in Landlord's cost of furnishing electric service to
the Premises. It is the intention hereof that Landlord only
recapture the charges payable by Tenant under Paragraph 3 and
under no circumstances shall Landlord earn any profit thereof.
(C) Tenant agrees to cooperate fully at all times with Landlord and to
abide by all regulations and requirements which Landlord may prescribe for the
use of the above utilities and services. Any failure to pay any costs as
described above shall constitute a breach of the obligation to pay Rent under
this Lease and shall entitle Landlord to rights herein granted for such breach.
(D) Landlord shall not be liable for, and Tenant shall not be entitled to,
any abatement or reduction of Rent by reason of Landlord's failure to furnish
any of the foregoing services, nor shall any such failure, stoppage or
interruption of any such service be construed either as an eviction of Tenant,
or relieve Tenant from the obligation to perform any covenant or agreement.
However, in the event of any failure, stoppage or interruption thereof, Landlord
shall use reasonable diligence to have service resumed promptly.
(E) Notwithstanding anything hereinafter to the contrary, Landlord
reserves the right from time to time to make reasonable modifications (Landlord
shall endeavor to minimize the interference of Tenant's business) to the above
provisions for utilities and services, provided that Tenant is able to conduct
its business.
RULES AND REGULATIONS
PARAGRAPH 10
Tenant agrees to abide by all rules and regulations of the Buildings and
Project ("Rules and Regulations") imposed by the Landlord as set forth in
Exhibit "D" attached hereto, as the same may
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be changed from time to time upon reasonable notice to Tenant. These Rules and
Regulations are imposed for the cleanliness, good appearance, proper
maintenance, good order and reasonable use of the Premises and the Project, as
may be necessary for the enjoyment of the Project by all tenants and their
employees and invitees. Landlord shall not be liable for the failure of any
tenant, its agents or employees to conform to the Rules and Regulations.
Landlord agrees to enforce such Rules and Regulations equally among all tenants.
TAXES AND TENANT'S PROPERTY
PARAGRAPH 11
(A) Tenant shall be liable for and shall pay not later than ten (10) days
before delinquency, all taxes, levies and assessments levied against any
personal property or trade fixtures placed by Tenant in or about the Premises.
If any such taxes, levies and assessments on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or if the assessed
value of the Building or the Project is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant and if
Landlord pays the taxes, levies and assessments, Tenant shall, upon demand,
repay to Landlord the taxes, levies and assessments so levied against Landlord,
or the proportion of such taxes, levies and assessments resulting from such
increase in the assessment.
(B) If Tenant improvements in the Premises, whether installed and/or paid
for by Landlord or Tenant and whether or not affixed to the real property so as
to become as part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which Tenant improvements conforming to
"Building Standard" (as referred to in Exhibit "B-2") are assessed, then the
real property taxes and assessments levied against Landlord or the Project by
reason of such excess, assessed valuation shall be deemed to be taxes levied
against personal property of Tenant and shall be governed by the provisions of
subparagraph 11(A). If the records of the Tax Assessor are available and
sufficiently detailed to serve as a basis for determining whether said Tenant
improvements are assessed at a higher valuation than Building Standard, such
records shall be binding on both Landlord and Tenant; otherwise the actual cost
of construction shall be the basis for such determination.
SUBSTITUTED PREMISES
PARAGRAPH 12
Landlord reserves the right without Tenant's consent on ninety (90) days'
written notice to Tenant, to substitute other premises located within the one
story Buildings controlled by Landlord in College Park at Forrestal Center for
the Premises described above, provided, that the substituted premises:
(i) contain at least the same contiguous square footage as the
Premises;
(ii) contain comparable electrical capacity, tenant improvements and
an independent Tenant control of the HVAC system; and
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(iii) are made available to Tenant such that the Rent is at the then
current rental rate for such space, in no event to exceed the
rental rate specified herein.
Landlord shall pay all reasonable out-of-pocket expenses of Tenant
incidental to such substitution of premises, including packing and moving
expenses, computer and telephone connection expenses, stationery, business
cards, and brochure expenses. Landlord shall reimburse Tenant within thirty
(30) days of Landlord's receipt of actual invoices for the above-listed
expenses. Landlord shall be responsible for ensuring that Tenant's modular
systems furniture remains in as good of a condition following such relocation as
it was prior to same (a walk-through inspection by both Tenant and Landlord
prior to any relocation shall determine such furniture's prior condition).
FIRE OR CASUALTY
PARAGRAPH 13
In the event that the Premises (regardless of whether the Premises or
access thereto is affected) are so damaged or destroyed to the extent of more
than one-third of their replacement cost, or to any substantial extent by a
casualty not covered by Landlord's insurance, or during the last two (2) years
of this Lease, Landlord or Tenant, upon giving thirty (30) days' notice to the
other, may elect to terminate this Lease. If the damage or destruction is other
than as provided above, then Landlord shall commence within ninety (90) days
after such damage or destruction to rebuild, repair or restore the Premises and
access thereto to substantially the same condition as when the same were
delivered to Tenant, excluding the improvements owned by Tenant, and the Lease
shall continue in full force and effect.
Landlord shall in no event be obligated to make any repairs or replacements
of any items owned by Tenant. If the Lease is not terminated but the Premises
are rendered totally untenantable, Rent shall abate during the period of such
untenantability. Tenant acknowledges (i) that Landlord shall not obtain
insurance of any kind on Tenant's improvements and betterment to the Premises
owned by Tenant or on Tenant's furniture, fixtures, equipment and other personal
property, (ii) that it is Tenant's obligation to obtain such insurance at
Tenant's sole cost and expense, and (iii) that Landlord not be obligated to
repair any damage thereto or replace the same.
EMINENT DOMAIN
PARAGRAPH 14
In case the whole of the Premises, or such part thereof as shall
substantially interfere with Tenant's use and occupancy thereof, shall be taken
by any lawful power or authority by exercise of the power of eminent domain,
Tenant or Landlord may terminate this Lease effective as of the date possession
is required to be surrendered to said authority. In the event of any taking (in
whole or part) of the Project whether or not the Premises or access thereto are
affected thereby, Landlord shall have the right to terminate this Lease. Except
as provided herein, Tenant shall not, because of any taking, assert any claim
against Landlord or the taking authority for any compensation because of such
taking, and Landlord shall be entitled to receive the entire amount of any award
without deduction for any estate or interest of Tenant. In the event the amount
of property or the type of estate taken shall not substantially interfere with
Tenant's use of the Premises, and Landlord does
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not terminate this Lease, Landlord shall proceed to restore the Premises (to the
extent permitted by the taking) to substantially their condition prior to such
partial taking, and a proportionate allowance shall be made to Tenant for Rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant shall be so deprived on account of such taking and restoration.
Provided same shall not diminish Landlord's award in any way, nothing contained
in this Paragraph 14 shall prevent Tenant from seeking any award against the
taking authority for the taking of personal property and fixtures owned by
Tenant or for relocation expenses recoverable from the taking authority. In no
event shall Landlord be required to expend more for restoration than received
from the taking authority for such taking. For the purposes of this paragraph,
"taking" shall also include any conveyance in lieu of condemnation.
ASSIGNMENT AND SUBLETTING
PARAGRAPH 15
(A) Except as provided in Subparagraph (G) below, Tenant shall not
voluntarily or involuntarily assign, sublet, mortgage, or otherwise encumber all
or any portion of its interest in this Lease or in the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Such attempted subletting, mortgage or other encumbrance
without such consent shall be null and void and of no effect. It is
conclusively recognized that with respect to any proposed sublet or assignment
that Landlord will be acting reasonably in withholding its consent in the
following instances (i) where the Rent per month of the proposed sublease or
assignment is less than eighty (80%) of the average Rent per month Tenant is
required to pay throughout the term of this Lease, (ii) the timing of the
proposed sublet is such that the Premises are vacant for a period of greater
than nine (9) months from the time the last of Tenant's employees have vacated
the Premises to the date Tenant requests Landlord's consent to a sublease or
assignment, (iii) the net worth of the proposed subtenant or assignee is less
than $10,000,000.00 (unless Tenant produces security satisfactory to Landlord),
(iv) the proposed subtenant's or assignee's use is not in accordance with uses
which are permissible by state and local zoning laws and/or Princeton University
regulations affecting uses permitted in College Park at Princeton Forrestal
Center. The above list of instances where the Landlord will be reasonable in
withholding its consent to a proposed assignment or sublease is not exclusive.
(B) No assignment, subletting, mortgage or other encumbrance of Tenant's
interest in this Lease shall relieve Tenant of its obligation to pay the Rent
and to perform all of the other obligations to be performed by Tenant hereunder.
The acceptance of Rent by Landlord from any other person shall not be deemed to
be a waiver by Landlord of any provision of this Lease or be a consent to any
subletting, assignment, mortgage or other encumbrance. Consent to one sublease,
assignment, mortgage or other encumbrance shall not be deemed to constitute
consent to any subsequent attempted subletting, assignment, mortgage or other
encumbrance.
(C) If Tenant desires at any time to assign this Lease or to sublet the
Premises or any portion thereof, Tenant shall first notify Landlord of Tenant's
desire to do so and shall submit in writing to Landlord no less than thirty (30)
days prior to such assignment or subletting (i) the name of the proposed
subtenant or assignee; (ii) the premises; (iii) the term and provisions of the
proposed sublease or assignment and a copy of the proposed sublease or assign-
ment; and (iv) such financial information as Landlord may reasonably request
concerning the proposed subtenant or assignee.
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(D) At any time within thirty (30) days after Landlord's receipt of the
information specified in subparagraph (C) above, Landlord may by written notice
to Tenant, elect (i) to take from Tenant a sublease of the Premises or the
portion thereof proposed to be subleased by Tenant, or to take an assignment of
Tenant's leasehold estate hereunder, or such part thereof as shall be specified
in said notice, upon the same terms as those offered to the proposed subtenant
or assignee, as the case may be; (ii) to give Tenant written consent to the
proposed assignment or sublease, provided that the Rent payable monthly by the
Tenant to the Landlord under the terms of this Lease shall be increased by a sum
equal to all rental and other considerations received by Tenant from its
subtenant or assignee in excess of the Rent payable by Tenant under the terms of
this Lease; or (iii) to terminate this Lease as to the portion (including all)
of the Premises proposed to be subleased or assigned with a proportionate
abatement in the Rent payable hereunder. If Landlord does not exercise any
option set forth in this subparagraph (D) within said thirty (30) day period,
Landlord shall be deemed to have refused to consent to the proposed assignment
or sublease and this Lease shall remain in full force and effect.
(E) If Tenant is a corporation, an unincorporated association or
partnership, the transfer, assignment or hypothecation of any stock or interest
in such corporation, association or partnership, in the aggregate in excess of
forty-nine (49%) percent, shall be deemed an assignment within the meaning and
provisions of this Paragraph, provided that the foregoing shall not apply with
respect to (i) any pledge of stock to an institutional lender, (ii) sales of
stock pursuant to a Public Offering, (iii) any sales of stock where (a), (b) and
(c) immediately following all apply (a) the Seller is the Tenant, (b) the buyer
of the stock is not an employee of the Tenant or an affiliate (as hereinafter
defined) of an employee and (c) the buyer is paying in cash an amount which the
Tenant reasonably certifies is fair market value for the stock, (iv) transfers
of stock not in a merger or consolidation transaction for prices current in the
market made while the Tenant's stock is publicly traded, (v) transfers of stock
in a merger or consolidation transaction which the surviving entity has a net
worth equal to the greater of $8,000,000.00 or the net worth of that entity
which is the Tenant immediately prior to the consummation of the merger or
consolidation transaction and the surviving entity assumes all obligations
imposed by the Lease or that party to it who is the Tenant. "Affiliate" shall
mean with respect to an entity or natural person any other natural person (who
by himself or together with his spouse or children) or other entity that
controls, is controlled by or is under common control with such, entity or
natural person.
(F) Tenant shall reimburse Landlord for Landlord's reasonable costs and
attorneys' fees incurred in conjunction with the processing and documentation of
any such requested assignment, subletting, transfer, change in ownership or
hypothecation of this Lease or Tenant's interest in and to the Premises.
(G) Tenant, if it is not then in default of this Lease may, without
Landlord's consent but with notice to Landlord with such information as
Landlord may reasonably request, sublet all or part of the Premises or assign
this Lease to any parent or wholly-owned subsidiary of Tenant; provided,
however, that Tenant shall at all times be and remain primarily and jointly
liable under this Lease despite any such subletting or assignment.
LANDLORD'S ACCESS TO PREMISES
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PARAGRAPH 16
Landlord reserves and shall at any and all times (having given notice
except in the event of an emergency) have the right to enter the Premises to
inspect the same, to supply janitorial service and any other service to be
provided by Landlord to Tenant hereunder, to show said Premises to prospective
purchasers or tenants, to alter or repair the Premises or any portion of the
Building or Project, all without being deemed guilty of an eviction of Tenant
and without abatement of Rent, and may for that purpose erect scaffolding and
other necessary temporary structures where reasonable required by the character
of the work to be performed, provided that the business of Tenant shall be
interfered with as little as is reasonably practicable. Tenant hereby waives
any claim for damages or any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord by any of said
means shall not under any circumstances be construed or deemed to be a forcible
or unlawful entry into, or a detainer of the Premises, or any eviction of Tenant
from the Premises or any portion thereof. No provision of this Lease shall be
construed as obligating Landlord to perform any repairs, alterations or
decoration except as otherwise expressly agreed to be performed by Landlord.
SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES
PARAGRAPH 17
(A) This Lease is junior, subject, and subordinate to all ground
leases, mortgages, deeds of trust, and other security instruments of any kind
now covering the Project or any portion thereof. Landlord reserves the right to
place liens or encumbrances on the Project or any part thereof or interest
therein superior in lien and effect to this Lease. This Lease, at the option of
Landlord, shall be subject and subordinate to any and all such liens or
encumbrances now or hereafter imposed by Landlord without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination. Notwithstanding the foregoing, Tenant covenants
and agrees to execute and deliver upon request such further instruments
evidencing such subordination of this Lease as may be reasonably requested by
Landlord. Landlord will ask for a Non-Disturbance Agreement from its current
and future mortgagees.
(B) Tenant shall at any time and from time to time upon not less than
ten (10) days' prior notice by Landlord, execute, acknowledge and deliver to
Landlord a statement in writing and in form and substance satisfactory to
Landlord certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that the same is in full force and effect
as modified and stating the modifications), and the dates to which the Basic
Annual Rent, Additional Rent and other charges have been paid in advance, if
any, and stating whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement or
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condition contained in this Lease and, if so, specifying each such default of
which Tenant may have knowledge. Any such statement delivered pursuant to this
Paragraph may be relied upon by any prospective purchaser of the fee of the
Building or the Project or any prospective purchaser of the fee of the Building
or the Project or any mortgagee, ground lessor or other encumbrancer thereof or
any assignee of any such person.
(C) Should any mortgage on the Property of which the Premises are a part
be foreclosed, the Purchaser upon foreclosure of the lien of the mortgage shall
have the right following foreclosure to preserve this Lease and the rights of
the Tenant or any other person or entity having an interest in the Premises,
and the Tenant shall attorn to such Purchaser at foreclosure and pay and perform
its obligations under this Lease for the benefit of such Purchaser.
SALE BY LANDLORD
PARAGRAPH 18
In the event of a sale or conveyance by Landlord of the Project or any
part thereof, the same shall operate to release Landlord from any and all
liability under this Lease after the date of such conveyance of title. If any
security deposit has been made by Tenant, Landlord shall transfer such security
deposit to the purchaser,and thereupon Landlord shall be discharged from any
further liability in reference thereto.
INDEMNIFICATION OF LANDLORD AND INSURANCE
PARAGRAPH 19
(A) Tenant shall indemnify, hold Landlord harmless from and defend
Landlord against any and all claims, loss, costs, damage, expense or liability,
including without limitation reasonable attorneys' fees, for any injury or
damages to any person or property whatsoever when such injury has been caused in
part or in whole by any act, neglect, fault, or omission of Tenant, its agents,
servants, employees or invitees. Landlord shall indemnify, hold Tenant harmless
from and defend Tenant against any and all claims, loss, costs, damage, expense
or liability, including without limitation reasonable attorneys' fees, for any
injury or damages to any person or property whatsoever when such injury has been
caused in part or in whole by any act, neglect, fault, or omission of Landlord,
its agents, servants, employees or invitees. This indemnity shall not require
any payment by Landlord as condition precedent to recovery.
(B) Tenant hereby agrees to maintain in full force and effect at all
times during the term of this Lease, at its own expense, for the protection of
Tenant and Landlord as their interests may appear, policies of insurance issued
by a responsible carrier or carriers acceptable to Landlord licensed in New
Jersey and also having a policyholder's rating of not less than A- in the most
current edition of Best's Insurance Reports, which afford the following
coverage:
(i) Worker's Compensation -- Statutory
Employer's Liability -- Not less than $250,000
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(ii) Comprehensive General -- Not less than $2,000,000
Liability Insurance Combined Single Limit
including Blanket for both bodily injury and
Contractual Liability property damage
Broad Form Property Damage,
Personal Injury, Completed
Operations, Products Liability,
Fire Damage
Landlord and its managing agent shall be named as an additional
insured on all policies listed under (ii) above, and (iv) below.
(iii) All Risk Property Coverage in an amount sufficient to cover
the full cost of replacement of all improvements and
betterment to the Premises owned by Tenant and all of Tenant's
fixtures and other personal property.
(iv) Rent Insurance and Business Interruption Insurance in an
amount equal to the Basic Annual Rent and Additional Rent for
a period of at least twelve (12) months commencing with the
date of loss.
(C) Tenant shall deliver to Landlord five (5) days prior to Tenant's
occupancy such insurance required to be carried by Tenant and thereafter at
least thirty (30) days prior to expiration of each such policy, certificates of
insurance evidencing the above coverage with limits not less than those
specified above. Such certificate, with the exception of Worker's Compensation,
shall expressly provide that the interest of Landlord therein shall not be
affected by any breach by Tenant of any provision of any such policy. Further,
all certificates shall expressly provide that no less than thirty (30) days
prior written notice shall be given Landlord in the event of material
alterations to or cancellation of the coverage evidenced by such certificates.
(D) Upon demand, Tenant shall provide Landlord, at Tenant's expense, with
such increased amount of existing insurance, and such other insurance in such
limits as Landlord may require and such other hazard insurance as the nature and
condition of the Premises may require in the sole judgement of Landlord, to
afford Landlord adequate protection for said risks. Such increased amounts
shall be comparable with those required by other landlords of comparable quality
Princeton area office parks.
(E) Intentionally Blank
(F) Landlord makes no representation that the limits of liability
specified to be carried by Tenant under the terms of this Lease are adequate to
protect Tenant against Tenant's undertaking under this Paragraph 19. In the
event Tenant believes that any such insurance coverage called for under this
Lease is insufficient, Tenant shall provide, at its own expense, such additional
insurance as it deems adequate.
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(G) Each policy evidencing the insurance to be carried by Tenant under
this Lease shall contain a clause that such policy and the coverage endorsed
thereby shall be primary with respect to any policies carried by Landlord, and
that any coverage carried by Landlord shall be excess insurance.
(H) Any insurance required of Tenant under this Lease may be furnished by
Tenant under a blanket policy carried by it. Such blanket policy shall contain
an endorsement that names Landlord as an additional insured, references the
Premises, and guarantees a minimum limit available for the Premises equal to the
insurance amounts required in this Lease.
(I) In the event Tenant fails to procure, maintain, and/or pay for the
insurance required by this Lease, at the times and for the durations specified
in this Lease, Landlord shall have the right, but not the obligation, at any
time and from time to time, and without notice, to procure such insurance and/or
pay the premiums for such insurance, in which event Tenant shall repay Landlord,
immediately upon demand by Landlord, as additional rent, all sums so paid by
Landlord together with interest thereon and any costs or expenses incurred by
Landlord in connection therewith, without prejudice to any other rights and
remedies of the Landlord under this Lease.
WAIVER OF SUBROGATION
PARAGRAPH 20
Tenant and Landlord each agree that the respective insurance carried by it
against loss or damage by fire or other casualty shall contain a clause whereby
the insurer waives its right of subrogation against the other party.
Pursuant to the foregoing, Landlord and Tenant hereby waive all claims for
recovery from the other party for any loss or damage to any of its property
insured under valid and collectible insurance policies to the extent of any
recovery collectible under such insurance. Landlord represents that it
currently has and will maintain during the term of this Lease all risk property
insurance for full replacement value of its property.
NO WAIVER
PARAGRAPH 21
No waiver by Landlord of any provision of this Lease or of any breach by
Tenant hereunder shall be deemed to be a waiver of any other provision hereof,
or for any subsequent breach by Tenant of the same or any other provisions.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act of Tenant. Failure of
Landlord to insist upon strict performance of any provision of this Lease shall
not be deemed to be a waiver of such provision. No act or omission by Landlord
or Landlord's agents during the term of this Lease shall be deemed an acceptance
of a surrender of the Premises, unless confirmed by Landlord in writing. The
delivery of the keys to an employee or agent of Landlord shall not operate as a
termination of the Lease or a surrender of the Premises. The acceptance of any
Rent by Landlord following a
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breach of this Lease by Tenant shall not constitute a waiver of any of
Landlord's rights unless such waiver is expressly stated in writing and signed
by Landlord.
DEFAULT
PARAGRAPH 22
(A) The occurrence of any of the following shall constitute a material
default and breach of this Lease by Tenant:
(i) Any failure by Tenant to pay the Rent or to make any other
payment required to be made by Tenant hereunder within five (5)
days of date due;
(ii) The abandonment of the Premises by Tenant;
(iii) Any failure by Tenant to observe and perform any of its
obligations under this Lease, where such failure continues for
thirty (30) days (except where a different period of time is
specified in this Lease) after Landlord has given Tenant
written notice or such other notice as may be required by law;
(iv) Tenant makes, or has made, or furnishes, or has furnished, any
warranty, representation or statement to Landlord in connection
with this Lease, or any other agreement to which Tenant and
Landlord are parties, which is or was false or misleading in
any material respect when made or furnished;
(v) Any substantial portion of the assets of Tenant is transferred
unless such transfer is incurred in the ordinary course of
Tenant's business in good faith for fair equivalent
consideration, and with Landlord's consent or unless the
transfer is to an entity that pursuant to Article 15 is a
permitted assignee of the Tenant's interest in this Lease;
(vi) Tenant becomes insolvent as defined in the Federal Bankruptcy
Code, admits in writing its insolvency or its present or
prospective inability to pay its debts as they become due, is
unable to or does not pay all or any material portion (in
number or dollar amount) of its debts as they become due,
permits or suffers a judgement to exist against it which
affects Tenant's ability to conduct its business in the
ordinary course (unless enforcement thereof is stayed pending
appeal), makes or proposes an assignment for the benefit of
creditors or any class thereof for purposes of effecting a
moratorium upon or extension or composition, or commences or
proposes to commence any bankruptcy, reorganization or
insolvency proceeding, or other proceedings under any federal,
state or other law for the relief of debtors;
(vii) Tenant fails to obtain the dismissal, within sixty (60) days
after the commencement thereof, of any bankruptcy,
reorganization or insolvency proceeding, or other proceeding
under any law for the relief of debtors, instituted against it
by one or more third parties, or fails actively to oppose any
such proceedings, or, in any such proceeding, defaults or files
an answer
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admitting the material allegations upon which the proceeding
was based or alleges its willingness to have an order for
relief entered or its desire to seek liquidation,
reorganization or adjustment of any of its debts;
(viii) Any receiver, trustee, or custodian is appointed to take
possession of all or any substantial portion of the assets of
Tenant.
(B) In the event of any such default by Tenant, then in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the option to immediately terminate this Lease and all rights of Tenant
hereunder by giving written notice of such intention to terminate. In the event
that Landlord shall elect to so terminate the Lease, then Landlord may recover
from Tenant:
(i) any unpaid Rent which shall have accrued at the time of such
termination; plus
(ii) the entire amount of unpaid Rent for the balance of the term
which amount shall, at Landlord's option, be immediately due
and payable; plus
(iii) any other amount necessary to compensate Landlord for
Landlord's loss or damage caused directly or indirectly by
Tenant's failure to perform its obligations under this Lease
including, but not limited to, reasonable attorneys' fees and
costs; plus
(iv) at Landlord's election, such other amounts in addition to, or
in lieu of the foregoing, as may be permitted from time to time
by applicable law.
(C) In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, to re-enter and to take
possession of the Premises and to remove all persons and property from the
Premises. Landlord is hereby granted a lien, in addition to any statutory lien
or right to distrain that may exist, on all personal property of Tenant in or
upon the Premises, to assure payment of the Rent and performance of the
covenants and conditions of this Lease. Landlord shall have the right, as agent
of Tenant, to take possession of all personal property of Tenant found in or
about the Premises including without limitation furniture and fixtures of Tenant
and, to sell the same at public or private sale and to apply the proceeds
thereof to the payment of any monies due or becoming under this Lease, or to
remove all such effects and store same in a public warehouse or elsewhere at the
cost of and for the account of Tenant, or any other owner or occupant, Tenant
hereby waiving the benefit of all laws exempting property from executing, levy
and sale of distress or judgement. So long as no material default and breach of
this Lease by Tenant as defined in Subparagraph (A) has occurred the Landlord
will subordinate liens it has by virtue of this Subparagraph (C) or by statute
or other law to the lien of an institutional lender who has made a bona fide
loan to Tenant but only to the extent the liens of the Landlord attach to
property of Tenant which property both (i) was or is purchased with the proceeds
of such a loan and (ii) is the subject of a security interest in favor of the
institutional lender.
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(D) In the event of the vacation or abandonment of the Premises by Tenant
or in the event that Landlord shall elect to re-enter as provided above or shall
take possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Landlord does not elect to terminate this Lease
as provided in this Paragraph 22, Landlord may from time to time, without
terminating this Lease, either recover all Rent as it becomes due or relet the
Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in his sole
discretion may deem advisable with the right to make alterations and repairs to
the Premises.
(E) In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied: first, to the
payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; second, to the payment of any reasonable cost of such reletting,
including but not limited to broker's commissions and reasonable attorneys'
fees; third, to the payment of the cost of any alterations and repairs to the
premises; fourth, to the payment of any Rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in payment of future Rent
as the same may become due and payable hereunder. Should any such reletting
result in the payment of rentals less than the Rent payable by Tenant hereunder,
then Tenant shall pay such deficiency to Landlord immediately upon demand
therefor by Landlord. Tenant shall also pay Landlord as soon as ascertained,
any reasonable costs and expenses incurred by Landlord in such reletting or in
making such alterations and repairs not covered by the rentals received from
such reletting.
(F) No re-entry or taking possession of the Premises by Landlord pursuant
to this Paragraph 22 shall be construed as an election to terminate this Lease
unless a written notice of such intention be given to Tenant. Notwithstanding
any reletting without termination by Landlord because of any default by Tenant,
Landlord may at any time after such reletting, elect to terminate this Lease for
any such default.
RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT
PARAGRAPH 23
If Tenant defaults in the making of any payment or in the doing of any act
herein required to be made or done by Tenant, then Landlord may but shall not be
required to make such payment or do such act and charge to Tenant the amount of
all costs in connection therewith including but not limited to reasonable legal
fees and expenses incurred by Landlord, with interest thereon as provided in
Paragraph 36 from the date paid by Landlord to the date of payment thereof by
Tenant. Such payment and interest shall constitute Additional Rent hereunder due
and payable upon ten (10) days notice but the making of such payment or the
taking of such action by Landlord shall not operate to cure such default or to
stop Landlord from the pursuit of any other remedy to which Landlord would
otherwise be entitled.
NOTICE
PARAGRAPH 24
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All notices which Landlord or Tenant may be required or may desire to serve
on the other may be served, as an alternative to personal service, by mailing
the same by registered or certified mail, return receipt requested, postage
prepaid, addressed as set forth in Item 15 of the Basic Lease Provisions, or
addressed to such other address or addresses as either Landlord or Tenant may
from time to time designate to the other by written notice.
INSOLVENCY OR BANKRUPTCY
PARAGRAPH 25
In no event shall this Lease be assigned or assignable by operation of law
and in no event shall this Lease be an asset of Tenant in any receivership,
bankruptcy, insolvency, or reorganization proceeding.
SURRENDER AND HOLDOVER
PARAGRAPH 26
(A) On the expiration or the sooner termination hereof, except for fire
damage and/or casualty for which Landlord has insurance, Tenant shall peaceably
surrender the Premises broom clean, in good order, condition and repair
(ordinary wear and tear excepted). On or before the last day of the term or the
sooner termination hereof, Tenant shall at its expense remove its trade
fixtures, signs and other personal property from the Premises. Any property not
removed shall be deemed abandoned and may either retained by Landlord as its
property, or disposed of, without accountability and at Tenant's expense, in
such manner as Landlord may determine. If the Premises are not surrendered at
the end of the term or the sooner termination, Tenant shall indemnify Landlord
against loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, claims made by any succeeding tenants
found on such delay. Tenant shall promptly surrender all keys for the Premises
and Building restrooms to Landlord at the place then fixed for payments of Rent.
Tenant's covenants hereunder shall survive the expiration or termination of this
Lease.
(B) If Tenant holds over after the expiration or sooner termination hereof
without the express written consent of Landlord, Tenant shall become a Tenant at
sufferance only at two times the greater of (i) the Rent due hereunder of (ii)
the then prevailing market rate rent, as determined by Landlord in its sole and
absolute discretion, plus all items of Additional Rent provided herein, and
either (i) or (ii) shall be prorated on a daily basis according to the number of
days contained in the month that such expiration or earlier termination takes
place, and otherwise upon the terms, covenants and conditions herein specified,
so far as applicable. Acceptance by Landlord of Rent after such expiration or
earlier termination shall not constitute a consent to a holdover hereunder or
result in a renewal. The foregoing provisions of this paragraph are in addition
to and do not affect Landlord's rights of re-entry or any other rights of
Landlord hereunder or as otherwise provided by law.
CONDITION OF PREMISES
PARAGRAPH 27
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Landlord's sole responsibility for preparation of the Premises will be as
set forth in the Work Letter attached hereto as Exhibit "B-1" and if there is no
Work Letter, Landlord's sole responsibility will consist of building of a
demising wall and an entry door for Tenant. Landlord's responsibility for the
preparation of the Premises as described above is hereinafter referred to as
Landlord's Work. Except for Landlord's Work provided herein, Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises, the Building or the
Project for the conduct of Tenant's business.
QUIET ENJOYMENT
PARAGRAPH 28
Upon Tenant's paying the rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be performed hereunder, Tenant shall have quiet enjoyment of the Premises for
the entire term hereof, subject to all of the provisions of this Lease. This
covenant shall be binding upon any Landlord hereunder only during its respective
ownership of the Premises.
LIMITATION OF LANDLORD'S LIABILITY
PARAGRAPH 29
(A) Landlord and its employees and agents shall not be liable for any
damage to Tenant's property entrusted to employees of Landlord or its agents,
nor for any loss or interruption of Tenant's possession, nor for loss of or
damage to any property by theft or otherwise, nor for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street, or
sub-surface or from any other place or resulting from dampness or any other
cause whatsoever in the Building or the Project. Landlord and its employees and
agents shall not be liable for any property loss resulting from any latent
defect in the Premises or in the Building.
(B) Tenant shall look solely to Landlord's estate and property in the
Project (or the proceeds thereof) for the satisfaction of Tenant's remedies for
the collection of a judgement (or other judicial process) requiring the payment
of money by Landlord in the event of any default by Landlord hereunder, and not
other property or assets of Landlord or Landlord's partners or members shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to either this Lease, the
relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the Premises.
GOVERNING LAW
PARAGRAPH 30
This Lease shall be governed by and construed pursuant to the laws of the
State of New Jersey.
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COMMON FACILITIES
PARAGRAPH 31
Tenant shall have the non-exclusive right in common with others, to the use
of common entrances, lobbies, elevators, ramps, drives, stairs and similar
access and serviceways and the other common facilities (except for parking
spaces other than those provided for in Paragraph 39) in and adjacent to the
Building or Project, as may be provided by Landlord from time to time for
general use, subject to such rules and regulations as may be adopted by the
Landlord including, but not limited to, the right to close from time to time all
or a portion of said common facilities to such extent as may be legally
sufficient, in Landlord's sole opinion, to prevent a dedication thereof or the
accrual of rights to any person or to the public therein.
SUCCESSORS AND ASSIGNS
PARAGRAPH 32
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. However, the obligations of Landlord
under this Lease shall not be binding upon Landlord herein named with respect to
any period subsequent to the transfer of its interest in the Project as owner or
lessee thereof, and in the event of such transfer said obligations shall
thereafter be binding upon each transferee of the interest of Landlord herein
named as such owner or lessee of the Project, but only with respect to the
period commencing with its respective transfer in and ending with a subsequent
transfer out, and such transferee, by accepting such interest, shall be deemed
to have assumed such obligations except only as may be expressly otherwise
provided in this Lease. A lease of Landlord's entire interest in the Project as
owner or lessee thereof shall be deemed a transfer within the meaning of this
Paragraph 32.
BROKERS
PARAGRAPH 33
Tenant represents and agrees that it has not directly or indirectly dealt
with any real estate broker(s) other than the firm(s) specified in Item 12 of
Basic Lease Provisions in connection with this transaction. Further, Tenant
covenants and agrees that with respect to any renewal or extension or expansion
of this Lease, or with respect to any transaction by Tenant or its affiliates,
successors or assigns with Landlord or 400 College Road Associates, Limited
Partnership with respect to the leasing of space by Tenant either by original
lease, renewal or expansion space within any buildings
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owned by Landlord or 400 College Road Associates, Limited Partnership within
College Park at Princeton Forrestal Center in Plainsboro, New Jersey, that
Tenant will pay all brokerage commissions or finders fees, commissions, fees or
other remuneration claimed by any real estate broker or finder other than the
firm(s) specified in Item 12 of the Basic Lease Provisions. Tenant agrees to
defend, indemnify and hold Landlord harmless from and against any claims for
brokerage commissions or finder's fee arising out of or based upon any actions
of Tenant with respect to any other broker or brokers other than the firm (s)
specified in Item 12 of the Basic Lease Provisions with respect to the leasing
of space by Tenant, either by original lease, renewal, or expansion space for
any space including, but not limited to the Premises, leased by Tenant or its
affiliates, successors or assigns from Landlord or 400 College Road Associates,
Limited Partnership within the buildings owned by either of them at College Park
at Princeton Forrestal Center in Plainsboro, New Jersey. The terms of this
Paragraph will survive termination of this Lease.
NAME
PARAGRAPH 34
Tenant shall not, without the written consent of Landlord, use the name of
the Building or the Project for any purpose other than as the address of the
business to be conducted by Tenant in the Premises, and in no event shall Tenant
acquire any rights in or to such names.
EXAMINATION OF LEASE
PARAGRAPH 35
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a Lease or otherwise until execution by and delivery to both Landlord and
Tenant.
ADDITIONAL CHARGES
PARAGRAPH 36
Any amount due from Tenant to Landlord which is not paid when due
(including any applicable grace periods), in addition to other remedies
available to Landlord, shall at Landlord's option bear interest which shall be
at the lesser of (i) twelve (12%) percent per annum or (ii) the maximum lawful
rate per annum, from the date such payment is due until paid, but the payment of
such interest shall not excuse the cure of default. In addition to the
foregoing, Landlord may also impose a late charge of two (2%) percent of the
amount past due, and a charge for reasonable legal fees and costs.
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MARGINAL HEADINGS
PARAGRAPH 37
The marginal headings and titles to the Paragraphs of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
PRIOR AGREEMENTS; SEVERABILITY
PARAGRAPH 38
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement, understanding or representation pertaining to any such matter shall
be effective for any purpose. No provision of this Lease may be amended or
added to except by an agreement in writing signed by the parties hereto or their
respective successors in interest. If any term or provision of this Lease, the
deletion of which would not adversely affect the receipt of any material benefit
by either party hereunder, shall be held invalid or unenforceable to any extent,
the remainder of this Lease shall not be affected thereby and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
PARKING
PARAGRAPH 39
Tenant shall have the right to the non-exclusive use of the number of
parking spaces shown in Item 11 of Basic Lease Provisions. Tenant covenants and
agrees to comply with all reasonable rules and regulation which Landlord may
hereafter from time to time make to assure use of parking spaces by permitted
users. Landlord's remedies under such rules and regulations may include, but
shall not be limited to, the right to tow away at owner's expense any vehicles
not parked in compliance with these rules and regulations. Landlord shall not
be responsible to Tenant for the noncompliance or breach by any other tenant of
said rules and regulations.
AUTHORITY
PARAGRAPH 40
Tenant represents that Tenant is authorized to do business in the State of
New Jersey. Upon Landlord's request, Tenant's signatories hereto will furnish
satisfactory evidence of Tenant's authorization and their authority to execute
this Lease on behalf of Tenant.
NO LIGHT, AIR OR VIEW EASEMENT
PARAGRAPH 41
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Any diminution or shutting off of light, air or view of any structure which
may be erected on lands adjacent to the Building shall in no way effect this
Lease or impose any liability on Landlord.
FORCE MAJEURE
PARAGRAPH 42
Except as otherwise expressly provided herein, this Lease and the
obligations of Tenant to pay Rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease, if
Landlord is prevented or delayed from so doing by reason of any cause beyond
Landlord's reasonable control, including, but not limited to, Acts of God,
strikes, labor troubles, shortage of material, governmental preemption in
connection with a national emergency or by reason of any rule, order or
regulations of any governmental agency or by reason of war, hostilities or
similar emergency; provided that Landlord shall in each instance exercise
reasonable diligence to effect performance as soon as possible. It is agreed
that Landlord shall not be required to incur any overtime or additional expenses
in Landlord's reasonable diligence to effect the performance of any of
Landlord's obligations hereunder.
ATTORNMENT
PARAGRAPH 43
If for any reason the leasehold estate of Landlord as Tenant under any
underlying lease is terminated by summary proceedings or otherwise, Tenant will
attorn to the Landlord under such underlying Lease and will recognize such
Landlord as Tenant's Landlord under this (sub)lease. Tenant agrees to execute
and deliver, at any time, and from time, to time, upon the request of Landlord
or of the Landlord under any such underlying lease, any instrument which may be
necessary or appropriate to evidence such attornment and Tenant hereby appoints
Landlord the Landlord under such underlying lease the attorney-in-fact,
irrevocable, of Tenant to execute and deliver any such instrument for and on
behalf of Tenant. Tenant further waives the provisions of any statute or rule
of law now or election to terminate this (sub)lease or to surrender possession
of the Premises in the event such underlying lease terminates or any such
proceeding is brought by Landlord under such underlying lease, and agrees that
his (sub)lease shall not be affected in any way whatsoever by any such
proceeding or termination.
COMMON AREA MAINTENANCE COST
PARAGRAPH 44
Base Project Operating Expenses as defined in Paragraph 3 shall also
include Landlord's costs and expenses incurred as Landlord's share of common
area maintenance all as set forth in Article 29 of the underlying Land Lease
between the Trustees of Princeton University as landlord and Landlord as tenant.
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NOTICE REGARDING TENANT'S MOVING IN OR OUT
PARAGRAPH 45
Two days prior to any move into or out of the Premises, Tenant must notify
National Business Parks, as Agent for College Road Associates, of the following:
the name of the Moving Company, Moving Company representative in charge of the
move, and Moving Company's phone number. All moves must be done during the work
week (Monday through Friday, inclusive between the hours of 7:30 A.M. and 4:30
P.M.). No elevators will be available Saturday, Sunday or holidays or after 4:30
P.M. on other days. The insurance evidence in the form required by Paragraph 19
hereof must be delivered to Landlord prior to commencement of the Tenant's move
into or out of the Premises.
FIRST OPTION TO RENEW
PARAGRAPH 46
Upon condition that Tenant is not in default in the payment of any Rent or
other charge payable to Tenant under this Lease and not in default in the
performance of any covenant or obligation to be performed by Tenant under this
Lease and upon Tenant's giving Landlord nine (9) months notice in writing in the
manner prescribed in Article 24 hereof prior to the expiration of the term
hereof, Tenant shall have the option to renew and extend this Lease for an
additional period of five (5) years, pursuant and subject to all terms,
covenants, provisions, and conditions of this Lease, including, without
limitation, the payment of all items of Rent as provided for hereunder, except
that the Basic Annual Rent shall be adjusted to ninety-five percent (95%) of the
then prevailing fair market rent for comparable space (excluding fixtures and
improvements installed by Tenant after the Commencement Date) within Princeton
Forrestal Center (including such concessions as free rent, tenant improvements
and brokerage commissions, if applicable).
SECOND OPTION TO RENEW
PARAGRAPH 47
Upon condition that Tenant is not in default in the payment of any Rent or
other charge payable to Tenant under this Lease and not in default in the
performance of any covenant or obligation to be performed by Tenant under this
Lease and upon Tenant's giving Landlord nine (9) months notice in writing in the
manner prescribed in Article 24 hereof prior to the expiration of the first
renewal term, Tenant shall have the option to renew and extend this Lease for an
additional period of five (5) years, pursuant and subject to all terms,
covenants, provisions, and conditions of this Lease, including, without
limitation, the payment of all items of Rent as provided for hereunder, except
that the Basic Annual Rent shall be adjusted to ninety-five percent (95%) of the
then prevailing fair market rent for comparable space (excluding fixtures and
improvements installed by Tenant after the Commencement Date) within Princeton
Forrestal Center (including such concessions as free rent, tenant improvements
and brokerage, if applicable).
EXPANSION
PARAGRAPH 48
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Upon condition that Tenant is not in default in the payment of Basic Annual
Rent, Additional Rent or other charges payable by Tenant under this Lease and
not in material default in the performance of any covenant or obligation to be
performed by Tenant under this Lease and upon Tenant's giving Landlord notice
in writing in the manner prescribed in Article 24 hereof, and Tenant requires a
minimum of 25,000 rentable square feet of total space (representing a minimum of
7,000 additional rentable square feet), and Landlord, without having to relocate
any other tenants within College Park at Princeton Forrestal Center, has such
appropriate 25,000 or more rentable square feet that are contiguous and not
subject to the rights of any other person or entity and not the subject of
negotiations with any other prospective tenant ("New Premises") available in its
buildings located within College Park at Princeton Forrestal Center, Landlord
shall respond within fifteen (15) days to Tenant to advise Tenant that Landlord
has such space. If Tenant elects to relocate to such space, Tenant and Landlord
shall amend this Lease as follows:
* Premises to be changed to New Premises;
* Landlord to provide an allowance (based upon the then prevailing
allowances offered in the Princeton Forrestal Center relative to corresponding
terms such as length of term, rental rate, etc...) to Tenant for the New
Premises' construction improvements;
* Any unamortized costs associated with the original Premises shall
be spread over the term and rental rate associated with the New Premises. Such
unamortized costs shall include the following: (i) any unamortized portion of
the Tenant Improvements (ii) any unamortized portion of the brokerage commission
associated with the original term of this Lease; (iii) the difference in Rent
(based upon an average rate per square foot) which Landlord has received from
Tenant at the time of Tenant's expansion from the Rent (based upon the average
price per square foot over the term of this Lease) which Landlord would have
received if Tenant had not expanded and had occupied the Premises for the entire
original term of this Lease. The difference in Rent shall be amortized in the
ensuing term for the New Premises in a time period not to exceed the balance of
time remaining in the initial term for the Original Premises. For example: On
the first day of the twenty-second (22nd) month of the Lease, Tenant notices
Landlord of its need to expand; then Landlord (within fifteen (15) days)
acknowledges that it has the space to accommodate such expansion ; the
unamortized rent calculation shall be based on the following: Assume the New
Premises are ready for occupancy ninety (90) days after Landlord has received
such notice (first day of the twenty-fifth (25th) month). The calculation of
the unamortized Rent will be as follows: First, there would have been sixty (60)
months remaining in the initial term. Therefore Landlord has received Rent for
only the first twenty-four (24) months - a total of $299,125.00 or an average of
$8.31 per square foot per annum; the average price per square foot over the term
of this Lease which Landlord would have received if Tenant had not expanded is
$17.59 per square foot per annum (however, because of (i) and (ii) above,
$200,000.00 for the initial tenant improvements and $100,000.00 for the
brokerage commission associated with the initial term for the original Premises
will be deducted - or $300,000.00/7 years/18,000 square feet = $2.38; therefore,
$17.59 - $2.38 = $15.21). Therefore, the difference is $6.90 per square foot per
annum, which must be amortized within the first sixty (60) months of the ensuing
term for the New Premises ($6.90 x 18,000 sf / 12 (months per year) x 24 months)
= $248,400.00; which must be amortized over the first sixty (60) months of the
ensuing term for the New Premises.
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* The rental rate and term for the New Premises shall be based upon
ninety-five percent (95%) of the then prevailing fair market value and length of
lease term for comparable space within Princeton Forrestal Center, but shall not
exceed $20.00 per square foot per annum if Tenant expands pursuant to this
Paragraph 48 within the first five (5) years of the term of this Lease.
If Landlord is unable to accommodate Tenant's expansion requirement,
Tenant may elect to terminate this Lease by paying to the Landlord a sum equal
to ninety percent (90%) of the balance of all Rent and Additional Rent remaining
due to Landlord hereunder at the time of Tenant's noticing Landlord of its
intent to terminate the Lease. If Tenant elects to terminate this Lease, Tenant
must vacate the Premises within one-hundred and eighty (180) days after having
submitted notice of its intent to do so. Any holdover thereafter is subject to
the terms and conditions contained within Paragraph 26 of this Lease.
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STATE OF NEW YORK :
:ss
COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this ______ day of _______________, 1996,
before me, the subscriber, a Notary Public of the State of
_________________________________, personally appeared John Zirinsky, of Z
Forrestal Corp., the General Partner of Z Forrestal Center, L.P., the General
Partner of College Road Associates, Limited Partnership, who, I am satisfied, is
the person who has signed the within instrument, and he did acknowledge that he
signed, sealed and delivered the same as such officer aforesaid; and that the
within instrument is the voluntary act and deed of said corporation made by
virtue of authority from its Board of Directors.
-------------------------------
STATE OF :
:ss
COUNTY OF :
BE IT REMEMBERED, that on this ______ day of ________________, 1996, before
me, the subscriber, a Notary Public of the State of __________________________,
personally appeared ___________________________________________, president of
_________________________________________, who, I am satisfied, is the person
who has signed the within instrument, and he did acknowledge that he signed,
sealed and delivered the same as such officer aforesaid; and that the within
instrument is the voluntary act and deed of said corporation made by virtue of
authority from its Board of Directors.
-------------------------------
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EXHIBIT B-1
LANDLORD'S WORK LETTER
It is the intent of this Exhibit that Tenant shall be permitted reasonable
freedom in the interior design and layout of its space, consistent with
applicable building codes and sound architectural and construction practices in
first class office buildings, provided that no interference
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is caused to the operation of the Building's mechanical, heating, cooling or
electrical systems or other building operations or functions, and no increase in
maintenance or utility charges will be incurred by Landlord. Any additional
costs of design, construction, operation or maintenance which results from
Tenant's deviations from Building Standard quantities or specifications shall be
charged to Tenant.
A. IMPROVEMENTS
1. Landlord's Work: Landlord (in accordance with applicable building
codes and regulations), at its sole cost and expense, shall furnish and
install in or for the benefit of the Premises pursuant to the plans and
specifications referred to below, the following:
(a) For divided-floor tenancies, all walls separating the Premises from
areas or from other tenant space.
(b) Interior core improvements, including men's and women's toilet
rooms, telephone closets, electrical closet, janitorial closet and
core walls.
(c) Those Building Standard improvements as shown in the list of
allowances as detailed in Exhibit B-2, and indicated as shown in
Exhibit "A".
2. Landlord Allowance: Landlord will contribute $200,000.00 towards all
Tenant Improvements in the demised Premises only. Landlord will inform Tenant
of Landlord's cost to perform the work as shown in Exhibit "A", and if such cost
exceed $200,000.00 and Tenant elects to have Landlord perform such work, Tenant
shall pay to Landlord the excess over the Landlord's contribution ($200,000.00)
in accordance with the payment schedule listed below. If the cost to perform
such work is less than $200,000.00 the difference shall be credited toward
Tenant's telephone and data installation.
3. Tenant's Option to Perform Work: Landlord under the terms of this
Lease will allow Tenant to perform its own work under the following conditions:
A) Landlord has the exclusive option to either accept to perform the
Tenant work upon the Tenant producing competitive bids from qualified and
approved contractors, and provided the scope of the work is equal to all other
bids. Tenant must submit to the Landlord its lowest bid price in the following
manner.
1) Name of the general contractor indicating a lump sum bid
and a bid breakdown of the general contractor's sub-contractors with their
bid price.
Example: Electrical:
Name: Contractor
Bid Price: Amount
HVAC:
Name: Contractor
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Bid Price: Amount
For the purpose of this bid, the following general contractors are here-by
approved:
1. Turner
2. Torcon Construction, Inc.
3. Lehrer, McGovern, Bovis
4. Gilbane Company
* Note: Work must be performed with union labor of local jurisdiction, no
outside local jurisdiction is approved under this Lease.
2) Landlord maintains the exclusive right to approve or
disapprove any of the general contractors or sub-
contractors, not listed above.
3) Landlord's Approval: Tenant's plan, as hereinafter
defined, shall be subject to Landlord's prior written
approval or disapproval within five days of the receipt of
same. If Tenant's plan requires any variance or any
modifications of any existing site plan, Tenant will be
responsible for obtaining all approvals required at Tenant's
sole cost and expense. Landlord will cooperate with Tenant
in securing such approvals.
4) If Landlord elects to perform all of the Tenant work,
then any cost above the Landlord's allowance will be paid
for by the Tenant. Payments to the Landlord will be made as
follows:
a) one third (1/3) at time of issuance of all building
permits
b) one third (1/3) when the work is 50% completed
c) one third (1/3) upon completion less 10% retainage
5) Base Building Changes: If Tenant Plan necessitates
revisions in the design of the base building or necessitates
changes in the construction of the base building for which
Landlord has previously contracted, Tenant shall be
responsible for all costs resulting from such design
revisions or construction changes, including but not limited
to architectural and engineering changes, and any special
permits for fees attributed thereto. Before Landlord shall
authorize such design and/or construction changes, Tenant
shall pay Landlord the full cost attributable thereto. All
costs will be paid to the Landlord with a 10% general
condition and a 10% profit fee, above sub-contractors cost.
Landlord will not proceed with any contract changes without
prior written consent by Tenant and or its representative.
6) In the event that Tenant performs its own construction
the payment of the Landlord's allowance will be paid to the
Tenant in the same manner as indicated in A4.
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4. Landlord's Approval: Tenant's Plan, as hereinafter defined, shall be
subject to Landlord's prior written approval. If Tenant's Plan requires any
variance or any modifications of any existing site plan, Tenant will be
responsible for obtaining all approvals required at Tenant's sole cost and
expense.
B. PLANS AND SPECIFICATIONS
Tenant may use the services of the space planner retained by Landlord at no
cost to Tenant, to prepare an initial space plan and one revision. Tenant may
at its own expense employ other professional space planning assistance. If
Tenant requests any additional work which is not provided in the Building
Standard, Tenant shall be responsible for all costs resulting from such
additional work, including but not limited to architectural and engineering
charges, and any special permits or fees attributed thereto. In either event,
both Landlord and Tenant shall conform with the applicable time schedule set
forth below.
1. Tenant Uses Landlord's Space Planner: Tenant shall devote such time
in consultation with Landlord's space planner as shall be necessary to enable
the latter to develop complete working drawings and specifications for Building
Standard improvements for the Premises (which drawings and specifications are
hereafter and in the foregoing Lease collectively called the "Tenant's Plan"),
showing thereon partitions, hardware, electrical and telephone outlets and
spacial requirements (if any), light fixture locations, wall finishes, floor
coverings, for Tenant's review and approval. Upon such approval, Landlord will
submit Tenant's Plan, including items of work above Building Standard Allowance,
to Landlord's contractor for determination of the cost of such work. Such costs
for items of work, if any, above Building Standard Allowance shall include the
contractor's fee of 10% for overhead and profit and Landlord's fee of 10% to
cover its costs in administering the work. After approval by Tenant of such
costs and before Landlord shall order that any work be commenced, Tenant shall
pay the first one third in accordance with the following:
One third (1/3) at time of approval of costs.
One third (1/3) when work is 50% completed.
One third (1/3) upon completion.
Tenant shall approve space plan and provide all information required for
working drawings no later than 5 days upon receipt of same.
The following maximum time periods shall be allowed for the following
matters after the completion of the immediately preceding item:
Business Days
Allowed to Complete
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(a) Landlord to complete working drawings
and specifications 20 days
(b) Tenant gives Landlord its approval of
working drawings and specifications with any
required changes 3 days
(c) Landlord quotes Tenant cost of work above
Building Standard Allowance for non-standard
items 5 days
(d) Tenant reviews, approves excess cost and pays
one third (1/3) thereof to Landlord 3 days
(e) Landlord authorizes commencement of work 1 day
2. Base Building Changes: If Tenant Plan necessitates revisions in the
design of the base building or necessitates changes in the construction of the
base building for which Landlord has previously contracted, Tenant shall be
responsible for all costs resulting from such design revisions or construction
changes, including but not limited to architectural and engineering changes, and
any special permits for fees attributed thereto. Before Landlord shall
authorize such design and/or construction changes, Tenant shall pay Landlord the
full cost attributable thereto which includes the contractor's fee of 10% for
overhead and profit and Landlord's fee of 10% to cover its costs in
administering the work.
C. CONSTRUCTION
1. By Landlord: All partitions, floors, ceilings, and doors shall be
installed and all work involving or affecting the Building's mechanical,
electrical systems shall be performed by Landlord's contractor. If any work is
not performed by the Landlord during the course of this Lease, or is performed
by Tenant's own contractors, a fee of 10% of the total cost will be paid to the
Landlord (at the time of Landlord's approval) to cover the cost of coordination
of Tenant's work.
2. By Tenant: Finish work in the Premises other than work described in
the preceding paragraph, may be done by Tenant, in compliance with the
following:
(a) No such work shall proceed without Landlord's prior written
approval of (i) Tenant's contractor; (ii) detailed plans and specifications for
the work; and (iii) a certificate of workman's compensation insurance in an
amount and with a company and on a form acceptable to Landlord and a certificate
of insurance in form and from an insurer acceptable to Landlord, showing Tenant
or Tenant's contractor to have in effect public liability, comprehensive general
liability and property damage insurance with limits of not less than
$1,000,000/$2,000,000 and $1,000,000 respectively. All such certificates except
worker's compensation shall be endorsed to show Landlord as an additional
insured and such insurance shall be maintained by Tenant or Tenant's contractor
at all times during the performance of Tenant's work.
(b) All such work shall be done in conformity with applicable codes
and regulations of governmental authorities having jurisdiction over the
Building and premises and with
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valid building permits and other authorizations from appropriate governmental
agencies when required shall be obtained by Landlord's representative at
Tenant's sole expense. Any work not acceptable to the appropriate governmental
agencies or not reasonably satisfactory to Landlord, shall be promptly replaced
at Tenant's expense. Notwithstanding any failure by Landlord to object to any
such work, Landlord shall have no responsibility therefor. Tenant agrees to save
and hold Landlord harmless for said work as provided in the Lease.
(c) Tenant and Tenant's contractors shall abide by all safety and
construction laws, ordinances, rules and regulations. All work and deliveries
shall be scheduled through Landlord. Entry by Tenant's contractors shall be
deemed to be under all the terms, covenants, provisions and conditions of the
Lease. All Tenant's materials, work, installations and decorations of any
nature brought upon or installed in the Premises before the Lease Commencement
Date shall be at Tenant's risk, and neither Landlord nor any party acting on
Landlord's behalf shall be responsible for any damage thereto or loss or
destruction thereof. Tenant shall not employ any contractor who in Landlords'
opinion may prejudice Landlord's negotiations or relationships with Landlord's
contractors or subcontractors or the negotiations or relationship of those
contractors or subcontractors with their employees, or may disturb harmonious
labor relations.
(d) Tenant shall reimburse Landlord for any extra expenses incurred by
Landlord by reason of faulty work done by Tenant or its contractors, or by
reason of delays caused by such work, or by reason of cleanup which fails to
comply with Landlord's rules and regulations, or by reason of use of elevators
outside normal working hours.
(e) Tenant shall pay to Landlord a building service fee of ten percent
(10%) of the total cost of Tenant's work not done by Landlord's contractor to
cover Landlord's cost of coordination of Tenant's Work. Such building service
fee shall be paid to Landlord at the time of Landlord's approval of Tenant's
contractor(s) as provided in Paragraph 2(a) above.
(f) Tenant's contractors shall not post any signs on any part of the
Building or the premises.
(g) Tenant shall, upon Landlord's request, provide Landlord with
copies of bills and invoices for the cost of Tenant's Work hereunder.
3. Tenant's Option to Use Landlord's Contractor: Tenant may elect to
have any of the work described in Paragraph 2 done by Landlord's contractor at
Tenant's expense.
4. Changes: If there are any changes requested by Tenant, after approval
of Tenant's Plan, Tenant shall be responsible for all costs including but not
limited to permits and fees, architectural, engineering and related design
expenses resulting from such changes. No such changes shall be made without
prior written approval of Landlord. Landlord shall not be responsible for delay
in occupancy by Tenant because of changes to plans after approval by Tenant as
outlined above. Upon completion of such revised working drawings and
specifications, Landlord shall notify Tenant in writing of the cost which will
be chargeable to Tenant by reason of such change, addition or deletion. Tenant
shall, within (5) business days, notify Landlord in writing whether it desires
to proceed with such change, addition or deletion. In the absence of such
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written authorization and payment in full of the total costs of such change,
addition or deletion, Landlord shall not be obligated to continue work on
Tenant's premises and may suspend work and Tenant shall be responsible and
chargeable for any and all delays in the completion of the Premises resulting
therefrom.
5. Tenant's Inspection: Tenant is authorized by Landlord to make
periodic inspections of the Premises during construction provided that such
inspections are made during reasonable business hours and that Tenant is
accompanied by a representative of the Landlord. Tenant shall advise Landlord
immediately in writing of any objection to the performance of such work.
D. ACCEPTANCE OF PREMISES
When Landlord's Work and Tenant's Work is substantially completed in
accordance with Tenant's Plan except for the punch list items the Premises
and/or Additional Space shall be considered acceptable for occupancy. Within
five (5) business days of Landlord's notice that Landlord's Work and Tenant's
Work has been substantially completed, Tenant shall inspect the Premises and/or
Additional Space, in the presence of Landlord and Landlord's contractor in order
to establish a punch list of items to be completed or corrected.
E. RESPONSIBILITY FOR DELAYS
If Tenant shall cause any delay in the construction of the Premises,
whether by reason of any failure by Tenant to comply with the applicable time
schedule set forth in Paragraph B1, or by Tenant's requirement of materials or
installations different from the Building Standard, or by delays in performance
of completion by a party employed by Tenant, or by reason of building code
problems arising from Tenant's design, or by reason of changes in the work
ordered by Tenant, then notwithstanding the provisions of the Lease or any other
provision of this Exhibit, any such delay in completing the Premises shall not
in any manner affect the Lease Commencement Date of the Tenant's liability for
the payment of rent set forth in the Lease.
F. INCORPORATED IN LEASE
This Agreement is, and shall be incorporated by reference in the Lease and
all of the terms and provisions of said Lease are and shall be incorporated
herein by this reference.
G. BUILDING STANDARD ALLOWANCES
Landlord, at Landlord's expense, except as otherwise expressly specified in
this Exhibit B-1 and in the foregoing Lease, shall furnish and install in and to
the Premises the following, all of which shall be of material, manufacture,
design, capacity, finish and color of the Building Standard adopted by Landlord
for the Building in accordance with the Tenant's Plan. The Building Standard
Allowances as attached represents a maximum to be provided at no cost to Tenant.
Tenant shall receive no credit for unused items.
H. ELECTRICAL CONSUMPTION CALCULATION
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If Tenant's electrical requirements exceed power designed to be provided to
the Premises, in order to accurately calculate the power consumed by Tenant,
Landlord at its option may require Tenant to install at Tenant's cost a check
meter. When no meter is required a survey of Tenant's electrical consumption
will be made at Tenant's expense.
I. FINAL PAYMENT OF EXCESS COSTS
If prior to Tenant's occupancy of the Premises and/or Additional Space
there is a default by Tenant in payment of the above, Landlord shall, in
addition to all other legally allowable remedies, have the same rights as in the
case of default in rent under the Lease. Tenant shall pay to Landlord the
balance of all excess costs to complete Tenant's Work and the entire amount of
any extra expenses incurred by Landlord.
EXHIBIT B-2
BUILDING STANDARD
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300 SERIES
1. PARTITIONS
(a) Partitions within the Demised Premises shall have 5/8" gypsum
board on each side of 2-1/2" metal studs, 24" on center, taped
and spackled, to underside of finished ceiling. Partitions
between the Demised Premises and corridor(s) and between the
Demised Premises, any adjacent space shall have 5/8" fire code
gypsum board, taped and spackled, on each side of 3-1/2" metal
studs, 24" on center. Demising partitions and corridor
partitions to have 1-1/2" (full thick) sound deadening insulation
installed within from floor to underside of floor above.
(b) There will be no jogs, curves or angles in any partition.
(c) Vinyl base 4" high to be on all partitioning and existing walls
and columns.
2. DOORS
(a) All frames to be 16 gauge, pressed steel, painted.
(b) Doors within Demised Premises to be 3'-0" x 7'-0" nominal x 1-
3/4" solid core oak, rift cut, matched finish. Doors to have
fire rating as required by applicable codes.
3. HARDWARE
(a) Cylindrical latch sets, standard weight, on individual office
doors within the Demised Premises.
(b) Cylindrical lock sets, heavy duty, and closers on doors from
corridor(s) on Demised Premises.
(c) Lock sets and latch sets to be Schlage, Sargent, Yale, Russwin or
equal, as selected by Landlord.
(d) All lock sets shall be keyed to the building master key system.
4. ACOUSTICAL CEILINGS
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(a) Lay-in acoustic tile ceilings, within Demised Premises, shall be
24" x 48" regressed white mineral fiber, textured panels with
white recessed "T"-spline, as selected by Landlord.
(b) Ceiling heights within Demised Premises to be nominal 9'-0".
(c) Direction of ceiling-grid to be as determined by Landlord.
5. FLOORING
Building standard carpet to be in all tenant areas where vinyl composition
tile is not installed. All carpets will be selected from Landlord's
samples, or of equal quality.
6. PAINTING
(a) Interior wall surfaces of gypsum board shall receive two (2)
coats of flat latex paint, colors to be selected by Tenant from
Landlord's samples.
(b) All interior ferrous metal surfaces shall receive two (2) coats
of alkyd semigloss enamel paint over shop-applied primer.
(c) All wood doors to receive one (1) coat of sealer and two (2)
coats of clear polyurethane satin varnish.
(d) Paint manufacturers to be Pratt & Lambert, Devoe & Reynolds,
Benjamin Moore, or approved equal, as selected by Landlord.
7. WINDOW COVERING
All exterior windows to receive building standard, narrow, horizontal
aluminum slat blinds, Levelor or equal, as selected by Landlord.
8. ELECTRICAL SPECIFICATIONS
(a) Lighting - Provide 2' x 4' 3L - high efficiency open deep cell
fixtures in regressed aluminum frame with air return feature.
(b) Power - Wall mounted duplex receptacles must meet all applicable
codes.
(c) The average electric load of the Demised Premises shall not
exceed five (5) watts per square foot for lighting and power in
office areas. Landlord will provide available service of 200A
277/480V, 3 phase, for Tenant's exclusive use. All other
switchgear required is a function of the work letter allowance.
(d) Landlord shall initially provide and install lamps and ballasts.
Replacement of same shall be by Landlord, at Tenant's expense.
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9. FIRE AND LIFE SAFETY FEATURES
(a) The Building is fully sprinklered in all areas.
(b) Fire Alarm System consisting of manual pull boxes, annunciators,
alarm bells, control panel, etc. shall be required per code.
(c) Smoke detectors, ionization-type, in corridors, Tenant's space,
electrical equipment rooms, elevator machine rooms and ductwork
where the air quality is over 15,000 CFM. Firestats in the
ductwork where air quality is less than 15,000 CFM.
(d) Battery back-up shall be required in the Building to operate all
emergency and exit lighting fixtures in public areas and fire
alarm system.
10. TELEPHONE WORK
(a) The Landlord shall arrange with New Jersey Bell Telephone Company
for telephone service within the equipment room in the Building's
core.
(b) All telephone work and wiring in partitions, floors and ceilings
to be paid for by Tenant as arranged for by Tenant with any
qualified installer selected by Tenant but approved by Landlord.
Landlord will coordinate work with other trades as required.
Completion or non-completion of the telephone work will not delay
Tenant's acceptance of the Demised Premises or the payment of
Rent. All electrical load centers, special wiring and plywood
supplied by Landlord for telephone equipment shall be an extra
cost to be paid by Tenant. Telephone company work is to meet all
prevailing codes.
11. HVAC SPECIFICATIONS
(a) Heating, ventilation and air-conditioning system shall be capable
of maintaining the following interior conditions, subject to
governmental regulations:
Summer - 75 degrees F (+2 degrees F) dry bulb and 50% relative
humidity when outside temperature is 90 degrees F dry bulb and 75
degrees wet bulb.
Winter - 68 degrees F when outside temperature is 14 degrees F.
(b) The VAV system with roof top A/C unit will have automatic
thermostats mounted in the rooms or open spaces within the
Demised Premises.
(c) The VAV units are connected to roof top A/C units with filters,
mixing dampers and fan motor.
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(d) Tenant override timers and running hour meter will be provided in
electrical closet for after hours use.
(e) The air supply distribution of the HVAC system for the Demised
Premises shall be based on five (5) watts per square foot of
total electrical load for all purposes. Occupancy rate is based
on one (1) person per 200 square feet.
(f) All heating will be provided from the perimeter base board
heaters via solid state controllers, from Building central
system.
(g) The control system for the heating will be by means of electric
thermostats mounted in the rooms or open spaces within the
Demised Premises as described in (11 b) interfaced with solar &
ambient outdoor temperature sensors.
(h) Zoning within Tenant's Demised Premises shall provide interior
and perimeter zones. The number of zones, as determined by
Landlord, shall be based on orientation and total area occupied
with average zones as follows:
Perimeter of areas - one (1) zone per 1,200 square feet
Interior areas - one (1) zone per 2,000 square feet
An average of 1 CFM per square foot will be delivered by the HVAC
system within the Demised Premises. Diffusers supplying air will
be spaced at 1 per 225 square feet.
(i) If Tenant's equipment (i.e. computers, business machines, etc.)
or special uses (i.e. conference rooms, mailrooms, lunch rooms,
etc.) requires air-conditioning above and beyond Building
Standard, as outlined, said additional air conditioning
(including cost of operation as stipulated in the Lease) shall be
paid for by Tenant. Any special exhaust requirements will also
be paid for by Tenant.
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EXHIBIT "C"
COMMENCEMENT DATE MEMORANDUM
THIS AGREEMENT made the ___ day of __________, 1996, by and between
COLLEGE ROAD ASSOCIATES, LIMITED PARTNERSHIP ("Landlord") and
__________________________ , with an office at ______________________,
Princeton, New Jersey 08540 ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease dated ____________
("Lease") setting forth the terms of occupancy by Tenant
of a portion of a Building located at ___________________ , Princeton, New
Jersey; and
WHEREAS, the Lease is for a term of ______________, with the "Target
Commencement Date" of the term being defined as _________________ in Basic Lease
Provisions of the Lease; and
WHEREAS, it has been determined that ___________________ is the actual
Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter set forth, it is agreed:
1. The actual Commencement Date of the term of the Lease is
__________________ and the termination date thereof is ______________________.
2. This agreement is executed by the parties for the purpose of providing
a record of the commencement and termination dates of the term of the Lease.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
instrument as of the day and year first above written.
COLLEGE ROAD ASSOCIATES,
LIMITED PARTNERSHIP
BY: Z FORRESTAL CENTER, L.P. Its Managing
General Partner
ATTEST: BY: Z FORRESTAL CORP., Its General Partner
BY: ___________________ BY: ______________________________________
Name: Name: John Zirinsky
Title: Title: President
ATTEST: BY: Voxware, Inc.
BY: ____________________ BY: ____________________________________
Name: Name:
Title: Title:
53
<PAGE>
RULES AND REGULATIONS
Exhibit D
1. The sidewalks, halls, passages, elevators and stairways shall not be
obstructed by any of the tenants nor used by them for any other purpose than for
ingress and egress to and from their respective offices, nor shall they be used
as a waiting or lounging place for tenant's employees or those having business
with tenants. The halls, passages, elevators, stairways and roofs are not for
the use of the general public, and Landlord retains in all cases the right to
control and prevent access to any part of said Building of all persons whose
presence, in the judgement of Landlord or Landlord's employees, may be
prejudicial to the safety, character, reputation or interests of the Building
and its tenants. In case of invasion, mob, riot, public excitement or other
commotion, Landlord reserves the right to prevent access to the Building during
the continuance of same by closing the doors or otherwise, for the safety of
tenants and the protection of property in said Building. During other than
business hours, access to the Building may also be refused, unless the person
seeking admission is known by Landlord's agent in charge to have the right to
enter the Premises therein or is properly identified. In addition, the
production of a key to such premises may be required. Landlord shall in no case
be liable in damages for the admission or exclusion of any person from said
Building.
2. The floors, walls, partitions, skylights, transoms that reflect or admit
light into passageways or into any place in said Building shall not be covered
or obstructed by any of the tenants. The toilet-rooms, sinks and other water
apparatus shall not be used for any purposes other than those for which they
were constructed, and no sweepings, rubbish, rags, ashes, chemicals or refuse
shall be thrown or placed therein. Any damage resulting from such misuses or
abuse shall be borne and immediately paid by Tenant by whom or by whose
employees it shall have been caused.
3. Nothing shall be placed by tenants or their employees on the outside of the
Building.
4. No sign, advertisement or notice shall be inscribed, painted or affixed on
any part of the outside or inside of said Building, unless of such character,
color, size and material and in such places as shall be first designated by
Landlord in writing. A sign painter authorized by Landlord will do such work at
Tenant's expense.
5. Tenant will see that the windows are closed and the doors securely locked
each day before leaving the Building. Shades shall be of the material, style,
form and color adopted by Landlord for the Building, and no tenant shall put up
any that do not conform to such standards. Tenant shall have the right to
remove such shades at the expiration of the lease.
6. Tenant, their employees or others shall not make or commit any improper
noises or disturbances of any kind in the Building, nor smoke in the elevators,
mark or defile the elevators, bathrooms or interfere in any way with other
tenants or those having business in the Building. Tenants shall be liable for
all damage to the Building done by their employees. Cigar & pipe smoking will
not be permitted anywhere in the Building.
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7. No carpet, rug or other article shall be hung or shaken out of any window,
and nothing shall be thrown by tenants or tenants' employees nor be allowed by
them to drop out of the windows or doors or down the passages or skylights of
the Building; and no tenant shall sweep or throw or permit to be swept or thrown
from the Premises any dirt or other substance into any of the corridors or
halls, elevators or stairways of the Building, or into any of the lightshafts or
ventilators thereof.
8. No animals shall be kept in or about the Premises.
9. If the tenants desire to introduce signalling, telegraphic, telephonic or
other wires and instruments, Landlord will direct the electricians as to where
and how the same are to be placed; and, without such direction, no placing
boring or cutting for wires will be permitted. Landlord retains in all cases
the right to require the placing and using of such electrical protecting devices
to prevent the transmission of excessive currents of electricity into or through
the Building, to require the changing of wires and of their placing an
arrangement underground or otherwise as Landlord may direct, and further to
require compliance on the part of all using or seeking access to such wires with
such rules as Landlord may establish thereto; and, in the event of
noncompliance by tenants or by those furnishing service by or using such wires
or by others with the directions, requirements or rules, Landlord shall have the
right to immediately cut, displace and prevent the use of such wires. Notice
requiring such changing of wires and their replacing and rearrangement given by
Landlord to any company or individual furnishing service by means of such wires
to any tenant shall be regarded as notice to such tenants and shall take effect
immediately. All wires used by tenants must be clearly tagged at the
distributing boards and junction boxes and elsewhere in the Building and with
the number of the office to which said wires lead and the purpose for which said
wires respectively are used, together with the names of the company operating
same.
10. A directory in a conspicuous place on the first floor, with the names of
tenants, will be provided by Landlord at Landlord's expense.
11. No varnish, stain, paint, linoleum, oil-cloth, rubber or other air-tight
covering shall be laid or put upon the floors; nor shall articles be fastened to
or holes drilled or nails or screws driven into walls, doors or partitions; nor
shall the walls, doors or partitions be painted, papered or otherwise covered or
in any way marked or broken; nor shall any tenant use any other method of
heating than that provided by Landlord; without the written consent of Landlord,
which consent shall not be unreasonably withheld.
12. The delivery of materials and other supplies to tenants in the Building
will be permitted only under the direction, control and supervision of the
Landlord.
13. The use of rooms as sleeping apartments is prohibited.
14. All entrance doors leading from the hallways are to be kept closed at all
times.
15. For the protection of tenants, the Landlord reserves the right to refuse
the admittance to the Building between the hours of 5:30 p.m. and 8:00 a.m.,
Monday through Friday, and from 1:00 p.m. Saturday to 8:00 a.m. Monday to any
person not producing a key to such Tenant's office or suite and a pass issued by
building management upon the direction of the tenant. Tenants will instruct the
Building manager from time to time as to the number of persons to whom they
desire
55
<PAGE>
passes issued for this purpose. It will be the responsibility of the Tenant to
pick up any pass and key whenever the employment of the passholder is
discontinued.
16. Tenants must use designated parking lots only during hours of building
operation. Tenant parking is restricted to main lots and is not permitted in
any other area whatsoever including visitor, delivery or fire lane areas. It is
expressly prohibited to allow overnight parking or storage of vehicles used by
employees or in the course of business without prior written consent of
Landlord.
Violation of this parking regulation will result in removal of the vehicle at
the sole cost of tenant.
17. Tenants must adhere to all recycling mandates (as they may be required by
local and state laws), and Landlord's existing established procedure (s).
18. No smoking is permitted in the Premises or any other part of the Building.
19. All deliveries to and/or from the Building must be coordinated with the
Building's Management.
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EXHIBIT E
COLLEGE PARK AT
PRINCETON FORRESTAL CENTER
JANITORIAL SPECIFICATIONS
General Cleaning
Cleaning Services provided five (5) days per week unless otherwise
specified.
Cleaning hours Monday through Friday, between 6:00 p.m. and before 8:00
a.m. of the following day.
On the last day of the week work will be done after 6:00 p.m. Friday, but
before 8:00 a.m. Monday.
No cleaning on holidays.
I. Office Area
Furniture and fixtures within reach will be dusted and desk tops will be
wiped clean. However, desks with loose papers on top will not be cleaned.
Window sills and baseboards to be dusted and washed when necessary.
Office wastepaper baskets will be emptied.
Cartons or refuse in excess of that which can be placed in wastebaskets
will not be removed. Tenants are required to place such unusual refuse in
trash cans.
Cleaner will not remove or clean tea or coffee cups or similar containers;
also, if such liquids are spilled in wastebaskets, the wastebaskets will be
emptied but not otherwise cleaned. All kitchen cleaning by Tenant.
Carpets will be vacuumed nightly.
All tile floors will be vacuumed nightly and wet mopped weekly.
Wipe clean all glass, brass and other bright work weekly.
Dust all pictures, charts, wall hangings monthly that are not reached in
nightly cleaning.
Dust all vertical surfaces to include doors, bucks and partitions monthly.
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Dust all ventilating louvers and other such installations monthly.
II. Lavatories
All lavatory floors to be swept and washed with disinfectant nightly.
Tile walls and dividing partitions to be washed and disinfected weekly.
Basins, bowls, urinals to be washed and disinfected daily.
Mirrors, shelves, plumbing work, bright work, and enamel surfaces cleaned
nightly.
Waste receptacles will be emptied and cleaned and wash dispensaries to be
filled with appropriate tissues, towels, and soap nightly.
III. Main Lobby Elevators. Building Exterior and Corridors
Wipe and wash all floors in Main Lobby nightly.
Wipe and/or vacuum elevator floor nightly.
Polish floors weekly in elevator.
IV: All windows interior and exterior will be cleaned once a year.
V: Tenant will comply fully with the New Jersey State Recycling Mandates.
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EXHIBIT "F"
Model Letter of Credit
___________________________
Name and address of issuing bank
________
Date
IRREVOCABLE LETTER OF CREDIT NO. _________
___________________________
Name and address of owner
Dear Sir:
At the request and for the account of ___________________________ located at
Name of Tenant
__________________(hereinafter called "Applicant"), we hereby establish our
Irrevocable Address of Tenant
Letter of Credit No. _____ in your favor and authorize you to draw on us up to
the aggregate amount of US $ _____________________________ available by your
draft(s) at sight drawn Amount of Letter of Credit
on us and accompanied by the following:
A written statement by you that:
(i) "Applicant is in default under that certain lease, dated as of
___________________ between you, as Landlord, and Applicant,
a tenant Date of Lease (the 'Lease');" or
(ii) "Applicant has failed to deliver timely a renewal Letter of Credit as
provided in the Lease."
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This Irrevocable Letter of Credit will duly honored by us a sight upon delivery
of the statement set forth above without inquiry as to the accuracy of such
statement and regardless of whether Applicant disputes the content of such
statement.
We hereby engage with you that all drafts drawn under and in compliance with the
terms of this Irrevocable Letter of Credit will be duly honored by us if
presented at _____________ no later than ___________________________________,
it being a condition of this address of issuing bank expiration date of
Letter of Credit
Irrevocable Letter of Credit that it shall be automatically extended for periods
of at least one year from the present and each future expiration date unless, at
least sixty (60) days prior to the relevant expiration date, we notify you, by
certified mail, return receipt period.
This Irrevocable Letter of Credit is transferable at no charge to any
transferee.
This Irrevocable Letter of Credit is subject to the Uniform Customs and
Practices for Documentary credits (1983-Rev) International Chamber of Commerce
Publication #400.
Sincerely yours,
______________________________
Authorized Signature
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Exhibit 10.18
================================================================================
ACQUISITION AGREEMENT
by and among
VOXWARE, INC.
and
K&F SOFTWARE
Gregory Foglesong
and
Matthew Krokosz
Dated as of January 30, 1996
================================================================================
<PAGE>
ACQUISITION AGREEMENT, dated as of January 30, 1996, by and between
Voxware, Inc., a Delaware corporation ("Purchaser"), K&F Software, a general
partnership organized and existing under the laws of the State of New Jersey
("Seller"), Matthew Krokosz ("Krokosz") and Gregory Foglesong ("Foglesong" and,
together with Krokosz, the "Partners"), the sole general partners of Seller.
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all the assets of Seller, for the purchase price and upon and
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in reliance upon the covenants and agreements set forth
herein, the parties hereto agree as follows:
I. DEFINITIONS
-----------
The following terms shall have the following respective meanings for
all purposes of this Agreement:
"Agreement" means this Acquisition Agreement, as it may be from time to
time be amended.
"Assets" has the meaning set forth in Section 2.1 hereof.
"Business" means the business conducted by or on behalf of Seller
relating to the design, development and manufacture of technology for telephony
over the internet.
"Closing" means the completion of the acquisition of the Assets
pursuant to this Agreement.
"Closing Date" means the date the Closing takes place.
"Person" means an individual, partnership, corporation, joint venture,
unincorporated organization, cooperative or a governmental entity or agency
thereof.
II. PURCHASE AND SALE OF ASSETS
---------------------------
Section 2.1. Purchase and Sale of Assets. At the Closing (as
---------------------------
hereinafter defined), upon the terms and subject to the conditions contained
herein, Seller shall sell, transfer, convey, assign and deliver to Purchaser,
effective as of the Closing, and Purchaser shall purchase and accept from
Seller, all of the properties, business and assets of Seller relating to the
Business of every kind and description, personal and mixed, tangible and
<PAGE>
intangible, wherever located, free and clear of all liens, mortgages, pledges,
encumbrances and charges of every kind (collectively, the "Assets"). Without
limiting the generality of the definition of the Assets being purchased by
Purchaser, the Assets shall include the following:
(a) all the intangible and intellectual property of Seller, including,
without limitation, all software and software libraries (including all source
codes, object codes, make-files and documentation, for all platforms), products,
processes, formulae, methods, plans, research data, marketing plans and
strategies, forecasts, patents and patent applications, inventions, discoveries,
know-how, trade secrets and ideas (including those in the possession of third
parties, but which are the property of Seller), and all drawings, records, books
or other indicia of the foregoing, trademarks, servicemarks, tradenames,
licenses (if transferable), copyrights, operating rights, permits and other
similar intangible property and rights;
(b) the complete and exclusive worldwide rights to Seller's client and
server applications, application components, works-in-progress, development
tools and test rigs, for all platforms;
(c) all the rights and benefits accruing to Seller under all agreements
and contracts, written or oral, entered into in connection with the conduct of
the Business, and all other rights of every kind of Seller with respect to the
Business, including, without limitation, all contracts, agreements and
arrangements listed in Schedule 2.1(c) hereto;
---------------
(d) all operating data and records of Seller relating to the Business,
including, without limitation, all available records of user downloads and
purchases, client lists and records, referral sources, research and development
reports and records, production reports and records, equipment logs, operating
guides and manuals, projections, copies of financial, accounting and personnel
records, correspondence and other similar documents and records;
(e) all claims, warranty rights, causes of action and other similar
rights granted or owing to Seller arising out of the Business;
(f) all Seller's inventories of raw materials, work-in-process,
intermediates and finished goods, if any;
(g) all of Seller's rights, to the extent of such rights, to use the
names "CyberScience" and "CyberPhone" and all variations on either thereof for
any and all purposes; and
(h) all goodwill and going-concern value of Seller and the Business.
-2-
<PAGE>
Section 2.2. Excluded Assets. Anything to the contrary in Section 2.1
---------------
notwithstanding, the Assets shall exclude and Purchaser shall not purchase any
(i) cash, (ii) real property of Seller used in the conduct of the Business or
(iii) machinery, equipment, computers, computer hardware, tools, supplies or
furniture of Seller.
Section 2.3. Liabilities. Purchaser and Seller agree that Purchaser
-----------
shall not assume, pay, discharge, become liable for or perform when due, and
Seller shall not cause Purchaser so to assume, pay, discharge, become liable for
or perform, any liabilities (contingent or otherwise), debts, contracts,
commitments and other obligations of Seller of any nature whatsoever which
relate to periods or arise prior to the Closing Date or which relate to
contracts which are not listed on Schedule 2.1(c) hereto.
---------------
Section 2.4. Closing. The Closing shall take place at the offices of
-------
Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, on
January 30, 1996, or as soon as practicable thereafter as all conditions to the
respective obligations of the parties have been satisfied or waived, or at such
other date, time and place as the parties may agree. Each party hereto agrees
to use its reasonable efforts to satisfy promptly the conditions to the
obligations of the respective parties hereto in order to expedite the Closing.
Section 2.5. Purchase Price. The Purchase Price for the Assets (the
--------------
"Purchase Price") shall consist of (i) $100,000, payable by Purchaser in cash or
by certified check made payable to Seller on the Closing Date or by wire
transfer and (ii) an option (the "Option") to purchase 50,000 shares (the
"Shares") of the common stock, $.001 par value, of Purchaser in the form
attached hereto as Exhibit A.
---------
Section 2.6. Transfer of Assets. (a) At the Closing, Seller shall
------------------
deliver to Purchaser such bills of sale, endorsements, assignments and other
instruments of sale, conveyance, transfer and assignment, satisfactory in form
and substance to Purchaser and its counsel, as may be reasonably requested by
Purchaser, in order to convey to Purchaser good and marketable title to the
Assets free and clear of all claims, charges, equities, liens, security
interests and encumbrances. Seller shall pay all sales or transfer taxes or
similar charges payable by reason of the sale hereunder.
Section 2.7 Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated in its entirety among the Assets in accordance with Schedule 2.7
------------
hereto. Seller, Purchaser and the Partners shall file all information and tax
returns (and any amendments thereto) in a manner consistent with this Section
2.7. If, contrary to the intent of the parties hereto as expressed in this
Section 2.7, any taxing authority makes or proposes an allocation different from
that contained in this Section 2.7, Seller, Purchaser and the Partners shall
cooperate with each other in good faith to contest such taxing authority's
allocation (or proposed allocation), provided, however, that, after consultation
with the party adversely
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<PAGE>
affected by such allocation (or proposed allocation), another party hereto may
file such protective claims or returns as may reasonably be required to protect
its interests.
-4-
<PAGE>
III. CONDITIONS PRECEDENT TO
OBLIGATIONS OF PURCHASER
------------------------
The obligation of Purchaser under this Agreement to consummate the
purchase of the Assets at the Closing shall be subject to the satisfaction, at
or prior to the Closing, of all of the following conditions, to the satisfaction
of Purchaser (any of which may be waived in writing in whole or in part by
Purchaser):
Section 3.1. Representations and Warranties Accurate. All
---------------------------------------
representations and warranties of Seller, Krokosz and Foglesong contained in
this Agreement (including the Schedules hereto) shall be true in all material
respects on and as of the Closing Date, with the same force and effect as though
such representations and warranties were made on and as of the Closing Date.
Section 3.2. Performance by Seller. Seller, Krokosz and Foglesong
---------------------
shall have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by each of them, respectively, prior to or on the Closing Date.
Section 3.3. Legal Prohibition. On the Closing Date, no injunction or
-----------------
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such transactions
unlawful and no action or proceeding shall have been instituted and remain
pending before a court, governmental body or regulatory authority to restrain or
prohibit the transactions contemplated by this Agreement and no adverse decision
shall have been made by any such court, governmental body or regulatory
authority which could materially adversely affect the value of the Business to
Purchaser.
Section 3.4. Consents, Approvals, Permits, Licenses, etc. All
--------------------------------------------
authorizations, consents, waivers, approvals, orders, registrations,
qualifications, designations, declarations, filings or other action required
with or from any federal, state or local governmental or other regulatory
authority or third party (including without limitation all parties to each of
the Assumed Contracts) in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby shall have been duly obtained and shall be reasonably
satisfactory to Purchaser and its counsel, and copies thereof shall be delivered
to Purchaser at or prior to the Closing. With respect to any Assumed Contract,
the assignment of which by its terms requires prior consent of the parties
thereto, if such consent is not obtained prior to or on the Closing Date, Seller
shall deliver to Purchaser written documentation setting forth arrangements for
the transfer of the economic benefits of such Assumed Contracts to Purchaser as
of the Closing Date under terms and conditions acceptable to all the parties
hereto. Purchaser shall have obtained all licenses, permits and other
authorizations necessary or desirable to conduct the business as currently
conducted.
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<PAGE>
Section 3.5. Employment and Consulting Agreements. Krokosz shall have
------------------------------------
entered into an Employment Agreement with Purchaser in the form of Exhibit B
---------
hereto and Foglesong shall have entered into a Consulting Agreement with
Purchaser in the form of Exhibit C hereto.
---------
Section 3.6. Title. Seller shall deliver to Purchaser at the Closing
-----
all documents, certificates and agreements necessary to transfer to Purchaser
good and marketable title to the Assets, free and clear of any and all liens
thereon.
Section 3.7. Partnership Proceedings. All partnership and other
-----------------------
proceedings of Seller in connection with the transactions contemplated by this
Agreement, and all documents and instruments incident to such proceedings, shall
be reasonably satisfactory in form and substance to Purchaser and its counsel.
IV. CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER
--------------------------
The obligation of Seller under this Agreement to consummate the sale of
the Assets at the Closing shall be subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, to the reasonable satisfaction
of Seller:
Section 4.1. Representations and Warranties Accurate. All
---------------------------------------
representations and warranties of Purchaser contained in this Agreement shall be
true in all material respects on and as of the Closing Date, with the same force
and effect as though such representations and warranties were made on and as of
the Closing Date.
Section 4.2. Performance by Purchaser. Purchaser shall have performed
------------------------
and complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by
Purchaser prior to or on the Closing Date.
Section 4.3. Legal Prohibition. On the Closing Date, no injunction or
-----------------
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such transactions
unlawful and no action or proceeding shall have been instituted and remain
pending before a court, governmental body or regulatory authority to restrain or
prohibit the transactions contemplated by this Agreement.
Section 4.4. Corporate Proceedings. All corporate and other
---------------------
proceedings of Purchaser in connection with the transactions contemplated by
this Agreement, and all documents and instruments incident to such corporate
proceedings, shall be reasonably satisfactory in form and substance to Seller
and its counsel.
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<PAGE>
V. REPRESENTATIONS AND WARRANTIES
OF SELLER, KROKOSZ AND FOGLESONG
--------------------------------
Seller, Krokosz and Foglesong, jointly and severally, represent,
warrant and agree that:
Section 5.1. Organization. Seller is a general partnership duly
------------
organized, validly existing and in good standing under the laws of the State of
New Jersey, with full partnership power and authority and all licenses and
permits necessary to conduct the Business as presently conducted, and to own,
lease and operate the properties and assets used in connection therewith and to
enter into and perform this Agreement and the transactions contemplated hereby.
Section 5.2. Due Authorization; No Conflict. (a) Seller has all
------------------------------
requisite partnership power and authority to execute and deliver this Agreement
and to perform fully its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by Seller of this
Agreement, the performance by Seller of its obligations hereunder, and the
transactions contemplated hereby have been duly and validly authorized by all
necessary partnership action on the part of Seller. This Agreement is a legal,
valid and binding obligation of Seller enforceable against it in accordance with
its terms (except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).
(b) Neither the execution and delivery of this Agreement or any of the
other documents contemplated hereby by Seller nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, result in a
breach or violation of or constitute (or with notice or lapse of time or both
constitute) a default under any statute, regulation, order, judgment or decree
or any instrument, contract or other agreement to which Seller, Krokosz or
Foglesong is a party or by which Seller, Krokosz or Foglesong (or any of the
properties or assets of Seller) is subject or bound, including, without
limitation, the partnership agreement of the Partnership, if any; (ii) result in
the creation of, or give any party the right to create, any lien, charge,
option, security interest or other encumbrance upon the property and assets of
Seller; (iii) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which Seller is a party or by which Seller is subject or bound; (iv) require
Seller, Krokosz or Foglesong to obtain any authorization, consent, approval or
waiver from, or to make any filing with, any public body or authority or to
obtain the approval or consent of any other Person; or (v) result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, qualification, authorization or approval applicable to Seller (insofar
as such permit, license, qualification, authorization or approval relates to the
Business), or the Business.
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<PAGE>
Section 5.3. Title to and Condition of Assets. Seller has, and,
--------------------------------
except for the assets which are sold by Seller in the ordinary course of the
Business between the date hereof and the Closing Date, upon payment therefor
Purchaser will have, good and marketable title to all of the Assets, free and
clear of any liens, charges, options, security interests or other encumbrances.
All the tangible personal property included in the Assets is in good operating
condition and repair, reasonable wear and tear excepted, and is suitable for use
in the ordinary conduct of the Business, and no maintenance, repair or
replacement has knowingly been deferred. Seller owns no real property and is
not a party to any lease or similar agreement with respect to real property.
Section 5.4. Contracts, Obligations and Commitments. In connection
--------------------------------------
with the operation of the Business, Seller has no existing contract, obligation
or commitment (written or oral) of any nature except as set forth on Schedule
--------
2.1(c) hereto. Each contract, agreement, arrangement, plan, lease, license or
- ------
similar instrument included in the Assets (collectively, the "Assumed
Contracts") is a valid and binding obligation of the parties thereto,
enforceable in accordance with its terms, and is in full force and effect on the
date hereof, and Seller has not breached any material provision of, nor is in
default in any material respect under the terms of (and no condition exists
which, with the passage of time, the giving of notice, or both, would result in
a default under the terms of), any of the Assumed Contracts. Each of the
Assumed Contracts is validly assignable to Purchaser without the consent of any
other party thereto so that, after the assignment thereof to Purchaser pursuant
to this Agreement, Purchaser will be entitled to the full economic and other
benefits thereof.
Section 5.5. Litigation. There is no suit, action, arbitration, or
----------
legal, administrative or other proceeding, or governmental investigation,
pending or, to the best of Seller's knowledge, threatened by or against Seller,
Krokosz or Foglesong that relates to the Business or the Assets before any
court, arbitrator, administrative or governmental body.
Section 5.6. Brokers. None of Seller, Krokosz or Foglesong has paid
-------
or become obligated to pay any fee or commission to any broker, finder,
investment banker or other intermediary in connection with the transactions
contemplated by this Agreement.
Section 5.7. Compliance with Law. The Business has been conducted,
-------------------
and is now being conducted, in compliance with all applicable laws, rules,
regulations and court or administrative orders and processes.
Section 5.8. Licenses; Registrations; Permits; Etc. Seller possesses
-------------------------------------
all governmental registrations, licenses, permits, authorizations and approvals
(collectively referred to herein as "Approvals") necessary, in all material
respects, to carry on, as presently conducted, the operations and business of
the Business; true, complete and correct copies of the Approvals have previously
been delivered to Purchaser. All such Approvals are in full force and effect as
of the date hereof and Seller has complied with all terms of such
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<PAGE>
Approvals. Seller is not in default under any of such Approvals and no event has
occurred and no condition exists which, with the giving of notice, the passage
of time, or both, would constitute a default thereunder.
Section 5.9. Patents, Trademarks, etc. Set forth on Schedule 5.9 is a
------------------------- ------------
list and brief description of all trademarks, service marks, trade names and
copyrights owned by Seller, or of which Seller is a licensor or licensee or in
which Seller has any right, and in each case a brief description of the nature
of such right. Seller has no patents, patent applications or other patent
rights, trademark applications, service mark applications or registered
trademarks, trade names, service marks or copyrights (collectively,
"Intellectual Property Rights"). Seller, Krokosz and Foglesong believe that no
Intellectual Property Rights other than Seller's trade secrets and know how and
the items listed on Schedule 5.9 (collectively referred to herein as the "Seller
------------
Intellectual Property") are required in order to conduct the Business as
presently conducted by Seller. To the best knowledge of Seller, Krokosz and
Foglesong, the Seller Intellectual Property does not infringe on the
Intellectual Property Rights of any third party; provided that, Seller, Krokosz
and Foglesong are aware of claims by third parties relating to the use of the
name "CyberPhone" by Seller. No claim is pending or, to the knowledge of
Seller, Krokosz and Foglesong, threatened against Seller to the effect that the
operations of Seller infringe upon or conflict with the asserted Intellectual
Property Rights of any other person, and there is no known basis for any such
claim (whether or not pending or threatened); provided that, Seller, Krokosz and
Foglesong are aware of claims by third parties relating to the use of the name
"CyberPhone" by Seller. No claim is pending or, to the knowledge of Seller,
Krokosz and Foglesong, threatened against Seller to the effect that any Seller
Intellectual Property is invalid or unenforceable by Seller, and there is no
known basis for any such claim (whether or not pending or threatened). Seller
has not granted or assigned to any other person or entity any right to any
Seller Intellectual Property or any right to assemble or sell Seller's products
or proposed products or to provide the services or proposed services of Seller,
other than a limited development license to CyberScience, Inc., a Delaware
corporation ("CyberScience"), of which the Partners or members of their
immediate families are the sole stockholders. The license to CyberScience has
been terminated. Neither Krokosz or Foglesong nor any other current or former
stockholder, employee, officer or director of Seller nor any affiliate of Seller
or either Partner, including CyberScience, has (directly or indirectly) any
right, title or interest in any of the Seller Intellectual Property other than
such right which either of the Partners may enjoy as a partner of Seller.
Section 5.10. Product Warranties. There are no outstanding claims of
------------------
any person or organization against Seller, or to the best of Seller's knowledge,
based on any warranty or guarantee or on any contention that products sold or
leased in connection with the Business failed to meet quality standards with
respect to such products.
Section 5.11. Taxes. Seller has filed all federal, state and local
-----
tax returns required by law and has paid all taxes (of every kind, character or
description), assessments,
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<PAGE>
penalties and interest shown to be due thereon that may affect the Business or
the Assets. Seller has no liability material in amount, contingent or otherwise,
for any taxes, assessments, penalties or interest.
Section 5.12. Disclosure. None of Seller, Krokosz or Foglesong has
----------
failed to disclose to Purchaser any material information adverse to the Seller
Intellectual Property, except as to matters affecting the economy generally, and
no written information furnished by or on behalf of Seller to Purchaser relating
to the Seller Intellectual Property, contains any untrue statement of a material
fact or omits to state a material fact necessary to make such statement, in the
light of the circumstances under which it was made, not misleading.
VI. REPRESENTATIONS AND
WARRANTIES OF PURCHASER
-----------------------
Purchaser hereby represents and warrants to Seller as follows:
Section 6.1. Organization. Purchaser is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own or lease its properties and carry
on its business as presently conducted.
Section 6.2. Due Authorization; No Conflict. (a) Purchaser has all
------------------------------
requisite corporate power and authority to execute and deliver this Agreement,
the Employment and Consulting Agreements referred to in Section 3.5 and the
Option (such Employment Agreement, Consulting Agreement and Option are
hereinafter referred to as the "Related Agreements") and to perform fully its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Purchaser of
this Agreement and the Related Agreements, the performance by Purchaser of its
obligations hereunder, and the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of Purchaser. This Agreement and the Related Agreements are legal, valid and
binding obligations of Purchaser enforceable against it in accordance with their
respective terms (except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether such
enforceability is considered in equity or at law).
(b) Neither the execution and delivery of this Agreement or any of the
other documents contemplated hereby by Purchaser nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, result in a
breach or violation of or constitute (or with notice or lapse of time or both
constitute) a default under any statute, regulation, order, judgment or decree
or any instrument, contract or other agreement to which Purchaser is a party or
by which Purchaser (or any of the properties or assets of
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<PAGE>
Purchaser) is subject or bound; (ii) result in the creation of, or give any
party the right to create, any lien, charge, option, security interest or other
encumbrance upon the property and assets of Purchaser; (iii) terminate or
modify, or give any third party the right to terminate or modify, the provisions
or terms of any agreement or commitment to which Purchaser is a party or by
which Purchaser is subject or bound; (iv) require Purchaser to obtain any
authorization, consent, approval or waiver from, or to make any filing with, any
public body or authority or to obtain the approval or consent of any other
Person; or (v) result in any suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, qualification, authorization or approval
applicable to Purchaser (insofar as such permit, license, qualification,
authorization or approval relates to the Business), or the Business.
Section 6.3. Brokers. Purchaser has not paid or become obligated to
-------
pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement.
VII. INDEMNIFICATION
---------------
Section 7.1. Survival of Representations and Warranties. All
------------------------------------------
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing and shall remain in full force and effect
until one (1) year after the Closing Date, regardless of any investigation made
by Purchaser or on its behalf; provided, however, that the representations and
warranties relating to taxes shall survive for the periods equal to the
applicable statutes of limitation relating thereto, and the representations and
warranties as to title in the first sentence of Section 5.3 and as to Patents,
Trademarks, etc. in Section 5.9 shall remain in full force and effect until two
(2) years after the Closing Date.
Section 7.2. Indemnity. Seller, Krokosz and Foglesong (collectively,
---------
the "Indemnifying Parties"), jointly and severally (subject to Section 7.3(b)
hereof), shall indemnify and hold harmless Purchaser and its successors and
assigns at all times after the Closing Date against and in respect of:
(a) any damage, loss, cost, expense or liability (including reasonable
attorney's fees) resulting to Purchaser from any false, misleading or
inaccurate representation, breach of warranty or nonfulfillment of any
agreement or condition on the part of any Indemnifying Party under this
Agreement or from any misrepresentation in or any omission from any
certificate, list, schedule or other instrument to be furnished to
Purchaser hereunder;
(b) all liabilities and obligations of Seller of any kind or nature
whatsoever, whether accrued, absolute, fixed, contingent, known or unknown;
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<PAGE>
(c) any loss, damage, cost or penalty incurred by Purchaser as a result
of non-compliance by Seller with any applicable bulk transfer or similar
law or by virtue of common law, statute or regulation imposing or
attempting to impose transferee liability on Purchaser; and
(d) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing.
This indemnity agreement in this Section 7.2 shall be in addition to
any liability which any Indemnifying Party may incur to Purchaser and shall not
foreclose any other rights or remedies Purchaser may have to enforce the
provisions of this Agreement.
Section 7.3. Limitations. (a) Purchaser shall not be entitled to
-----------
make any claim for indemnification under Section 7.2 hereof with respect to the
breach of any representation and warranty contained herein after the date on
which such representation and warranty ceases to survive pursuant to Section 7.1
hereof.
(b) The aggregate liability of each Indemnifying Party under Section
7.2(a) and under Section 7.2(d) with respect to claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses incident to the
matters described in Section 7.2(a) shall not exceed the sum of the amount of
the Purchase Price actually received by such Indemnifying Party. Any claim for
indemnification under Section 7.2(a) or Section 7.2(d) as it relates to Section
7.2(a) (an "Indemnity Claim") shall be paid, at the election of the respective
Indemnifying Party, in (i) cash, (ii) Shares, (iii) Options, or (iv) any
combination of the foregoing. For purposes of determining the number of Shares
or Options required to pay the Indemnity Claim, the Shares will be valued at the
average last sale price of the Shares, as reported by the principal securities
exchange on which the Shares are listed or admitted to trading, or, if the
Shares are not listed or admitted to trading on any securities exchange or if
any such exchange on which the Shares are listed is not its principal trading
market, the average closing bid price as furnished by the National Association
of Securities Dealers, Inc. through NASDAQ, the OTC Bulletin Board or similar
organization, for the five consecutive trading days ending on and including the
trading day immediately preceding the date of payment. To the extent that the
Shares are not quoted on NASDAQ or other similar organization, the Shares will
be valued in good faith by the Board of Directors of the Company based in part
on the price of recent sales of securities by the Company. For purposes of
determining the number of Options required to pay an Indemnity Claim, the
Options will be valued at the value of the Shares underlying such Options less
the aggregate exercise price thereof.
Section 7.4. Notice and Defense of Claims. Purchaser shall give
----------------------------
notice to the Indemnifying Parties promptly after Purchaser has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Parties to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the
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<PAGE>
Indemnifying Parties, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by Purchaser (whose approval
shall not unreasonably be withheld), and Purchaser may participate in such
defense at its expense, and provided further that the failure of Purchaser to
give notice as provided herein shall not relieve the Indemnifying Parties of
their obligations under this Article VII. The Indemnifying Parties, in the
defense of any such claim or litigation, shall not, except with the consent of
Purchaser, consent to entry of any judgment or entry into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to Purchaser of a release from all liability in respect to such claim
or litigation. Purchaser shall furnish such information regarding itself or the
claim in question as the Indemnifying Parties may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
Section 7.5. Reimbursement. At the time that Purchaser shall suffer a
-------------
loss because of a breach of any warranty, representation or covenant by the
Indemnifying Parties or at the time the amount of any liability on the part of
the Indemnifying Parties under this Article VII is determined (which in the case
of payment to third persons shall be the earlier of (i) the date of such
payments or (ii) the date that a court of competent jurisdiction shall enter a
final judgment, order or decree (after exhaustion of appeal rights) establishing
such liability) (such loss or amount being hereinafter referred to as the
"Indemnity Claim"), the Indemnifying Parties shall forthwith, upon notice from
Purchaser pay to Purchaser the amount of the Indemnity Claim. If such amount is
not paid forthwith, then Purchaser may, at its option, take legal action against
the Indemnifying Parties for reimbursement in the amount of its Indemnity Claim.
For purposes hereof the Indemnity Claim shall include the amounts so paid, or
determined to be owing, by Purchaser together with costs and reasonable
attorney's fees and interest on the foregoing items at the rate of ten percent
(10%) per annum from the date the Indemnity Claim is due from the Indemnifying
Parties to Purchaser as hereinabove provided, until the Indemnity Claim shall be
paid.
VIII. CERTAIN ACTIONS AFTER THE CLOSING
---------------------------------
Section 8.1. Delivery of Property Received by Seller or Purchaser
----------------------------------------------------
After Closing. From and after the Closing, Purchaser shall have the right and
- -------------
authority to collect, for the account of Purchaser, all assets which shall be
transferred or are intended to be transferred to Purchaser as part of the Assets
as provided in this Agreement, and to endorse with the name of Seller any checks
or drafts received on account of any such assets. Seller agrees that it will
transfer or deliver to Purchaser, promptly after the receipt thereof, any cash
or other property which Seller receives after the Closing Date in respect of any
assets transferred or intended to be transferred to Purchaser as part of the
Assets under this Agreement. In addition, Purchaser agrees that it will
transfer or deliver to Seller, promptly after receipt thereof, any cash or other
property which Purchaser receives after the Closing
-14-
<PAGE>
Date in respect of any assets not transferred or intended to be transferred to
Purchaser as part of the Assets under this Agreement.
Section 8.2. Certain Transfers by Seller. To the extent not
---------------------------
transferred prior to the Closing Date, following the Closing Date, Seller agrees
to use its best efforts to (i) transfer its web domain link to www.Voxware.com,
and (ii) transfer the right to distribute and market the existing CyberPhone
product line to Purchaser, with the recognition that Purchaser's goal will be to
migrate the existing user base to a Purchaser-branded telephone as soon as
practical.
Section 8.3. Further Assurances. Seller from time to time after the
------------------
Closing, at Purchaser's request, will execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer (including the
transfer of licenses, where permitted, for all third-party compilers, software
libraries, or other development tools necessary to enhance and maintain Seller's
source code) and will take such other actions and execute and deliver such other
documents, certifications and further assurances as Purchaser may reasonably
require in order to vest more effectively in Purchaser, or to put Purchaser more
fully in possession of, any of the Assets. Each of the parties hereto will
cooperate with the other and execute and deliver to the other such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by the other party hereto as necessary to carry out,
evidence and confirm the intended purposes of this Agreement.
Section 8.4. Filings and Authorizations. Each of Seller and
--------------------------
Purchaser, as promptly as practicable, (i) will make, or cause to be made, all
filings and submissions under laws, rules and regulations applicable to it as
may be required for it to consummate the transactions contemplated hereby; (ii)
will use its reasonable efforts to obtain, or cause to be obtained, all
authorizations, approvals, consents and waivers from all Persons and
governmental or public authorities or bodies necessary to be obtained by it, or
any subsidiaries or affiliates, in order for it so to consummate such
transactions; and (iii) will use its best efforts to take, or cause to be taken,
all other actions necessary, proper or advisable in order for it to fulfill its
obligations hereunder. Seller and Purchaser will coordinate and cooperate with
one another in exchanging information and supplying such reasonable assistance
as may be reasonably requested by each in connection with the foregoing.
Section 8.5 Payment of Liabilities. Following the Closing Date,
----------------------
Seller agrees to discharge, in accordance with their terms, any liabilities
(contingent or otherwise), debts, contracts, commitments and other obligations
of Seller of any nature whatsoever, including those liabilities existing under
the Assumed Contracts.
IX. MISCELLANEOUS
-------------
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<PAGE>
Section 9.1. Expenses. Each party to this Agreement shall pay its own
--------
costs and expenses relating to this Agreement, the negotiations leading up to
this Agreement and the transactions contemplated by this Agreement.
Section 9.2. Amendment. This Agreement shall not be amended or
---------
modified except by a writing duly executed by Seller and Purchaser.
Section 9.3. Entire Agreement. This Agreement, including the
----------------
Schedules and Exhibits hereto, contains all of the terms, conditions and
representations and warranties agreed upon by the parties relating to the
subject matter of this Agreement and supersedes all prior agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, respecting such subject matter.
Section 9.4. Headings. The headings contained in this Agreement are
--------
intended solely for convenience and shall not affect the rights of the parties
to this Agreement.
Section 9.5. Notices. All notices, requests, demands and other
-------
communications made in connection with this Agreement shall be in writing and
shall be deemed to have been duly given (a) on the date of delivery, if
delivered to the persons identified below, (b) seven calendar days after mailing
if mailed, with proper postage, by certified or registered mail, air mail
postage prepaid, return receipt requested, addressed as follows:
If to Seller, Krokosz or Foglesong:
K&F Software
58 Fairmount Avenue
Edison, New Jersey 08820
Attention: Matthew Krokosz
with a copy to: Crummy, Del Deo, Dolan,
Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Attention: David Hyman, Esq.
If to Purchaser:
Voxware, Inc.
172 Tamarack Circle
Skillman, New Jersey 08558
Attention: Kenneth H. Traub
-16-
<PAGE>
with a copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Lawrence A. Spector, Esq.
or (c) on the date of receipt if sent by telex or telecopy, and confirmed in
writing in the manner set forth in (b) on or before the next day after the
sending of the telex or telecopy. Such addresses and numbers may be changed,
from time to time, by means of a notice given in the manner provided in this
Section.
Section 9.6. Severability. If any provision of this Agreement is held
------------
to be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable to the full extent possible.
Section 9.7. Waiver. Waiver of any term or condition of this
------
Agreement by any party shall only be effective if in writing and shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
Section 9.8. Counterparts. This Agreement may be signed in two or
------------
more counterparts with the same effect as if the signatures to each counterpart
were upon a single instrument, and all such counterparts together shall be
deemed an original of this Agreement.
Section 9.9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the law of the State of New Jersey, without regard
to the conflicts of laws principles thereof.
Section 9.10. Remedies. Any remedy chosen by the parties hereto shall
--------
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
Section 9.11. Third Parties. Except as specifically set forth or
-------------
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person other than the parties hereto and
their successors or assigns any rights or remedies under or by reason of this
Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date set forth above.
VOXWARE, INC.
-17-
<PAGE>
By: /s/ Kenneth H. Traub
-------------------------------------
K&F SOFTWARE
By: /s/ Matthew Krokosz
-------------------------------------
/s/ Matthew Krokosz
----------------------------------------
Matthew Krokosz
/s/ Gregory Foglesong
----------------------------------------
Gregory Foglesong
-18-
<PAGE>
Schedule 5.9
Seller has used two unregistered tradenames, "CyberScience" and "CyberPhone" and
Seller, Krokosz and Foglesong are aware of claims by third parties relating to
the use of the name "CyberPhone" by Seller.
-19-
<PAGE>
Schedule 2.1(c)
None
-20-
<PAGE>
EXHIBIT 11
VOXWARE, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1996
-------------
<S> <C>
Net loss......................................................... $(2,867,312)
===========
Weighted average shares outstanding.............................. 14,258,753
Incremental shares considered outstanding (1).................... 3,325,227
-----------
Shares used in computing pro forma net loss per share............ 17,583,980
===========
Pro forma net loss per share..................................... $ (0.16)
===========
</TABLE>
- ----------------
(1) Pursuant to the requirements of the Securities and Exchange Commission,
stock, stock options and warrants issued by the Company during the twelve
months immediately preceding the initial public offering have been included
in computing pro forma net loss per share as if they were outstanding for
all periods using the treasury stock method.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and all references to our firm included in or made part of this registration
statement.
Arthur Andersen LLP
Philadelphia, Pa.,
July 18, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 3,836,836 1,523,054
<SECURITIES> 0 0
<RECEIVABLES> 494,750 0
<ALLOWANCES> 25,000 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,360,944 1,528,494
<PP&E> 735,745 149,379
<DEPRECIATION> 124,772 20,610
<TOTAL-ASSETS> 5,336,453 1,666,827
<CURRENT-LIABILITIES> 473,606 110,530
<BONDS> 0 0
5,938,325 0
0 0
<COMMON> 11,895 11,545
<OTHER-SE> (1,087,373) 1,544,752
<TOTAL-LIABILITY-AND-EQUITY> 5,336,453 1,666,827
<SALES> 1,607,038 0
<TOTAL-REVENUES> 1,607,038 0
<CGS> 45,414 0
<TOTAL-COSTS> 4,560,793 1,233,720
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,867,312) (1,168,780)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,867,312) (1,168,780)
<EPS-PRIMARY> (0.16) (.07)
<EPS-DILUTED> (0.16) (.07)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM VOXWARE, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> AUG-20-1993
<PERIOD-END> JUN-30-1994
<CASH> 307,297
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 307,297
<PP&E> 48,820
<DEPRECIATION> 3,951
<TOTAL-ASSETS> 358,700
<CURRENT-LIABILITIES> 52,469
<BONDS> 0
0
0
<COMMON> 8,245
<OTHER-SE> 297,986
<TOTAL-LIABILITY-AND-EQUITY> 358,700
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 215,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (215,508)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,508)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
