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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 31, 2000
---------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____________________
Commission File Number 0-021403
VOXWARE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3934824
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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 office)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at May 8, 2000
- ----------------------------- ---------------------------------
Common Stock, $.001 par value 14,284,000
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VOXWARE, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
- ------------------------------
<S> <C>
Item 1. Consolidated Financial Statements Page No.
--------
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 2000 and 1999 (unaudited)........ 3
Consolidated Balance Sheets
March 31, 2000 (unaudited) and June 30, 1999............................. 4
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 2000 and 1999 (unaudited).................... 5
Notes to Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................................... 9
Item 3. Qualitative and Quantitative Disclosures about Market Risk................... 16
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information............................................................ 16
Item 6. Exhibits and Reports on Form 8-K............................................. 16
SIGNATURES................................................................................... 17
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</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Voxware, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Product revenues:
Product sales ............................................... $ 478 $ 129 $ 1,134 $ 129
License fees ................................................ 328 210 1,286 661
Royalties and recurring revenues ............................ 213 135 411 457
-------- -------- -------- --------
Total product revenues .............................. 1,019 474 2,831 1,247
Service revenues ................................................. 32 136 182 626
-------- -------- -------- --------
Total revenues .............................................. 1,051 610 3,013 1,873
-------- -------- -------- --------
Cost of revenues:
Cost of product revenues ......................................... 221 62 621 62
Cost of service revenues ......................................... 4 85 59 322
-------- -------- -------- --------
Total cost of revenues ...................................... 225 147 680 384
-------- -------- -------- --------
Gross profit ........................................ 826 463 2,333 1,489
-------- -------- -------- --------
Operating expenses:
Research and development ......................................... 863 544 2,053 1,655
Sales and marketing .............................................. 765 514 1,938 1,884
General and administrative ....................................... 455 454 1,409 1,312
Amortization of purchased intangibles ............................ 324 147 964 147
-------- -------- -------- --------
Total operating expenses .................................... 2,407 1,659 6,364 4,998
-------- -------- -------- --------
Operating loss .............................................. (1,581) (1,196) (4,031) (3,509)
Interest income .................................................... 97 118 279 473
Gain on sale of tax loss carryforwards ............................. --- --- 501 ---
Gain on sale of assets ............................................. --- --- 3,799 ---
-------- -------- -------- --------
Net income (loss) .................................................. $ (1,484) $ (1,078) $ 548 $ (3,036)
======== ======== ======== ========
Basic and diluted net income (loss) per
common share ..................................................... $ (0.11) $ (0.08) $ 0.04 $ (0.23)
======== ======== ======== ========
Shares used in computing net income (loss) per common share:
Basic ...................................................... 13,575 13,344 13,514 13,321
======== ======== ======== ========
Diluted .................................................... 13,575 13,344 14,812 13,321
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
3
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Voxware, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
-------- --------
(unaudited)
(In thousands, except share and per share data)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................... $ 1,627 $ 2,438
Short-term investments ................................................. 3,967 2,008
Accounts receivable, net ................................................ 886 989
Inventory, net .......................................................... 669 249
Prepaid expenses and other current assets ............................... 200 778
Restricted cash ......................................................... -- 604
-------- --------
Total current assets ............................................. 7,349 7,066
Property and equipment, net .................................................... 407 395
Intangible assets, net ......................................................... 3,689 4,680
Other assets, net .............................................................. 591 451
-------- --------
$ 12,036 $ 12,592
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................... $ 919 $ 2,089
Deferred revenues ....................................................... 337 531
-------- --------
Total current liabilities ........................................ 1,256 2,620
-------- --------
Deferred rent .................................................................. 211 263
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized;
None issued and outstanding .......................................... -- --
Common stock, $.001 par value, 30,000,000 shares authorized;
13,632,604 and 13,381,367 shares issued and outstanding at
March 31, 2000 and June 30, 1999, respectively ...................... 14 13
Additional paid-in capital .............................................. 30,310 29,995
Unrealized gain (loss) on available-for-sale securities ................ (6) 4
Accumulated deficit ..................................................... (19,749) (20,303)
-------- --------
Total stockholders' equity ....................................... 10,569 9,709
-------- --------
$ 12,036 $ 12,592
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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Voxware, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------------------
2000 1999
-------- --------
(in thousands)
<S> <C> <C>
Operating Activities:
Net income (loss) .......................................................... $ 548 $ (3,036)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization ........................................... 1,174 302
Provision for doubtful accounts ......................................... 15 105
Gain on sale of tax loss carryforwards .................................. (501) --
Gain on sale of assets .................................................. (3,799) --
Stock based compensation expense ........................................ 20 --
Changes in assets and liabilities, net of business acquired:
Accounts receivable ..................................................... 88 801
Inventory ............................................................... (341) (22)
Prepaid expenses and other current assets ............................... 34 (339)
Restricted cash-current ................................................. 604 (604)
Other assets ............................................................ (140) (384)
Accounts payable and accrued expenses ................................... (966) 354)
Deferred revenues ....................................................... (194) (160)
Deferred rent ........................................................... (52) (49)
-------- --------
Net cash used in operating activities ................................ (3,510) (3,032)
-------- --------
Investing Activities:
Purchases of short-term investments ........................................ (15,150) (16,831)
Sales and maturities of short-term investments ............................. 13,180 17,704
Purchases of property and equipment ........................................ (223) (50)
Proceeds from sale of tax loss carryforwards ............................... 501 --
Proceeds from sale of assets ............................................... 4,146 --
Purchase of Verbex Voice Systems, Inc. ..................................... (51) (5,163)
-------- --------
Net cash provided by (used in) investing activities .................. 2,403 (4,340)
-------- --------
Financing Activities:
Proceeds from exercises of common stock options ............................ 241 19
Issuance of common stock pursuant to Employee Stock Purchase Plan .......... 55 31
-------- --------
Net cash provided by financing activities ............................ 296 50
-------- --------
Decrease in cash and cash equivalents .......................................... (811) (7,322)
Cash and cash equivalents, beginning of period ................................. 2,438 9,149
-------- --------
Cash and cash equivalents, end of period ....................................... 1,627 1,827
Short-term investments, end of period .......................................... 3,967 3,516
-------- --------
Cash, cash equivalents and short-term investments, end of period ............... $ 5,594 $ 5,343
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Unrealized gain (loss) on short-term investments ..................... $ (10) $ 1
======== ========
Purchase accounting adjustment related to inventory acquired
from Verbex ................................................ $ (79) $ --
======== ========
</TABLE>
5
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Voxware, Inc.
Notes To Consolidated Financial Statements
1. BASIS OF PRESENTATION
The consolidated financial statements for Voxware, Inc. and its
wholly-owned subsidiary, Verbex Acquisition Corporation ("Voxware" or the
"Company"), as of March 31, 2000 and for the three and nine month periods
ended March 31, 2000 and 1999 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the consolidated
financial position and operating results for the interim periods. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K which was filed on
September 28, 1999.
The results of operations for the interim periods ended March 31, 2000
are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2000 or any other future periods.
2. NET INCOME (LOSS) PER SHARE
The Company has presented net income (loss) per share for the three
and nine months ended March 31, 2000 and 1999 pursuant to Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings per Share." Basic
net income (loss) per share was computed by dividing the net income (loss)
by the weighted average number of common shares outstanding during the
three and nine months ended March 31, 2000 and 1999. Diluted income per
share for the nine months ended March 31, 2000 was computed by dividing net
income for the period by the weighted average number of shares of common
stock and common stock equivalents outstanding using the treasury stock
method. Due to the Company's net loss for the three months ended March 31,
2000 and the three and nine months ended March 31, 1999, the effect of
including outstanding common stock options in the calculation of net loss
per share would be anti-dilutive. Therefore, outstanding common stock
equivalents have not been included in the calculation of net loss per share
for such periods and as a result, basic net loss per share is the same as
diluted net loss per share. All common stock equivalents consist of common
stock options. For the nine months ended March 31, 2000, common stock
equivalents used in computing diluted income per share totaled 1,298,000
shares. As of March 31, 2000, the Company had stock options outstanding to
purchase 86,000 shares of common stock that were not included in the
computation of net income per share because to do so would be
anti-dilutive.
3. REVENUE RECOGNITION
The Company generates revenues from products and services. Product
revenues consist of product sales, license fees, and royalties and
recurring revenues. Product sales represent shipments of portable and
stationary voice-based products and solutions for various industrial and
warehouse markets. Revenues from product sales are generally recognized
upon shipment, provided there are no significant post-delivery obligations.
The Company began shipping voice based products subsequent to its
acquisition of substantially all of the assets of Verbex Voice Systems,
Inc. ("Verbex"), which occurred on February 18, 1999. License fees are
generally derived from licensing the Company's speech compression
technologies to customers in the multimedia and consumer devices markets
and from licensing the Company's voice-based software applications acquired
in the Verbex transaction. License fees are generally recognized upon
shipment of the underlying technolgies, provided that there are no
significant post-delivery obligations, persuasive evidence of an
arrangement exists, pricing is fixed or determinable, the payment is due
within one year and collection of the resulting receivable is deemed
probable. Royalties and recurring revenues include royalties, which are
generally based on a percentage of licensees' sales or units shipped, and
pre-determined periodic license fees. Royalty revenues are recognized at
the time of the customer's shipment of products incorporating the
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Company's technology. Recurring product license fees are generally
recognized at the inception of the renewal period, provided that there are
no significant post-delivery obligations, persuasive evidence of an
arrangement exists, pricing is fixed or determinable, the payment is due
within one year and collection of the resulting receivable is deemed
probable. Service revenues from customer maintenance support, including the
amounts bundled with initial or recurring revenues, are recognized over the
term of the maintenance support period, which is typically one year.
Service revenues from engineering fees are recognized upon customer
acceptance or over the period in which services are provided if customer
acceptance is not required.
4. COMPREHENSIVE INCOME (LOSS)
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income
(loss). SFAS 130 requires that all items defined as comprehensive income,
including changes in the amounts of unrealized gains and losses on
available-for-sale securities, be shown as a component of comprehensive
income. The only comprehensive income item the Company has is unrealized
gains (losses) on available-for-sale securities.
The following reconciles net income (loss) to comprehensive income
(loss) for the three and nine month periods ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ --------------------------
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net income (loss) ................................. $(1,484) $(1,078) $ 548 $(3,036)
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale securities ..................... (6) 5 (10) 1
------- ------- ------- -------
Comprehensive net income(loss) .................... $(1,490) $(1,073) $ 538 $(3,035)
======= ======= ======= =======
</TABLE>
5. ACQUISITION OF ASSETS OF VERBEX VOICE SYSTEMS, INC.
On February 18, 1999, the Company acquired substantially all of the
assets of Verbex for a total of $5,422,000, which consists of $4,800,000
paid upon closing, a purchase price adjustment of $272,000, which was paid
in October 1999, and transaction costs of $350,000. Upon payment in October
1999, the purchase price adjustment was released from an account which was
established at the closing of the Verbex transaction. As of December 31,
1999, the escrow balance was released from restricted cash. The acquisition
was accounted for under the purchase method of accounting, whereby the
purchase price is allocated to the assets acquired and liabilities assumed
based on their fair market values at the acquisition date. The excess of
purchase price over the fair value of net assets acquired was assigned to
identifiable intangibles and goodwill. Intangible assets acquired from
Verbex include capitalized software and underlying intellectual property
rights, value added reseller agreements and relationships, customer lists
and engineering workforce. These intangibles and goodwill are being
amortized over four years, which represents the estimated economic life of
these assets. Verbex's results of operations have been included in the
Company's consolidated financial statements from the date of the
acquisition.
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6. SALE OF ASSETS TO ASCEND
On September 21, 1999, the Company's stockholders approved an
agreement with Ascend Communications, Inc. ("Ascend", which is now a wholly
owned subsidiary of Lucent Technologies, Inc.), to sell to Ascend for
approximately $5.1 million in cash substantially all of the Company's
assets relating to what has historically been the Company's primary
business of developing and licensing speech compression technologies and
products. Upon closing in September 1999, the Company received $4,146,000
in cash. The Company had previously received $204,000 of the purchase
price. The remaining $750,000 is being held in escrow for 18 months (until
March 21, 2001) to secure Voxware's indemnification provisions under the
agreement with Ascend. As a result of the sale, the Company recorded a gain
of $3,799,000 during the quarter ended September 30, 1999. Such gain does
not include the $750,000 held in escrow. The sale to Ascend did not include
the Company's rights and obligations under its existing license agreements
and, as part of the sale, the Company received a license back from Ascend
to use the technology necessary to service the Company's existing licensees
in the speech compression business. With the consent of Ascend, the Company
may also license the speech coding technologies to new licensees for uses
that are not competitive with Ascend.
7. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" during fiscal year 1999. Prior to the
Company's acquisition of Verbex in February 1999 (Note 5), the Company had
been managed in one operating segment. Since the Verbex acquisition, the
Company has been managed in two operating segments: industrial voice-based
solutions and speech compression technologies. The voice-based solutions
business relates to the Company's current business focus since the Verbex
acquisition. The speech compression technologies business relates to the
Company's business focus prior to the Verbex acquisition. In September
1999, the Company sold substantially all of the assets related to the
speech compression business to Ascend. In connection with the sale to
Ascend, the Company received a license back from Ascend to service the
Company's existing speech compression licensees, and to continue to license
the speech compression technologies for uses that are not competitive with
Ascend, subject to the consent of Ascend. The Company does not expect to
pro-actively market the speech compression technologies in the future, and
expects new licensing activity relating to the speech compression
technologies business to decrease significantly over time.
Business segment information for the nine months ended March 31, 2000
is included in the table below. Corporate and administrative overhead
expenses, including costs related to executive management, accounting and
finance, information systems and human resources are included in the speech
compression technologies segment. Intangible assets and goodwill related to
the Verbex acquisition (Note 5), and the amortization of those assets, are
included in the industrial voice-based products segment.
<TABLE>
<CAPTION>
Voice-Based Speech Compression
Products Segment Technologies Segment Total
---------------- -------------------- -----
<S> <C> <C> <C>
Revenues $ 1,473 $ 1,540 $ 3,013
Loss from operations (3,654) (377) (4,031)
Depreciation and amortization 996 178 1,174
Identifiable assets 5,308 6,728 12,036
</TABLE>
8. SUBSEQUENT EVENT
On April 4, 2000, Voxware purchased certain assets (primarily
intangible) of InRoad, Inc. for 650,000 shares of common stock valued at
$5.4 million, 325,000 warrants to purchase common stock valued at $2.5
million and $0.2 million in cash. Substantially all of the purchase price
was assigned to intangible assets acquired including all industrial and
intellectual property rights including patents, trademarks, licenses,
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copyrights and proprietary processes. These intangibles are being amortized
over three years, which represents the estimated economic life of these
assets. The asset purchase provides the Company with a voice-based hardware
platform for its new VoiceLogistics(TM) product.
Item 2. Management's discussion and analysis of results of operations and
financial condition
This report contains forward-looking statements. Such statements are
subject to certain factors that may cause Voxware's plans to differ or
results to vary form those expected including the risks associated with
Voxware's need to introduce new and enhanced products and services in order
to increase market penetration and the risk of obsolescence of its products
and services due to technological change; Voxware's need to attract and
retain key management and other personnel with experience in providing
integrated voice-based solutions for e-logistics, specializing in the
supply chain sector; the potential for substantial fluctuations in
Voxware's results of operations; competition from others; Voxware's
evolving distribution strategy and dependence on its distribution channels;
the potential that voice-based products will not be widely accepted;
Voxware's need for additional capital; and a variety of risks set forth
from time to time in Voxware's filings with the Securities and Exchange
Commission. Voxware undertakes no obligation to publicly release results of
any of these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrences of
unexpected results.
Overview
On February 4, 1999, we entered into an asset purchase agreement with
Ascend (which at the time was publicly owned but since then was acquired by
Lucent Technologies, Inc. and is now a wholly owned subsidiary of Lucent)
to sell to Ascend substantially all of our assets relating to what had
historically been our primary business of developing and selling speech
compression technologies and products. The sale to Ascend was consummated
on September 21, 1999. Also on February 4, 1999, we entered into a
definitive agreement with Verbex to acquire substantially all of the assets
of Verbex. The Verbex transaction was consummated on February 18, 1999.
Since our acquisition of Verbex, Voxware has been focusing its efforts on
developing, marketing and selling integrated voice-based solutions for
picking, receiving, return goods processing, cross-docking and put-away
operations in the distribution and logistics industries.
Voxware is a provider of industrial integrated voice-based solutions
for distribution and logistics in e-commerce, retail, direct-to-consumer,
wholesale and business-to-business operations. Voxware solutions are
available for all major market industry sectors, including consumer goods
manufacturers, consumer packaged goods, direct to consumer (e-commerce and
catalog), food and grocery, retail, third party logistics providers and
wholesale distribution. Voxware's products are also deployed in package
handling, mail sorting and manufacturing, inspection and military combat
applications. We generate revenues primarily from product sales, licenses
and development services. Product sales consist of: portable devices and
software used for various mobile industrial and warehouse applications;
stationary voice-based devices, primarily used for warehouse receiving and
package sorting applications; and accessories that complement our product
offerings, including microphones, headsets and computer hardware.
Development services consist of providing technical resources and
assistance to customer-specific development. Revenues from product sales
are generally recognized when products are deployed for their intended use,
or when they are shipped to a specific value-added reseller.
Prior to our acquisition of Verbex, Voxware generated revenues
relating to its speech and audio coding business from fees for software
product licenses and fees for services provided. Product revenues consist
of software license fees and royalties and recurring revenues. Voxware
licensed its products primarily to software and hardware companies which
incorporated Voxware's products and technologies into their products.
Arrangements with customers, which were negotiated on a case-by-case basis,
included one or more of the following: initial license fees, quarterly
license fees, annual license fees or royalties based on the licensee's
revenue generated or units shipped of products incorporating Voxware's
technologies. Software
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product revenues are generally recognized upon shipment, provided that
there are no significant post-delivery obligations, persuasive evidence of
an arrangement exists, pricing is fixed or determinable, the payment is due
within one year and collection of the resulting receivable is deemed
probable. If an acceptance period is required, revenues are recognized upon
customer acceptance. Royalty revenues are recognized in the period of
customer shipment. Service revenues consist of customer maintenance support
and engineering fees. Customer maintenance support revenues are recognized
over the term of the support period, which typically lasts for one year.
Engineering fees are generally recognized upon customer acceptance or upon
delivery if customer acceptance is not required. All research and
development costs are expensed as incurred.
The sale of the assets, relating to the speech and audio coding
business, to Ascend did not include Voxware's rights and obligations under
its then existing license agreements. We continue to have revenue from
existing licensees of our speech coding technology in the multimedia and
consumer devices markets in the form of periodic license renewal fees,
royalties and service fees. With the consent of Ascend, we may also license
our speech coding technologies for uses that are not competitive with
Ascend. Although we do not have any agreements or arrangements with Ascend
relating to any general or specific guidelines for obtaining Ascend's
consent, we believe that Ascend will consent to our licensing the speech
coding technologies in the multimedia and consumer devices markets. Our new
licensing activity relating to the speech coding technologies has been
decreasing since prior to the sale to Ascend and we expect this trend to
continue. Furthermore, as we focus on the Verbex business, revenues from
licenses of speech coding technologies is becoming a less significant part
of our revenues. For the three month period ended March 31, 2000 revenues
related to the speech coding business accounted for 29% of total revenues
for the quarter, while revenue from our voice-based solutions accounted for
71% of the quarter's revenues. While we may continue to take advantage of
favorable opportunities to license our speech coding technologies in the
future, we do not dedicate significant resources to the development,
marketing or licensing of our speech coding technologies.
On April 5, 2000 the Company introduced VoiceLogistics(TM), a
voice-based solution set of software, hardware and professional services.
VoiceLogistics strives to enable businesses to achieve new levels of
customer satisfaction by expanding the distribution and logistics
capabilities of e-commerce, retail, direct-to-consumer, wholesale and
business-to-business operations with integrated voice solutions for
fulfillment. VoiceLogistics is the industry's first and only Web-based
voice solution. The product provides a set of speech dialogues that
interact with and guide workers in logistics tasks such as picking,
receiving, putaway, inspection, returns processing, cycle counting, value-
added services and other procedural or directed operations. In conjunction
with our introduction of VoiceLogistics, Voxware acquired certain assets of
InRoad, Inc. This asset purchase allows Voxware to offer a rugged, wireless
hardware client as part of our new VoiceLogistics solution set. This new
platform is an integral component of our voice-based logistics solutions.
As described previously, since our acquisition of Verbex in February
1999, our primary business focus is developing, marketing and selling
industrial integrated voice-based solutions. As our business focus has
changed, we are developing new strategic alliances to market our integrated
voice-based solutions. During the three months ended March 31, 2000 Voxware
announced an alliance with Sonica Software that will provide customers with
warehouse management and voice-based solutions. Sonica Software is a
leading provider of NT/Oracle-based warehouse management systems.
Voxware has only a limited operating history upon which an evaluation
of Voxware and its prospects can be based. Since its inception, Voxware has
incurred significant losses and, as of March 31, 2000, Voxware had an
accumulated deficit of $19,749,000. In at least the near term quarters, we
expect to incur net losses as we develop our voice-based solutions
business. The recent sale of our speech compression technologies business
to Ascend and recent acquisition of the speech recognition systems business
of Verbex make the prediction of future results of operations extremely
difficult. Therefore, Voxware's historical revenues should not be taken as
indicative of future revenues. In addition, Voxware's operating results may
fluctuate significantly in the future as a result of a variety of factors,
including, but not limited to, the entrance into a new line of business,
the budgeting cycles of potential customers, the volume of and revenues
derived from
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sales of products by our customers that incorporate our products, the
introduction of new products or services by Voxware or its competitors,
pricing changes in the industry, the degree of success of Voxware's efforts
to penetrate its target markets, technical difficulties with respect to the
use of products developed by Voxware or its customers and general economic
conditions.
Results of Operations
Revenues
Voxware recorded revenues of $1,051,000 for the three months ended
March 31, 2000 compared to revenues of $610,000 for the three months ended
March 31, 1999. This represents an increase of $441,000 from the prior year
period, which reflects increases of $349,000 in product sales, $118,000 in
license fees and $78,000 in royalty revenue. These increases are partially
offset by a decrease in service revenues of $104,000. On a year to date
basis, total revenues increased $1,140,000 from $1,873,000 for the nine
months ended March 31, 1999 to $3,013,000 for the nine months ended March
31, 2000. This increase reflects increased product sales of $1,005,000 and
increased license fees of $625,000, partially offset by a reduction in
service revenue of $444,000 and royalties of $46,000. These increases for
the three and nine month periods ended March 31, 2000 represent increases
in sales of our voice-based logistics products. For the three and nine
months ended March 31, 1999 our revenue was generated primarily from
license fees, service revenues and royalties related to Voxware's speech
coding business. The current year revenues are now driven primarily by our
integrated voice-based solutions. Increases in the three month period ended
March 31, 2000 can be attributed to sales of our voice-based logistics
products as well as licensing of those products. During the past quarter,
the Company recognized license fees of $265,000 related to our strategic
alliance agreement with ITT Industries, Inc. (ITT). Voice-based solutions
accounted for $742,000 (71%) of Voxware's total revenue for the three
months ended March 31, 2000 versus $129,000 (21%) for the three months
ended March 31, 1999.
Total product revenues increased $545,000 from $474,000 in the three
months ended March 31, 1999 to $1,019,000 in the three months ended March
31, 2000. In the nine month period ended March 31, 2000 product revenues
totaled $2,831,000, reflecting an increase of $1,584,000 from product
revenues of $1,247,000 for the nine months ended March 31, 1999. The
increase in product revenues for the nine month period reflects an increase
of $1,005,000 in industrial voice-based product sales (which we began
selling in February 1999 as a result of our purchase of Verbex Voice
Systems) and a $625,000 increase in product license fees. These increases
are offset by a decrease of $444,000 in service revenues and a decrease in
royalty revenue of $46,000, both of which are related to our speech
compression business. For the three month periods ended March 31, 2000 and
1999, approximately 47% and 27% of the Company's product revenues were
attributable to voice-based product sales, respectively, 32% and 44% were
attributable to license fees, respectively and 21% and 28% were
attributable to royalties and recurring revenues, respectively. For the
nine month periods ended March 31, 2000 and 1999, approximately 40% and 10%
of the Company's product revenues were attributable to integrated
voice-based solutions, respectively, 45% and 53% were attributable to
license fees, respectively and 15% and 37% were attributable to royalties
and recurring revenues, respectively. Since our acquisition of Verbex in
February 1999, our primary business focus is providing integrated
voice-based solutions for distribution and logistics in e-commerce, retail,
direct-to-consumer, wholesale and business-to-business operations. This
shift in business focus is evidenced in the Company's product revenues in
the quarter ended March 31, 2000. Of the total product revenues of
$1,019,000 in the quarter, voice-based revenues account for $742,000 (73%)
of revenues for the quarter. These revenues include $478,000 in product
sales and $265,000 in license fees. The product sales consist primarily of
sales of our legacy voiced-based products to one package sorting customer,
while the license fees primarily represent revenue recognized in connection
with an agreement we entered into with ITT, related to military
applications of our voice-based technologies.
11
<PAGE>
Service revenues were primarily attributable to customer maintenance
support and fees for engineering services relating to our speech coding
technologies business. For the three months ended March 31, 2000, service
revenues totaled $32,000, reflecting a decrease of $104,000 from service
revenues of $136,000 for the three months ended March 31, 1999. For the
nine months ended March 31, 2000, service revenues totaled $182,000,
reflecting a decrease of $444,000 from service revenues of $626,000 for the
nine months ended March 31, 1999. The decrease in service revenue is
primarily attributable to reduced customer maintenance support revenues due
to a reduction in the Company's portfolio of customers for these services
from the three and nine month periods ended March 31, 1999 to the three and
nine month periods ended March 31, 2000. We expect a continued decline in
service revenues as a result of the shift in focus, in calendar year 1999,
away from a custom development-based OEM business to the operation of the
voice-based logistics solutions business.
Cost of Revenues
Cost of revenues increased $78,000 from $147,000 for the three months
ended March 31, 1999 to $225,000 for the three months ended March 31, 2000.
This increase in cost of revenues is due to an increase in cost of product
revenues of $159,000, partially offset by a decrease in cost of service
revenues of $81,000. For the nine months ended March 31, 2000 cost of
revenues totaled $680,000, an increase of $296,000 from $384,000 for the
prior year nine month period. Similar to the mix for the three months ended
March 31, 2000, this increase is due to an increased cost of product
revenues ($559,000), partially offset by lower cost of service revenues
($263,000). The increases in costs of revenues can be attributed to the
Company's change in business focus towards being a provider of integrated
voice-based solutions. The nature of the voice-based solutions business is
such that product sales will comprise a greater portion of the Company's
revenue, which will cause the cost of these revenues to increase in
relation to the increased sales. An increase in cost of product revenues,
offset by a decrease in cost of service revenues is reflective of the
change in composition of our revenues.
Cost of product revenues of $221,000 and $621,000 for the three and
nine months ended March 31, 2000, respectively, reflect costs associated
with the shipment of our voice-based logistics products. The cost of
product revenues in the current year represents increases of $159,000 and
$559,000, respectively, versus cost of product revenues of $62,000 for both
the three and nine months ended March 31, 1999. For the three and nine
months ended March 31, 2000 cost of product revenues represented 46% and
55% of product revenues, respectively. As of March 31, 2000, Voxware had a
manufacturing staff of four, the costs related to this staff are included
in cost of product revenues.
Cost of service revenues consists primarily of the expenses associated
with customer maintenance support and engineering services, including
employee compensation and equipment depreciation. Cost of service revenues
decreased $81,000 from $85,000 in the three months ended March 31, 1999 to
$4,000 in the three months ended March 31, 2000. For the nine months ended
March 31, 2000 cost of service revenues were $59,000, which represents a
decrease of $263,000 from $322,000 for the prior year nine month period.
The decrease in cost of service revenues is directly attributable to the
decrease in service revenues described above.
Operating Expenses
Total operating expenses increased by $748,000 (45%) from $1,659,000
in the three months ended March 31, 1999 to $2,407,000 in the three months
ended March 31, 2000. In the nine month period ended March 31, 2000,
operating expenses totaled $6,364,000, reflecting a $1,366,000 (27%)
increase from total operating expenses of $4,998,000 for the nine month
period ended March 31, 1999. Excluding amortization of purchased
intangibles totaling $324,000 and $964,000 for the three and nine months
ended March 31, 2000, respectively, and $147,000 for the three and nine
months ended March 31, 1999, operating expenses
12
<PAGE>
increased by $571,000 (38%) and $549,000 (11%) for the respective three and
nine month periods. The increases for the three and nine month periods are
due primarily to higher costs in research and development and increased
sales and marketing expense. The increases to research and development can
be attributed to the development of our VoiceLogistics product suite, the
industry's first and only Web-based voice solution for logistics and
distribution, which was launched in April 2000. The increased sales and
marketing expenses are primarily attributable to the launch of our
VoiceLogistics product. As of March 31, 2000, the Company's headcount
totaled 38, compared to a total headcount of 42 as of March 31, 1999.
Research and development expenses primarily consist of employee
compensation and equipment depreciation and lease expenditures related to
product research and development. In the quarter ended March 31, 2000
Voxware introduced VoiceLogistics, a voice-based solution set of software,
hardware and professional services. Reflecting the Company's commitment to
development of its voice-based products, research and development expenses
increased $319,000 (59%) from $544,000 in the three months ended March 31,
1999 to $863,000 in the three months ended March 31, 2000. In the nine
month period ended March 31, 2000 research and development expenses totaled
$2,053,000, reflecting an increase of $398,000 (24%) from $1,655,000 for
the nine months ended March 31, 1999. The Company's research and
development staff at March 31, 2000 included 16 full time employees and 4
consultants, compared to a staff of 18 and zero consultants at March 31,
1999. However, the main factor driving these cost increases is the
development of our voice-based products. The current fiscal year includes
nine months of costs associated with the development of voice-based
products and solutions, while minimal costs were incurred through the nine
months ended March 31, 1999 (Verbex was acquired February 19, 1999).
Sales and marketing expenses primarily consist of employee
compensation (including direct sales commissions), travel expenses and
trade shows. Sales and marketing expenses increased $251,000 (49%) from
$514,000 in the three months ended March 31, 1999 to $765,000 in the three
months ended March 31, 2000. In the nine month period ended March 31, 2000,
sales and marketing expenses totaled $1,938,000, reflecting an increase of
$54,000 (3%) from expenses of $1,884,000 for the nine months ended March
31, 1999. As of March 31, 2000 the Company had a sales and marketing staff
of eleven compared to ten at March 31, 1999. Although the total sales and
marketing headcount did not increase significantly from year-to-year, there
was turnover during the period that contributed to the increase in the
total costs. This turnover is reflective of our recruitment of new
personnel, better suited to address our new business focus. For the three
months ended March 31, 2000 three additions were made to the sales force
which caused the company to incur additional recruiting costs as compared
to the prior year. In addition, sales and marketing expenses increased in
the three month period due to costs related to the launch of our
VoiceLogistics product suite.
General and administrative expenses consist primarily of employee
compensation and fees for insurance, rent, office expenses and professional
services. General and administrative expenses remained relatively unchanged
for the three months ended March 31, 2000 as compared to the three months
ended March 31, 1999. For the nine months ended March 31, 2000 general and
administrative expenses amounted to $1,409,000, an increase of $97,000 (7%)
from expenses of $1,312,000 for the nine months ended March 31, 1999. The
increase in general and administrative expense for the nine month period
can be attributed to costs associated with the addition of our Cambridge
office and consulting fees related directly to our acquisition of Verbex
Voice Systems. These increases are partly offset by a reduction in
headcount, Voxware had a general and administrative staff of six at March
31, 2000 compared to nine at March 31, 1999.
Amortization of purchased intangibles totaled $324,000 and $964,000
for the three and nine month periods ended March 31, 2000. These
intangibles relate to the acquisition of Verbex in February 1999.
Intangibles capitalized from the Verbex acquisition approximated $5,131,000
and those intangibles are being amortized over four years.
13
<PAGE>
Interest Income
Interest income decreased $21,000 to $97,000 for the three months
ended March 31, 2000 from $118,000 for the three months ended March 31,
1999. For the nine months ended March 31, 2000 interest income was $279,000
a decrease of $194,000 (41%) from $473,000 at March 31, 1999. The decrease
is primarily related to a decrease in Voxware's total cash, cash
equivalents and short-term investments portfolio balance as a result of
cash used for operations and the acquisition of substantially all of the
assets of Verbex for approximately $5,102,000 plus transaction costs in
February 1999. As of March 31, 2000, Voxware's cash, cash equivalents and
short-term investments portfolio totaled $5,594,000 compared to $5,343,000
at March 31, 1999. The average balance for the 1999 period included the
funds used in the Verbex acquisition in February 1999. We expect that
interest income will continue to decline as cash is expended to fund
operations.
Income Taxes
As of March 31, 2000, we had approximately $17,500,000 of federal net
operating loss carryforwards which will begin to expire in 2009 if not
utilized. As of March 31, 2000, we have provided a full valuation allowance
on the net deferred tax asset because of the uncertainty regarding
realization of the deferred asset, primarily as a result of considering
such factors as our limited operating history, the volatility of the market
in which we compete, the operating losses incurred to date and the
operating losses anticipated in future periods.
Gain on Sale of Tax Loss Carryforwards
In addition, during 1999, the State of New Jersey passed legislation
which allows New Jersey technology companies to apply for the transfer or
sale of unused New Jersey State net operating losses and research and
development tax credits for cash. Profitable companies can buy these losses
and credits at a discount, thereby reducing their state tax obligation.
Voxware applied to the State of New Jersey to sell up to approximately
$14,900,000 of its net operating loss carryforwards. Voxware received a
determination letter from the State of New Jersey to sell $7,420,000 of its
New Jersey State net operating losses which, upon the sale provided Voxware
$501,000 in cash as of December 31, 1999. The remaining $7,480,000, if
approved and sold, could provide Voxware with up to an additional $540,000.
Gain on Sale of Assets
During the quarter ended September 30, 1999, we completed the sale of
substantially all of the assets relating to our speech coding technology
business for $5,100,000, of which $750,000 has been placed in escrow for a
period of 18 months from the closing date to secure our indemnification
obligations under the agreement with Ascend. Upon closing, we received
$4,146,000 from Ascend. We had previously received a payment of $204,000 of
the purchase price. For the nine months ended March 31, 2000, we recorded a
gain on the sale of the speech coding assets totaling $3,799,000, which
reflects the total proceeds received to date totaling $4,350,000, less
transaction costs of $517,000 and equipment transferred to Ascend totaling
$34,000.
Liquidity and Capital Resources
As of March 31, 2000, we had a total of $5,594,000 in cash, cash
equivalents and short-term investments consisting of $1,627,000 of cash and
cash equivalents and $3,967,000 in short-term investments. Included in our
cash, cash equivalents and short-term investments balance is $4,146,000
received upon the closing of the Ascend transaction. We also had received a
deposit of $204,000 from Ascend in January 1999 which was restricted until
the closing of the transaction. As of March 31, 2000, $750,000 of the sale
price was placed in escrow for a period of 18 months to secure our
indemnification obligations. Our cash, cash
14
<PAGE>
equivalents and short-term investments portfolio is liquid and investment
grade, consisting of high-grade money-market funds, United States
Government-backed securities and commercial paper and corporate
obligations. Since inception, we have primarily financed our operations
through the sale of equity securities.
For the nine months ended March 31, 2000, cash used in operating
activities totaled $3,510,000. Net income for the period totaled $548,000,
which was comprised of a $3,799,000 gain on the sale of substantially all
of the assets of our speech coding business to Ascend and a gain on the
sale of tax loss carryforwards of $501,000, offset by a loss from
operations totaling $2,788,000, amortization totaling $964,000 and changes
in operating assets and liabilities. For the nine months ended March 31,
1999, cash used to fund operations totaled $3,032,000. Cash used to fund
operations was primarily attributable to the net operating loss of
$3,036,000.
For the nine months ended March 31, 2000, cash provided by investing
activities totaled $2,403,000, which consisted of proceeds from the sale of
net operating loss carryforwards totaling $501,000 and proceeds from the
sale of assets to Ascend for $4,146,000, which were offset by $1,970,000 in
net purchases of short-term investments, $223,000 in purchases of property
and equipment and a payment of $51,000 for a contingent purchase price
adjustment to Verbex Voice Systems for the purchase of substantially all of
the assets in February 1999. For the nine months ended March 31, 1999, cash
used in investing activities totaled $4,340,000, which consisted of
$5,163,000 in cash paid for the Verbex business and $50,000 in net
purchases of property and equipment, offset by $873,000 in net sales and
maturities of short-term investments. For the nine months ended March 31,
2000 and 1999, cash provided by financing activities totaled $296,000 and
$50,000, respectively. These amounts represent proceeds from exercises of
common stock options of $241,000 and $19,000 and proceeds from the issuance
of common stock pursuant to the Company's Employee Stock Purchase Plan of
$55,000 and $31,000 for the nine months ended March 31, 2000 and 1999,
respectively.
We have a $2,000,000 revolving line of credit with Silicon Valley
Bank. Borrowings under the credit facility will bear interest at the bank's
prime lending rate. As amended on May 9, 2000, the credit facility requires
Voxware to secure all indebtedness with cash held at the bank's offices in
an amount not less than 100% of the outstanding amount of all indebtedness
we owe to the bank. The credit facility requires payment of all outstanding
principal, if any, plus all accrued interest on May 8, 2001. In connection
with the lease of our office facility, we have outstanding a $300,000
standby letter of credit at March 31, 2000 naming the lessor of the office
facility beneficiary of the standby letter of credit in the event that we
default on the lease. As required by the credit facility, we have secured
the $300,000 standby letter of credit with cash that is included in "other
assets" in the March 31, 2000 balance sheet. In accordance with the lease
agreement, as of May 15, 2000 the standby letter of credit will be reduced
to $225,000, thereby reducing the restricted cash obligation to $225,000.
We have no material commitments for capital expenditures except for
those under operating leases for our facilities and leased equipment. At
March 31, 2000, our working capital totaled approximately $6,095,000. We
believe that our current cash, cash equivalents and short-term investments
balances will be sufficient to fund our working capital and capital
expenditures requirements, exclusive of cash required for possible
acquisitions of, or investments in businesses, products and technologies
for at least twelve months beyond March 31, 2000.
15
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We do not engage in significant activity with respect to market risk
sensitive instruments. Accordingly, our risk with respect to market
risk sensitive instruments is immaterial.
PART II - OTHER INFORMATION
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Item 5. Other Information
On April 4, 2000, Voxware purchased certain assets (primarily
intangible) of InRoad, Inc. for 650,000 shares of common stock valued
at $5.4 million, 325,000 warrants to purchase common stock valued at
$2.5 million and $0.2 million in cash. Substantially all of the
purchase price was assigned to intangible assets acquired including
all industrial and intellectual property rights including patents,
trademarks, licenses, copyrights and proprietary processes. These
intangibles are being amortized over three years, which represents the
estimated economic life of these assets. The asset purchase provides
the Company with a voice-based hardware platform for its new
VoiceLogistics product.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
2.1 Acquisition Agreement, dated as of April 4, 2000, by and among
Voxware, Inc., Verbex Acquisition Corporation and InRoad, Inc.
4.1 Form of Warrant issued to Inroad, Inc.
4.2 Warrant issued to Stratos Product Development, LLC
4.3 Stock Restriction and Registration Rights Agreement, dated April
4, 2000, among Voxware, Inc., Verbex Acquisition Corporation,
InRoad, Inc. and Stratos Product Development, LLC.
10.1 Loan Modification Agreement dated May 9, 2000 between Silicon
Valley Bank and the Company
27.1 Financial Data Schedule (FDS) for current reporting periods ended
March 31, 2000.
(b) Reports on Form 8-K. None
- --------------------------------------------------------------------------------
16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2000
VOXWARE, INC.
(Registrant)
By: /s/ Bathsheba J. Malsheen
------------------------------------------
Bathsheba J. Malsheen, President and Chief
Executive Officer
By: /s/ Nicholas Narlis
------------------------------------------
Nicholas Narlis, Senior Vice President,
Chief Financial Officer, Treasurer and
Secretary (Principal Financial Officer and
Principal Accounting Officer)
17
<PAGE>
Exhibit 2.1
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
by and among
VOXWARE, INC.,
VERBEX ACQUISITION CORPORATION
and
INROAD, INC.
Dated as of April 4, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS.............................................................1
II. PURCHASE AND SALE OF ASSETS............................................3
Section 2.1 Purchase and Sale of Assets...........................3
Section 2.2 Excluded Assets.......................................4
Section 2.3 Excluded Liabilities; Assumed Contracts...............4
Section 2.4 License Agreements....................................5
Section 2.5 Closing...............................................5
Section 2.6 Consideration for Assets..............................5
Section 2.7 Royalties.............................................6
Section 2.8 Transfer of Assets....................................7
Section 2.9 Allocation of Purchase Price..........................7
III. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.......................7
Section 3.1 Representations and Warranties Accurate...............7
Section 3.2 Performance by Seller.................................7
Section 3.3 Certificate...........................................7
Section 3.4 Opinion of Counsel for Seller.........................8
Section 3.5 Legal Prohibition.....................................8
Section 3.6 Permits, Waivers, Orders, Etc.........................8
Section 3.7 Secretary's Certificate...............................8
Section 3.8 Closing Matters.......................................9
Section 3.9 Supplemental Disclosure...............................9
Section 3.10 Other Agreements......................................9
IV. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER..........................9
Section 4.1 Representations and Warranties Accurate...............9
Section 4.2 Performance by Purchaser..............................9
Section 4.3 Certificate...........................................9
Section 4.4 Legal Prohibition.....................................9
Section 4.5. Opinion of Counsel for Purchaser and Voxware..........9
Section 4.6. Closing Matters......................................10
Section 4.7. Other Agreements.....................................10
V. INDEMNIFICATION........................................................10
Section 5.1 Survival of Representations and Warranties...........10
Section 5.2 Seller's Indemnity...................................10
Section 5.3 Purchaser's Indemnity................................11
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Section 5.4 Limitation...........................................12
Section 5.5 Subsequent Tax Liability Indemnification.............12
Section 5.6 Notice and Defense of Claims.........................12
Section 5.7 Reimbursement........................................12
VI. REPRESENTATIONS AND WARRANTIES OF SELLER..............................13
Section 6.1 Organization and Qualification.......................13
Section 6.2 Due Authorization; No Conflict.......................13
Section 6.3 Title to and Condition of Assets.....................14
Section 6.4 Financial Information................................15
Section 6.5 Taxes................................................15
Section 6.6 Events Subsequent to the Interim Balance Sheet Date..16
Section 6.7 Assumed Contracts....................................16
Section 6.8 Litigation...........................................16
Section 6.9 Compliance with Law..................................17
Section 6.10 Brokers..............................................17
Section 6.11 Intellectual Property................................17
Section 6.12 Assets...............................................17
Section 6.13 No Product Liabilities; Product Warranties...........17
Section 6.14 Disclosure...........................................18
VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND VOXWARE...............18
Section 7.1 Organization.........................................18
Section 7.2 Due Authorization; No Conflict.......................18
Section 7.3 SEC Filings..........................................19
Section 7.4 No Material Adverse Change...........................20
Section 7.5 Brokers..............................................20
VIII. COVENANTS...........................................................20
Section 8.1 Conduct and Preservation of Business.................20
Section 8.2 Access to Information; Confidentiality...............20
Section 8.3 Filings and Authorizations...........................20
Section 8.4 Public Announcements.................................21
Section 8.5 Schedules............................................21
IX. CERTAIN ACTIONS AFTER THE CLOSING.....................................21
Section 9.1 Maintenance of Books and Records.....................21
Section 9.2 Tax Returns Through Closing..........................22
Section 9.3 Purchaser to Act as Agent for Seller.................22
Section 9.4 Delivery of Property Received by Seller or Purchaser
After Closing........................................22
Section 9.5 Purchaser Appointed Attorney for Seller..............22
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Section 9.6 Further Assurances...................................23
X. TERMINATION............................................................23
Section 10.1 Termination Events...................................23
Section 10.2 Effect of Termination................................23
XI. MISCELLANEOUS.........................................................24
Section 11.1 Expenses.............................................24
Section 11.2 Risk of Loss.........................................24
Section 11.3 Amendment............................................24
Section 11.4 Entire Agreement.....................................24
Section 11.5 Headings.............................................24
Section 11.6 Notices..............................................24
Section 11.7 Severability.........................................25
Section 11.8 Waiver...............................................25
Section 11.9 Governing Law........................................26
Section 11.10 Force Majeure........................................26
Section 11.11 Third Parties........................................26
Section 11.12 Counterparts.........................................26
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EXHIBITS
--------
Exhibit A Form of Escrow Agreement
- ---------
Exhibit B Form of HDH License
- ---------
Exhibit C Form of Rights Agreement
- ---------
Exhibit D Form of Opinion of Counsel for Seller
- ---------
Exhibit E Form of Opinion of Counsel for Purchaser and Voxware
- ---------
SCHEDULES
---------
Schedule 2.1(a) Fixed Assets
Schedule 2.1(b) Existing Units and Spare Parts
Schedule 2.1(d) Intellectual Property
Schedule 2.2 Excluded Assets
Schedule 2.3 Assumed Contracts
Schedule 2.9 Allocation of Purchase Price
Schedule 6.2 Consents; Waivers
Schedule 6.3 Title and Condition of Assets
Schedule 6.7 Assumed Contracts
Schedule 6.8 Litigation
Schedule 6.11 Intellectual Property
Schedule 6.13 Product Warranty Payments
Schedule 7.2 No Conflict
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ACQUISITION AGREEMENT, dated as of April 4, 2000, by and among Voxware,
Inc., a Delaware corporation ("Voxware"), Verbex Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Voxware ("Purchaser"), and
InRoad, Inc., a Delaware corporation ("Seller").
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the
assets used in connection with the conduct of the Business (as defined herein).
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:
"Affiliate" or "affiliate"means, with respect to any Person, any other
Person that, directly or indirectly, controls or is controlled by or is under
common control with such Person. As used in this definition of "Affiliate," the
term "control" and any derivative thereof means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Acquisition Agreement, as it may be from time to
time amended.
"Assets" has the meaning set forth in Section 2.1.
"Assumed Contracts" has the meaning set forth in Section 2.3.
"Business" means the business operations previously conducted by Seller
relating to the design and manufacture of network computer hardware products;
provided that, "Business" shall not include the HDH Business.
"Closing" means the completion of the acquisition of the Assets pursuant to
this Agreement.
"Closing Date" means the date the Closing takes place.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.001 per share, of
Voxware.
"Escrow Agent" means United States Trust Company of New York.
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"Escrow Agreement" means the agreement, dated the Closing Date, by and
among Seller, Purchaser and the Escrow Agent, a form of which is attached hereto
as Exhibit A.
---------
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Exclusive Markets" has the meaning set forth in Section 2.4.
"Existing Unit" has the meaning set forth in Section 2.7.
"HDH Business" means Seller's business activities concerning the
development and manufacture of Headset Display Hardware.
"HDH License" has the meaning set forth in Section 2.4.
"Headset Display Hardware" means Seller's headset display hardware,
comprising SVGA microdisplay controller electronics, viewing optics, drive
electronics, speaker, microphone and x-windows client/server firmware ports to
Inquire and customized for the display controller.
"Indemnified Party" has the meaning set forth in Section 5.6.
"Indemnifying Party" has the meaning set forth in Section 5.6.
"Intellectual Property" has the meaning set forth in Section 2.1(d).
"Interim Balance Sheet" has the meaning set forth in Section 6.4.
"Interim Balance Sheet Date" has the meaning set forth in Section 6.4.
"Material Adverse Change" means an occurrence or event which has had or is
reasonably likely to have a material adverse effect on the business operations,
assets, liabilities or condition (financial or otherwise) of the affected
Person.
"Mutual Nondisclosure Agreement" means the mutual nondisclosure agreement,
dated July 26, 1999, between Purchaser and Seller, as may be amended from time
to time.
"Payment Shares" has the meaning set forth in Section 2.6(b).
"Permits" means all permits, licenses, registrations, approvals,
qualifications, consents and other authorizations necessary for the lawful
conduct, ownership and operation of the Business.
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"Permitted Encumbrances" has the meaning set forth in Section 6.3(a).
"Person" means an individual, partnership, corporation, joint venture,
unincorporated organization, cooperative or a governmental entity or agency
thereof.
"Rights Agreement" means the Stock Restriction and Registration Rights
Agreement, dated the Closing Date, by and among Voxware, Purchaser and Seller, a
form of which is attached hereto as Exhibit C.
---------
"Royalties" has the meaning set forth in Section 2.7.
"Royalty Period" means the period of time from the Closing Date to, and
including, the fifth anniversary of the Closing Date.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller Financial Statements" has the meaning set forth in Section 6.4(a).
"Taxes" has the meaning set forth in Section 6.5(a).
"Transaction Agreements" means the Escrow Agreement, Warrants, the HDH
License and the Rights Agreement.
"Transaction Costs" mean all financial, tax, accounting, consulting,
finders, investment banking, legal, advisory and similar fees, commissions and
expenses incurred by Seller in connection with the consummation of the
transactions contemplated hereby.
"Warrants" has the meaning set forth in Section 2.6(c).
"Warrant Shares" has the meaning set forth in Section 2.6(d).
II. PURCHASE AND SALE OF ASSETS
---------------------------
Section 2.1 Purchase and Sale of Assets. At the Closing, upon the terms and
---------------------------
subject to the conditions contained herein, Seller shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall purchase and accept from
Seller, all right, title and interest of Seller in and to the following assets
of Seller related to the Business (except for Excluded Assets, as defined in
Section 2.2 below) (collectively, the "Assets"), free and clear of all liens,
pledges, encumbrances and charges of every kind (except for Permitted
Encumbrances):
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(a) all machinery, equipment, furniture and fixtures, computers,
computer hardware and software, system software, manufacturing systems
(including tooling), tools, supplies and other tangible assets of Seller related
to the Business, including, without limitation, those described in Schedule
--------
2.1(a);
- ------
(b) all Seller's inventories of raw materials, work-in-process, Existing
Units, spare parts and packaging materials used or useful in the conduct of the
Business, including, without limitation, those Existing Units and spare parts
described in Schedule 2.1(b);
---------------
(c) the following operating data and records of Seller relating to the
Business: customer, supplier and distribution lists and records, production
reports and records, equipment logs, and operating guides and manuals;
(d) all industrial and intellectual property rights used or useful in
the Business (other than those used exclusively in the HDH Business, except as
set forth in Section 2.4 hereof), including, without limitation, patents,
pending patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyrights,
know-how, franchises, licenses, trade secrets, proprietary processes and
formulae, technologies, methods, plans, research data, marketing plans and
strategies, forecasts, product designs, fabrication data, research and
development, operating rights, software (including, without limitation, all
source codes and object codes), permits, licenses and other intellectual
property used in the Business (other than those used exclusively in the HDH
Business, except as set forth in Section 2.4 hereof) (collectively "Intellectual
Property"), including, without limitation, all such property and rights listed
on Schedule 2.1(d).
---------------
(e) all continuing manufacturer's warranties relating to any of the
Assets (but excluding any claims thereunder accrued prior to the Closing Date);
and
(f) all rights and benefits accruing to Seller under those certain
licenses and other contracts identified as Assumed Contracts on Schedule 2.3.
------------
Section 2.2 Excluded Assets. Anything to the contrary in Section 2.1
---------------
notwithstanding and subject to Section 2.4, the Assets shall exclude, and
Purchaser shall not acquire, (a) any cash or cash equivalents in hand or in bank
accounts, (b) any accounts receivable, (c) any patents and pending patents,
proprietary information or technology and related physical assets (completed
units and related work-in-process inventory) related to the HDH Business, (d)
any real property or rights or agreements relating to real property, (e) claims
or causes of action arising in the conduct of the Business prior to the Closing
Date, (f) insurance contracts and rights thereunder, (g) any other contracts or
agreements entered into in connection with the Business (other than Assumed
Contracts as specified in Schedule 2.3) and rights thereunder, (h) any Permits,
------------
and (i) those items specifically set forth in Schedule 2.2 hereto (collectively,
------------
the "Excluded Assets").
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Section 2.3 Excluded Liabilities; Assumed Contracts. The parties hereto
---------------------------------------
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, except liabilities arising in connection with the operation
of the Business by the Purchaser after the Closing Date under the licenses and
other contracts set forth on Schedule 2.3 hereto (the "Assumed Contracts"),
------------
which licenses and contracts Purchaser specifically assumes as of the Closing
Date.
Section 2.4 License Agreements. (a) On or prior to the Closing Date, Seller
------------------
shall grant to Purchaser an exclusive, worldwide object and source code license
to use the Headset Display Hardware (including any improvements thereto by
Seller and derivative works thereof) within the industrial, package sorting,
warehouse and military spaces (the "Exclusive Markets") pursuant to the
cross-license agreement in the form attached hereto as Exhibit B (the "HDH
---------
License"). Purchaser shall have the right to assign this license or to
sublicense with the prior written consent of Seller, such consent shall not be
unreasonably withheld.
(b) On the Closing Date, as part of the HDH License, Purchaser shall
grant to Seller an object and source code license to use, in all markets that
are not Exclusive Markets, those assets that are part of the Assets (including
any improvements thereto or derivative works thereof) and are useful in order to
enable Seller to exploit and commercialize its technology relating to Headset
Display Hardware in markets other that the Exclusive Markets. Seller shall have
the right to assign this license or to sublicense with the prior written consent
of Purchaser, such consent of Purchaser is not to be unreasonably withheld.
Section 2.5 Closing. The Closing shall take place at the offices of
-------
Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, as soon
as practicable following satisfaction of the conditions set forth in Articles
III and IV hereof, or at such other date, time and place as the parties may
mutually 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 2.6 Consideration for Assets.
------------------------
(a) At the Closing, Purchaser shall deliver to Seller $240,000 by wire
transfer of immediately available funds to an account specified by Seller prior
to the Closing Date.
(b) At the Closing, Purchaser shall deliver 487,500 shares of Common
Stock to Seller and 162,500 shares of Common Stock to the Escrow Agent pursuant
to the Escrow Agreement (all such shares of Common Stock are referred to herein
as the "Payment Shares") (the number of Payment Shares having been determined in
accordance with the understanding among Purchaser, Seller and Voxware that the
number of Payment Shares issued by Voxware to Seller would be based on the
average closing bid price of the Common Stock during the period beginning
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on October 20, 1999 (the date of that certain Development Agreement between
Seller and Voxware) and ending on the Closing Date.
(c) At the Closing, Purchaser shall deliver five-year warrants with an
exercise price of $3.08 per share (the "Warrants") (such exercise price per
share having been determined in accordance with the understanding among
Purchaser, Seller and Voxware that such exercise per share would be the greater
of (1) $3.00 and (2) the average closing bid price of the Common Stock during
the period beginning on October 20, 1999 (the date of that certain Development
Agreement between Seller and Voxware) and ending on the Closing Date) to
purchase an aggregate of 325,000 shares of Common Stock as follows: Warrants to
purchase 243,750 shares of Common Stock shall be delivered to Seller and
Warrants to purchase 81,250 shares of Common Stock shall be delivered to the
Escrow Agent under the Escrow Agreement.
(d) All Payment Shares and all shares of Common Stock issued upon
exercise of the Warrants ("Warrant Shares") shall be subject to transfer
restrictions and will be entitled to be registered for resale under the
Securities Act in accordance with the Rights Agreement.
(e) Simultaneously with the Closing, Purchaser is delivering to Stratos
Product Development, LLC five-year warrants with an exercise price of $3.00 per
share to purchase an aggregate of 50,000 shares of Common Stock in consideration
for Stratos Product Development, LLC entering into a release agreement with
Seller and Purchaser.
Section 2.7 Royalties. Purchaser shall pay (and Voxware shall cause
---------
Purchaser to pay) to Seller royalties ("Royalties"), payable to Seller on a
quarterly basis for a period of five (5) years from the Closing Date, due thirty
(30) days following the end of each fiscal quarter, as follows:
(a) for each previously manufactured Inquire unit (package assembled
with internal components) acquired by Purchaser at the Closing (each, an
"Existing Unit"), $250 per Existing Unit (i) actually sold by Purchaser or any
of its Affiliates or transferees, or (ii) cannibalized, disassembled or
otherwise used or transferred in whole or in part by Purchaser or any of its
Affiliates or transferees. Notwithstanding the foregoing, Purchaser shall not be
obligated to pay to Seller a Royalty in connection with the 25 Inquire units
transferred to Purchaser in or prior to October, 1999.
(b) for each New Unit (as defined below), $250 per New Unit actually
sold by Purchaser or any of its Affiliates, licensees, sublicensees or
assignees. A "New Unit," subject to the aforementioned Royalty is defined as any
computer which incorporates a RISC-based processor and/or thin-client
architecture.
(c) Royalties on all units will be reportable and payable to Seller
within thirty (30) days after the end of each calendar quarter in which (i)
Existing Units or New Units have been shipped by Purchaser or any of its
Affiliates, licensees, sublicensees or assignees as part of a normal pilot or
order in which the unit(s) are obligated to be paid for or (ii) Existing Units
are cannibalized,
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disassembled or otherwise used or transferred in while or in part by Purchaser
or any of its Affiliates or transferees. Any demos and beta site units are
excluded from each quarterly royalty calculation until such units are converted
to a pilot or order in which the unit(s) are obligated to be paid for. Royalties
previously paid to Seller on sales of Units which are subsequently returned to
Buyer by customers shall be credited against future royalty obligations. Seller
shall have the right upon reasonable advance notice and no more often than once
per calendar year, to have the records of the Purchaser and its Affiliates
relating to the sale , cannibalization, disassembly, use or transfer of Existing
Units and New Units audited. Such audit may be conducted by an independent third
party acceptable to Purchaser or one of the "big five" accounting firms. Any
such audit shall be conducted at Seller's sole expense unless such audit reveals
an underpayment of five percent (5%) or more in any quarterly payment due to
Seller in which case Purchaser shall reimburse Seller for all costs incurred in
connection with such audit.
Section 2.8 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 except as
permitted by this Agreement. All sales, transfer or stamp taxes, or similar
charges, payable by reason of the sale hereunder shall be borne equally by
Seller and Purchaser.
(b) Within ten (10) days of the Closing Date, Seller shall deliver to
Purchaser all Existing Units and spare parts, unless Purchaser and Seller
mutually agree otherwise. Seller shall pay all costs associated with the
delivery of the Existing Units and spare parts, and Seller shall also assume the
risk of loss in connection with the delivery to Purchaser of all Existing Units
and spare parts.
Section 2.9 Allocation of Purchase Price. The purchase price shall be
----------------------------
allocated in its entirety among the Assets in accordance with Schedule 2.9
------------
hereto. Seller and Purchaser shall file all information and tax returns (and any
amendments thereto) in a manner consistent with this Section 2.9. If, contrary
to the intent of the parties hereto as expressed in this Section 2.9, any taxing
authority makes or proposes an allocation different from that contained in this
Section 2.9, Seller and Purchaser shall cooperate with each other in good faith
to contest such taxing authority's allocation (or proposed allocation).
III. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
------------------------------------------------
The obligation of Purchaser under this Agreement to consummate the purchase
of the Assets shall be subject to the satisfaction, at or prior to the Closing,
of all of the following conditions, to the reasonable satisfaction of Purchaser:
Section 3.1 Representations and Warranties Accurate. All representations
---------------------------------------
and warranties of Seller contained in this Agreement (including the Schedules
hereto), and all written information delivered to Purchaser by Seller on or
prior to the Closing Date pursuant to this
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<PAGE>
Agreement, (i) that are qualified as to materiality shall be true in all
respects on and as of the Closing Date and (ii) that are not qualified as to
materiality 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, and such written information was delivered, on and as of
the Closing Date.
Section 3.2 Performance by Seller. Seller shall have performed and complied
---------------------
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by Seller prior to or on the Closing Date.
Section 3.3 Certificate. Purchaser shall have received a certificate, dated
-----------
the Closing Date, signed by an authorized officer of Seller, certifying that the
conditions set forth in Sections 3.1, 3.2 and 3.8 have been satisfied.
Section 3.4 Opinion of Counsel for Seller. Purchaser shall have received
-----------------------------
from Gray Cary Ware & Freidenrich counsel to Seller, a written opinion, dated
the Closing Date, substantially in the form attached hereto as Exhibit D.
Section 3.5 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, suit or proceeding shall have been threatened, instituted or remain
pending before any court, governmental body or regulatory authority to restrain,
prohibit or obtain damages in connection with the transactions contemplated by
this Agreement and no adverse decision shall have been made by any court,
governmental body or regulatory authority which could be reasonably anticipated
to materially and adversely restrict or impair the ability of Purchaser to own
the Assets or utilize the Assets in the conduct of its business. No Federal,
state or local statute, rule or regulation shall have been enacted the effect of
which would be to prohibit, restrict, impair or delay the consummation of the
transactions contemplated hereby or restrict or impair the ability of Purchaser
to own or utilize the Assets or to utilize the Assets in the conduct of its
business.
Section 3.6 Permits, Waivers, Orders, Etc. All permits, waivers, orders,
-----------------------------
qualifications, designations, declarations, filings, consents, rulings,
approvals or other action required with or from any Federal, state or local
governmental or other regulatory authority or third party in connection with the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby shall have been duly obtained and shall be
reasonably satisfactory to Purchaser and its counsel, and copies thereof shall
be delivered to the Purchaser at or prior to the Closing. No such permit, waiver
or other action (a) shall be conditioned on the material modification,
cancellation or termination of any Assumed Contract, or (b) shall impose on
Purchaser or any of its Affiliates any material condition or provision or
requirement with respect to the ownership of the Assets or the operation of its
business that is more restrictive than or different from the conditions imposed
upon such operation prior to Closing, unless Purchaser gives its prior written
approval.
Section 3.7 Secretary's Certificate. Purchaser shall have received a
-----------------------
certificate, dated the Closing Date, signed by the Secretary of Seller,
certifying: (i) that attached thereto is a true and complete copy of the
Certificate of Incorporation of Seller, which has not been amended since
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<PAGE>
February 16, 1999; (ii) that attached thereto is a true and complete copy of the
By-laws of Seller as in effect on the Closing Date; (iii) that attached thereto
is a true and complete copy of all resolutions adopted by the Board of Directors
and stockholders of Seller authorizing the execution, delivery and performance
of this Agreement, the HDH License, the Escrow Agreement and the Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby, that such resolutions are in full force and effect as of the Closing
Date and that such resolutions are all the resolutions adopted in connection
with the transactions contemplated hereby; (iv) that Seller has obtained the
approval of at least 80% in interest of its stockholders of this Agreement, the
sale of the Assets and the related proposed transactions; and (v) as to the
incumbency and specimen signature of each officer of Seller executing this
Agreement, any certificate, agreement or other instrument furnished pursuant
hereto or thereto, including a certification by another officer of Seller as to
the incumbency and signature of the Secretary of Seller.
Section 3.8 Closing Matters. All proceedings (including, without
---------------
limitation, the matters referred to in Section 2.8(a)) to be taken by the Seller
in connection with the consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby shall be reasonably satisfactory in form
and substance to Purchaser and its counsel.
Section 3.9 Supplemental Disclosure. If Seller shall have supplemented or
-----------------------
amended any Schedule pursuant to its obligations set forth in Section 8.5
hereof, Purchaser shall not have given notice to Seller that, as a result of
information provided to Purchaser in connection with any or all of such
amendments or supplements, Purchaser has determined not to proceed with the
consummation of the transactions contemplated hereby.
Section 3.10 Other Agreements. Seller and the Escrow Agent shall have
----------------
executed and delivered the Escrow Agreement, and Seller shall have executed the
HDH License and the Rights Agreement.
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 and Voxware contained in this Agreement, and all
written information delivered to Seller by Purchaser on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to materiality shall
be true in all respects on and as of the Closing Date and (ii) that are not
qualified as to materiality 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, and such written information was delivered, 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.
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Section 4.3 Certificate. Seller shall have received a certificate, dated
-----------
the Closing Date, signed by authorized officers of Purchaser and Voxware, to the
effect that the conditions set forth in Sections 4.1 and 4.2 have been
satisfied.
Section 4.4 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, suit or proceeding shall have been threatened, instituted or remain
pending before any court, governmental body or regulatory authority to restrain,
prohibit or obtain damages in connection with the transactions contemplated by
this Agreement.
Section 4.5. Opinion of Counsel for Purchaser and Voxware. Seller shall
--------------------------------------------
have received from Fulbright & Jaworski L.L.P., counsel for Purchaser and
Voxware, a written opinion dated the Closing Date, substantially in the form
attached hereto as Exhibit E.
---------
Section 4.6. Closing Matters. All proceedings to be taken by Purchaser and
---------------
Voxware in connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby shall be reasonably satisfactory
in form and substance to Seller and its counsel.
Section 4.7. Other Agreements. Purchaser shall have executed the Escrow
----------------
Agreement and the HDH License, and Voxware shall have executed the Rights
Agreement and the Warrants delivered at Closing.
V. INDEMNIFICATION
---------------
Section 5.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained in this Agreement shall survive the Closing and shall
remain in full force and effect for a period of one year after the Closing Date
(except, with respect to Seller, for the representations and warranties set
forth in Sections 6.1, 6.2 and 6.3 which shall remain in full force and effect
until three (3) years after the Closing Date), regardless of any investigation
made by Purchaser or Seller or on their behalf, except as to any matters with
respect to which a bona fide written claim shall have been made or an action at
law or in equity shall have commenced before such date, in which event survival
shall continue (but only with respect to, and to the extent of, such claim)
until the final resolution of such claim or action, including all applicable
periods for appeal; provided, however, that the representations and warranties
relating to Taxes in Section 6.5 shall survive until the expiration of the
applicable statute of limitations.
Section 5.2 Seller's Indemnity. Seller shall indemnify and hold harmless
------------------
Purchaser, its Affiliates (including Voxware) and their respective successors
and assigns against and in respect of:
(a) any damage, loss, cost, expense or liability (including reasonable
attorneys' fees) resulting to Purchaser from any false, misleading or inaccurate
representation, breach of warranty or nonfulfillment of any agreement, covenant
or condition on the part of Seller under this
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Agreement and the Transaction Documents 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 (including, without limitation, any liability relating to the Assets
or Business with respect to any period prior to the Closing Date), whether
accrued, absolute, fixed, contingent, known or unknown, except for obligations
and liabilities accruing under the Assumed Contracts after the Closing Date;
(c) any damage, loss, cost or penalty incurred by Purchaser as a result
of non-compliance by Seller with any applicable bulk transfer or similar law;
(d) any damage, loss, cost, expense or liability (including reasonable
attorneys' fees) resulting to Purchaser from any of the matters set forth on
Schedule 6.8.; and
- ------------
(e) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing.
This indemnity agreement in this Section 5.2 shall be the exclusive remedy
of Purchaser and Voxware with respect to the matters set forth in Section
5.2(a), and shall be subject to the following limitations: (i) no claim for
indemnification for the matters set forth in Section 5.2(a) shall be made until
the aggregate loss or damages to Purchaser resulting therefrom exceeds $50,000;
(ii) Seller shall indemnify Purchaser in full (inclusive of the first $50,000)
for any claim for indemnification under Section 5.2(a) when the losses or
damages to the Purchaser resulting from therefrom exceed $50,000; and (iii) in
no event shall Seller's aggregate indemnification liability with respect to the
matters set forth in Section 5.2(a) exceed $1,000,000. The foregoing limitation
shall not apply to Seller's indemnification obligations with respect to the
matters set forth in Section 5.2(b) and (c).
Section 5.3 Purchaser's Indemnity. Purchaser and Voxware shall indemnify
---------------------
and hold harmless Seller, and its Affiliates and their respective successors and
assigns against and in respect of:
(a) any damage, loss, cost, expense or liability (including reasonable
attorneys' fees) resulting to Seller from any false, misleading or inaccurate
representation, breach of warranty or nonfulfillment of any agreement, covenant
or condition on the part of Purchaser or Voxware under this Agreement and the
Transaction Documents or from any misrepresentation in or any omission from any
certificate, list, schedule or other instrument to be furnished to Seller
hereunder;
(b) all liabilities and obligations of Purchaser and Voxware of any kind
or nature whatsoever whether accrued, absolute, fixed, contingent, known or
unknown, including but not limited to liabilities arising after the Closing Date
under the Assumed Contracts or from Purchaser's use, exploitation, sale or
transfer of the Assets after the Closing Date; and
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<PAGE>
(c) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing.
This indemnity agreement in this Section 5.3 shall be the exclusive
remedy of Seller with respect to the matters set forth in Section 5.3(a) , and
shall be subject to the following limitations: (i) no claim for indemnification
for the matters set forth in Section 5.3(a) shall be made until the aggregate
loss or damages to Seller resulting therefrom exceeds $50,000; (ii) Purchaser
shall indemnify Seller in full (inclusive of the first $50,000) for any claim
for indemnification under Section 5.3(a) when the losses or damages to the
Seller resulting from therefrom exceed $50,000; and (iii) in no event shall
Purchaser's aggregate indemnification liability with respect to the matters set
forth in Section 5.3(a) exceed $1,000,000. The foregoing limitations shall not
apply to Purchaser's indemnification obligations with respect to the matters set
forth in Section 5.3(b).
Section 5.4 Limitation. Neither Seller nor Purchaser nor Voxware shall be
----------
entitled to make any claim for indemnification under Section 5.2 and 5.3 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 5.1.
Section 5.5 Subsequent Tax Liability Indemnification. If, subsequent to the
----------------------------------------
Closing Date, any liability for Taxes relating to the Assets or the Business is
imposed on Purchaser or its Affiliates with respect to any period prior to the
Closing Date for which Seller prepared and filed any return or report of Taxes,
then Seller shall indemnify and hold Purchaser and its Affiliates harmless from
and against, and shall pay, as an adjustment to the purchase price, the full
amount of such tax liability, including any interest, additions to tax or
penalties thereon, together with interest on such additions to tax penalties (as
well as reasonable attorneys' or other fees and disbursements of Purchaser
incurred in determination thereof or in connection therewith). Seller shall, at
its sole expense and in its reasonable discretion, either settle any tax claim
that may be the subject of indemnification under this Section 5.5 at such time
and on such terms as it shall deem appropriate or assume the entire defense
thereof, provided, however, that Seller shall in no event take any position in
such settlement or defense that subjects Purchaser to any civil fraud or civil
or criminal penalty. Notwithstanding the foregoing, Seller shall not consent,
without the prior written consent of Purchaser, which prior written consent
shall not be unreasonably withheld, to any change in the treatment of any item
which would, in any manner whatsoever, affect the tax liability of Purchaser for
a period subsequent to the Closing Date.
Section 5.6 Notice and Defense of Claims. Any Person entitled to
----------------------------
indemnification hereunder (an "Indemnified Party") shall give notice to the
Person providing indemnification hereunder (the "Indemnifying Party") promptly
after the Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party, at the
Indemnifying Party's expense, to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of the
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article V unless such failure
to give notice materially prejudices the Indemnifying Party's ability to
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defend such claim. The Indemnifying Party, in the defense of any such claim or
litigation, shall not, except with the consent of the 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 the Indemnified Party of a release from all liability in respect to such
claim or litigation.
Section 5.7 Reimbursement.
-------------
(a) At the time that the Indemnified Party shall suffer a loss because
of a breach of any warranty, representation or covenant by the Indemnifying
Party or at the time the amount of any liability on the part of the Indemnifying
Party under this Article V 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 Party shall forthwith, upon notice from the Indemnified Party pay
to the Indemnified Party the amount of the Indemnity Claim. If such amount is
not paid forthwith, then the Indemnified Party may, at its option, take legal
action against the Indemnifying Party 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 the Indemnified Party 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 of notice that the
Indemnity Claim is due from the Indemnifying Party to the Indemnified Party as
hereinabove provided, until the Indemnity Claim shall be paid.
(b) In addition to its other obligations under this Section 5.7, the
Indemnifying Party agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding for which
indemnification may be required pursuant to this Article V, it will, if it does
not assume the defense thereof (for any reason other than a good faith dispute
as to whether such indemnification is required under this Article V), reimburse
the Indemnified Party on a monthly basis for all reasonable legal fees or other
out-of-pocket expenses reasonably incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding.
Any such required interim reimbursement payments which are not made to the
Indemnified Party within 30 days of a request for reimbursement shall bear
interest at the rate of ten percent (10%) per annum from the date of such
request.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents, warrants and agrees that except as set forth on
Schedules attached hereto and numbered to correspond to the following Sections
(as such Schedules may be supplemented pursuant to Section 8.5):
Section 6.1 Organization and Qualification. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, with corporate power and authority to conduct the Business and to own,
lease and operate the properties and assets used in connection therewith.
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<PAGE>
Section 6.2 Due Authorization; No Conflict. (a) Seller has all requisite
------------------------------
corporate power and authority to execute and deliver this Agreement and the
Transaction Agreements and to perform fully its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by Seller of this Agreement and the Transaction
Agreements, the performance by Seller of its obligations hereunder and
thereunder, and the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of Seller
and its stockholders. This Agreement and the Transaction Agreements have been
duly executed and delivered by Seller, and this Agreement is, and each of the
Transaction Agreements and the other agreement contemplated hereby and thereby
to which Seller will be a party will be, upon execution and delivery thereof by
Seller, 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
creditor's rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or in law).
(b) Seller has complete and unrestricted power and the unqualified right
to sell, convey, assign, transfer and deliver the Assets to Purchaser (subject
to any consents or waivers of third parties required in connection with such
sale, conveyance, assignment, transfer and delivery of the Assets or any part
thereof, all of which consent(s) or waiver(s) have been or will have been duly
obtained by Seller prior to the Closing Date and are set forth on Schedule 6.2),
and the instruments of transfer, conveyance and assignment to be executed and
delivered by Seller to Purchaser at the Closing will be valid and binding
obligations of Seller, enforceable in accordance with their respective terms,
sufficient for purposes of recordation and filing where permitted by law,
sufficient to transfer, convey and assign to Purchaser all right, title and
interest of Seller in and to the Assets.
(c) Neither the execution and delivery of this Agreement, the
Transaction Agreements or any of the other documents contemplated hereby by
Seller nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, result in a breach or violation of or constitute (or
with notice or lapse of time or both constitute) a default under, (i) the
Certificate of Incorporation or By-laws of Seller or (ii) any law, statute,
regulation, order, judgment or decree or any instrument, contract or other
agreement to which Seller is a party or by which Seller (or any of the
properties or assets of Seller) is subject or bound; (b) result in the creation
of, or give any party the right to create, any lien, charge, option, security
interest or other encumbrance upon the Assets; (c) terminate or modify, or give
any third party the right to terminate or modify, the provisions or terms of any
Assumed Contract; or (d) require Seller or, to the knowledge of Seller,
Purchaser to obtain any permit or waiver from, to give any notification to, or
to make any filing with, any governmental body or authority or to obtain the
approval or consent of any other Person.
Section 6.3 Title to and Condition of Assets. (a) Seller has, and, upon
--------------------------------
payment therefor Purchaser will have, good and marketable title to, or valid and
subsisting leasehold interests in or valid licenses to use, all of the Assets,
free and clear of any liens, charges, options, security interests or other
encumbrances of any nature, options to purchase or lease, restrictions,
covenants, conditions, or imperfections of title, whether existing or proposed,
except (i) those accepted by the Purchaser which are set forth on Schedule 6.3
------------
hereto; and (ii) the lien of current Taxes not yet due
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<PAGE>
and payable or of Taxes the validity of which is being contested in good faith
by appropriate proceedings, so long as such contest does not involve any real
danger of the sale, foreclosure or loss of any Assets (collectively, the
"Permitted Encumbrances").
(b) Schedule 2.1(a) hereto includes a true, correct and complete list of
---------------
all machinery equipment, computers and computer hardware, system software,
manufacturing systems (including tooling), tools, supplies, and other tangible
assets of the Seller related to the Business, except for items having a value of
less than $100 but not more than $5,000 in the aggregate.
(c) Schedule 2.1(b) hereto includes a true and completed list of all
---------------
Existing Units and spare parts.
Section 6.4 Financial Information.
---------------------
(a) Seller has delivered to Purchaser copies of Seller's unaudited
balance sheet as of June 30, 1999 (the "Interim Balance Sheet"). June 30, 1999
is herein referred to as the "Interim Balance Sheet Date."
(b) The Interim Balance Sheet is in accordance with the books and
records of Seller and presents fairly as of the date thereof the financial
condition of the Seller (subject to year end adjustments that may be required
upon audit, which adjustments will not have a material adverse effect on such
financial statements).
(c) All inventory of Seller used in the conduct of the Business,
including, without limitation, raw materials, work-in process and finished
goods, reflected on the Interim Balance Sheet or acquired since the date thereof
was acquired and has been maintained in the ordinary course of business.
Purchaser understands, however, that Seller has discontinued the Business, and
the parties agree that all inventory and other tangible assets being acquired by
Purchaser hereunder are, except as otherwise specifically set forth herein,
being sold strictly on an "as-is" basis. Seller is not under any liability or
obligation with respect to the return of inventory in the possession of
wholesalers, retailers or other customers.
(d) Since the Interim Balance Sheet Date, there has been no Material
Adverse Change in the Assets, whether as a result of any legislative or
regulatory change, fire, explosion, accident, casualty, flood, drought, riot,
storm, condemnation or act of God or otherwise.
Section 6.5 Taxes.
-----
(a) (i) Seller has filed on a timely basis (taking into account any
extensions received from the relevant taxing authorities) all returns and
reports pertaining to all U.S. federal, state, local and foreign income,
profits, unemployment compensation, payroll, social security, franchise,
unincorporated business, capital, general corporate, sales, use, occupation,
property, excise and any and all other taxes (all such taxes, irrespective of
the period for which such taxes are payable or attributable, hereinafter
referred to as "Taxes") relating to the Assets and the use thereof that are or
were required to be filed with the appropriate taxing authorities in all
jurisdictions in which such returns and reports are or were required to be
filed, and all such returns and reports are
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true, correct and complete in all material respects, (ii) all Taxes (including
interest, additions to tax and penalties thereon together with interest on such
additions to tax and penalties) relating to the Assets that are due from or may
be asserted against Seller (including deferred taxes) in respect of or
attributable to all periods ending on or before the Closing Date have been fully
paid, deposited or adequately provided for on the books and financial statements
of the Seller, (iii) no issues have been raised (or are currently pending) by
any taxing authority in connection with any of the returns and reports referred
to in clause (i) which might be determined adversely to the Seller and which
could have a material adverse effect on the Assets, (iv) Seller has not given or
been requested to give waivers or extensions of any statute of limitations with
respect to the payment of Taxes, and (v) no tax liens which have not been
satisfied or discharged by payment or concession by the relevant taxing
authority or as to which sufficient reserves have not been established on the
books and financial statements of the Seller are in force as of the date hereof
with respect to any of the Assets.
(b) All Taxes relating to the Assets that Seller is or was required by
law to withhold, to deposit or to collect have been duly withheld, deposited or
collected and, to the extent required, have been paid to the relevant taxing
authority.
Section 6.6 Events Subsequent to the Interim Balance Sheet Date. Since the
---------------------------------------------------
Interim Balance Sheet Date, Seller has not (a) mortgaged, pledged or subjected
to lien any of the Assets, tangible or intangible, other than liens of current
real property taxes not yet due and payable; (b) sold, assigned or transferred
any of its tangible assets which would have been included in the Assets if the
Closing had been held on the Interim Balance Sheet Date or on any date since
then except for the sale of inventory in the ordinary course of business; (c)
sold, assigned, transferred or granted any license with respect to any patent,
trademark, trade name, service mark, copyright, trade secret or other intangible
asset or Intellectual Property which is part of the Assets; or (d) suffered any
damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting the Assets.
Section 6.7 Assumed Contracts. Except as set forth on Schedule 6.7, each of
----------------- ------------
the Assumed Contracts listed on Schedule 2.3, is a valid and binding obligation
of Seller and, to the knowledge of Seller, the other parties thereto,
enforceable 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), and is in full
force and effect, and neither Seller nor, to the knowledge of Seller, any other
party thereto has breached any material provision of, nor is in default under
the terms of (and, to the knowledge of Seller, 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 the Purchaser without the consent of any other party
thereto so that, after the assignment thereof to the Purchaser pursuant to this
Agreement, the Purchaser will be entitled to the full economic and other
benefits thereof.
Section 6.8 Litigation. Except as set forth on Schedule 6.8, (i) Neither
---------- ------------
Seller, any Affiliate of Seller, nor any director, officer, employee or agent of
Seller (in their capacity as such), is a party to any pending or, to the
knowledge of Seller, threatened action, suit, proceeding or investigation, at
law or in equity or otherwise in, before or by any court or governmental board,
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<PAGE>
commission, agency, department or office, or private arbitration tribunal, nor
does Seller know, after due inquiry, of any basis therefor; (A) arising in
connection with the conduct by Seller of the Business, (B) to restrain, prohibit
or invalidate, or to obtain damages or other relief from Seller, or any of its
directors or officers, or equitable or other relief in respect of this Agreement
or the transactions contemplated hereby, (C) which arises out of any contract,
agreement, letter of intent or arrangement alleged to have been entered into or
agreed to by Seller and which conflicts with this Agreement or the transactions
contemplated hereby, or gives rise to a claim or right of any kind of any person
as a result of the execution of this Agreement or the consummation of the
transactions contemplated hereby, or (D) which, if successful, could adversely
affect the right of Purchaser after the Closing Date to own the Assets and to
utilize the assets in its business; and (ii) Seller is not a party or subject to
any order, ruling, judgment, decree which affects the Assets, or which would
prevent the transactions contemplated by this Agreement.
Section 6.9 Compliance with Law. To the Seller's best knowledge, the
-------------------
Business has been conducted, and is now being conducted, and the Assets have
been used and are now being used, in compliance with all applicable laws, rules,
regulations and court or administrative orders and processes.
Section 6.10 Brokers. Neither Seller nor any of its Affiliates 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 6.11 Intellectual Property. Seller in the conduct of the Business
---------------------
did not utilize any patent, trademark, trade name, or service mark, or any
material copyright, licensed technology or software except for those listed on
Schedule 2.1(d) and except for Excluded Assets. There is no patent, trademark,
- ---------------
trade name, service mark, copyright, trade secret or knowhow which is used in
connection with the HDH Business and which was also used in connection with the
Business. Except as set forth on Schedule 6.11, Seller owns or is licensed
-------------
exclusively or otherwise has the exclusive right to use all the Intellectual
Property listed on Schedule 2.1(d). All licenses, if any, of Seller to use all
---------------
Intellectual Property listed on Schedule 2.1(d) are in full force and effect and
---------------
neither the Seller nor, to the knowledge of Seller, any of the other parties to
such licenses are in breach in any material respect of any provision of, or in
default in any material respect under any of the terms of, such licenses. Seller
has not granted any person any license or other right to use any of the
Intellectual Property listed on Schedule 2.1(d), whether requiring the payment
---------------
of royalties or not. To the best of Seller's knowledge, the Assets do not
infringe upon or unlawfully or wrongfully use any patent, trademark, trade name,
service mark, copyright, trade secret or know-how owned or claimed by another,
and to the best of Seller's knowledge, no Person is infringing upon, or is in
violation of, any of Seller's Intellectual Property or rights thereto. Except as
(i) set forth in Section 2.4 and (ii) shall be set forth on Schedule 6.11,
-------------
subsequent to the Closing, neither Seller nor any of its current or former
directors, officers or employees shall own, have an interest in or have the
right to use any Intellectual Property listed on Schedule 2.1(d). Except as (i)
---------------
set forth in Section 2.4 and (ii) shall be set forth on Schedule 6.11, all
licences, trademarks, service marks, copyrights, trade names and other
Intellectual Property listed on Schedule 2.1(d) are owned or are useable on a
---------------
royalty-free basis by Seller, and will continue to be so owned or useable on a
royalty-free basis by Purchaser after the Closing Date. There is no pending or,
to the knowledge of Seller, threatened claim or litigation against Seller
contesting the rights to use its Intellectual Property in the conduct
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<PAGE>
of the Business, asserting the misappropriation or misuse of any thereof or
asserting that Seller has violated or infringed the rights of another party.
This Agreement and the transactions contemplated hereby will not in any manner
affect Purchaser's rights with respect to, or ability to use, the Intellectual
Property listed on Schedule 2.1(d).
---------------
Section 6.12 Assets. Other than this Agreement, there are no existing
------
agreements, options, commitments or rights with, of or to any person to acquire
any of Seller's Assets or any interest therein.
Section 6.13 No Product Liabilities; Product Warranties.
------------------------------------------
(a) To Seller's best knowledge, except as set forth on Schedule 6.13
-------------
hereto, Seller has not incurred, nor does Seller know of or have any reason to
believe there is any basis for alleging, any liability, damage, loss, cost or
expense as a result of any defect or other deficiency (whether of design,
materials, workmanship, labeling, instructions or otherwise) ("Product
Liability") with respect to any product sold or service rendered by Seller,
whether such Product Liability is incurred by reason of any express or implied
warranty (including, without limitation, any warranty of merchantability or
fitness), any doctrine of common law (tort, contract or other), any statutory
provision or otherwise and irrespective of whether such Product Liability is
covered by insurance.
(b) Seller has furnished Purchaser with all forms of warranties or
guarantees of Seller's products and services that are in effect or were used by
Seller in the conduct of the Business. There are no pending or, to the knowledge
of Seller, threatened claims under any warranty or guaranty against Seller.
Section 6.14 Disclosure. Seller has not failed to disclose to Purchaser any
----------
material adverse information with respect to the Assets, and no information
furnished by or on behalf of Seller to Purchaser, taken generally with other
information furnished to Purchaser, 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.
VII. REPRESENTATIONS AND WARRANTIES
------------------------------
OF PURCHASER AND VOXWARE
------------------------
Purchaser and Voxware hereby jointly and severally represent and warrant to
Seller as follows:
Section 7.1 Organization. Each of Purchaser and Voxware 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 7.2 Due Authorization; No Conflict.
------------------------------
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<PAGE>
(a) Each of Purchaser and Voxware have all requisite corporate power and
authority to execute and deliver this Agreement and the Transaction Agreements
to which they are parties and to perform fully their respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Transaction
Agreements by Purchaser and Voxware, the performance by Purchaser and Voxware of
their obligations hereunder and thereunder, and the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of each of Purchaser and Voxware, respectively.
This Agreement and the Transaction Agreements have been duly executed by
Purchaser and Voxware, respectively, and this Agreement is, and each of the
Transaction Agreements will be, upon execution and delivery thereof by Purchaser
and Voxware, a legal, valid and binding obligation of each of Purchaser and
Voxware, enforceable against each of them 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) The issuance of the Payment Shares, the Warrants and the Warrant
Shares has been duly authorized by all necessary corporate action on the part of
Voxware. The Warrants, upon execution thereof by Voxware and delivery by
Purchaser, will be legal, valid and binding obligations of Voxware enforceable
against it in accordance with their 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). The Payment
Shares and the Warrant Shares, when issued and delivered in accordance with this
Agreement and the Warrants, respectively, will be duly and validly issued, fully
paid and nonassessable shares of Common Stock. Voxware has reserved sufficient
shares of Common Stock for issuance upon exercise of the Warrants.
(c) Except as set forth in Schedule 7.2, neither the execution and
------------
delivery of this Agreement or the Transaction Agreements by Purchaser and
Voxware nor the consummation of the transactions contemplated hereby or thereby
by each of Purchaser and Voxware will (a) conflict with, result in a breach or
violation of or constitute (or with notice or lapse of time or both constitute)
a default under, (i) their respective Certificates of Incorporation or By-laws,
or (ii) any law, statute, regulation, order, judgment or decree or any
instrument, contract or other agreement to which either Purchaser or Voxware is
a party or by which either of them (or any of their respective properties or
assets) is subject or bound; (b) result in the creation of, or give any party
the right to create, any lien, charge, encumbrance, security interest or other
adverse interest upon any property or asset of Purchaser or Voxware; (c)
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 or
Voxware is a party or by which either of them (or any of their respective
properties or assets) is subject or bound which would have a Material Adverse
Effect on the business of Purchaser or Voxware; or (d) require Purchaser or
Voxware to obtain any authorization, consent, approval or waiver from, to give
notification to, or to make any filing (other than filing to qualify as a
foreign corporation where necessary) with, any governmental body or authority,
or to obtain the approval or consent of any other Person, except for such
approvals as may be required under Federal and State securities laws in order to
comply with the registration provision of the Rights Agreement.
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<PAGE>
Section 7.3 SEC Filings.
-----------
(a) Voxware has made available to Seller (i) its annual report on Form
10-K for its fiscal year ended June 30, 1999 (the "10-K"), (ii) its quarterly
report on Form 10-Q for its fiscal quarters ended September 30, 1999 and
December 31, 1999 (the "10-Qs") and (iii) its current report on Form 8-K, as
filed with the SEC on October 6, 1999 (the "8-K") (the 10-K, 10- Qs and 8-K are
collectively referred to herein as the "Filings"). None of the Filings, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading, and all such filed documents (including the financial statements
contained therein), as of their respective filing dates, complied as to form in
all material respects with the applicable requirements of the Exchange Act.
(b) The financial statements of Voxware (including the related notes)
included in each of the Filings fairly present the financial position of Voxware
and the results of operations and changes in financial condition as of the dates
and periods therein specified. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise noted therein).
Section 7.4 No Material Adverse Change. Since December 31, 1999, there has
--------------------------
been no material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in the results of operations of
Purchaser or Voxware, taken as a whole.
Section 7.5 Brokers. Neither Purchaser, Voxware nor any of their respective
-------
Affiliates 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.
VIII. COVENANTS
---------
Section 8.1 Conduct and Preservation of Business. Except as contemplated by
------------------------------------
this Agreement, during the period from the date hereof to the Closing Date,
Seller shall (i) use its best efforts to maintain, preserve and protect the
Assets; (ii) comply in all material respects with all laws, ordinances, rules,
regulations and orders applicable to the Assets; (iii) not cause nor permit to
occur any of the events or occurrences described in Section 6.6; and (iv) not
take any action or omit to take any action which act or omission would result in
the inaccuracy of any of its representations and warranties set forth herein if
such representations or warranties were to be made immediately after the
occurrence of such act or omission.
Section 8.2 Access to Information; Confidentiality. Between the date of
--------------------------------------
this Agreement and the Closing Date, Seller will (i) permit Purchaser's
authorized representatives reasonable access during normal business hours to all
of its books and records relating to the Assets; (ii) permit Purchaser to make
such inspections thereof as Purchaser may reasonably request; provided, however,
that any such investigation shall be conducted in such a manner as not to
interfere unreasonably with the Seller's operations. Each of Purchaser and
Voxware and Seller will hold, and shall cause their counsel, independent
certified public accountants, appraisers and investment
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<PAGE>
bankers to hold in confidence any confidential data or information made
available to it by the other in connection with this Agreement using the same
standard of care to protect such confidential data or information as is used to
protect its own confidential information. If the transactions contemplated by
this Agreement are not consummated, each of Purchaser and Voxware and Seller
agrees that it shall return or cause to be returned to the other all written
materials and all copies thereof that were supplied to it by the other and that
contain any such confidential data or information. Notwithstanding the
foregoing, information provided by each party to the other hereunder will be
subject to the terms of the Mutual Nondisclosure Agreement.
Section 8.3 Filings and Authorizations. Each of Seller, Purchaser and
--------------------------
Voxware, as promptly as practicable, (i) will make, or cause to be made, all
filings and submissions required under laws, rules and regulations applicable to
it, or to its subsidiaries and affiliates, as may be required for it to
consummate the transactions contemplated hereby; (ii) will use their respective
reasonable efforts to obtain, or cause to be obtained, all permits and waivers
from all Persons and governmental or public authorities or bodies necessary to
be obtained by each of them, or any of their respective subsidiaries or
Affiliates, in order for each of them, respectively, so to consummate such
transactions; and (iii) will use their respective best efforts to take, or cause
to be taken, all other actions necessary, proper or advisable in order for each
of them to fulfill their respective obligations hereunder. In particular, Seller
shall seek and use its reasonable best efforts to obtain all consents necessary
to any assignment to Purchaser of the Assumed Contracts. 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. Purchaser and Voxware shall each use its
reasonable efforts to assist Seller in obtaining all consents required under the
Assumed Contracts as a result of this Agreement and the transactions
contemplated hereby.
Section 8.4 Public Announcements.
--------------------
(a) Unless and to the extent required by law, each party hereto will
agree in advance prior to the issuance by either of any press release or the
making of any public statement with respect to this Agreement and the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement without the agreement of the other party. In the
event that any party is required to issue a press release or make a public
statement by law, it will notify the other parties of the contents thereof in
advance of the issuance or making thereof.
(b) Seller agrees to provide a quote from an executive of The Hillman
Company for inclusion in a press release announcing the transactions
contemplated hereby, such quote to be mutually agreed upon by Purchaser, Voxware
and Seller and The Hillman Company prior to the Closing Date.
Section 8.5 Schedules. From time to time prior to the Closing Date, Seller
---------
will promptly supplement or amend its disclosure schedules and the exhibits
hereto with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedules and Exhibits hereto. No supplement or
amendment of a Schedule or Exhibit made pursuant to this Section shall be deemed
to cure any breach of, affect or otherwise diminish any representation or
warranty made in this Agreement
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unless Purchaser specifically agrees thereto in writing.
IX. CERTAIN ACTIONS AFTER THE CLOSING
---------------------------------
Section 9.1 Maintenance of Books and Records. Each of Seller and Purchaser
--------------------------------
shall preserve until the sixth anniversary of the Closing Date all records
possessed or to be possessed by such party relating to any of the Assets or the
Business prior to the Closing Date. After the Closing Date, where there is a
legitimate purpose, such party shall provide the other party with access, upon
prior reasonable written request specifying the need therefor, during regular
business hours, to (i) the officers and employees of such party and (ii) the
books of account and records of such party, but, in each case, only to the
extent relating to the Assets or the Business prior to the Closing Date, and the
other party and its representatives shall have the right to make copies of such
books and records; provided, however, that the foregoing right of access shall
not be exercisable in such a manner as to interfere unreasonably with the normal
operations and business of such party; and further, provided, that, as to so
much of such information as constitutes trade secrets or confidential business
information of such party, the requesting party and its officers, directors and
representatives will use due care to not disclose such information except (i) as
required by law, (ii) with the prior written consent of such party, which
consent shall not be unreasonably withheld, or (iii) where such information
becomes available to the public generally, or becomes generally known to
competitors of such party, through sources other than the requesting party, its
Affiliates or its officers, directors or representatives. Such records may
nevertheless be destroyed by a party if such party sends to the other parties
written notice of its intent to destroy records, specifying with particularity
the contents of the records to be destroyed. Such records may then be destroyed
after the 30th day after such notice is given unless another party objects to
the destruction in which case the party seeking to destroy the records shall
deliver such records to the objecting party.
Section 9.2 Tax Returns Through Closing. Seller shall prepare and file on a
---------------------------
timely basis all reports and returns of Taxes relating to the Assets or the
Business with respect to all periods through and including the Closing Date and
shall pay or cause to be paid when due all Taxes relating to the Assets or the
Business for such periods, including any interest, additions to tax or penalties
thereon together with interest on such additions to tax or penalties. Seller
shall be entitled to receive any tax refund to which the Seller may be entitled
in respect of any period prior to, through and including the Closing Date.
Section 9.3 Purchaser to Act as Agent for Seller. This Agreement shall not
------------------------------------
constitute an agreement to assign any contract right included among the Assets
if any attempted assignment of the same without the consent of the other party
thereto would constitute a breach thereof or in any way adversely affect the
rights of Seller thereunder. If such consent is not obtained or if any attempted
assignment would be ineffective or would adversely affect Seller's rights
thereunder so that Purchaser would not in fact receive all such rights, then
Purchaser shall act as the agent for Seller in order to obtain for Purchaser the
benefits thereunder. Nothing herein shall be deemed to make Purchaser Seller's
agent in respect of the Excluded Assets.
Section 9.4 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 are
intended to be transferred to Purchaser as provided in this
-22-
<PAGE>
Agreement. 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 intended to be transferred to
Purchaser 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 Date in respect of any
assets not transferred or intended to be transferred to Purchaser as part of the
Assets under this Agreement.
Section 9.5 Purchaser Appointed Attorney for Seller. Seller, effective at
---------------------------------------
the Closing Date, hereby constitutes and appoints Purchaser, its successors and
assigns, the true and lawful attorney of Seller, in the name of either Purchaser
or Seller (as Purchaser shall determine in its sole discretion) but for the
benefit of Purchaser: (i) to institute and prosecute all proceedings which
Purchaser may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in or to the Assets as provided for in this
Agreement; (ii) to defend or compromise any and all actions, suits or
proceedings in respect of any of the Assets, and to do all such acts and things
in relation thereto as Purchaser shall deem advisable; and (iii) to take all
action which Purchaser, its successors or assigns may reasonably deem proper in
order to provide for Purchaser, its successors or assigns, the benefits under
any of the Assets where any required consent of another party to the sale or
assignment thereof to Purchaser pursuant to this Agreement shall not have been
obtained. Seller acknowledges that the foregoing powers are coupled with an
interest and shall be irrevocable. Purchaser shall be entitled to retain for its
own account any amounts collected pursuant to the foregoing powers, including
any amounts payable as interest in respect thereof. Purchaser agrees to act in
good faith in seeking to collect, assert or enforce any claim against any third
party in accordance with this Section 9.5.
Section 9.6 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 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.
X. TERMINATION
-----------
Section 10.1 Termination Events. Subject to the provisions of Section 10.2,
------------------
this Agreement may, by written notice given at or prior to the Closing in the
manner hereinafter provided, be terminated and abandoned:
(a) By either Seller on one hand or Purchaser and Voxware on the other
if a material default or breach shall be made by the other party with respect to
the due and timely performance of any of its covenants and agreements contained
herein, or with respect to the due compliance with any of the representations
and warranties contained in Article VI or VII, as the case may be, and such
default cannot be cured and has not been waived;
-23-
<PAGE>
(b) By written mutual consent of Seller, Purchaser and Voxware;
(c) By Purchaser or Voxware if Seller amends or supplements any Schedule
hereto in accordance with Section 8.5 hereof and such amendment or supplement
constitutes a Material Adverse Change in the Assets or Purchaser's ability to
use the Assets in its business after the date hereof; or
(d) By Purchaser or Voxware, if the conditions set forth in Article III
hereof shall not have been met (or shall not, in the reasonable judgment of
Purchaser, be capable of being met), or by Seller, if the conditions set forth
in Article IV hereof shall not have been met (or shall not, in the reasonable
judgement of the Seller, be capable of being met), in each case by February,
2000.
Section 10.2 Effect of Termination. In the event this Agreement is
---------------------
terminated pursuant to Section 10.1, all further obligations of the parties
hereunder shall terminate, no party shall have any right against the other party
hereto, except as set forth in Section 8.2 and this Section 10.2, and each party
shall bear its own costs and expenses, except that if this Agreement is so
terminated by one party because one or more of the conditions to such party's
obligations hereunder is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, it is expressly agreed and
understood that the terminating party's right to pursue all legal remedies for
breach of contract or otherwise, including, without limitation, damages relating
thereto, shall survive such termination unimpaired.
XI. MISCELLANEOUS
-------------
Section 11.1 Expenses. Except as provided herein, each party to this
--------
Agreement shall pay its own Transaction Costs relating to this Agreement, the
negotiations leading up to this Agreement and the transactions contemplated by
this Agreement.
Section 11.2 Risk of Loss. Subject to Section 2.8(b), the risk of loss or
------------
damage to any of the Assets, transfer of which is contemplated hereby, shall
remain with Seller until the Closing, and the Seller shall maintain its
insurance policies covering the Assets through the Closing. With respect to the
Assets, if prior to the Closing, all or any part of the Assets are destroyed or
damaged by fire or the elements or by any other cause, Seller shall within ten
(10) days provide written notice thereof to Purchaser and shall also provide
Purchaser, together with such notice, copies of all insurance then in force
relating to such Assets, whereupon Purchaser may, by written notice to Seller
within twenty (20) days after receipt of notice of the occurrence, elect in
writing not to purchase such Assets if such damage exceeds $100,000 and Seller
does not agree to repair, restore and replace such Assets to Purchaser's
reasonable satisfaction within 60 days of the notice of the casualty delivered
to Purchaser. Purchaser's election to so terminate may be exercised, however, if
after Seller agrees to so repair, restore and replace, Seller fails to effect
such repair, restoration and replacement within such 60 day period. Upon such
election, this Agreement shall wholly cease and terminate. If all or any part of
the Assets are so destroyed and Seller has not made the required repairs or
restoration but this Agreement is not so terminated by Purchaser, this Agreement
shall not be affected, but Seller, at the Closing, shall assign, transfer and
set over to Purchaser all of Seller's right, title and interest in and to the
policies of insurance insuring against the loss and
-24-
<PAGE>
Seller's interest in sums payable thereunder and Seller shall pay to Purchaser
the amount of any deductibles under such insurance policies and any payments
theretofore made on account of the destruction or damage, but only to the extent
of the value of the Assets not so repaired or restored by the Seller.
Section 11.3 Amendment. This Agreement shall not be amended or modified
---------
except by a writing duly executed by all the parties hereto.
Section 11.4 Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules hereto, the Transaction Agreements and the other instruments,
agreements and documents delivered pursuant to this Agreement contain all of the
terms, conditions agreed upon by the parties relating to the subject matter of
this Agreement and supersede all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter.
Section 11.5 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 11.6 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 first-class mail,
postage prepaid, return receipt requested, addressed as follows:
If to Seller: InRoad, Inc.
2025 First Avenue
Market Place Tower, #1250
Seattle, Washington 98121
Telecopy: (206) 441-2954
Attention: Mr. Al Stephan
With a copy to: Gray Cary Ware & Freidenrich
701 Fifth Avenue, Suite 3600
Seattle, Washington 98104
Telecopy: (206) 839-4801
Attention: John M. Steel, Esq.
If to Purchaser: Voxware, Inc.
305 College Road East
Princeton, New Jersey 08540
Telecopy: (609) 514-4102
Attention: Mr. Nicholas Narlis
With a copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
-25-
<PAGE>
Telecopy: (212) 752-5958
Attention: Lawrence A. Spector, Esq.
(c) on the date of receipt if sent by telecopy, and confirmed in writing in the
manner set forth in (b) on or before the next day after the sending of the
telecopy or (d) one business day after delivery to a nationally recognized
overnight courier service marked for overnight delivery. Such addresses and
numbers may be changed, from time to time, by means of a notice given in the
manner provided in this Section 11.6.
Section 11.7 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible.
Section 11.8 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 hereof.
Section 11.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the law of the State of New York, without regard to
the conflicts of laws principles thereof; provided that such choice of New York
law shall not be deemed to cause any bulk transfer or similar laws of the State
of New York to apply to the transactions contemplated by this Agreement.
Section 11.10 Force Majeure. Neither party shall be responsible to the
-------------
other for failure to perform any of the obligations (other than the obligation
to pay money) imposed by this Agreement, provided such failure shall be
occasioned by fire, flood, explosion, lighting, windstorm, earthquake,
subsidence of soil, failure or destruction, in whole or in part, of machinery or
equipment, failure of supply of materials, discontinuance in the supply of
power, government interference, civil commotion, riot, war, strikes, labor
disturbance, transportation difficulties, labor shortage, acts of third parties,
or by any other cause beyond the reasonable control of the party in question.
Section 11.11 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.
Section 11.12 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.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Acquisition
Agreement as of the date set forth above.
VOXWARE, INC.
By: /s/ Bathsheba J. Malsheen
--------------------------
Name: Bathsheba J. Malsheen
Title: President and CEO
VERBEX ACQUISITION CORPORATION
By: /s/ Bathsheba J. Malsheen
--------------------------
Name: Bathsheba J. Malsheen
Title: President and CEO
INROAD, INC.
By: /s/ Allan H. Stephan
---------------------
Name: Allan H. Stephan
Title: President
<PAGE>
Exhibit 4.1
THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK WHICH MAY BE
ACQUIRED UPON THE EXERCISE HEREOF ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT DATED APRIL 4, 2000,
MADE BY THE HOLDER, STRATOS PRODUCT DEVELOPMENT, LLC, THE COMPANY AND THE
WHOLLY-OWNED SUBSIDIARY OF THE COMPANY (THE "RIGHTS AGREEMENT"). COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
WHICH MAY BE ACQUIRED UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHE CATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH WARRANTS OR SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION.
Warrant No. I-___ Right to purchase up to ________ Shares of Common
Stock (subject to adjustment as described herein) of
Voxware, Inc.
VOXWARE, INC.
WARRANT CERTIFICATE
Issued April 4, 2000
Exercisable on or before 5:00 P.M., New York April 4, 2005
1. Grant. THIS WARRANT CERTIFICATE CERTIFIES THAT for value received,
INROAD, INC. is the registered holder ("Holder") of __________________________
(________) warrants (each a "Warrant" and collectively "Warrants") to purchase
at any time from the date hereof until, subject to Section 3 hereof, 5:00 P.M.
New York time on April 4, 2005 (the "Expiration Date"), up to a total of
__________________________ (________) fully paid and non-assessable shares (each
a "Share" and collectively "Shares"), of common stock, par value $.001 per share
("Common Stock") of VOXWARE, INC., a Delaware corporation (the "Company"), at
the Exercise Price (as defined in Section 2 below), upon surrender of this
Warrant Certificate and payment of the Exercise Price at the offices or agency
of the Company, but subject to the conditions set forth herein.
<PAGE>
Payment of the Exercise Price shall be made by check or money order payable to
the order of the Company. No Warrant may be exercised after 5:00 P.M. New York
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall become void. Neither this Warrant
Certificate (nor any replacement Warrant Certificate) nor any rights of the
Holder hereof may be transferred or assigned without the prior written consent
of the Company, which consent may be given or withheld in the sole discretion of
the Company. Notwithstanding the foregoing, this Warrant Certificate (or any
replacement Warrant Certificate) or any rights of the Holder hereof, may in
connection with the liquidation of Holder, be transferred to the stockholders of
Holder or to partners or members of any such stockholders that are partnerships
or limited liability companies.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of warrants issued pursuant to that certain Acquisition
Agreement, dated April 4, 2000, by and among the Company, Verbex Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the Company
("Purchaser"), and Holder, whereby, among other things, Purchaser agreed to
purchase, and Holder agreed to sell, certain business assets.
2. Exercise Price. The exercise price of the Warrants shall be $3.08 per
share of Common Stock, subject to adjustment as set forth herein.
3. Exercise of Warrant. Subject to the terms and conditions hereof, the
Warrants are exercisable in whole or in part, on one or more occasions, upon
payment of the Exercise Price for the shares being purchased, payable to the
Company by certified check or money order. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price for the Shares purchased at the
Company's principal offices at 305 College Road East, Princeton, New Jersey
08540 (or such other place as may be the Company's principal offices from time
to time) and subject to satisfaction of the terms and conditions hereof, the
Holder hereof shall be entitled to receive a certificate or certificates for the
Shares so purchased. The rights represented hereby are exercisable at the option
of the Holder hereof, in whole or in part (but not as to fractional Shares),
subject to the terms of this Warrant Certificate. In the case of the purchase of
less than all the Shares purchasable hereunder the Company shall cancel this
Warrant Certificate upon the surrender hereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the Shares purchasable
hereunder. The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
4. Issuance of Certificates. (a) Upon the exercise of the Warrants in
accordance with the provisions hereof, certificates for Shares issuable upon
exercise of the Warrants shall be issued forthwith and in any event within seven
business days thereafter. The Holder exercising this Warrant shall be deemed for
all purposes to become the legal holder of the Shares issuable upon such
exercise when all conditions to exercise (as specified in Section 3 above) are
satisfied, without regard to any delay thereafter in the issuance and delivery
of the certificates representing such Shares.
-2-
<PAGE>
(b) Certificates for the Shares will be issued without charge
(including, without limitation, any tax which may be payable in respect of the
issuance thereof) to the Holder(s) hereof and such certificates shall be issued
in the name of, or in such names as may be directed by, the Holder hereof. The
Company shall not be required to pay any tax which may be payable in respect of
any transfer of any Warrants involved in the issuance and delivery of any such
certificates in the name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
5. Adjustments of Number of Shares. The number of Shares purchasable upon
exercise of each Warrant shall be subject to adjustment from time-to-time as
follows:
5.1 Subdivisions, Combinations and Other Issuances. If the Company shall
at any time prior to the expiration of this Warrant subdivide its Common Stock,
by split-up or otherwise, or combine its Common Stock, or issue additional
shares of its Common Stock as a dividend with respect to any shares of its
Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the purchase price payable per
Share, but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 5.1 shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
5.2 Reclassification, Reorganization and Consolidation. In case of any
reclassification, capital reorganization, or change in the Common Stock of the
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 5.1 above), then lawful provision shall be made so that
the Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise of
this Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be made
with respect to the rights and interest of the Holder so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
5.3 Merger or Consolidation. In the case of a merger, consolidation or
similar transaction which results in a replacement of the Company's Common Stock
with the stock of another corporation, the Company will make a reasonable
effort, but shall not be required, to replace this Warrant, to the extent it has
not been previously exercised, with a comparable warrant to purchase the stock
of such other corporation. To the extent this Warrant is not replaced and is not
exercised prior to the closing of the merger, consolidation or other
transaction, this Warrant shall be terminated (provided the Holder has been
given advance notice pursuant to Section 5.4 below).
-3-
<PAGE>
Notwithstanding the foregoing, if the Company is the surviving corporation in
the merger and the holders of the Common Stock of the Company hold at least a
majority of the voting power of the surviving corporation after the merger, the
Company shall be obligated to replace this Warrant with a comparable warrant to
purchase the stock of the surviving corporation.
5.4 Notice of Adjustment. Whenever there shall be an adjustment pursuant
to this Section 5, or a transaction or proposed transaction that would result in
an adjustment pursuant to this Section 5, the Company shall cause written notice
thereof to be sent to the Holder of the Warrants, accompanied by a certificate,
signed by an officer of the Company, setting forth (i) a brief statement of the
facts requiring such adjustment or a brief description of the transaction that
would require such adjustment, (ii) the number of shares of Common Stock or
other securities purchasable upon the exercise hereof after giving effect to
such adjustment, and (iii) the method by which the adjustment was calculated.
Such written notice shall be given at least fifteen (15) days in advance of (a)
any record date for determining shareholders entitled to receive notice of and
to vote with respect to any proposed transaction or other adjustment event, and
(b) the effective date of any proposed transaction or other adjustment event.
5.5 No Change in Purchase Price; No Change of Warrant. Unless otherwise
indicated, none of the events specified in this Section 5 shall give rise to an
adjustment in the purchase price specified in the opening paragraph herein. The
form of this Warrant Certificate need not be changed because of any adjustment
in number and kind of shares of Common Stock purchasable hereunder pursuant to
this Section 5. Any Warrant issued after any such adjustment upon any partial
exercise or upon replacement or transfer may continue to express the same terms
as are stated in this Warrant Certificate as initially issued, and the number
and kind of shares of Common Stock purchasable hereunder shall be considered to
have been so changed as to the close of business on the date or dates of
adjustment.
6. Replacement of Warrant Certificate. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of any such loss, theft or destruction
of any Warrant Certificate, upon delivery of a contractual agreement of
indemnity reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant Certificate at the
principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
7. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock on the
exercise of the Warrants, nor shall it be required to pay cash in lieu of
fractional interests, it being the intent of all the parties that all fractional
interests shall be eliminated by rounding any fraction equal to or greater than
one-half up to the nearest whole number of shares of Common Stock and by
rounding any fraction less than one-half down to the nearest whole number of
shares of Common Stock.
8. Reservation of Common Stock. The Company shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of the Warrants such number of shares of
Common Stock as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
-4-
<PAGE>
payment of the Exercise Price therefor, all Shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid and non-assessable.
9. No Rights as Stockholder. Except as specified in Section 5.4 above,
nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a stockholder in
respect of any meetings of stockholders for the election of directors or any
other matter, or as having any rights whatsoever as a stockholder of the
Company; provided, that the Holder shall be entitled to such rights immediately
upon satisfaction of all conditions to exercise of this Warrant (as specified in
Section 3 above).
10. Transferability; Successors. Neither this Warrant nor any rights of the
Holder hereof may be transferred or assigned, in whole or in part, except with
the prior written consent of the Company, except upon liquidation of Holder, in
which case this Warrant and the rights of Holder may be transferred to the
stockholders of Holder or to partners or members of any such stockholders that
are partnerships or limited liability companies. Subject to the foregoing, the
terms and provisions of this Warrant shall inure to the benefit of, and be
binding upon, the Company and the Holder hereof and their respective successors
and assigns.
11. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holder.
12. Notices. All notices required or permitted hereunder shall be in
writing and shall be sufficiently given if: (a) hand delivered (in which case
the notice shall be effective upon delivery); (b) telecopied, provided that in
--------
such case a copy of such notice shall be concurrently sent by registered or
certified mail, return receipt requested, postage prepaid (in which case the
notice shall be effective two days following dispatch); (c) delivered by Express
Mail, Fed Ex or other nationally recognized overnight courier service (in which
case the notice shall be effective one business day following dispatch); or (d)
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid (in which case the notice shall be effective three days
following dispatch), to the parties at the following addresses and/or telecopier
numbers, or to such other address or number as a party shall specify by written
notice to the others.
If to the Holder:
-----------------
InRoad, Inc. 2025 First Avenue Market Place Tower, #1250 Seattle, Washington
98121 Attention: Mr. Al Stephan
If to the Company:
------------------
Voxware, Inc. 305 College Road East Princeton, New Jersey 08540 Attention: Mr.
Nicholas Narlis
13. Termination. The rights and benefits evidenced by this Warrant
Certificate shall terminate and expire at 5:00 p.m. New York time on April 4,
2005 or on any earlier date when all Warrants have been exercised.
14. Governing Law. This Warrant Certificate shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with
-5-
<PAGE>
its laws without giving effect to the rules governing the conflicts of laws.
15. Headings. The Article and Section headings in this Warrant Certificate
are inserted for purposes of convenience only and shall have no substantive
effect.
-6-
<PAGE>
IN WITNESS WHEREOF, Voxware has caused this Warrant to be duly executed as
of the day and year first above written.
VOXWARE, INC.
By: /s/ Bathsheba J. Malsheen
-------------------------
Bathsheba Malsheen, President
and CEO
By: /s/ Nicholas Narlis
-------------------
Nicholas Narlis, Senior Vice
President, CFO and Secretary
-7-
<PAGE>
Exhibit 4.2
THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK WHICH MAY BE
ACQUIRED UPON THE EXERCISE HEREOF ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT DATED APRIL 4, 2000,
MADE BY THE HOLDER, INROAD, INC., THE COMPANY AND THE WHOLLY-OWNED SUBSIDIARY OF
THE COMPANY (THE "RIGHTS AGREEMENT"). COPIES OF SUCH AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
WHICH MAY BE ACQUIRED UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHE CATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH WARRANTS OR SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION.
Warrant No. S-1 Right to purchase up to 50,000 Shares of Common
Stock (subject to adjustment as described herein) of
Voxware, Inc.
VOXWARE, INC.
WARRANT CERTIFICATE
Issued April 4, 2000
Exercisable on or before 5:00 P.M., New York April 4, 2005
1. Grant. THIS WARRANT CERTIFICATE CERTIFIES THAT for value received,
STRATOS PRODUCT DEVELOPMENT, LLC is the registered holder ("Holder") of Fifty
Thousand (50,000) warrants (each a "Warrant" and collectively "Warrants") to
purchase at any time from the date hereof until, subject to Section 3 hereof,
5:00 P.M. New York time on April 4, 2005 (the "Expiration Date"), up to a total
of Fifty Thousand (50,000) fully paid and non-assessable shares (each a "Share"
and collectively "Shares"), of common stock, par value $.001 per share ("Common
Stock") of VOXWARE, INC., a Delaware corporation (the "Company"), at the
Exercise Price (as defined in Section 2 below), upon surrender of this Warrant
Certificate and payment of the Exercise Price at the offices or agency of the
Company, but subject to the conditions set forth herein. Payment of the Exercise
Price shall be made by check or money order payable to the order of the
<PAGE>
Company. No Warrant may be exercised after 5:00 P.M. New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall become void. Neither this Warrant Certificate (nor any
replacement Warrant Certificate) nor any rights of the Holder hereof may be
transferred or assigned without the prior written consent of the Company, which
consent may be given or withheld in the sole discretion of the Company.
The Warrants evidenced by this Warrant Certificate are a duly authorized
issue of warrants issued pursuant to that certain Release Agreement, dated April
4, 2000, by and among the Company, InRoad, Inc., a Delaware corporation, and
Holder.
2. Exercise Price. The exercise price of the Warrants shall be $3.08 per
share of Common Stock, subject to adjustment as set forth herein.
3. Exercise of Warrant. Subject to the terms and conditions hereof, the
Warrants are exercisable in whole or in part, on one or more occasions, upon
payment of the Exercise Price for the shares being purchased, payable to the
Company by certified check or money order. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price for the Shares purchased at the
Company's principal offices at 305 College Road East, Princeton, New Jersey
08540 (or such other place as may be the Company's principal offices from time
to time) and subject to satisfaction of the terms and conditions hereof, the
Holder hereof shall be entitled to receive a certificate or certificates for the
Shares so purchased. The rights represented hereby are exercisable at the option
of the Holder hereof, in whole or in part (but not as to fractional Shares),
subject to the terms of this Warrant Certificate. In the case of the purchase of
less than all the Shares purchasable hereunder the Company shall cancel this
Warrant Certificate upon the surrender hereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the Shares purchasable
hereunder. The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
4. Issuance of Certificates. (a) Upon the exercise of the Warrants in
accordance with the provisions hereof, certificates for Shares issuable upon
exercise of the Warrants shall be issued forthwith and in any event within seven
business days thereafter. The Holder exercising this Warrant shall be deemed for
all purposes to become the legal holder of the Shares issuable upon such
exercise when all conditions to exercise (as specified in Section 3 above) are
satisfied, without regard to any delay thereafter in the issuance and delivery
of the certificates representing such Shares.
(b) Certificates for the Shares will be issued without charge
(including, without limitation, any tax which may be payable in respect of the
issuance thereof) to the Holder(s) hereof and such certificates shall be issued
in the name of, or in such names as may be directed by, the Holder hereof. The
Company shall not be required to pay any tax which may be payable in respect of
any transfer of any Warrants involved in the issuance and delivery of any such
certificates in the name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the
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<PAGE>
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
5. Adjustments of Number of Shares. The number of Shares purchasable upon
exercise of each Warrant shall be subject to adjustment from time-to-time as
follows:
5.1 Subdivisions, Combinations and Other Issuances. If the Company shall
at any time prior to the expiration of this Warrant subdivide its Common Stock,
by split-up or otherwise, or combine its Common Stock, or issue additional
shares of its Common Stock as a dividend with respect to any shares of its
Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the purchase price payable per
Share, but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 5.1 shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
5.2 Reclassification, Reorganization and Consolidation. In case of any
reclassification, capital reorganization, or change in the Common Stock of the
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 5.1 above), then lawful provision shall be made so that
the Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise of
this Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be made
with respect to the rights and interest of the Holder so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
5.3 Merger or Consolidation. In the case of a merger, consolidation or
similar transaction which results in a replacement of the Company's Common Stock
with the stock of another corporation, the Company will make a reasonable
effort, but shall not be required, to replace this Warrant, to the extent it has
not been previously exercised, with a comparable warrant to purchase the stock
of such other corporation. To the extent this Warrant is not replaced and is not
exercised prior to the closing of the merger, consolidation or other
transaction, this Warrant shall be terminated (provided the Holder has been
given advance notice pursuant to Section 5.4 below). Notwithstanding the
foregoing, if the Company is the surviving corporation in the merger and the
holders of the Common Stock of the Company hold at least a majority of the
voting power of the surviving corporation after the merger, the Company shall be
obligated to replace this Warrant with a comparable warrant to purchase the
stock of the surviving corporation.
5.4 Notice of Adjustment. Whenever there shall be an adjustment pursuant
to this Section 5, or a transaction or proposed transaction that would result in
an adjustment pursuant to
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<PAGE>
this Section 5, the Company shall cause written notice thereof to be sent to the
Holder of the Warrants, accompanied by a certificate, signed by an officer of
the Company, setting forth (i) a brief statement of the facts requiring such
adjustment or a brief description of the transaction that would require such
adjustment, (ii) the number of shares of Common Stock or other securities
purchasable upon the exercise hereof after giving effect to such adjustment, and
(iii) the method by which the adjustment was calculated. Such written notice
shall be given at least fifteen (15) days in advance of (a) any record date for
determining shareholders entitled to receive notice of and to vote with respect
to any proposed transaction or other adjustment event, and (b) the effective
date of any proposed transaction or other adjustment event.
5.5 No Change in Purchase Price; No Change of Warrant. Unless otherwise
indicated, none of the events specified in this Section 5 shall give rise to an
adjustment in the purchase price specified in the opening paragraph herein. The
form of this Warrant Certificate need not be changed because of any adjustment
in number and kind of shares of Common Stock purchasable hereunder pursuant to
this Section 5. Any Warrant issued after any such adjustment upon any partial
exercise or upon replacement or transfer may continue to express the same terms
as are stated in this Warrant Certificate as initially issued, and the number
and kind of shares of Common Stock purchasable hereunder shall be considered to
have been so changed as to the close of business on the date or dates of
adjustment.
6. Replacement of Warrant Certificate. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of any such loss, theft or destruction
of any Warrant Certificate, upon delivery of a contractual agreement of
indemnity reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant Certificate at the
principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
7. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock on the
exercise of the Warrants, nor shall it be required to pay cash in lieu of
fractional interests, it being the intent of all the parties that all fractional
interests shall be eliminated by rounding any fraction equal to or greater than
one-half up to the nearest whole number of shares of Common Stock and by
rounding any fraction less than one-half down to the nearest whole number of
shares of Common Stock.
8. Reservation of Common Stock. The Company shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of the Warrants such number of shares of
Common Stock as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and payment of the
Exercise Price therefor, all Shares of Common Stock issuable upon such exercise
shall be duly and validly issued, fully paid and non-assessable.
9. No Rights as Stockholder. Except as specified in Section 5.4 above,
nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a stockholder in
respect of any meetings of stockholders for the election of directors or any
other matter, or as having any rights whatsoever as a stockholder of the
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<PAGE>
Company; provided, that the Holder shall be entitled to such rights immediately
upon satisfaction of all conditions to exercise of this Warrant (as specified in
Section 3 above).
10. Transferability; Successors. Neither this Warrant nor any rights of the
Holder hereof may be transferred or assigned, in whole or in part, except with
the prior written consent of the Company. Subject to the foregoing, the terms
and provisions of this Warrant shall inure to the benefit of, and be binding
upon, the Company and the Holder hereof and their respective successors and
assigns.
11. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holder.
12. Notices. All notices required or permitted hereunder shall be in
writing and shall be sufficiently given if: (a) hand delivered (in which case
the notice shall be effective upon delivery); (b) telecopied, provided that in
--------
such case a copy of such notice shall be concurrently sent by registered or
certified mail, return receipt requested, postage prepaid (in which case the
notice shall be effective two days following dispatch); (c) delivered by Express
Mail, Fed Ex or other nationally recognized overnight courier service (in which
case the notice shall be effective one business day following dispatch); or (d)
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid (in which case the notice shall be effective three days
following dispatch), to the parties at the following addresses and/or telecopier
numbers, or to such other address or number as a party shall specify by written
notice to the others.
If to the Holder:
-----------------
Stratos Product Development, LLC 2025 First Avenue Market Place Tower PHB
Seattle, Washington 98121 Attention: Mr. Al Stephan
If to the Company:
------------------
Voxware, Inc. 305 College Road East Princeton, New Jersey 08540 Attention: Mr.
Nicholas Narlis
13. Termination. The rights and benefits evidenced by this Warrant
Certificate shall terminate and expire at 5:00 p.m. New York time on April 4,
2005 or on any earlier date when all Warrants have been exercised.
14. Governing Law. This Warrant Certificate shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with its laws without giving effect to the rules
governing the conflicts of laws.
15. Headings. The Article and Section headings in this Warrant Certificate
are inserted for purposes of convenience only and shall have no substantive
effect.
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<PAGE>
IN WITNESS WHEREOF, Voxware has caused this Warrant to be duly executed as
of the day and year first above written.
VOXWARE, INC.
By: /s/ Bathsheba J. Malsheen
-------------------------------------
Bathsheba Malsheen, President
By: /s/ Nicholas Narlis
-------------------------------------
Nicholas Narlis, Secretary
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<PAGE>
Exhibit 4.3
STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT, dated April 4,
2000, (this "Agreement") is made by Voxware, Inc., a Delaware corporation
("Voxware"), Verbex Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Voxware ("Purchaser"), InRoad, Inc., a Delaware
corporation ("Seller") and Stratos Product Development, LLC, a Washington
limited liability company ("Stratos"). Capitalized terms not otherwise defined
herein shall have meanings ascribed to such terms in the Acquisition Agreement,
dated as of April 3, 2000, by and among Voxware, Purchaser and Seller (the
"Acquisition Agreement").
W-I-T-N-E-S-S-E-T-H
WHEREAS, in accordance with the Acquisition Agreement, on and as of the
date hereof, Purchaser has purchased certain business assets from Seller;
WHEREAS, in accordance with the Acquisition Agreement, Purchaser has
delivered 650,000 shares of Common Stock to Seller (of which 162,500 shares are
being held by United States Trust Company of New York, as Escrow Agent pursuant
to the Escrow Agreement in order to secure Seller's indemnification obligations
under the Acquisition Agreement) (all such shares are collectively referred to
herein as the "Payment Shares");
WHEREAS, in accordance with the Acquisition Agreement, Purchaser has
delivered to Seller five-year warrants to purchase 325,000 shares of Common
Stock (of which warrants to purchase 81,250 shares are being held by United
States Trust Company of New York, as Escrow Agent pursuant to the Escrow
Agreement in order to secure Seller's indemnification obligations under the
Acquisition Agreement) (all such warrants are collectively referred to herein as
the "Seller Warrants");
WHEREAS, Purchaser has delivered to Stratos five-year warrants to purchase
50,000 shares of Common Stock (such warrants are collectively referred to herein
as the "Stratos Warrants," and the Seller Warrants and the Stratos Warrants are
collectively referred to herein as the "Warrants"); and
WHEREAS, Purchaser has agreed to undertake to register under the Securities
Act (i) the Payment Shares and (ii) the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") in accordance with the terms
hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
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<PAGE>
1. Definitions. For purposes of this Agreement:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act and
pursuant to Rule 415 under the Securities Act or any successor rule providing
for offering securities on a continuous basis ("Rule 415"), and the declaration
or ordering of effectiveness of such registration statement or document by the
Securities and Exchange Commission (the "SEC").
(b) The term "Registrable Securities" means (i) the Payment Shares and
(ii) the Warrant Shares; provided that, to the extent that Payment Shares or
Warrants are forfeited by Seller in accordance with the terms of the Escrow
Agreement and the Acquisition Agreement, Voxware shall have no obligation
hereunder to register such forfeited Payment Shares or the applicable Warrant
Shares, and such forfeited securities shall not be "Registrable Securities"
hereunder.
(c) The term "Registration Date" means January 3, 2001.
(d) The term "Transfer" means, with respect to any Registrable
Securities, directly or indirectly, to sell, assign, transfer, pledge, convey,
distribute, mortgage, encumber, hypothecate or otherwise dispose, whether by
gift, for consideration or for no consideration.
2. Registration.
(a) Subject to, and in accordance with, the provisions contained in this
Agreement, Voxware shall use its best efforts to effect the registration under
the Securities Act of all Payment Shares and the Warrant Shares prior to the
Registration Date.
(b) Voxware shall not be obligated to register any Payment Share or
Warrant Share more than once pursuant to this Agreement.
3. Obligations of Voxware. In connection with the registration of the
Registrable Securities pursuant to this Agreement, Voxware shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement or statements
or similar documents (each, a "Registration Statement") with respect to the
Registrable Securities, and use its best efforts to cause each Registration
Statement to become effective as soon as reasonably possible after such filing
and on or prior to the Registration Date, and to keep the Registration Statement
effective pursuant to Rule 415 at all times until the Expiration Date (as
defined below), which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material
2
<PAGE>
fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to each Registration Statement and
the prospectus used in connection with each Registration Statement as may be
necessary to keep the Registration Statement effective at all times until the
Expiration Date and during such period to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement. The Expiration Date shall be, with respect to each
Registration Statement, the first to occur of (i) the later of (A) nine months
after the effective date of the Registration Statement or (B) if the
Registration Statement covers the resale of Warrant Shares, the date which is
nine months after the Warrant Shares become issuable upon the exercise of
Warrants and (ii) the date on which all of the Registrable Securities covered by
the Registration Statement have been sold or transferred by the selling
stockholders named therein.
(c) Furnish promptly to Seller such numbers of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as Seller may reasonably request in order to facilitate
the disposition of the Registrable Securities.
(d) Use its reasonable efforts to register and qualify the Registrable
Securities under such other securities or Blue Sky laws of such jurisdiction as
shall be reasonably requested by Seller and prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to maintain such
registration and qualification in effect at all times until the Expiration Date,
and to take all other actions necessary or advisable to enable the disposition
of such securities in such jurisdictions, provided that Voxware shall not be
required in connection therewith or as a condition thereto to qualify to do
business, to file a general consent to service of process or to subject itself
to general taxation in any such states or jurisdictions or to provide any
undertaking or make any change in its charter or by-laws which the Board of
Directors of Voxware determines to be contrary to the best interest of Voxware
and its shareholders.
(e) In the event Voxware selects underwriters for the offering and
Seller consents in its sole discretion to the use of underwriters for the
offering (in which case Stratos shall be deemed to have consented to the use of
underwriters for the offering), enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering. If the offering is to involve an
underwriting and if the managing underwriter advises Seller and Stratos that
marketing factors require a limitation on the number of Registrable Securities
to be underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the offering. The number of securities that are
entitled to be included in the offering shall be allocated first to Seller and
Stratos (pro rata based on the number of Warrants held by them) and thereafter
to other persons exercising "piggy-back" registration rights, and
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<PAGE>
directors, officers and other participating management personnel of Voxware. In
the event that any Payment Shares or Warrant Shares are excluded from the
offering pursuant to this Section 3(e), Voxware's obligations pursuant to
Section 2(a) shall not be deemed to have been met with respect to such Payment
Shares and Warrant Shares so excluded.
(f) Notify Seller and Stratos, at any time when a prospectus relating to
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Voxware shall use its best efforts to promptly
amend or supplement the Registration Statement to correct any such untrue
statement or omission.
(g) Notify Seller and Stratos (or in the event of an underwritten
offering, the managing underwriters) of the issuance by the SEC of any stop
order suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose. Voxware will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible time.
(h) Permit a single firm of counsel, designated as selling shareholders'
counsel by Seller, to review each Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing, and shall
not file any document in a form to which such counsel reasonably objects.
(i) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve-month period beginning not later
than the first day of Voxware's fiscal quarter next following the effective date
of each Registration Statement.
(j) At the request of Seller, furnish to the underwriters on the date
that Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement (i) an opinion, dated
such date, of the counsel representing Voxware for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters and (ii) a
letter, dated such date, from the independent certified public accountants of
Voxware, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters.
(k) Make available for inspection by Seller, any underwriters
participating in the offering pursuant to a Registration Statement and the
counsel, accountants or other agents retained by Seller or any such underwriter
(collectively the "Inspectors"), all pertinent financial and other records,
corporate documents and properties of Voxware (collectively, the "Records"), and
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<PAGE>
cause Voxware's officers, directors and employees to supply all information
reasonably requested by Seller or any such underwriters in connection with the
Registration Statement. Records and other information which Voxware determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, shall not be disclosed by the Inspectors (or used for any purpose
unrelated to the offering) unless (i) the disclosure of such Records is
necessary in the written opinion of counsel to Seller delivered to Voxware (such
counsel being reasonably satisfactory to Voxware) to comply with the Federal
securities laws, (ii) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the Registration Statement, (iii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, or (iv) the information in such Records has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. Voxware shall not be required to
disclose any confidential information or other Records to any Inspectors until
and unless the Inspectors shall have entered into reasonable confidentiality
agreements (in the form and substance reasonably satisfactory to Voxware) with
Voxware with respect thereto; provided, however, that if the opinion identified
in the preceding sentence is delivered to Voxware, then Seller shall be
permitted to disclose in the Registration Statement the Records covered by such
opinion. Seller agrees that it shall, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction or through other means,
give prompt notice to Voxware and allow Voxware, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(l) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or if the Common Stock is not then listed on a
national securities exchange, use its best efforts to facilitate the quotation
of the Common Stock on NASDAQ.
(m) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement.
(n) Take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be sold pursuant to the Registration
Statement and to enable such certificates to be in such denominations and
registered in such names as Seller or any underwriters may reasonably request.
(o) Take all other actions reasonably necessary to expedite and
facilitate disposition by Seller and Stratos of the Registrable Securities
pursuant to the Registration Statement.
(p) Notwithstanding anything contained in this Section 3 to the
contrary, Voxware shall have no obligation pursuant to Sections 2 or 3 to
continue to maintain the accuracy and effectiveness of a registration of
Registrable Securities held by Seller after the date on which both (i) Seller
would be entitled to sell under Rule 144 within a single three-month period (or
such other unitary period prescribed under Rule 144 as may be provided by
amendment thereof) all of the
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<PAGE>
Registrable Securities then held by Seller, and (ii) the number of Registrable
Securities held by Seller is within the volume limitations under paragraph (e)
of Rule 144 (calculated as if Seller were an affiliate within the meaning of
Rule 144).
4. Obligations of Seller and Stratos. In connection with each registration
of the Registrable Securities, Seller and Stratos shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of Voxware to
take any action pursuant to this Agreement with respect to Seller and Stratos
that each of Seller and Stratos shall furnish to Voxware such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be reasonably required to effect the
registration of the Registrable Securities and shall execute such documents in
connection with such registration as Voxware may reasonably request.
(b) Each of Seller and Stratos, by its acceptance of the Registrable
Securities, agrees to cooperate with Voxware in connection with the preparation
and filing of any Registration Statement hereunder.
(c) In the event underwriters are selected by Voxware for any offering
consented to by Seller in accordance with Section 3(e), each of Seller and
Stratos agrees to enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations and market stand-off obligations,
with the managing underwriter of such offering and to take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities.
(d) Each of Seller and Stratos agrees that, upon receipt of any notice
from Voxware of the happening of any event of the kind described in Section
3(f), Seller and Stratos will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until their receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) and, if so desired by Voxware, they
shall deliver to Voxware (at the expense of Voxware) or destroy (and deliver to
Voxware a certificate of such destruction) all copies, other than permanent file
copies then in their possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(e) Neither Seller nor Stratos may participate in any underwritten
registration hereunder unless Seller and Stratos (i) agree to sell their
Registrable Securities on the basis provided in any underwriting arrangements
approved by Seller entitled hereunder to approve such arrangements, (ii)
complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agree to pay their pro rata portion
of all underwriting discounts and commissions.
6
<PAGE>
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions which are incurred in connection with registration,
filings, or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing, filing and qualification fees, printers
and accounting fees, the fees and disbursements of legal counsel (including fees
and expenses of a single counsel for all sellers of Registrable Securities in
such registration), shall be borne by Voxware.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, Voxware will indemnify and hold
harmless Seller and Stratos, their directors, their officers who sign the
Registration Statement, each person, if any, who controls Seller or Stratos, any
underwriter (as defined in the Securities Act) for Seller or Stratos and each
person, if any, who controls any such underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, expenses or liabilities (joint or
several) to which any of them may become subject under the Securities Act, the
1934 Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading or (iii) any violation or alleged violation by
Voxware of the Securities Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the 1934 Act or any
state securities law; and subject to the restrictions set forth in Section 6(c)
with respect to the number of legal counsel, Voxware will reimburse Seller,
Stratos and each such underwriter or controlling person, promptly as such
expenses are incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the indemnity agreement
contained in this subsection 6(a) (I) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the prior written consent of Voxware, which
consent shall not be unreasonably withheld, (II) shall not apply to any such
case for any such loss, claim, damage, liability or action arising out of or
based upon a Violation which occurs in reasonable reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by Seller, Stratos or any such underwriter or controlling
person, as the case may be, and (III) with respect to any preliminary
prospectus, shall not inure to the benefit of any person from whom the person
asserting any such claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained the preliminary
prospectus was corrected in the prospectus, as then
7
<PAGE>
amended or supplemented. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Seller, Stratos or any
such underwriter or controlling person and shall survive the transfer of the
Registrable Securities by Seller or Stratos pursuant to Section 8.
(b) To the extent permitted by law, Seller and Stratos will indemnify
and hold harmless, to the same extent and in the same manner set forth in
Section 6(a), Voxware, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls Voxware
within the meaning of the Securities Act or the 1934 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such holder or
underwriter, against any losses, claims, damages or liabilities (joint or
several) to which any of them may become subject, under the Securities Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by Seller or Stratos expressly for use in connection with such
registration; and Seller and Stratos will reimburse any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
Seller and Stratos shall be liable under this paragraph for only that amount of
losses, claims, damages and liabilities as does not exceed the proceeds to
Seller or Stratos as a result of the sale of Registrable Securities pursuant to
such registration. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of the Registrable Securities by Seller or
Stratos pursuant to Section 8. Voxware shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same extent as
provided above, with respect to information about such persons so furnished in
writing by such persons expressly for inclusion in the Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel satisfactory to the indemnifying
parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel for the
indemnifying party, representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. Voxware shall pay for only one
legal counsel for Seller and Stratos; such legal counsel shall be selected by
Seller. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6 only to the extent prejudicial to its ability to defend such action, but the
omission so to
8
<PAGE>
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 6. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, promptly as such expense, loss, damage or liability is incurred and
is due and payable.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 6 to the extent permitted by law; provided that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in this
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
7. Reports Under Securities Exchange Act of 1934. With a view to making
available to Seller and Stratos the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit Seller and Stratos to sell securities of Voxware to the public without
registration, Voxware agrees to:
(a) make and at all times keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) file with the SEC in a timely manner all reports and other documents
required of Voxware under the Securities Act and the 1934 Act; and
(c) furnish to Seller and Stratos, so long as Seller owns any
Registrable Securities, forthwith upon request (i) a written statement by
Voxware that it has complied with the reporting requirements of Rule 144 under
the Securities Act, the Securities Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of Voxware and such other reports and
documents so filed by Voxware and (iii) such other information as may be
reasonably requested in availing Seller and Stratos of any rule or regulation of
the SEC which permits the selling of any such securities without registration.
8. Assignment of Registration Rights. The rights to have Voxware register
securities granted to Seller and Stratos by Voxware hereunder may be transferred
or assigned in connection with a transfer of the Registrable Securities which is
not in violation of this Agreement (other than to a transferee pursuant to Rule
144 or pursuant to a Registration Statement); provided that, Voxware is given
written notice at the time of said transfer or assignment stating the name and
address of said transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being transferred
or assigned, and provided further that the transferee or
9
<PAGE>
assignee of such rights assumes the obligations of Seller or Stratos under this
Agreement with respect to the transferred Registrable Securities, and; provided
further, that said transferee or assignee is not a competitor or an affiliate of
a competitor of Voxware.
9. Transfer Restrictions.
(a) The holder of each certificate representing Registrable Securities
by acceptance thereof agrees to comply in all respects with the provisions of
this Agreement. Prior to any proposed Transfer of any Registrable Securities
(other than (i) a Transfer not involving a change in beneficial ownership, (ii)
in transactions involving the distribution without consideration of Registrable
Securities by Seller to any of its stockholders in dissolution, (iii) in
transactions involving the transfer without consideration of Registrable
Securities by any Person during his or her lifetime by way of gift or on death
by will or intestacy, (iv) in transactions involving the transfer or
distribution of Registrable Securities by a corporation to any subsidiary,
parent or affiliate of such corporation, (v) in transactions in compliance with
Rule 144, (vi) Transfers under and pursuant to any Registration Statement or
(vii) in transactions involving the Transfer of Registrable Securities by a
partnership or limited liability company to its partners or members; provided,
that, in the case of (i), (ii), (iii), (iv), (vi) and (vii), the transferee
agrees to be bound by the terms of this Agreement as if it were Seller
hereunder), unless there is in effect a registration statement under the
Securities Act covering the proposed Transfer, the holder thereof shall give
written notice to Voxware of such holder's intention to effect such Transfer,
sale, assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed Transfer, sale, assignment or pledge in suffi
cient detail, and if requested by Voxware shall be accompanied at such holder's
expense by either (i) an unqualified written opinion of legal counsel who shall
be reasonably satisfactory to Voxware, addressed to Voxware and reasonably
satisfactory in form and substance to Voxware's counsel, to the effect that the
proposed transfer of the Registrable Securities may be effected without
registration under the Securities Act and applicable state securities laws, or
(ii) a "no-action" letter from the SEC to the effect that the distribution of
such securities without registration will not result in a recommendation by the
staff of the SEC that action be taken with respect thereto, whereupon the holder
of such Registrable Securities shall be entitled to transfer such Registrable
Securities in accordance with the terms of the notice delivered by the holder to
Voxware. Each certificate evidencing the Registrable Securities transferred as
above provided
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<PAGE>
shall bear the appropriate restrictive legend set forth below, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for Voxware such legend is not required in order to establish compliance with
any provisions of the Securities Act or applicable state securities laws.
(b) Notwithstanding anything herein to the contrary, Seller agrees that
it shall not Transfer Payment Shares, Warrants or Warrant Shares and Stratos
agrees that it shall not Transfer any Warrants or Warrant Shares until the
Registration Date except in Transfers described in clauses (i), (ii), (iii),
(iv), (vi) and (vii) of Section 9(a) above.
(c) Each certificate representing the Warrants, the Payment Shares or
the Warrant Shares or any other securities issued upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event shall (unless
otherwise permitted or unless the securities evidenced by such certificate shall
have been registered under the Securities Act) be stamped or otherwise imprinted
with a legend in substantially the following form (in addition to any legend
required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAW, OR THE RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
Upon request of a holder of such a certificate, Voxware shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if (x) with such request, Voxware shall
have received either an opinion of counsel reasonably satisfactory to Voxware to
the effect that any transfer by such holder of the securities evidenced by such
certificate will not violate the Securities Act and applicable state securities
laws, or (y) in accordance with paragraph (k) of Rule 144, such holder is not
and has not during the last three months been an affiliate of Voxware and such
holder has held the securities represented by such certificate for a period of
at least two years.
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10. Miscellaneous.
(a) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to
Voxware, at Voxware, Inc., 305 College Road East, Princeton, New Jersey 08540,
Attention: Nicholas Narlis, (ii) if to Seller, at InRoad, Inc., 2025 First
Avenue, Market Place Tower, #1250, Seattle, Washington 98121, Attention: Al
Stephan, and (iii) if to Stratos, at Stratos Product Development, LLC, 2025
First Avenue, Market Place Tower PHB, Seattle, Washington 98121, Attention: Al
Stephan, or at such other address as each such party furnishes by notice given
in accordance with this Section 10(a).
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
(c) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of New York. In the event that
any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(d) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof other than the Acquisition
Agreement and the Escrow Agreement. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of: (i) as to Voxware, Voxware, (ii) as to the holders of
Registrable Securities, holders of Registrable Securities holding a majority of
the then outstanding (or issuable upon exercise of Warrants) Registrable
Securities; provided that each holder of Registrable Securities may waive his,
her or its rights hereunder without obtaining the consent of any other holder.
Any amendment or waiver effected in accordance with this 10(d) shall be binding
upon all holders of Registrable Securities, Voxware, and their respective
successors and assigns.
(e) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If Voxware receives conflicting instructions, notices or elections
from two or more persons or entities with respect to the same Registrable
Securities, Voxware shall be entitled to act upon the basis of instructions,
notice or election received from registered owner of such Registrable
Securities.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Restriction
and Registration Rights Agreement on the day, month and year first written
above.
VOXWARE, INC.
By: /s/ Bathsheba J. Malsheen
----------------------------
Title: President and CEO
-------------------------
INROAD, INC.
By: /s/ Allan H. Stephan
----------------------------
Title: President
-------------------------
STRATOS PRODUCT
DEVELOPMENT, LLC
By: /s/ Allan H. Stephan
----------------------------
Title: CEO
--------------------------
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Exhibit 10.1
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
VOXWARE, INC.
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated May 9, 2000,
between SILICON VALLEY BANK ("Bank"), a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
with a loan production office located at 5 Radnor Corporate Center, Suite 555,
100 Matsonford Road, Radnor, PA 19087 and VOXWARE, INC. ("Borrower"), whose
address is 305 College Road East, Princeton, New Jersey 08540.
RECITALS
A. Bank and Borrower are parties to that certain Promissory Note
dated June 8, 1996, as amended (collectively, the "Original
Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital loan and to amend and
restate in its entirety without novation the Original Agreement in
accordance with the provisions herein. This Agreement shall be
construed to impart upon Bank a duty to act reasonably at all
times.
AGREEMENT
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
--------------------------
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Credit Extensions.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding (i) the Committed Revolving
Line, minus (ii) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit), and minus (iii) the FX Reserve.
Amounts borrowed under this section may be repaid and reborrowed during the term
of this Agreement.
(b) To obtain an advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
<PAGE>
2.1.2 Letters of Credit Sublimit.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the Committed Revolving Line minus (ii) the outstanding
principal balance of the Advances minus the FX Reserve; however, the face amount
of outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) may not exceed $2,000,000. Each Letter of Credit will have an expiry
date of no later than 180 days after the revolving maturity date, but Borrower's
reimbursement obligation will be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonable request.
2.1.3 Foreign Exchange Sublimit.
If there is availability under the Committed Revolving Line then Borrower
may enter in foreign exchange forward contracts with the Bank under which
Borrower commits to purchase from or sell to Bank a set amount of foreign
currency more than one business day after the contract date (the "FX Forward
Contract"). Bank will subtract 10% of each outstanding FX Forward Contract from
the foreign exchange sublimit which is a maximum of $250,000 (the "FX Reserve").
The total FX Forward Contracts at any one time may not exceed 10 times the
amount of the FX Reserve. Bank may terminate the FX Forward Contracts if an
Event of Default occurs.
2.2 Interest Rate, Payments.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate equal to the Prime Rate. After an Event of Default,
Obligations accrue interest at 5 percent above the rate effective immediately
before the Event of Default. The interest rate increases or decreases when the
Prime Rate changes. Interest is computed on a 360 day year for the actual number
of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 8th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number __________________ for principal and interest payments
owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when
it debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Eastern time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and no additional fees or interest
accrue.
2.3 Fees.
Borrower will pay:
(a) Facility Fee. Fully earned, non-refundable Facility Fee of $1,000 due
on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorney's
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3 CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the Initial
Credit Extension, is subject to the following:
<PAGE>
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no event of default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest.
Borrower grants Bank a security interest in the Collateral to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents. Bank's security interest is a first priority security interest in the
Collateral. Bank may place a "hold" on the certificate of deposit pledged as
Collateral.
5 REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 Litigation.
Except as shown in the schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.3 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous persons, in
disposing, producing, storing, treating or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provisions to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
<PAGE>
5.4 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.5 Full Disclosure.
No written representations, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
---------------------
Borrower will do all of the following:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 90 days after the end of Borrower's fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank; (ii) within 5 days of filing, copies
of all statements , reports and notices made available to Borrower's security
holders or to any holders of Subordinated Debt and all reports on Form 10-K,
10-Q and 8-K filed with the Securities and Exchange Commission.
6.3 Taxes.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.4 Primary Accounts.
Borrower will maintain a depository account with Bank.
6.5 Further Assurances.
Borrower will execute any further instruments and take further action as
Bank reasonable requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
------------------
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld:
<PAGE>
7.1 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management (other than the
sale of Borrower's equity securities in a public offering or to venture capital
investors approved by Bank) of greater than 25%. Borrower will not, without at
least 30 days prior written notice, relocate its chief executive office or add
any new offices or business locations.
7.2 Compliance.
Become an "investment company" or a company controlled by an investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
-----------------
Any one of the following is an Event of Default:
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after their
due date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
If Borrower violates any covenant in Section 7 or does not perform or
observe any other material term, condition or covenant in this Agreement, any
Loan Document, or in any agreement between Borrower and Bank and as to any
default under a term, condition or covenant that can be cured, has not cured the
default within 10 days after it occurs, or if the default cannot be cured within
10 days or cannot be cured after Borrower's attempts within 10 day period, and
the default may be cured within a reasonable time, then Borrower has an
additional period (of not more than 30 days) to attempt to cure the default.
During the additional time, the failure to cure the default is not an Event of
Default (but no Credit Extensions will be made during the cure period);
8.3 Material Adverse Change.
If there (i) occurs a material impairment in the perfection or priority
of the Bank's security interest in the Collateral or in the value of such
Collateral which is not covered by adequate insurance or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations.
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business of if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
<PAGE>
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 Judgments
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement r any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any of all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower; and
(d) Dispose of the Collateral according to the Code.
9.2 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
10 NOTICES
-------
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage
<PAGE>
prepaid, return receipt requested, or by telefacsimile to the addresses set
forth at the beginning of this Agreement. A party may change its notice address
by giving the other party written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
------------------------------------------
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 Severability of Provision.
Each provision of this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties and negotiations between
the parties about the subject matter of this Agreement merge into this Agreement
and the Loan Documents.
12.6 Counterparts.
<PAGE>
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this agreement
continue in full force while any obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against the Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 Effect of Amendment and Restatement.
This Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All credit extensions or loans
outstanding under the Original Agreement are and shall continue to be
outstanding under this Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
12.10 Countersignature.
This Agreement shall become effective only when it shall have been
executed by Borrower and Bank (provided, however, in no event shall this
Agreement become effective until signed by an officer of Bank in California).
12.11 Attorney's Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
-----------
13.1 Definitions.
In this Agreement:
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
<PAGE>
"Bank Expenses" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expense) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the California Uniform Commercial Code.
"Collateral" is the property described on exhibit A.
"Committed Revolving Line" is an Advance of up to $2,000,000.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Credit Extension" is each Advance, Letter of Credit, Exchange Contract,
or any other extension of credit by Bank for Borrower's benefit.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"FX Forward Contract" is defined in Section 2.1.3.
"FX Reserve" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Letter of Credit" is defined in Section 2.1.2.
<PAGE>
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this agreement, all as amended, extended or restated.
"Material Adverse Change" is defined in Section 8.3.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after insolvency proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Original Agreement" has the meaning set forth in recital paragraph A.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it
is not the Bank's lowest rate.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is May 8, 2001.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"Subsidiary" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more affiliates of
the Person.
BORROWER:
VOXWARE, INC.
By: /s/ Nicholas Narlis
----------------------------------
Title: Senior Vice President and CFO
--------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ Heidi Fedi
-----------------------------------
Title: /s/ Assistant Vice President
--------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 AND 9 MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JAN-01-2000 JUL-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 1,627 1,627
<SECURITIES> 3,967 3,967
<RECEIVABLES> 1,262 1,262
<ALLOWANCES> 376 376
<INVENTORY> 669 669
<CURRENT-ASSETS> 7,349 7,349
<PP&E> 1,399 1,399
<DEPRECIATION> 992 992
<TOTAL-ASSETS> 12,036 12,036
<CURRENT-LIABILITIES> 1,256 1,256
<BONDS> 0 0
0 0
0 0
<COMMON> 14 14
<OTHER-SE> 10,555 10,555
<TOTAL-LIABILITY-AND-EQUITY> 12,036 12,036
<SALES> 1,051 3,013
<TOTAL-REVENUES> 1,051 3,013
<CGS> 221 621
<TOTAL-COSTS> 225 680
<OTHER-EXPENSES> 2,407 6,364
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,484) 548
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,484) 548
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,484) 548
<EPS-BASIC> (0.11) 0.04
<EPS-DILUTED> (0.11) 0.04
</TABLE>
