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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-26772
VISIO CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1448389
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
520 PIKE STREET, SUITE 1800, SEATTLE, WASHINGTON 98101-4001
(Address of principal executive offices) (Zip code)
(206) 521-4500
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ( )
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on November
22, 1996 as reported on the Nasdaq National Market, was approximately
$302,248,000. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of November 22, 1996, there were 13,781,607 shares outstanding of the
registrant's Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the registrant's definitive Proxy Statement for the 1996 Annual
Meeting of Shareholders to be held on February 26, 1997 are incorporated by
reference in Part III of this Form 10-K.
Visio, SmartShapes and Visio Solutions Library are either registered
trademarks or trademarks of Visio Corporation in the United States and/or other
countries. All other trademarks, trade names or company names referenced herein
are used for identification only and are the property of their respective
owners.
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VISIO CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business ............................................................................ 4
Item 2. Properties .......................................................................... 11
Item 3. Legal Proceedings ................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ................................. 11
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters ........... 12
Item 6. Selected Financial Data ............................................................. 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data ......................................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 20
PART III
Item 10. Directors and Executive Officers of the Registrant ................................. 36
Item 11. Executive Compensation ............................................................. 36
Item 12. Security Ownership of Certain Beneficial Owners and Management ..................... 36
Item 13. Certain Relationships and Related Transactions ..................................... 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ................... 37
Signatures .................................................................................. 38
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
Except for the historical information contained in this Annual Report, the
matters discussed herein, particularly those identified with the words
"expects," believes," "anticipates" and similar expressions, are forward-looking
statements. These statements reflect management's best judgment based on factors
known to them at the time of such statements. Such forward-looking statements
are subject to certain risks and uncertainties, including without limitation
those set forth under "Certain Risk Factors That May Impact Future Results of
Operations" contained in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations of this Annual Report on Form
10-K, many of which are beyond the Company's control, that could cause actual
results to differ materially from those anticipated. Such factors should be
carefully considered when evaluating the Company's business and prospects, and
the forward-looking information provided by Visio pursuant to the safe harbor
provisions established by recent securities legislation. Readers should also
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission.
GENERAL
Visio Corporation, a Washington corporation, ("Visio" or the "Company") is a
leading supplier of business drawing and diagramming software. Visio(R)
software, introduced in 1992, enables business and technical users to create
drawings and diagrams using a "drag and drop" approach. Customers use the
Company's software for creating drawings and diagrams ranging from simple
diagrams such as flowcharts, block diagrams and organizational charts to complex
technical drawings such as space plans, electrical schematics and network
designs. Visio's flexible product architecture and powerful graphics engine
allow organizations to standardize on a single, easy-to-use product that meets a
broad range of business drawing and diagramming needs, and thereby realize
savings on purchasing, training and support. The Company's mission is to become
the single standard for creating, storing and exchanging drawings within
business.
BACKGROUND
Drawing and diagramming - the visual representation of concepts, processes and
relationships - can be as important to businesses as words and numbers for
communicating and exchanging ideas. Drawings and diagrams can succinctly
communicate abstract concepts and relationships such as organizational
structures and technical schematics. Business drawings and diagrams,
traditionally done by hand using rulers, templates and graph paper, or delegated
to specialists such as graphic artists or drafters, are increasingly created
using software products. Just as the advent of personal computers made
electronic word processing and spreadsheet preparation possible for the general
user, the widespread acceptance of easy-to-use graphical user interfaces has
created a similar opportunity for personal computer software to replace
traditional paper-based drawing and diagramming for general business users.
Most existing drawing and diagramming software was introduced for narrowly
defined drawing needs, for specialists or as secondary features of office suite
products. For example, single-purpose products were created for specific tasks
such as flowcharting, organizational charting or network diagramming. Users were
confronted with a variety of products, each with a different user interface, and
the drawings and diagrams they produced were often difficult to integrate into
word-processed documents, spreadsheets or presentation materials. Illustration,
page layout and CAD software has also been created for graphics artists,
designers and drafters. These specialty products generally do not address the
needs of nonspecialists who wish to create, share or modify drawings and
diagrams. These products are also generally expensive, may require special
system configurations, usually require a substantial investment of time to
master and must be used regularly for the investment to be justified and the
mastery maintained. Although the drawing capabilities of office suite products
were developed for general business users, the Company believes that to date
they have lacked the depth and breadth of functionality necessary to enable
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users to easily create a variety of business drawings and diagrams. The result
has been a market highly focused on specific users and fragmented among many
applications.
THE VISIO SOLUTION
To address the limitations of existing drawing and diagramming software, the
Company introduced Visio in November 1992. The Company's primary products,
Visio, Visio Technical and Visio Professional, offer users solutions based on a
single, easy-to-use technology for a wide variety of drawing and diagramming
needs, while add-on Visio Shapes products provide users with additional shapes
for particular applications.
All Visio products are based on a common graphics "engine" that drives
parametrically defined SmartShapes(R) symbols, intelligent objects and
connectors that maintain relationships within and between shapes as they are
moved. Visio's SmartShapes objects, its stencil metaphor and its drag-and-drop
features allow users with no prior graphics or CAD training to select shapes
easily, combine them with text and manipulate them to create sophisticated
drawings and diagrams. Visio's switchable user interface allows users to select
a graphical interface compatible with the leading office suites.
The Visio graphics engine employs Windows ActiveX technology to embed Visio
drawings and diagrams into other documents, link documents and incorporate
information from other sources into Visio drawings and diagrams. Visio utilizes
an open architecture that is easily extensible and customizable in order to
facilitate and encourage the development of specific solutions by both end users
and third-party solution providers and to enable the Company to expand its
products to address new markets.
The Company believes that its software is expanding the market for drawing and
diagramming software. Visio replaces hand-drawing and single-use products and
moves drawing and diagramming out of the specialist art and drafting departments
and onto the desktops of general users throughout business enterprises. The
Company's software allows users of Visio, Visio Technical and Visio Professional
to share files created with any other Visio product and permits users trained in
one product to easily move to another. Most importantly, Visio software enables
organizations to realize purchasing, training and support savings by
standardizing on a common technology that addresses a wide variety of drawing
and diagramming needs.
VISIO'S STRATEGY
Visio's mission is to become the single standard for creating, storing and
exchanging drawings within business. By becoming the standard, the Company
believes it can introduce new users to electronic drawing and diagramming and
thereby expand the market for its products. The Company's strategy to achieve
this objective includes the following elements:
- - Focus on Business Users. The Company has focused on personal computer-
based drawing and diagramming for business enterprises such as large
corporations, consulting firms and governmental entities. The Company targets
enterprises that create durable drawings, share those drawings in electronic
form across organizational functions and departments and create custom solutions
for specific drawing needs. The Company believes these enterprises are more
likely to standardize on a single product and provide the best opportunity for
the Company to embed its products broadly within an organization. The Company
offers these entities a variety of volume licensing arrangements that encourage
wide use of, and standardization on, its products.
- - Maintain Leading Technology and Extend Product Line. The Company's
strategy is to maintain and improve the flexibility and extensibility of its
graphics engine and increase the ease-of-use and functionality of its products.
The Company will continue to expand its product lines to address market segments
where the value of drawings is high and is exploring complementary products. In
December 1996, the Company released Visio Professional, designed for information
systems and business process design.
- - Expand Use of Visio as a Platform. Building on Visio's open
architecture and ease of customization, the Company seeks to develop
relationships with third-party solution providers, system integrators,
consultants and
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other software developers who can create specific content for Visio products.
Additional content may include new shapes and automated routines that provide
solutions to specific industries or businesses. The Company has established the
Visio Solutions Library which includes solutions, add-ons and content developed
by Visio and by Visio's business partners with market expertise in core
industries. The Visio Solutions Library will complement Visio's existing
products by providing users the tools to accomplish specific business tasks and
optimize enterprise standardization on Visio. The Company has established a
developer training program which offers a foundation of knowledge for companies
and individuals to employ Visio graphics technology to meet a broad range of
business needs critical to their business.
- - Focus on Microsoft Windows and the Microsoft Strategy. The Company
develops products primarily for the Windows environment and has historically
worked closely with Microsoft to more fully utilize the capabilities of Windows
technology. The Company believes that Microsoft's strategies for expansion of
the Windows market will ultimately provide a broad market opportunity for Visio
products. The Company intends to continue to work closely with Microsoft to gain
access to new Windows technology and exploit it fully in Visio products. The
Visio license agreement with Microsoft to incorporate Visual Basic for
Applications (VBA) into the future versions of Visio products illustrates the
Company's strategy to maintain its position as a key developer of products for
Windows.
- - Expand International Markets. The Company markets the Visio product
line in nine languages and in more than 35 countries throughout the world.
International revenues represented approximately 37% and 29% of the Company's
revenues in fiscal 1996 and 1995, respectively. The Company plans to continue to
expand both the number of its products distributed in international markets and
its sales and marketing offices and distribution networks within those markets.
- - Separate Product Teams. In September 1996, the Company reorganized its
internal marketing and development organizations into product teams centering on
its key product groups. The Company believes this approach creates greater
synergy between marketing and development, clearer focus on market needs and
greater accountability to the success of a product.
PRODUCTS
The Company currently sells two core software products, Visio and Visio
Technical, together with add-on Visio Shapes software products. The Company
recently released a third core product, Visio Professional. These products offer
solutions to a wide variety of drawing and diagramming needs based on a single,
easy-to-use technology. The Company designs its product features to be
intuitive, enabling even occasional users to draw and diagram efficiently. The
Company's products integrate well with other desktop applications and can be
easily customized to meet individual needs.
Many business drawings and diagrams are composed almost entirely of standard
symbols. Accordingly, the Company's products utilize a visual "stencil"
metaphor. This metaphor is implemented through a stencil window that displays a
collection of standard shapes, including connectors, on a visually distinctive
background. The user incorporates these standard shapes into a drawing by
dragging the shapes from the stencil window and dropping them into the drawing
window. In addition, users can customize the behavior of shapes and create their
own shapes. All Visio shapes can have associated text, which moves when the
shape is moved. The Company's software allows users to associate nongraphical
data with shapes, enabling users to easily generate nongraphical information,
such as parts lists and bills of material, from Visio drawings and diagrams.
VISIO
The Company's leading product, Visio, was first shipped in November 1992. Visio
enables general business personal computer users to create a wide variety of
diagrams. Many of Visio's features are designed to optimize its ease of use. For
example, Visio incorporates a switchable user interface that enables users to
select the Microsoft Office or Lotus SmartSuite graphical user interface. Visio
also includes wizards for organization charts, time lines and page layouts that
automatically generate diagrams based on the data the user provides and the
user's formatting
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preferences. In addition to enabling users to easily create diagrams, Visio also
includes features to enhance the information content of diagrams. Visio users
can link diagrams to databases and associate nongraphical data with shapes
within a diagram. Some of the diagrams that can be created with Visio include:
Flowcharts Organization Charts
Timelines Block Diagrams
Geographic Maps Marketing Charts
The Company released Visio 4.0 in August 1995 with 16-bit and 32-bit executables
in one box. With Visio 4.0, users can create new diagram types such as
perspective block diagrams for sophisticated spatial representation and
mind-mapping charts for stimulating creative thinking. Visio 4.0 includes a new
SmartShapes wizard that provides users easier access to customizing smart
behavior and helps users to create their own SmartShapes objects, and includes
spellcheck and find-and-replace features. Visio 4.0 supports the binder feature
of Microsoft Office, allowing users to create single documents consisting of
Microsoft Word documents, Excel spreadsheets, PowerPoint presentation slides,
Visio drawings and diagrams and documents from other binder-compatible
applications. Access to Visio 4.0's feature sets through ActiveX automation
gives corporate developers and third party solution providers expanded ability
to manipulate and automate Visio's functionality. Visio 4.0 has an estimated
street price (average purchase price paid by end users) of $149.
VISIO TECHNICAL
Visio Technical is designed for technical professionals such as drafters,
engineers and architects. It offers all the features and capabilities of Visio,
plus shapes and capabilities necessary to create professional-quality technical
drawings. Visio Technical enables users to efficiently create two-dimensional
drawings and technical schematics without the long learning curve normally
associated with CAD software. Visio Technical users can easily share technical
drawings with other Windows applications, and can create intelligent drawings by
linking them to databases. Visio Technical includes more than 2,000
industry-specific SmartShapes objects. Some of the drawings that can be created
with Visio Technical include:
Space Planning Facilities Management
Electrical Schematics Construction Drawings
Mechanical Engineering Heating, Ventilation and Air Conditioning
In May 1996, the Company released Visio Technical 4.1, which offers improved
integration with Autodesk AutoCAD files. Visio Technical 4.1 can import and
export native AutoCAD files, thereby enabling Visio Technical users who are not
trained on AutoCAD to use AutoCAD files and to share drawings and diagrams with
AutoCAD users. Visio Technical 4.1 reads AutoCAD files directly, maintaining all
AutoCAD attributes and automatically converting AutoCAD symbol libraries into
SmartShapes objects. An append option also allows users to add information in
Visio Technical on top of an imported AutoCAD file. When the file is exported
and opened in AutoCAD, the appended information appears on a new layer and can
be manipulated by the AutoCAD user.
Other new features for Visio Technical 4.1 include a database connectivity
wizard which makes it possible to link any Visio shape or drawing to any on-line
database connectivity (ODBC)-compliant database, new support for Visual Basic
4.0, over 500 new technical SmartShapes symbols on 12 new stencils and powerful
new drawing tools. Visio Technical 4.1 has an estimated street price of $299.
VISIO PROFESSIONAL
Visio Professional is a complete diagramming tool for information technology
professionals such as LAN managers, database analysts, software developers and
web masters as well as business process professionals. It offers all the
features and capabilities of Visio as well as new SmartShapes symbols, including
more than 350 vendor-specific network equipment shapes. Visio Professional also
provides database connectivity and support for the latest Windows technology,
Internet/intranet tools to optimize Web site design and documentation and
advanced formatting tools such as auto layout. It includes Microsoft's VBA
technology and is Microsoft Office 97 compatible. Some of the diagrams that can
be created with Visio Professional include:
Network Diagrams Process Flowchanges
Database Design Workflow Diagrams
Web Site Design TQM Diagrams
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Additionally, Visio Professional enables users to visualize and improve business
practices, implement re-engineering programs and track total quality
initiatives. Visio Professional has an estimated street price of $349.
VISIO SHAPES AND OTHER PRODUCTS
In addition to Visio, Visio Technical and Visio Professional, the Company also
offers Visio Shapes, a line of add-on stencil products. These products
supplement Visio, Visio Technical and Visio Professional by extending the number
and types of drawings available for job-specific drawing needs. Each Visio
Shapes product includes from 4 to 10 stencils and from 100 to 420 SmartShapes
objects. Some Visio Shapes products also include automated routines that further
simplify the creation of drawings and diagrams. The Company introduced three new
Visio Shapes products in fiscal 1996. The Visio Shapes products offered by the
Company, which have estimated street prices ranging from $49 to $99, are as
follows:
Accident Reporting Chemistry
Advanced Electrical Engineering Crime Scenes
Advanced Flowcharts Home Planning
Advanced Network Diagrams Kids
Advanced Software Diagrams Landscape Planning
Advanced Space Planning Marketing
Biotechnology Medicine Mechanical Engineering
Calendar Maker Network Equipment
Chemical Engineering Petroleum Engineering
The Company has from time to time offered special versions of its products for
specific applications. For example, the Company offers Visio Express, a version
of Visio that contains a reduced feature set, for inclusion in certain OEM
arrangements. The Company also offers the Visio Business Modeler, an add-on
designed to expedite implementations of the SAP(R) R/3(TM) system.
SALES, MARKETING AND DISTRIBUTION
Visio's marketing efforts were initially directed at creating a new product
category - drawing and diagramming software for general business users. Those
marketing efforts were directed at individual end users who purchased the
Company's products through standard retail software distribution channels. As
the need for drawing and diagramming software for general business users has
been recognized, the Company has refocused its marketing efforts on
strengthening Visio brand name recognition to facilitate the introduction of
additional Visio-branded products and on expanding its distribution channels. In
addition, the Company is increasingly focusing its sales and marketing efforts
on volume licensing arrangements with large accounts. As a result of this
effort, volume licensing revenues have been 10%, 5% and 3% of total revenues in
fiscal 1996, 1995 and 1994, respectively. The Company expects continued
investment in the volume licensing sales staff in fiscal 1997 and, as a result,
expects this percentage to increase.
In North America, the Company's products are sold primarily through
distributors, including Ingram Micro, Inc. ("Ingram"), Merisel, Inc. ("Merisel")
and Tech Data Corporation ("Tech Data"). These distributors resell the Company's
products to retail software outlets and computer superstores. The Company also
sells its products directly to Egghead, Inc. ("Egghead"). The Company has
entered into nonexclusive distribution agreements with each of Ingram, Merisel
and Tech Data and a nonexclusive resellers agreement with Egghead. The
agreements with Egghead, Ingram and Tech Data may be terminated without cause by
either party upon 30 days notice. The agreement with Merisel is automatically
renewed on an annual basis and may be terminated without cause by either party
upon 60 days' notice. In fiscal 1996, 1995 and 1994, sales to the Company's
three largest distributors and resellers accounted for the following percentages
of the Company's revenues: Ingram 34%, 30% and 35%, respectively; Merisel 16%,
17% and 22%, respectively; and Egghead 8%, 12% and 19%, respectively. No other
customer accounted for more than 10% of the Company's revenues in those fiscal
years.
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Distribution outside of North America is also primarily through distributors and
is managed by the Company's international headquarters in Dublin and regional
sales and marketing offices in London, Munich, Paris, Sydney, Kuala Lumpur and
Miami. Internationally, the Company has numerous non-exclusive distributors,
none of which accounted for 10% of the Company's revenues in fiscal 1996, 1995
or 1994. The international headquarters personnel are responsible for all
international administration, finance, manufacturing, customer support,
localization and local content engineering. In Japan, the Company has a
distribution agreement with ASCII Something Good Corporation ("ASG") which
provides for exclusive distribution rights, excluding direct sales and licensing
by Visio, through March 31, 1997, and non-exclusive distribution rights through
December 31, 1997, except that ASG retains exclusive distribution rights for
license packs and volume licenses through December 31, 1997.
The Company from time to time has established OEM arrangements with hardware
manufacturers such as Dell Computer Corporation and ACER Incorporated and
software vendors such as Microsoft Corporation. The Company also sells products
directly to end users.
The Company outsources technical support and customer service. To the extent it
remains economically advantageous to do so, the Company expects to continue to
outsource these functions in the future.
PRODUCT DEVELOPMENT
The Company believes that its future success will depend in large part on its
ability to enhance its current product line, develop new products, maintain
technological leadership and satisfy an evolving range of customer requirements
and industry standards for drawing and diagramming software. The Company's
product development group is actively engaged in identifying, defining and
developing new products and product enhancements to meet customer needs. The
Company's principal product development efforts focus on continued enhancements
to the Visio graphics engine and development of new customer solutions and
applications, including increased drawing complexity, increased number of
objects, increased "smartness" of SmartShapes objects and improved database
connectivity.
The Company's products have been developed primarily by its product development
group. Certain technologies, such as the ability to read and write to AutoCAD
files and to spellcheck, have been licensed from other sources and integrated
into the Company's products. The Company intends to continue licensing
technologies as it increases product offerings. In fiscal 1996, the Company
purchased source code and other intellectual property from Arcland, Inc. to be
integrated into the Company's products. The Company intends to continue to make
substantial investments in product development. The Company's product
development expenses totaled $8.8 million, $5.1 million and $3.6 million, or
14.8%, 14.9% and 17.4% of revenues in fiscal 1996, 1995 and 1994, respectively.
As a developer of products designed to operate on Microsoft Windows, the
Company has historically enjoyed a collaborative working relationship with
Microsoft. For example, the Company participated in early design reviews and
beta testing of versions 1.0 and 2.0 of Microsoft's OLE standard and commented
on design requirements for the graphics subsystem of Windows 95. The Company
was an early beta tester of, and participated in Microsoft's "early adopter"
marketing program for, Windows 95. The Company released Visio 4.0 concurrently
with Microsoft's launch of Windows 95, and released Visio Technical 4.0 shortly
thereafter. If the Company's relationship with Microsoft were disrupted for any
reason, the Company's development efforts and results of operations could be
materially adversely affected.
COMPETITION
The computer software drawing and diagramming markets are intensely competitive
and subject to rapidly changing technology and evolving standards. The Company
competes primarily with small niche companies and larger software companies with
strong market position and technology. The Company's principal competitors are
companies with leading products in the special purpose drawing and diagramming,
illustration, CAD and office suite categories. Products competing with Visio
include ABC Flowcharter by Micrografx, CorelFLOW and CorelDRAW by Corel and
Intellidraw by Adobe. Visio Technical competes with various products, including
AutoCAD LT and AutoSketch by Autodesk and Designer by Micrografx. Visio
Professional competes with various products including netViz by Quyen Systems
Inc. and Process Charter by Scitor Corporation. In addition, the drawing
capabilities included in Microsoft Office, SmartSuite by Lotus and WordPerfect
Suite by Corel compete with Visio. If any of these producers of office suites
aggressively pursues business drawing and diagramming markets and commits
further resources to development in this area, the Company's results of
operations could be materially adversely affected. Many of these competitors
have significantly greater financial, technical, sales and marketing and other
resources than the Company. As business drawing and diagramming software markets
develop, the Company believes that additional companies may enter these markets
and thereby intensify competition.
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The principal competitive factors affecting the computer software drawing and
diagramming markets include product functionality, ease of use, performance and
reliability; customer service and support; product availability; vendor
credibility; brand awareness; ability to keep pace with technological change;
and price. Although the Company believes that its products currently compete
favorably with respect to these factors, there can be no assurance that the
Company can maintain its competitive position in the face of increasing
competition from new products and enhancements introduced by existing
competitors and new companies entering this market. The markets for the
Company's products are characterized by significant price competition, and the
Company expects it will face increasing pricing pressures. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors or that competitive pressures faced by the Company will
not materially adversely affect its business, financial condition and results of
operations.
PROPRIETARY RIGHTS
The Company regards its software as proprietary and relies primarily on a
combination of copyright and trademark laws, trade secret protection,
confidentiality procedures and contractual provisions, including nondisclosure
agreements with employees and others, to protect is proprietary rights. The
Company has no patents or patent applications pending and existing copyright and
trade secret laws afford only limited protection. The Company believes that,
because of the rapid pace of technological change in the computer software
industry, copyright and trade secret protection have less effect on the
Company's business and results of operations than factors such as the knowledge,
ability and experience of the Company's employees, frequent product enhancements
and the timeliness and quality of support services.
The Company provides its products to business enterprises under nonexclusive
licenses that are generally nontransferable. The Company also provides its
products to individual end users, in which case the Company relies on "shrink
wrap" licenses that are not signed by the end user and therefore may not be
enforceable in certain jurisdictions. The Company's products do not contain copy
protection. Policing unauthorized use of software is difficult and, while the
Company is unable to determine the extent of piracy of its software, it expects
software piracy to be a persistent problem in the computer software industry.
The Company licenses some software programs from independent developers and
incorporates them into the Company's products. Generally, such agreements grant
the Company nonexclusive, perpetual, worldwide licenses with respect to the
subject program and terminate only upon a material breach by the Company.
Certain of these licenses require payment of royalties based on the number of
products sold.
No material claims have been made against the Company for infringement of
proprietary rights of others; however, there can be no assurance that others
will not assert infringement claims in the future. As the number of software
products in the industry increases and the functionality of these products
further overlaps, the Company believes that software programs will increasingly
become subject to infringement claims. The cost of responding to any such
assertion may be material, whether or not the assertion is valid.
PRODUCTION
Production of the Company's software products primarily involves duplication of
various media and the printing of user manuals and packaging materials. Media
for the Company's products include CD-ROMs and 3.5-inch diskettes and are
available from multiple sources. The Company outsources procurement of materials
for, and production of, its products. To date, the Company has not experienced
any material difficulties or delays in production of its software products or
documentation. To the extent it remains economically advantageous to do so, the
Company intends to continue outsourcing production in the future.
EMPLOYEES
As of September 30, 1996, the Company employed 205 persons, including 83 in
sales and marketing, customer service and technical support, 73 in product
development and 49 in finance, administration and operations. The Company
believes that its future success will depend, in part, on its ability to
continue to attract and retain skilled
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product development, technical support, marketing and management personnel.
Competition for such personnel in the computer software industry is intense. The
Company believes its relations with its employees are good.
ITEM 2. PROPERTIES
The Company's headquarters are located in Seattle, Washington, where it leases
approximately 45,250 square feet for administrative, sales and marketing,
customer service and product development activities. The Company also leases
approximately 9,100 square feet of office space in Dublin, Ireland and an
aggregate of 5,600 square feet of office space in London, Munich, Paris and
Kuala Lumpur. The Company believes that its existing facilities and options on
additional facilities are adequate to meet its needs for the foreseeable future.
The Company believes that it can acquire additional space, if needed, on
acceptable terms.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of its fiscal year ended September 30, 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
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<CAPTION>
FISCAL YEAR 1996
QUARTER ENDED: DEC 31 MAR 31 JUN 30 SEP 30 FISCAL YEAR
<S> <C> <C> <C> <C> <C>
Common stock prices:
High $28 1/4 $29 3/4 $44 1/2 $44 1/4 $44 1/2
Low $21 3/4 $22 $24 1/2 $29 1/4 $21 2/3
</TABLE>
Visio's common stock has been traded on the Nasdaq National Market under the
Nasdaq symbol VSIO since the Company's initial public offering in November
1995. The high and low closing sales prices noted above are as reported on the
Nasdaq National Market. On November 22, 1996, there were 140 holders of record
of the Company's common stock. The Company has not paid cash dividends on its
common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data and other operating
information of Visio Corporation. The selected financial data in the table are
derived from the financial statements of Visio Corporation. The data should be
read in conjunction with the financial statements, related notes, and other
financial information included herein.
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $59,699 $34,224 $20,616 $ 7,142 --
Operating Income (loss) 14,573 3,206 157 (1,453) (1,979)
Net income (loss) 11,091 2,346 (152) (1,422) (1,905)
Earnings (loss) per share .76 .20 (.03) (.36) (.49)
Cash and short-term investments 61,107 7,063 3,669 1,597 2,290
Total assets 71,608 19,247 7,879 2,650 2,553
Shareholders' equity (deficit) 55,225 (1,040) (3,476) (3,513) (2,102)
Long-term obligations $ 148 453 587 168 9
Redeemable preferred stock -- $ 6,545 $ 5,055 $ 4,355 $ 4,355
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Visio, which commenced operations in September 1990, develops drawing
and diagramming software for the general business personal computer user. All of
the Company's products have been developed for the Microsoft Windows 3.1,
Windows 95 and Windows NT operating systems and are marketed under the Visio(R)
brand. The Company's primary products are Visio, Visio Technical and Visio
Professional. The Company's first product Visio, which first shipped in November
1992, began creating a new market for business diagramming. The Company shipped
its second significant product line, Visio Technical, for technical drawing in
December 1994. The Company has announced the introduction of its third
significant product line to be released in December 1996, Visio Professional,
for information systems and business process design.
Visio classifies its revenues in four channels: "Distribution," "Direct,"
"Volume Licensing," and "OEM." Distribution revenues represent sales of packaged
products through national distributors and corporate, retail and mail order
resellers. Direct revenues represent sales of packaged products directly by the
Company, including upgrades, generally to end users responding to advertising or
other marketing promotions. Volume Licensing revenues are derived from volume
licenses, which are generally administered through corporate resellers after the
Company's sales staff has negotiated the sale. The typical sales cycle for a
volume license is six to eighteen months. Volume Licensing revenues usually do
not include any significant amount of packaged goods, but do include maintenance
and support revenues, which are priced separately and recognized over the lives
of the contracts. Volume Licensing revenues characteristically have higher gross
profit as a percentage of revenues, but lower operating profit as a percentage
of revenues, due to costs of supporting the related sales staff. OEM revenues
include licenses of Visio products to hardware and software manufacturers for
bundling arrangements. OEM revenues include packaged product sales, as well as
royalty payments with no associated product costs.
The distribution channel commonly stocks and displays packaged products to
achieve in-store visibility and timely delivery to customers. Fluctuations in
distributor inventory levels can affect the Company's revenues. Distributor
inventory levels may fluctuate for a variety of reasons, including the inability
of distributors to sell a product at the levels purchased, as well as the
phenomena called "channel dry" and "channel fill." Channel dry occurs prior to
the release of an upgrade version of an existing product as the distribution
channel reduces the inventory levels to minimize product returns. Channel fill
occurs following the introduction of a new product or new version of a product,
in anticipation of price increases, in response to planned end-user promotions
and in connection with purchases of additional display space. The Company defers
the recognition of revenues from distributor inventory that it estimates to be
in excess of levels appropriate for the channel. Nonetheless, the effects of
channel fill could add substantial volatility to the Company's revenues.
The Company has invested heavily in the development of its core graphics
technology, new product introductions, Visio brand awareness and its worldwide
infrastructure. These investments are part of the Company's strategy for growth
and are consistent with its mission to become the single standard for creating,
storing and exchanging drawings and diagrams in business. Although the Company
believes that these investments have established a foundation for the worldwide
expansion of its business, they have also significantly affected the Company's
historical profitability. There can be no assurance that the Company's revenue
growth will be sufficient in future periods to maintain its recent profitability
as the Company continues to make such investments.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth statement of income data as a percentage of
revenues for the fiscal years indicated:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of revenues 14.6 17.8 19.7
--------------------------------------
Gross profit 85.4 82.2 80.3
Operating expenses:
Research and development 14.8 14.9 17.4
Sales and marketing 38.5 50.7 52.7
General and administrative 7.7 7.3 9.4
--------------------------------------
Total operating expenses 61.0 72.9 79.5
--------------------------------------
Operating income 24.4 9.3 0.8
Interest and other income, net 2.5 1.3 0.4
--------------------------------------
Income before income taxes 26.9 10.6 1.2
Provision for income taxes 8.3 3.7 1.9
-------------------------------------
Net income (loss) 18.6% 6.9% (0.7%)
======================================
</TABLE>
<TABLE>
<CAPTION>
REVENUES
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------
1996 CHANGE 1995 CHANGE 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Business diagramming $41,108 68.9% 46% $28,235 82.5% 48% $19,029 92.3%
Technical drawing 17,747 29.7 274% 4,742 13.9 334% 1,092 5.3
Other 844 1.4 (32%) 1,247 3.6 152% 495 2.4
-------------- --------------- --------------
Total revenues $59,699 100.0% 74% $34,224 100.0% 66% $20,616 100.0%
============== =============== ==============
</TABLE>
Revenues include sales of software products, maintenance and support contracts
and licenses, net of reserves for estimated future returns and allowances.
Revenues from the sale of maintenance and support contracts have not been
material to date. License revenues are derived from volume licenses,
international royalties and certain OEM arrangements.
Visio's revenues increased 74% to $59.7 million in the fiscal year ended
September 30, 1996 and 66% to $34.2 million in the fiscal year ended September
30, 1995. The increase in revenues was due primarily to sales volume growth
across product groups, distribution channels and geographic regions and
secondarily to price increases.
Percentage growth within the product groups was most significant for the
technical drawing product group, which grew 274% and 334% for fiscal 1996 and
1995, respectively. Upgrades to Visio Technical 4.0 in fiscal 1995 and Visio
Technical 4.1 in fiscal 1996, as well as the introduction of three localized
language versions in fiscal 1996, contributed to this growth. The growth in the
business diagramming product group was also strong, growing 46% and 48% for
fiscal 1996 and 1995, respectively. Upgrades to Visio 4.0 in the fourth quarter
of fiscal 1995 and the introduction of a Japanese version of Visio in fiscal
1995, which was upgraded in fiscal 1996, contributed to this growth. Other
revenues consisted primarily of sales of Visio Home and related Visio Shapes
products, which represented a decreasing percentage of total revenues due to the
Company's focus on business personal computer users.
The channel mix of Distribution, Direct, Volume Licensing and OEM revenues for
fiscal 1996 was 76%, 10%, 10% and 4%, respectively, compared to 75%, 14%, 6% and
5%, respectively, for fiscal 1995 and 77%, 20%, 3% and 0%, respectively, for
fiscal 1994. Percentage growth was most significant for the Volume Licensing
channel, which grew 198% and 213% for fiscal 1996 and 1995, respectively. This
growth is primarily the result of continued infrastructure investment in the
volume licensing program.
14
<PAGE> 15
Revenues in the United States and Canada increased 55% to $37.7 million in
fiscal 1996 and 33% to $24.3 million in fiscal 1995 from $18.3 million in fiscal
1994. The increase in revenues in fiscal 1996 and 1995 primarily reflects the
contribution of Visio Technical and the release of upgrade versions of Visio and
Visio Technical. International revenues increased 122% to $22.0 million in
fiscal 1996 and 325% to $9.9 million in fiscal 1995 from $2.3 million in fiscal
1994. As a percentage of total revenues, international revenues represented 37%,
29% and 11% in fiscal 1996, 1995 and 1994, respectively. The growth in fiscal
1996 primarily reflects the release of upgrade localized versions of Visio,
particularly in Japan, and the introduction of Visio Technical in Europe. The
growth in fiscal 1995 resulted primarily from increased Distribution revenues
due to continued expansion of the customer base, OEM revenues from certain
promotions and the introduction of a Japanese version of Visio in March 1995.
The Company's operating results are affected by foreign exchange rates.
Approximately 20%, 22% and 4% of the Company's revenues were collected in
foreign currencies during fiscal 1996, 1995 and 1994, respectively. Since most
of the Company's international production costs and operating expenses are
incurred in foreign currencies, the net impact of exchange rate fluctuations on
income from operations is less than on revenues.
<TABLE>
<CAPTION>
COST OF REVENUES
(IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 CHANGE 1995 CHANGE 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of revenues $8,701 14.6% 43% $6,077 17.8% 50% $4,054 19.7%
</TABLE>
Cost of revenues varies with the mix of Distribution, Direct, Volume Licensing
and OEM revenues, due to relative variations in the standard costs associated
with each revenue category, and with fluctuations in period costs. Standard
costs consist primarily of documentation, packaging, media duplication, assembly
and material management costs. Period costs consist primarily of technical
support, production management, freight and fulfillment, certain royalties,
standard material variances and inventory valuation adjustments.
Standard costs associated with each revenue category are primarily determined by
the amount of packaged product delivered in that revenue category. Accordingly,
most of the Company's standard costs are associated with Distribution and Direct
revenues, all of which are derived from sales of packaged products. Volume
Licensing revenues have the lowest standard costs because they generally do not
include any significant amount of packaged goods.
The decrease in cost of revenues as a percentage of revenues in fiscal 1996
resulted primarily from increased Volume Licensing revenues which have little or
no standard costs, an increase in the percentage of revenue from Visio
Technical, which has lower standard costs as a percentage of revenues than
Visio, disk duplication cost control measures and the increased use of
lower-cost CD-ROM media.
<TABLE>
<CAPTION>
RESEARCH AND DEVELOPMENT
(IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 CHANGE 1995 CHANGE 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Research and development $8,842 14.8% 74% $5,086 14.9% 41% $3,595 17.4%
</TABLE>
Research and development expenses consist primarily of personnel, contract
services, occupancy and equipment costs required to conduct the Company's
product development efforts. Product development includes product engineering,
documentation development, localization, usability testing, quality assurance
and advanced research and development costs. Contract localization costs and
lump sum payments for technology such as file converters are capitalized and
amortized to development over the lesser of the useful life or 12 months.
Research and development expenses are charged to operations as incurred.
Generally accepted accounting principles requiring capitalization of certain
software development costs subsequent to the establishment of technological
feasibility are not applicable because these costs have been immaterial.
15
<PAGE> 16
Increases in research and development expenses for fiscal 1996 resulted
primarily from planned additions to the Company's development organization and
the acquisition of source code and other intellectual property from Arcland,
Inc. Research and development expenses for fiscal 1995 increased primarily due
to planned additions to the Company's development organization, much of which
occurred in Dublin where the Company established the development organization
required to deliver international versions of its products. The Company believes
increased research and development expenses in absolute dollars will be required
during fiscal 1997 and beyond to expand its product lines and introduce new
language versions to international markets.
<TABLE>
<CAPTION>
SALES AND MARKETING
(IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 CHANGE 1995 CHANGE 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and marketing $22,974 38.5% 32% $17,340 50.7% 60% $10,864 52.7%
</TABLE>
Sales and marketing expenses, which include customer service expenses, have
increased in absolute terms as the Company continues building its worldwide
sales, marketing and customer service infrastructure. The fiscal 1996 growth in
these expenses was primarily due to increased product marketing costs, continued
development of the worldwide sales infrastructure and the creation of an
internal consulting group to support customers and developers. As a percentage
of revenues, sales and marketing expenses decreased in fiscal 1996 primarily due
to increased revenues and the significant sales and marketing investment made in
fiscal 1995. This investment consisted primarily of brand awareness activities
including an advertising campaign aimed at developing the Visio brand and
accelerating awareness levels.
The Company believes substantial spending on marketing awareness and Volume
Licensing sales staffing is essential to achieve revenue growth and to maintain
and enhance the Company's competitive position. Accordingly, Visio expects sales
and marketing expenses to continue to increase in fiscal 1997.
<TABLE>
<CAPTION>
GENERAL AND ADMINISTRATIVE
(IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 CHANGE 1995 CHANGE 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General and administrative $4,609 7.7% 83% $2,515 7.3% 29% $1,946 9.4%
</TABLE>
General and administrative expenses increased in absolute terms in fiscal 1996
primarily due to higher personnel costs associated with increased operations,
outside legal and accounting fees and costs associated with becoming a public
company. The increase in fiscal 1995 resulted primarily from increased staffing
and occupancy costs in the Dublin office. The Company expects to show increased
general and administrative expenses in absolute terms in future periods for
infrastructure to support revenue growth.
INTEREST AND OTHER INCOME, NET
Interest income was $1.7 million, $0.2 million and $0.1 million for fiscal 1996,
1995 and 1994, respectively. The increase in fiscal 1996 was primarily due to
interest earned on investment of proceeds from the Company's initial public
offering completed in November 1995, and was partially offset by other
nonoperating expenses. Other income includes foreign currency transaction gains
and losses and grant income from the Industrial Development Agency of Ireland
tied to employment levels in the Company's Dublin operation. Visio does not
currently engage in hedging activities.
INCOME TAXES
The Company's effective income tax rate was 31% and 35% for fiscal 1996 and
1995, respectively. The lower effective tax rate for fiscal 1996 was primarily
due to the benefit of the utilization of foreign net operating loss
carryforwards, tax-exempt interest and income taxed in other jurisdictions at
rates lower than the U.S. rate. The income tax provision for fiscal 1994 of
$385,000 is primarily related to taxes on U.S. income, with no tax benefit
recognized for foreign tax losses.
16
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash and short-term investments, which
consist of high-quality municipal bonds, totaling $61.1 million, compared to
$7.1 million at September 30, 1995. The increase in cash and short-term
investments was due primarily to net proceeds of $35.7 million from the sale of
Common Stock in the Company's initial public offering completed in November
1995. The remainder of the increase was due primarily to cash generated from
operations, and the exercise of employee stock options and warrants. Since its
inception, the Company has financed its operations primarily through cash
generated by its operations, as well as through sales of its Common Stock and
Preferred Stock and bank financing. The Company has a $1.0 million unsecured
bank line of credit, which matures on February 28, 1997.
At September 30, 1996, the Company's principal commitments consisted primarily
of leases on its headquarters facilities. The Company's capital expenditures
totaled $2.5 million in fiscal 1996. At September 30, 1996, the Company had no
material commitments for capital expenditures. The Company believes that its
current cash and short-term investment balances, funds available under its line
of credit and cash flow from operations will be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
From time to time, the Company evaluates potential acquisitions of businesses,
products or technologies that complement the Company's business. At September
30, 1996, the Company had no material agreements or commitments with respect to
any such transaction.
CERTAIN RISK FACTORS THAT MAY IMPACT FUTURE RESULTS OF OPERATIONS
Except for the historical information contained in this Annual Report, the
matters discussed herein, particularly those identified with the words
"expects," believes," "anticipates" and similar expressions, are forward-looking
statements. These statements reflect management's best judgment based on factors
known to them at the time of such statements. Such forward-looking statements
are subject to certain risks and uncertainties, including without limitation
those set forth below, many of which are beyond the Company's control, that
could cause actual results to differ materially from those anticipated. The
factors set forth below should be carefully considered when evaluating the
Company's business and prospects, and the forward-looking information provided
by Visio pursuant to the safe harbor provisions established by recent securities
legislation. Readers should also carefully review the risk factors described in
other documents the Company files from time to time with the Securities and
Exchange Commission.
Fluctuations in Quarterly Performance. The Company's quarterly results of
operations can be affected substantially by demand for the Company's products,
the timing and customer acceptance of new products, product enhancements and
promotions by the Company or its competitors, product returns, fluctuations in
foreign exchange rates, the impact of acquisitions of other technologies or
companies and changes in economic conditions. The Company is increasingly
focusing its sales efforts on volume licensing to large accounts. The timing of
those licenses could significantly affect quarterly results of operations. A
significant portion of the Company's operating expenses are relatively fixed in
the short term, and planned expenditures are based on the Company's estimates
for quarterly revenues. As a result, variations in timing of revenues can cause
significant variations in quarterly results of operations. In general, the
Company has experienced the strongest demand for its software products during
the December quarter and the weakest demand in the June quarter. These seasonal
patterns have been overshadowed in particular quarters by the timing of new
product introductions, expansion into international markets, the execution of
volume licenses and other factors affecting the Company's business.
Dependence on Microsoft Windows; Relationship With Microsoft. Substantially all
of the Company's revenues are derived from sales of products that are designed
to work within a Microsoft Windows environment and are marketed primarily to
Windows users. As a result, sales of the Company's products would be materially
affected by market developments adverse to Windows-based products. As a
developer of products for Windows, the Company has historically enjoyed a
collaborative working relationship with Microsoft. If the relationship were
disrupted for any reason, such as a decision by Microsoft to introduce or
acquire products that compete directly with the Company's products, the
Company's development efforts and results of operations could be materially
adversely affected.
17
<PAGE> 18
Competition. The computer software drawing and diagramming markets are intensely
competitive and subject to rapidly changing technology and evolving standards.
The software industry has limited barriers to entry, and the availability of
personal computers with continuously expanding capabilities, at progressively
lower prices, contributes to the ease of market entry. Because of this and other
factors, competitive conditions in the future are likely to intensify. The
markets for the Company's products are characterized by significant price
competition, and the Company expects it will face increasing pricing pressures.
Increased competition could result in price reductions, reduced profit margins
and loss of market share, which could materially adversely affect the Company's
results of operations.
Dependence on a Single Technology; Limited Product Line. The Company has derived
substantially all of its revenues to date from sales of drawing and diagramming
products based on its core technology. The Visio product line and related
enhancements are expected to continue to account for substantially all of the
Company's revenues for the foreseeable future. A decline in demand for these
products as a result of competition, technological change or any other reason
would have a material adverse effect on the Company's results of operations.
Rapid Technological Change and New Product Development. The markets for the
Company's products are characterized by rapidly changing technology, evolving
industry standards, changes in customer needs and frequent new product
introductions. The Company's future success will depend on its ability to
enhance its current products, to develop new products that meet changing
customer needs on a timely and cost-effective basis and to respond to emerging
industry standards and other technological changes. Any failure by the Company
to anticipate or respond adequately to changes in technology and customer
preferences, or any significant delays in product development or introduction,
would have a material adverse effect on the Company's results of operations.
Management of Growth and Future Acquisitions. The Company has recently
experienced rapid growth that has placed, and will continue to place, a
significant strain on its management and operations. The Company's ability to
manage its growth effectively will require it to improve its operating,
financial and management information systems and to attract, train, motivate,
manage and retain key employees. Furthermore, the Company intends to enter into
strategic relationships and make strategic acquisitions of technologies and
businesses in order to expand its product lines and the capabilities of its
current products. The risks associated with acquisitions including increased
costs and uncertain benefits and the ability to integrate operations of acquired
companies could adversely affect the Company's results of operations.
Risks Associated with International Operations. The Company expects that
international sales will account for an increasing portion of its revenues. Most
of the Company's international revenues are denominated in foreign currencies.
Consequently, a decrease in the value of a relevant foreign currency in relation
to the U.S. dollar occurring after establishing prices and before receipt of
payment by the Company would have an adverse effect on the Company's results of
operations. The Company does not currently engage in foreign currency hedging
transactions, although it may engage in such transactions in the future.
Change in Licensing and Marketing Methods. The Company is increasingly
emphasizing sales to enterprises through volume, installment and enterprise
licensing arrangements. These licensing arrangements typically involve a longer
cycle (up to 18 months from first contact to execution of an initial license)
than sales through other distribution channels, require a greater investment of
resources in establishing the enterprise relationship and result in lower
operating margins. The timing of the execution of volume licenses, or their
nonrenewal or renegotiation by large customers, could cause volatility in the
Company's quarterly results of operations and could materially adversely affect
its results of operations.
Continued Reliance on Resellers and Distributors. The Company expects to
continue to rely on resellers and distributors for sales of its products in
domestic and international markets. Sales to the Company's two largest
distributors and its largest reseller during fiscal 1996, 1995 and 1994
accounted for an aggregate of 58%, 59% and 76% of the Company's revenues,
respectively. The distribution channels through which software products are sold
have been characterized by rapid change, including consolidations and financial
difficulties of certain distributors and resellers, the emergence of new
resellers such as general mass merchandisers and the development of new channels
such as electronic networks. The Company's resellers and distributors carry
competing product lines.
18
<PAGE> 19
There can be no assurance that resellers and distributors will continue to
purchase the Company's products or be able to market them effectively or that
the Company will be able to effectively distribute its products through new
distribution channels.
Reliance on Outsourcing. The Company outsources most of the production of its
products, which primarily involves duplication of various media and the printing
of user manuals and packaging materials. In addition, the Company outsources
procurement, order fulfillment, technical support, customer service and
localization of its products. So long as it remains economically advantageous to
do so, the Company intends to continue, and possibly to increase, outsourcing in
the future. Although the Company believes that it has adequate alternative
suppliers of such services, the loss of a supplier or its inability to perform
contracted services could materially adversely affect the Company's results of
operations.
Dependence on Proprietary Technology. The Company's ability to compete
effectively depends in large part on its ability to develop and maintain
proprietary aspects of its technology. The Company relies on a combination of
copyright and trademark laws, trade secret protection, confidentiality
procedures and contractual provisions, including nondisclosure agreements with
employees and others, to protect its proprietary rights. There can be no
assurance that such measures will be adequate to protect the Company's
proprietary intellectual property or that claims of infringement of third
parties' intellectual property rights will not occur. In addition, the cost of
responding to an intellectual property litigation claim, both in legal fees and
expenses and the diversion of management resources, whether or not the claim is
valid, could have a material adverse effect on the Company's results of
operations.
Dependence on Key Personnel. The Company's success depends to a significant
extent on senior management and technical personnel. The Company's growth and
future success will depend in large part on its continuing ability to hire,
motivate and retain highly qualified management, technical, sales and marketing
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be successful in hiring, motivating or retaining
such qualified personnel.
Reliance on Independent Developers for Future Market Expansion. The Company has
designed its technology with an open architecture and has incorporated certain
features to encourage independent solution providers, system integrators and
other software developers to design industry or customer-specific drawing and
diagramming solutions that will extend the adoption and use of the Company's
products. There can be no assurance, however, that developers will design
solutions to extend the Company's products, and the failure of these development
efforts to materialize could adversely affect the expansion of the markets for
the Company's products. If independent developers do design solutions for
specific industries or customers, the Company could be effectively precluded
from offering add-on products that address the same industries or customers.
19
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report 21
Balance Sheets as of September 30, 1996 and 1995 22
Statements of Operations for each of the three years ended September 30, 1996 23
Statements of Shareholders' Equity (Deficit) for each of the three years ended September 30, 1996 24
Statements of Cash Flows for each of the three years ended September 30, 1996 25
Notes to Financial Statements 26
Schedule II - Valuation and Qualifying Accounts for each of the three years ended September 30, 1996 35
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING, AND
FINANCIAL DISCLOSURE
None
20
<PAGE> 21
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
VISIO CORPORATION
We have audited the accompanying balance sheets of Visio Corporation as of
September 30, 1996 and 1995, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended September 30, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Visio Corporation at September
30, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Seattle, Washington
October 18, 1996
21
<PAGE> 22
VISIO CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS) SEPTEMBER 30,
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and short-term investments $61,107 $ 7,063
Accounts receivable 2,242 4,462
Inventories 604 1,431
Prepaid expenses 2,426 1,662
Deferred income taxes 1,779 2,136
-------------------
Total current assets 68,158 16,754
Equipment and leasehold improvements 3,445 2,308
Other assets 5 185
-------------------
Total assets $71,608 $19,247
===================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,525 $ 4,176
Accrued compensation and benefits 2,002 1,025
Other accrued liabilities 8,798 5,041
Income taxes payable 1,584 2,653
Current portion of long-term obligations 326 394
-------------------
Total current liabilities 16,235 13,289
===================
Long-term obligations 148 453
Convertible and redeemable preferred stock:
Issued and outstanding 3,320 shares -- 6,545
Shareholders' equity (deficit):
Common stock, $.01 par value:
Authorized -- 100,000 shares; issued and
outstanding -- 13,653 and 5,570 45,688 543
Retained earnings (deficit) 9,537 (1,583)
-------------------
Total shareholders' equity (deficit) 55,225 (1,040)
-------------------
Total liabilities and shareholders' equity (deficit) $71,608 $19,247
===================
</TABLE>
See accompanying notes.
22
<PAGE> 23
VISIO CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $59,699 $34,224 $20,616
Cost of revenues 8,701 6,077 4,054
-----------------------------------
Gross profit 50,998 28,147 16,562
-----------------------------------
Operating expenses:
Research and development 8,842 5,086 3,595
Sales and marketing 22,974 17,340 10,864
General and administrative 4,609 2,515 1,946
-----------------------------------
Total operating expenses 36,425 24,941 16,405
-----------------------------------
Operating income 14,573 3,206 157
Interest and other income, net 1,500 403 76
-----------------------------------
Income before income taxes 16,073 3,609 233
Provision for income taxes 4,982 1,263 385
-----------------------------------
Net income (loss) $11,091 $ 2,346 $ (152)
===================================
Earnings (loss) per share $ .76 $ .20 $ (.03)
Shares used in computation of
earnings (loss) per share 14,576 11,838 4,686
</TABLE>
See accompanying notes.
23
<PAGE> 24
VISIO CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Common Retained
Stock Common Earnings
Shares Stock (deficit) Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at October 1, 1993 3,985 $ 190 $(3,703) $ (3,513)
Exercise of stock options 1,115 232 -- 232
Net loss -- -- (152) (152)
Translation adjustments -- -- (43) (43)
------------------------------------------
Balances at September 30, 1994 5,100 $ 422 $(3,898) $ (3,476)
Exercise of stock options 477 122 -- 122
Repurchase of restricted stock (7) (1) -- (1)
Net income -- -- 2,346 2,346
Translation adjustments -- -- (31) (31)
------------------------------------------
Balances at September 30, 1995 5,570 $ 543 $(1,583) $ (1,040)
Conversion of preferred stock 5,205 6,545 -- 6,545
Initial public offering, net of
offering costs of $3,848 2,471 35,680 -- 35,680
Exercise of stock options 300 153 -- 153
Stock issued under employee
stock purchase plan 21 341 -- 341
Exercise of warrants 113 750 -- 750
Repurchase of restricted stock (27) (7) -- (7)
Tax benefit related to
disqualifying dispositions -- 1,683 -- 1,683
Net income -- -- 11,091 11,091
Translation adjustments -- -- 29 29
------------------------------------------
Balances at September 30, 1996 13,653 $45,688 $ 9,537 $55,225
==========================================
</TABLE>
See accompanying notes.
24
<PAGE> 25
VISIO CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operations
Net income (loss) $11,091 $2,346 $ (152)
Adjustments to reconcile net income (loss) to net cash
from operations:
Depreciation and amortization 1,341 839 480
Deferred income taxes 357 (2,136) --
Changes
Accounts receivable 2,227 (3,518) (744)
Inventories 828 (1,175) (216)
Prepaid expenses (760) (604) (804)
Other assets 180 (160) 21
Accounts payable (661) 2,294 1,356
Accrued compensation and benefits 976 308 458
Other accrued expenses 3,751 2,574 1,585
Income taxes payable 614 2,322 331
-------------------------
Net cash from operations 19,944 3,090 2,315
-------------------------
CASH FLOWS USED FOR INVESTMENTS
Purchases of short-term investments (27,751) -- --
Proceeds from maturities of short-term investments 9,150 -- --
Purchases of equipment and leasehold improvements (2,473) (1,182) (1,796)
-------------------------
Net cash used for investing (21,074) (1,182) (1,796)
-------------------------
CASH FLOWS FROM FINANCING
Issuance of common stock 1,237 121 232
Issuance of preferred stock -- 1,490 700
Proceeds from initial public offering 35,680 -- --
Proceeds from long-term obligations -- 260 750
Payments on long-term obligations (373) (343) (92)
-------------------------
Net cash from financing 36,544 1,528 1,590
-------------------------
Net increase in cash and cash equivalents 35,414 3,436 2,109
Effect of exchange rate changes on cash 29 (42) (37)
Cash and cash equivalents, beginning 7,063 3,669 1,597
-------------------------
Cash and cash equivalents, ending 42,506 7,063 3,669
Short-term investments 18,601 -- --
-------------------------
Cash and short-term investments $61,107 $7,063 $3,669
-------------------------
SUPPLEMENTAL DISCLOSURES:
Income tax payments $ 4,010 $1,073 $ 55
Noncash financing activity -- conversion of
preferred stock $ 6,545 -- --
</TABLE>
See accompanying notes.
25
<PAGE> 26
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Visio Corporation ("Visio" or the "Company") is a leading supplier of business
drawing and diagramming software products. The Company's primary products are
Visio and Visio Technical. Visio software enables business and technical users
to create drawings and diagrams ranging from simple diagrams such as flowcharts,
block diagrams and organizational charts to complex technical drawings such as
space plans, electrical schematics and network designs.
BASIS OF PRESENTATION
The Company's fiscal year is the 52/53-week period that ends on the Friday
nearest September 30. For convenience of presentation, all fiscal periods in
these financial statements are treated as ending on a calendar month end. The
accompanying financial statements are consolidated to include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Certain reclassifications were
made to prior-year financial statements to conform to the current year
presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars at the exchange rate on the balance sheet date. Revenues and expenses
are translated at the average rates of exchange prevailing during the year. The
translation adjustment, which is immaterial for all periods presented, resulting
from this process is included in retained earnings. Gains and losses on foreign
currency transactions are included in other income, net.
REVENUE RECOGNITION
Revenues and accounts receivable are principally from distributors and resellers
of the Company's products. The Company performs periodic credit evaluations of
its customers and maintains reserves for potential credit losses. Revenues are
generally recognized at the time of shipment, net of deferrals for inventory at
distributors which the Company estimates to be in excess of levels appropriate
for that channel and adjustments for estimated future returns. Revenues
attributable to free upgrade rights are deferred and not recognized until the
free upgrade has been shipped to the customer. Revenues attributable to the sale
of extended customer support and maintenance programs are deferred and
recognized ratably over the contract period. The Company accrues estimated costs
of technical support to customers as the related revenues are recognized.
FINANCIAL INSTRUMENTS
The Company considers highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents. Management
currently classifies its short-term investments consisting primarily of debt
securities as available-for-sale. These securities are reported at market, which
approximates amortized cost, and therefore, there are no unrealized gains and
losses included in shareholders' equity. Realized gains and losses and declines
in value judged to be other than temporary on available-for-sale securities are
included in investment income. The cost of securities sold is based on the
specific identification method. At September 30, 1996, the short-term
investments had contractual maturities of less than one year.
INVENTORIES
Inventories are stated at the lower of cost or market and include adjustments
for estimated obsolescence. Cost is principally determined using currently
adjusted standard costs, which approximate actual cost on a first-in, first-out
basis.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Depreciation is
provided on the straight-line method for financial statement purposes and
accelerated methods for federal income tax purposes over estimated useful lives
of three to five years. Leasehold improvements are amortized over the lesser of
the lease term or estimated useful life.
26
<PAGE> 27
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and consist primarily of
software development costs. Financial accounting rules requiring capitalization
of certain software development costs have not materially affected the Company.
INCOME TAXES
Income taxes are computed using the liability method whereby the provision for
income taxes includes income taxes currently payable and deferred taxes arising
from temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.
PER SHARE DATA
Earnings per share is based on weighted average common and dilutive common
equivalent shares outstanding using the treasury stock method. Dilutive common
equivalent shares include stock options and warrants. Fully diluted earnings per
share for all periods presented were not materially different from primary
earnings per share.
The amount in fiscal 1995 is pro forma and reflects the conversion of all
outstanding preferred stock that was converted upon the consummation of the
Company's initial public offering in November 1995. In accordance with
Securities and Exchange Commission requirements, all common and common
equivalent shares issued during the 12-month period prior to the filing of the
initial public offering were included in the calculation as if they were
outstanding for all periods, using the treasury stock method and the initial
public offering price.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation," which will be effective for the
Company's fiscal year ended September 30, 1997. FAS No. 123 allows for the
adoption of a new fair-value-based method or the continued use of the intrinsic
value method, as prescribed by Accounting Principles Board Opinion No. 25 (APB
No. 25) to measure stock-based compensation for the Company's stock-based
compensation plans. The Company intends to continue to follow APB No. 25 but
will be required to make pro forma disclosures of net income and earnings per
share as if the fair-value-method had been applied.
27
<PAGE> 28
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. BALANCE SHEET INFORMATION
Detailed balance sheet data is as follows:
<TABLE>
<CAPTION>
(in thousands) SEPTEMBER 30,
- --------------------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and short-term investments:
Cash and equivalents $42,506 $7,063
Short-term investments 18,601 --
-----------------------------
$61,107 $7,063
Accounts receivable:
Receivables $ 2,891 $4,806
Allowance for doubtful accounts (649) (344)
-----------------------------
$ 2,242 $4,462
Inventories:
Raw materials $ 189 $ 356
Finished goods 415 1,075
-----------------------------
$ 604 $1,431
Equipment and leasehold improvements:
Computer hardware $ 4,057 $2,544
Office furniture, equipment, and leasehold improvements 2,343 1,378
-----------------------------
6,400 3,922
Accumulated depreciation and amortization (2,955) (1,614)
-----------------------------
$ 3,445 $2,308
Other accrued liabilities:
Advertising and promotion $ 1,669 $1,099
Deferred revenue 3,313 1,818
Other 3,816 2,124
-----------------------------
$ 8,798 $5,041
=============================
</TABLE>
3. BANK LINE OF CREDIT
The Company has an unsecured $1 million working capital line of credit that
expires on February 28, 1997. Borrowings under the credit line bear interest at
the lending bank's prime interest rate (8.25% at September 30, 1996). The line
of credit agreement requires the Company to meet certain financial covenants.
There were no borrowings under this line at September 30, 1996.
4. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
(in thousands) SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable to bank in monthly installments of $7
plus interest at 9.5%, maturing in July 1997 $ 69 $ 153
Note payable to bank in monthly installments of $14
plus interest at prime plus 2.0%, maturing in October 1997 181 347
Note payable to bank in monthly installments of $7 plus
interest at prime plus 1.75%, maturing in December 1998 224 260
Capital lease obligations -- 87
----------------------------
474 847
Current portion (326) (394)
----------------------------
$ 148 $ 453
============================
</TABLE>
28
<PAGE> 29
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
Notes payable to bank are secured by equipment with a net book value of $454,000
at September 30, 1996.
Future principal payments on long-term debt at September 30, 1996 are: 1997--
$326,000, 1998-- $104,000, and 1999-- $44,000.
Visio rents office facilities and automobiles under operating leases. Certain
office facility leases contain renewal and escalation clauses and space
expansion provisions. Future minimum lease payments under noncancelable
operating leases are:
<TABLE>
<CAPTION>
(in thousands)
- ---------------------------------------------------------------------------------------------------------
OPERATING LEASES
- ---------------------------------------------------------------------------------------------------------
<S> <C>
1997 $1,143
1998 1,096
1999 951
2000 569
2001 222
2002 and thereafter 1,228
----------------------
Total minimum lease payments $5,209
======================
</TABLE>
Rental expenses under operating leases totaled $1,001,000, $875,000 and $447,000
in fiscal 1996, 1995 and 1994, respectively.
5. INCOME TAXES
Income before income taxes consists of the following:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $13,209 $ 3,664 $ 1,484
International 2,864 (55) (1,251)
------------------------------------------------
$16,073 $ 3,609 $ 233
================================================
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
U.S. federal $ 4,445 $ 3,198 $ 375
State -- 8 10
Foreign 180 193 --
------------------------------------------------
Total current provision 4,625 3,399 385
Deferred tax (provision) benefit:
U.S. federal 357 (2,136) --
------------------------------------------------
Total provision for income taxes $ 4,982 $ 1,263 $ 385
================================================
</TABLE>
The effective rate differs from the U.S. federal statutory rate as follows:
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax provision at statutory rate $ 5,465 $ 1,227 $ 79
Losses producing no current tax benefit 77 865 397
Tax-free interest (429) -- --
Valuation allowance for deferred tax assets (167) (999) (110)
Other 36 170 19
-----------------------------------------------
$ 4,982 $ 1,263 $ 385
===============================================
</TABLE>
29
<PAGE> 30
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
Deferred income tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
(in thousands) SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserves for sales returns and doubtful accounts $ 624 $1,201
Deferred revenue 798 618
Reserves and expenses not currently deductible 488 392
Foreign net operating loss carryforwards -- 167
-----------------------------
1,910 2,378
Valuation allowance for deferred tax assets -- (167)
-----------------------------
1,910 2,211
Deferred tax liabilities:
Deductible prepaid expenses and other (131) (75)
-----------------------------
Net deferred tax assets $1,779 $2,136
=============================
</TABLE>
6. EMPLOYEE BENEFITS
401(K) PLAN
Effective January 1, 1993, Visio implemented a salary deferral 401(k) plan for
all of its domestic employees. Employees may contribute a percentage of their
pretax earnings annually, up to the maximum dollar limitation prescribed by the
Internal Revenue Service. The plan also provides that Visio contribute an amount
equal to 50% of employee contributions, up to 6% of salary. Visio recognized
expense of $188,000, $147,000 and $98,000 in fiscal 1996, 1995 and 1994,
respectively, related to the plan.
1990 STOCK OPTION PLAN
In 1990, Visio adopted the 1990 Stock Option Plan, which provided for the
granting of incentive stock options and nonqualified stock options to employees,
officers, directors, agents, consultants and independent contractors. Options
under the 1990 Stock Option Plan have generally been granted at fair market
value on the date of grant, expire after ten years, and vest ratably over a
period of four years. As a result of the adoption of the 1995 Long-Term
Incentive Compensation Plan in May 1995, all previously reserved shares of
common stock under the 1990 Stock Option Plan were transferred to the 1995
Long-Term Incentive Compensation Plan upon the effective date of the Company's
initial public offering. Prior to the effective date of the Company's initial
public offering, there were 40,500 options granted under the 1990 Stock Option
Plan in fiscal 1996.
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
In April 1995, Visio adopted the 1995 Nonemployee Director Stock Option Plan,
which took effect upon the effective date of the Company's initial public
offering and provides for the granting of options to nonemployee directors of
the Company. The Company has reserved an aggregate of 120,000 shares of common
stock for issuance under the plan. There were no options granted under the plan
in fiscal 1996.
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
In May 1995, Visio adopted the 1995 Long-Term Incentive Compensation Plan, which
provides for the granting of incentives and awards to employees, agents and
consultants of the Company and its subsidiaries. The plan is a long-term
incentive compensation plan and combines the features of an incentive and a
nonqualified stock option plan, a stock appreciation rights plan, a stock award
plan and a performance-based plan. As of September 30, 1996, a total of 274,846
shares of common stock remained available under the plan for future grants.
There were 437,205 options granted under the plan in fiscal 1996.
1995 EMPLOYEE STOCK PURCHASE PLAN
In August 1995, Visio adopted the 1995 Employee Stock Purchase Plan (the
"ESPP"). The Company has reserved an aggregate of 375,000 shares of common stock
for issuance under the ESPP. The ESPP permits eligible employees of the Company
to purchase common stock at not less than 85% of fair market value as defined in
the plan through payroll deductions of up to 15% of their compensation, provided
that no employee may purchase common stock worth more than $15,000 in any
calendar year or more than 10,000 shares of common stock during any offering
period. The ESPP will expire in 2005. There were 21,319 shares issued under the
ESPP in fiscal 1996.
30
<PAGE> 31
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
Stock option activity and option price information were as follows:
(in thousands, except per share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SHARES SHARE PRICE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, October 1, 1993 1,491 $.11- $ .33
Granted 1,219 .17- .33
Exercised (60) .13- .33
Exercised and converted to restricted stock (1,055) .13- .33
Canceled (142) .13- .33
-----------
Balance, September 30, 1994 1,453 .11- .33
Granted 696 .33- 12.00
Exercised (68) .11- .33
Exercised and converted to restricted stock (409) .13- 4.00
Canceled (108) .13- 1.00
-----------
Balance, September 30, 1995 1,564 .11- 12.00
Granted 478 12.00- 42.25
Exercised (259) .13- 8.67
Exercised and converted to restricted stock (41) .13- .33
Canceled (79) .13- 27.88
-----------
Balance, September 30, 1996 1,663 $.11-$42.25
===========
</TABLE>
<TABLE>
<CAPTION>
(in thousands) SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balances are as follows:
Available for future grants 395 794
Exercisable 1,225 504
Exercised, subject to repurchase 265 551
</TABLE>
31
<PAGE> 32
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
7. SHAREHOLDERS' EQUITY
COMMON STOCK REPURCHASE RIGHTS
In 1994, all employees of Visio were offered the opportunity to accelerate the
vesting of stock options and purchase an equal number of restricted common stock
shares at the original option price. These restricted shares vest according to
the vesting schedule of the corresponding options. The Company has the right of
first refusal to purchase vested shares before they can be transferred at the
then fair market value. Nonvested shares are not transferable. As of September
30, 1996, 1,504,575 restricted shares have been purchased for $345,000, of which
1,206,352 shares were fully vested; and 33,562 shares have been repurchased for
$8,000.
INITIAL PUBLIC OFFERING
In November 1995, the Company completed its initial public offering for the sale
of 2,470,500 shares of common stock at $16.00 per share. The net proceeds, after
underwriting discounts and offering expenses, from the sale of common stock was
$35.7 million. Upon closing, all outstanding shares of preferred stock converted
into 5,205,089 shares of common stock.
WARRANTS
In connection with a venture lease agreement entered into in fiscal 1993, Visio
granted a warrant to purchase 11,173 shares of Series B preferred stock at $1.79
per share. The warrant is exercisable for ten years after date of issuance or
five years after an initial public offering of Visio's common stock, whichever
period is shorter. Since the effective date of the initial public offering, the
Series B preferred stock converted to common stock, and the warrant became
exercisable for 16,759 shares of common stock at a purchase price of
approximately $1.19 per share. As of September 30, 1996, the warrant had not
been exercised.
In connection with the 1994 sale of Series B preferred stock, Visio granted a
warrant to purchase 225,000 shares of Common Stock at approximately $6.67 per
share to an officer of the Company. The warrant is exercisable for six years
after the date of issuance and vests ratably over a period of four years. In the
event of a merger, consolidation, acquisition, reorganization or liquidation of
the Company, the warrant will be canceled and all rights will terminate. The
Company is required to deliver notice of reorganization no less than 15 business
days before the date scheduled for reorganization. The holder has the right
immediately prior to the reorganization to exercise the warrant. In fiscal 1996,
112,500 of these warrants were exercised.
DIVIDEND RESTRICTIONS
The Company's loan agreement with a bank lender prohibits the Company from
declaring or paying a dividend without the bank's prior written consent.
COMMON SHARES RESERVED
Visio has reserved shares of common stock for future issuance as follows:
<TABLE>
<CAPTION>
(in thousands) SEPTEMBER 30,
- ------------------------------------------------------------------------------
1996
- ------------------------------------------------------------------------------
<S> <C>
Stock options 2,058
Employee stock purchase plan 354
Common stock purchase warrants 129
------------------
2,541
==================
</TABLE>
32
<PAGE> 33
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
8. BUSINESS SEGMENT AND OTHER INFORMATION
The Company operates in one business segment: software products and related
services for users of personal computers.
Sales to unaffiliated customers accounting for greater than 10% of sales are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
- ------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer A 34% 30% 35%
Customer B 16 17 22
Customer C 8 12 19
</TABLE>
Information regarding the Company's operations in different geographic areas is
set forth below. Revenues, operating income and identifiable assets are reported
based on the location of the Company's facilities. Transfers between geographic
locations are recorded based on a percentage of list price commensurate with
respective costs.
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED SEPTEMBER 30,
- ---------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
U.S. domestic customers $ 37,708 $ 24,320 $ 18,283
Export customers 117 60 (40)
Transfer between geographic locations 90 34 834
-------------------------------------------
37,915 24,414 19,077
European operations customers 21,874 9,844 2,373
Transfer between geographic locations 100 138 37
-------------------------------------------
21,974 9,982 2,410
Eliminations (190) (172) (871)
-------------------------------------------
$ 59,699 $ 34,224 $ 20,616
===========================================
Operating income (loss):
U.S. operations $ 11,652 $ 3,540 $ 1,477
European operations 2,927 (296) (1,305)
Eliminations (6) (38) (15)
-------------------------------------------
$ 14,573 $ 3,206 $ 157
===========================================
Identifiable assets:
U.S. operations $ 6,406 $ 9,965 $ 3,021
European operations 4,467 2,585 1,517
Eliminations (372) (366) (328)
-------------------------------------------
10,501 12,184 4,210
Corporate assets 61,107 7,063 3,669
-------------------------------------------
$ 71,608 $ 19,247 $ 7,879
===========================================
</TABLE>
33
<PAGE> 34
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
fiscal year 1996
- ----------------------------------------------------------------------------------------------
QUARTER ENDED: DEC 31 MAR 31 JUN 30 SEP 30 FISCAL YEAR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $13,417 $14,527 $15,231 $16,524 $59,699
Gross profit $11,072 $12,143 $13,106 $14,677 $50,998
Net income $ 2,079 $ 2,321 $ 2,845 $ 3,846 $11,091
Earnings per share $ 0.15 $ 0.16 $ 0.19 $ 0.26 $ 0.76
Shares used in computation
of earnings per share 13,548 14,849 14,944 14,964 14,576
Common stock prices:
High $ 28 1/4 $ 29 3/4 $ 44 1/2 $ 44 1/4 $ 44 1/2
Low $ 21 5/8 $ 22 $ 24 3/4 $ 29 3/4 $ 21 5/8
</TABLE>
<TABLE>
<CAPTION>
fiscal year 1995
- ------------------------------------------------------------------------------------------------
QUARTER ENDED: DEC 31 MAR 31 JUN 30 SEP 30 FISCAL YEAR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 8,227 $ 7,653 $ 8,059 $10,285 $34,224
Gross profit $ 6,885 $ 6,280 $ 6,802 $ 8,180 $28,147
Net income $ 314 $ 388 $ 696 $ 948 $ 2,346
Earnings per share $ 0.03 $ 0.03 $ 0.06 $ 0.08 $ 0.20
Shares used in computation
of earnings per share 11,350 11,738 12,051 12,213 11,838
</TABLE>
Visio's common stock has been traded on the Nasdaq National Market under the
symbol VSIO since the Company's initial public offering in November 1995. The
high and low closing sales prices noted above are as reported on the Nasdaq
National Market. On November 22, 1996, there were 140 holders of record of the
Company's common stock. The Company has not paid cash dividends on its common
stock.
34
<PAGE> 35
SCHEDULE II
VISIO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND REDUCTIONS AT END
CLASSIFICATION OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
- -------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended Setember 30, 1996 $ 344 $ 329 $ (24) $ 649
Year ended Setember 30, 1995 $ 162 $ 172 $ -- $ 344
Year ended Setember 30, 1994 $ 53 $ 112 $ (3) $ 162
RESERVE FOR OBSOLETE INVENTORY:
Year ended Setember 30, 1996 $ 746 $ 646 $(813) $ 579
Year ended Setember 30, 1995 $ 253 $ 651 $(158) $ 746
Year ended Setember 30, 1994 $ 13 $ 308 $ (68) $ 253
</TABLE>
35
<PAGE> 36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
sections labeled "Election of Directors" and "Additional Information" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on February 26, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
sections labeled "Election of Directors" and "Additional Information" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on February 26, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section labeled "Additional Information" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on February 26,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
section labeled "Additional Information" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on February 26,
1997.
36
<PAGE> 37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The financial statements included in Item 8, Financial Statements and
Supplementary Data, are set forth in the Index to Financial Statements
and Financial Statement Schedules listed on page 21 of this Annual
Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules are set forth in the Index to
Financial Statements and Financial Statement Schedules listed on page
21 of this Annual Report on Form 10-K.
3. EXHIBITS
The exhibits filed in response to Item 601 of Regulation S-K are listed
in the Exhibit Index contained herein.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended September 30, 1996.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf of the undersigned, thereunto duly authorized.
VISIO CORPORATION
by: /s/ JEREMY A. JAECH
-----------------------------
Jeremy A. Jaech
President and Chief Executive Officer
Date: December 17, 1996
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES AND APPOINTS JEREMY
A. JAECH AND THEODORE C. JOHNSON, AND EACH OF THEM, WITH FULL POWER OF
SUBSTITUTION AND FULL POWER TO ACT WITHOUT THE OTHER, AS HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT AND AGENT TO ACT IN HIS NAME, PLACE AND STEAD AND TO EXECUTE IN
THE NAME AND ON BEHALF OF EACH PERSON, INDIVIDUALLY AND IN EACH CAPACITY STATED
BELOW, AND TO FILE, ANY AND ALL AMENDMENTS TO THIS ANNUAL REPORT ON FORM 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JEREMY A. JAECH President, Chief Executive Officer and Chairman of December 17, 1996
- -------------------------------------- the Board (Principal Executive Officer)
Jeremy A. Jaech
/s MARTY CHILBERG Chief Financial Officer, Vice President, Finance and December 20, 1996
- -------------------------------------- Operations, Assistant Secretary and Treasurer
Marty Chilberg (Principal Financial and Accounting Officer)
/s/ THEODORE C. JOHNSON Executive Vice President December 17, 1996
- -------------------------------------- Director
Theodore C. Johnson
/s/ TOM A. ALBERG Director December 18, 1996
- --------------------------------------
Tom A. Alberg
/s/ THOMAS H. BYERS Director December 18, 1996
- --------------------------------------
Thomas H. Byers
Director
- --------------------------------------
John R. Johnston
/s/ DOUGLAS MACKENZIE Director December 18, 1996
- --------------------------------------
Douglas Mackenzie
/s/ SCOTT OKI Director December 18, 1996
- --------------------------------------
Scott Oki
</TABLE>
38
<PAGE> 39
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
3.1 Restated Articles of Incorporation of Visio Corporation *
3.2 Restated Bylaws of Visio Corporation *
4.1 Specimen Common Stock Certificate of Visio Corporation *
10.1 1990 Stock Option Plan *
10.2 1995 Long-Term Incentive Stock Option Plan *
10.3 1995 Stock Option Plan for Nonemployee Directors *
10.4 Office Lease between Visio Corporation and Sixth & Pike
Associates, L.P. dated October 28, 1993 *
10.4(a) Amendment to Office Lease between Visio Corporation and
Sixth & Pike Associates, L.P. dated June 13, 1996 ***
10.5 Office Lease between Shapeware International Limited and
Irish Airlines Pensions Limited dated March 25, 1995 *
10.6 Master Lease Agreement between Visio Corporation and
Comdisco, Inc. dated February 23, 1993 *
10.7 Registration Rights Agreement among Visio Corporation and
the Investors, as defined therein, dated as of April 11,
1991, as amended *
10.8 Warrant Agreement dated as of February 23, 1993 between Visio
Corporation and Comdisco, Inc. *
10.9 Common Stock Purchase Warrant issued April 22, 1994 to Gary
Gigot *
10.10 Loan and Security Agreement between Silicon Valley Bank and
Visio Corporation dated January 26, 1994, as amended ***
10.10(a) Amendment to the Loan and Security Agreement between Silicon
Valley Bank and Visio Corporation dated April 3, 1996 *
10.11 Form of Indemnification Agreement for directors and officers
10.12+ Distribution Agreement dated as of December 14, 1992, as
amended, between Visio Corporation and Merisel, Inc. *
10.13+ Distributor Agreement dated as of November 2, 1992, as amended,
between Visio Corporation and Ingram Micro, Inc. *
10.14+ Reseller Agreement dated as of August 8, 1993, as amended,
between Visio Corporation and Egghead, Inc. *
10.15+ Distribution Agreement dated as of January 1, 1995, between
Visio Corporation and ASCII Corporation *
10.15(a)+ Agreement for the Amendment of Distribution Agreement dated
January 15, 1996, between Visio Corporation and ASCII
Corporation **
10.16+ License Agreement dated as of July 10, 1995 *
10.17+ Distribution Agreement dated September 25, 1996, between
Visio Corporation and ASCII Something Good Corporation
10.18 Office Lease between Visio International Limited and Erin
Executor & Trustee Co. Limited dated August 20, 1996
11.1 Computation of Earnings Per Share
21.1 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney (contained on signature page)
27.1 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information
purposes only and not filed.
</TABLE>
- -------------
* Filed as an exhibit to the registrant's Registration Statement on Form
S-1 (Registration No. 33-96986) effective November 9, 1995 and
incorporated herein by reference.
** Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1996 and incorporated herein by
reference.
*** Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1996 and incorporated herein by
reference.
+ Confidential treatment.
<PAGE> 1
EXHIBIT 10.17
VISIO CORPORATION DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into as of September 25,
1996 by and between Visio Corporation, having its principal place of business at
520 Pike Street, Suite 1800, Seattle, Washington 98101-4001, USA, and its
affiliates including but not limited to Visio International, Ltd. (collectively
referred to as "Visio"), and ASCII Something Good Corporation, a corporation
organized under the laws of Japan, having its principal place of business at
24-9 Kami-Oosaki 2 chome, Shinagawa-ku, Tokyo, Japan and its affiliates
("Distributor").
Visio is engaged in the design, manufacture, distribution, sale and
licensing of the Products and has the right to appoint distributors thereof, and
Distributor desires to act as a distributor appointed by Visio in the Territory.
In consideration of the mutual promises and covenants herein contained, the
parties hereto agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
following meanings:
(a) "ASCII Add-ons" shall include, but not be limited to, shapes,
program behavior of shapes, graphic styles, and any component
software (i) that interfaces with the Product and graphic styles
that are developed and owned by Distributor and (ii) that are
distributed as a stand-alone product.
(b) "Customers" shall mean end users, resellers, and sub-distributors
of the Products and the Visio Add-ons in the Territory.
(c) "Price Schedule" shall mean the schedule set forth in Exhibit A
attached hereto and incorporated herein, as modified, enhanced and
updated from time to time by written mutual consent of the
parties.
(d) "Product(s)" shall mean: (i) those software products developed by
or for Visio for distribution in the Territory and described in
Exhibit B attached hereto and incorporated herein, and such
additional products as the parties may agree in writing from time
to time to add to Exhibit B; (ii) shapes, program behavior of
shapes, graphic styles, and any component software that interfaces
with the Product and graphic styles that are included as part of
the Product; (iii) end user documentation and other instructional
materials regarding use of any of the foregoing products; (iv)
marketing materials, including but not limited to boxes for the
Products and advertising materials; and (v) training, consulting,
and software support services for any of the foregoing products.
(e) "Sell-Through" shall mean the total number of Units of the Product
sold by Distributor to resellers or end users of the Product and
sold by sub-distributors of the Product to resellers or end users
of the Product, net of all returns of the Product.
(f) "Software License Agreement" shall mean the end user license
agreement included in the packaging of the Product by Visio.
- 1 -
<PAGE> 2
(g) "Third Party Add-ons" shall include, but not be limited to,
shapes, program behavior of shapes, graphic styles, and any
component software that interfaces with the Product(s) owned by
third parties.
(h) "Territory" shall mean Japan.
(i) "Trademark(s)" shall mean any trademarks owned or licensed by
Visio.
(j) "Value Added Functions" shall mean the marketing, sales, customer
services and technical support functions for the Products and
Customers in the Territory.
(k) "Visio Add-ons" shall include, but not be limited to, shapes,
program behavior of shapes, graphic styles, and any component
software (i) that interfaces with the Product(s) that are
developed by or on behalf of Visio or that are acquired from third
parties by or on behalf of Visio and (ii) that Visio, in its sole
discretion, may include as part of the Product or may distribute
as a stand-alone product.
2. APPOINTMENT
(a) Visio hereby appoints Distributor as an exclusive distributor,
excluding direct sales or licensing by Visio, to acquire, market,
distribute and sell the Products and Visio Add-ons in the
Territory until March 31, 1997, and thereafter as a nonexclusive
distributor to acquire, market, distribute and sell the Products
and Visio Add-ons in the Territory, except as set forth in Section
2(e) herein. Distributor shall purchase the Products and Visio
Add-ons for distribution in the Territory only from Visio. Visio
and Distributor acknowledge that Distributor may acquire, market,
distribute and sell Third Party Add-ons. Visio and Distributor
agree that Distributor may market, distribute and sell ASCII
Add-ons; provided, however, that Distributor may not market,
distribute and sell any ASCII Add-ons and Third Party Add-ons to
Customers without Visio's prior written consent. Visio will not
unreasonably withhold its consent and will respond within twenty
(20) days of Distributor's request. Both parties agree that the
list of the end users of the Products and Visio Add-ons are owned
solely by Visio.
(b) Distributor shall have the right (i) to use the Products and Visio
Add-ons solely for demonstration, technical support or customer
service purposes, and (ii) to distribute the Products and Visio
Add-ons and their documentation to Customers on such terms as are
set forth or referred to herein subject to the terms of the
Software License Agreement.
(c) Distributor acknowledges that Visio may discontinue production or
marketing of any Product and Visio Add-ons covered by this
Agreement upon providing Distributor with at least thirty (30)
days advance written notice.
(d) Distributor will continue to distribute directly to its
sub-distributors in the Territory through March 31, 1997.
Notwithstanding Section 2(a)
- 2 -
<PAGE> 3
herein, on and after April 1, 1997, Visio may distribute the
Products and Visio Add-ons to such distributors in the Territory
as Visio deems appropriate, subject to payments to Distributor of
sales commissions in accordance with Section 7(h) herein.
Distributor agrees that, on and after April 1, 1997, it will
facilitate Visio order processing and fulfillment based on
mutually agreed-upon terms, and that Distributor will manage its
inventory of Products to mutually agreed-upon minimum levels.
(e) Visio hereby agrees that, notwithstanding Section 2(a) herein, on
and after July1, 1997, Distributor will remain an exclusive
distributor, excluding direct sales or licensing by Visio, in the
Territory to acquire, market, distribute and sell, until December
31, 1997, (i) the license packs set forth on Exhibit B attached
hereto and incorporated herein and (ii) volume licenses (defined
as license sales greater than 100 units).
3. SUBDISTRIBUTORS AND OEM TRANSACTIONS
(a) Distributor will continue to distribute the Products to [*].
Additionally, Distributor will begin distribution with [*] after a
channel marketing plan provided by [*] has been expressly approved
by Visio. Such sub-distributors shall continue to be bound by
terms and conditions similar to the terms and conditions hereof,
except those terms and conditions which require Distributor to
provide customer service and technical support. Visio shall have
no obligation to such sub-distributors except as expressly
provided herein. Visio shall allow Distributor to appoint other
sub-distributors in the Territory upon Visio's prior written
approval. Visio will respond within twenty (20) days of
Distributor's request. Visio's approval shall not be unreasonably
withheld.
(b) Visio and Distributor agree that Distributor may enter into
agreements with original equipment manufacturers ("OEM's") as set
forth herein, provided that Distributor shall make payments to
Visio for each OEM transaction, as mutually agreed upon by Visio
and Distributor. Distributor must obtain Visio's prior written
approval before entering into any transaction with an OEM. Visio
and Distributor agree that Visio shall manage the relationship
with Microsoft Corporation and Distributor agrees not to
participate in any interactions with Microsoft Corporation as they
relate to Visio, until notified by Visio.
1. TRADEMARKS AND END USER LIST
(a) Distributor may use during the term of this Agreement the
Trademarks and any Product name and trade name of Visio, provided
that Distributor (i) will use such marks and names only in the
manner specified from time to time by Visio, and (ii) will submit
all items (including existing and proposed sales and marketing
materials) using such names and marks to Visio for its review and
approval before the same is used or disseminated by Distributor.
The appropriate trademark symbol shall be used whenever a Product
name or other trade name or Trademark first is
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 3 -
<PAGE> 4
mentioned in any advertisement, brochure, or other material
circulated or displayed by Distributor. Distributor recognizes and
acknowledges that the Trademarks and any Product name and trade
name of Visio are the exclusive property of Visio and that
Distributor is not entitled either by implication or otherwise to
any right, title and interest in the Trademarks or trade names. In
addition, Distributor acknowledges that the goodwill associated
with all such names and marks belongs exclusively to Visio and
that all use of such names and marks will inure to the benefit of
Visio.
(b) Distributor may not use the Trademarks in any manner associated
with the ASCII Add-ons. The parties agree to negotiate in good
faith in the event that Distributor desires to license the
Trademarks.
(c) Visio grants to Distributor a royalty-free, non-exclusive license
until June 30, 1997 to use the list of the end users of the
Products and Visio Add-ons provided that Distributor (i) will use
said end user list for the sole purpose of marketing. distributing
and selling the ASCII Add-ons and (ii) has received Visio's prior
written approval to market, distribute and sell such ASCII
Add-ons.
1. PRICES, TERMS OF SALE
(a) Visio and Distributor agree that all versions of any Product will
be manufactured in Ireland by Visio with Distributor's cooperation
to ensure that Products meet Distributor's quality requirements
and delivery schedules. Visio shall invoice Distributor in US
Dollars each time Products are shipped. Prices shall be as set out
in the Price Schedule. Distributor agrees to pay Visio on a Net 30
days basis from the date of invoice.
(b) Prices shall be in accordance with Visio's Product prices as
determined solely by Visio as set forth in the Price Schedule. All
prices are quoted and all payments shall be made in United States
Dollars.
(c) All prices are C.I.F. port of destination Narita Airport which,
for the avoidance of doubt, means that Visio will cover freight
costs to Narita Airport. All prices are exclusive of applicable
sales, use or value added taxes or other taxes, import or export
fees, duties including import clearance charges or tariffs, and
any other taxes, duties or fees of any kind which may be levied in
connection with the transactions covered hereby. Such charges
shall be paid by Distributor. Visio, however, shall be responsible
for all taxes based upon its net income.
(d) In the event that taxes are withheld by Distributor in connection
with any payment hereunder to Visio, Distributor shall obtain the
appropriate withholding certificates and promptly forward them to
Visio so as to enable Visio to file the certificates with its U.S.
income tax return and obtain a foreign tax credit. Distributor
shall remain liable for such taxes until Distributor has provided
Visio with documentation sufficient to
- 4 -
<PAGE> 5
enable Visio to obtain the U.S. tax credit. Distributor agrees to
indemnify and hold Visio harmless from any encumbrance, fine,
penalty, or other expense which Visio may incur as a result of
Distributor's failure to pay any taxes as required by this
Agreement.
(e) Visio may, in its sole discretion at any time, elect to provide
any Value Added Functions with its own agents or employees.
(f) In each of the three calendar quarters set forth on Exhibit C,
Distributor will receive a marketing rebate (as a performance
incentive) of [*] per unit of a Product sold if the Sell-Through
of a Product listed on Exhibit C is equal to or greater than the
number of units forecast for such Product on Exhibit C. For each
of such calendar quarters, the aggregate marketing rebate shall
not exceed [*] nor shall it be less than [*]. Distributor shall
receive the marketing rebate as set forth in this Section 5(f)
within thirty (30) days of the end of the respective calendar
quarter. Notwithstanding the foregoing, if Distributor fails to
achieve the obligations set forth on Exhibit E for any given
calendar quarter, Distributor shall not be entitled to any
marketing rebate for such calendar quarter.
(g) In each of the three calendar quarters set forth on Exhibit C,
Distributor will receive a sales rebate in addition to the
marketing rebate set forth in Section 5(f) herein (as a
performance incentive) of [*] per unit of a Product sold if the
Sell-Through of a Product listed on Exhibit C is equal to or
greater than the number of units forecast for such Product on
Exhibit C. This sales rebate applies to each individual product
listed. Distributor shall receive the sales rebate as set forth in
this Section 5(g) within thirty (30) days of the end of the
respective calendar quarter.
6. DISTRIBUTOR'S OBLIGATIONS
Distributor shall:
(a) not distribute, without Visio prior written consent, any software
product which competes directly or indirectly with any Product.
The parties agree that software products of Distributor's print
publishing division and that the products listed in Exhibit D, as
may be modified from time to time in writing signed by both
parties, are deemed to be non-competitive with the Products;
(b) achieve the key performance measures set forth in this Agreement;
(c) not make any changes nor additions to the Products without the
prior written approval of Visio;
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 5 -
<PAGE> 6
(d) not copy, without Visio's prior written consent, any of the
Products' software, manuals or documentation;
(e) not reverse engineer, disassemble, decompile, modify, alter or
change any part of a Product or its packaging;
(f) inform Visio, on a timely basis, of any known business
opportunities involving the Products which Distributor is unable
to pursue;
(g) market and distribute the Products only in the Territory and
refrain from marketing or distributing the Products to any
individual or entity whom Distributor has reason to believe may
market or distribute the Products outside of the Territory.
Distributor shall refer to Visio any inquiries or orders for the
Products received from outside the Territory;
(h) on a quarterly basis, with Visio representatives, review its
progress in meeting the key performance measures as set forth in
this Agreement;
(i) upon Visio's request, assist Visio in preventing, investigating
and prosecuting any unauthorized copying of the Products by
individuals, corporations or other entities. Distributor agrees to
promptly inform Visio of any unauthorized copying or copies which
come to Distributor's attention;
(j) provide Visio with monthly reports in the form requested by Visio
for sales reports, including sales out by customer, report of
inventory on hand, report of returns, report of backlogs, and
cumulative list of registered users;
(k) work towards maintaining a minimum of four (4) weeks inventory
with Distributor and its sub-distributors in Japan, based on
average weekly Sell-Through for the previous five weeks, subject
to Section 2(d) herein;
(l) submit to Visio a monthly 90-day rolling forecast of stock keeping
units ("SKUs") of products which Visio will ship to Distributor on
a monthly basis, based on a firm monthly purchase order;
(m) provide Visio within two (2) business days from the end of each
week with a weekly report, in the form requested by Visio,
including but not limited to the following:
(i) inventory held by Distributor and sub-distributors of the
Product;
- 6 -
<PAGE> 7
(ii) inventory held by major retailers (such as Softmap and
Loax). In the instance where this information is
unavailable from major retailers, Distributor will provide
best estimates;
(iii) Sell-Through;
(iv) purchases of the Product by Distributor;
(v) purchases of the Product by sub-distributors from
Distributor; and
(vi) purchases of the Product by resellers from
sub-distributors;
(a) provide Visio with monthly reports, in the form requested by
Visio, to be delivered within five (5) business days from the end
of each month as to royalties, customer service and technical
support calls, marketing activities (such as advertising, channel
marketing, product and price promotions), corporate account
licensing activities and customer registrations. Distributor will
provide best estimates of corporate account licensing activities
where this information is unavailable from major retailers;
(b) create, produce and employ advertisements in strict conformity
with the key performance measures set for on Exhibit E attached
hereto and incorporated herein. Distributor expressly acknowledges
that failure to provide advertising in accordance with the media
schedule set forth on Exhibit E constitutes a material breach of
this Agreement;
(c) conduct ongoing public relations activities related to Product
announcements, Product reviews, corporate case studies and the
like. Such activities specifically include interviews and Product
demonstrations with computer and press journalists;
(d) create and execute a mutually agreeable channel marketing plan
each calendar quarter, which plan will include specific channel
communication, promotions, training and merchandising activities
which have been approved in advance by Visio;
(e) organize and conduct the activities included on Exhibit F attached
hereto and incorporated herein related to the launch of Visio
Technical 4.1J in October 1996;
- 7 -
<PAGE> 8
(f) continue to provide ongoing marketing activities for volume
licenses (defined as license sales greater than 100 units),
including but not limited to devoting personnel to selling to
medium- and large-sized organizations and seeding target accounts
with Visio evaluation kits;
(g) continue providing customer service and technical support as set
forth on Exhibit G attached hereto and incorporated herein at
least through June 30, 1997; and
(h) on or before June 30, 1997, deliver to Visio (i) all artwork and
other work created by Distributor for or on behalf of Visio, (ii)
all details and information relating to Visio product customers,
including but not limited to, for each customer, Visio Customer
Database information, a complete history of technical support
issues, a complete history of customer service issues, and product
purchase and registration information and (iii) all other material
owned by Visio.
1. VISIO'S OBLIGATIONS
Visio shall:
(a) provide Distributor with assistance (either by telephone, telex,
e-mail, or facsimile machine) regarding the installation, use and
maintenance of the Products;
(b) use its best efforts to fill firm orders on the specified delivery
dates;
(c) assist Distributor in technical matters connected with or
otherwise related to Distributor's functions and duties hereunder,
and furnish Distributor with relevant information, as determined
by Visio, for the promotion of the Product;
(d) upon Distributor's request and at Distributor's sole expense,
provide press kits, marketing literature, and such marketing
support materials as are developed by Visio in the ordinary course
of business that, in Visio's discretion, may be useful to
Distributor in carrying out its obligations hereunder;
(e) provide notice of upgrades and identified problems, and technical
letters to Distributor;
(f) upon Distributor's request and at Distributor's sole expense,
provide training of the Products for Distributor's sales,
marketing, technical support, customer service and engineering
functions;
(g) manage all negotiations with Microsoft Corporation; and
- 8 -
<PAGE> 9
(h) Visio shall pay to Distributor an amount equal to (i) [*] per unit
for all units of Visio v.4.0J sold-through to distributors other
than Distributor during the period from April 1, 1997 through June
30, 1997 (the "Period") and (ii) [*] per unit for all units of
Visio Technical v.4.1J sold-through to distributors other than
Distributor during the Period. Distributor shall receive the
payment as set forth in this Section 7(h) by July 31, 1997.
1. ACCEPTANCE
Distributor shall examine all shipments of Products upon receipt to confirm that
the shipment contains the proper Product quantities and that no damage has
occurred during shipping. Distributor shall be deemed to have accepted a
shipment of Products unless it provides Visio with written notice of rejection
within seven (7) days after receipt of the shipment. Such notice shall specify
in detail any claimed Product quantity deficiencies. All claims for goods
damaged during shipment within Japan shall be made directly to Distributor's
carrier.
9. PRODUCT ORDERS, ORDER CHANGES AND SHIPMENT SCHEDULES
If Distributor places an order for Products that is not in excess of the
projections for Product orders as stated herein, Visio shall ship the Products
in a prompt fashion. If Distributor's order is in excess of such projections,
Distributor must place its orders at least thirty (30) days prior to the
requested shipment date. Each order must include a written shipment schedule
which shall be subject to Visio's approval. Visio will ship the Product for
accepted orders to the address listed in the first paragraph of this Agreement,
or to such other address specified by Distributor and approved in advance by
Visio. Distributor shall place one main monthly order for all products in line
with the forecast as per this Agreement and to support Sell-Through. Distributor
shall also be entitled to make one further order in any given calendar month.
Visio may at its sole discretion accept further orders from Distributor in the
same calendar month.
10. RETURN OF MERCHANDISE
(j) For Products manufactured pursuant to this Agreement, the parties
will use best efforts to establish a mutually agreed upon
verification and credit process for return of Products.
(k) Subject to Section 10(c) herein, Distributor may only return
Products to Visio as follows:
(i) if the Product has not be accepted pursuant to Section 8;
(ii) if the Product is being returned pursuant to any end user
warranty claim pursuant to Section 11; or
(iii) Products as listed in Exhibit B, for which Product updates
have been issued ("Obsolete Product") may be exchanged but
only if:
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 9 -
<PAGE> 10
Distributor returns the Obsolete Products to Visio within
forty-five (45) days after notification from Visio of the
discontinuance of a Product or the release of a Product
update and such Obsolete Product is exchanged for new
Products on an equivalent value basis. In returning
Obsolete Product, Distributor shall return Product disks to
Visio and destroy all Product documentation. However, if
Visio authorizes Distributor not to return the Obsolete
product, Distributor must destroy all copies of the
Obsolete Product disks and all Obsolete Product
documentation. Visio shall provide notice in writing of
each Product update to Distributor at least ninety (90)
days prior to the shipping date of that Product update.
(a) Distributor shall pay all expenses, including without limitation,
freight, duties and insurance for returned Products.
11. WARRANTY
(k) Limited Warranty
Visio warrants its Products to end users as set out in the written
limited warranty document accompanying each Product. Visio will accept
all Products returned by end users, for failure to meet the written
limited warranty, which are processed by Distributor provided that: (I)
written notice of the end user warranty claim is received by Visio from
Distributor within thirty (30) days of Distributor's receipt of such
claim from the Customer, (ii) after Visio's authorization, the
non-conforming Products are returned by Distributor to Visio, freight
charges prepaid, and (iii) after examination, Visio determines to its
satisfaction that the Products are non-conforming. All replacement
Products are delivered subject to the terms of the Visio limited
product warranty. Distributor's sole remedy and Visio's sole obligation
under this Section 11 shall be, at Visio's sole election, replacement
of the returned Product or issuance of a credit by Visio for the
original purchase price paid therefor by Distributor. THE FOREGOING
LIMITED WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, OR STATUTORY, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, AND OF ALL OTHER OBLIGATIONS OR
LIABILITIES ON VISIO'S PART.
(b) No Other Warranties
Neither Distributor nor any of its employees, agents or
sub-distributors shall have any right to make any other warranties or
promises for the use of the Products which are not contained in the
written warranty document accompanying the Product. Distributor may,
however, make representations and give instructions for the use of the
Product which are contained on the Product label or container, or end
user documentation provided with the manual or Visio product literature
denoted by Visio part number or authorized in writing by Visio.
- 10 -
<PAGE> 11
(c) No Warranties for Non-Visio Products
Visio makes no warranties as to items distributed under a third party
name, copyright, trademark, or trade name which may be included within
the retail package. Visio makes no warranties as to items distributed
by a third party of a Product sold hereunder. To the extent permitted
by its contract with the supplier of such included item, Visio shall
assign to Distributor any rights that Visio may have under such
supplier's warranty.
12. LIMITATION OF LIABLITY
(l) IN NO EVENT SHALL VISIO BE LIABLE FOR DIRECT, INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER,
INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, USE OF DATA OR OTHER
COMMERCIAL LOSS WHETHER OR NOT VISIO HAS BEEN ADVISED OF T'HE
POSSIBLITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO ANY
CLAIM OR CAUSE OF ACTION WHETHER IN CONTRACT OR TORT (INCLUDING
NEGLIGENCE), IN LAW OR EQUITY, STRICT PRODUCT LIABILITY OR
OTHERWISE, OR UNDER ANY OTHER THEORY INCLUDING CLAIMS CONCERNING
PATENT, COPYRIGHT OR OTHER PROPRIETARY RIGHTS INFRINGEMENT.
(m) IN ANY EVENT, VISIO'S LIABILITY (I) UNDER ANY PROVISION OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED BY THIS AGREEMENT, OR,
(ii) FOR ANY DAMAGES CAUSED BY A PROGRAM OR DEFECT OR FAILURE IN
ANY PRODUCT, OR (iii) ARISING FROM A COURT OF PROPER JURISDICTION
HOLDING ANY OF THE ABOVE WARRANTIES OR DISCLAIMERS OF WARRANTIES
INVALID, SHALL BE LIMITED TO THE AMOUNT ACTUALLY PAID BY
DISTRIBUTOR TO VISIO PURSUANT TO THIS AGREEMENT. VISIO'S
LIMITATION OF LIABILITY IS CUMULATIVE WITH ALL OF DISTRIBUTOR'S
EXPENDITURES BEING AGGREGATED TO DETERMINE THE SATISFACTION OF THE
LIMIT. DISTRIBUTOR RELEASES VISIO FROM ANY AND ALL OBLIGATION,
LIABILITY, CLAIMS OR DEMANDS IN EXCESS OF THE LIMITATION. THE
PARTIES ACKNOWLEDGE THAT THE OTHER PARTS OF THIS AGREEMENT RELY
UPON THE INCLUSION OF THIS SECTION. THIS SECTION SHALL SURVIVE ANY
TERMINATION OR EXPIRATION OF THIS AGREEMENT.
13. CONFIDENTIALITY
Distributor agrees to retain in confidence and to require all of its employees,
agents and subcontractors to retain in confidence all information identified by
Visio as confidential and all information which by the nature of the
circumstances surrounding its disclosure ought in good faith to be treated as
proprietary and/or confidential. Visio hereby identifies its communications to
Distributor regarding
- 11 -
<PAGE> 12
non-public information related to Microsoft Corporation as confidential.
Distributor agrees it will make no use of confidential information and know-how
except under the terms and during the existence of this Agreement. Distributor's
obligation to maintain confidential information in confidence shall extend to
the earlier of such time as the information is in the public domain through no
fault of Distributor or ten (10) years following the termination or expiration
of this Agreement. Distributor's confidentiality obligations set forth herein
shall survive any termination or expiration of this Agreement.
14. RIGHT TO AUDIT
During the term of this Agreement, Distributor agrees to keep all usual and
proper records in regard to its distribution and marketing of the Products.
Visio may cause an audit to be made of Distributor's records in order to verify
any statements issued by Distributor and to confirm Distributor's strict
compliance with the terms of this Agreement. Any audit conducted by Visio shall
be conducted during normal business hours in a manner so as to not unreasonably
interfere with Distributor's business. Visio shall pay all costs associated with
such audit unless the audit discloses that Distributor has materially violated
any of the terms of this Agreement, including but not limited to an audit which
reveals that fees paid by Distributor to Visio under Section 5 of this Agreement
for any quarter are less than ninety-five percent (95%) of what should have been
paid by Distributor for such quarter, in which event the costs of such audit
shall be borne entirely by Distributor, in addition to and without limitation of
any right or remedy Visio may have. Prompt payment of any amount found due and
owing Visio, including audit fees and expenses due Visio under this Section 14,
shall be made by Distributor upon demand by Visio.
15. COMPLIANCE WITH LAWS AND GOVERNMENT REGULATIONS
(o) Distributor shall at its own expense obtain and maintain any and
all governmental approvals required in the Territory for the
performance of the terms and conditions of this Agreement.
Distributor warrants and represents that the Products may be
imported into the Territory under the current laws of the
Territory.
(p) Distributor shall provide Visio with copies of any and all
governmental approvals and registrations that it obtains in regard
to this Agreement and the Products.
(q) If any necessary governmental approvals are not or cannot be
obtained within a reasonable time and in a form and substance
satisfactory to Visio, Visio may terminate this Agreement and upon
receipt of notice of termination by Distributor, this Agreement
shall be null, void and of no effect.
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 12 -
<PAGE> 13
1. RELATIONSHIPS BETWEEN PARTIES
All products supplied to Distributor hereunder shall be purchased by Distributor
for its own account at its own risk and resold only in accordance with the terms
hereof. Visio and Distributor are independent contractors and are not, and shall
not represent themselves as principal and agent or joint venturers. Distributor
shall act as a principal on its own behalf and has no legal power or authority,
expressed or implied, to act for or obligate Visio in any manner.
17. PROPRIETARY RIGHTS
(q) The parties agree not to disclose to any third party any
confidential information concerning the Products or any
information of a confidential nature about Visio. Distributor
acknowledges that Visio retains all copyrights and other
proprietary rights to the Products and Trademarks, and
specifically Distributor obtains only the rights to the Products
specifically granted in Section 2 hereof. Distributor shall not
reverse engineer, nor shall Distributor permit any third party to
reverse engineer, any of the Products.
(r) Distributor shall transfer no Product to a Customer unless (I)
such Product is packaged in such a way that the opening of the
package by the Customer obligates the Customer to comply with
Visio's terms and conditions for sale, or (ii) Distributor shall
have obtained from the Customer prior to such transfer a signed
copy of the Software License Agreement, as such may be amended
from time to time by Visio, signed copies of which, with respect
to each such Customer, shall be furnished to Visio. Upon any
amendment of the Software License Agreement, Visio shall notify
Distributor of such amendment and shall furnish Distributor with a
copy of the amended Software License Agreement.
1. DURATION
This Agreement shall commence upon the execution of this Agreement by both
parties and shall terminate on December 31, 1997, unless earlier terminated by
either party, whereupon all rights and obligations of the parties hereunder
shall cease, except the obligations of Sections 11,12,13,14, 17, 18, 19, 20, and
21(a), (e) and (k) hereof and any other rights or obligations which survive the
termination hereof.
19. TERMINATION
This agreement may be terminated as follows:
(a) (Automatically in the event the other party becomes insolvent or
bankrupt, makes an assignment for the benefit of creditors, ceases
to function as an ongoing concern and conduct its operations in
the normal course of business or has a trustee or receiver
appointed for it.
- 13 -
<PAGE> 14
(b) By Distributor upon written notice to Visio, if Visio has breached
the terms of this Agreement in any material respect and fails to
cure such breach within sixty (60) days after Visio's receipt of
written notice of such default.
(c) By Visio upon written notice to Distributor, in the event
Distributor breaches any of its obligations contained herein,
including without limitation the obligation to meet the key
performance measures as set forth in this Agreement. Termination
for failure to pay any money due hereunder shall be effective ten
(10) days after notice of termination to Distributor, if
Distributor's payment defaults have not then been cured prior to
the end of such ten (10) days. In all other cases, termination
shall be effective thirty (30) days after notice of termination to
Distributor if Distributor's defaults have not then been cured
prior to the end of such thirty (30) days. The rights and remedies
of Visio provided in this Section 19 shall not be exclusive and
are in addition to any other rights and remedies provided by law
or this Agreement.
1. EFFECT OF TERMINATION
Upon any termination or expiration of this Agreement for any reason:
(a) Visio, at its option, may repurchase any or all Products then in
Distributor s possession which are in their original packaging,
undamaged, and are shown on Visio's then current product List, at
a price not greater than the price paid by Distributor for such
Products. Upon receipt of any Products so repurchased from
Distributor, Visio shall issue an appropriate credit to
Distributor's account.
(b) The due date of all outstanding invoices to Distributor for
Products shall automatically be accelerated to become due and
payable by immediate wire transfer on the effective date of
termination, even if longer terms have been previously agreed to.
All orders or portions thereof remaining un-shipped as of the
effective date of termination shall automatically be canceled.
(c) For a period of one (1) year after the date of termination,
Distributor shall make available to Visio for inspection and
copying all books and records of Distributor that pertain to
Distributor's performance under and compliance with its
obligations, warranties and representations under this Agreement.
(d) Distributor shall forthwith cease all use of Trademarks, and will
not use any mark which is confusingly similar to any Trademark of
Visio.
(e) Distributor shall return all Visio marketing literature and
materials to Visio.
- 14 -
<PAGE> 15
(f) Neither Visio nor Distributor shall be liable to the other for
damages of any kind, including incidental or consequential damages
on account of the termination of this Agreement for any reason.
(g) Distributor will immediately cease all representations that it is
a Visio Distributor.
(h) Neither party will be entitled to any reimbursement in any amount
for any training, market development, investments or other costs
expended by either party before the termination of this Agreement,
or other payment as an indemnity or compensation for termination,
regardless of the reason for, or method of, termination of this
Agreement.
21. MISCELLANEOUS
(a) Notice
All notices or reports permitted or required under this Agreement
must be in writing and must be delivered by personal delivery,
telegram, facsimile transmission or by certified or registered
mail (or airmail if international), return requested receipt, and
shall be deemed given upon personal delivery, five (5) days after
deposit in the mail, or upon acknowledgment or receipt of
electronic transmission. Notices shall be sent to the address set
forth above or to such other address as either party may specify
in writing. All notices to Visio shall be sent to its President.
(b) Force Majeure
Neither party will be liable hereunder by reason of any failure or
delay in the performance of its obligations hereunder (except for
the payment of money) on account of strikes, shortages, riots,
insurrection, fires, flood, storm, explosions, acts of God, war,
governmental action, labor conditions, earthquakes, or any other
similar cause which is beyond the reasonable control of such
party.
(c) Waiver
The failure of either party to require performance by the other
party of any provision hereof will not affect the full right to
require such performance at any time thereafter nor will the
waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of the provision itself.
(d) Severability
In the event that any provision of this Agreement is found to be
- 15 -
<PAGE> 16
unenforceable or invalid under any applicable law or is so held by
a court of competent jurisdiction, such unenforceability or
invalidity will not render this Agreement unenforceable or invalid
as a whole, and, in such event, such provision will be changed and
interpreted so as to accomplish the objectives of such
unenforceable or invalid provision within the limits of applicable
law or applicable court decision.
(e) Attorneys' Fees; Governing Law
In the event an action is commenced to enforce a party's rights
under this Agreement, the prevailing party in such action shall be
entitled to recover its actual costs and reasonable attorneys'
fees. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Washington, USA, without
reference to its rules relating to choice of law, except to the
extent preempted by the laws of the United States of America which
will then apply, and Distributor hereby consents to venue in and
jurisdiction of the state and federal courts sitting in the State
of Washington, USA. Distributor agrees that any lawsuit arising
hereunder brought by Distributor shall be brought in either the
state or federal courts sitting in King County, State of
Washington, USA. Notwithstanding anything to the contrary in this
Agreement, Visio shall have the right to elect in its sole
discretion the forum for any law suit arising hereunder brought by
Visio.
(f) Headings
The Section headings appearing in the Agreement are inserted only
as a matter of convenience and in no way define, limit, construe
or describe the scope or extent hereof, and in no manner affect
this Agreement.
(g) Amendments
The parties agree that this Agreement may be amended by written
agreement of the parties hereto.
(h) Counterparts
This Agreement may be signed in two (2) or more counterparts, each
of which shall be deemed to be an original, but which together
will form a single Agreement as if both parties had executed the
same document.
(i) Authority
Each party warrants that (I) it has full power and authority to
enter into
- 16 -
<PAGE> 17
and perform its obligations under this Agreement, (ii) this
Agreement has been duly authorized by and is binding and
enforceable upon such party, and (iii) the person signing this
Agreement on that party's behalf has been duly authorized and
empowered to enter into this Agreement.
Each party further acknowledges that it has read this Agreement,
understands it, and agrees to be bound by it.
(j) Approvals
In each case where approvals or consents of either party are
required under this Agreement, such approvals or consents shall
not be unreasonably withheld.
(k) Indemnification
Distributor hereby agrees to defend, indemnify and hold harmless
Visio and its employees, officers and directors from and against
any and all claims, demands, causes of action, damages, losses,
expenses and liabilities (including without limitation, attorneys'
fees, actual litigation costs, and settlement costs) arising out
of or in any way connected with any breach by Distributor of any
of the terms of this Agreement.
(l) Assignment
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
except that Distributor may not assign, nor attempt to assign, its
rights or obligations under this Agreement in any way without the
prior written consent of Visio.
(m) Compliance With Anti-Boycott Laws
Distributor shall at all times during the term of this Agreement
comply with U.S. Anti-Boycott laws. Such compliance means, without
limitation, that Distributor shall not provide information, refuse
to do business, require any third parties to refuse to do
business, make or cause third parties to make discriminatory
employment decisions, or knowingly agree to take any of the
foregoing actions, with intent to comply with, further or support
a boycott not sanctioned by the U.S. Government (except as set
forth in 14 C.F.R. Part 769.3). Distributor shall report to Visio
any request that Distributor is required to report to the U.S.
Department of Commerce under 15 C.F.R. Part 769.6, and shall
provide Visio with a copy of any information or document that it
- 17 -
<PAGE> 18
submits in response to such a reportable request. Distributor
shall be solely responsible for and shall indemnify, defend, and
hold harmless Visio in connection with any liability and costs
that Distributor or Visio incurs as a result of any violation by
Distributor of U.S. Anti-Boycott laws.
(n) Export of Product
Distributor agrees that it does not intend to and will not
knowingly, without prior written consent, if required, of the
Office of Export Administration of the United States Department of
Commerce, Washington D.C. 20230, directly or indirectly, export or
transmit any Product or direct data therefrom to any country that
is subject to U.S. export restrictions (currently including, but
not necessarily limited to, Cuba, Iraq, Libya, Montenegro, Serbia,
and North Korea) and any group Q, S, W, Y, or Z country specified
in Supplement No. l to Section 770 of Export Administration
Regulation issued by the U.S. Department of Commerce or to any
other country to which such export or transmission is restricted
by such regulations or applicable statutes.
(o) Government Licenses
Any Product which Distributor licenses or acquires under this
Agreement for or on behalf of the United States of America, its
agencies, instrumentalities, or agents ("U.S. Government") is
provided to Distributor with RESTRICTED RIGHTS and shall be
provided to the U.S. Government with RESTRICTED RIGHTS. Use,
duplication, or disclosure by the U.S. Government is subject to
restrictions as set forth in subparagraph (C)(l)(ii) of the Rights
in Technical Data and Computer Software clause at DFARS, 48 C.F.R.
52.227-7013 or subparagraphs (C)(l) and (C)(2) of the Commercial
Computer Software -- Restricted Rights clause at FAR, 48 C.F.R.
52.227-19. Distributor shall comply with any requirements of the
Government to obtain such RESTRICTED RIGHTS.
Contractor/manufacturer is Visio Corporation/520 Pike Street/Suite
1800/Seattle, Washington 98101-4001, USA.
(p) Entire Agreement
This Agreement (including the Exhibits) sets forth the entire
understanding and agreement of the parties as to the matters
covered hereby. This Agreement supersedes any prior or collateral
agreements, including that certain Distribution Agreement dated as
of January 1, 1995 and amended March 8, 1996 between ASCII
Corporation and
- 18 -
<PAGE> 19
Visio, with respect to the matters covered by this Agreement.
- 19 -
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above. All signed copies of this Agreement shall be deemed
originals.
Visio Corporation ASCII Something Good, Inc.
By /s/ Marty Chilberg By /s/ Keiichi Sakamoto
-------------------- ---------------------
Marty Chilberg Keiichi Sakamoto
- ----------------------- -----------------------
Name (Print) Name (Print
Vice President President
- ----------------------- -----------------------
Title Title
September 25, 1996 October 3, 1996
- ----------------------- -----------------------
Date Date
Visio International, Ltd.
By /s/ Marty Chilberg
---------------------
Marty Chilberg
- -----------------------
Name (Print)
Director
- -----------------------
Title
September 25, 1996
- -----------------------
Date
- 20 -
<PAGE> 21
EXHIBIT A
PRICE SCHEDULE
Purchase Price (per unit) from the Effective Date until March 31, 1997
- ----------------------------------------------------------------------
$ USD
- ----------------------------------------------------------------------
Visio v4.0J (retail) [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (retail) [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (upgrade) [*]
- ----------------------------------------------------------------------
Purchase Price (per unit) from the Effective Date until June 30, 1997
- ----------------------------------------------------------------------
$ USD
- ----------------------------------------------------------------------
Visio v4.0J (license) 1, 10, 50 [*]
- ----------------------------------------------------------------------
Visio v4.0J (license) 100+ [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (license) 1, 10, 50 [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (license) 100+ [*]
- ----------------------------------------------------------------------
Purchase Price (per unit) from July 1, 1997 until December 31, 1997
- ----------------------------------------------------------------------
$ USD
- ----------------------------------------------------------------------
Visio v4.0J (license) 1, 10, 50 [*]
- ----------------------------------------------------------------------
Visio v4.0J (license) 100+ [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (license) 1, 10, 50 [*]
- ----------------------------------------------------------------------
Visio Technical v4.1J (license) 100+ [*]
- ----------------------------------------------------------------------
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 21 -
<PAGE> 22
EXHIBIT B
PRODUCTS
Visio v4.0J (retail)
Visio v4.0J (license) 1, 10, 50
Visio v4.0J (license) 100+
Visio Technical v4.1J (retail)
Visio Technical v4.1J (upgrade)
Visio Technical v4.1J (license) 1, 10, 50
Visio Technical v4.1J (license) 100+
- 22 -
<PAGE> 23
EXHIBIT C
SALES FORECAST
Key performance measures:
Forecast (number of units)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Product Quarter ended Quarter ended Quarter ended Totals
December 31, 1996 March 31, 1996 June 30, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Visio v4.0J (retail) [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Visio v4.0J (license) [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Visio Technical v4.1J (retail) [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Visio Technical v4.1J (license) [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
Visio Technical v4.1J (upgrade) [*] [*]
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Totals [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------
</TABLE>
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 23 -
<PAGE> 24
EXHIBIT D
NONCOMPETITIVE PRODUCTS
The CARD for Windows. The GRAPH for Windows, CANDY for Windows, VOICE MOUSE,
OLENS, VINCENT, Super JG, Super Kid, Midisoft STUDIO, PC Paintbrush, PHOTO
FINISH, WingZ, CARD PRESS, 3-D PERS for Windows, 3-D PERS, CANDY, The CARD,
Media Room, Music Magic, Presentation Partner, Music Mentor, Sound Impression,
JAM TRAX, Audio Works, Media Browser, Media Works, Softkicker, SMART Sketch,
DESK SONIC, CARD 3+ Graph, Z's STAFF KID, Calendar Creator, Key Note, FUDEOh,
HOHSEI Fit, Letter Express, EIBUN Rescue (English Rescue), Motion Magic,
Stmage, Vmaker, SANKAKU DENDEN, Power++, WinTutor, Internet Rescue, Web Pilot,
Ninja, Ninja Filer
- 24 -
<PAGE> 25
EXHIBIT E
DISTRIBUTOR MARKETING COMMITMENT
Key Performance Measures:
Advertising
Distributor will create, produce, and employ advertisements as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Advertising Oct. 1996 Nov. 1996 Dec. 1996 Jan. 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Visio v4.0J [*]
- ----------------------------------------------------------------------------------------
Visio Technical v4.1J [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------
</TABLE>
Visio v4.0J Advertising Media Schedule (number of pages) Sept. 1996 - June 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Magazine Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Number
1996 1996 1996 1996 1997 1997 1997 1997 1997 1997 of
Pages
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
Total Pages [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------
</TABLE>
Visio Technical v4.1J Advertising Media Schedule (number of pages) Sept. 1996 -
June 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Magazine Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Number
1996 1996 1996 1996 1997 1997 1997 1997 1997 1997 of Pages
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
Total Pages [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
</TABLE>
Marketing Collateral:
Distributor will create, produce and employ the following marketing collateral:
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 25 -
<PAGE> 26
EXHIBIT F
VISIO TECHNICAL 4.1J PRODUCT LAUNCH ACTIVITIES
Distributor commits to the following activities related to the launch of Visio
Technical 4.1J in October 1996:
1. Organize and assist Visio with a series of interviews and product
demonstrations with the press, planned for October 14, 15 and 16, 1996.
2. Organize and assist Visio with a series of meetings and product
demonstrations with key distributors including [*] and with resellers
including [*], planned for October 14, 15 and 16, 1996.
3. Create, produce and mail [*] upgrade mailers to the Visio registered user
and Visio prospect base, to be completed by October 31, 1996.
ASG Distribution Agreement
[*] Confidential Treatment Requested
- 26 -
<PAGE> 27
EXHIBIT G
CUSTOMER SERVICE AND TECHNICAL SUPPORT ACTIVITIES
Customer Service:
Distributor shall handle the following types of service requests:
1. Replacement product diskettes
2. Product literature
3. Dealer location information
4. Fulfillment of special offers and promotions
5. Tracking customer information requests
6. Maintaining product registrations and the customer database
Technical Support:
Distributor will provide Visio product customers with high quality technical
support via phone and fax to the registered user base. Distributor shall provide
the following to Visio (in both Seattle and Dublin):
1. Customer name and address details on a monthly basis
2. 24-hour response to customer technical support queries
3. Technical support metrics (number of calls, and hold and
abandonment rate) on a monthly basis
4. Customer feedback
Distributor shall track all technical support queries by customer and shall
inform Visio (Dublin) of any issues which could not be resolved.
- 27 -
<PAGE> 1
EXHIBIT 10.18
Dated August 20, 1996
(1) Landlord: ERIN EXECUTOR &
TRUSTEE CO. LIMITED
(2) Tenant: VISIO INTERNATIONAL
LIMITED
(3) Guarantor: VISIO CORPORATION
LEASE
- OF -
9TH & 10TH FLOORS
INCLUDING USE OF 12 CAR SPACES
FITZWILTON HOUSE
Term Commences: 19th day of August, 1996
Length of Term: 25 years
Rent Reviews: Every Five Years
Break Option: At Ten Years
Initial Rent:IR(pound sterling)141,298 p.a. exclusive
Initial Licence Fee (car spaces) (pound sterling)12,000 p.a. exclusive
(subject to review as herein provided)
A & L Goodbody,
1, Earlsfort Centre,
Hatch Street,
Dublin 2.
DJLE3001.07X\SD
<PAGE> 2
C O N T E N T S
Contents i
Summary v
Parties 1
Definitions 2
Interpretation
Demise and Rents
Tenants Covenants
4.1 Rents
4.2 Interest on arrears
4.3 Outgoings
4.4 Repairs
4.5 Decorations
4.6 Cleaning
4.7 Yield Up
4.8 Rights of entry by Landlord
4.9 To Comply with Notices
4.10 Dangerous materials and use of machinery
4.11 Overloading floors and services
4.12 Conduits
4.13 Disposal of refuse
4.14 Obstruction of Common Areas
4.15 Prohibited users
4.16 User
4.17 Nuisance
4.18 Alterations
4.19 Signs, advertisements and blinds
4.20 Alienation
4.21 Registration of dispositions
4.22 Disclosure of information
4.23 Landlord's costs
4.24 Statutory requirements
4.25 Planning Acts, Building Control Act and Public Health Acts
4.26 Statutory notices
4.27 Fire and safety precautions and equipment
4.28 Electro-magnetic compatibility
4.29 Encroachments and easements
4.30 Reletting notices
4.31 Indemnity
4.32 Landlord's Regulations
4.33 Stamp Duty and Value Added Tax
5. Landlord's Covenants
5.1 Quiet Enjoyment
5.2 Provision of Services
6. Insurance
6.1 Landlord to insure
6.2 Landlord to produce evidence of insurance
<PAGE> 3
6.3 Destruction of the Demised Premises
6.4 Where reinstatement is prevented
6.5 Cesser of Rent and Service Charge
6.6 Insurance becoming void
6.7 Notice by Tenant
7. Provisos
7.1 Forfeiture
7.2 No implied easements
7.3 Exclusion of Warranty as to User
7.4 Representations
7.5 Use of Demised Premises outside Business Hours
7.6 Failure by Landlord to provide services
7.7 Exclusion of Landlord's liability
7.8 Covenants relating to Adjoining Property
7.9 Effect of Waiver
7.10 Applicable law
7.11 Notices
7.12 Disputes with adjoining Occupiers
8. Service Charge
9. The Guarantor's Covenants
10. Termination of Term
11. Section 45 Land Act 1965
12. Finance Act Certificates
13. Section 29 Companies Act, 1990
14. Assent
15. Tenant's address and description
First Schedule
Second Schedule
Third Schedule
Fourth Schedule
Fifth Schedule
Sixth Schedule
Seventh Schedule
Execution Clauses
<PAGE> 4
S U M M A R Y
Landlord: Erin Executor & Trustee Co. Limited
Tenant: Visio International Limited
Guarantor: Visio Corporation
Premises: 9th and 10th Floor(s), Fitzwilton House,
Wilton Place, Dublin 2
Term:
Commences: 19th August, 1996
Expires: 18th August, 2021
Initial Rent: (pound sterling)141,298
Initial Licence Fee
(car spaces) (pound sterling) 12,000
Date Revised Rent
1st Review 19th August, 2001
2nd Review 19th August, 2006
3rd Review 19th August, 2011
4th Review 19th August, 2016
5th Review
6th Review
Date Assignee
1st Assignment
2nd Assignment
3rd Assignment
4th Assignment
5th Assignment
<PAGE> 5
THIS LEASE is made the 20th day of August 1996
BETWEEN
(a) LANDLORD: ERIN EXECUTOR & TRUSTEE CO. LIMITED
having its registered office at 17 College Green, Dublin 2
(b) TENANT: VISIO INTERNATIONAL LIMITED
(of) having its registered office at
(c) GUARANTOR: VISIO CORPORATION
(of) having its registered office at 520 Pike Street, Suite 1800
Seattle, Washington 98101
USA
WITNESSETH as follows:-
<PAGE> 6
1. DEFINITIONS
IN this Lease, unless the context otherwise requires the following
expressions shall have the following meanings:-
1.1 "ADJOINING PROPERTY" means any land and/or buildings adjoining or
neighbouring the Demised Premises;
1.2 "BASE RATE" means annual rate of interest for the time being chargeable
under Section 22 of the Courts Act 1981;
1.3 "BUILDING" means the premises more particularly described in the First
Schedule PROVIDED ALWAYS that for the purposes of Clause 6 herein,
reference to the Building in so far as it includes the Demised Premises
shall exclude (unless otherwise agreed in writing by the Landlord and
the Tenant) all additions, alterations and improvements made to the
Demised Premises by the Tenant;
1.4 "BUILDING CONTROL ACT" means the Building Control Act 1990;
1.5 "BUSINESS HOURS" mean for the purpose of the provision of the services
referred to in Clause 5.2., the usual business or working hours of the
Building Mondays to Fridays (inclusive) (excluding Christmas Day, Good
Friday and all usual bank or public holidays) and such additional hours
as may, from time to time, be reasonably approved by the Landlord, who
shall have regard to the interests of the tenants and occupiers of the
Building;
1.6 "CAR SPACES" mean the car spaces referred to in Clause 4 of the Third
Schedule and same shall be included in the definition of "Demised
Premises" for the purposes only of the Fifth Schedule;
1.7 "COMMON PARTS" mean the pedestrian ways, courtyards, forecourts,
entrance halls, corridors, passages, lobbies, landings, staircases,
lifts and any other amenities in the Building or within the curtilage
thereof which are or may, from time to time, be provided or designated
by the Landlord for common use by the tenants and occupiers of the
Building and all persons expressly or by implication authorised by them
but excluding the Lettable Areas;
1.8 "CONDUITS" mean each of the following of whatsoever nature:-
<PAGE> 7
all sewers, drains, pipes, gullies, gutters, ducts, mains,
watercourses, channels, subways, wires, cables, conduits, flues and
other transmission or conducting media and installations of whatsoever
nature or kind;
*1.9 "DECORATION YEARS" mean the year ending 18th August,2001 and
thereafter in every subsequent fifth year of the Term;
1.10 "DEMISED PREMISES" mean the Premises demised by this Lease and more
particularly described in the Second Schedule;
*1.11 "FIRST INSURANCE PAYMENT" means the sum of IR(pound sterling)[ ]
payable under Clause 3.2;
*1.12 "FIRST RENTAL PAYMENT" means the sum of IR(pound sterling)18,059.76
being the first payment of rent and licence fee payable under Clause
3.1 hereof covering the period from the Rent Commencement Date to the
day before the Quarterly Gale Day immediately following the Rent
Commencement Date;
1.13 "GUARANTOR" means the party (if any) named as "Guarantor" at the
commencement of this Lease and, in the case of an individual, includes
the personal representatives of such Guarantor;
*1.14 "INITIAL RENT" means One Hundred and Forty One Thousand Two Hundred and
Ninety Eight Pounds (IR(pound sterling)141,298) per annum in respect of
the Demised Premises.
1.15 "INITIAL LICENCE FEE" means Twelve Thousand pounds (IR(pound
sterling)12,000) per annum in respect of the Car Spaces and same shall
be included in the references to "rent" for the purposes only of the
Fifth Schedule.
1.16 "INSURED RISKS" mean, subject always to such exclusions, excesses and
limitations as are normally available and as may be imposed by the
Landlord's insurers for the time being in respect of any or all of the
following risks;
fire, storm, tempest, flood, earthquake, lightning, explosion, impact,
aircraft and other aerial devices and articles dropped therefrom, riot,
civil commotion and malicious damage, bursting or overflowing of water
tanks, apparatus or pipes and such other risks as the Landlord may in
its absolute discretion from time to time determine;
1.17 "LANDLORD" means the party or parties named as "Landlord"
<PAGE> 8
at the commencement of this Lease, and includes the person for the time
being entitled to the reversion immediately expectant on the
determination of the Term;
1.18 "THIS LEASE" means this Lease and any document which is made
supplemental hereto, or which is entered into pursuant to or in
accordance with the terms hereof;
1.19 "LETTABLE AREAS" mean those parts of the Building (including the
Demised Premises) leased or intended to be leased to occupational
tenants;
*1.20 "PERMITTED USER" means offices;
1.21 "THE PERPETUITY PERIOD" means the period commencing on the date of this
Lease and ending on the expiration of twenty one years from the date of
the death of the last survivor of the issue now living of His Late
Britannic Majesty King George V.
*1.22 "PLAN" mean the plan(s) and drawing(s) numbered 1, 2 and 3 annexed to
this Lease;
1.23 "PLANNING ACTS" mean the Local Government (Planning and Development)
Acts 1963 to 1993;
1.24 "PRESCRIBED RATE" means the rate per centum per month which shall
exceed by one half per centum per month the monthly rate of interest
for the time being chargeable under Section 550 of the Income Tax Act
1967 (or such other monthly rate of interest as may from time to time
be chargeable upon arrears of tax) or if the Landlord shall so elect at
a rate of eighteen per centum per annum.
1.25 "PUBLIC HEALTH ACTS" mean the Local Government (Sanitary Services) Act,
1878 to 1964;
1.26 "QUARTERLY GALE DAYS" mean 1st day of January, 1st day of April, 1st
day of July and 1st day of October in every year of the Term.
1.27 "RENT COMMENCEMENT DATE" means 19th day of November 1996.
1.28 "RENT REVIEW DATES" means the first day of the sixth year, the first
day of the eleventh year, the first day of the sixteenth year and the
first day of the twenty first year of the Term.
1.29 "RETAINED PARTS" mean all parts of the Building which do
<PAGE> 9
not comprise Lettable Areas, including, but not limited to:-
1.29.1 the Common Parts;
1.29.2 the Car Spaces;
1.29.3 office and residential or other accommodation which may from time to
time be reserved in the Building for staff;
1.29.4 any parts of the Building reserved by the Landlord for the housing of
plant, machinery and equipment or otherwise in connection with or
required for the provision of services;
1.29.5 all Conduits in, upon, over, under or within and exclusively serving
the Building except any that form part of the Lettable Areas;
1.29.6 the main structure of the Building and, in particular, but not by way
of limitation, the roof, foundations, external walls, internal load
bearing walls and the structural parts of the roof ceilings and floors,
all party structures, boundary walls, railings and fences and all
exterior parts of the Building and all roads, pavements, pavement
lights and car parking areas within the curtilage of the Building;
*1.30 "SERVICE CHARGE" means [ ] per cent ( %) of the Expenditure as defined
in Clause 8;
1.31 "SERVICE CHARGE COMMENCEMENT DATE" means 19th day of November 1996.
1.32 "SURVEYOR" means any person appointed by the Landlord (including an
employee of the Landlord and the person appointed by the Landlord to
collect the rents and manage the Building) to perform the function of a
surveyor for any purpose of this Lease but does not include the
Surveyor defined in the Fifth Schedule;
1.33 "TENANT" means the party or parties named as "Tenant" at the
commencement of this Lease and includes the successors in title of the
Tenant and permitted assigns of the Tenant and, in the case of an
individual or individuals his/their personal representatives;
1.34 "TERM" means 25 Years.
<PAGE> 10
1.35 "TERM COMMENCEMENT DATE" means 19th day of August 1996.
1.36 "UTILITIES" mean the following of whatsoever nature:-
water, soil, steam, air, gas, electricity; radio, television,
telegraphic, telephonic and other communications, and other services
and information;
1.37 "THE 1860 ACT" and "THE 1881 ACT" shall mean respectively the Landlord
and Tenant Law Amendment Act, Ireland, 1860 and the Conveyancing Act
1881.
2. INTERPRETATION
UNLESS there is something in the subject or context inconsistent
therewith:
2.1 where two or more persons are included in the expression "the Landlord"
and/or "the Tenant" and/or "the Guarantor" the covenants which are
expressed to be made by the Landlord and/or the Tenant and/or the
Guarantor shall be deemed to be made by such persons jointly and
severally;
2.2 words importing persons shall include firms, companies and corporations
and vice versa;
2.3 any covenant by the Tenant not to do any act or thing shall include an
obligation not to permit or suffer such act or thing to be done;
2.4 references to any right of the Landlord to have access to or entry upon
the Demised Premises shall be construed as extending to all persons
authorised by the Landlord, including agents, professional advisers,
prospective purchasers of any interest of the Landlord in the Demised
Premises or in the Adjoining Property, contractors, workmen and others;
2.5 any reference to a statute or statutes (whether specifically named or
not) or to any sections or sub-sections therein shall include any
amendments or re-enactments thereof for the time being in force and all
Statutory Instruments, orders, notices, regulations, directions,
bye-laws, permissions and plans for the time being made, issued or
given thereunder or
<PAGE> 11
deriving validity therefrom;
2.6 the titles or headings appearing in this Lease are for reference only
and shall not affect its construction or interpretation;
2.7 wherever in this Lease either party is granted a future interest in
property there shall be deemed to be included in respect of every such
grant a provision requiring that future interest to vest within the
Perpetuity Period;
2.8 any reference to a clause or schedule shall mean a clause or schedule
of this Lease;
2.9 any reference to the masculine gender shall include reference to the
feminine gender and any reference to the neuter gender shall include
the masculine and feminine genders and reference to the singular shall
include reference to the plural.
2.10 if any term or provision in this Lease shall be held to be illegal or
unenforceable in whole or in part, such term shall be deemed not to
form part of this Lease but the enforceability of the remainder of this
Lease shall not be affected;
3. DEMISE AND RENTS
THE Landlord in consideration of the rents herein reserved (including
the increases thereof as hereinafter provided) and the covenants on the
part of the Tenant and the conditions hereinafter contained HEREBY
DEMISES unto the Tenant the Demised Premises TOGETHER WITH the rights,
easements and privileges specified in the Third Schedule EXCEPTING AND
RESERVING the rights and easements specified in the Fourth Schedule
SUBJECT TO all rights, easements, quasi-easements, privileges,
covenants, restrictions and stipulations of whatsoever nature affecting
the Demised Premises TO HOLD the Demised Premises unto the Tenant from
and including the Term Commencement Date for the Term YIELDING AND
PAYING unto the Landlord during the Term:-
3.1 yearly and proportionately for any fraction of a year, the Initial Rent
and Initial Licence Fee and from and including each Rent Review Date,
such yearly rent and yearly licence fee as shall become payable under
and in accordance with the provisions of the Fifth Schedule and in each
case to be paid (at the option of the Landlord, which said option may
be exercised on any number of occasions) either by standing
<PAGE> 12
order, direct debit, credit transfer or cheque by equal quarterly
payments in advance on the Quarterly Gale Days without any deduction,
set-off or counterclaim whatsoever; the first payment to be made on the
execution hereof and the same shall be the First Rental Payment;
3.2 a percentage or due proportion (equivalent to the same percentage or
due proportion of the Expenditure which is used to determine the
Service Charge) of all sums which the Landlord shall from time to time
pay for insuring the Building against the Insured Risks pursuant to
Clause 6.1. (including the whole of the sums which the Landlord shall
from time to time pay for insuring against loss of rent and the Service
Charge pursuant to Clause 6.1.6.), all such sums to be paid on demand
the first payment to be made on the execution hereof and to be such
amount as has been advised to the Tenant prior to the delivery of this
Lease;
3.3 the Service Charge to be paid on demand in accordance with Clause 8.
4. TENANT'S COVENANTS
The Tenant to the intent that the obligations may continue throughout
the Term HEREBY COVENANTS with the Landlord as follows:
4.1 RENTS
To pay the rents or increased rents reserved by this Lease and referred
to at paragraphs 3.1, 3.2 and 3.3 and any additional sums payable
herein at the times and in the manner herein prescribed for the payment
of same.
4.2 INTEREST ON ARREARS
Without prejudice to any other right, remedy or power herein contained
or otherwise available to the Landlord, if any of the rents reserved by
this Lease (whether formally demanded or not) or if any other sum of
money payable to the Landlord by the Tenant under this Lease shall
remain unpaid for more than fourteen days after the date when payment
was due, to pay interest thereon at the Prescribed Rate from and
including the date on which payment was due to the date of payment to
the Landlord (both before and after any judgment).
<PAGE> 13
4.3 OUTGOINGS
4.3.1 To pay and indemnify the Landlord against all existing and future
rates, taxes, duties, charges, assessments, impositions and outgoings
whatsoever (whether parliamentary, parochial, local or of any other
description and whether or not of a capital or non-recurring nature)
which now are or may at any time during the Term be charged, levied,
assessed or imposed upon or payable in respect of the Demised Premises
or upon the owner or occupier of them (excluding any tax payable by the
Landlord upon any of the rents herein received or occasioned by any
disposition of or dealing with the reversion of this Lease);
4.3.2 Pending a separate valuation of the Demised Premises the Tenant shall
discharge to the Landlord upon demand rates payable on the Demised
Premises upon a notional valuation of (pound sterling)650.00.
4.3.3 To pay all charges for electricity, gas (if any), water and other
services consumed in the Demised Premises, including any connection and
hiring charges and meter rents and to perform and observe all present
and future regulations and requirements of the electricity, gas and
water supply authorities or boards in respect of the supply and
consumption of electricity, gas and water on the Demised Premises and
to keep the Landlord indemnified against any breach thereof.
4.4 REPAIRS
4.4.1 To repair put and keep in good and substantial repair and condition the
Demised Premises and, as often as may be necessary, to rebuild,
reinstate or renew any part or parts of the Demised Premises (damage by
the Insured Risks excepted (other than in respect of any amount which
may be deducted or disallowed by the insurers pursuant to any excess
provision in the insurance policy upon settlement of any claim by the
Landlord) save to the extent that payment of the insurance moneys shall
be withheld by reason of any act, neglect or default of the Tenant or
the servants or agents of the Tenant or any undertenant or any person
under its or their control) and, as and when necessary, to replace any
of the Landlord's fixtures and fittings which may be
<PAGE> 14
or become beyond repair with new ones which are similar in type and
quality AND in case the Demised Premises or any part thereof shall be
destroyed or become ruinous and uninhabitable or incapable of
beneficial occupation or enjoyment by for or from any of the Insured
Risks the Tenant hereby absolutely waives and abandons its rights (if
any) to surrender this Lease under the provisions of Section 40 of the
1860 Act or otherwise.
4.5 DECORATIONS
4.5.1 In every Decoration Year and also in the last three months of
the Term (whether determined by effluxion of time or
otherwise) in a good and workmanlike manner to prepare and
decorate (with two coats at least of good quality paint) or
otherwise treat, as appropriate, all parts of the Demised
Premises required to be so treated and, as often as may be
reasonably necessary, to wash down all tiles, glazed bricks
and similar washable surfaces; such decorations and treatment
in the last year of the Term to be executed in such colours
and materials as the Landlord may reasonably require.
4.5.2 In every tenth year of the Term and in the last year thereof
(howsoever determined) to replace the ceiling finishes
including all suspended ceilings (if any) and light fittings
therein and to replace all carpeting in the Demised Premises
with carpeting of comparable quality to that included in the
demise and for the avoidance of doubt, the provisions of this
Clause 4.5.2 are additional to repairs from time to time
throughout the Term as set out at Clause 4.4.1.
4.6 CLEANING
To keep the Demised Premises in a clean and tidy condition AND at least
once in every month, to clean properly the inside of all windows and
window frames and all other glass in the Demised Premises.
4.7 YIELD UP
At the expiration or sooner determination of the Term quietly to yield
up the Demised Premises in such good and
<PAGE> 15
substantial repair and condition as shall be in accordance with the
covenants on the part of the Tenant herein contained and in any licence
or consent granted by the Landlord pursuant to the provisions of this
Lease and in case any of the Landlord's fixtures and fittings shall be
missing, broken damaged or destroyed to forthwith replace them with
others of a similar kind and of equal value and to remove from the
Demised Premises any moulding, sign, writing or painting of the name or
business of the Tenant or occupiers and if so required by the Landlord,
but not otherwise, to remove and make good to the original prevailing
condition, all alterations or additions made to the Demised Premises by
the Tenant including the making good of any damage caused to the
Demised Premises by the removal of the Tenant's fixtures, fittings,
furniture and effects.
4.8 RIGHTS OF ENTRY BY LANDLORD
To permit the Landlord with all necessary materials and appliances at
all reasonable times upon reasonable prior notice (except in cases of
emergency) to enter and remain upon the Demised Premises for any of the
following purposes:-
4.8.1 to view and examine the state and condition of the Demised
Premises and to take schedules or inventories of the
Landlord's fixtures;
4.8.2 to exercise any of the rights excepted and reserved by this
Lease;
4.8.3 for any other purpose connected with the interest of the
Landlord in the Demised Premises or the Building, including
but not limited to, valuing or disposing of any interest of
the Landlord.
4.9 TO COMPLY WITH NOTICES
Whenever the Landlord shall give written notice to the Tenant of any
defects, wants of repair or breaches of covenant, the Tenant shall
within sixty (60) days of such notice, or sooner if requisite, make
good and remedy the breach of covenant to the reasonable satisfaction
of the Landlord and if the Tenant shall fail within twenty-one (21)
days of such notice, or as soon as reasonably possible in the case of
emergency, to commence and then diligently and expeditiously to
continue to comply with such notice, the Landlord may enter the Demised
Premises and carry out or
<PAGE> 16
cause to be carried out all or any of the works referred to in such
notice and all costs and expenses thereby incurred shall be paid by the
Tenant to the Landlord on demand, and in default of payment, shall be
recoverable as rent in arrear.
4.10 DANGEROUS MATERIALS AND USE OF MACHINERY
4.10.1 Not to bring into the Building or keep in or on the Demised
Premises any article or thing which is or might become
dangerous, offensive, unduly combustible or inflammable,
radio-active or explosive or which might unduly increase the
risk of fire or explosion;
4.10.2 Not to keep or operate in the Demised Premises any machinery
which shall be unduly noisy or cause vibration or which is
likely to annoy or disturb the other tenants and occupiers of
the Building or of the Adjoining Property.
4.11 OVERLOADING FLOORS AND SERVICES
4.11.1 Not to overload the floors of the Demised Premises or suspend
any excessive weight from the roofs, ceilings, walls,
stanchions or structure of the Building and not to overload
the Utilities and Conduits in or serving the Building;
4.11.2 Subject to Clauses 4.10.2 and 4.11.1, not to install any
machinery, apparatus, equipment or installation (other than
standard office equipment) without first notifying and
advising the Landlord of the technical specifications thereof
and obtaining the Landlord's prior written consent.
4.11.3 Not to do anything which may subject the Demised Premises or
the Building or any parts thereof to any strain beyond that
which they are designed to bear with due margin for safety;
4.11.4 to observe the weight limits and capacity prescribed for all
lifts in the Building.
4.12 CONDUITS
Not to discharge into any Conduits any oil or grease or any noxious or
deleterious effluent or substance whatsoever
<PAGE> 17
which may cause an obstruction or might be or become a source of
danger, or which might injure the Conduits or the drainage system of
the Building or the Adjoining Property.
4.13 DISPOSAL OF REFUSE
Not to deposit in or on the Common Parts any trade empties, rubbish or
refuse of any kind, other than in proper receptacles, provided for the
purpose or as may be designated by the Landlord and not to burn any
rubbish or refuse on the Demised Premises.
4.14 OBSTRUCTION OF COMMON PARTS
Not to do anything whereby the Common Parts or other areas over which
the Tenant may have rights of access or use may be damaged, or the fair
use thereof by others may be obstructed in any manner whatsoever AND
not to park any vehicles of any description upon any road or open area
within the curtilage of the Building.
4.15 PROHIBITED USERS
4.15.1 Not to use the Demised Premises or any part thereof for any
public or political meeting, public exhibition or public
entertainment show or spectacle of any kind, nor for any
dangerous, noisy, noxious or offensive trade, business or
occupation whatsoever, nor for any illegal or immoral purpose,
nor for residential or sleeping purposes;
4.15.2 Not to use the Demised Premises or any part thereof for
gambling, betting, gaming or wagering, or as a betting office,
or as a club, or for the sale of beer, wines and spirits, and
not to play or use any musical instrument, record player, loud
speaker or similar apparatus in such a manner as to be audible
outside the Demised Premises, and not to hold any auction on
the Demised Premises;
4.15.3 Not to place outside the Demised Premises, nor to expose from
the windows of the Demised Premises, any articles, goods or
things of any kind.
4.16 USER
<PAGE> 18
4.16.1 Not without the prior written consent of the Landlord (which
consent shall not be unreasonably withheld) to use the Demised
Premises or any part thereof except for the Permitted User
4.16.2 Not to leave the Demised Premises continuously unoccupied
(other than for normal holiday periods) without notifying the
Landlord and providing such caretaking or security
arrangements as the Landlord shall reasonably require in order
to protect the Demised Premises from vandalism, theft or
unlawful occupation;
4.16.3 At all times to comply with all requirements of the relevant
Local Authority in connection with the user of the Demised
Premises for the purpose of the Tenant's business;
4.16.4 to provide the Landlord with the name, address and home
telephone number of at least two authorised key holders for
the time being of the Demised Premises and to notify the
Landlord of any changes in the person(s) so authorised as
keyholders of the Demised Premises;
4.17 NUISANCE
Not to do anything in or about the Demised Premises or the Building
which may be or become a nuisance, or which may cause damage,
annoyance, inconvenience or disturbance to the Landlord or the other
tenants in the Building or the owners, tenants or occupiers of the
Adjoining Property, or which may be injurious to the value, tone,
amenity or character of the Building.
4.18 ALTERATIONS
4.18.1 Not to make any alterations or additions to the Landlord's
fixtures or to any of the Conduits without obtaining the prior
written consent of the Landlord (such consent not to be
unreasonably withheld);
4.18.2 Not to make any alterations or additions of a non-structural
nature to the Demised Premises without obtaining the prior
written consent of the Landlord, (such consent not to be
unreasonably withheld), PROVIDED ALWAYS that the Tenant shall
be permitted to install in the Demised Premises from time
<PAGE> 19
to time non-structural partitions of a de-mountable nature
without the requirement for Landlord's prior written consent
Provided However that same shall be removed forthwith upon the
Landlord's request or at the expiration or sooner
determination of the Term the Tenant making good any damage
caused by the erection and removal of such partitions;
4.18.3 The Landlord may, as a condition of giving any such consent,
require the Tenant to enter into such covenants, as the
Landlord shall require, regarding the execution of any such
works and the reinstatement of the Demised Premises at the end
or sooner determination of the Term.
4.18.4 If any alterations or additions to or within the Demised
Premises result in a variation of the reinstatement cost of
the Demised Premises from the said cost prior to such
alterations or additions;
4.18.4.1 Forthwith to give notice in writing to the Landlord of
the variation in value so caused to enable the
Landlord to alter the insurance cover in respect of
the Demised Premises;
4.18.4.2 To pay or reimburse to the Landlord any shortfall of
insurance cover caused by a failure to comply with the
requirements in Sub-Clause 4.18.4.1;
4.18.4.3 Notice under Sub-Clause 4.18.4.1 notifying the
variation of the reinstatement cost shall only be
sufficient notice if it refers to the Sub-Clause in
question and the Landlord shall not otherwise be
deemed to have received such notice or to be
responsible for varying the said insurance cover.
4.19 SIGNS, ADVERTISEMENTS AND BLINDS
4.19.1 Not to erect or display on the exterior of the Demised
Premises or in the windows thereof so as to be visible from
the exterior, any pole, flag, aerial, advertisement poster,
notice or other sign or thing whatsoever, save that the Tenant
may display on the entrance door to the Demised Premises a
sign stating the Tenant's name and business or profession on
obtaining the prior written consent of the Landlord to the
size, style and the position thereof and the materials to be
used (such consent not to be unreasonably withheld).
<PAGE> 20
4.19.2 Not to install any blind or blinds in the windows of the
Demised Premises other than such as shall be approved in
writing by the Landlord.
4.20 ALIENATION
Not to assign, transfer, underlet, mortgage, charge or part with the
possession or occupation of the Demised Premises or any part thereof
or suffer any person to occupy the Demised Premises or any part
thereof as a licensee BUT SO THAT NOTWITHSTANDING the foregoing the
Landlord shall not unreasonably withhold its consent to an assignment
of the entire or to an underletting of the entire or part (which for
the avoidance of doubt shall mean an entire floor only and not part
thereof and such underletting of part shall be for a term of four
years and nine months only) of the Demised Premises to an assignee or
underlessee of good and sufficient financial standing and otherwise
reasonably acceptable to the Landlord subject always to the following
provisions or such of them as may be appropriate, that is to say:-
4.20.1 The Tenant shall prior to any such alienation as aforesaid
apply to the Landlord and give all reasonable information
concerning the proposed transaction and concerning the
proposed assignee, under-lessee or disponee as the Landlord
may require;
4.20.2 An assignee or underlessee shall be deemed to be of sufficient
financial standing if it or its Guarantor's pre-tax profit in
its audited accounts for the previous three financial years is
not less than 2-1/2 times the rents hereby reserved or if it
provides a guarantee of a bank licensed to carry on business
in Ireland in respect of 12 months rent and outgoings for any
period or period during the entire of the first 5 years of the
assignee's or underlessee's occupation of the Demised
Premises.
4.20.3 The Landlord's consent to any such alienation shall be in
writing and shall be given in such manner as the Landlord
shall decide and the Tenant shall pay the reasonable costs of
the Landlord in connection with the furnishing of such
consent;
4.20.4 In the case of an assignment to a limited liability company,
it shall be deemed reasonable for the Landlord to require that
two sureties satisfactory to the Landlord shall join in such
consent as aforesaid as sureties for such Company in order
jointly and severally to covenant with the Landlord in the
manner
<PAGE> 21
described in the guarantee contained in the Sixth Schedule
(mutatis mutandis) and where necessary such guarantee shall
contain provisions similar to those in Clause 7.10.1 to 7.10.5
inclusive; Provided however that if the assignee or
underlessee provides a bank guarantee in accordance with the
provisions of Clause 4.20.2 above no further guarantees or
sureties shall called for;
4.20.5 In the case of an under-lease the same shall be of the entire
of the Demised Premises and the same shall be made without
taking a fine or premium at the then current market rent or at
the rent payable hereunder at the time of the granting of such
under-lease (whichever is the higher) and the under-lessee
shall, if required by the Landlord, enter into a direct
covenant with the Landlord to perform and observe all the
covenants (other than that for payment of the rents hereby
reserved) and conditions herein contained and every such
under-lease shall also be subject to the following conditions,
that is to say that it shall contain:-
4.20.5.1 provisions for the review of the rent thereby reserved
(which the Tenant hereby covenants to operate and
enforce) on an upwards only basis corresponding both
as to terms and dates and in all other respects
(mutatis mutandis) with the rent review provisions
contained in this Lease;
4.20.5.2 a covenant, condition or proviso under which the rent
from time to time payable under such under-lease shall
not be less than the rent from time to time payable
hereunder;
4.20.5.3 a covenant by the undertenant (which the Tenant hereby
covenants to enforce) prohibiting the undertenant from
doing or suffering any act or thing upon or in
relation to the Demised Premises inconsistent with, or
in breach of, the provisions of this Lease;
4.20.5.4 a condition for re-entry on breach of any covenant by
the undertenant;
4.20.5.5 the same restrictions as to alienation, assignment,
underletting, parting with or sharing the possession
or occupation of the premises underlet;
4.20.6 To enforce at the Tenant's own expense the
<PAGE> 22
performance and observance by every such undertenant of the
covenants, provisions and conditions of the under-lease and
not, at any time, either expressly or by implication, to
waive any breach of the same;
4.20.7 Not to agree any reviewed rent with the undertenant or any
rent payable on any renewal thereof without the prior
written consent of the Landlord (such consent not to be
unreasonably withheld);
4.20.8 Not to vary the terms or accept any surrender of any
permitted under-lease without the prior written consent of
the Landlord, such consent not to be unreasonably withheld;
4.20.9 As long as the Tenant is Visio International Limited, the
original tenant in the within Lease the Tenant may permit a
Company within the Visio group of companies to occupy the
whole or part of the Demised Premises as a licencee only or
if as a tenant the tenancy shall be for a term of not more
than four years and nine months.
4.20.10 Any such licence or tenancy as referred to in Clause 4.20.9
shall be subject to the Landlord's prior written consent
which shall not be unreasonably withheld or delayed.
4.21 REGISTRATION OF DISPOSITIONS
Within twenty-one (21) days of every alienation, assignment, transfer,
assent, under-lease, assignment of under-lease, mortgage, charge
(including lodgment of the relevant document or instrument as
security) or any other disposition, whether mediate or immediate, of
or relating to the Demised Premises or any part thereof, to produce to
and leave with the Landlord or its solicitors a certified copy of the
deed, instrument or other document evidencing or effecting such
disposition and to pay to the Landlord's solicitors their reasonable
legal costs and other expenses in connection with such alienation.
4.22 DISCLOSURE OF INFORMATION
Upon making any application or request in connection with the Demised
Premises or this Lease, to disclose to the Landlord such information
as the Landlord may reasonably require and, whenever the Landlord
shall reasonably request, to supply full particulars;
<PAGE> 23
4.22.1 of all persons in actual occupation or possession of the
Demised Premises and of the right in which they are in such
occupation or possession, and
4.22.2 of all persons having an interest in the Demised Premises
(other than in the reversion to the Term).
4.22.3 upon any change of name of the Tenant, being a company, to
furnish to the Landlord a certified copy of the Certificate
of Incorporation on Change of Name.
4.23 LANDLORD'S COSTS
To pay and indemnify the Landlord against all reasonable costs, fees,
charges, disbursements and expenses properly incurred by the Landlord,
including, but not limited to, those payable to solicitors, counsel,
architects, surveyors and sheriffs
4.23.1 in relation to the preparation and service of a notice
under Section 14 of the 1881 Act and of any proceedings
under the 1881 Act and/or the 1860 Act (whether or not any
right of re-entry or forfeiture has been waived by the
Landlord or a notice served under Section 14 of the 1881
Act has been complied with by the Tenant and
notwithstanding that forfeiture has been avoided otherwise
than by relief granted by the Court);
4.23.2 in relation to the preparation and service of all notices
and schedules relating to wants of repair, whether served
during or after the expiration of the Term (but relating in
all cases only to such wants of repair that accrued not
later than the expiration or sooner determination of the
Term);
4.23.3 in connection with the recovery or attempted recovery of
arrears of rent or other sums due from the Tenant, or in
procuring the remedying of the breach of any covenant by
the Tenant;
4.23.4 in relation to any application for consent required or made
necessary by this Lease whether or not the same is granted
(except in cases where the Landlord is obliged not to
unreasonably withhold its consent and the withholding of
its consent is held to be unreasonable), or whether or not
the application has been withdrawn;
<PAGE> 24
4.23.5 In relation to any application made by the Landlord at the
request of the Tenant and whether or not such application
is accepted, refused or withdrawn.
4.24 STATUTORY REQUIREMENTS
4.24.1 At the Tenant's own expense, to comply in all respects with
the provisions of all Acts, Statutory Instruments, Bye Laws
and other regulations now in force or which may hereafter
be in force and any other obligations imposed by law
relating to the Demised Premises or the user thereof;
4.24.2 To execute all works and provide and maintain all
arrangements upon or in respect of the Demised Premises or
the user thereof, which are directed or required (whether
by the Landlord, Tenant or occupier) by any statute now in
force or which may hereafter be in force or by any
government department, local or other competent authority
or duly authorised officer or court of competent
jurisdiction acting under or in pursuance of any statute
and to indemnify and keep the Landlord indemnified against
all costs, charges, fees and expenses of or incidental to
the execution of any works or the provision or maintenance
of any arrangements so directed or required;
4.24.3 Not to do in or near the Demised Premises, any act or thing
by reason of which the Landlord may, under any statute,
incur or have imposed upon it or become liable to pay any
penalty, damages, compensation, costs, charges or expenses.
4.25 PLANNING ACTS, BUILDING CONTROL ACT AND PUBLIC HEALTH ACTS
4.25.1 Not to do anything on or in connection with the Demised
Premises the doing or omission of which shall be a
contravention of the Planning Acts, the Building Control
Act or (if applicable) the Public Health Acts or of any
notices, orders, licences, consents, permissions and
conditions (if any) served, made, granted or imposed
thereunder and to indemnify (as well after the expiration
of the Term by effluxion of time or otherwise as during its
continuance) and keep indemnified the Landlord against all
actions,
<PAGE> 25
proceedings, damages, penalties, costs, charges, claims and
demands in respect of such acts and omissions or any of
them and against the costs of any application for planning
permission, commencement notices, fire safety certificates
and the works and things done in pursuance thereof;
4.25.2 In the event of the Landlord giving written consent to any
of the matters in respect of which the Landlord's consent
shall be required under the provisions of this Lease or
otherwise and in the event of permission or approval from
any local authority under the Planning Acts or the Building
Control Act or the Public Health Acts being necessary for
any addition, alteration or change in or to the Demised
Premises or for the change of user thereof, to apply, at
the cost of the Tenant, to the relevant local authority for
all approvals, certificates, consents and permissions which
may be required in connection therewith and to give notice
to the Landlord of the granting or refusal (as the case may
be) together with copies of all such approvals,
certificates, consents and permissions forthwith on the
receipt thereof and to comply with all conditions,
regulations, bye laws and other matters prescribed by any
competent authority either generally or specifically in
respect thereof and to carry out such works at the Tenant's
own expense in a good and workmanlike manner to the
satisfaction of the Landlord;
4.25.3 To give notice forthwith to the Landlord of any notice,
order or proposal for a notice or order served on the
Tenant under the Planning Acts or the Building Control Act
or the Public Health Acts and if so required by the
Landlord to produce the same and at the request of the
Landlord but at the cost of the Tenant, to make or join in
making such objections or representations in respect of any
proposal as the Landlord may require;
4.25.4 To comply at its own cost with any notice or order served
on the Tenant under the provisions of the Planning Acts or
the Building Control Act or the Public Health Acts;
4.25.5 Not to implement any planning permission before it and any
necessary fire safety certificates have been produced to
and approved in writing by the Landlord (such approval not
to be unreasonably withheld) PROVIDED THAT the Landlord may
refuse to approve such planning permission or fire safety
certificate on the grounds that any condition contained
<PAGE> 26
in it or anything omitted from it or the period referred to
in it would, in the reasonable opinion of the Landlord, be
or be likely to be, prejudicial to the Landlord's interest
in the Demised Premises.
4.25.6 To produce to the Landlord on demand all plans, documents
and other evidence as the Landlord may reasonably require
in order to satisfy itself that all of the provisions in
this covenant have been complied with.
4.26 STATUTORY NOTICES
Within fourteen(14) days of receipt of the same (or sooner if
requisite having regard to the requirements of the notice or order in
question or the time limits stated therein) to produce to the Landlord
a true copy and any further particulars required by the Landlord of
any notice or order or proposal for the same given to the Tenant and
relevant to the Demised Premises or the occupier thereof by any
government department or local or public or statutory authority, and,
without delay, to take all necessary steps to comply with the notice
or order in so far as the same is the responsibility of the Tenant,
and, at the request of the Landlord but at the cost of the Tenant, to
make or join with the Landlord in making such objection or
representation against or in respect of any such notice, order or
proposal as the Landlord shall deem expedient.
4.27 FIRE AND SAFETY PRECAUTIONS AND EQUIPMENT
4.27.1 To comply with the requirements and reasonable
recommendations (whether notified or directed to the
Landlord and then to the Tenant or directly to the Tenant)
of the appropriate local authority, the insurers of the
Building and the Landlord in relation to fire and safety
precautions affecting the Demised Premises;
4.27.2 Not to obstruct the access to or means of working any fire
fighting, extinguishing and other safety appliances for the
time being installed in the Demised Premises or in the
Building or the means of escape from the Demised Premises
or the Building in case of fire or other emergency.
4.28 ELECTRO-MAGNETIC COMPATIBILITY
To ensure that all electrical and electronic equipment located
<PAGE> 27
placed or installed in the Demised Premises is, insofar as it is
reasonably practicable and foreseeable to do so, located, placed or
installed and kept and maintained in such place and in such manner as
to avoid or minimize electromagnetic interference, including
malfunction in its own or in other electrical and electronic equipment
in the Building, including in particular (but without prejudice to the
generality of the foregoing), data transmission systems;
4.29 ENCROACHMENTS AND EASEMENTS
Not to stop up, darken or obstruct any of the windows or lights
belonging to the Demised Premises and not to permit any new window,
light, opening, doorway, passage, Conduit or other encroachment or
easement to be made or acquired into, upon or over the Demised
Premises or any part thereof, and in case any person shall attempt to
make or acquire any encroachment or easement whatsoever, to give
written notice thereof to the Landlord immediately the same shall come
to the notice of the Tenant, and, at the request of the Landlord but
at the cost of the Tenant, to adopt such means as may be reasonably
required by the Landlord for preventing any such encroachment or the
acquisition of any such easement.
4.30 RELETTING NOTICES
To permit the Landlord at all reasonable times during the last six (6)
months of the Term to enter upon the Demised Premises and affix and
retain without interference upon any suitable parts of the Demised
Premises (but not so as to materially affect the access of light and
air to the Demised Premises) notices for reletting the same and not to
remove or obscure the said notices and to permit all persons with the
written authority of the Landlord to view the Demised Premises at all
reasonable hours in the daytime, upon prior notice having been given.
4.31 INDEMNITY
4.31.1 To keep the Landlord fully indemnified from and against all
actions, proceedings, claims, demands, losses, costs,
expenses, damages and liability arising in any way directly
or indirectly out of any act, omission or negligence of the
Tenant or any persons in on or about the Demised Premises
expressly or impliedly with the Tenant's authority or the
user of the Demised Premises or any breach of the Tenant's
covenants or the conditions or other provisions contained
in this Lease;
<PAGE> 28
4.31.2 To effect and keep in force during the Term such public
liability, employer's liability and other policies of
insurance (to the extent that such insurance cover is
available) as may be necessary to cover the Tenant against
any claim arising under this covenant and to extend such
policies of insurance so that the Landlord is indemnified
by the insurers in the same manner as the Tenant AND
whenever required to do so by the Landlord, to produce to
the Landlord the said policy or policies together with
satisfactory evidence that the same is/are valid and
subsisting and that all premiums due thereon have been
paid.
4.32 LANDLORD'S REGULATIONS
To comply with all reasonable regulations made by the Landlord from
time to time and notified to the Tenant in writing for the general
management and security of the Building and any other areas used or to
be used in common with others.
4.33 STAMP DUTY AND VALUE ADDED TAX
To pay to the Landlord the stamp duty payable on this Lease and the
counterpart thereof and to pay and indemnify the Landlord against any
Value Added Tax payable on the delivery hereof or on the rents
reserved herein.
5. LANDLORD'S COVENANTS
The Landlord HEREBY COVENANTS with the Tenant as follows:-
5.1 QUIET ENJOYMENT
That the Tenant paying the rents reserved by this Lease and performing
and observing the covenants on the part of the Tenant herein
contained, shall and may peaceably hold and enjoy the Demised Premises
during the Term without any interruption by the Landlord or any person
lawfully claiming through,under, or in trust for it.
5.2 PROVISION OF SERVICES
<PAGE> 29
Subject to reimbursement by the Tenant of the Service Charge, to use
all reasonable endeavours to provide the following services in
accordance with the principles of good estate management:-
5.2.1 REPAIRS
To keep the Retained Parts in good repair and condition;
5.2.2 COMMON PARTS
To keep clean and maintained in a proper manner, the Common
Parts including the outside windows thereof and to keep
same adequately lighted, where appropriate, during the
Business Hours;
5.2.3 LIFTS
During the Business Hours, to provide a lift service by the
operation of the lifts now installed or by such substituted
lifts as the Landlord, in its absolute discretion, may from
time to time decide to install;
5.2.4 HEATING
During the Business Hours, to provide heating to the
Demised Premises and the Common Parts to such temperatures
as the Landlord may, from time to time, consider adequate
and for such periods of the year as the Landlord shall deem
desirable;
5.2.5 STAFF
To employ such staff as the Landlord may, in its absolute
discretion, deem desirable or necessary to enable it to
provide all or any of the services in the Building and for
the general management and security of the Building;
5.2.6 NAME BOARDS
To provide and install name boards of such size and design
as the Landlord may, in its absolute discretion, determine
in the main entrance to the Building and at
<PAGE> 30
such other locations as the Landlord may consider
desirable;
5.2.7 OPEN AREAS
To repair and maintain those parts of the Building which
are not built upon and to keep the same clear of all
rubbish and free from weeds and to provide and maintain, at
the Landlord's discretion, such plants, shrubs, trees or
garden or grassed areas as may be appropriate and to keep
the same planted and the grass cut.
5.2.8 OTHER SERVICES
Any other services which in the reasonable opinion of the
Landlord are necessary or desirable from time to time in
accordance with the principles of good estate management
for the comfort convenience and security of the tenants,
occupiers and users of the Building or any part or parts
thereof;
6. INSURANCE
6.1 LANDLORD TO INSURE
Subject to the Landlord being able to effect insurance against any one
or more of the items referred to in this sub-clause and subject to
reimbursement by the Tenant of the sums referred in paragraph 3.2 of
the reddendum, the Landlord covenants with the Tenant to insure the
following in the name of the Landlord:-
6.1.1 the Building against loss or damage by the Insured Risks in
the full reinstatement cost thereof (to be determined from
time to time by the Landlord or his Surveyor or
Professional Adviser) including;
6.1.2 Architects, Surveyors, Consultants and other professional
fees (including Value Added Tax thereon);
6.1.3 the costs of shoring up, demolishing, site clearing and
similar expenses;
6.1.4 all stamp duty and other taxes or duties exigible on any
<PAGE> 31
building or like contract as may be entered into and all
other incidental expenses relative to the reconstruction,
reinstatement or repair of the Building;
6.1.5 such provision for inflation as the Landlord in its
absolute discretion shall deem appropriate;
6.1.6 the loss of rent and the Service Charge, from time to time
payable, or reasonably estimated to be payable under this
Lease (taking account of any review of the rent which may
become due under this Lease) following loss or damage to
the Building by the Insured Risks, for four (4) years or
such longer period as the Landlord may, from time to time,
reasonably deem to be necessary, having regard to the
likely period required for obtaining planning permission
and bye law approval (if applicable) and any other consents
and approvals for reinstating the Building;
6.1.7 property owners, public, employer's, all necessary
engineering insurances and other liability of the Landlord
arising out of or in relation to the Building; and
6.1.8 such other insurances as the Landlord may, in its
discretion from time to time, deem necessary to effect.
6.2 LANDLORD TO PRODUCE EVIDENCE OF INSURANCE
6.2.1 At the request of the Tenant, the Landlord shall and hereby covenants
with the Tenant to produce to the Tenant reasonable evidence from the
insurers of the terms of the insurance policy/policies and the fact
that the policy/policies is subsisting and in effect.
6.2.2 The Landlord shall use all reasonable endeavours:
(i) to procure a waiver from its insurers of all subrogation
rights against the Tenant in respect of damage caused or
contributed to by the Tenant in respect of the Demised
Premises;
(ii) a letter from its insurers confirming that it will give the
Tenant twenty eight days prior written notice of any lapse
in the policy;
6.3 DESTRUCTION OF THE DEMISED PREMISES
<PAGE> 32
If the Building or any part thereof is destroyed or damaged by any of
the Insured Risks so as to render the Demised Premises unfit for use
and occupation then:-
6.3.1 unless payment of the insurance moneys shall be refused in
whole or in part by reason of any act neglect or default of
the Tenant or the servants agents licensees or invitees of
the Tenant or any under-tenant or any person under its or
their control; and
6.3.2 subject to the Landlord being able to obtain any necessary
planning permission and fire safety certificates and all
other necessary licences, approvals and consents (in
respect of which the Landlord shall use its reasonable
endeavours to obtain without delay); and
6.3.3 subject to the necessary labour and materials being and
remaining available (in respect of which the Landlord shall
use its reasonable endeavours to obtain as soon as
practicable);
the Landlord shall lay out the proceeds of such insurance, (other than
any in respect of the loss of rent and Service Charge) in the
rebuilding and reinstating of the Building or the part or parts
thereof so destroyed or damaged, substantially as the same were prior
to any such destruction or damage (but not so as to provide
accommodation identical in layout and manner or method of construction
if it would not be reasonably practical to do so).
6.4 WHERE REINSTATEMENT IS PREVENTED
If the Landlord is prevented (for whatever reason) from rebuilding or
reinstating the Demised Premises or the Building, the Landlord shall
be relieved from such obligation and shall be solely entitled to all
the insurance moneys and if such rebuilding and reinstating shall
continue to be so prevented for four (4) years after the date of the
destruction or damage and this Lease has not been terminated by
frustration, either the Landlord or the Tenant may at any time after
the expiry of such four (4) years by written notice given to the
Tenant or the Landlord as the case may be determine this demise but
without prejudice to any claim by either party against the other in
respect of any antecedent breach of covenant.
6.5 CESSER OF RENT AND SERVICE CHARGE
<PAGE> 33
In case the Building or any part or parts thereof shall be destroyed
or damaged by any of the Insured Risks so as to render the Demised
Premises unfit for use and occupation and the insurance shall not have
been vitiated or payment of the policy moneys refused in whole or in
part as a result of some act or default of the Tenant or any
under-tenant or any person under its or their control, then the rent
first reserved by this Lease and the Service Charge or a fair
proportion thereof, according to the nature and extent of the damage
sustained, shall be suspended until the Demised Premises or the part
destroyed or damaged shall be again rendered fit for beneficial use
and occupation and accessible or until the expiration of four (4)
years from the date of the destruction or damage (whichever is the
earlier) and any dispute regarding the cesser of rent shall be
referred to a single arbitrator to be appointed, in default of
agreement, upon the application of either party, by or on behalf of
the President (or other officer endowed with the functions of such
President) for the time being of the Society of Chartered Surveyors in
accordance with the provisions of the Arbitration Acts 1954 to 1980.
6.6 INSURANCE BECOMING VOID
The Tenant shall not do or omit to do anything that could cause any
policy of insurance in respect of or covering the Demised Premises or
the Building or such of any Adjoining Property as may be owned by the
Landlord to become void or voidable wholly or in part nor (unless the
Tenant has previously notified the Landlord and agreed to pay the
increased premium) do anything whereby any abnormal or loaded premium
may become payable and the Tenant shall, on demand, pay to the
Landlord all expenses incurred by the Landlord in renewing any such
policy.
6.7 NOTICE BY TENANT
The Tenant shall give notice to the Landlord forthwith upon the
happening of any event or thing which might affect any insurance
policy relating to the Demised Premises or (in so far as the Tenant
may be aware) the Building.
7. PROVISOS
PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:-
<PAGE> 34
7.1 FORFEITURE
Without prejudice to any other right, remedy or power herein contained
or otherwise available to the Landlord:-
7.1.1 if the rents reserved by this Lease or any part or parts
thereof shall be unpaid for twenty one (21) days after
becoming payable (whether formally demanded or not); or
7.1.2 if any of the covenants by the Tenant contained in this Lease
shall not be performed or observed; or
7.1.3 if the Tenant and/or the Guarantor (either or both being a
body corporate) has a winding-up petition presented against it
or passes a winding-up resolution (other than in connection
with a members' voluntary winding up for the purposes of an
amalgamation or reconstruction which has the prior written
approval of the Landlord) or resolves to present its own
winding-up petition or is wound-up (whether in Ireland or
elsewhere) or a Receiver and Manager is appointed in respect
of the Demised Premises or any part thereof or of the Tenant
or the Guarantor; or
7.1.4 if the Tenant and/or the Guarantor (either or both being an
individual, or if more than one individual, then any one of
them) has a bankruptcy petition presented against him or is
adjudged bankrupt (whether in Ireland or elsewhere) or suffers
any distress or execution to be levied on the Demised Premises
or enters into composition with his creditors or shall have a
receiving order made against him,
THEN, and in any such case, the Landlord may at any time thereafter
re-enter the Demised Premises or any part thereof in the name of the
whole and thereupon the Term shall absolutely cease and determine but
without prejudice to any rights or remedies which may then have accrued
to the Landlord against the Tenant in respect of any antecedent breach
of any of the covenants or conditions contained in this Lease.
7.2 NO IMPLIED EASEMENTS
Nothing herein contained shall impliedly confer upon or grant to the
Tenant any easement, right or privilege other than those expressly
granted by this Lease.
<PAGE> 35
7.3 EXCLUSION OF WARRANTY AS TO USER
7.3.1 Nothing contained in this Lease or in any consent granted by the
Landlord under this Lease shall imply or warrant that the Demised
Premises may be used under the Planning Acts or the Building Control
Act and the Public Health Acts for the purpose herein authorised or any
purpose subsequently authorised and the Tenant hereby acknowledges and
admits that the Landlord has not given or made at any time any
representation or warranty that any such use is or will be or will
remain a permitted use under the Planning Acts;
7.3.2 The Landlord hereby warrants that at the date of the granting of this
Lease that the Demised Premises comply with the Fire Officer's
requirements and with building bye-laws.
7.4 REPRESENTATIONS
The Tenant acknowledges that this Lease has not been entered into in
reliance wholly or partly on any statement or representation made by or
on behalf of the Landlord, except any such statement or representation
that is expressly set out in this Lease.
7.5 USE OF DEMISED PREMISES OUTSIDE BUSINESS HOURS
If the Tenant shall desire, from time to time, to use the Demised
Premises outside the Business Hours, then (subject to the Landlord
being able to provide such staff, services and security for the
Building, as the Landlord may, in its absolute discretion, consider
necessary or desirable) the Tenant shall be entitled to use and occupy
the Demised Premises and have access thereto on the following terms and
conditions:-
7.5.1 the Tenant on each occasion shall make prior arrangements with
the Landlord or with the Surveyor or caretaker and shall
comply with any reasonable requirements as to the use and
occupation of the Demised Premises and the means of access
thereto;
7.5.2 the Tenant shall pay to the Landlord, on demand, the whole of
the costs and expenses attributable to the provision of any
staff, services and security;
7.5.3 the Landlord shall not be obliged to provide any services to
the Demised Premises or the Building if the Landlord shall, at
any time in its absolute discretion, consider it impractical
to do so.
<PAGE> 36
7.6 FAILURE BY LANDLORD TO PROVIDE SERVICES
The Landlord shall not be liable to the Tenant in respect of any
failure by the Landlord to perform any of the services referred to in
this Lease, whether express or implied, unless and until the Tenant has
notified the Landlord of such failure and the Landlord has failed
within a reasonable time to remedy the same and then in such case the
Landlord shall (subject to the provisions of Clause 7.7 below) be
liable to compensate the Tenant only for actual (but not consequential)
loss or damage sustained by the Tenant after such reasonable time has
elapsed.
7.7 EXCLUSION OF LANDLORD'S LIABILITY
The Landlord shall not, in any circumstances, incur any liability for
any failure or interruption in any of the services provided by the
Landlord or for any inconvenience or injury to person or property
arising from such failure or interruption due to mechanical breakdown,
failure or malfunction, overhauling, maintenance, repair or
replacement, strikes, labour disputes shortages of labour or materials,
inclement weather or any cause or circumstance beyond the control of
the Landlord but the Landlord shall use its reasonable endeavours to
cause the service in question to be reinstated with the minimum of
delay.
7.8 COVENANTS RELATING TO ADJOINING PROPERTY
Nothing contained in or implied by this Lease shall give to the Tenant
the benefit of or the right to enforce or to prevent the release or
modification of any covenant, agreement or condition entered into by
any tenant of the Landlord in respect of the Adjoining Property.
7.9 EFFECT OF WAIVER
Each of the Tenant's covenants shall remain in full force both at law
and in equity notwithstanding that the Landlord shall have waived or
released temporarily any such covenant, or waived or released
temporarily or permanently, revocably or irrevocably a similar covenant
or similar covenants affecting other property belonging to the
Landlord.
7.10 APPLICABLE LAW
7.10.1 This Lease shall in all respect be governed by and
<PAGE> 37
interpreted in accordance with the laws of Ireland;
7.10.2 For the benefit of the Landlord, both the Tenant and the
Guarantor hereby irrevocably agree that the Courts of Ireland
are to have jurisdiction to settle any disputes which may
arise out of or in connection with this Lease and that
accordingly any suit, action, or proceedings (together in this
Clause referred to as "proceedings") arising out of or in
connection with this Lease may be brought in such Courts;
7.10.3 The Tenant and the Guarantor hereby irrevocably waive any
objection which they or either of them may have now or
hereafter to the taking of any proceedings in any such Court
as is referred to in this Clause and any claim that any such
proceedings have been brought in an inconvenient forum and
further irrevocably agree that any judgment in any proceedings
brought in the Courts of Ireland shall be conclusive and
binding upon them and may be enforced in the courts of any
other jurisdiction;
7.10.4 Nothing contained in this clause shall limit the right of the
Landlord to take proceedings against the Tenant and/or the
Guarantor in any other Court of competent jurisdiction nor
shall the taking of proceedings in one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction
whether concurrently or not;
7.10.5 The Tenant and the Guarantor hereby jointly and severally
agree that the proceedings may be served upon the Tenant and
or the Guarantor by delivery at the Demised Premises or at
such other address in Ireland as the Tenant and/or the
Guarantor (as the case may be) may from time to time notify to
the Landlord in writing for this purpose.
7.11 NOTICES
7.11.1 Any demand or notice required to be made, given to, or served
on the Tenant or the Guarantor under this Lease shall be duly
and validly made, given or served if addressed to the Tenant
or the Guarantor respectively (and, if there shall in either
case be more than one of them, then to any one of them) and
sent by pre-paid registered or recorded delivery mail, or sent
by telex or telegraphic facsimile transmission addressed (in
the case of a company) to its registered office, or (whether a
company or individual) to its last known address, or
<PAGE> 38
(in the case of a notice to the Tenant and/or the Guarantor)
to the Demised Premises;
7.11.2 Any notice required to be given to or served on the Landlord
shall be duly and validly given or served if sent by pre-paid
registered or recorded delivery mail, or sent by telex
telegraphic facsimile transmission addressed to the Landlord
at its registered office;
7.12 DISPUTES WITH ADJOINING OCCUPIERS
Any dispute arising between the Tenant and other tenants or occupiers
of the Building relating to any easement, quasi-easement, right,
privilege or Conduit in connection with the Demised Premises or the
Building shall be fairly and reasonably determined by the Landlord.
8. SERVICE CHARGE
8.1 For the purpose of this Lease, the following expressions shall have the
following meanings:-
8.1.1 "EXPENDITURE" means:
8.1.2 the aggregate of all costs, fees, expenses and outgoings
whatsoever incurred by the Landlord in complying with its
obligations in Clause 5.2 and in respect of the items set out
in the Seventh Schedule (whether or not the Landlord is
obliged by this Lease to incur the same);
8.1.3 such sums as the Landlord shall, in its absolute discretion,
consider desirable to set aside from time to time for the
purpose of providing for periodically recurring items of
expenditures, whether recurring at regular or irregular
intervals;
8.1.4 such provision for anticipated expenditure in respect of any
of the services to be provided by the Landlord or any of the
items referred to in the Seventh Schedule as the Landlord
shall, in its absolute discretion, consider fair and
reasonable in the circumstances;
8.1.5 "FINANCIAL YEAR" means the period from the 1st day of October
in every year to the 30th day of September the following year
or such other period as the Landlord may, in its absolute
discretion, from time to time
<PAGE> 39
reasonably determine;
8.1.6 "ESTIMATED EXPENDITURE" means for any Financial Year during
the Term, such sum as the Landlord shall, from time to time,
specify as being, in its absolute discretion, a fair and
reasonable estimate of the Expenditure for the current
Financial Year based upon a budget prepared by the Landlord
and submitted to the Tenant Provided That the Landlord may
from time to time during any Financial Year, as appropriate,
submit to Tenant revised budgets with respect to its estimate
of the Expenditure for that Financial Year whereupon
appropriate adjustments shall be made to such sum to reflect
the revised budget(s);
8.1.7 "ACCOUNTANT" means any person being a qualified chartered or
certified accountant appointed by the Landlord (including an
employee of the Landlord) to perform the function of an
accountant in relation to the Expenditure;
8.2 The Landlord shall, as soon as convenient after the end of each
Financial Year, prepare an account showing the Expenditure for that
Financial Year and containing a fair summary of the various items
comprising the Expenditure and, upon such account being certified by
the Surveyor or Accountant (a copy of which shall be supplied to the
Tenant), the same shall save in the case of manifest error be
conclusive evidence, for the purposes of this Lease, of all matters of
fact referred to in the account;
8.3 The Tenant shall pay to the Landlord on account of the Service Charge
for the period commencing on the Service Charge Commencement Date down
to the end of the following Financial Year and thereafter during each
subsequent Financial Year during the Term the same percentage of the
Estimated Expenditure ("the Advance Payment") as that upon which the
Service Charge is calculated and such payments shall be made by equal
quarterly payments in advance on the Quarterly Gale Days (subject to
adjustment if the Estimated Expenditure is revised as contemplated by
the definition thereof) Provided Always that the first portion of the
Advance Payment shall be a proportionate part of the first quarterly
payment of the Advance Payment as notified to the Tenant prior to
delivery of this Lease and shall be payable on the execution hereof in
respect of the period from and including the Service Charge
Commencement Date to the day before the Quarterly Gale Day following
the Service Charge Commencement Date;
<PAGE> 40
8.4 If the Service Charge for any Financial Year shall:-
8.4.1 exceed the Advance Payment for that Financial year, the excess
shall be paid by the Tenant to the Landlord on demand; or
8.4.2 be less than the Advance Payment for that Financial Year, the
overpayment shall be credited to the Tenant against the next
quarterly payment of the Service Charge.
8.5 Any omission by the Landlord to include in any Financial Year a sum
expended or a liability incurred in that Financial Year shall not
preclude the Landlord from including such sum or the amount of such
liability in any subsequent Financial Year, as the Landlord shall
reasonably determine.
8.6 In performing its obligations contained in Clause 5.2, the Landlord
shall be entitled, at its discretion, to employ agents, contractors and
such other persons as it may think fit and to delegate its duties and
powers to them and their fees and expenses (including VAT) shall form
part of the Expenditure.
8.7 The Landlord may, at its discretion, withhold, add to, extend, vary or
make any alterations to any of the services from time to time if the
Landlord shall reasonably deem it desirable to do so for the more
efficient management, security and operation of the Building, or for
the comfort of the tenants in the Building.
8.8 The provisions of this clause shall continue to apply notwithstanding
the expiration or sooner determination of the Term but only in respect
of the period down to such expiration or sooner determination, the
Service Charge for that Financial Year being apportioned for the said
period on a daily basis.
9. THE GUARANTOR'S COVENANTS
In consideration of this demise having been made at its request, the
Guarantor HEREBY COVENANTS with the Landlord, as a primary obligation,
in the terms contained in the Sixth Schedule.
10. TERMINATION OF TERM
If the Tenant desires to determine this Lease upon the
<PAGE> 41
expiration of 10 years of the Term and gives not less than twelve
months prior notice in writing to the Landlord of its desire so to do
and up to such determination pays the Rent, Service Charge, Insurance
and other sums herein reserved and made payable and observes in all
material respects the covenants on its part in this Lease contained,
then immediately upon the expiration of the tenth year of the Term and
upon delivering up the Demised Premises together with fixtures and
fittings therein to the Landlord with vacant possession in a condition
consistent with full compliance with the Tenant's covenants herein this
Lease shall thereupon cease and determine subject to payment of a
penalty from the Tenant to the Landlord of six months rent but without
prejudice to the remedies of either party against the other in respect
of any antecedent breach of any of the covenants or conditions
contained in this Lease and if requested by the Landlord the Tenant
shall at its own expense execute a formal Deed of Surrender hereof
PROVIDED ALWAYS that the provisions of this clause 5.20 shall be
personal to Visio International Limited as tenant set out herein and
shall not enure to the benefit of any third party.
11. SECTION 45 LAND ACT 1965
IT IS HEREBY CERTIFIED that the Demised Premises are situate in the
City of Dublin.
12. FINANCE ACT CERTIFICATES
12.1 IT IS HEREBY CERTIFIED that the transaction hereby effected does not
form part of a larger transaction or of a series of transactions in
respect of which the amount or value or the aggregate amount or value
of the consideration (other than rent) exceeds IR(pound sterling)
5,000.00;
12.2 IT IS HEREBY FURTHER CERTIFIED for the purposes of the stamping of this
Instrument that this is an instrument to which the provisions of
Section 112 of the Finance Act 1990 do not apply for the reason that
the property being leased is an existing commercial premises.
13. ASSENT
The Landlord Hereby Assents to the registration of this Lease as a
burden on the property comprised in Folio 10719F of the Register County
Dublin AND HEREBY CONSENTS to the use
<PAGE> 42
of the Land Certificate (if issued) of the said Folio for the purposes
of such registration.
14. TENANT'S ADDRESS AND DESCRIPTION
The address of the Tenant in the State for service of notices and its
description are:
[ ]
IN WITNESS whereof the parties hereto have executed this Lease in the manner
following and on the day and year first herein WRITTEN.
<PAGE> 43
FIRST SCHEDULE
BUILDING
ALL THAT the entire of the lands and premises together with the
building erected thereon or on part or parts thereof comprised in Folio
10719F of the Register County Dublin shown outlined in blue on the Plan
numbered 1 annexed hereto and known as Fitzwilton House situate at
Wilton Terrace in the Parish of St. Peter and City of Dublin and
including without prejudice to the generality of the foregoing:
1. all Landlord's fixtures, fittings,plant, machinery apparatus and
equipment now or hereafter in or upon the same;
2. all Conduits in, upon, over, under or exclusively serving the Building;
and
3. all additions, alterations and improvements thereto.
<PAGE> 44
SECOND SCHEDULE
DEMISED PREMISES
* ALL THAT portion of the Building comprising the 9th and 10th
floors thereof and shown outlined in red on the Plans numbered
2A and 2B annexed hereto and including
1. the internal plaster surfaces and finishes of all structural
or load bearing walls and columns therein or which enclose the
same, but not any other part of such walls and columns;
2. the entirety of all non-structural or non-load bearing walls
and columns therein;
3. the inner half severed medially of the internal non-load
bearing walls (if any) that divide the same from other parts
of the Building;
4. the floor finishes thereof and all carpets save that the lower
limit of the Demised Premises shall not extend to anything
below the floor finishes except that raised floors and the
cavity below them shall be included;
5. the ceiling finishes thereof, including all suspended ceilings
and light fittings save that the upper limit of the Demised
Premises shall not extend to anything above the ceiling
finishes except that the cavity above any suspended ceilings
shall be included;
6. all window frames and window furniture and all glass in the
windows and all doors, door furniture and door frames;
7. all sanitary and hot and cold water apparatus and equipment
and the radiators (if any) therein and all fire fighting
equipment and hoses therein;
8. all Conduits therein and exclusively serving the same;
<PAGE> 45
THIRD SCHEDULE
RIGHTS AND EASEMENTS GRANTED
1. The right for the Tenant and all persons expressly or by implication
authorised by the Tenant (in common with the Landlord and all persons
having a like right) but subject to any existing or future regulations
made by the Landlord:-
1.1 to use such of the Common Parts as shall from time to time be
designated for the Tenant's use shown coloured yellow on the
Plan numbered 2 for all proper purposes in connection with the
use and enjoyment of the Demised Premises;
1.2 to use of the passenger lifts in the Building shown on the
Plan numbered 2 for the purpose only of obtaining access to
and egress from the Demised Premises;
2. The free passage and running of the Utilities (subject to temporary
interruption for repair, alteration or replacement) to and from the
Demised Premises through the Conduits which now are or may at any time
be in upon under, or through other parts of the Building, so far as any
of the same are necessary for the reasonable use and enjoyment of the
Demised Premises;
3. The right of support and protection for the benefit of the Demised
Premises as is now enjoyed from all other parts of the Building;
4.1 The right for the Tenant and the occupiers and other bona fide users of
the Demised Premises to use 12 Car Spaces marked/coloured green on the
Plan numbered 3 for the parking of private motor cars and for no other
purpose together with all necessary rights of access thereto and egress
therefrom over such route as the Landlord may, from time to time,
determine subject to any existing or future regulations made by the
Landlord and to the right of the Landlord from time to time, on giving
to the Tenant not less than one month's written notice, to alter the
position of the space or spaces and designate some other space or
spaces as the
<PAGE> 46
Landlord may, in its absolute discretion, determine.
4.2 The Tenant shall be a licensee only of the Car Spaces and accordingly
the right set out at Clause 4.1 of this Schedule shall not operate or
be deemed to operate either at law or in equity as a demise of the Car
Spaces or any of them or any alternative Car Space or Car Spaces that
may be substituted therefor.
<PAGE> 47
FOURTH SCHEDULE
EXCEPTIONS AND RESERVATIONS
The following rights and easements are excepted and reserved out of the Demised
Premises to the Landlord and the tenants and occupiers of the Building and all
other persons authorised by the Landlord or having the like rights and
easements:-
1. The free and uninterrupted passage and running of the Utilities through
the Conduits which are now, or may at any time during the Term be in,
on, under, or passing through or over the Demised Premises;
2. The right, at all reasonable times and where possible outside Business
Hours upon reasonable prior notice, except in cases of emergency, to
enter (or, in cases of emergency or after the giving of reasonable
written notice during the Tenant's absence, to break and enter) the
Demised Premises in order to:-
2.1 inspect, cleanse, maintain, repair, connect, remove, lay,
renew, relay, replace with others, alter or execute any works
whatever to or in connection with the Conduits and any other
services;
2.2 execute repairs, decorations, alterations and any other works
and to make installations to the Demised Premises, the
Building or the Adjoining Property or to do anything
whatsoever which the Landlord may or must do under this Lease;
2.3 see that no unauthorised erections additions or alterations
have been made and that authorised erections additions and
alterations are being carried out in accordance with any
consent given herein and any permission or approval granted by
the relevant local authority,
PROVIDED THAT the Landlord or the person exercising the foregoing
rights shall cause as little inconvenience as possible to the Demised
Premises and shall make good, without delay, any damage thereby caused
to the Demised Premises;
3. The right to erect scaffolding for the purpose of repairing
refurbishing or cleaning the Building and any building now or hereafter
erected on the Adjoining Property or in
<PAGE> 48
connection with the exercise of any of the rights mentioned in this
Schedule notwithstanding that such scaffolding may temporarily
interfere with the proper access to or the enjoyment and use of the
Demised Premises; Provided that should the exercise of this right
result in the temporary interference proper access to and/or the use
and enjoyment of the Car Spaces or any of them the Licence Fees
applicable to such car spaces shall be suspended until uninterrupted
access and enjoyment of such Car Spaces is restored to the Tenant;
4. The right to erect and maintain signs on the Demised Premises and on
the Building and any premises abutting the same advertising the sale or
letting of any premises or for the purpose of a planning or other
application in respect of the premises.
5. The rights of light, air, support, protection and shelter and all other
easements and rights now or hereafter belonging to or enjoyed by other
parts of the Building or the Adjoining Property;
6. Full right and liberty at any time hereafter to raise the height of, or
make any alterations or additions or execute any other works to the
Building or to any buildings on the Adjoining Property, or to erect any
new buildings of any height on the Adjoining Property in such a manner
as the Landlord or the person exercising the right shall think fit
notwithstanding the fact that the same may obstruct, affect or
interfere with the amenity of, or access to, the Demised Premises or
the passage of light and air to the Demised Premises but not so that
the Tenant's use and occupation thereof is materially affected;
Provided that should the exercise of this right result in the temporary
interference proper access to and/or the use and enjoyment of the Car
Spaces or any of them the Licence Fees applicable to such car spaces
shall be suspended until uninterrupted access and enjoyment of such Car
Spaces is restored to the Tenant;
7. The right to enter the Demised Premises (in times of emergency or
during fire-drills) for the purpose of obtaining access to, or using,
any of the fire escapes or routes of escape in the Building whether or
not in existence at the date hereof.
<PAGE> 49
FIFTH SCHEDULE
RENT REVIEWS
1. DEFINITIONS
In this Schedule, the following expressions shall have the following
meanings:-
1.1. "REVIEW DATE" means each of the Rent Review Dates specified in the
Particulars and "Relevant Review Dates" shall be construed accordingly;
1.2 "OPEN MARKET RENT" means the full open market rent without any
deductions whatsoever at which the Demised Premises might reasonably be
expected to be let in the open market with vacant possession at the
Relevant Review Date by a willing landlord to a willing tenant and
without any premium or any other consideration for the grant thereof
for a term equal to the unexpired residue of the Term at the Relevant
Review Date or a period of fifteen years, whichever is the longer and
otherwise on the same terms and conditions and subject to the same
covenants and provisions contained in this Lease (other than the amount
of the rent payable hereunder but including these provisions for the
review of rent) and having regard to other open market rental values
current at the Review Date in so far as the Surveyor (as defined in
Clause 1.5 of this Schedule) may deem same to be pertinent to the
matters under consideration by him and making the Assumptions but
disregarding the Disregarded Matters;
1.3 "THE ASSUMPTIONS" mean the following assumptions (if not facts) at the
Relevant Review Date:-
1.3.1 that the Demised Premises are ready and available for
immediate occupation and use by the Tenant and may be lawfully
used by any person for any of the purposes permitted by this
Lease;
1.3.2 that no work has been carried out to the Demised Premises by
the Tenant, any undertenant or their respective predecessors
in title during the Term, which has diminished the rental
value of the Demised Premises;
1.3.3 that if the Demised Premises or any part or parts of the
Building have been destroyed or damaged, they
<PAGE> 50
have been fully rebuilt and reinstated;
1.3.4 that the Demised Premises are in a good state of repair and
decorative condition;
1.3.5 that all the covenants on the part of the Tenant contained in
this Lease have been fully performed and observed.
1.4 "THE DISREGARDED MATTERS" mean:-
1.4.1 any effect on rent of the fact that the Tenant, any permitted
undertenant or their respective predecessors in title have
been in occupation of the Demised Premises or any part
thereof;
1.4.2 any goodwill attaching to the Demised Premises by reason of
the business then carried on at the Demised Premises by the
Tenant or any permitted undertenant;
1.4.3 any increase in rental value of the Demised Premises
attributable to the existence at the Relevant Review Date, of
any works (otherwise than in pursuance of an obligation under
this Lease or any agreement therefor) executed by and at the
expense of the Tenant (or any party lawfully occupying the
Demised Premises under the Tenant) with the consent of the
Landlord (where required under this Lease) in on or to the
Demised Premises or any part thereof;
1.4.4 any rent free concession, reduced rent or other inducement
which would or might be given to an incoming tenant on the
grant of a lease of the Demised Premises at the Relevant
Review Date to the intent that no reduction shall be made in
ascertaining the Open Market Rent to reflect such rent free
concession, reduced rent or other inducement to compensate the
Tenant for the absence thereof.
1.5 "THE SURVEYOR" means an independent chartered surveyor who is
experienced in the valuation and leasing of property similar to the
Demised Premises and is acquainted with the market in the area in which
the Demised Premises are located, appointed from time to time to
determine the Open Market Rent pursuant to the provisions of this
Schedule;
<PAGE> 51
1.6 "THE PRESIDENT" means the President for the time being of the Society
of Chartered Surveyors and includes the Vice-President or any person
authorised by the President to make appointments on his behalf;
1.7 "RENT RESTRICTIONS" means the restrictions imposed by any statute for
the control of rent in force on a Review Date or on the date on which
any increased rent is ascertained in accordance with this Schedule and
which operate to impose any limitation, whether in time or amount, on
the collection of an increase in the rent first reserved by this Lease
or any part thereof.
2. UPWARDS ONLY RENT REVIEW
The rent first reserved by this Lease shall be reviewed at each Review
Date in accordance with the provisions of this Schedule and, from and
including each Review Date, the rent shall equal the higher of either
the rent contractually payable immediately before the Relevant Review
Date or the Open Market Rent on the Relevant Review Date, as agreed or
determined pursuant to the provisions of this Schedule.
3. AGREEMENT OR DETERMINATION OF THE REVIEWED RENT
The Open Market Rent at any Review Date may be agreed in writing at any
time between the Landlord and the Tenant but if, for any reason, they
have not so agreed, either party may (whether before or after the
Relevant Review Date) by notice in writing to the other require the
Open Market Rent to be determined by the Surveyor.
4. APPOINTMENT OF SURVEYOR
In default of agreement between the Landlord and the Tenant on the
appointment of the Surveyor, the Surveyor shall be appointed by the
President on the written application of either party, such application
to be made not earlier than twelve (12) months before and not later
than twelve (12) months after the Relevant Review Date.
5. FUNCTIONS OF THE SURVEYOR
The Surveyor shall:-
5.1 at the option of the Landlord act either as an arbitrator in
<PAGE> 52
accordance with the Arbitration Acts 1954 to 1980 or as an expert, such
option to be exercised by the Landlord giving written notice to the
President at the time of the Landlord's written application to the
President or, if application is made by the Tenant, then within seven
(7) days of the Landlord being notified of the appointment of the
Surveyor but if no written notice is given by the Landlord as
aforesaid, the Surveyor shall act as an arbitrator;
5.2 (if acting as an expert) invite the Landlord and the Tenant to submit
to him, within such time limits (not being less than fifteen (15)
working days) as he shall consider appropriate, a valuation
accompanied, if desired, by a statement of reasons and such
representations and cross representations as to the amount of the Open
Market Rent with such supporting evidence as they may respectively
wish;
5.3 within sixty (60) days of his appointment, or within such extended
period as the Landlord and the Tenant shall jointly agree in writing,
give to each of them written notice of the amount of the Open Market
Rent as determined by him.
6. FEES OF SURVEYOR
The fees and expenses of the Surveyor (if acting as an expert),
including the costs of his nomination, shall be in the award of the
Surveyor (but this shall not preclude the Surveyor from notifying both
parties of his total fees and expenses notwithstanding the
non-publication at that time of his award) and, failing such award, the
same shall be payable by the Landlord and the Tenant in equal shares
who shall each bear their own costs, fees and expenses. Without
prejudice to the foregoing, both the Landlord and the Tenant shall each
be entitled to pay the entire fees and expenses, due to the Surveyor
and thereafter recover as a simple contract debt the amount (if any)
due from the party who failed or refused to pay same.
7. APPOINTMENT OF NEW SURVEYOR
If the Surveyor fails to give notice of his determination within the
time aforesaid, or if he dies, or is unwilling to act, or becomes
incapable of acting, or if, for any other reason, he is unable to act,
either party may request the President to discharge the Surveyor and
appoint another surveyor in his place to act in the same capacity,
which procedure may be repeated as many times as necessary.
<PAGE> 53
8. INTERIM PAYMENTS PENDING DETERMINATION
In the event that by the Relevant Review Date the amount of the
reviewed rent has not been agreed or determined as aforesaid (the date
of agreement or determination being herein called "the Determination
Date") then, in respect of the period (herein called "the Interim
Period") beginning with the Relevant Review Date and ending on the day
before the Quarterly Gale Day following the Determination Date, the
Tenant shall pay to the Landlord rent at the yearly rate payable
immediately before the Relevant Review Date, and on the Determination
Date, the Tenant shall pay to the Landlord, on demand as arrears of
rent, the amount (if any) by which the reviewed rent exceeds the rent
actually paid during the Interim Period (apportioned on a daily basis)
together with interest thereon at the Base Rate from the Relevant
Review Date to the date of actual payment.
9. RENT RESTRICTIONS
On each and every occasion during the Term that Rent Restrictions shall
be in force, then and in each and every case:
9.1.1 the operation of the provisions herein for review of the rent
shall be postponed to take effect on the first date or dates
thereafter upon which such operation may occur, and
9.1.2 the collection of any increase or increases in the rent shall
be postponed to take effect on the first date or dates
thereafter that such increase or increases may be collected
and/or retained in whole or in part and on as many occasions
as shall be required to ensure the collection of the whole
increase
AND until the Rent Restrictions shall be relaxed either partially or
wholly the rent reserved by this Lease (which if previously reviewed
shall be the rent payable under this Lease immediately prior to the
imposition of the Rent Restrictions) shall (subject always to any
provision to the contrary appearing in the Rent Restrictions) be the
maximum Rent from time to time payable hereunder.
10. MEMORANDA OF REVIEWED RENT
As soon as the amount of any reviewed rent has been agreed
<PAGE> 54
or determined, memoranda thereof shall be prepared by the Landlord or
its solicitors and thereupon shall be signed by or on behalf of the
Tenant and the Landlord, and the Tenant shall be responsible for and
shall pay to the Landlord the stamp duty (if any) payable on such
memoranda and any counterparts thereof but the parties shall each bear
their own costs in respect thereof.
11. TIME NOT OF THE ESSENCE
For the purpose of this Schedule, time shall not be of the essence.
<PAGE> 55
SIXTH SCHEDULE
COVENANTS BY THE GUARANTOR AND FORM OF GUARANTEE TO BE GIVEN IN THE CASE OF AN
ASSIGNMENT TO A LIMITED LIABILITY COMPANY
1.1 COVENANT AND INDEMNITY BY GUARANTOR
The Guarantor hereby covenants with the Landlord, as a primary
obligation, that the Tenant or the Guarantor shall at all times during
the Term (including any continuation or renewal of this Lease) duly
perform and observe all the covenants on the part of the Tenant
contained in this Lease, including the payment of the rents and all
other sums payable under this Lease in the manner and at the times
herein specified and the Guarantor hereby indemnifies the Landlord
against all claims, demands, losses, damages, liability, costs, fees
and expenses whatsoever sustained by the Landlord by reason of or
arising in any way directly or indirectly out of any default by the
Tenant in the performance and observance of any of its obligations or
the payment of any rent and other sums arising before or after the
expiration or termination of this Lease.
1.2 GUARANTOR JOINTLY AND SEVERALLY LIABLE WITH TENANT
The Guarantor hereby further covenants with the Landlord that the
Guarantor is jointly and severally liable with the Tenant (whether
before or after any disclaimer by a liquidator or trustee in
bankruptcy) for the fulfilment of all the obligations of the Tenant
under this Lease and agrees that the Landlord, in the enforcement of
its rights hereunder, may proceed against the Guarantor as if the
Guarantor was named as the Tenant in this Lease.
1.3 WAIVER BY GUARANTOR
The Guarantor hereby waives any right to require the Landlord to
proceed against the Tenant or to pursue any other remedy whatsoever
which may be available to the Landlord before proceeding against the
Guarantor.
1.4 POSTPONEMENT OF CLAIMS BY GUARANTOR AGAINST TENANT
The Guarantor hereby further covenants with the Landlord
<PAGE> 56
that the Guarantor shall not claim in any liquidation, bankruptcy,
composition or arrangement of the Tenant in competition with the
Landlord and shall remit to the Landlord the proceeds of all judgments
and all distributions it may receive from any liquidator, trustee in
bankruptcy or supervisor of the Tenant and shall hold for the benefit
of the Landlord all security and rights the Guarantor may have over
assets of the Tenant whilst any liabilities of the Tenant or the
Guarantor to the Landlord remain outstanding.
1.5 POSTPONEMENT OF PARTICIPATION BY GUARANTOR IN SECURITY
The Guarantor shall not be entitled to participate in any security held
by the Landlord in respect of the Tenant's obligations to the Landlord
under this Lease or to stand in the place of the Landlord in respect of
any such security until all the obligations of the Tenant or the
Guarantor to the Landlord under this Lease have been performed or
discharged.
1.6 NO RELEASE OF GUARANTOR
None of the following, or any combination thereof, shall release,
determine, discharge or in any way lessen or affect the liability of
the Guarantor as principal debtor under this Lease or otherwise
prejudice or affect the right of the Landlord to recover from the
Guarantor to the full extent of this guarantee:
1.6.1 any neglect, delay or forbearance of the Landlord in
endeavouring to obtain payment of the rents or any part or
parts thereof and/or the amounts required to be paid by the
Tenant or in enforcing the performance or observance of any of
the obligations of the Tenant under this Lease;
1.6.2 any refusal by the Landlord to accept rent tendered by or on
behalf of the Tenant at a time when the Landlord was entitled
(or would after the service of a notice under Section 14 of
the 1881 Act have been entitled) to re-enter the Demised
Premises;
1.6.3 any extension of time given by the Landlord to the Tenant;
1.6.4 any variation of the terms of this Lease (including any
reviews of the rent payable under this Lease) or the transfer
of the Landlord's reversion or the
<PAGE> 57
assignment of this Lease;
1.6.5 any change in the constitution, structure or powers of either
the Tenant, the Guarantor or the Landlord or the liquidation,
administration or bankruptcy (as the case may be) of either
the Tenant or the Guarantor;
1.6.6 any legal limitation, or any immunity, disability or
incapacity of the Tenant (whether or not known to the
Landlord) or the fact that any dealings with the Landlord by
the Tenant may be outside or in excess of the powers of the
Tenant;
1.6.7 any other act, omission, matter or thing whatsoever whereby,
but for this provision, the Guarantor would be exonerated
either wholly or in part (other than a release under seal
given by the Landlord).
1.7 DISCLAIMER OR FORFEITURE OF LEASE
1.7.1 The Guarantor hereby further covenants with the Landlord that:
1.7.1.1 if a liquidator or trustee in bankruptcy shall
disclaim or surrender this Lease; or
1.7.1.2 if this Lease shall be forfeited; or
1.7.1.3 if the Tenant shall cease to exist
THEN the Guarantor shall, if the Landlord by notice in writing
given to the Guarantor within twelve (12) months after such
disclaimer or other event so requires, accept from and execute
and deliver to the Landlord a new lease of the Demised
Premises subject to and with the benefit of this Lease (if the
same shall still be deemed to be extant at such time) for a
term commencing on the date of the disclaimer or other event
and continuing for the residue then remaining unexpired of the
Term, such new lease to be at the cost of the Guarantor and to
be at the same rents and subject to the same covenants,
conditions and provisions as are contained in this Lease;
1.7.2 If the Landlord shall not require the Guarantor to take a new
lease, the Guarantor shall nevertheless upon demand pay to the
Landlord a sum equal to the
<PAGE> 58
rents and other sums that would have been payable under this
Lease but for the disclaimer, forfeiture or other event in
respect of the period from and including the date of such
disclaimer, forfeiture or other event until the expiration of
twelve (12) months therefrom or until the Landlord shall have
granted a lease of the Demised Premises to a third party
(whichever shall first occur).
1.8 BENEFIT OF GUARANTEE
This guarantee shall enure for the benefit of the successors and
assigns of the Landlord under this Lease without the necessity for any
assignment thereof.
1.9 The Guarantor shall be released from its obligations under this
guarantee on an assignment of this Lease with the Landlord's written
consent.
<PAGE> 59
SEVENTH SCHEDULE
ITEMS OF EXPENDITURE AS REFERRED TO IN CLAUSE 8
1. REPAIRS AND MAINTENANCE
1.1 Repairing, maintaining, decorating and (where appropriate) cleaning,
washing down, lighting, heating, servicing and (as and when necessary)
altering, replacing, renewing, rebuilding and reinstating the Retained
Parts;
1.2 Carpeting, furnishing and equipping the Retained Parts as the Landlord
may determine including, but not limited to, the provision in the main
entrance halls and lift lobby areas of floral decorations, desks,
tables, chairs and other fixtures and fittings.
2. PLANT AND MACHINERY
Providing, maintaining, repairing, operating, inspecting, servicing,
overhauling, cleaning, lighting and (as and when necessary) renewing or
replacing all plant, machinery, apparatus and equipment within the
Retained Parts from time to time, including, but not limited to, all
boilers and items relating to the ventilation, heating, air
conditioning and hot and cold water systems, the lifts, lift shafts and
lift motor rooms and cleaning cradle and all fuel and electricity for
the same and any necessary maintenance contracts and insurance in
respect thereof.
3. SECURITY AND EMERGENCY SYSTEMS
Providing, maintaining, repairing, operating, inspecting, servicing,
overhauling, cleaning and (as and when necessary) renewing or replacing
all security and emergency systems for the Building, including, but not
limited to, alarm systems, internal telephone and television systems,
generators, emergency lighting, fire detection and prevention systems,
any fire escapes for the Building and all fire fighting and fire
prevention equipment and appliances (other than those for which a
tenant is responsible) and any traffic barriers, car park and traffic
control and security systems.
4. STAFF
<PAGE> 60
The provision of staff (including such direct or indirect labour as the
Landlord deems appropriate) for the day-to-day running of the
installations and plant and the provision of the other services to the
Building and for the general management, operation and security of the
Building and all other incidental expenditure, including, but not
limited to:
4.1 insurance, health, pension, welfare, severance and other payments,
contributions and premiums;
4.2 the provision of uniforms, working clothes, tools, appliances,
materials and equipment (including telephones) for the proper
performance of the duties of any such staff;
4.3 providing, maintaining, repairing, decorating and lighting any
accommodation and facilities for staff, and all rates, gas and
electricity charges in respect thereof and any actual or notional rent
for such accommodation.
5. SIGNS ETC
Providing, maintaining and renewing name boards and signs in the main
entrance halls, lift lobby areas and any other parts of the Building
and all directional signs and fire regulation notices and any flags,
flag poles and television and radio aerials.
6. REFUSE
Providing and maintaining any dustbins or other receptacles for refuse
for the Building and the cost of collecting, storing and disposing of
refuse.
7. LANDSCAPING
Providing and maintaining floodlighting (if any) and any plants,
shrubs, trees or garden or grassed areas in the Retained Parts.
8. MISCELLANEOUS ITEMS
8.1 leasing or hiring any of the items referred to in this Schedule;
<PAGE> 61
8.2 interest, commission and fees in respect of any moneys borrowed to
finance the provision of services and any of the items referred to in
this Schedule;
8.3 enforcing the covenants in any of the other leases of the Building for
the general benefit of the tenants thereof as determined by the
Landlord.
9. INSURANCE
9.1 periodic valuations of the Building for insurance purposes;
9.2 works required to the Building in order to satisfy the requirements
and/or recommendations of the insurers of the Building;
9.3 property owner's liability, third party liability and employer's
liability and such other insurances as the Landlord may, in its
absolute discretion from time to time, determine;
9.4 any amount which may be deducted or disallowed by the insurers pursuant
to any excess provision in the insurance policy upon settlement of any
claim by the Landlord.
10. COMMON FACILITIES
Making, laying, repairing, maintaining, rebuilding, decorating,
cleansing and lighting, as the case may be, any roads, ways,
forecourts, passages, pavements, party walls or fences, party
structures, Conduits or other conveniences and easements whatsoever
which may belong to, or be capable of being used or enjoyed by the
Building in common with any Adjoining Property.
11. OUTGOINGS
All existing and future rates (including water rates) taxes, duties,
charges, assessments, impositions and outgoings whatsoever (whether
parliamentary, parochial, local or of any other description and whether
or not of a capital or non-recurring nature or of a wholly novel
character) payable by the Landlord in respect of the Retained Parts or
any part thereof.
12. STATUTORY REQUIREMENTS
<PAGE> 62
Carrying out any works to the Building required to comply with any
statute (other than works for which any tenant or occupier is
responsible).
13. REPRESENTATIONS
Taking any steps deemed desirable or expedient by the Landlord for
complying with, making representations against, or otherwise contesting
the incidence of the provisions of any statute concerning planning,
public health, highways, streets, drainage and all other matters
relating or alleged to relate to the Building or any part of it for
which any tenant is not directly responsible.
14. MANAGEMENT
14.1 The proper and reasonable fees, costs, charges, expenses and
disbursements (including any VAT payable thereon) of the Landlord, the
Surveyor and/or the Accountant and any other person employed or
retained by the Landlord for or in connection with surveying and
accounting functions, the collection of the rents, (including all costs
and expenses incurred in the enforcement of same), the performance of
the services and any other duties in and about the Building or any part
of it relating to the general management, administration, security,
maintenance, protection and cleanliness of the Building;
14.2 The proper and reasonable fees and expense (including any VAT payable
thereon) of the Landlord in connection with the management of the
Building and any of the functions and duties referred to in paragraph
14.1 that may be undertaken by or on behalf of the Landlord, such fees
and expenses to include overheads and profits commensurate with the
current market practice of property companies providing management
services.
15. VALUE ADDED TAX
Value Added Tax at the rate for the time being in force chargeable in
respect of any item of expenditure referred to in this Schedule to the
extent not otherwise recoverable by the Landlord.
<PAGE> 63
16. GENERALLY
Any costs and expenses (not referred to above) which the Landlord may
incur in providing such other services and in carrying out such other
works as the Landlord, in its absolute discretion, may deem desirable
or necessary for the benefit of the Building or any part of it or the
tenants or occupiers thereof, or for securing or enhancing any amenity
of or within the Building, or in the interests of good estate
management.
PRESENT when the Common Seal
of the said ERIN EXECUTOR
& TRUSTEE CO. LIMITED was
hereunto affixed:
[SEAL]
/s/ Harry Cassidy
-----------------
Harry Cassidy
Director
/s/ Terri Neylon
----------------
Terri Neylon
Secretary
[SEAL]
/s/ Geraldine Kelly
-------------------
Geraldine Kelly
Director
/s/ S .F. Cleary
-------------------------
p.p. Goodbody Secretarial
Secretary
PRESENT when the Common Seal
of the said VISIO INTERNATIONAL
LIMITED was hereunto affixed:
--------------
Director
<PAGE> 64
--------------
Director/
Secretary
PRESENT when the Common Seal of
the said VISIO CORPORATION, as Guarantor,
was hereunto affixed:
/s/ Jeremy Jaech
Jeremy Jaech
--------------
President
/s/ Ken Mc Graw
Ken Mc Graw
--------------
Secretary
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
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0
0
<COMMON> 45,688
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