<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
GIGA INFORMATION GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8732 06-1422860
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
----------------
ONE KENDALL SQUARE, BUILDING 1400W, CAMBRIDGE, MASSACHUSETTS 02139 (617) 577-
9595
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GIDEON I. GARTNER
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
GIGA INFORMATION GROUP, INC.
ONE KENDALL SQUARE, BUILDING 1400W
CAMBRIDGE, MASSACHUSETTS 02139 (617) 577-9595
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
Copies to:
PAUL P. BROUNTAS, ESQ. GORDON H. HAYES, JR., ESQ.
MARK G. BORDEN, ESQ. TESTA, HURWITZ & THIBEAULT, llp
HALE AND DORR High Street Tower
60 State Street 125 High Street
Boston, Massachusetts 02109 Boston, Massachusetts 02110
(617) 526-6000 (617) 248-7000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] 333-
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1) FEE(2)
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<S> <C> <C>
Common Stock, par value $.001 per share............... $50,600,000 $17,449
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</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the maximum
offering price.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated September 10, 1996
PROSPECTUS
4,000,000 SHARES
[LOGO]
COMMON STOCK
-------------
All of the 4,000,000 shares of Common Stock offered hereby are being sold by
Giga Information Group, Inc. ("Giga" or the "Company"). Prior to this Offering,
there has been no public market for the Common Stock. It is currently
anticipated that the initial public offering price will be between $9.00 and
$11.00 per share. See "Underwriting" for the factors to be considered in
determining the initial public offering price. The Company has applied for
inclusion of the Common Stock on the Nasdaq National Market under the symbol
"GIGX."
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING AT PAGE 5.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share..........................
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Total(3)...........................
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $1,000,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 600,000 additional shares of Common Stock on the same
terms and conditions set forth above, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
-------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain other conditions. It is expected that delivery of certificates
for the shares of Common Stock will be made at the offices of Lehman Brothers
Inc., New York, New York, on or about , 1996.
-------------
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
SALOMON BROTHERS INC
, 1996
<PAGE>
[PICTURES TO FOLLOW]
The Giga logo(TM), Giga Information Group(TM), Giga Advisory Service(TM),
GigaWeb(TM), Relevance Services(TM), Gigabots(TM), GigaNotes(TM), GigaTel(TM),
GigaWorld(TM), Smart Search(TM) and ExperNet(TM) are trademarks of Giga
Information Group, Inc. All other trademarks or trade names referred to in
this Prospectus are the property of their respective owners.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information
contained in this Prospectus (i) assumes no exercise of the Underwriters' over-
allotment option, (ii) reflects the automatic conversion of all outstanding
shares of the Company's Series A and Series B Preferred Stock (the "Preferred
Stock") into an aggregate of 7,552,215 shares of Common Stock upon the closing
of the Offering, and (iii) has been adjusted to reflect a four-for-one stock
split of the Common Stock effected as a stock dividend in November 1995.
THE COMPANY
The Company provides information, analysis and advice relating to
developments and trends in the computing, telecommunications and related
industries (collectively, the information technology or "IT" industry).
Information technologies have become increasingly critical to the
competitiveness and long-term viability of a wide range of organizations. As a
result, many of these organizations have turned to IT "Continuous Information
Service" providers, which monitor and analyze IT developments and trends to
support customers' IT decisions. The Company's customers include: users of IT
products and services; vendors of IT hardware, software and services; and
institutional and other investors in the IT industry. These customers access
the Company's services and products through a personalized Internet-based
interface, as well as through published reports and consultation with the
Company's analysts and consultants.
Giga was founded in 1995 by Gideon I. Gartner, who founded Gartner Group,
Inc. in 1979 and served as its Chairman and Chief Executive Officer for twelve
years. Building upon his extensive experience in the IT Continuous Information
Services industry, Mr. Gartner formed Giga with the objective of creating a new
approach to providing Continuous Information Services to address customers'
needs more effectively than existing IT information providers.
The Giga Advisory Service, the principal service offering of the Company,
provides customers access to all of the Company's Giga Advisory Service
information, analysis and advice, as well as inquiry access to analysts and
practitioners, and participation in briefings, conferences, electronic forums
and teleconferences. The Company believes that its integrated, single-service
offering, which is provided to customers for an annual subscription fee,
delivers significant advantages over its competitors' multiple product
offerings that require customers to select, and separately purchase, subject-
specific services. The Company also provides its customers with access to its
ExperNet network of external IT practitioners who are available to answer
inquiries by customers. The Company recently introduced its first of a planned
series of specialized research products, called Relevance Services, which
combine original analysis, data and information produced by proprietary surveys
and methodologies with consulting, to assist in enhancing the IT practices and
operations of Giga's customers. In addition, the Company is pursuing
relationships with select content partners to complement the original
information and analyses provided by Giga's analysts.
The Company's GigaWeb system, an Internet-based interface to its services and
products, is designed to make it easy and efficient for customers to navigate
through the full spectrum of Giga's original research and third-party content.
Through the use of intelligent software agents, the Company is able to provide
customized information to each customer and also allow customers to search for
and select the information that is most relevant to their particular needs.
In addition, customers of the Giga Advisory Service and Relevance Services
have access to the Company's information products, including various IT events,
publications, consulting and econometric forecasting. These products are
generally offered on a non-continuous basis and are also marketed outside the
Company's Giga Advisory Service and Relevance Services customer base to
generate incremental revenue and broaden the Company's IT industry visibility.
Since the introduction of its Giga Advisory Service in April 1996, the
Company's customers grew to 109 as of June 30, 1996 and reached 171 as of
August 31, 1996. Customers of the Company's services include AIG, Alcatel
Mobile Phones, The Boeing Co., Colonial Penn Insurance Company, Digital
Equipment Corporation, Duracell Inc., IBM, KPMG Peat Marwick LLP, Oracle
Corporation, Safeguard Scientifics, Inc. and Southwestern Bell Telephone
Company.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.............. 4,000,000 shares
Common Stock to be outstanding
after the Offering............... 17,662,815 shares(1)
Working capital and other general corporate
Use of Proceeds................... purposes
Proposed Nasdaq National Market
symbol........................... GIGX
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES (2) COMPANY
---------------------------------------------------- -------------------------------------
SIX MONTHS
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 MARCH 17 TO MARCH 17 ENDED
DECEMBER 15, DECEMBER 31, DECEMBER 31, TO APRIL 5, DECEMBER 31, TO JUNE 30, JUNE 30,
1993(3) 1993 1994 1995 1995 1995 1996
------------ -------------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues............. $11,371 $ 329 $12,700 $3,237 $10,706 $3,571 $6,482
Loss from continuing
operations, net of
taxes............... (2,193) (462) (5,064) (449) (5,116) (733) (9,913)
Income (loss) from
discontinued BIS
market research
business, net of
taxes............... 1,044 44 (1,469) 597 1,490 301 (2,390)
Net income (loss).... (1,149) (418) (6,533) 148 (3,626) (432) (12,303)
Pro forma results per common and common equivalent share(3):
Loss from continuing operations......................................... $(0.34) $(0.61)
Net loss................................................................ $(0.24) $(0.75)
Pro forma weighted average common and common equivalent shares outstand-
ing(3):.................................................................. 14,855,209 16,360,287
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
DECEMBER 31, PRO FORMA
1995 ACTUAL PRO FORMA (3) AS ADJUSTED (3)(4)
------------ ------- ------------- ------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. $16,906 $ 9,331 $ 9,331 $45,531
Working capital......... 11,205 2,734 2,734 38,934
Total assets............ 24,684 19,220 19,220 55,420
Deferred revenues....... 2,480 4,995 4,995 4,995
Long-term debt, less
current portion........ 1,437 1,472 1,472 1,472
Total stockholders'
equity................. 13,660 4,053 4,053 40,253
</TABLE>
- -------
(1) Based on shares outstanding as of June 30, 1996. Does not include (i)
3,627,473 shares of Common Stock issuable upon the exercise of outstanding
options as of August 31, 1996 at a weighted average option exercise price
of $0.61 per share; (ii) 3,400,000 shares of Common Stock reserved for
issuance under the Company's stock plans as of August 31, 1996;
(iii) 286,266 shares of Common Stock issuable upon conversion of
outstanding convertible notes at a weighted average conversion price of
$4.09 per share at August 31, 1996; (iv) 393,590 shares of Common Stock
issuable upon exercise of outstanding warrants at a weighted average
exercise price of $2.95 per share at August 31, 1996, which will expire if
not exercised prior to the closing of the Offering; and (v) shares of
Common Stock issued by the Company to employees after June 30, 1996. See
"Management--Executive Compensation" and "Description of Capital Stock."
(2) Financial data included herein contains results of certain predecessor
companies acquired by the Company in 1995. For a description of the
predecessor companies and an explanation of the comparative periods
presented herein, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Organization of the Company and
Financial Statement Presentation."
(3) Presented on a pro forma basis to give effect to the automatic conversion
of all outstanding shares of the Company's Preferred Stock into an
aggregate of 7,552,215 shares of Common Stock upon the closing of the
Offering. See Note 2 of the Notes to Consolidated Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 4,000,000 shares of
Common Stock offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
--------------
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the caption "'Risk Factors," which could cause actual results to differ
materially from those indicated by such forward-looking statements.
4
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information contained in this Prospectus before purchasing the Common
Stock offered hereby.
LIMITED OPERATING HISTORY; PRIOR LOSSES AND ANTICIPATION OF FUTURE LOSSES
The Company was incorporated on March 17, 1995, and in April 1996 introduced
the Giga Advisory Service, its principal service offering, and GigaWeb, the
Company's Internet-based system for delivering information, analyses and
advice to its customers. The Company introduced the first of its planned
series of Relevance Services in July 1996. The Company has been marketing its
Giga Advisory and Relevance Services for only a limited period of time, and
the Company's future success will depend on its ability to successfully market
and enhance these services.
Substantially all of the Company's revenues through June 30, 1996 were
derived from the operations of BIS Strategic Decisions, Inc. and its five
foreign affiliates (collectively, "BIS") which the Company acquired on April
5, 1995. The Company acquired BIS to obtain its marketing, sales, and other
corporate infrastructures and certain of its personnel. BIS was engaged in
compiling and providing data-intensive market research to vendors for use
primarily in planning their product offerings and marketing programs. The BIS
offerings were principally quantitative in nature; employed in large part
relatively junior data specialists; marketed to purchasers of quantitative
research; included little high level advice and analysis; were marketed in
multiple separate service offerings; and focused principally on vendors
(collectively, the "BIS Market Research Business"). In contrast, the Company's
strategic business plan focuses on qualitative, analytical information and
advice addressed to meet a broader range of customers; employs a single,
integrated continuous information model; contemplates building a cadre of
high-level research analysts and other professionals who are peers of its
target customers to develop original ideas and knowledge; and concentrates
marketing of its services and products to senior decision makers to support
their critical IT decisions. The BIS Market Research Business did not fit with
Giga's own business model. Accordingly, in June 1996 the Company decided to
discontinue the BIS Market Research Business, including termination of the
personnel employed in developing and compiling its data-intensive market
research products; assignment of its obligations under existing BIS
subscription agreements to two unrelated IT service providers; and cessation
of operations at its two leased facilities in England. Results from the
discontinued operations of the BIS Market Research Business are reflected in
Loss From Discontinued Operations in the Company's historical financial
statements, and results from the events, publications, consulting and
econometric forecasting formerly provided by BIS, which the Company continues
to offer, are included in the Company's continuing operating results. The
Company does not consider the historical results of the discontinued BIS
Market Research Business to be meaningful or indicative of the Company's
future operating results. See "Risk Factors -- Risks Associated with
Discontinuance of BIS Market Research Business."
Since its inception, the Company has incurred substantial costs to develop
its Giga Advisory Service, establish its GigaWeb system, build a management
team and recruit, employ and train research analysts, sales and support staff
for its Giga Advisory Service. As a consequence, the Company has incurred
substantial operating losses since its inception, and at June 30, 1996 had an
accumulated deficit of $16,537,000. The Company expects to incur losses
through at least 1997 and expects that such losses will continue to be
substantial as the Company expands and develops its services and products. The
magnitude and duration of the Company's losses will depend on a number of
factors both within and outside of the Company's control, including the
Company's ability to successfully market its Giga Advisory Service and
Relevance Services; customer acceptance of the Company's single-service model;
the Company's ability to attract and retain qualified research analysts and
sales personnel on a timely basis and the related costs of such efforts; the
response of competitors to the Company's services and products; the ability of
the Company to develop and market new services and products; and the continued
acceptance by customers of subscription agreements providing for advance
payments rather than equal monthly installments or some other payment model.
In addition, the Company has significantly increased its operating expenses
and expects to continue such increases in the future primarily to expand its
staff
5
<PAGE>
of research analysts and sales and support personnel and to further develop
and enhance its Giga Advisory Service, Relevance Services, GigaWeb system and
other information products. As a result, the Company may not be readily able
to reduce or adjust expenses in the event that it does not generate planned
revenues or if its revenues decrease. There can be no assurance when or if the
Company will begin to generate revenue that is sufficient to achieve
profitability, to maintain profitability on a quarterly or annual basis or to
sustain or increase its revenue growth in future periods. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON SALES AND RENEWALS OF SUBSCRIPTION-BASED SERVICES; NEED TO
ANTICIPATE CHANGING MARKET NEEDS
The Company offers its Continuous Information Services on a subscription
basis. Accordingly, the Company's prospects will depend on its ability to
enter into a significant number of contracts for subscriptions to its services
and to achieve and sustain high renewal rates, and no assurance can be given
that it will be successful in doing so. The Company's ability to secure
subscriptions and subscription renewals is dependent upon, among other things,
its ability to deliver, through its Continuous Information Services,
consistently high-quality and timely analysis and advice with respect to
issues, developments and trends in the IT industry that clients view as
important. To deliver valuable analysis and advice on a sustained basis, the
Company must, among other things, recruit and retain a large and growing
number of highly talented professionals in a very competitive job market,
understand and anticipate market trends so as to keep its analysis focused on
the changing needs of its customers, and deliver services and products of
sufficiently high quality and timeliness to withstand competition. There can
be no assurance that the Company will be able to sustain the necessary level
of performance to enter into contracts for subscriptions to its services and
to achieve and sustain high subscription renewal rates or that the Company's
employees will be able to achieve expected sales productivity levels. Any
material decline in subscriptions and subscription renewal rates or inability
of the Company's employees to achieve expected sales productivity levels would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
The Company competes in the market for IT information services and products
directly with other independent providers of Continuous Information Services,
including Gartner Group, Inc., META Group Inc. and Forrester Research Inc.,
and also competes with the internal planning, research and marketing staffs of
current and prospective customer organizations. The Company also competes
indirectly with other information providers, including market research firms,
"Big Six" accounting firms, consulting firms and systems integrators. Many of
the Company's direct and indirect competitors have substantially greater
financial, information gathering and marketing resources than the Company.
Some of the Company's direct and indirect competitors also have established
research organizations with greater market recognition and experience in the
IT industry. There can be no assurance that the Company will continue to be
successful in establishing a competitive research organization. Delays,
difficulty in developing and achieving market acceptance of the Giga Advisory
Service and Relevance Services or customer dissatisfaction would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, there are few barriers to entry into the
Company's market, and new competitors could readily seek to compete in one or
more market segments addressed by the Company's services and products. There
can be no assurance that the Company's current or potential competitors will
not develop services and products comparable or superior to those developed by
the Company or respond more quickly to new or emerging industry trends or
changing customer requirements. Increased competition, direct and indirect,
could adversely affect the Company's operating results through pricing
pressure and loss of market share. There can be no assurance that the Company
will be able to continue to compete successfully against existing or new
competitors. In addition, any pricing pressures, reduced margins or loss of
market share resulting from increased competition could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
6
<PAGE>
DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
The Company's success will depend in large part upon the continued services
of its executive officers and key employees, including its founder, Chairman
of the Board of Directors and Chief Executive Officer, Gideon I. Gartner. Mr.
Gartner, in particular, is well known in the IT community and his reputation
in the Continuous Information Services industry and his network of contacts
have been instrumental in establishing and building the Company's business and
in obtaining financing for the Company. The loss of the services of either Mr.
Gartner or of one or more of the Company's other key personnel would have a
material adverse effect on the Company.
The Company's success will also depend upon its ability to hire, train,
motivate and retain a significant number of highly-skilled and experienced
employees, particularly management, research analysts and sales personnel. The
Company experiences, and expects to continue to experience, intense
competition for professional personnel with, among others, producers of IT
services and products, management consulting firms and system integrators.
Many of these firms have substantially greater financial resources than the
Company to attract and compensate qualified personnel. In addition, some of
the Company's competitors require that their employees enter into non-
competition agreements the terms of which could prohibit such individuals for
a period of time from working for the Company. There can be no assurance that
the Company will be successful in attracting a sufficient number of highly-
skilled employees in the future, or that it will be successful in training,
motivating and retaining the employees it is able to hire, and any inability
to do so would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Employees."
RISKS ASSOCIATED WITH DISCONTINUANCE OF BIS MARKET RESEARCH BUSINESS
In connection with the discontinuance of the BIS Market Research Business,
the Company in August 1996 entered into contracts with two unrelated IT
service providers to fulfill the Company's obligations under certain existing
BIS subscription agreements, all of which expire on or before June 1997. There
can be no assurance that these providers will be able to fulfill the Company's
obligations under these subscription agreements satisfactorily. If such
providers are not able to satisfactorily fulfill the terms of the subscription
agreements, customers may seek refunds and other damages from the Company. As
of August 15, 1996, the total remaining contract value of these agreements for
which payment has been received by the Company was $1,982,000. Although the
Company has established a reserve for these potential refunds which it
believes is adequate, there can be no assurance that the amount of actual
obligations of the Company to these BIS customers will not exceed the amount
of this reserve. A substantial amount of claims in excess of the reserve
established by the Company would have a material adverse effect on the
Company's business, financial condition and results of operations.
In addition, the Company determined to cease or relocate former BIS
operations at leased facilities in Luton, England at Rothesay Road (the
"Rothesay Road Facility") and Napier Road (the "Napier Road Facility"). The
lease at the Rothesay Road Facility has a remaining term of approximately 19
years and the lease at the Napier Road Facility has a remaining term of
approximately five years. If the Company is not able to negotiate a
termination of these lease agreements, it will seek to sublease the rental
obligations for the remainder of each lease term. There can be no assurance
that the Company will be able to enter into sublease contracts on terms that
satisfy the Company's obligations under the leases, if at all. The Company has
established a reserve for the Rothesay Road Facility and for the Napier Road
Facility equal to the present value of the expected expenses of these
facilities for two and one-half years plus 50% of the expected expenses over
the remaining life of the leases. There can be no assurance that these
reserves are adequate for such expenses or that the Company will be able to
terminate these leases or enter into sublease agreements. Any failure to
successfully negotiate a termination of the leases or to successfully enter
into subleases on terms favorable to the Company would have a material adverse
effect on the business, financial condition and results of operations of the
Company.
In connection with the cessation of operations at the Rothesay Road facility
and Napier Road facility and the relocation of certain of the operations
previously conducted at those facilities, the Company has terminated
approximately eight employees and expects that, in addition, approximately 16
of the remaining 22 employees will determine not to relocate. Pursuant to
certain United Kingdom labor laws, the Company will be required to
7
<PAGE>
pay severance wages to its terminated employees as well as to those employees
who elect not to relocate. The Company has established a reserve for the
payment of such severance wages. Although the Company believes that this
reserve is adequate, if additional employees elect not to relocate then the
actual obligations of the Company would exceed the reserve. Significant claims
in excess of the reserve established by the Company could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
RISKS ASSOCIATED WITH DEVELOPMENT OF NEW SERVICES AND PRODUCTS
The Company's future success will depend in part on its ability to
anticipate emerging market trends and to develop or acquire new services and
products that address the changing information and analysis needs of IT users,
vendors and investors. The process of internally researching, developing,
launching and gaining client acceptance of a new service or product, or
assimilating and marketing an acquired service or product, is inherently risky
and costly. Delays or failures during development or implementation, or lack
of market acceptance of these services and products could have a material
adverse effect on the Company. The future success of the Giga Advisory Service
will depend in part of the Company's ability to expand the breadth and depth
of its services through the addition of internal analysts and content from
third party sources. The Company has recently introduced its first of a
planned series of Relevance Services. The success of these services will
depend on the Company's ability to add experienced consultants and to complete
the development of additional Relevance Services on a timely basis. The
Company's continued ability to differentiate itself through its Internet-based
GigaWeb system will depend on its ability to continue to add features and
functionality to GigaWeb. In addition, the Company has limited internal
resources dedicated to its Web site development and relies on third parties,
including consultants and software developers, for the design, development and
testing of its GigaWeb system. Any technical or other related problems or
deficiencies in GigaWeb in the areas of reliability, performance and
scalability could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company has had limited
experience introducing new services and products and there can be no assurance
that its efforts to introduce new, or assimilate acquired, services or
products, will be successful. If the Company is unable, for technical or other
reasons, to develop and introduce new services or products or make
enhancements to existing services and products in a timely manner in response
to changing market conditions or customer requirements, or if its Giga
Advisory Service or other services offered by the Company do not achieve
market acceptance, the Company's business, financial condition and results of
operations would be materially adversely affected. See "Business--Services and
Products."
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may fluctuate significantly in the future
due to various factors, including the level and timing of renewals of
subscriptions to Continuous Information Services, the timing and amount of new
business generated by the Company, the mix of domestic versus international
business, the timing of the development, introduction and marketing of new
services and products, the timing of the hiring of research analysts and sales
people, changes in the spending patterns of the Company's target clients, the
Company's accounts receivable collection experience, changes in market demand
for IT research and analysis and competitive conditions in the industry. Due
to these and other factors, the Company believes period-to-period comparisons
of results of operations may not be meaningful and should not be relied upon
as an indication of future results of operations. The potential fluctuations
in the Company's operating results make it possible that, in some future
period, the Company's operating results will be below the expectations of
securities analysts and investors, which would have a material adverse effect
on the price of the Company's Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
UNCERTAINTIES RELATING TO PROPRIETARY RIGHTS AND USE OF THE INTERNET
The Company's success and ability to compete is dependent in part upon its
proprietary information and technology. The Company relies on a combination of
copyright, trademark and trade secret laws, employee and third-party
nondisclosure agreements and contractual provisions and other methods to
protect its proprietary
8
<PAGE>
information and technology. There can be no assurance that the measures taken
by the Company to protect its proprietary information and technology will be
adequate to prevent misappropriation or that others will not develop similar
proprietary information or technology independently. Furthermore, there can be
no assurance that competitors will not develop similar or superior proprietary
information or technologies.
As a distributor of content over the Internet, the Company faces potential
liability for libel, defamation, negligence, copyright and trademark
infringement and other claims based on the nature of the content that it
distributes, although the nature and extent of the liability is generally
unsettled under law. In addition, the Company licenses certain content from a
third party and may license content from other third parties in the future.
There can be no assurance the Company will not be involved in expensive and
time consuming litigation with respect to claims based on the third-party
content that it distributes. Any such litigation, whether or not resulting in
a ruling requiring the payment of damages, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
SUBSTANTIAL FUTURE CAPITAL NEEDS; RISKS OF WORKING CAPITAL DEFICIENCY
The Company's business has significant fixed costs, primarily attributable
to the costs associated with producing research to implement its single
service strategy, which provides for coverage of many of the IT sectors and
contemplates broad direct distribution worldwide. The Company has spent
substantial amounts to date and expects capital and operating expenditures to
increase in the near term as it hires additional sales people, research
analysts and other support staff and continues to develop its services and
products. The Company anticipates funding its ongoing working capital needs,
including the hiring of additional research analysts and other personnel, the
expansion of its sales force, the further enhancement of the GigaWeb system
and the expansion of its international operations, principally through the net
proceeds to the Company from the Offering. However, in the event that the
Company encounters difficulties in collecting accounts receivable, experiences
low or reduced subscription renewal rates or otherwise has revenues that are
lower than planned, the Company might require additional working capital and
there can be no assurance that such capital would be available to the Company
on terms that are acceptable, if at all. If adequate funds are not available,
the Company may be required to reduce its fixed costs and delay, scale back or
eliminate certain of its products or services, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Certain of the Company's operations are located outside of the United States
and the Company expects that sales to customers outside of the United States
will increase. The Company believes there are certain risks inherent in
international operations, including changes in demand resulting from
fluctuations in interest and exchange rates, changes in trade policies,
regulatory requirements, difficulties in staffing and managing foreign sales
operations, and higher levels of taxation on foreign income than domestic
income. Most of the Company's international revenues are expected to be
denominated in foreign currencies. Consequently, a decrease in the value of a
relevant foreign currency in relation to the United States dollar could have
an adverse impact on the Company's results of operations. Adverse developments
in any one of these factors could have a material adverse effect on the
Company's business, financial condition or results of operations.
9
<PAGE>
MANAGEMENT OF GROWTH
The Company's planned expansion is expected to place a significant strain on
the Company's financial, operational and managerial resources. To manage its
expansion, the Company must continue to implement and improve its operations
and financial systems and to increase, train and manage its personnel. There
can be no assurance that the Company's systems, procedures or controls
currently in place will be adequate to support the Company's operations or
that the Company will be able to implement additional systems successfully and
in a timely manner if required. If the Company continues to grow, it will be
required to expand its research staff, expand its sales and marketing force,
recruit additional key management personnel, improve its operational and
financial systems and train, motivate and manage additional employees. There
can be no assurance that the Company will be able to manage these changes
successfully. Any inability of the Company to manage its growth successfully
could have a material adverse effect on the Company's business, financial
condition and results of operations.
LEGAL PROCEEDINGS
The Company and Mr. Gartner are currently involved in a pending lawsuit with
a former employee based upon allegations by the former employee that, among
other things, the Company breached an oral employment agreement with him and
that the Company and Mr. Gartner made fraudulent representations in inducing
him to accept employment with the Company. The former employee has asserted
that he is entitled to certain compensation, 60,000 shares of the Company's
Common Stock (or cash in lieu thereof) and an option to purchase an additional
60,000 shares of the Company's Common Stock, as well as $2.5 million in
compensatory damages and $1.0 million in punitive damages. See "Business--
Legal Proceedings."
CONTROL BY MANAGEMENT
Upon the closing of the Offering, Mr. Gartner will beneficially own
approximately 36% of the outstanding Common Stock and Mr. Gartner, together
with the Company's other executive officers and directors, including entities
affiliated with them, will beneficially own approximately 54% of the
outstanding Common Stock. As a result, these stockholders will be able to
exercise control over matters requiring stockholder approval, including the
election of directors and the approval of significant corporate matters such
as transactions which may lead to a change of control of the Company. The
effects of such control could be to delay or prevent a change of control of
the Company unless the terms are approved by such stockholders. See
"Management" and "Principal Stockholders."
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. There can be no assurance that, following the Offering, an
active trading market for the Common Stock will develop or be sustained or
that the market price of the Common Stock will not decline below the initial
public offering price. The initial public offering price was determined
through negotiations between the Company and the Representatives of the
Underwriters and will not necessarily reflect the market price of the Common
Stock after the Offering. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The stock market
in recent years has experienced extreme price and volume fluctuations that
have particularly affected market prices of many growth-oriented companies in
industries similar or related to that of the Company and that have often been
unrelated or disproportionate to the operating performance of such companies.
The market price of the Common Stock could also be subject to significant
fluctuations in response to, and may be adversely affected by, variations in
quarterly results, changes in earnings estimates or other actions by analysts
and earnings or other announcements of the Company's clients or competitors as
well as other factors.
10
<PAGE>
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of the
Common Stock from the initial public offering price. Additional dilution will
occur upon exercise of outstanding stock options. See "Dilution" and "Shares
Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following the Offering could adversely affect the market price for the Common
Stock. See "Shares Eligible for Future Sale" and "Description of Capital
Stock".
EFFECT OF ANTI-TAKEOVER PROVISIONS
A Restated Certificate of Incorporation (the "Restated Certificate") will be
filed upon the closing of the Offering, pursuant to which the Company's Board
of Directors will have the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, conversion ratios,
preferences and privileges of those shares without any further vote or action
by the Company's stockholders. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
Preferred Stock. Any such issuance, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company and could negatively impact the
voting power or other rights of the holders of Common Stock. In addition, such
Preferred Stock may have other rights, including economic rights senior to the
Common Stock, and, as a result, the issuance thereof could have a material
adverse effect on the market value of the Common Stock. The Restated
Certificate will provide for a classified Board of Directors and will permit a
member of the Board of Directors to be removed for cause only upon the
affirmative vote of holders of a majority, or without cause only upon the
affirmative vote of at least two-thirds, of the shares of capital stock of the
Company entitled to vote. Furthermore, the Company is subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law
that prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person first becomes an "interested stockholder,"
unless the business combination is approved in a prescribed manner. The
application of Section 203 could also have the effect of delaying or
preventing a change of control of the Company. Certain other provisions of the
Restated Certificate may have the effect of delaying or preventing changes of
control or management of the Company, which could adversely affect the market
price of the Company's Common Stock. See "Description of Capital Stock--
Delaware Law and Certain Charter and By-Law Provisions; Anti-Takeover
Effects."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to Giga from the sale of the 4,000,000 shares of Common
Stock offered hereby are estimated to be $36,200,000 ($41,780,000 if the
Underwriters' over-allotment option is exercised in full) after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company and assuming an initial public offering price of $10.00 per
share.
The Company expects to use the net proceeds from the Offering for working
capital and other general corporate purposes. A portion of the net proceeds
may also be used for the acquisition of businesses, products and technologies
that are complementary to those of the Company. The Company currently has no
plans, commitments or agreements with respect to any such acquisitions as of
the date of this Prospectus. Pending such uses, the Company intends to invest
the net proceeds from the Offering in short-term, investment grade, interest-
bearing instruments.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
its growth strategy and does not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account
various factors including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion.
12
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1996 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the
Company as described in Note (1) below, and (iii) the pro forma capitalization
of the Company as adjusted to reflect the issuance and sale by the Company of
4,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $10.00 per share and receipt of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction
with the Company's Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
--------------- ---------------- ---------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Long term debt, less
current portion.......... $1,472 $1,472 $1,472
--------------- --------------- ---------------
Stockholders' Equity(3):
Preferred Stock, $.001
par value; 5,000,000
shares authorized; none
issued or outstanding on
an actual, pro forma and
pro forma as adjusted
basis................... -- -- --
Series A Preferred Stock,
$.001 par value;
650,000 shares
authorized; 570,000
shares issued and
outstanding (actual); no
shares authorized,
issued or outstanding on
a pro forma and pro
forma as adjusted
basis................... 1 -- --
Series B Preferred Stock,
$.001 par value;
6,500,000 shares
authorized; 5,272,215
shares issued and
outstanding (actual); no
shares authorized,
issued or outstanding on
a pro forma or pro forma
as adjusted basis....... 5 -- --
Common Stock, $.001 par
value; 60,000,000 shares
authorized; 6,110,600
shares issued and
outstanding (actual);
13,662,815 shares issued
and outstanding (pro
forma); 17,662,815
shares issued and
outstanding (pro forma
as adjusted)(2)......... 6 14 18
Additional paid-in
capital................. 20,631 20,629 56,825
Stock subscriptions
receivable.............. (75) (75) (75)
Accumulated deficit...... (16,537) (16,537) (16,537)
Cumulative translation
adjustments............. 22 22 22
--------------- --------------- ---------------
Total stockholders'
equity................. 4,253 4,253 40,253
--------------- --------------- ---------------
Total capitalization.... $ 5,525 $ 5,525 $ 41,725
=============== =============== ===============
</TABLE>
- --------
(1) Presented on a pro forma basis to give effect to the conversion of all
outstanding shares of Preferred Stock into an aggregate of 7,552,215
shares of Common Stock upon the closing of the Offering. See Note 2 of
Notes to Consolidated Financial Statements.
(2) Based on shares outstanding as of June 30, 1996. Does not include (i)
3,627,473 shares of Common Stock issuable upon the exercise of outstanding
options at a weighted average option exercise price of $0.61 per share as
of August 31, 1996; (ii) 3,400,000 shares of Common Stock reserved for
issuance under the Company's stock plans as of August 31, 1996;
(iii) 286,266 shares of Common Stock issuable upon conversion of
outstanding convertible notes at a weighted average conversion price of
$4.09 per share at August 31, 1996; (iv) 393,590 shares of Common Stock
issuable upon exercise of outstanding warrants at a weighted average
exercise price of $2.95 per share at August 31, 1996, which will expire if
not exercised prior to the closing of the Offering; and (v) shares of
Common Stock issued by the Company to employees after June 30, 1996. See
"Management--Executive Compensation" and "Description of Capital Stock."
(3) Reflects the filing of the Company's Restated Certificate of Incorporation
upon the closing of the Offering.
13
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996 was
$2,756,000 or $0.20 per share. Pro forma net tangible book value per share
represents the amount of total tangible assets (total assets less intangible
assets) of the Company reduced by the Company's total liabilities, divided by
the pro forma number of shares of Common Stock outstanding. Assuming an
initial public offering price of $10.00 per share, and after giving effect to
the sale by the Company of 4,000,000 shares of Common Stock in the Offering
(after deducting the estimated underwriting discounts and commissions and
estimated offering expenses), the pro forma net tangible book value of the
Company as of June 30, 1996 would have been $38,956,000 or $2.21 per share.
This represents an immediate increase in pro forma net tangible book value of
$2.01 per share to existing stockholders and an immediate dilution in pro
forma net tangible book value of $7.79 per share to new investors purchasing
Common Stock in the Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed price to public...................................... $10.00
Pro forma net tangible book value per share before the
Offering................................................... $0.20
Increase per share attributable to new investors............ 2.01
-----
Pro forma net tangible book value per share after the
Offering.................................................... 2.21
------
Dilution per share to new investors.......................... $ 7.79
======
</TABLE>
The following table sets forth on a pro forma basis as of June 30, 1996, the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by the
existing stockholders and by the investors purchasing shares of Common Stock
offered hereby (at an assumed initial public offering price of $10.00 per
share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 13,662,815 77.4% $21,564,052 35.0% $ 1.58
New investors............. 4,000,000 22.6% $40,000,000 65.0% $10.00
---------- ------ ----------- ------
Total................. 17,662,815 100.0% $61,564,052 100.0%
========== ====== =========== ======
</TABLE>
The foregoing assumes no exercise of any outstanding stock options, warrants
or convertible notes to purchase shares of Common Stock. As of August 31,
1996, there were outstanding (i) options to purchase 3,627,473 shares of
Common Stock at a weighted average exercise price of $0.61 per share; (ii)
warrants to purchase 393,590 shares of Common Stock at a weighted average
exercise price of $2.95 per share, which will expire if not exercised prior to
the closing of the Offering; and (iii) convertible notes that are convertible
into 286,266 shares of Common Stock at a weighted average conversion price of
$4.09 per share. In addition, as of August 31, 1996, 3,400,000 shares of
Common Stock were reserved for future issuance pursuant to the Company's stock
plans. To the extent that the outstanding options, warrants and convertible
notes are exercised or converted at prices lower than the initial public
offering price, there will be further dilution to new investors. See
"Management--Executive Compensation," "Certain Transactions" and "Description
of Capital Stock."
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are derived from the consolidated
financial statements of the Company and the combined financial statements of
BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively,
the "Predecessor Companies"). For the years ended December 31, 1991 and 1992
and the period January 1 to December 15, 1993, the operations comprising the
Predecessor Companies were those of wholly-owned subsidiaries of NYNEX
Corporation ("NYNEX"). For the period December 16 to December 31, 1993, the
year ended December 31, 1994 and the period January 1 to April 5, 1995, the
operations of the Predecessor Companies were those of wholly-owned
subsidiaries of Friday Holdings, L.P. ("Friday Holdings"). Because of the
impact to the statements of operations of the revaluation of the assets and
liabilities in connection with the acquisitions and the application of
different accounting methods, the results of operations of the Predecessor
Companies for the periods under NYNEX and Friday Holdings ownership are not
comparable with each other or with those reported by the Company.
The consolidated financial statements of the Company as of December 31, 1995
and June 30, 1996 and for the period from March 17, 1995 to December 31, 1995
and the six months ended June 30, 1996 included elsewhere in this Prospectus
have been audited by Coopers & Lybrand L.L.P., independent accountants. The
consolidated financial statements of the Company for the period March 17, 1995
to June 30, 1995 included elsewhere in this Prospectus are unaudited, however,
in the opinion of management, such unaudited data include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information included therein. The results of operations
for the periods March 17, 1995 to December 31, 1995, March 17, 1995 to June
30, 1995 and the six months ended June 30, 1996 are not necessarily indicative
of the results for an entire fiscal year or any other interim period. The
combined financial statements of the Predecessor Companies for the period
January 1, 1995 to April 5, 1995 included elsewhere in this Prospectus have
been audited by Coopers & Lybrand L.L.P. The combined financial statements of
the Predecessor Companies as of December 31, 1994 and for the periods January
1, 1993 to December 15, 1993 and December 16, 1993 to December 31, 1993 and
for the year ended December 31, 1994 included elsewhere in this Prospectus
have been audited by Ernst & Young LLP, independent auditors. For the periods
January 1, 1993 to December 15, 1993 and December 16, 1993 to December 31,
1993, the financial statements of BIS Shrapnel PTY Limited, one of the
combined companies, were audited by other auditors. Ernst & Young LLP's report
on the combined financial statements as of December 31, 1994 and for the
periods January 1, 1993 to December 15, 1993, and December 16, 1993 to
December 31, 1993 and the year ended December 31, 1994, includes a description
of uncertainties regarding the Predecessor Companies' ability to continue as a
going concern which is discussed in Note 4 to the financial statements of BIS
Strategic Decisions. The selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the financial statements and accompanying
notes thereto included elsewhere in this Prospectus.
15
<PAGE>
SELECTED FINANCIAL DATA--(CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES(1) PREDECESSOR COMPANIES PRO FORMA(2)
------------------------------ ----------------------------------- -----------------------
YEAR ENDED JANUARY 1 DECEMBER 16 YEAR JANUARY 1
DECEMBER 31, TO TO ENDED TO SIX MONTHS YEAR ENDED
---------------- DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, ENDED JUNE DECEMBER 31,
1991 1992 1993 1993(1) 1994 1995 30, 1995 1995
------- ------- ------------ ------------ ------------ --------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
Continuous
information
services........ $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Information
products........ 14,415 12,774 11,371 329 12,700 3,237 6,880 14,015
------- ------- ------- ----- ------- ------ ------ -------
Total revenues.. 14,415 12,774 11,371 329 12,700 3,237 6,880 14,015
------- ------- ------- ----- ------- ------ ------ -------
Costs and
Expenses:
Cost of services
and product
development..... 7,169 6,462 5,530 357 6,172 2,208 4,803 10,775
Sales and
marketing....... 2,617 1,685 1,448 92 1,589 266 457 1,282
General and
administrative.. 9,802 9,132 6,901 307 8,108 1,197 2,672 7,455
Depreciation and
amortization.... 1,064 963 744 38 3,068 250 927 1,797
------- ------- ------- ----- ------- ------ ------ -------
Total costs and
expenses....... 20,652 18,242 14,623 794 18,937 3,921 8,859 21,309
------- ------- ------- ----- ------- ------ ------ -------
Operating loss... (6,237) (5,468) (3,252) (465) (6,237) (684) (1,979) (7,294)
Interest income... 206 153 114 7 103 26 54 287
Interest expense.. (176) (57) (38) (4) (26) (4) (50) (134)
------- ------- ------- ----- ------- ------ ------ -------
Loss from
continuing
operations
before income
taxes
(benefit)....... (6,207) (5,372) (3,176) (462) (6,160) (662) (1,975) (7,141)
Benefit from
income taxes..... -- (1,063) (983) -- (1,096) (213) (531) (1,311)
------- ------- ------- ----- ------- ------ ------ -------
Loss from
continuing
operations...... (6,207) (4,309) (2,193) (462) (5,064) (449) (1,444) (5,830)
------- ------- ------- ----- ------- ------ ------ -------
Discontinued
operations:
Income (loss)
from the
discontinued BIS
market research
business (net of
tax effect)..... 4,922 4,623 1,044 44 (1,469) 597 899 2,097
Loss on disposal
of discontinued
BIS market
research
business (net of
tax effect)..... -- -- -- -- -- -- -- --
------- ------- ------- ----- ------- ------ ------ -------
Income (loss)
from
discontinued
operations...... 4,922 4,623 1,044 44 (1,469) 597 899 2,097
------- ------- ------- ----- ------- ------ ------ -------
Net income
(loss).......... $(1,285) $ 314 $(1,149) $(418) $(6,533) $ 148 $ (545) $(3,733)
======= ======= ======= ===== ======= ====== ====== =======
Pro forma results
per common and
common equivalent
share:
Loss from
continuing
operations......
Net loss.........
Pro forma weighted
average common
and common
equivalent shares
outstanding......
</TABLE>
<TABLE>
<CAPTION>
COMPANY
--------------------------------
MARCH 17 MARCH 17 SIX MONTHS
TO TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ -------- ----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
Continuous
information
services........ $ -- $ -- $ 627
Information
products........ 10,706 3,571 5,855
---------- ------ ----------
Total revenues.. 10,706 3,571 6,482
---------- ------ ----------
Costs and
Expenses:
Cost of services
and product
development..... 8,445 2,473 9,648
Sales and
marketing....... 1,016 191 1,982
General and
administrative.. 6,216 1,433 4,257
Depreciation and
amortization.... 1,397 527 1,088
---------- ------ ----------
Total costs and
expenses....... 17,074 4,624 16,975
---------- ------ ----------
Operating loss... (6,368) (1,053) (10,493)
Interest income... 259 26 375
Interest expense.. (100) (16) (52)
---------- ------ ----------
Loss from
continuing
operations
before income
taxes
(benefit)....... (6,209) (1,043) (10,170)
Benefit from
income taxes..... (1,093) (310) (257)
---------- ------ ----------
Loss from
continuing
operations...... (5,116) (733) (9,913)
---------- ------ ----------
Discontinued
operations:
Income (loss)
from the
discontinued BIS
market research
business (net of
tax effect)..... 1,490 301 (85)
Loss on disposal
of discontinued
BIS market
research
business (net of
tax effect)..... -- -- (2,305)
---------- ------ ----------
Income (loss)
from
discontinued
operations...... 1,490 301 (2,390)
---------- ------ ----------
Net income
(loss).......... $ (3,626) $ (432) $ (12,303)
========== ====== ==========
Pro forma results
per common and
common equivalent
share:
Loss from
continuing
operations...... $(0.34) $(0.61)
Net loss......... $(0.24) $(0.75)
Pro forma weighted
average common
and common
equivalent shares
outstanding...... 14,855,209 16,360,287
</TABLE>
16
<PAGE>
SELECTED FINANCIAL DATA--(CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES COMPANY
------------------------------ ---------------------
DECEMBER 31,
-------------------------------- DECEMBER 31, JUNE 30,
1991 1992 1993 1994 1995 1996
------ ------- ------- ------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $2,177 $ 1,798 $ 2,814 $ 1,809 $ 16,906 $ 9,331
Working capital
(deficit).............. (347) (680) 1,893 (1,777) 11,205 2,734
Total assets............ 7,124 6,632 12,979 8,601 24,684 19,220
Deferred revenues....... 1,194 386 1,299 1,681 2,480 4,995
Long term debt, less
current portion........ 258 -- -- -- 1,437 1,472
Total stockholders'
equity................. 1,784 1,843 8,679 1,823 13,660 4,053
</TABLE>
- --------
(1) Effective January 1, 1993, the Predecessor Companies changed the method of
accounting for revenue recognized from the BIS Market Research Business.
For the years ended December 31, 1991 and 1992, the Predecessor Companies
recognized 35% of the revenue upon execution of a services contract and
the remaining 65% on a pro rata monthly basis over the contract period.
Under the Company's current revenue recognition method, income after taxes
from the discontinued BIS Market Research Business and net income would
have been reduced by approximately $632,000 and $32,000 for the years
ended December 31, 1991 and 1992, respectively. Subsequent to January 1,
1993, the Predecessor Companies recognized such revenue ratably over the
related contract periods. The cumulative effect of this change in
accounting method decreased income from the discontinued BIS Market
Research Business and net income for the period ended December 15, 1993 by
$1,928,000, net of applicable income taxes of $462,000.
(2) The pro forma results reflect the results of operations as if the
acquisitions of BIS and ExperNet had occurred on January 1, 1995. See Note
3 of the Notes to Consolidated Financial Statements.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ORGANIZATION OF THE COMPANY AND FINANCIAL STATEMENT PRESENTATION
The Company was organized on March 17, 1995. On April 5, 1995, the Company
acquired BIS Strategic Decisions, Inc. and its five foreign affiliates
(collectively, "BIS" or the "Predecessor Companies") as part of its strategic
plan to accelerate the development of its Continuous Information Services
business and to obtain the marketing, sales and other corporate
infrastructures and certain personnel of BIS. On July 6, 1995, the Company
acquired a 77.8% equity interest in ExperNet Corporation ("ExperNet"), which
was owned by Gideon I. Gartner and David L. Gilmour, each a director and
officer of the Company, and, on December 29, 1995, acquired the remaining
22.2% equity interest.
This Prospectus includes the financial statements of BIS, as the predecessor
to the Company, through the period ended April 5, 1995, the date of
acquisition by the Company. The period December 16 to December 31, 1993 is
shown separately for the Predecessor Companies because of a prior acquisition
by an unrelated entity on December 16, 1993. The periods covered by the
financial statements of the Company commence on March 17, 1995, the date of
its incorporation, and include the results of operations of BIS from April 5,
1995 and the results of operations of ExperNet from July 6, 1995, their
respective dates of acquisition. Results of operations of ExperNet are not
included in results of Predecessor Companies, which are solely the results of
BIS. The acquisition of BIS was accounted for under the purchase method;
accordingly, acquired assets were recorded at their estimated fair values and
related goodwill of approximately $3,059,000 was also recorded and is being
amortized over two years. Because ExperNet was a related company under common
control, its assets were recorded by the Company at their historical cost.
OVERVIEW
The Company's current services and products target three principal customer
markets: IT users, IT vendors and IT institutional and other investors. The
Company derives its revenues primarily from two sources: Continuous
Information Services, which include its Giga Advisory Service and Relevance
Services, and Information Products, which include events, publications,
consulting and econometric forecasting.
In June 1996, the Company discontinued the BIS Market Research Business.
Results of operations from the discontinued BIS Market Research Business of
BIS are reflected as Discontinued Operations in the Company's financial
statements. The Company continues to generate revenues from the events,
publications, consulting and econometric forecasting businesses acquired as
part of the acquisition of BIS, which are reflected in the statements of
operations as Information Products revenue. Revenues to date have been
primarily attributable to Information Products. The Company expects these
revenues will be a declining percentage of total revenues in future periods.
As a result of the discontinuance of the BIS Market Research Business, Giga
recorded a charge of approximately $2.3 million in the six months ended June
30, 1996. The Company does not consider the historical results of Predecessor
Companies' operations which have been discontinued to be meaningful or
indicative of the Company's future operating results. The Company has entered
into agreements with two unrelated parties which have assumed responsibility
for fulfillment of the Company's obligations to former BIS customers in
exchange for a share of the deferred revenues recorded by Giga with respect to
such customers. See "Risk Factors--Limited Operating History; Prior Losses and
Anticipation of Future Losses," and "--Risks Associated with Discontinuance of
BIS Market Research Business."
In April 1996, the Company introduced its Giga Advisory Service and GigaWeb.
In July 1996, the Company introduced the first of a planned series of
specialized research products, called Relevance Services, which combine
original analysis, data and information with consulting to address specific IT
needs of customers. The Company expects that future revenues from its
Continuous Information Services will significantly increase as a percentage of
future total revenues.
18
<PAGE>
The Company's Giga Advisory Service and Relevance Services are typically sold
through annual subscriptions which generally provide for payment at the
commencement of the subscription period and renew automatically unless the
customer cancels the subscription. Amounts received in advance of services
provided are reflected initially in the Company's financial statements as
deferred revenues and are recognized on a pro rata monthly basis over the term
of the subscription. The Company expects costs of services and product
development to continue to significantly increase in the future primarily as a
result of the Company's expansion of its staff of analysts and further
development of its Giga Advisory Service, Relevance Services and other
consulting services.
The Company has incurred significant operating losses since its inception in
1995 due to its focus on building its research and sales and marketing
capabilities, development and enhancement of its GigaWeb system and the
development of the Giga Advisory Service and Relevance Services. The Company
expects sales and marketing expenses to continue to significantly increase in
the future as it expands its sales, marketing and support staff. The Company
expects to incur losses through at least fiscal year 1997 as it continues to
invest in these activities.
The Company believes that a leading measure of the Company's anticipated
future revenue is the annual value ("AV") of its Giga Advisory Service and
Relevance Services subscription agreements. The Company calculates AV each
month as the cumulative annualized value of all subscription agreements which
either commence or continue on the first day of the following month, without
regard to contract duration or cancellation risk. Agreements may be included in
AV even though final terms and conditions may not have been agreed upon;
however, revenues from these agreements will not begin to be recognized until
all terms and conditions are finalized. AV has grown every month since the
introduction of the Company's Giga Advisory Service and at August 31, 1996
totalled approximately $4.2 million, excluding approximately $1.1 million of
subscriptions sold to former customers of the BIS Market Research Business.
There can be no assurance that the Company's AV will continue to grow.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS ENDED JUNE 30,
1995
For purposes of the following discussion, the pro forma six month period
ended June 30, 1995 reflects the results of operations of the Predecessor
Companies from January 1, 1995 to April 5, 1995 (the date of acquisition of the
Predecessor Companies by the Company) and the Company from March 17, 1995 (the
date of inception) through June 30, 1995, and includes the amortization of
goodwill incurred in connection with the acquisitions of the Predecessor
Companies and ExperNet as though such acquisitions occurred on January 1, 1995.
The Company's activities from March 17, 1995 to April 5, 1995 were principally
devoted to the acquisition of the Predecessor Companies.
Revenues. Revenues for the six months ended June 30, 1996 were approximately
$6.5 million compared to revenues of approximately $6.9 million for the pro
forma six months ended June 30, 1995. In the six months ended June 30, 1996,
the Company recorded Continuous Information Services revenues of $0.6 million.
Information Products revenues declined by approximately $1.0 million as
compared to the pro forma six months ended June 30, 1995, primarily due to a
reduction in the number of events sponsored by the Company.
Cost of Services and Product Development. The Company's cost of services and
product development increased to approximately $9.6 million in the six months
ended June 30, 1996 from approximately $4.8 million in the pro forma six months
ended June 30, 1995. The increase was principally attributable to the Company's
substantial investment during the six months ended June 30, 1996 in research
and technology related to the development of the Company's Giga Advisory
Service and GigaWeb system.
Sales and Marketing Expenses. Sales and marketing expenses in the six months
ended June 30, 1996 increased to approximately $2.0 million compared to
approximately $0.5 million in the pro forma six months
19
<PAGE>
ended June 30, 1995. The increase was principally attributable to the
increased investment in marketing programs and expansion of the Company's
sales force to support the introduction and marketing of its Giga Advisory
Service.
General and Administrative Expenses. General and administrative expenses
increased to approximately $4.3 million in the six months ended June 30, 1996
from approximately $2.7 million in the pro forma six months ended June 30,
1995. The increase resulted principally from significant investments for
internal systems, facilities and infrastructure, including the hiring of a
senior management team.
Discontinued Operations. The Company recorded a loss from discontinued
operations of approximately $2.4 million for the six months ended June 30,
1996 compared to income of approximately $0.9 million for the pro forma six
months ended June 30, 1995. The 1996 loss included $2.3 million of charges
related to the discontinuance of the BIS Market Research Business in June
1996. See Note 16 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS FOR 1995 PRO FORMA, 1994 AND 1993
For purposes of the following discussion, the pro forma year ended December
31, 1995 reflects the operations of the Predecessor Companies from January 1,
1995 to April 5, 1995 and the Company from March 17, 1995 to December 31,
1995.
Revenues. Revenues were approximately $14.0 million, $12.7 million and $11.7
million for pro forma 1995, 1994 and 1993, respectively. The revenues were
derived from the Predecessor Companies' Information Products business,
consisting of events, publications, consulting and econometric forecasting.
The increases in pro forma 1995 and 1994 were attributable primarily to
increased events and consulting revenues in those years.
Cost of Services and Product Development. Expenses for cost of services and
product development increased year to year, with the major increase occurring
in pro forma 1995, when these costs were approximately $10.8 million compared
to approximately $6.2 million in 1994. The pro forma 1995 increase resulted
primarily from increased expenditures relating to the development of the
GigaWeb system and the hiring of research analysts.
Sales and Marketing Expenses. Sales and marketing expenses in 1994 and 1993
were relatively unchanged, but declined to approximately $1.3 million in pro
forma 1995 from $1.6 million in 1994. The pro forma 1995 decline resulted
primarily from a curtailment of marketing investments in the Predecessor
Companies' Information Products business and a reduction in the number of
sponsored events.
General and Administrative Expenses. General and administrative expenses for
pro forma 1995, 1994 and 1993 did not vary significantly during the three year
period. The decrease in these expenses to approximately $7.5 million in pro
forma 1995 from approximately $8.1 million in 1994 resulted primarily from
certain headcount reductions made by the Company shortly after its acquisition
of BIS in April 1995 and severance expenses included in the 1994 results.
Discontinued Operations. The income from discontinued operations increased
to $2.1 million in pro forma 1995, compared with a loss of $1.5 million in
1994. The results for the year ended 1994 included a charge of $2.6 million
for an impairment of goodwill recognized in connection with the planned sale
of BIS by Friday Holdings.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations since inception primarily through
private placements of equity securities. The private placements of equity
securities have provided the Company with net proceeds of approximately $20.6
million, representing $1.0 from the sale of Common Stock, $2.0 million from
the sale of Series A Preferred Stock and $17.6 million from the sale of Series
B Preferred Stock. At June 30, 1996, the Company had cash and cash equivalents
of $9.3 million. See Notes 10 and 11 of Notes to Consolidated Financial
Statements.
20
<PAGE>
The Company has used the proceeds of the private placements primarily to
hire research analysts and sales personnel and to fund the development of its
Continuous Information Services. In the period March 17 to June 30, 1995 and
the six months ended June 30, 1996, the Company's capital expenditures
totalled approximately $0.2 million and $1.1 million, respectively, primarily
for computer equipment. The Company expects that additional purchases of
computer equipment will be made as the Company's employee base grows. As of
June 30, 1996, the Company had no material commitments for capital
expenditures.
The Company believes that the net proceeds from the Offering, together with
its existing cash and cash equivalents and cash generated from operations,
will be sufficient to fund the Company's working capital needs at least
through 1997. In the event that the Company is unable to complete the
Offering, certain of its existing investors have represented that they will,
to the extent necessary, fund the Company through June 1997 on terms to be
mutually agreed upon. The Company's actual future capital requirements will
depend on numerous factors, including the Company's ability to successfully
market its Giga Advisory Service and Relevance Services; the Company's ability
to enter into contracts for the sale of its services and products and to
achieve and sustain high renewal rates; its ability to attract and retain
qualified research analysts and sales personnel on a timely basis and the
related costs of such efforts; the response of competitors to the Company's
services and products; the Company's ability to develop and market new
services and products; and the continued acceptance by customers of annual
membership agreements providing for advance payments rather than equal monthly
installments or some other payment model. The Company expects that it may
require additional working capital in the future and there can be no assurance
that such capital would be available to the Company on terms that are
acceptable, if at all. If adequate funds are not available, the Company may be
required to reduce its fixed costs and delay, scale back or eliminate certain
of its products or services, any of which could have a material adverse effect
on the Company's business, financial condition or results of operations. See
"Risk Factors--Substantial Future Capital Needs; Risks of Working Capital
Deficiency."
21
<PAGE>
BUSINESS
The Company provides information, analysis and advice relating to
developments and trends in the computing, telecommunications and related
industries (collectively, the information technology or "IT" industry).
Information technologies have become increasingly critical to the
competitiveness and long-term viability of a wide range of organizations. As a
result, many of these organizations have turned to IT "Continuous Information
Service" providers, which monitor and analyze IT developments and trends to
support customers' IT decisions. The Company's customers include: users of IT
products and services; vendors of IT hardware, software and services; and
institutional and other investors in the IT industry. These customers access
the Company's services and products through a personalized Internet-based
interface, as well as through published reports and consultation with the
Company's analysts and consultants.
Giga was founded in 1995 by Gideon I. Gartner, who founded Gartner Group,
Inc. in 1979 and served as its Chairman and Chief Executive Officer for twelve
years. Building upon his extensive experience in the IT Continuous Information
Services industry, Mr. Gartner formed Giga with the objective of creating a
new approach to providing Continuous Information Services to address
customers' needs more effectively than existing IT information providers.
The Giga Advisory Service, the principal service offering of the Company,
provides customers access to all of the Company's Giga Advisory Service
information, analysis and advice, as well as inquiry access to analysts and
practitioners, and participation in briefings, conferences, electronic forums
and teleconferences. The Company believes that its integrated, single-service
offering, which is provided to customers for an annual subscription fee,
delivers significant advantages over its competitors' multiple product
offerings that require customers to select, and separately purchase, subject-
specific services. The Company also provides its customers with access to its
ExperNet network of external IT practitioners who are available to answer
inquiries by customers. The Company recently introduced its first of a planned
series of specialized research products, called Relevance Services, which
combine original analysis, data and information produced by proprietary
surveys and methodologies with consulting, to assist in enhancing the IT
practices and operations of Giga's customers. In addition, the Company is
pursuing relationships with select content partners to complement the original
information and analyses provided by Giga's analysts.
The Company's GigaWeb system, an Internet-based interface to its services
and products, is designed to make it easy and efficient for customers to
navigate through the full spectrum of Giga's original research and third-party
content. Through the use of intelligent software agents, the Company is able
to provide customized information to each customer and also allow customers to
search for and select the information that is most relevant to their
particular needs.
In addition, customers of the Giga Advisory Service and Relevance Services
have access to the Company's information products, including various IT
events, publications, consulting and econometric forecasting. These products
are generally offered on a non-continuous basis and are also marketed outside
the Company's Giga Advisory Service and Relevance Services customer base to
generate incremental revenue and broaden the Company's IT industry visibility.
INDUSTRY BACKGROUND
Information technologies have become increasingly critical to the
competitiveness and long-term viability of a wide range of organizations. As
organizations have recognized the importance of information technologies, they
have made substantial and increasing financial commitments to IT systems and
services. At the same time, IT products have become increasingly complex and
diverse, and the rate of technological change and new product introductions
has accelerated. Many organizations maintain an internal staff of IT
professionals and also engage outside consultants to assist in IT decision
support. However, these organizations often require greater capabilities than
they can economically support internally and a more integrated approach than
individual consultants can provide. As a result, they have increasingly turned
for assistance to providers of Continuous Information Services which
continuously monitor and analyze IT industry developments and trends and
provide reports and information to clients on a subscription basis.
22
<PAGE>
The overall market for IT Continuous Information Services consists primarily
of three types of customers --users of IT products and services; vendors of IT
hardware, software and services; and institutional and other investors in the
IT industry.
Users.Users continually assess new technologies and anticipate future
trends in making major purchasing decisions and formulating long-term IT
strategies. Decision-making has become increasingly complicated as the pace
of technological change continues to accelerate. As a result, IT users
require current information and analysis of new product introductions and
other events, independent comparisons among competing platforms and
vendors, accurate assessments of trends such as pricing and obsolescence
and reasoned analysis of how issues will evolve over time. Users generally
seek alternative points of view and rely on the advice and insights of more
than one provider of Continuous Information Services for their IT
requirements.
Vendors.Vendors use Continuous Information Services primarily for product
planning, evaluation of competitors' products and formulation of marketing
and other business strategies. Vendors require a reliable source of
information on areas such as new markets and market forecasts, competitive
products, user preferences and buying trends, distribution and marketing
strategies and evolving market needs. The Company believes that much of the
information and analyses serving the needs of users can also benefit the
vendor community.
Investors.Institutional and other investors require Continuous
Information Services to evaluate user and vendor strategies, new IT product
performance, product purchase expectations and evolving market trends. By
gaining timely access to this information and using it in their company and
industry analyses, investors can make more informed decisions and enhance
their ability to make successful IT investments.
The IT information service industry began in the 1960s with companies that
analyzed IT market trends and provided quantitative data to either vendors or
users. The next generation of IT information providers, which emerged in the
1980s, generally offered IT analysis to both users and vendors. This second
generation model is still prevalent and typically provides multiple
information service offerings, each of which is focused on a specific subject
within the IT industry. For example, a second generation provider might offer
separate service offerings addressing mainframes, personal computers,
operating systems, application development tools and relational databases.
The Company believes that the second generation business model for IT
information providers does not fulfill the evolving needs of IT users, vendors
and investors. A solution to a customer's particular IT problem typically
involves a broad range of platforms, technologies and services. Giga believes
that separate reports addressing each distinct technology or issue do not
provide integrated or cost-effective support for the customer. The planning,
selection and implementation of IT solutions is becoming increasingly complex.
Historically, IT users would typically purchase a vertically integrated
solution involving hardware, operating systems and application software from a
single large vendor. In the current environment, IT users must evaluate a
variety of products based on emerging technologies from multiple vendors and
design systems in which the products operate with one another, with existing
legacy systems and, increasingly, within the Internet and emerging corporate
intranet environments.
Users have been confronted not only with an increasing number of
technological choices but also with a proliferation of technical information
from multiple independent sources, such as newsletters, vendors, trade
publications, the World Wide Web and the news media. This glut of information
makes it difficult for users to find the particular analysis and expertise
that is most relevant to their particular operational needs and can lead to
information-anxiety, confusion and frustration.
In seeking to formulate their IT plans and strategies in an environment of
rapid technological change and proliferation of available information,
organizations desire Continuous Information Services that can best address the
following needs:
. Broad-Based Coverage. Since IT solutions generally require knowledge of
multiple segments of the IT industry, the Company believes that customers
will increasingly desire integrated broad-based coverage of the IT
market, rather than a subject-specific approach.
23
<PAGE>
. Practical Experience. Industry analysts who conduct IT research and
analysis generally have an analytical or strategic orientation. However,
the solutions to many of today's IT problems require practical hands-on
experience.
. Customized Services. The mass of content produced by IT information
providers is often unconnected to the specific problem confronted by the
IT customer. IT customers need services that can provide access to
independent research while at the same time make that research relevant
to their particular application or environment.
. Efficient Information Retrieval. Customers want to quickly search for,
find and retrieve the particular research, analyses and expertise that
they require.
The Company believes that these largely unsatisfied and evolving needs have
created a market opportunity for a third generation IT information provider
that is able, through the use of technological innovation and reorientation of
the IT information provider business model, to satisfy the demand for
comprehensive, easy-to-use and cost-effective Continuous Information Services.
THE GIGA SOLUTION
The Company has developed, and is continuing to develop, a range of
innovative IT services and products that meet customers' needs for
comprehensive and customized Continuous Information Services. The principal
elements of Giga's solution for IT users, vendors and investors are as
follows:
. Single-Service Model. The Company's Giga Advisory Service is offered to
customers as a single integrated service. Customers may, for a
subscription fee, access the full spectrum of the Giga Advisory Service
information, analysis and advice on a continuous basis, in contrast to
the multiple services approach that requires customers to purchase
multiple services which generally are neither integrated nor
comprehensive.
. ExperNet. Subscribers to the Giga Advisory Service have access to the
Company's ExperNet network of external IT practitioners. These
practitioners have significant practical experience in solving real-world
IT problems and are available to answer customer inquiries and provide
analysis and advice.
. Relevance Services. The Company offers a series of Relevance Services
that combine original analysis, data and information produced by
proprietary surveys and methodologies with consulting, to assist in
enhancing the IT practices and operations of the Company's customers. The
Company believes its Relevance Services will be used by IT management to
evaluate competitive industry practices, benchmark their IT practices
against peer practices and assist in decision support.
. GigaWeb. The Company has focused its efforts not only on developing
original research and analyses content, but also on developing
technologies and methodologies to effectively deliver such original
content and other third-party content to customers in an efficient,
flexible and personalized manner. The Company's Internet-based interface,
GigaWeb, enables Giga's customers to gain personalized, interactive
access to the Company's full range of information sources. The GigaWeb
interface includes search and intelligent software agent technology
("Gigabots") that is designed to make it easy for customers to navigate
through the full spectrum of the Company's available information and,
based on the customer's profile, to obtain automatically the content that
is of particular interest to the customer.
THE GIGA STRATEGY
Giga's objective is to become a leading provider of IT Continuous
Information Services by delivering information, analysis and advice that is of
high strategic relevance to customers. The Company's strategy includes the
following key elements:
. Expand Breadth of Research. The Company plans to broaden its research and
analysis coverage both by hiring additional analysts and by recruiting
additional IT practitioners for the ExperNet network. At August 31, 1996,
the Company employed 50 in-house analysts, 32 of whom were Giga Advisory
Service
24
<PAGE>
analysts, and has established relationships with approximately 140
external IT practitioners as part of its ExperNet network. The Company
seeks to hire analysts who have significant experience in existing and
emerging areas of technology covering computer infrastructure,
applications and development, networking and telecommunications and IT
management.
. Increase Penetration of Existing Customers. The Company seeks to expand
its relationships with existing customers both by increasing the number
of individual subscribers within an organization and by upgrading the
status of subscribers from site license seat holders (who only have
access to the Company's research databases) to members (who have full
access to all of the Company's Continuous Information Services and may
make inquiries to the Company's analysts and ExperNet practitioners). The
Company will also seek to increase its penetration of existing accounts
by developing and offering additional services, such as its Relevance
Services, events, publications, consulting and econometric forecasting.
. Leverage Technological Innovation. The Company seeks to take advantage of
technological developments to enhance both the creation and delivery of
its research and analyses to customers. For example, the Company has
developed GigaWeb using both its own proprietary technology and licensed
third-party technologies. The Company plans to continue to evaluate and
implement technologies that can help to facilitate the flow of
information between the Company and its customers.
. Expand Worldwide Sales Force and Marketing. The Company's global strategy
is to increase its market penetration on a worldwide basis. The Company
plans to approximately double its worldwide direct sales force in the
next six months and to continue to expand its sales force in the future.
At August 31, 1996, the Company had 51 sales personnel worldwide. The
Company also plans to expand its market presence through events and
publications, the World Wide Web, direct mail, public relations,
telesales, and additional strategic alliances.
25
<PAGE>
SERVICES AND PRODUCTS
The Company's three principal service and product areas are the Giga
Advisory Service, Relevance Services and Information Products. The Company's
services and products are designed to be accessed through the Company's
personalized Internet-based interface, GigaWeb, as well as through published
reports and consultation with the Company's analysts and consultants.
--------------------
| GIGA INFORMATION |
| GROUP |
--------------------
|
----------------------------------------------------------
| | |
| ------------------------- |
| | GIGA ADVISORY | |
- --------------------- | SERVICE | -----------------------
| RELEVANCE SERVICES | | | |INFORMATION PRODUCTS |
| | |Continuous subscription-| | |
| Survey/methodology | | based advisory service | | |
| based research | | | | |
| services combined | | ExperNet Network | |Events, Publications,|
| with consulting | -------------------------- | Consulting and |
|focusing on specific| | | Econometric |
| user needs | | | Forecasting |
- ---------------------- | -----------------------
|
|
|
----------------------------------------------------------
| GIGA WEB |
| Internet-based information delivery system for |
| proprietary research and third-party content |
----------------------------------------------------------
GIGA ADVISORY SERVICE
The Company's Giga Advisory Service is the principal service offering of the
Company. The Giga Advisory Service offers customers, generally for an annual
subscription fee billed and payable in advance, access to all of the Company's
Giga Advisory Service information, analysis and advice, as well as inquiry
access to analysts and practitioners, and participation in briefings,
conferences and teleconferences.
The Giga Advisory Service offers the following deliverables to its
customers:
. PAs (Planning Assumptions). PAs are typically multi-page research reports
that provide customers with in-depth analyses of IT topics and
recommendations for action. Through August 31, 1996, the Company had
produced approximately 465 PAs.
. CQAs (Catalyst, Question and Answer). CQAs are brief presentations of
developments or ideas, in question and answer format, that are intended
to provide customers with quick, up-to-date findings and opinions,
authored by the Company's analysts. Through August 31, 1996, the Company
had produced approximately 3,000 CQAs.
. Inquiry Support. The Company maintains a "Knowledge Center," which
consists of experienced research associates who track customer inquiries
and direct customers to the appropriate analyst or source of information.
Customers also have direct access to the Company's analysts to answer
specific questions. Customers can make their inquiries and track the
status of an inquiry on-line through GigaWeb.
26
<PAGE>
. ExperNet. ExperNet is a network of external IT practitioners who are
available to respond to customer inquiries that require hands-on,
practical advice. ExperNet practitioners may include consultants, system
integrators, value-added resellers, IT vendor representatives and
developers. The Company has developed a multi-dimensional database
organized by topic that enables customers to access the particular
ExperNet practitioner whose experience and skills match the customer's IT
area of inquiry. Customers can direct their ExperNet inquiries to the
Knowledge Center by telephone. The Company reimburses its ExperNet
practitioners on a fee basis per customer inquiry. In addition, the
Company permits its ExperNet practitioners to enter into follow-on
consulting arrangements with the Company's customers for which Giga
currently receives no compensation.
. Events. The Company sponsors conferences on significant IT industry
issues and trends. Since the beginning of 1996, Giga had sponsored or co-
sponsored six conferences addressing various industry topics in North
America and Europe, with attendance exceeding approximately 1,700
participants, and plans to sponsor or co-sponsor five additional
conferences prior to the end of 1996.
. GigaTels. GigaTels are audio-teleconferences that include presentations
by analysts on selected topics and provide an open forum for questions,
exchanges and debate. GigaTels typically take place from three to five
times per week. Through August 31, 1996, the Company had produced over 70
GigaTels with over 1,000 participants.
. Workgroups. Customers who have shared objectives or interests will be
able to interact with each other through on-line discussion groups
(electronic forums) and special interest groups, which the Company plans
to introduce in the fourth quarter of 1996. Also, customers can respond
to a PA by initiating discussion among analysts and other users of
GigaWeb.
. Partner Content. In May 1996, the Company entered into a content
distribution agreement with Dow Jones & Company, Inc. ("Dow Jones")
pursuant to which Dow Jones granted the Company a nonexclusive right to
distribute and make available to GigaWeb users IT industry news and
information via access to several leading business-oriented news sources,
including Dow Jones Online News, The Wall Street Journal Interactive,
Public Relations Newswire, and Canada Businesswire. The agreement is for
an initial term ending in November 1997 and is renewable yearly
thereafter. As a result of this collaboration, a user can, using the
Company's Smart Search technology, supplement original Giga content with
up-to-date news and information. Giga plans to add additional suppliers
of third-party content in the future.
At August 31, 1996, the Company employed 32 analysts to support its Giga
Advisory Service and had relationships with approximately 140 external IT
practitioners to support its ExperNet network. In addition, the Company
employed 44 research and analysis support and fulfillment personnel. The
Company plans to broaden its research and analysis coverage both by hiring
additional analysts and by recruiting additional external IT practitioners for
the ExperNet network. The Company actively monitors technology trends and
industry issues. The Company's research process is designed to produce timely
analysis that is responsive to day-to-day IT developments. In their research,
analysts identify significant patterns from a broad range of inputs, formulate
original ideas, collaborate with other Company analysts to refine these ideas,
and document the results.
27
<PAGE>
The following table sets forth certain technology areas covered by the
Company's Giga Advisory Service:
- --------------------------------------------------------------------------------
GIGA ADVISORY SERVICE
RESEARCH COMPETENCIES
- --------------------------------------------------------------------------------
MANAGEMENT OF IT APPLICATIONS AND SOLUTIONS
. Asset Management . Application Development
. Costs of Ownership Tools and Methods
. Financial Strageties for IT . Object Technology
. Help Desk and Customer Support . Packaged Solutions
. Intellectual Property and Licensing . Personal Productivity
. Organizing the IT Function . Programming Environments
. Outsourcing . Web Development Tools
. Process Management . Workgroup and Workflow
. Project Management Computing
. Quality and Testing
. Re-engineering IT
. Year 2000 Problem
- --------------------------------------------------------------------------------
COMPUTER INFRASTRUCTURE NETWORKING AND COMMUNICATIONS
. Client-Server Architectures . Electronic Commerce
. Data Management on the Internet
. Data Mining . Internet Security
. Desktop Computing . LAN Hardware and Software
Hardware . Network Operating Systems
. Middleware . Private Networking
. Operating Systems . Protocols and Interoperability
. Server Hardware . Public Networking
. Storage Management . Remote Access
. Systems Configuration . Telecommunications
and Management Environment
. Transaction Processing . Web Browsers and Clients
. Web Servers . Wireless Networking
- --------------------------------------------------------------------------------
RELEVANCE SERVICES
The Company has begun to offer a series of Relevance Services, which combine
original analysis, data, and information produced by proprietary surveys and
methodologies with consulting, to assist in enhancing the IT practices and
operations of Giga's customers. The Company believes its Relevance Services
will be used by IT management to evaluate competitive industry practices,
benchmark their IT practices against peer practices and assist in decision
support. In July 1996, the Company introduced the first of its Relevance
Services which will consist of several studies relating to best industry
practices ("Best Practices") for IT management job functions. The initial
Relevance Service focuses on the human resources management function within
organizations, and illustrates tested IT Best Practices of individuals
performing that function. The first study within this service covers skills
assessment and management best practices. Results of each Relevance Service
will be furnished to customers through the studies, peer group meetings,
GigaWeb-facilitated collaborations and periodic on-site visits by the Company's
consultants.
28
<PAGE>
The Company also plans to develop additional Relevance Services addressing
other customer IT needs. One such planned service will assist clients in
determining the benefits, productivity and returns from IT assets and
investments. The Company is also developing Relevance Services that will focus
on specific IT industry sectors and vertical applications.
INFORMATION PRODUCTS
Giga offers discrete information products which are not subscribed to on a
continuous basis, including separately-priced events, publications, consulting
services and econometric forecasting.
Events. Through the acquisition of BIS, Giga acquired a conference
development and management operation that produced more than 20 IT industry
events in 1995 in the U.S. and Europe. In the first half of 1996, the Company
sponsored or co-sponsored six events and five half-day briefings and plans to
conduct five additional events and six half-day briefings during the remainder
of 1996. The events are targeted to IT users and vendors, and cover such
topics as business process reengineering, workflow, electronic commerce,
mobile and wireless communications and data warehousing. The Company's events
typically draw between 200 and 500 participants per conference and are
designed to showcase its analysts and encourage networking among participants.
The Company establishes strategic alliances with prominent industry
associations, consulting firms, and publishing houses to enhance the quality
of its conferences and gain marketing leverage. For example, the Company has
relationships with Arthur D. Little, Inc. with which the Company co-sponsors
conferences, Smith Bucklin, Inc. and Decision Support Technology, Inc. These
relationships supplement the Company's marketing communications programs and
help build awareness of the Giga name.
Publications. The Company's publications business includes special reports
and newsletters. The Company plans to publish approximately 35 reports and
newsletters in 1996. These reports include original content as well as
contributions from outside authors.
Consulting. The Company offers engagement-based consulting that focuses on
solving specific customer problems in areas such as market and product line
strategy, competitive positioning, channel dynamics, product life cycle
analysis, feature and functional specification requirements and market demand
analysis. At August 31, 1996, the Company provided these consulting services
through 11 consultants located at the Company's facilities in the United
States, Europe and Australia.
Econometric Forecasting. The Company's Australian subsidiary specializes in
supporting a diverse range of industries with a mix of econometric forecasting
and modeling, market research, and market analysis services. This organization
offers customers multi-client studies, subscription-based information services
in key industry sectors, including information technologies, building and
construction, economics and government, financial services, manufacturing and
commercial property.
GIGAWEB
GigaWeb is the Company's Internet-based information delivery interface.
GigaWeb provides customers with on-line access to the Company's analysts,
research and reports and third-party content. Customers who have shared
objectives or interests can interact with each other through on-line
discussion groups, such as electronic forums. GigaWeb is designed to optimize
the search and retrieval of the information and analyses by enabling the
selection and management of information from multiple sources based on the
customer's specific needs.
GigaWeb is designed to make it easy and efficient for a customer to navigate
through the full spectrum of Giga's original research and third-party content.
Subscribers to GigaAdvisory are provided with a personalized home page (the
"Virtual Office") which may be accessed through a password using a standard
Web browser.
29
<PAGE>
Based on the individualized customer profile, GigaWeb automatically selects
the particular subset of Giga original and third-party content most relevant
to the customer and delivers it to the customer's Virtual Office. In addition,
GigaWeb includes search technologies that enable customers to search for
relevant information using word searches, concept and topic associations.
GigaWeb also incorporates intelligent software agents that are designed to
accept predetermined search criteria and apply them on a repetitive basis
against selected sources of information, alerting the customer only when the
criteria under which the agent is operating finds a match. These technologies
enable the Company to provide customized information to each customer and also
allow customers to search for and select information most relevant to their
particular needs.
GigaWeb is based on both proprietary and third-party software, including
both text indexing and retrieval. The Company plans to continue to evaluate
and implement technologies that can help facilitate the flow of information
from the Company to its customers. For example, the Company has established an
authoring environment based on Lotus Notes that automatically feeds research
findings over GigaWeb. The Company also offers an alternative on-line delivery
mechanism, GigaNotes, for customers that use the Lotus Notes platform for
collaboration and information access.
SALES, MARKETING AND CUSTOMERS
At August 31, 1996 the Company had a North American direct sales force
comprised of 41 field sales personnel. The Company's internal marketing
organization, comprised of 12 marketing personnel located primarily at the
Company's Norwell, Massachusetts facility, provide public relations, lead
generation, direct mail support and other related services. The Company plans
to approximately double its domestic sales force over the next six months and
to continue to substantially expand its domestic marketing organization. The
Company also plans to develop a domestic telemarketing group.
At August 31, 1996 the Company had an international sales and marketing
force of 10 sales personnel in Europe and Asia Pacific. The Company plans to
expand its international sales force over the next six months and to explore
the development of alternative worldwide distribution channels.
The Company offers its Giga Advisory Service pursuant to subscription
agreements which generally provide for payment promptly following the start of
the subscription period and renew automatically each year unless cancelled by
the customer. The Company initially records contractual subscription fees as
deferred revenue and recognizes the revenue on a pro rata monthly basis over
the term of the contract. The Company has three categories of subscribers:
members (who have full access to original and third party content and may make
inquiries to the Company's analysts and ExperNet practitioners); users (who
have access only to to the Company's research databases and partner content),
and site license seat holders (who have access to the Company's research
databases). The Company's list annual subscription fee for these services is
currently $12,000 per member, $1,200 per user and $150 per site license seat
holder for up to 250 site license seats after which the price per site license
seat varies. The Company also offers volume discounts and transaction-based
options to qualified customers.
The Company offers its Relevance Services pursuant to subscription
agreements which provide for payment in full promptly after the start of the
subscription period and renew automatically each year unless cancelled by the
customer. The Company's annual list subscription fee for its Relevance
Services ranges between $24,000 and $36,000 per customer. The Company
initially records contractual subscription fees as deferred revenue and
recognizes the revenue on a pro rata monthly basis over the term of the
contract.
The Company believes that a leading measure of the Company's anticipated
future Continuous Information Services revenue is the annual value ("AV") of
its Giga Advisory Service and Relevance Services subscription agreements. The
Company calculates AV each month as the cumulative annualized value of all
subscription agreements which either commence or continue on the first day of
the following month, without regard to contract duration or cancellation risk.
Agreements may be included in AV even though final terms and conditions may
not have been agreed upon; however, revenues will not begin to be recognized
from these agreements until all terms and conditions are finalized.
30
<PAGE>
AV has grown every month since the introduction of the Company's Giga
Advisory Service and at August 31, 1996 totalled approximately $4.2 million,
excluding approximately $1.1 million of subscriptions sold to former customers
of the BIS Market Research Business. The table set forth below shows the
Company's cumulative monthly AV and customer growth since the introduction of
the Company's Giga Advisory Service in April 1996. No assurance can be given
that the Company's AV will continue to grow, and actual AV levels may differ
materially in future periods.
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
AV FOR GIGA CUSTOMER
1996 ADVISORY SERVICE(1) ORGANIZATIONS
---- ------------------- -------------
<S> <C> <C>
April................................... $ 484,000 27
May..................................... 1,097,000 59
June.................................... 2,324,000 109
July.................................... 3,257,000 143
August.................................. 4,216,000 171
</TABLE>
--------
(1) Excludes $1.1 million of AV realized prior to April
1996 with respect to subscriptions sold to customers
of the BIS Market Research Business.
Customers of the Company's Giga Advisory Service include:
AIG IBM
Alcatel Mobile Phones KPMG Peat Marwick LLP
The Boeing Co. Lexmark International Group, Inc.
Colonial Penn Insurance Company National Cash Register Company
Digital Equipment Corporation Oracle Corporation
Duracell Inc. Safeguard Scientifics, Inc.
First USA Bank Southwestern Bell Telephone Company
COMPETITION
The Company competes in the IT information services and products market
directly with other independent providers of Continuous Information Services
including Gartner Group, Inc., META Group, Inc. and Forrester Research Inc,
and will compete with the internal planning, research and marketing staffs of
current and prospective customer organizations. The Company also competes
indirectly with other information providers, including market research firms,
"Big Six" accounting firms, consulting companies and system integrators. Many
of the Company's direct and indirect competitors have substantially greater
financial information gathering and marketing resources than does the Company.
Some of the Company's direct and indirect competitors also have established
research organizations with greater market recognition and experience in the
IT industry. There can be no assurance that the Company will continue to be
successful in establishing a competitive research organization. Delays,
difficulty in developing and achieving market acceptance of the Giga Advisory
Service and Relevance Services or customer dissatisfaction would have a
material adverse effect on the Company's business, financial condition and
results of operations. While the Company believes it can compete successfully
on the basis of price, quality, distinctiveness, and responsiveness to
customers, there are few barriers to entry into the Company's market and new
competitors could readily seek to compete in one or more market segments
addressed by the Company's products and service. There can be no assurance
that the Company's current or potential competitors will not develop services
and products comparable or superior to those developed by the Company or
respond more quickly to new or emerging industry trends or changing customer
requirements. Increased competition, direct and indirect, could adversely
affect the Company's operating results through pricing pressure and loss of
market share. There can be no assurance that the Company will be able to
compete successfully against existing or new competitors. In addition, any
pricing pressures, reduced margins or loss of market share resulting from
increased competition could have a material adverse effect on the Company's
business, financial condition or results of operations.
31
<PAGE>
BIS STRATEGIC DECISIONS ACQUISITION
The Company acquired BIS in April 1995 to obtain its marketing, sales, and
other corporate infrastructures and certain of its personnel. BIS was engaged
in compiling and providing data-intensive market research to vendors for use
primarily in planning their product offerings and marketing programs. The BIS
Market Research Business offerings were principally quantitative in nature;
employed in large part relatively junior data specialists; marketed to
purchasers of quantitative research; included little high level advice and
analysis; were marketed in multiple separate service offerings; and focused
principally on vendors. In contrast, the Company's strategic business plan
focuses on qualitative, analytical information and advice addressed to meet a
broader range of customers; employs a single, integrated continuous
information model; contemplates building a cadre of high-level research
analysts and other professionals who are peers of its target customers to
develop original ideas and knowledge; and concentrates marketing of its
services and products to senior decision makers to support their critical IT
decisions. The BIS Market Research Business did not fit with Giga's own
business model. Accordingly, in June 1996 the Company decided to discontinue
the BIS Market Research Business, including termination of the personnel
employed in developing and compiling its data-intensive market research
products; assignment of its obligations under existing BIS subscription
agreements to two unrelated IT service providers; and cessation of operations
at its two leased facilities in England. See "Risk Factors--Risks Associated
With Discontinuance of BIS Market Research Business."
EMPLOYEES
As of August 31, 1996, the Company employed 247 persons (excluding employees
from the Company's discontinued BIS Market Research Business), including 50
analysts, 44 research and analysis support and fulfillment personnel, 51 sales
personnel, 20 conferences, events and publications personnel, 12 marketing
personnel, 11 consultants and 59 administrative and operational personnel. Of
such employees, 100 are located at the Company's facilities in Cambridge and
Norwell, Massachusetts, 67 are located at other domestic facilities or home
offices and 80 are located overseas. None of the Company's employees is
represented by a collective bargaining arrangement and the Company has
experienced no work stoppages. The Company considers its relations with
employees to be good.
FACILITIES
The Company's headquarters are located in approximately 8,000 square feet of
office space in Cambridge, Massachusetts. This facility, together with the
Company's approximately 27,000 square feet Norwell facility, accommodate
corporate administration, research and analysis, marketing and sales and
customer support. The lease on the Cambridge facility expires in November 2000
and the lease on the Norwell facility expires in April 1998. The Company also
leases office space in four other domestic and seven international locations
to support its research and analysis, domestic and international sales efforts
and other functions. The Company believes its existing facilities and
expansion options are adequate for its current needs and that additional
facilities will be available for lease on reasonable terms to meet future
needs.
LEGAL PROCEEDINGS
In July 1996, Alan J. Green, a former employee of the Company, filed a
lawsuit against the Company and Gideon I. Gartner in the United States
District Court for the Southern District of New York. In his complaint, Mr.
Green alleged that the Company breached an oral employment agreement with him
by failing to pay him certain compensation. In connection with this claim, Mr.
Green is seeking damages of approximately $2,200 in cash; at his option,
either the right to purchase 60,000 shares of Common Stock at a purchase price
of $.50 per share or payment of an amount of money equal to the fair market
value of 60,000 shares on the date that judgment is entered less $30,000; and
an option to purchase an additional 60,000 shares of Common Stock at an
exercise price of $0.50 per share. Mr. Green also alleged that the Company and
Mr. Gartner, among other things, made fraudulent representations in inducing
him to accept employment with the Company, and with respect to this claim Mr.
Green is seeking compensatory damages of $2.5 million and punitive damages of
$1.0 million. The Company believes it has meritorious defenses and intends to
vigorously defend itself against these claims.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE Position
---- --- --------
<C> <C> <S>
Gideon I. Gartner 61 Chairman of the Board of Directors and Chief
Executive Officer
Kenneth E. Marshall 43 President and Chief Operating Officer;
Director
David L. Gilmour 38 Senior Vice President, Research &
Technology; Director
Richard B. Goldman 50 Senior Vice President, Chief Financial
Officer; Treasurer; Secretary
Leander R. Jennings, Jr. 36 Senior Vice President, Worldwide Sales
Jeffrey L. Swartz 42 Senior Vice President, Marketing Operations,
Events, Publications
Neill H. Brownstein 52 Director
Richard L. Crandall 53 Director
Irwin Lieber(1)(2) 57 Director
James D. Robinson III(1)(2) 60 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
MR. GARTNER has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since its inception in March 1995. From 1993
to 1994, he was a private investor. From 1991 to 1992, he served as Chairman,
and from 1979 to 1991 he served as President, Chairman and Chief Executive
Officer, of Gartner Group, Inc., an information technology company which he
founded. From 1972 to 1979, he served as a technology analyst and subsequently
as a partner at Oppenheimer & Co., an entity engaged in the financial services
business. Mr. Gartner received his B.S. in engineering from Massachusetts
Institute of Technology ("MIT") and received an M.A. in management from MIT's
Sloan School.
MR. MARSHALL has served as President and Chief Operating Officer and as a
director of the Company since December 1995. From 1990 to 1995, he served as
President and Chief Executive Officer of Object Design, Inc., a computer
software company ("Object Design"). From 1985 to 1989, he held a variety of
management positions, the last being Group Vice President, East Operations, at
Oracle Corporation, a computer software company ("Oracle"). From 1979 to 1985,
he served as a consultant at Planmetrics, Inc., a management consulting firm.
Mr. Marshall received his B.S. in education from Northeastern University and
his M.A. in economics from Boston College.
MR. GILMOUR has served as Senior Vice President, Research & Technology of
the Company since April 1996 and as a director of the Company since July 1995.
From December 1995 to April 1996, he served as Senior Vice President of
Technology of the Company. From July 1993 to December 1995, he served as Chief
Executive Officer of ExperNet Corporation ("ExperNet"), an information
technology company which he founded with Mr. Gartner. From October 1992 to
April 1993, Mr. Gilmour served as acting President and Chief Executive
Officer, and from April 1991 to October 1992 and from April 1993 to July 1993
he served as Executive Vice President, Marketing, of Versant Object Technology
Corporation, a computer software company. From 1989 to 1991, he served as Vice
President--Database Systems Division, from 1986 to 1989 he served as General
Manager--Advanced Products Division, and from 1984 to 1986 he served as
Director--Product Planning, at Lotus
33
<PAGE>
Development Corporation, a software company. Mr. Gilmour received a B.S. in
Applied Physics, an M.E. in engineering and an M.B.A. with distinction from
Harvard University.
MR. GOLDMAN has served as Senior Vice President and Chief Financial Officer
since May 1996, and as Treasurer and Secretary of the Company since August
1996. From October 1992 to May 1996, he served as Executive Vice President,
Finance and Chief Financial Officer of Sequoia Systems, Inc., a manufacturer
of fault tolerant servers, mobile computers and other computer products. From
May 1991 to October 1992, he served as Senior Vice President, Finance and
Chief Financial Officer for Connell Limited Partnership, a multi-business
industrial equipment manufacturing company. From 1990 to 1991, he served as
Senior Vice President, Finance and Administration and Chief Financial Officer
of Alliant Computer Systems Corporation, a manufacturer of super computers.
From 1978 to 1989, he served in a number of management capacities at Prime
Computer, Inc., a supplier of mini computers and CAD/CAM services and
products, the last of which was as Senior Vice President, Finance and
Administration and Chief Financial Officer from 1988 to 1989. Mr. Goldman
received a B.S. in accounting from Northeastern University and an M.B.A. in
finance from Boston University.
MR. JENNINGS has served as Senior Vice President, Worldwide Sales of the
Company since February 1996. From June 1995 to February 1996, Mr. Jennings
served as National Product and Sales Manager of the Telecom, Cable and
Wireless Division of Oracle. From 1991 to June 1995, he served as the Western
Regional Director of Object Design. From 1990 to 1991, he served as Vice
President of Sales of Carlyle Sales, Inc., a developer of library automation
systems. Mr. Jennings received a B.A. from Boston College.
MR. SWARTZ has served as Senior Vice President, Marketing Operations, Events
and Publications since April 1996. From March 1995 to February 1996, he served
as Vice President, Conferences and Publications of the Company. From 1989
until 1995, he served in a number of capacities at BIS Strategic Decisions,
Inc., serving as interim Co-CEO from January until March 1995, as Senior Vice
President, Conferences and Publications Division from 1994 to 1995, as Senior
Vice President, Consulting from 1992 to 1994, and as Vice President, Research
Publications from 1989 to 1992. From 1986 to 1989 he served as an independent
consultant, and from 1982 to 1986 he served as President, at Communications
Publishing Group, Inc., a newsletter publishing company which he founded. Mr.
Swartz received a B.S. in psychology from Boston College.
MR. BROWNSTEIN has served as a director of the Company since July 1995 and
has served as an advisor to the Company since its inception. Since January
1995, he has been a private investor. From 1970 to January 1995, Mr.
Brownstein was associated with Bessemer Securities Corporation and was a
founder and General Partner of three affiliated venture capital funds:
Bessemer Venture Partners L.P., Bessemer Venture Partners II L.P. and Bessemer
Venture Partners III L.P., for which he currently serves as a Special General
Partner. Since 1970, he has been president of Neill H. Brownstein Corporation,
an investment management counseling enterprise. He serves as a director of DSP
Communications, Inc. Mr. Brownstein received a B.A. from Columbia College and
an M.B.A. from the Kellogg School of Management at Northwestern University.
MR. CRANDALL has served as a director of the Company since August 1995.
Since April 1994, he has served as Chairman, and from 1970 until April 1994 he
served as President and Chief Executive Officer, of Comshare, Incorporated, a
software company which he founded ("Comshare"). He currently serves on the
Board of Directors of Comshare, Computer Task Group, Incorporated and Diebold,
Incorporated. Mr. Crandall received a B.S. in electrical engineering, a B.S.
in mathematics and an M.S.E. in industrial engineering, each from the
University of Michigan.
MR. LIEBER has served as a director of the Company since November 1995.
Since 1979, he has served as Chairman and Chief Executive Officer of Geo
Capital Corporation, a investment advisory firm which he founded.
Additionally, Mr. Lieber has served as a corporate officer of InfoMedia
Associates Ltd., a general partner of 21st Century Communications Partners,
L.P., an investment fund. From 1970 to 1979, Mr. Lieber was a General Partner
of First Manhattan Co., an investment management, brokerage and investment
banking firm. Mr. Lieber is a director of LeaRonal Inc. He received a B.S.
degree in electrical engineering from City College of New York and an M.S.
degree in electrical engineering from Syracuse University.
34
<PAGE>
MR. ROBINSON has served as a director of the Company since August 1995. Since
1994, Mr. Robinson has served as Chairman and Chief Executive Officer of RRE
Investors, L.L.C., a venture capital firm which he co-founded. From 1977 to
1993, Mr. Robinson served as Chairman and Chief Executive Officer of the
American Express Company and held a series of executive positions with American
Express Company from 1970 to 1976. Mr. Robinson is a director of The Coca-Cola
Company, Union Pacific Corporation, Bristol-Meyers Squibb Company, First Data
Corporation, New World Communications Group, Incorporated, Alexander &
Alexander Services Inc. and Cambridge Technology Partners (Massachusetts), Inc.
Mr. Robinson received a B.S. from the Georgia Institute of Technology and an
M.B.A. from Harvard University.
Following the Offering, the Board of Directors will be divided into three
classes, each of whose members will serve for a staggered three-year term. The
Board will consist of three Class I Directors (Messrs. Gilmour, Crandall and
Lieber), two Class II Directors (Messrs. Marshall and Brownstein) and two Class
III Directors (Messrs. Gartner and Robinson). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed directors of the same class whose term is then expiring. The terms of
the Class I Directors, Class II Directors and Class III Directors will expire
upon the election and qualification of successor directors at the annual
meeting of stockholders held during the calendar years 1997, 1998 and 1999,
respectively.
Certain of the current directors of the Company were nominated and elected in
accordance with a stockholders voting agreement. This agreement will terminate
upon the consummation of the Offering. See "Certain Transactions." Mr. Marshall
serves on the Board of Directors pursuant to the terms of his Employment
Agreement. See "--Executive Compensation."
Each officer serves at the discretion of the Board of Directors. There are no
family relationships among any of the directors and executive officers of the
Company.
BOARD COMPENSATION
Each non-employee director is reimbursed for expenses incurred in connection
with his attendance at meetings of the Board of Directors and committees
thereof. Directors who are employees of the Company currently receive no
compensation for serving as directors.
For a discussion of transactions between the Company and certain directors of
the Company, see "Certain Transactions."
35
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal year ended
December 31, 1995 for the Company's Chief Executive Officer and the Company's
other most highly compensated executive officer whose annual cash compensation
exceeds $100,000 (the Chief Executive Officer and such other executive officer
are hereinafter referred to as the "Senior Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------- ------------
NUMBER OF
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION SALARY($)(1) BONUS($) OPTIONS
------------------ ------------ -------- ------------
<S> <C> <C> <C>
Gideon I. Gartner............................ 0(2) 0 660,000
Chairman of the Board of Directors
and Chief Executive Officer
David L. Gilmour(3).......................... 129,838 0 120,000
Senior Vice President,
Research & Technology; Director
</TABLE>
- --------
(1) Includes amounts payable in 1995 and/or 1996 for services rendered by the
Senior Executives in 1995. Other compensation in the form of perquisites
and other personal benefits has been omitted because it constitutes the
lesser of $50,000 or ten percent of the total annual salary and bonus of
each of the Senior Executives in 1995.
(2) In 1995, Mr. Gartner was paid no compensation for his services as Chairman
of the Board of Directors and Chief Executive Officer of the Company. In
1996, Mr. Gartner will receive annual compensation and will be entitled to
receive a cash bonus in such amount as shall be determined by the Board of
Directors or Compensation Committee thereof.
(3) In 1995, Mr. Gilmour served as Chief Executive Officer of ExperNet, which
became a wholly-owned subsidiary of the Company in that year.
The following table sets forth certain information regarding options granted
by the Company to each of the Senior Executives during the fiscal year ended
December 31, 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------
POTENTIAL
REALIZABLE
VALUE
AT ASSUMED
NUMBER ANNUAL RATES OF
OF PERCENT OF EXERCISE STOCK PRICE
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PER OPTION TERM($)(1)
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------------
GRANTED FISCAL YEAR ($) DATE 5% 10%
---------- ------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gideon I. Gartner....... 500,000(2) 16.1% $0.50 10/16/05 $157,224 $398,436
160,000(2) 5.1 0.50 07/06/05 50,312 127,499
David L. Gilmour........ 120,000(3) 3.9 0.50 07/06/05 37,734 95,625
</TABLE>
- --------
(1) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholders' continued employment through the option period and the date
on which the options are exercised.
(2) These stock options are immediately exercisable.
(3) Twenty-five percent of the shares subject to the option vest on July 6,
1996 and one thirty-sixth of the remaining shares vest monthly thereafter.
36
<PAGE>
The following table sets forth certain information concerning stock options
held as of December 31, 1995 by each of the Senior Executives:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT FISCAL YEAR-END AT FISCAL YEAR END(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gideon I. Gartner....... 0 0 660,000/ 0 $6,207,000/$ 0
David L. Gilmour........ 0 0 0 /120,000 $ 0 /$1,140,000
</TABLE>
- --------
(1) Represents the total gain which would be realized if all in-the-money
options held at December 31, 1995 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and the assumed initial public
offering price of $10.00 per share. An option is in-the-money if the fair
market value of the underlying shares exceeds the exercise price of the
option.
Employment Agreements
Gideon I. Gartner. The Company has entered into a non-competition agreement
with Mr. Gartner, dated November 13, 1995, pursuant to which Mr. Gartner has
agreed not to compete with the Company, solicit any employee or take away any
customer of the Company either during his employment with the Company or for
so long thereafter as the Company continues to pay Mr. Gartner annual
compensation of at least $120,000 (whether as an employee, consultant or in
the form of severance or post-employment benefits).
Kenneth E. Marshall. Mr. Marshall serves as President and Chief Operating
Officer pursuant to the terms of a five-year employment agreement with the
Company, dated December 1, 1995. During the term of his employment, Mr.
Marshall will serve as a director of the Company and will have the right to
recommend one person to serve on the Board of Directors. Mr. Marshall is
entitled to a base salary of $160,000 and a guaranteed bonus of $80,000 for
1996, and a base salary of $192,000 and a target bonus of $96,000, of which
$48,000 is guaranteed, for 1997. Pursuant to the employment agreement, Mr.
Marshall was granted a stock option to purchase 600,000 shares of Common Stock
at an exercise price of $0.50 per share and received a loan from the Company
in the amount of $20,000. Twenty-five percent of the shares subject to the
option vest on January 31, 1997 and one thirty-sixth of the remaining shares
vest monthly thereafter. In addition, the Company has agreed to grant
Mr. Marshall an option to purchase 80,000 shares of Common Stock if the
Company achieves certain goals for the year ended December 31, 1996. If Mr.
Marshall terminates his employment for cause or is terminated by the Company
other than for cause, the agreement provides for a severance payment of
$160,000 in the event termination occurs prior to January 31, 1997, or, in the
event such termination occurs on or following January 31, 1997, 50% of his
average annual base salary during the twelve months prior to such termination.
In addition, Mr. Marshall has agreed not to compete with the Company either
during his employment and for a period of one year thereafter.
David L. Gilmour. Mr. Gilmour serves as Senior Vice President, Research &
Technology pursuant to the terms of a two-year employment agreement, dated
July 6, 1995, with ExperNet, at the time a majority-owned subsidiary of the
Company, to which the Company is successor by reason of the merger of ExperNet
with the Company. Pursuant to the terms of the employment agreement, Mr.
Gilmour was elected to serve as a director of the Company. Mr. Gilmour was
entitled to receive a salary of $90,000 per year through August 1995 and a
salary of $160,000 per year commencing on September 1, 1995. If Mr. Gilmour is
terminated without cause before July 6, 1997, he is entitled to a severance
payment equal to one year's salary and thirty percent of all unvested options
become immediately exercisable. If Mr. Gilmour is terminated without cause, he
has agreed to provide the Company with consultation services for up to one-
quarter time for one year after such termination.
37
<PAGE>
He also has agreed that he will not engage in any activities that are designed
to impact the Company negatively in the marketplace, which agreement will
terminate on the latter to occur of one year after such termination or the
date Mr. Gilmour divests himself of all shares of the Company's capital stock
then owned by him.
Leander R. Jennings, Jr. Mr. Jennings serves as Senior Vice President,
Worldwide Sales pursuant to the terms of an employment agreement with the
Company, dated February 1, 1996. The employment agreement terminates on June
30, 1997. Mr. Jennings is entitled to receive a base salary of $120,000, plus
commissions and relocation expenses, for the first twelve months, and
thereafter as may be determined by the Compensation Committee of the Board of
Directors. Pursuant to the employment agreement, Mr. Jennings was granted an
option to purchase 120,000 shares of Common Stock at $.60 per shares. Twenty-
five percent of the shares subject to the option vest on February 1, 1997 and
one thirty-sixth of the remaining shares vest monthly thereafter. Mr. Jennings
is also entitled to receive additional options if certain sales quotas are met
in 1997. If his employment is terminated by the Company other than for cause,
the agreement provides for a severance payment equal to the greater of (i) the
base salary he would have received had his employment not been so terminated
and (ii) the amount that would be payable to Mr. Jennings for the greater of
the remainder of his term of employment or six months. In addition, Mr.
Jennings has agreed not to compete with the Company either during his
employment by the Company and for a period of one year thereafter.
Stock Plans
1995 Stock Option/Stock Issuance Plan. The Company's 1995 Stock Option/Stock
Issuance Plan, as amended (the "1995 Stock Plan") was adopted by the Board of
Directors in September 1995 and was approved by the stockholders in February
1996. Under the terms of the 1995 Stock Plan, the Company is authorized to
make awards of restricted stock and to grant incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") ("incentive stock options"), and stock options not intended to
qualify as incentive stock options ("non-statutory stock options"), to
employees, officers and directors of, and consultants and advisors to, the
Company and its subsidiaries. A total of 6,000,000 shares of Common Stock may
be issued upon the exercise of options or restricted stock awards granted
under the 1995 Stock Plan.
The Board of Directors is authorized to select the option recipients and to
determine the kind and terms of each option, including (i) the number of
shares of Common Stock subject to each option, (ii) the option exercise price,
(iii) the vesting schedule of the option, and (iv) the duration of the option.
Options are generally not assignable or transferable except by will or the
laws of descent and distribution.
Restricted stock awards under the 1995 Stock Plan entitle the recipient to
purchase Common Stock from the Company under terms which provide for vesting
over a period of time and a right of repurchase of unvested stock by the
Company when the recipient's relationship with the Company terminates. The
Board of Directors is authorized to select the recipients of restricted stock
awards and to determine the terms of each award, including (i) the dates on
which restricted stock awards are made, (ii) the number of shares of Common
Stock subject to the award, (iii) the purchase price (which can be less than
the fair market value of the Common Stock) of the award, and (iv) the vesting
schedule of the award. The recipients may not sell, transfer or otherwise
dispose of shares subject to a restricted stock award until such shares are
vested. Upon termination of the recipient's relationship with the Company, the
Company will be entitled to repurchase those shares which are not vested on
the termination date at a price equal to their original purchase price.
At August 31, 1996, 2,987,253 shares of Common Stock were available for
future grant under the 1995 Stock Plan. However, in connection with the
adoption of the 1996 Option Plan (defined below), the Board of Directors
amended the 1995 Stock Plan to provide that all future options would only be
granted under the 1996 Option Plan.
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996
Option Plan") was adopted by the Board of Directors, subject to approval by
the stockholders of the Company, in August 1996. The 1996
38
<PAGE>
Option Plan provides for the grant of stock options to employees, officers and
directors of, and consultants or advisors to, the Company and its
subsidiaries. Under the 1996 Option Plan, the Company may grant incentive
stock options or non-statutory stock options. Incentive stock options may only
be granted to employees of the Company. A total of 3,000,000 shares of Common
Stock may be issued upon the exercise of options granted under the 1996 Option
Plan. The maximum number of shares with respect to which options may be
granted to any employee under the 1996 Option Plan shall not exceed 100,000
shares of Common Stock during any calendar year.
The 1996 Option Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1996 Option Plan, the
Compensation Committee has the authority to select option recipients and to
determine the kind and terms of each option, including (i) the number of
shares of Common Stock subject to the option, (ii) the option exercise price,
which, in the case of incentive stock options, must be at least 100% (110% in
the case of incentive stock options granted to a stockholder owning in excess
of 10% of the Company's Common Stock) of the fair market value of the Common
Stock as of the date of grant, (iii) the vesting schedule of the option, and
(iv) the duration of the option (which, in the case of incentive stock
options, may not exceed ten years).
Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash and Common Stock or by any other method
(including delivery of a promissory note payable on terms specified by the
Compensation Committee) approved by the Compensation Committee consistent with
Section 422 of the Code and Rule 16b-3 under the Securities Exchange Act of
1934, as amended. Options are not assignable or transferable except by will or
the laws of descent and distribution and, in the case of non-statutory
options, pursuant to a qualified domestic relations order (as defined in the
Code).
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the "1996 Purchase Plan") was adopted by the Board of
Directors, subject to approval by the stockholders, in August 1996, and will
become effective upon the consummation of the Offering. The 1996 Purchase Plan
authorizes the issuance of up to 400,000 shares of Common Stock to
participating employees.
All employees of the Company, including directors of the Company who are
employees, and all employees of the Company's subsidiaries whose customary
employment is more than 25 hours per week and for more than six months in any
calendar year, are eligible to participate in the 1996 Purchase Plan.
Employees who would immediately after the grant own 5% or more of the total
combined voting power or value of the Common Stock of the Company or any
subsidiary are not eligible to participate.
On the first day of a payroll deduction period, as designated by the
Compensation Committee of the Board of Directors (the "Offering Period"), the
Company will grant to each eligible employee who has elected to participate in
the 1996 Purchase Plan an option to purchase shares of Common Stock. The
employee may authorize a percentage (as determined by the Compensation
Committee, and in no event greater than 10%) of such employee's regular pay to
be deducted by the Company during the Offering Period and applied to the
purchase of Common Stock. On the last day of the Offering Period, the employee
is deemed to have exercised the option, at the option exercise price, to the
extent of all accumulated payroll deductions. Under the terms of the 1996
Purchase Plan, the option price is an amount equal to 85% of the fair market
value per share of the Common Stock on either the first day or the last day of
the Offering Period, whichever is lower. No employee may purchase Common Stock
under the 1996 Purchase Plan at a rate which exceeds $25,000 of the fair
market value of such Common Stock (determined on the commencement date of the
Offering Period) in any calendar year. The Compensation Committee may, in its
discretion, choose an Offering Period of 12 months or less for each Offering
Period.
If an employee is not a participant of the 1996 Purchase Plan on the last
day of the Offering Period, such employee is not entitled to exercise any
option and the amount of such employee's accumulated payroll deductions will
be refunded. An employee's rights under the 1996 Purchase Plan terminate upon
voluntary withdrawal from the 1996 Purchase Plan at any time or when such
employee ceases employment for any reason,
39
<PAGE>
except that upon termination of employment because of death, the employee's
beneficiary has certain rights to elect to exercise the option to purchase the
shares which the accumulated payroll deductions in the participant's account
would purchase on the date of death.
401(k) Profit Sharing Plan. The Company maintains a 401(k) Profit Sharing
Plan (the "401(k) Plan"), a tax-qualified plan covering all of its employees
who are at least 21 years of age and have completed one year of service with
the Company. Each employee may elect to reduce his or her current compensation
by up to 10% (on a pre-tax basis). The Company matches by 25% that portion of
an employee's contribution representing the first 3% of an employee's base
salary and by 50% that portion representing the next 3% of an employee's base
salary.
All employee and Company contributions to the 401(k) Plan are fully vested
at all times. Upon termination of employment, an employee may elect a lump sum
distribution of all amounts contributed by him or her under the 401(k) Plan.
Early withdrawals from amounts contributed under the 401(k) Plan are allowed
under certain circumstances, such as disability. In addition, subject to
certain restrictions, employees may take a loan drawn on contributions made by
the employee under the 401(k) Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Irwin Lieber and James D.
Robinson III.
40
<PAGE>
CERTAIN TRANSACTIONS
In 1995, Mr. Gartner, Chairman of the Board of Directors and Chief Executive
Officer of the Company, contributed approximately $1.0 million to the capital
of the Company. In consideration for such capital contribution, the Company
issued to Mr. Gartner (i) in March 1995, 4,200,000 shares of Common Stock at a
purchase price of $0.02375 per share, (ii) in July 1995, 240,000 shares of
Series A Preferred Stock at a purchase price of $1.25 per share, and (iii) in
October 1995, 1,200,000 shares of Common Stock at a purchase price of $0.50
per share. The shares of Common Stock and Series A Preferred Stock of the
Company issued to Mr. Gartner are subject to restrictions on transfer and
rights of first offer pursuant to an agreement entered into in November 1995
among Mr. Gartner, the Company and certain stockholders, which agreement will
terminate upon the consummation of the Offering. In addition, Mr. Gartner has
made loans totalling $221,000 to ExperNet and $186,000 to the Company, which
loans were repaid, together with interest thereon, in December 1995 and August
1995, respectively.
In July 1995, Giga acquired all of the ExperNet shares owned by Mr. Gartner
and a majority of the ExperNet shares owned by Mr. Gilmour, aggregating 77.8%
of ExperNet's outstanding common stock, in exchange for (i) 160,000 shares of
Series A Preferred Stock (640,000 shares on an as-converted basis) of the
Company, 80,000 shares (320,000 shares on an as-converted basis) of which were
issued to Mr. Gartner and 80,000 shares (320,000 shares on an as-converted
basis) of which were issued to Mr. Gilmour, and (ii) the issuance to Mr.
Gartner of a fully-vested option to purchase 160,000 shares of Common Stock at
an exercise price of $0.50 per share. In December 1995, the Company acquired
Mr. Gilmour's remaining 22.2% interest in ExperNet in exchange for a $400,000
6% Convertible Note due December 31, 2005 (the "Convertible Note"). The
Convertible Note is convertible at any time after December 31, 1996 at the
option of Mr. Gilmour into shares of the Company's Series B Preferred Stock
pursuant to a formula set forth in the Convertible Note. The shares of Series
A Preferred Stock, as well as the shares of Series B Preferred Stock issuable
upon the conversion of the Convertible Note held by Mr. Gilmour, are subject
to repurchase by the Company under certain circumstances. In addition, Mr.
Gilmour made loans totalling $101,000 to ExperNet, which loans were repaid in
full, together with interest thereon, by ExperNet in December 1995.
In July 1995, the Company issued and sold an aggregate of 2,280,000 shares
of Series A Preferred Stock at a purchase price of $1.25 per share to a
limited number of investors, including Mr. Brownstein (240,000 shares), Mr.
Crandall (60,000 shares) and Mr. Robinson (40,000 shares).
In August 1995, the Company entered into a Convertible Promissory Note and
Warrant Purchase Agreement (the "Note and Warrant Agreement") with RRE Giga
Investors, L.P. ("RRE Giga"), pursuant to which the Company borrowed $2.0
million from RRE Giga and issued RRE Giga a convertible promissory note (the
"Note") in the principal amount of $2,000,000 and a warrant to purchase
285,714 shares of Common Stock at an exercise price of $2.345 per share (the
"Series B Warrant"). In November 1995, the Note was converted into 571,428
shares of Series B Preferred Stock. Mr. Robinson, a director of the Company,
is Chairman and Chief Executive Officer of RRE Investors, L.L.C., the General
Partner of RRE Giga.
In August 1995, the Company entered into a consulting arrangement with Mr.
Crandall, a director of the Company. The arrangement provided for payment to
Mr. Crandall of $50,000 per annum in 1995 and $60,000 per annum in 1996. In
lieu of certain payments due to Mr. Crandall, the Company issued to Mr.
Crandall 120,000 shares of Common Stock at a purchase price of $0.50 per
share. The shares are subject to vesting and certain restrictions on transfer.
In July 1996, as compensation for the consulting services Mr. Crandall will
render to the Company for the twelve month period ending June 30, 1997, the
Company granted to Mr. Crandall an option to purchase 20,000 shares of Common
Stock at an exercise price of $0.60 per share. Twenty-five percent of the
shares subject to the option vest one year from the date of grant and one
thirty-sixth of the remaining shares vest monthly thereafter.
In October 1995, the Company sold to Mr. Brownstein, a director of the
Company, 80,000 shares of Common Stock at a purchase price of $.50 per share.
The shares are subject to vesting and certain restrictions on transfer.
41
<PAGE>
In November 1995 and February 1996, the Company sold an aggregate of
5,272,215 shares of Series B Preferred Stock, at a purchase price of $3.50 per
share, to a limited number of investors, including the following persons and
entities who are directors, affiliates of directors and/or principal
stockholders of the Company:
<TABLE>
<CAPTION>
TOTAL
NAME NO. OF SHARES CONSIDERATION PAID
---- ------------- -------------------
<S> <C> <C>
21st Century Communications Partners,
L.P..................................... 968,615 $3,390,153
21st Century Communications T-E Partners,
L.P..................................... 329,560 1,153,460
21st Century Communications Foreign Part-
ners, L.P............................... 130,397 456,390
Quota Fund N.V........................... 224,000 784,000
Haussmann Holdings....................... 288,000 1,008,000
Montgomery Small Cap Partners, L.P....... 40,000 140,000
Montgomery Small Cap Partners II, L.P.... 96,000 336,000
Montgomery Small Cap Partners III, L.P... 40,000 140,000
Nosrob Investments Ltd................... 48,000 168,000
RRE Giga Investors, L.P.................. 571,428 2,000,000
RRE Giga Investors II, L.P............... 288,571 1,010,000
Neill and Linda Brownstein............... 16,000 56,000
</TABLE>
Mr. Lieber, a director of the Company, is a corporate officer of InfoMedia
Associates, Ltd., which is a General Partner of 21st Century Communications
Partners, L.P., 21st Century Communications T-E Partners, L.P. and 21st
Century Communications Foreign Partners, L.P. Mr. Robinson, a director of the
Company, is Chairman and Chief Executive Officer of RRE Investors, L.L.C., the
General Partner of RRE Giga and RRE Giga Investors II, L.P.
Montgomery Securities served as private placement agent in connection with
the sale by the Company of the Series B Preferred Stock. In consideration for
such private placement agent services, Montgomery Securities received a
placement agent fee of $695,105 and a warrant to purchase 107,876 shares of
Series B Preferred Stock, exercisable for five years from the date of issuance
at an exercise price of $4.625 per share. Montgomery Securities is a limited
partner of Montgomery Asset Management, L.P., which is the investment advisor
for Montgomery Small Cap Partners, L.P., Montgomery Small Cap Partners II,
L.P., Montgomery Small Cap Partners III, L.P., Quota Fund N.V., Haussmann
Holdings and Nosrob Investments Ltd.
In December 1995, the Company loaned to Mr. Marshall, its President and
Chief Operating Officer, $20,000 pursuant to the terms of a promissory note
which bears interest at 5.74% per annum. The loan, plus interest, is payable
in full on December 1, 1996.
In January 1996, the Company entered into a one-year consulting agreement
with the Neill H. Brownstein Corporation (the "Brownstein Corporation"), of
which the sole shareholder is Neill H. Brownstein, a director of the Company.
Pursuant to the consulting agreement, the Brownstein Corporation is entitled
to receive a consulting fee of $60,000, plus reasonable expenses, payable
quarterly. The Brownstein Corporation has agreed that during the term of the
agreement and for a period of one year thereafter, the Brownstein Corporation
will not use any of the Company's proprietary or confidential information or
disclose such proprietary and confidential information to any third party.
Messrs. Gartner, Gilmour, Robinson and Lieber were elected to the Board of
Directors pursuant to the terms of an Investor Rights and Voting Agreement
dated November 13, 1995 among the Company, Messrs. Gartner and Gilmour and
certain stockholders of the Company. The agreement terminates upon the
consummation of the Offering.
For a description of certain transactions between the Company and certain
directors of the Company, see "Management--Director Compensation." For a
description of certain employment and other arrangements
42
<PAGE>
between the Company and certain executive officers of the Company, see
"Management--Executive Compensation" and "Management--Employment Agreements."
The Company believes that the securities issued in the transactions
involving the Company described above were sold by the Company at their then
fair market value and that the terms of the transactions described above were
no less favorable than the Company could have obtained from unaffiliated third
parties.
The Company has adopted a policy, effective following the consummation of
the Offering, that all material transactions between the Company and its
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Company's Board of Directors and by a majority of the
disinterested members of the Company's Board of Directors, and (ii) be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties. In addition, this policy will require that any
loans by the Company to its officers, directors or other affiliates be for
bona fide business purposes only.
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of July 31, 1996 (assuming the
conversion of all outstanding shares of all series of Preferred Stock into
Common Stock), and as adjusted to reflect the sale of the shares of Common
Stock offered hereby, by (i) each person or entity known to the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each of the
Company's directors, (iii) each of the Senior Executives and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)(2)
----------------------------
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY OWNED BEFORE AFTER
BENEFICIAL OWNER PRIOR TO OFFERING(1) OFFERING OFFERING
------------------- -------------------- ------------ ------------
<S> <C> <C> <C>
21st Century 1,428,572(3) 10.5% 8.1%
Communications Partners
L.P. ....................
767 Fifth Avenue, 45th
Floor
New York, NY 10153
Entities affiliated with 1,049,143(4) 7.7 5.9
S/2/ Technology
Corporation..............
515 Madison Avenue, Suite
4200
New York, NY 10022
Funds managed by 736,000(5) 5.4 4.2
Montgomery Asset
Management, L.P..........
101 California Street
San Francisco, CA 94111
RRE Giga Investors, 1,145,713(6) 8.2 6.4
L.P......................
126 East 56th Street,
22nd Floor
New York, NY 10022
Gideon I. Gartner........ 6,608,000(7) 46.1 36.1
c/o Giga Information
Group, Inc.
One Kendall Square
Cambridge, MA 02139
David L. Gilmour......... 355,000(8) 2.6 2.0
Neill H. Brownstein...... 360,000(9) 2.6 2.0
Richard L. Crandall...... 180,000(10) 1.3 1.0
Irwin Lieber............. 1,428,572(11) 10.5 8.1
James D. Robinson III.... 1,185,713(12) 8.5 6.6
Kenneth E. Marshall...... 0 -- --
Richard B. Goldman....... 0 -- --
Leander R. Jennings, 0 -- --
Jr. .....................
Jeffrey L. Swartz........ 14,166(13) * *
All directors and execu-
tive officers as a group
(10 persons)............ 10,131,451(14) 69.1 54.3
</TABLE>
- --------
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect
to the shares listed, except as otherwise noted. Amounts shown include
shares issuable within the 60-day period following July 31, 1996 pursuant
to the exercise of options or warrants.
(2) On July 31, 1996, there were 13,664,148 shares of Common Stock
outstanding, assuming the conversion of all outstanding shares of all
series of Preferred Stock into Common Stock.
(3) Includes 968,615 shares of Common Stock held by 21st Century
Communications Partners, L.P., a limited partnership ("21-CCP"), 329,560
shares of Common Stock held by 21st Century Communications T-E Partners,
L.P., a limited partnership ("21-CCTEP") and 130,397 shares of Common
Stock held by 21st Century Communications Foreign Partners, L.P., a
limited partnership ("21-CCFP").
44
<PAGE>
(4) S/2/ Technology Corporation ("S Squared"), an investment manager, is the
General Partner of (i) Sci-Tech Investment Partners L.P., which holds
98,058 shares of Common Stock, (ii) SG Partners, L.P., which holds 84,127
of Common Stock, and (iii) Executive Technology, L.P., which holds 66,080
shares of Common Stock. Seymour L. Goldblatt, the President of S Squared,
is the Managing Director of both The Matrix Technology Group, which holds
39,746 shares of Common Stock, and Core Technology Fund, Inc., which
holds 184,339 shares of Common Stock. S Squared serves as an investment
advisor to each of the foregoing funds and exercises by agreement
investment and voting power on behalf of each fund. Mr. Goldblatt, as
President of S Squared, also exercises by agreement investment and voting
power for the following funds: (i) Yale University, which holds 524,581
shares of Common Stock, (ii) Yale University Retirement Plan for Retired
Employees, which holds 25,752 shares of Common Stock, and (iii) Monstol
Investment N.V., which holds 26,460 shares of Common Stock.
(5) Includes 224,000 shares of Common Stock held by Quota Fund N.V., 288,000
shares of Common Stock held by Haussmann Holdings, 40,000 shares of
Common Stock held by Montgomery Small Cap, L.P., 96,000 shares of Common
Stock held by Montgomery Small Cap Partners II, L.P., 40,000 shares of
Common Stock held by Montgomery Small Cap Partners III, L.P. and 48,000
shares of Common Stock held by Nosrob Investments Ltd. Montgomery Asset
Management, L.P. serves as the investment advisor to each of these funds
and shares investment and voting power with the General Partners of each
fund.
(6) Includes 285,714 shares of Common Stock issuable to RRE Giga Investors,
L.P. ("RRE Giga") upon the exercise of a warrant exercisable within 60
days of July 31, 1996, which warrant will terminate if not exercised
prior to the consummation of the Offering, 571,428 shares of Common Stock
held by RRE Giga and 288,571 shares of Common Stock held by RRE Giga
Investors II, L.P ("RRE Giga II").
(7) Includes options to purchase 660,000 shares of Common Stock which are
exercisable within 60 days of July 31, 1996. Also includes 660,000 shares
of Common Stock which are held of record by members of Mr. Gartner's
family. Mr. Gartner disclaims beneficial ownership of shares held by
members of his family.
(8) Includes options to purchase 35,000 shares of Common Stock which are
exercisable within 60 days of July 31, 1996.
(9) Includes 24,000 shares of Common Stock held by Mr. Brownstein's children
and 16,000 shares of Common Stock held by Mr. Brownstein and his spouse
jointly. Mr. Brownstein disclaims beneficial ownership of the 18,000
shares of Common Stock held by his adult children, Adam J. and Todd D.
Brownstein, and Will Gordon, the adult child of his spouse. Mr.
Brownstein disclaims beneficial ownership of the 6,000 shares of Common
Stock held by his minor child, Emily Hamilton; however, Mr. Brownstein
claims investment and voting power with respect to these shares. Of the
shares held by Mr. Brownstein directly, 80,000 of such shares are subject
to repurchase by the Company under certain circumstances.
(10) Includes 120,000 shares of Common Stock which are subject to repurchase
by the Company under certain circumstances.
(11) Includes 968,615 shares of Common Stock held by 21-CCP, 329,560 shares of
Common Stock held by 21-CCTEP and 130,397 shares of Common Stock held by
21-CCFP. Mr. Lieber, a director of the Company, is a General Partner of a
General Partner of 21-CCP, 21-CCTEP and 21-CCFP. Mr. Lieber disclaims
beneficial ownership of such shares, except to the extent of his
pecuniary interest in such shares. Mr. Lieber shares dispositive and
voting power of such shares with the General Partners of the General
Partner of each fund.
(12) Includes 857,142 shares held by RRE Giga, including 285,714 shares
issuable to RRE Giga upon the exercise of a warrant exercisable within 60
days of July 31, 1996, which warrant will terminate if not exercised
prior to the consummation of the Offering, and 288,571 shares of Common
Stock held by RRE Giga II. Mr. Robinson, a director of the Company, is a
General Partner of the General Partner of RRE Giga and RRE Giga II. Mr.
Robinson disclaims beneficial ownership of such shares, except to the
extent of his pecuniary interest in such shares. Mr. Robinson shares
dispositive and voting power of such shares with the General Partners of
the General Partner of RRE Giga and RRE Giga II.
(13) Represents shares which Mr. Swartz has the right to acquire within 60
days of July 31, 1996 upon exercise of stock options.
(14) Includes 994,880 shares of Common Stock issuable upon exercise of stock
options and warrants held by all directors and executive officers as a
group which are exercisable within 60 days of July 31, 1996. Also
includes 200,000 shares of Common Stock held by all directors and
executive officers as a group which may be repurchased by the Company
under certain circumstances.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At June 30, 1996, there were outstanding an aggregate of 6,110,600 shares of
Common Stock and 5,842,215 shares of Preferred Stock of the Company. Upon the
closing of the Offering, all of such shares of Preferred Stock will
automatically be converted into an aggregate of 7,552,215 shares of Common
Stock. All of the shares of Preferred Stock that have been converted will
cease to be outstanding and may not be reissued.
Assuming conversion of all of the Company's Preferred Stock, at June 30,
1996, there were 13,662,815 shares of Common Stock outstanding, held of record
by 81 stockholders.
COMMON STOCK
The Company's Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation"), which will become effective upon the closing
of the Offering, will authorize the issuance of up to 60,000,000 shares of
Common Stock, $.001 par value per share. Holders of Common Stock are entitled
to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of
a majority of the shares of Common Stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor.
Upon the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive ratably the net assets of the Company
available after the payment of all debts and other liabilities. Holders of
Common Stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of Common Stock are, and the shares offered by
the Company in the Offering will be, when issued and paid for, fully paid and
nonassessable.
PREFERRED STOCK
Upon the consummation of the Offering, the Restated Certificate of
Incorporation will authorize the issuance of up to 5,000,000 shares of
Preferred Stock, $.001 par value per share. Under the terms of the Restated
Certificate of Incorporation, the Board of Directors is authorized, subject to
any limitations prescribed by law, without stockholder approval, to issue such
shares of Preferred Stock in one or more series. Each such series of Preferred
Stock shall have such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated
with a stockholder vote on specific issuances. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company. The
Company has no present plans to issue any shares of Preferred Stock.
WARRANTS
At August 31, 1996, there were outstanding warrants to purchase 285,714
shares of Common Stock at an exercise price of $2.345 per share and warrants
to purchase 107,876 shares of Common Stock at an exercise price of $4.5625 per
share. Such warrants confer upon the holders thereof no rights as stockholders
until the exercise thereof and will terminate if not exercised prior to the
consummation of the Offering.
CONVERTIBLE NOTES
The Company's 6% $400,000 convertible note (the "6% Note") is convertible at
the option of the holder after December 31, 1995 and at any time prior to
December 31, 2005 into the lesser of (i) the number of shares of
46
<PAGE>
Common Stock arrived at by dividing the unpaid principal of the 6% Note being
converted by $3.50 and (ii) the amount of such unpaid principal amount being
converted, expressed as a fraction of the total unpaid principal of the 6%
Note, multiplied by the Maximum Conversion Amount. The "Maximum Conversion
Amount" equals 28,576 shares plus an additional 2,857 shares on the sixth day
of each of the thirty months after January 1996. At August 31, 1996, the
principal amount of the 6% Note is convertible into 48,575 shares of Common
Stock of the Company.
The Company's 5% $1.0 million convertible note (the "5% Note") is
convertible at the option of the holder, Friday Holdings L.P., at any time
prior to April 5, 1998, in whole or in part, into that number of shares that
is equal to 2.67% of the outstanding Common Stock based upon an equity
capitalization for the Company of up to $5.0 million. The Company intends to
provide notice of repayment of the 5% Note promptly after closing of the
Offering and therefore expects that the 5% Note will be converted into Common
Stock at that time.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of a
corporation's voting stock.
The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management." In addition, the Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of two-thirds of the shares of
capital stock of the Company entitled to vote. Under the Restated Certificate
of Incorporation, any vacancy on the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, may only be
filled by vote of a majority of the directors then in office. The
classification of the Board of Directors and the limitations on the removal of
directors and filling of vacancies could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, control of the Company.
The Restated Certification of Incorporation also provides that after the
consummation of the Offering, any action required or permitted to be taken by
the stockholders of the Company at an annual meeting or special meeting of
stockholders may only be taken if it is properly brought before such meeting
and may not be undertaken by written action in lieu of a meeting. The Restated
Certificate of Incorporation further provides that special meetings of the
stockholders may only be called by the Chairman of the Board of Directors, the
Chief Executive Officer or, if none, the President of the Company or by the
Board of Directors. Under the Company's Amended and Restated By-Laws (the "By-
Laws"), which will become effective upon the closing of the Offering, in order
for any matter to be considered "properly brought" before a meeting, a
stockholder must comply with certain requirements regarding advance notice to
the Company. The foregoing provisions could have the effect of delaying until
the next stockholders' meeting stockholder actions which are favored by the
holders of a majority of the outstanding voting securities of the Company.
These provisions may also discourage another person or entity from making a
tender offer for the Company's Common Stock, because such person or entity,
even if it acquired a majority of the outstanding voting securities of the
Company, would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called stockholders meeting,
and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case
may be, requires a greater percentage. The Restated Certificate of
Incorporation and the By-Laws require the affirmative vote of the holders of
at least two-thirds of the shares of capital stock of the Company issued and
outstanding and entitled to vote to amend or repeal any of the provisions
described in the prior two paragraphs.
47
<PAGE>
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. Further, the Restated Certificate of Incorporation
contains provisions to indemnify the Company's directors and officers to the
fullest extent permitted by the General Corporation Law of Delaware. The
Company believes that these provisions will assist the Company in attracting
and retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, based on the number of shares outstanding
at June 30, 1996, there will be 17,662,815 shares of Common Stock outstanding.
Of these shares, the 4,000,000 shares of Common Stock sold in the Offering
will be freely transferable without restriction under the Securities Act,
except that any shares purchased by "affiliates" of the Company, as that term
is defined in Rule 144 under the Securities Act ("Rule 144"), generally must
be sold in compliance with the limitations of Rule 144 described below. The
remaining 13,662,815 shares of Common Stock outstanding will be "restricted
securities" as that term is defined in Rule 144 (the "Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which rules are summarized below.
Subject to the lock-up agreements described below and the provisions of Rules
144, 144(k) and 701, additional shares will be available for sale in the
public market (subject in the case of shares held by affiliates to compliance
with certain volume restrictions) as follows: (i) no shares will be available
for immediate sale in the public market on the date of the Prospectus, (ii)
2,600 shares will be eligible for resale 90 days after the date of this
Prospectus, (iii) 4,200,000 shares will be eligible for resale upon expiration
of lock-up agreements 180 days after the date of this Prospectus, and,
thereafter (iv) the remaining 9,460,215 shares will be eligible for sale upon
expiration of their respective two-year holding periods.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least two years, including persons who may be deemed affiliates of the
Company, would be entitled to sell within any three-month period, subject to
meeting certain manner of sale and notice requirements, a number of shares
that does not exceed the greater of (i) one percent of the number of shares of
Common Stock then issued and outstanding (176,628 shares upon consummation of
the Offering) and (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 notice of
sale with the Securities and Exchange Commission. A person who is not deemed
to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years, is entitled to sell such shares under Rule
144(k) without regard to the volume limitations described above. Affiliates
whose shares are not Restricted Shares must nonetheless comply with the same
Rule 144 restrictions applicable to Restricted Shares with the exception of
the two-year holding period requirement. The Securities and Exchange
Commission has proposed to reduce the two- and three-year holding periods to
one and two years, respectively. If enacted, such modification may have a
material effect on the timing of when certain shares of Common Stock become
eligible for resale.
Rule 701 promulgated under the Securities Act provides that shares of Common
Stock acquired on the exercise of outstanding options may be resold by
persons, other than affiliates, beginning 90 days after the date of this
Prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates, beginning 90 days after the date of this Prospectus, subject to
all provisions of Rule 144 except its two-year minimum holding period.
The Company's executive officers and directors of the Company (who in the
aggregate will beneficially own approximately 10,033,714 Restricted Shares,
including 709,166 shares of Common Stock that may be acquired by them upon the
exercise of stock options exercisable with 60 days of June 30, 1996) have
agreed not to sell or offer to sell or otherwise dispose of any shares of
Common Stock currently held by them, or to exercise any right to acquire any
shares of Common Stock or any securities exercisable for or convertible into
any shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Lehman Brothers Inc. Lehman
Brothers Inc. may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to these lock-up
agreements. See "Underwriting."
49
<PAGE>
The Company has agreed, subject to certain exceptions, not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus, except that the Company may issue, and grant
options to purchase, shares of Common Stock under its current stock option and
purchase plans and other currently outstanding options.
The Company intends to file registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the 1995
Stock Plan, 1996 Option Plan and 1996 Purchase Plan. These registration
statements are expected to be filed approximately 180 days after the effective
date of the Registration Statement of which this Prospectus is a part and will
be effective upon filing. Shares issued upon the exercise of stock options
after the effective date on the Form S-8 registration statements will be
eligible for resale in the public market without restriction, subject to Rule
144 limitations applicable to affiliates and the lock-up agreements noted
above.
At August 31, 1996, the holders of 10,880,215 shares of Common Stock and
warrants to purchase 393,590 shares of Common Stock are entitled to certain
demand and/or piggyback registration rights with respect to such shares (the
"Registrable Shares"). At any time after the earlier of November 1, 1999 or
six months after the Company's initial public offering, holders of at least
40% of the Registrable Shares then outstanding may request that the Company
file, at the Company's expense, a registration statement under the Securities
Act covering at least 20% of the Registrable Shares then outstanding with
aggregate gross proceeds of at least $5,000,000. The Company is obligated to
effect only two demand registrations and, in any event, not more than one such
registration in any twelve-month period. In addition, holders of Registrable
Shares with piggyback registration rights may include their shares in any
registration statement the Company intends to effect for the Company's shares
for stockholders other than the holders of Registrable Shares. So long as the
Company is qualified to effect a registration statement on Form S-3, holders
of at least 20% of the Registrable Shares may request that the Company effect
a registration on Form S-3 provided that (i) the aggregate price of the
Registrable Shares to be sold on such Form S-3 exceeds $500,000, (ii) the
Company is obligated to file only one such Form S-3 in any 6-month period and
(iii) the Company is only obligated to effect a total of six such
registrations.
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of shares for sale
will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market could adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities.
50
<PAGE>
UNDERWRITING
Under the terms of, and subject to the conditions contained in, an
Underwriting Agreement (the "Underwriting Agreement"), the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is
a part, the underwriters named below (the "Underwriters"), for whom Lehman
Brothers Inc., Oppenheimer & Co., Inc. and Salomon Brothers Inc are acting as
Representatives (the "Representatives"), have severally agreed to purchase
from the Company, and the Company has agreed to sell to the Underwriters, the
aggregate number of shares of Common Stock set forth opposite the name of each
Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc. .............................................
Oppenheimer & Co., Inc. ..........................................
Salomon Brothers Inc..............................................
---------
Total........................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase shares of Common Stock are subject to certain conditions, and that
if any of the shares of Common Stock are purchased by the Underwriters
pursuant to the Underwriting Agreement, all shares of Common Stock agreed to
be purchased by the Underwriters pursuant to the Underwriting Agreement must
be purchased.
The Company has been advised that the Underwriters initially propose to
offer the shares of Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers (who may include the Underwriters) at such public offering price less
a selling concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain other Underwriters or to certain other brokers or dealers.
After the initial public offering, the public offering price, the concession
to selected dealers and the reallowance to other dealers may be changed by the
Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, and to contribute to payments that the Underwriters may be required
to make in respect thereof.
The Company has granted to the Underwriters an option to purchase up to an
additional 600,000 shares of Common Stock at the public offering price less
the underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. Such option may be
exercised at any time until 30 days after the date of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters
will be committed, subject to certain conditions, to purchase a number of
option shares proportionate to such Underwriter's initial commitment.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
The Company, the directors and officers and certain other securityholders of
the Company have agreed not to, directly or indirectly, offer, sell or
contract to sell, or otherwise dispose of shares of Common Stock of the
Company, or any securities convertible into, or exchangeable for, or any
rights to acquire, shares of Common
51
<PAGE>
Stock, for a period of 180 days after the date of this Prospectus without the
prior written consent of Lehman Brothers Inc. on behalf of the
Representatives, except that the Company may issue, and grant options to
purchase, shares of Common Stock under its current stock option and purchase
plans and other currently outstanding options. In addition, the Company may
issue shares of Common Stock in connection with any acquisition of another
company if the terms of such issuance provide that such Common Stock shall not
be resold prior to the expiration of the 180-day period referenced in the
preceding sentence.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
among the Company and the Representatives of the Underwriters. Among the
factors to be considered in determining the initial public offering price, in
addition to prevailing market conditions, will be the Company's historical
performance, capital structure, estimates of the business potential and
earnings prospects of the Company, an overall assessment of the Company, an
assessment of the Company's management, and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the shares of Common Stock offered hereby for employees of
the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the Offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the Underwriters to the general public on the same basis as
other shares offered hereby.
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Hale and Dorr, Boston, Massachusetts.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets of the Company at December 31, 1995 and June
30, 1996 and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the periods March 17, 1995 to December 31,
1995 and January 1, 1996 to June 30, 1996 included in this Prospectus have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The combined balance sheet of BIS Strategic Decisions at April 5, 1995 and
the related combined statements of operations, cash flows and stockholder's
equity for the period January 1, 1995 to April 5, 1995 included in this
Prospectus have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The combined balance sheet of BIS Strategic Decisions at December 31, 1994
and the related combined statements of operations, cash flows and
stockholder's equity for the periods January 1, 1993 to December 15, 1993,
December 16, 1993 to December 31, 1993 and for the year ended December 31,
1994 included in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains
explanatory paragraphs with respect to BIS Strategic Decision's ability to
continue as a going concern and an accounting change as described in Notes 4
and 2, respectively, of the Notes to the Combined Financial Statements)
appearing elsewhere herein, which, as to the periods from January 1, 1993
through December 15, 1993, and December 16, 1993 through December 31, 1993 are
based in part on the report of Coopers & Lybrand and are included herein in
reliance upon such reports, given upon the authority of such firms as experts
in accounting and auditing.
52
<PAGE>
The statements of operations, changes in stockholder's equity and cash flows
of BIS Shrapnel PTY Limited for each of the periods of January 1, 1993 to
December 15, 1993 and December 16, 1993 to December 31, 1993 on which the
report of Ernst & Young LLP, independent auditors, for the related periods are
based in part is given in reliance on the reports of Coopers & Lybrand,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, to which Registration Statement
reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GIGA INFORMATION GROUP, INC.:
Report of Independent Accountants--Coopers & Lybrand L.L.P............... F-2
Consolidated Balance Sheets at December 31, 1995 and June 30, 1996....... F-3
Consolidated Statements of Operations for the periods March 17, 1995 to
December 31, 1995; March 17, 1995 to June 30, 1995 (unaudited) and
January 1, 1996 to June 30, 1996........................................ F-4
Consolidated Statements of Changes in Stockholders' Equity for the
periods March 17, 1995 to December 31, 1995 and January 1, 1996 to June
30, 1996................................................................ F-5
Consolidated Statements of Cash Flows for the periods March 17, 1995 to
December 31, 1995; March 17, 1995 to June 30, 1995 (unaudited) and
January 1, 1996 to June 30, 1996........................................ F-6
Notes to Consolidated Financial Statements............................... F-7
BIS STRATEGIC DECISIONS:
Report of Independent Accountants--Coopers & Lybrand L.L.P............... F-19
Report of Independent Auditors--Ernst & Young LLP........................ F-20
Reports of Independent Accountants--Coopers & Lybrand ................... F-21
Combined Balance Sheet at December 31, 1994.............................. F-23
Combined Statements of Operations for the periods January 1, 1993 to
December 15, 1993; December 16, 1993 to December 31, 1993; the year
ended December 31, 1994 and for the period January 1, 1995 to April 5,
1995.................................................................... F-24
Combined Statements of Changes in Stockholder's Equity for the periods
January 1, 1993 to
December 15, 1993; December 16, 1993 to December 31, 1993; the year
ended December 31, 1994 and for the period January 1, 1995 to April 5,
1995.................................................................... F-25
Combined Statements of Cash Flows for the periods January 1, 1993 to
December 15, 1993; December 16, 1993 to December 31, 1993; the year
ended December 31, 1994 and for the period January 1, 1995 to April 5,
1995.................................................................... F-26
Notes to Combined Financial Statements................................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Giga Information Group, Inc.:
We have audited the accompanying consolidated balance sheets of Giga
Information Group, Inc. as of December 31, 1995 and June 30, 1996, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the periods from March 17, 1995 (date of inception) to
December 31, 1995 and January 1, 1996 to June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. 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 Giga Information Group,
Inc. as of December 31, 1995 and June 30, 1996, and the results of its
operations and its cash flows for the period March 17, 1995 to December 31,
1995 and the six months ended June 30, 1996 in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 31, 1996
F-2
<PAGE>
GIGA INFORMATION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
1995 JUNE 30, 1996 JUNE 30, 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $16,906 $ 9,331
Trade accounts receivable, net of
allowance for uncollectible
accounts of $79 and $86 at December
31, 1995 and June 30, 1996,
respectively....................... 2,180 3,030
Unbilled accounts receivable........ 90 925
Prepaid expenses and other current
assets............................. 1,406 1,571
------- -------
Total current assets................ 20,582 14,857
Property and equipment, net of
accumulated depreciation and
amortization of $562 and $1,136 at
December 31, 1995 and June 30, 1996,
respectively........................ 2,194 2,716
Leasehold intangible, net of
accumulated amortization of $283 and
$496 at December 31, 1995 and June
30, 1996, respectively.............. 1,028 815
Goodwill, net of accumulated
amortization of $482 and $803 at
December 31, 1995 and June 30, 1996,
respectively........................ 803 482
Note receivable...................... 150
Other assets......................... 77 200
------- -------
Total assets...................... $24,684 $19,220
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdrafts..................... $ 458 $ 479
Accounts payable.................... 1,519 651
Deferred revenues................... 2,480 4,995
Accrued compensation and benefits... 632 1,095
Other current liabilities and
accrued expenses................... 3,427 3,337
Net liabilities of discontinued
operations, current portion........ 861 1,566
------- -------
Total current liabilities........... 9,377 12,123
Long-term debt - related party....... 400 412
Long-term debt - other............... 1,037 1,060
Other liabilities.................... 210 240
Net liabilities of discontinued
operations, less current portion.... -- 1,332
------- -------
Total liabilities................... 11,024 15,167
Commitments and other contingent
liabilities (Note 17)...............
Stockholders' equity:
Preferred Stock, $.001 par value;
10,000,000 shares authorized; none
issued or outstanding.............. -- -- --
Series A Preferred Stock; $.001 par
value per share, 650,000 shares
authorized: 570,000 shares issued
and outstanding (liquidation
preference of
$2,850,000)........................ 1 1 --
Series B Preferred Stock; $.001 par
value per share, 6,000,000 and
6,500,000 shares authorized:
4,598,200 and 5,272,215 shares
issued and outstanding at December
31, 1995 and June 30, 1996,
respectively (liquidation
preference of $16,094,000 and
$18,453,000 at December 31, 1995
and June 30, 1996, respectively)... 4 5 --
Common Stock; $.001 par value per
share, 28,000,000 shares
authorized: 6,108,000, 6,110,600
and 13,662,815 shares issued and
outstanding at December 31, 1995,
June 30, 1996 and June 30, 1996 pro
forma, respectively................ 6 6 $ 14
Additional paid-in capital.......... 18,295 20,631 20,629
Stock subscriptions receivable...... (375) (75) (75)
Accumulated deficit................. (4,234) (16,537) (16,537)
Cumulative translation adjustments.. (37) 22 22
------- ------- -------
Total stockholders' equity.......... 13,660 4,053 $ 4,053
------- ------- -------
Total liabilities and
stockholders' equity............. $24,684 $19,220
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
GIGA INFORMATION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 17 TO MARCH 17 TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Continuous Information Services........ $ -- $ -- $ 627
Information Products................... 10,706 3,571 5,855
---------- ------ ----------
Total revenues....................... 10,706 3,571 6,482
Cost and Expenses:
Cost of services and product
development........................... 8,445 2,473 9,648
Sales and marketing.................... 1,016 191 1,982
General and administrative............. 6,216 1,433 4,257
Depreciation and amortization.......... 1,397 527 1,088
---------- ------ ----------
Total costs and expenses............. 17,074 4,624 16,975
---------- ------ ----------
Operating loss......................... (6,368) (1,053) (10,493)
Interest income.......................... 259 26 375
Interest expense......................... (100) (16) (52)
---------- ------ ----------
Loss from continuing operations before
income taxes.......................... (6,209) (1,043) (10,170)
Income tax benefit....................... (1,093) (310) (257)
---------- ------ ----------
Loss from continuing operations........ (5,116) (733) (9,913)
---------- ------ ----------
Discontinued operations:
Income (loss) from the discontinued BIS
market research business, net of tax
effect.................................. 1,490 301 (85)
Loss on disposal of discontinued BIS
market research business, net of tax
effect.................................. -- -- (2,305)
---------- ------ ----------
Income (loss) from discontinued
operations............................ 1,490 301 (2,390)
---------- ------ ----------
Net loss............................. $ (3,626) $ (432) $(12,303)
========== ====== ==========
Results per common and common equivalent
share--historical basis (Note 2):
Pro forma results per common and common
equivalent share:
Loss from continuing operations........ $(0.34) $(0.61)
Net loss............................... $(0.24) $(0.75)
Pro forma weighted average common and
common equivalent shares outstanding.... 14,855,209 16,360,287
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
GIGA INFORMATION GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SERIES A SERIES B ADDITIONAL STOCK CUMULATIVE TOTAL
PREFERRED PREFERRED COMMON PAID-IN SUBSCRIPTIONS TRANSLATION ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL RECEIVABLE ADJUSTMENTS DEFICIT EQUITY
--------- --------- ------ ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 6,108,000
shares of Common
Stock.................. $ 6 $1,054 $(350) $710
Issuance of 160,000
shares of Series A
Preferred Stock and
convertible note for
acquisition of ExperNet
Corporation............ $(608) (608)
Issuance of 410,000
shares of Series A
Preferred Stock ....... $ 1 2,049 (25) 2,025
Issuance of 4,026,772
shares of Series B
Preferred Stock........ $ 4 13,212 13,216
Conversion of bridge
financing to 571,428
shares of Series B
Preferred Stock........ 1,980 1,980
Net loss................ (3,626) (3,626)
Translation
adjustments............ $(37) (37)
--- --- --- ------- ----- ---- -------- --------
Balance at December 31,
1995................... 1 4 6 18,295 (375) (37) (4,234) 13,660
--- --- --- ------- ----- ---- -------- --------
Payment of stock
subscription
receivable............. 300 300
Issuance of 674,015
shares of Series B
Preferred Stock........ 1 2,336 2,337
Issuance of 2,600 shares
of Common Stock........ -- --
Net loss................ (12,303) (12,303)
Translation
adjustments............ 59 59
--- --- --- ------- ----- ---- -------- --------
Balance at June 30,
1996................... $ 1 $ 5 $ 6 $20,631 $ (75) $ 22 $(16,537) $ 4,053
=== === === ======= ===== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
GIGA INFORMATION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 17 TO MARCH 17 TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ----------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(3,626) $ (432) $(12,303)
Adjustments to reconcile net loss to
net cash used in continuing operating
activities:
(Income) loss from discontinued
operations......................... (1,490) (301) 85
Loss on disposal of discontinued
operations......................... -- -- 2,305
Depreciation and amortization....... 1,397 527 1,088
Provision for (recovery from)
doubtful accounts.................. 27 (24) 48
(Increase) decrease in deferred
taxes.............................. 50 -- (8)
Interest on long term debt added to
principal.......................... 37 12 35
(Gain) loss on sale of fixed
assets............................. 15 (6) 4
Changes in assets and liabilities
net of effects of acquisitions:
Decrease (increase) in accounts
receivable........................ 1,638 525 (1,799)
Decrease (increase) in prepaid
expenses and other current
assets............................ (1,462) 585 (142)
Increase (decrease) in accounts
payable and accrued liabilities... 2,067 (295) (292)
Increase (decrease) in deferred
revenues........................... 283 (936) 2,500
------- ------ --------
Net cash provided by (used in)
operating activities:
Net cash used in continuing
operations.......................... (1,064) (345) (8,479)
Net cash provided by (used in)
discontinued operations............. 335 352 (333)
------- ------ --------
Net cash provided by (used in)
operating activities: (729) 7 (8,812)
Cash flows from investing activities:
Acquisition of equipment and
improvements........................ (1,049) (34) (1,140)
Net cash acquired in BIS
acquisition......................... 1,013 1,013 --
Net cash acquired in ExperNet
acquisition......................... 61 -- --
Issuance of note receivable.......... -- -- (150)
Other, net........................... 96 2 (56)
------- ------ --------
Cash provided by (used in) investing
activities............................ 121 981 (1,346)
------- ------ --------
Cash flows from financing activities:
Proceeds from issuance of Common
Stock............................... 710 100 --
Due to shareholder................... -- 1,086 --
Proceeds from issuance of Series A
Preferred Stock..................... 2,025 -- --
Proceeds from bridge financing, net
of issuance costs of $20............ 1,980 -- --
Proceeds from issuance of Series B
Preferred Stock, net of issuance
costs of $878 and $25............... 13,216 -- 2,337
Repayments of principal to related
parties............................. (321) -- --
Proceeds from stock subscriptions
receivable.......................... -- -- 300
Net short-term borrowings............ 40 193 23
Principal payments on long-term
debt................................ (97) (34) (32)
------- ------ --------
Cash provided by financing activities.. 17,553 1,345 2,628
------- ------ --------
Effect of exchange rates on cash....... (39) -- (45)
Net increase (decrease) in cash and
cash equivalents...................... 16,906 2,333 (7,575)
Cash and cash equivalents, beginning of
period................................ -- -- 16,906
------- ------ --------
Cash and cash equivalents, end of
period................................ $16,906 $2,333 $ 9,331
======= ====== ========
Supplementary cash flow information:
Income taxes paid.................... $39 $0 $22
Interest paid........................ $58 $2 $14
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE PERIOD MARCH 17, 1995 TO JUNE 30, 1995 IS
UNAUDITED)
1. THE COMPANY
Giga Information Group, Inc. ("Giga" or the "Company") was incorporated on
March 17, 1995 (date of inception) in the State of Delaware. The Company's
principal business activity is to provide information, analysis and advice
relating to developments and trends in the computing, telecommunications and
related industries (collectively the information technology or "IT" industry)
primarily through subscription based products. The Company derives its
revenues primarily from two sources: Continuous Information Services, which
include its Giga Advisory Service and Relevance Services; and Information
Products, which include events, publications, consulting and econometric
forecasting. On April 5, 1995, the Company acquired BIS Strategic Decisions,
Inc. and its five foreign affiliates (collectively "BIS" or "Predecessor
Companies"). On July 6, 1995, Giga acquired a 77.8% equity interest in
ExperNet Corporation ("ExperNet") which was owned by Gideon I. Gartner,
Chairman of the Board of Directors and Chief Executive Officer of the Company,
and David L. Gilmour, a director and officer of the Company, and, on December
29, 1995, acquired the remaining 22.2% interest. The results of operations of
ExpertNet are included in the Company's results from July 6, 1995.
The Company is subject to a number of risks similar to other companies in
its industry, including a dependence on sales and renewals of subscription-
based services, uncertainty of market acceptance of its services and products,
competition from other companies including those with greater resources than
the Company, dependence on key individuals, the need to obtain additional
financing, protection of proprietary information and technology and the risks
associated with international operations. In addition, the Company is subject
to risks associated with the discontinuance of the BIS Market Research
Business (see Note 16).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements include the results of operations,
cash flows and changes in stockholders' equity for the periods from March 17,
1995 (date of inception) to December 31, 1995 and March 17, 1995 to June 30,
1995 and the six months ended June 30, 1996. The financial statements
pertaining to the period from the date of inception to June 30, 1995 have been
prepared for comparative purposes only and as such have not been audited. In
the opinion of the Company's management, these unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation. The comparison of the period from the date
of inception to June 30, 1995 and the six months ended June 30, 1996 may not
be meaningful because the periods are of different durations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
the Company and its wholly-owned subsidiaries. The Company's 50% interest in
BIS Japan, Inc. has been accounted for at cost which approximates equity. All
significant intercompany balances and transactions have been eliminated.
Pursuant to the purchase method of accounting, acquired assets and
liabilities were revalued to their fair market value. The excess of the
purchase price over the fair market value of the net assets acquired was
recorded as goodwill.
CASH AND CASH EQUIVALENTS
Cash equivalents primarily represent liquid investments, with original
maturities of 90 days or less, in money market funds which are convertible to
a known amount of cash and bear an insignificant risk of change in value.
FOREIGN CURRENCY TRANSLATION
For international operations, the local currency is used as the functional
currency. The assets and liabilities of the foreign entities are translated at
the period-end rates of exchange and the related statements of operations and
cash flows are translated at the weighted average rates of exchange for the
respective periods. The resulting
F-7
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
translation adjustments are excluded from the results of operations and
charged to a separate component of stockholders' equity. Realized and
unrealized exchange gains or losses arising from translation adjustments are
reflected in operations and are not material.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
in money market accounts and trade receivables. The Company places its
temporary cash investments with high credit quality financial institutions in
accordance with its investment policy as approved by its board of directors.
Trade receivables result from contracts with various customers. Giga generally
does not require collateral or other security from these customers.
Historically, no significant credit-related losses have been incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS
109"), which uses a balance sheet approach in accounting for income taxes.
Under SFAS 109, deferred tax liabilities and assets are recognized based on
differences between book and tax bases of assets and liabilities using
presently enacted tax rates. The provision for income taxes is the sum of the
amount of income tax paid or payable for the period as determined by applying
the provisions of enacted tax laws to taxable income for the period and the
net changes during the period in the Company's deferred tax assets and
liabilities.
Income taxes on $807,000, $444,000 and $0 of cumulative undistributed
earnings of subsidiaries outside of the United States for the periods from
March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and the
six months ended June 30, 1996, respectively, have not been provided for as
these earnings will either be indefinitely reinvested or remitted
substantially free of additional tax.
REVENUE AND COMMISSION EXPENSE RECOGNITION
Continuous Information Services provide customers with ongoing information,
analysis and advice relating to developments and trends in the IT industry on
a subscription basis. Revenues from Continuous Information Services are
deferred and recognized on a pro rata monthly basis over the contract period,
generally one year. The Company's policy is to record a receivable and related
deferred revenues for the full amount of the contract on the date it is
signed. Contracts are generally billable upon signing. The Company also
records the related commission obligation upon the signing of these contracts
and amortizes the corresponding deferred commission expense over the contract
period in which the related Continuous Information Services revenues are
earned.
Information Products revenues from events, publications, consulting and
econometric forecasting are recognized as earned.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost for items acquired after the
initial acquisition of the respective entities and at estimated fair market
value for those assets in existence at the date of acquisition. Expenditures
for maintenance and repairs are charged to expense while the costs of
significant improvements are capitalized. Depreciation is computed for
financial reporting purposes principally by using the straight-line method
over the following estimated useful lives:
<TABLE>
<S> <C>
Computers and related
equipment................ 3 years
Furniture and fixtures.... 5 years
Motor vehicles............ 4 years
Leaseholds and related im-
provements............... Shorter of economic life or remaining lease term
</TABLE>
F-8
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Upon retirement or sale, the cost of assets disposed of and the related
accumulated depreciation are eliminated from the balance sheet and related
gains or losses are reflected in income.
GOODWILL
Goodwill represents the excess of the purchase price of entities acquired
over the fair values of amounts assigned to the net tangible assets acquired
and liabilities assumed. Amortization is recorded using the straight-line
method over two years. These amounts are subject to adjustment in accordance
with the provisions of SFAS 109. Impairment of goodwill is measured on the
basis of whether anticipated future undiscounted operating cash flows expected
from the acquired businesses will recover the recorded respective intangible
asset balances over the remaining amortization period. At June 30, 1996,
approximately $666,000 of goodwill identifiable with the discontinued
operations was written off to expenses in connection with the disposition of
these operations.
Amortization expense was $482,000, $160,000 and $321,000 for the periods
from March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and
the six months ended June 30, 1996, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (i) the reported amounts of assets and liabilities,
(ii) disclosure of contingent assets and liabilities at the dates of the
financial statements and (iii) the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
NET LOSS PER COMMON SHARE
The unaudited pro forma net loss per common share is computed based upon the
weighted average number of common shares, on an as-if converted basis, and
common equivalent shares outstanding after certain adjustments described
below. Common equivalent shares comprise stock options and warrants using the
treasury stock method. Common equivalent shares from stock options and
warrants are excluded from the computation if their effect is antidilutive. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 83 ("SAB No. 83"), all common and common equivalent shares and other
potentially dilutive instruments which include stock options, warrants and the
Series A and Series B Preferred Stock issued at prices below the estimated
initial public offering price of $10.00 per share during the twelve month
period prior to the initial filing date of September 10, 1996 of the
Registration Statement have been included in the calculation as if they were
outstanding for all periods presented.
Other than shares of Series A Preferred Stock and Series B Preferred Stock
considered as Common Stock equivalents under SAB No. 83, shares of Series A
Preferred Stock and Series B Preferred Stock are not included as Common Stock
equivalents because their inclusion would be anti-dilutive.
Results per common share on an historical basis are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 17 TO MARCH 17 TO ENDED JUNE
DECEMBER 31, 1995 JUNE 30, 1995 30, 1996
----------------- ------------- ----------
<S> <C> <C> <C>
Loss from continuing operations... $(5,116) $(733) $(9,913)
Net loss available to common
shareholders..................... (3,626) (432) (12,303)
Loss from continuing operations
per common share................. $(0.38) $(0.06) $(0.70)
========== ========== ==========
Net loss per common share......... $(0.27) $(0.04) $(0.87)
========== ========== ==========
Weighted average number of common
shares outstanding............... 13,486,788 12,299,420 14,180,287
========== ========== ==========
</TABLE>
F-9
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PRO FORMA PRESENTATION (UNAUDITED)
Upon the closing of an initial public offering of Common Stock at an
offering price of not less than $5.25 per share and having aggregate proceeds
of $15,000,000, all of the Company's shares of Series A Preferred Stock and
Series B Preferred Stock will be converted into 7,552,215 shares of Common
Stock. The unaudited pro forma presentation of the June 30, 1996 balance sheet
reflects the conversion of outstanding shares of Series A Preferred Stock and
Series B Preferred Stock into Common Stock.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which is effective for fiscal year 1996. The
Company has determined that it will elect the disclosure-only alternative. The
Company will be required to disclose the pro forma net income or loss and per
share amounts in the notes to the financial statements using the fair value
based method for fiscal year 1996 with comparable disclosures for fiscal year
1995. The Company has not determined the impact of these pro forma
adjustments.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," which must be adopted in fiscal year
1996, requires that impairment losses be recognized when the carrying value of
an asset exceeds its fair value. The Company regularly assesses all of its
long-lived assets for impairment and, therefore, does not believe the adoption
of the standard will have a material effect on its financial position or
results of operations.
3. ACQUISITIONS
BIS STRATEGIC DECISIONS, INC. AND AFFILIATES
On April 5, 1995, the Company acquired 100% of the stock of BIS for $200,000
in cash and a $1,000,000 convertible promissory note (see Note 9). The
acquisition was accounted for as a purchase and, accordingly, the cost
(including acquisition costs of $204,000) was assigned to the tangible and
identifiable intangible assets acquired and liabilities assumed based upon
their estimated fair values at the date of acquisition. As part of the
transaction, an intangible asset (leasehold) of approximately $1,300,000 was
recorded representing the fair value of payments being made through May 1998
by a former owner of BIS. The excess of the purchase price over the net assets
acquired of approximately $3,059,000 has been recorded as goodwill. The
Company's statements of operations include the results of operations of BIS
from April 5, 1995.
EXPERNET
On July 6, 1995, the Company acquired a majority interest in ExperNet in
exchange for (i) 160,000 shares of Series A Preferred Stock (640,000 shares of
Common Stock on an as-converted basis), 80,000 shares (320,000 shares of
Common Stock on an as-converted basis) of which were issued to Mr. Gartner and
80,000 shares (320,000 shares of Common Stock on an as-converted basis) of
which were issued to Mr. Gilmour and (ii) the issuance to Mr. Gartner of an
option to purchase 160,000 shares of Common Stock at an exercise price of $.50
per share which vested immediately. On December 29, 1995, the Company acquired
Mr. Gilmour's remaining interest in ExperNet in exchange for a $400,000 6%
convertible note (the "Note") due December 31, 2005 (see Note 9). As a result
of the common control of the Company and ExperNet, there has been no
adjustment to the historical cost basis of the net assets acquired and
liabilities assumed of ExperNet. As a result of the transaction, the Company's
accumulated deficit increased by $608,000 representing the net deficit of
ExperNet at the date of acquisition ($208,000) and the obligation under the
convertible note ($400,000). The results of operations include ExperNet from
July 6, 1995.
F-10
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions of BIS and ExperNet had occurred on
January 1, 1995 and does not purport to be indicative of what would have
occurred had the acquisitions been made as of that date or of the results
which may occur in the future (in thousands):
<TABLE>
<CAPTION>
JANUARY 1, TO
DECEMBER 31, 1995
-----------------
(UNAUDITED)
<S> <C>
Information Products revenues......................... $14,015
Cost of services and product development.............. 10,775
Sales and marketing................................... 1,282
General and administrative............................ 7,455
Depreciation and amortization......................... 1,797
-------
Total costs and expenses........................... 21,309
-------
Operating loss..................................... (7,294)
Interest income, net.................................. 153
-------
Loss from continuing operations before income tax-
es................................................. (7,141)
Income tax benefit.................................... (1,314)
-------
Loss from continuing operations.................... $(5,827)
=======
</TABLE>
4. RELATED PARTIES
During the period from March 17, 1995 to December 31, 1995, the Company
reimbursed Mr. Gartner $186,000 for disbursements made by him for items
related to the acquisition of BIS and for other operational expenses prior to
the incorporation of the Company.
In addition, following the initial closing of the sale of Series B Preferred
Stock by the Company in November 1995, ExperNet repaid a loan in the principal
amount of approximately $221,000 plus accrued interest at a rate of 10%, or a
total of approximately $248,000, to Mr. Gartner and a loan in the principal
amount of approximately $101,000 plus accrued interest at a rate of 10%, or a
total of approximately $113,000, to Mr. Gilmour.
In the event the Company is unable to complete its proposed initial public
offering, certain of its existing investors have represented that they will,
to the extent necessary, fund the Company through June 1997 on terms to be
mutually agreed upon.
5. PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation and
amortization, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Computers and related equipment............ $1,815 $2,422
Furniture and fixtures..................... 498 1,000
Motor vehicles............................. 426 339
Leasehold improvements..................... 17 91
------ ------
2,756 3,852
Less accumulated depreciation and amortiza-
tion...................................... (562) (1,136)
------ ------
Property and equipment, net................ $2,194 $2,716
====== ======
</TABLE>
F-11
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASE COMMITMENTS
The Company leases certain office space and equipment under operating lease
agreements. As of June 30, 1996, future minimum rental commitments under all
operating leases with remaining noncancelable terms of one year or more,
including the rental payments being made by a former owner of the Company (see
Note 3), are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
YEAR LEASES
---- ---------
<S> <C>
1996............................................................... $ 765
1997............................................................... 1,485
1998............................................................... 999
1999............................................................... 729
2000............................................................... 583
Thereafter......................................................... 3,364
------
Total lease commitments ......................................... $7,925
======
</TABLE>
Rent expense, net of sublease income of approximately $60,000, $20,000 and
$39,000, was $650,000, $218,000 and $452,000 for the periods March 17, 1995 to
December 31, 1995, March 17, 1995 to June 30, 1995 and January 1, 1996 to June
30, 1996, respectively. Amortization expense includes $253,000, $63,000 and
$190,000 amortization of the leasehold asset in lieu of rent expense for the
periods March 17, 1995 to December 31, 1995, March 17, 1995 to June 1995 and
January 1, 1996 to June 30, 1996, respectively.
7. INCOME TAXES
The Company has deferred tax assets of approximately $2,833,000 and
$6,421,000 at December 31, 1995 and June 30, 1996, respectively. For financial
reporting purposes, valuation allowances of $2,772,000 and $6,351,000,
respectively, have been recognized to offset these deferred tax assets. During
the period March 17, 1995 to December 31, 1995 and the six month period ended
June 30, 1996, the valuation allowance increased by approximately $1,006,000
and $3,579,000, respectively.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Deferred revenue........................... $ 539 $ 370
Net operating loss carryforwards........... 2,395 5,910
Other, net................................. (101) 141
------ ------
Total deferred tax assets................ 2,833 6,421
Valuation allowance for deferred tax
assets.................................... 2,772 6,351
------ ------
Net deferred tax assets.................. $ 61 $ 70
====== ======
</TABLE>
F-12
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For financial reporting purposes, income before income taxes includes the
following components (in thousands):
<TABLE>
<CAPTION>
MARCH 17 TO SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1995 1996
------------ --------------
<S> <C> <C>
Pre-tax loss from continuing operations:
United States.................................. $(4,972) $ (9,690)
Non-United States.............................. (1,237) (480)
------- --------
Consolidated..................................... $(6,209) $(10,170)
======= ========
</TABLE>
The Company has available net operating loss carryforwards of approximately
$15,109,000 at June 30, 1996, which may be used to reduce future taxable
income. Of this amount, U.S. carryforwards of approximately $11,804,000 expire
in various years through 2011, certain non-U.S. carryforwards of approximately
$1,589,000 expire in various years through 2001 and the balance may be carried
forward indefinitely. If losses of acquired companies are used to reduce
future taxable income, associated tax benefits will first reduce acquired
goodwill and other noncurrent intangible assets before being recognized as a
reduction of income tax expense in the period the benefits are realized.
Utilization of the net operating loss carryforwards may be limited pursuant to
the provisions of Section 382 of the Internal Revenue Code of 1986.
The results of continuing operations for March 17, 1995 to December 31,
1995, the period March 17, 1995 to June 30, 1995 and the six months ended June
30, 1996 include non-U.S. income tax benefits of approximately $(339,000),
$(55,000) and $0, respectively, and U.S. federal, state and local income,
franchise and minimum tax benefits of approximately $(754,000), $(255,000) and
($257,000), respectively.
8. JOINT VENTURE AGREEMENT
In 1991, BIS Strategic Decisions, Inc. entered into a joint venture
agreement with a Japanese company to provide additional market penetration in
Japan for its products and services. BIS Strategic Decisions, Inc.'s initial
equity ownership was 40%. Pursuant to the terms of the agreement, the Company
purchased an additional 10% interest in the joint venture from its partner in
March 1996 for approximately $85,000. In April 1996, the Company and its
partner each increased their investment in the joint venture by approximately
$24,000.
At December 31, 1995 and June 30, 1996, the Company had accounts receivable
due from the joint venture of $100,000 and $69,000, respectively.
9. LONG TERM DEBT
In connection with the Company's acquisition of BIS, the Company issued a
$1,000,000 5% convertible note due April 5, 1998 in favor of Friday Holdings,
L.P. The note is convertible into 2.67% of the outstanding Common Stock of the
Company based on equity capitalization for the Company of up to $5,000,000.
In connection with the Company's acquisition of ExperNet, the Company issued
a $400,000 6% convertible note to Mr. Gilmour (see Note 3). The Note is
convertible into shares of Series B Preferred Stock. The Note may be prepaid
in part, up to $150,000, at the option of the holder at any time between July
1, 1997 and July 1, 1999 and all, or any part, at the option of the holder on
or after July 1, 1999. The holder may convert all or part of the unpaid
principal amount of the Note to the Company's Series B Preferred Stock in
increasing amounts over a 30-month period beginning December 31, 1996. As of
June 30, 1996, the note is convertible into 42,861 shares of Series B
Preferred Stock.
F-13
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. PREFERRED STOCK
The authorized capital stock of the Company includes 10,000,000 shares of
Preferred Stock. Of the Preferred Stock, 650,000 shares have been designated
as Series A Preferred Stock and 6,500,000 shares have been designated as
Series B Preferred Stock. The remaining 2,850,000 shares of Preferred Stock
have not been designated. Upon completion of the Company's proposed initial
public offering, the Company will have authorized 5,000,000 shares of
undesignated Preferred Stock.
SERIES A PREFERRED STOCK
During 1995, the Company issued 410,000 shares of Series A Preferred Stock
(1,640,000 shares on an as- converted basis) for consideration of $2,050,000
which consisted of $2,025,000 cash and a $25,000 non-recourse note from an
employee in connection with his acceptance of employment with the Company. In
addition, 160,000 shares of Series A Preferred Stock (640,000 shares on an as-
converted basis) were issued in connection with the acquisition of ExperNet as
described in Note 3.
SERIES B PREFERRED STOCK
During 1995, the Company issued 4,026,772 shares of Series B Preferred Stock
for cash consideration of $13,216,000, net of issuance costs of $878,000. In
addition, bridge financing in the principal amount of $2,000,000 was
automatically converted into 571,428 shares of Series B Preferred Stock at the
first closing of the Series B Preferred Stock financing in November 1995.
During the six months ended June 30, 1996, the Company issued 674,015 shares
of Series B Preferred Stock for cash consideration of $2,337,000, net of
issuance costs of $25,000.
CONVERSION
Each share of Series A Preferred Stock and Series B Preferred Stock is
convertible, at the holder's option, into that number of shares of Common
Stock as is determined by dividing the initial purchase price of such shares
by the conversion price in effect at the time of conversion. The conversion
price of each share of Series A Preferred Stock and Series B Preferred Stock
is subject to adjustment upon the occurrence of certain events. At June 30,
1996 each share of Series A Preferred Stock is convertible into four shares of
Common Stock and each share of Series B Preferred Stock is convertible into
one share of Common Stock.
The Series A Preferred Stock and Series B Preferred Stock will automatically
convert into Common Stock at the then effective conversion price immediately
prior to the closing of a firm commitment underwritten public offering of
Common Stock at a price of at least $5.25 per share (as adjusted for any stock
splits, stock dividends, subdivisions or combinations), and having aggregate
gross proceeds of at least $15,000,000. In addition, the Series A Preferred
Stock and Series B Preferred Stock will convert into Common Stock at the then
effective conversion price upon the consent of the holders of at least two-
thirds (2/3) of the then outstanding Series A Preferred Stock and Series B
Preferred Stock.
LIQUIDATION
Upon (i) the liquidation, dissolution, or winding up of the Company (either
voluntary or involuntary) or (ii) the merger or consolidation of the Company
with another corporation or the sale or other transfer of all or substantially
all of the assets of the Company which is not agreed to by the holders of not
less than a majority of the Preferred Stock, voting together as a single
class, and in which stockholders of the Company immediately prior to such
transaction do not own more than a 50% interest in the surviving entity, (i)
holders of the Series A Preferred Stock are entitled to receive out of the
assets of the Company available for distribution to its stockholders, an
amount equal to $5.00 per share, plus any declared but unpaid dividends, prior
to any distribution to the holders of the Company's Common Stock, and (ii)
holders of Series B Preferred Stock are
F-14
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
entitled to receive out of the assets of the Company available for
distribution to its shareholders, an amount equal to $3.50 per share, plus any
declared but unpaid dividends, prior to any distribution to the holders of the
Company's Common Stock. Following distribution of such preferential amounts,
holders of Series A Preferred Stock and Series B Preferred Stock shall not
participate in any further distribution.
VOTING
Except as provided by law or in the Company's Amended and Restated
Certificate of Incorporation, the holders of the Series A Preferred Stock and
Series B Preferred Stock vote with holders of the Company's Common Stock on an
as converted basis and not as a separate class or series. In addition, so long
as any shares of Series A Preferred Stock or Series B Preferred Stock are
outstanding, the Company may not, without the approval of at least a majority
of the outstanding shares of the Series A Preferred Stock and Series B
Preferred Stock, take certain actions as described in the Certificate of
Incorporation.
11. COMMON STOCK
In November 1995, the Company amended its Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 10,000,000 to
28,000,000. In November 1995, the Company effected a four-for-one stock split
of the Common Stock in the form of a stock dividend. All share and per share
data presented herein have been restated to reflect the Common Stock split.
Upon completion of the Company's proposed initial public offering, the Company
will have authorized 60,000,000 shares of Common Stock.
12. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
In June 1995, the Company adopted the 1995 Stock Plan (the "Prior Stock
Plan"). The Prior Stock Plan was superseded in October 1995 by the 1995 Stock
Option/Stock Issuance Plan (the "1995 Stock Plan"). A total of 5,000,000
shares of Common Stock were reserved for issuance under the 1995 Stock Plan as
of June 30, 1996.
The 1995 Stock Plan provides for direct purchases of Common Stock and the
grants of non-qualified and incentive options to purchase shares of the
Company's Common Stock to employees (including officers and directors who are
employed by the Company) of, and consultants to, the Company at the fair
market value determined by the Board on the date of the grant. The Board may
determine the date on which these shares vest and become exercisable. Shares
purchased as the result of the exercise of these options are subject to the
Company's right to repurchase such shares upon the occurrence of certain
events and at a price equal to the fair market value as defined on the date of
repurchase. At June 30, 1996, 2,271,361 shares were available for grant.
F-15
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of activity under the 1995 Stock Plan through June 30, 1996
follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE/
SHARES UNDER PURCHASE
OPTION/PURCHASE PRICE
--------------- ----------
<S> <C> <C>
Outstanding at March 17, 1995
Granted........................................ 2,550,400 $0.50-0.60
Exercised/purchased............................ (160,000) 0.50
Cancelled...................................... (60,000) 0.50
---------
Outstanding at December 31, 1995 2,330,400
Granted........................................ 586,050 0.50-0.90
Exercised/purchased............................ (2,600) 0.50
Cancelled...................................... (347,811) 0.50-0.90
---------
Outstanding at June 30, 1996..................... 2,566,039 0.50-0.90
=========
</TABLE>
Through August 31, 1996, pursuant to the 1995 Stock Plan, the Company
granted additional options to acquire a total of 371,000 shares of Common
Stock at exercise prices ranging from $0.90 to $6.75, net of cancellations of
options to purchase 86,892 shares of Common Stock. In addition, the Company
has granted options to purchase a total of 780,000 shares of Common Stock
granted other than pursuant to the 1995 Stock Plan at an exercise price of
$0.50.
WARRANTS
In connection with certain financings of the Company, the Company has issued
a warrant to purchase 107,876 shares of Series B Preferred Stock at an
exercise price of $4.5625 per share and a warrant to purchase 285,714 shares
of Series B Preferred Stock at an exercise price of $2.345 per share. Each of
the warrants is for a term of five years, subject to earlier expiration upon
the occurrence of certain events.
13. STOCK PURCHASE PLANS/AGREEMENTS
In the period from inception to December 31, 1995, the Company sold 420,000
shares of Common Stock to certain employees of the Company at $0.50 per share
under the provisions of the 1995 Stock Plan or separate stock purchase
agreements. Employees vest in these shares over four years from their
respective dates of purchase, with 25% vesting on the first anniversary of the
purchase and the remainder vesting pro rata thereafter monthly over the
remaining 36 months. If an employee who purchased stock under either the 1995
Stock Plan or separate agreements ceases to be employed by the Company, the
Company at its option may elect to repurchase the employee's unvested shares
at the original cost paid by the employee for such stock and vested shares at
a price equal to the fair market value as defined on the date of repurchase.
In October 1995, the Company sold 120,000 shares of Common Stock to Richard
Crandall, a director who also serves as a consultant to the Company for $0.50
per share of which $10,000 was paid in cash and $50,000 was paid in the form
of a non-recourse interest bearing note due March 31, 1996. In June 1996, the
Company cancelled the promissory note plus interest accrued thereunder
(totalling approximately $52,000), in lieu of payment to Mr. Crandall for
services rendered to the Company in 1995 (for which Mr. Crandall was entitled
to receive $25,000) and the first six months of 1996 (for which Mr. Crandall
was entitled to receive $30,000) plus interest. These shares are also subject
to certain repurchase rights by the Company in the event that Mr. Crandall
ceases to be either a director of, or consultant to, the Company.
14. EMPLOYEE BENEFITS AND DEFERRED COMPENSATION PLANS
In the United States, the Company maintains a Savings and Retirement Plan
(the "401(k) Plan") under Section 401 of the Internal Revenue Code. Employees
are eligible to participate in the 401(k) Plan who work a
F-16
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
minimum of one year and have attained the age of 21. The Company matches by
25% that portion of a participant's contribution representing the first 3% of
an employee's base salary and by 50% that portion representing the next 3% of
an employee's base salary. The Company may also make additional contributions
to the 401(k) Plan at the discretion of the Board of Directors. The Company
has made mandatory contributions to the 401(k) Plan of $47,000, $17,000 and
$33,000 during the periods March 17, 1995 to December 31, 1995, March 17, 1995
to June 30, 1995 and the six months ended June 30, 1996. The Company has not
made any discretionary contributions to the 401(k) Plan during 1995 or 1996.
15. GEOGRAPHICAL MARKET INFORMATION
The Company operates in one business segment and in the geographical markets
indicated in the table below. Sales for continuing operations are reflected in
the segment from which the sales are made. The Other International segment
includes France, Italy, Germany and Korea.
<TABLE>
<CAPTION>
(IN THOUSANDS)
NORTH UNITED OTHER
AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL
------- --------- ------- ------------- -------
<S> <C> <C> <C> <C> <C>
MARCH 17, 1995 TO DECEMBER
31, 1995:
Revenues:
Total revenues......... $ 3,755 $ 3,832 $ 2,051 $1,185 $10,823
Transfers between
areas................. -- -- (55) (62) (117)
------- ------- ------- ------ -------
Unaffiliated revenues.. 3,755 3,832 1,996 1,123 10,706
======= ======= ======= ====== =======
Income (loss) from
operations.............. (5,087) 215 (857) (639) (6,368)
Total assets............. 20,222 1,163 2,077 1,222 24,684
MARCH 17, 1995 TO JUNE 30,
1995:
Revenues:
Total revenues......... $ 1,113 $ 1,337 $ 681 $ 472 $ 3,603
Transfers between
areas................. -- -- (13) (19) (32)
------- ------- ------- ------ -------
Unaffiliated revenues.. 1,113 1,337 668 453 3,571
======= ======= ======= ====== =======
Income (loss) from
operations.............. (898) 135 (117) (173) (1,053)
Total assets............. 7,517 996 2,017 1,351 11,881
JANUARY 1, 1996 TO JUNE 30,
1996:
Revenues:
Total revenues......... $ 2,364 $ 2,281 $ 1,239 $ 662 $ 6,546
Transfers between
areas................. (12) -- (16) (36) (64)
------- ------- ------- ------ -------
Unaffiliated revenues.. 2,352 2,281 1,223 626 6,482
======= ======= ======= ====== =======
Loss from operations..... (9,978) (9) (288) (218) (10,493)
Total assets............. 15,014 1,434 1,773 999 19,220
</TABLE>
16. DISCONTINUED OPERATIONS
On June 25, 1996, the Company announced the discontinuation of the BIS
Market Research Business. In connection with the discontinuance of such
operations, the Company terminated the personnel employed in developing and
compiling the BIS data-intensive market research products, ceased operations
at two of its licensed facilities in England and entered into contracts with
two independent IT service providers engaged to fulfill the Company's
obligations to customers of BIS under certain existing subscription
agreements, all of which expire on or before June 1997. The results of these
operations prior to June 25, 1996 have been classified as discontinued
operations and prior year financial statements have been restated to reflect
the discontinuance. A charge of approximately $2,305,000 (net of taxes of
approximately $158,000) was recorded in June 1996 for the loss on disposition
of the operations consisting primarily of rent and compensation.
F-17
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net liabilities of the discontinued operations of the BIS business have
been segregated in the consolidated balance sheets and as of June 30, 1996
consist primarily of accounts receivable ($1,739,000) and amounts payable
related to rent and facilities expenses ($1,893,000), customer refunds
($1,187,000) and salaries and related severance costs ($495,000). The
operating results of the BIS business are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 17 TO MARCH 17, SIX MONTHS ENDED
DECEMBER 31, 1995 TO JUNE 30, 1995 JUNE 30, 1996
----------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................ $11,329 $3,829 $3,521
Pre-tax income.......... 2,987 731 29
Provision for income
taxes.................. 1,497 430 114
------- ------ ------
Net income (loss)....... $ 1,490 $ 301 $ (85)
======= ====== ======
</TABLE>
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Company entered into an agreement in May 1996 with Dow Jones & Company,
Inc. regarding the distribution of certain content provided by Dow Jones to
GigaWeb subscribers. In exchange for the rights to distribute Dow Jones
information, the Company is required to pay Dow Jones a monthly fee equal to
the greater of a Guaranteed Minimum Monthly Payment or an established rate per
GigaWeb subscriber. The Guaranteed Minimum Monthly Payment schedule is as
follows: $5,000 per month for July and August 1996, $7,500 for September 1996,
$10,000 for October 1996, $11,000 per month for November and December 1996 and
$22,500 per month throughout calendar year 1997. The total minimum payments
would be approximately $320,000 over the life of the Agreement. This agreement
is due to expire on December 31, 1997.
A subsidiary of the Company, BIS Strategic Divisions, Ltd., has an unused
line of credit with a bank which is secured by all assets owned or leased by
the Company.
18. SUBSEQUENT EVENTS
In July 1996, an action was brought against the Company and its chairman by
a former employee alleging breach of employment agreement and fraud and
seeking, among other things, approximately $3.5 million in compensatory and
punitive damages. The Company believes it has meritorious defenses and intends
to vigorously defend its case. Management believes it is unlikely that the
outcome of this case will have a material adverse effect on the financial
condition of the Company.
In August 1996, the Board of Directors authorized, subject to stockholder
approval and the closing of an proposed initial public offering, the filing of
a Restated Certificate of Incorporation which authorized 60,000,000 shares of
Common Stock and 5,000,000 shares of undesignated Preferred Stock which is
issuable in one or more series, each of such series to have such rights and
preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences as shall be determined by
the Board of Directors.
On August 5, 1996, the Board of Directors amended the 1995 Stock Plan,
subject to stockholder approval, to increase the number of shares of Common
Stock reserved for issuance under the 1995 Stock Plan from 5,000,000 to
6,000,000. On August 28, 1996, the Board of Directors adopted, subject to
stockholder approval, the 1996 Stock Option Plan (the "1996 Plan") to
effectively supersede the 1995 Stock Plan. The 1996 Stock Plan will provide
for the granting of options to purchase 3,000,000 shares of Common Stock. As a
result, the Board of Directors also voted not to grant any additional stock
options under the 1995 Stock Plan.
On August 28, 1996, the Board of Directors also adopted, subject to
stockholder approval and the closing of the proposed initial public offering,
the 1996 Employee Stock Purchase Plan (the "Purchase Plan"). A total of
400,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Giga Information Group, Inc.:
We have audited the accompanying combined statements of operations, changes
in stockholder's equity and cash flows of BIS Strategic Decisions for the
period from January 1, 1995 to April 5, 1995. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 1 to the combined financial statements, BIS Strategic
Decisions was acquired by Giga Information Group, Inc. on April 5, 1995 and
has been operated by the management of Giga since that date. The transaction
involved the payment of $200,000 cash and a convertible note in the principal
amount of $1,000,000 for all the outstanding shares of BIS Strategic
Decisions.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of BIS Strategic Decisions'
operations and its cash flows for the period from January 1, 1995 to April 5,
1995 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 31, 1996
F-19
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholder
BIS Strategic Decisions
We have audited the accompanying combined balance sheet of the entities
listed in Note 2 as of December 31, 1994, and the related combined statements
of operations, stockholder's equity, and cash flows for the year ended
December 31, 1994, the period from December 16, 1993 to December 31, 1993, and
the period from January 1, 1993 to December 15, 1993. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits. We did not audit the financial statements of BIS Shrapnel
PTY Limited for the periods January 1, 1993 to December 15, 1993, and December
16, 1993 to December 31, 1993, which statements reflect total revenues of
approximately $4,245,000 and $187,000, respectively. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion for the period from January 1, 1993 to December 15, 1993, and December
16, 1993 to December 31, 1993, insofar as it relates to data included for BIS
Shrapnel PTY Limited, is based solely on the reports of other auditors.
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 and, for the periods
January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31,
1993, the report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for the periods January 1, 1993 to
December 15, 1993, and December 16, 1993 to December 31, 1993, the report of
other auditors, the combined financial statements referred to above present
fairly, in all material respects, the combined financial condition of the
entities listed in Note 2 as of December 31, 1994, and the combined results of
their operations and their cash flows for the year ended December 31, 1994,
the period from December 16, 1993 to December 31, 1993, and the period from
January 1, 1993 to December 15, 1993, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared assuming
that the Companies listed in Note 2 will continue as a going concern. As more
fully described in Note 4, the Companies' expired line of credit with a bank
and projected cash shortfalls for 1995 raise substantial doubt about their
ability to continue as a going concern. The Companies are wholly-owned by
Friday Holdings, L.P., a limited partnership that is in the process of winding
up its affairs. In connection therewith, Friday Holdings, L.P. is in
discussions with potential buyers of the Companies. On March 6, 1995, Friday
Holdings, L.P. entered into a nonbinding letter of intent to sell the
Companies. Among other things, the terms of the nonbinding letter of intent
provide that the buyer infuse up to $1,800,000 into the Companies during the
first year. See Note 4 for additional information about the nonbinding letter
of intent and management's plans to address the projected cash shortfalls. The
accompanying combined financial statements as of December 31, 1994, and for
the year ended December 31, 1994, the period from December 16, 1993 to
December 31, 1993, and the period from January 1, 1993 to December 15, 1993,
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of this uncertainty.
As described in Note 2, effective January 1, 1993, the Companies changed
their method of accounting for revenue recognized for continuous information
services.
Ernst & Young LLP
Boston, Massachusetts
March 13, 1995, except with respect to
the matters described in Note 12, as to which the date is September 6, 1996.
F-20
<PAGE>
BIS SHRAPNEL PTY LIMITED
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
BIS SHRAPNEL PTY LIMITED
SCOPE
We have audited the attached financial package of the business BIS Shrapnel
from 1 January 1993 to 15 December 1993. The results incorporate the
operations of the two legal entities that carried on the business under the
name BIS Shrapnel and have been prepared on the basis of the footnotes to the
financial package.
The company's directors are responsible for the preparation and presentation
of the financial package and the information contained therein. We have
conducted an independent audit of this financial package in order to express
an opinion on the financial package to the members of the company.
Our audit has been conducted in accordance with Australian Auditing Standards,
which are substantially comparable to United States Generally Accepted
Auditing Standards, to provide reasonable assurance as to whether the
financial package is free of material misstatement. Our procedures included
examination, on a test basis, of evidence supporting the amounts and other
disclosures in the financial package, and the evaluation of accounting
policies and significant accounting estimates. These procedures have been
undertaken to form an opinion as to whether, in all material respects, the
financial package is presented fairly in accordance with Australian accounting
standards so as to present a view of the business which is consistent with our
understanding of its financial position, the results of its operations and its
cash flows.
The audit opinion expressed in this report has been formed on the above basis.
AUDIT OPINION
In our opinion the financial package of the business of BIS Shrapnel is
properly drawn up:
(a) so as to give a true and fair view of the state of affairs of the business
as at 15 December 1993 and of its result and cash flows for the period
from 1 January 1993 to 15 December 1993; and
(b) in accordance with applicable Accounting Standards.
COOPERS & LYBRAND
Chartered Accountants
Signed at Sydney this 6th day of July 1994.
F-21
<PAGE>
BIS SHRAPNEL PTY LIMITED
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
BIS SHRAPNEL PTY LIMITED
SCOPE
We have audited the attached financial package of BIS Shrapnel Pty Limited
from 16 December 1993 to 31 December 1993. The financial package has been
prepared on the basis of the footnotes to the financial package.
The company's directors are responsible for the preparation and presentation
of the financial package and the information contained therein. We have
conducted an independent audit of this financial package in order to express
and opinion on the financial package to the members of the company.
Our audit has been conducted in accordance with Australian Auditing Standards,
which are substantially comparable to United States Generally Accepted
Auditing Standards, to provide reasonable assurance as to whether the
financial package is free of material misstatement. Our procedures included
examination, on a test basis, of evidence supporting the amounts and other
disclosures in the financial package, and the evaluation of accounting
policies and significant accounting estimates. These procedures have been
undertaken to form an opinion as to whether, in all material respects, the
financial package is presented fairly in accordance with Australian accounting
standards so as to present a view of the company which is consistent with our
understanding of its financial position, the results of its operations and its
cash flows.
The audit opinion expressed in this report has been formed on the above basis.
AUDIT OPINION
In our opinion the financial package of the business of BIS Shrapnel is
properly drawn up:
(a) so as to give a true and fair view of the state of affairs of the company
as at 31 December 1993 and of its result and cash flows for the period
from 16 December 1993 to 31 December 1993; and
(b) in accordance with applicable Accounting Standards.
COOPERS & LYBRAND
Chartered Accountants
Signed at Sydney this 6th day of July 1994.
F-22
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $1,809
Trade accounts receivable, net of allowance for uncollectible
accounts of $45............................................. 2,227
Unbilled accounts receivable................................. 663
Prepaid expenses and other current assets.................... 302
------
Total current assets..................................... 5,001
Property and equipment, net of accumulated depreciation of
$674.......................................................... 1,807
Goodwill, net of accumulated amortization of $2,299............ 1,778
Other assets................................................... 15
------
Total assets........................................... $8,601
======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank loans................................................... $345
Accounts payable, other current liabilities and accrued ex-
penses...................................................... 2,394
Deferred revenues............................................ 1,681
Accrued compensation and benefits............................ 791
Net liabilities of discontinued operations................... 1,567
------
Total current liabilities................................ 6,778
Stockholder's equity:
Common Stock:
BIS Strategic Decisions, Inc. $0.01 par value per share;
one share authorized, issued and outstanding.............. --
BIS Strategic Decisions, Ltd. (Pounds)1 par value per
share;
2,160,791 shares authorized, issued and outstanding....... 3,220
BIS Shrapnel PTY Ltd. A$1 par value per share; 10,000,000
shares
authorized, 2,467,841 shares issued and outstanding....... 1,654
BIS Strategic Decisions, GmbH DM 60,000 par value per
share;
one share authorized, issued and outstanding.............. 29
BIS Strategic Decisions, Srl Lire 200,000 par value per
share;
100 shares authorized, issued and outstanding............. 11
BIS Strategic Decisions, Sarl FF 100 par value per share;
10,000 shares authorized, issued and outstanding.......... 171
Additional paid-in capital................................... 4,011
Accumulated deficit.......................................... (6,951)
Cumulative translation adjustment............................ (322)
------
Total stockholder's equity............................... 1,823
------
Total liabilities and stockholder's equity............. $8,601
======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-23
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
(NYNEX) PREDECESSOR COMPANIES (FHLP)
--------------- ----------------------------------------
JANUARY 1 DECEMBER 16 YEAR ENDED JANUARY 1
TO DECEMBER 15, TO DECEMBER 31, DECEMBER 31, TO APRIL 5,
1993 1993 1994 1995
--------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Information products
revenues............... $11,371 $ 329 $12,700 $3,237
Cost and expenses:
Cost of services and
product development.. 5,530 357 6,172 2,208
Sales and marketing... 1,448 92 1,589 266
General and
administrative....... 6,901 307 8,108 1,197
Depreciation and
amortization......... 744 38 3,068 250
------- ----- ------- ------
Total costs and
expenses........... 14,623 794 18,937 3,921
------- ----- ------- ------
Operating loss........ (3,252) (465) (6,237) (684)
Interest income......... 114 7 103 26
Interest expense........ (38) (4) (26) (4)
------- ----- ------- ------
Loss from continuing
operations before
income taxes......... (3,176) (462) (6,160) (662)
Income tax provision
(benefit).............. (983) -- (1,096) (213)
------- ----- ------- ------
Loss from continuing
operations........... (2,193) (462) (5,064) (449)
Discontinued operations:
Income (loss) from the
discontinued BIS
market research
business, net of tax
effect .............. 1,044 44 (1,469) 597
------- ----- ------- ------
Net income (loss)....... $(1,149) $(418) $(6,533) $148
======= ===== ======= ======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-24
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
---------------- PAID-IN TRANSLATION ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL ADJUSTMENTS DEFICIT EQUITY
--------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Predecessor Companies
(NYNEX):
Balance at December 31,
1992; $2,764 $(282) $(1,021) $1,461
BIS Strategic Deci-
sions, Inc., par
value $.01 per
share................ 1 $ -- -- -- -- --
BIS Strategic Deci-
sions, Ltd., par
value (Pounds).1 per
share................ 1,050,000 160 -- -- -- 160
BIS Shrapnel PTY Ltd.,
par value A$1 per
share................ 230,000 206 -- -- -- 206
BIS Strategic Deci-
sions, Srl, par value
Lire 200,000 per
share................ 100 16 -- -- -- 16
Reorganization adjust-
ments: 135 -- (823) (688)
BIS Strategic Deci-
sions, GmbH, par
value DM 50,000 per
share................ 1 29 -- -- -- 29
BIS Strategic Deci-
sions, Sarl, par
value FF 100 per
share................ 10,000 171 -- -- -- 171
BIS Strategic Deci-
sions, Ltd. par value
(Pounds).01 per
share................ -- 31 -- -- -- 31
BIS Strategic, Srl,
par value Lire
200,000 share........ -- (5) -- -- -- (5)
Net income............ (1,149) (1,149)
Common stock issued in
conjunction with reor-
ganization:
BIS Strategic Deci-
sions, Ltd., par
value (Pounds)1 per
share................ 1,110,791 3,029 -- -- -- 3,029
BIS Strategic PTY
Ltd., par value A$1
per share............ 2,237,841 1,448 -- -- -- 1,448
Equity adjustment from
translation........... -- -- -- 331 -- 331
--------- ------ ------ ----- ------- ------
Balance at December 15,
1993.................. 4,638,734 $5,085 $2,899 $ 49 $(2,993) $5,040
========= ====== ====== ===== ======= ======
- -------------------------------------------------------------------------------------------
Predecessor Companies
(FHLP):
Pushdown of invest-
ment................. -- -- 1,112 (49) 2,993 4,056
--------- ------ ------ ----- ------- ------
Balance at December 16,
1993.................. 4,638,734 5,085 4,011 -- -- 9,096
--------- ------ ------ ----- ------- ------
Net loss.............. -- -- -- -- (418) (418)
Equity adjustment from
translation.......... -- -- -- 1 -- 1
--------- ------ ------ ----- ------- ------
Balance at December 31,
1993.................. 4,638,734 5,085 4,011 1 (418) 8,679
--------- ------ ------ ----- -------
Net loss.............. -- -- -- -- (6,533) (6,533)
Equity adjustment from
translation.......... -- -- -- (323) -- (323)
--------- ------ ------ ----- ------- ------
Balance at December 31,
1994.................. 4,638,734 5,085 4,011 (322) (6,951) 1,823
--------- ------ ------ ----- ------- ------
Net income............ -- -- -- -- 148 148
Equity adjustment from
translation.......... -- -- -- (6) (6)
--------- ------ ------ ----- ------- ------
Balance at April 5,
1995.................. 4,638,734 $5,085 $4,011 $(328) $(6,803) $1,965
========= ====== ====== ===== ======= ======
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-25
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
(NYNEX) PREDECESSOR COMPANIES (FHLP)
------------ ----------------------------------------
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO
DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5,
1993 1993 1994 1995
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities
Net income (loss)...... $(1,149) $(418) $(6,533) $148
Adjustments to
reconcile net income
(loss) to net cash
used in continuing
operating activities:
Net (income) loss
from discontinued
operations.......... (1,044) (44) 1,469 (597)
Depreciation
expense............. 744 30 788 226
Amortization and
writedown of
goodwill............ -- 8 2,280 24
Loss (gain) on sale
of fixed assets..... (11) -- 62 --
Provision for
deferred income
taxes............... -- -- (1,183) 58
Allowance for
doubtful accounts... (1) (3) 27 9
Changes in certain
operating assets and
liabilities:
Increase in accounts
receivable......... (110) (123) (217) (608)
Decrease (increase)
in unbilled
services........... (74) 10 (3) 183
Decrease (increase)
in prepaid expenses
and other current
assets............. (805) 377 257 (314)
Increase (decrease)
in accounts payable
and accrued
expenses........... 461 (827) 589 (559)
Increase (decrease)
in deferred
revenue............ 818 (221) 1,763 490
------- ------- ------- ------
Net cash provided by
(used in) operating
activities of:
Continuing
operations........... (1,171) (1,211) (701) (940)
Discontinued
operations........... 3,302 812 1,136 642
------- ------- ------- ------
Net cash provided by
(used in) operating
activities........... 2,131 (399) 435 (298)
Cash flows from
investing activities:
Purchase of fixed
assets............... (795) (19) (1,157) (197)
Proceeds from sale of
equipment............ 107 -- 70 32
------- ------- ------- ------
Net cash used in
investing
activities........... (688) (19) (1,087) (165)
Cash flows from
financing activities:
Proceeds from
borrowings........... 176 -- 80 22
Principal payments on
borrowings........... (157) -- -- (157)
Principal payments on
capital lease
obligations.......... (61) -- -- (19)
------- ------- ------- ------
Net cash provided by
(used in) financing
activities............. (42) -- 80 (154)
Effect of exchange rate
changes on cash........ 37 (4) (433) 225
------- ------- ------- ------
Net increase (decrease)
in cash and cash
equivalents............ 1,438 (422) (1,005) (392)
Cash and cash
equivalents at
beginning of period... 1,798 3,236 2,814 1,809
------- ------- ------- ------
Cash and cash
equivalents at end of
period................ $3,236 $2,814 $1,809 $1,417
======= ======= ======= ======
Supplemental cash flow
information:
Income taxes paid..... $ 155 $ 0 $ 51 $ 7
Interest paid......... $ 17 $ 6 $ 35 $ 2
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-26
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
1. BACKGROUND
During the period January 1, 1993 to December 15, 1993, BIS Strategic
Decisions, Inc. and its five foreign affiliates (collectively "BIS Strategic
Decisions," "BIS" or the "Predecessor Companies") were wholly-owned
subsidiaries of NYNEX Corporation ("NYNEX"). On December 16, 1993, Friday
Holdings, L.P. ("FHLP") acquired 100% of the common stock outstanding of each
of the Predecessor Companies from NYNEX in exchange for $8,696,000 in cash. On
April 5, 1995, Giga Information Group, Inc. ("Giga") acquired 100% of the
common stock outstanding of each of the Predecessor Companies from FHLP for
$200,000 in cash and a $1,000,000 convertible promissory note. The acquisition
of the Predecessor Companies by Giga was accounted for as a purchase. As part
of the transaction, a $1,300,000 intangible asset was recorded representing
the fair value of payments being made on a property lease through May 1998 by
a former owner of the Predecessor Companies. The financial data of the
Predecessor Companies for the period January 1, 1993 to December 15, 1993 are
reflected on the financial statements and referred to from time to time herein
as "Predecessor Companies (NYNEX)." The financial data for the Predecessor
Companies for the period December 16, 1993 to December 31, 1993, the year
ended December 31, 1994 and for the period January 1 to April 5, 1995 are
reflected on the financial statements and referred to from time to time herein
as "Predecessor Companies (FHLP)."
On June 25, 1996, the Company decided to discontinue the BIS Market Research
Business. In connection with the discontinuance of such operations, the
Company terminated the personnel employed in developing and compiling the BIS
market research products, ceased operations at two of the licensed facilities
in England and entered into contracts with two independent IT service
providers engaged to fulfill the Company's obligations to customers of BIS
under certain existing subscription agreements, all of which expire on or
before June 1997.
The continuing operations reflected in the financial statements represent
revenues and expenses associated with the Predecessor Companies Information
Products revenues, which include events, publications, consulting and
econometric forecasting.
The financial statements for the period January 1, 1993 to December 15, 1993
are presented as if the Predecessor Companies existed as an entity separate
from NYNEX and include only financial information directly related to the
Predecessor Companies. During 1993, in anticipation of the sale of the
Predecessor Companies, NYNEX initiated certain reorganization efforts which
changed the legal and capital structure of certain of the Predecessor
Companies.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The combined financial statements of BIS Strategic Decisions include the
accounts of BIS Strategic Decisions, Inc., BIS Strategic Decisions, Ltd., BIS
Shrapnel PTY Ltd., BIS Strategic Decisions, GmbH, BIS Strategic Decisions, Srl
and BIS Strategic Decisions, Sarl. All intercompany accounts and transactions
have been eliminated in combination.
Pursuant to the acquisition of BIS on December 16, 1993 by FHLP,
identifiable assets acquired and liabilities assumed were carried over at net
book value which approximates fair market value. The excess of the purchase
price over the fair market value of the net identifiable assets acquired was
recorded as goodwill.
F-27
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Because of the impact to the combined statements of operations, changes in
stockholder's equity and cash flows of the revaluation of the net assets
acquired by FHLP on December 16, 1993, the combined statements of operations,
changes in stockholder's equity and cash flows for the periods January 1, 1993
to December 15, 1993 are not comparable with those of December 16, 1993 to
December 31, 1993, the year ended December 31, 1994 and the period January 1,
1995 to April 5, 1995.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
Effective January 1, 1993, the Predecessor Companies changed their method of
accounting for revenue recognized for continuous information services (which
services were provided solely by the BIS Market Research Business) to
recognize revenue ratably over the contract period. Previously, 35% of the
revenue was recognized at the start of the service term and the remaining 65%
was recognized ratably over the service period. Management believes that the
change in accounting principle results in better matching of revenues and
expenses and is preferable given the current industry practice. The cumulative
effect of the change in accounting at January 1, 1993, net of $462,000 in
applicable income taxes, decreased the net income by $1,928,000 for the period
ended December 15, 1993. The change in revenue recognition is reflected in its
entirety in the results of discontinued operations.
FOREIGN CURRENCY TRANSLATION
For international operations, the local currency is used as the functional
currency. The assets and liabilities of the foreign companies are translated
at the year-end rates of exchange and the related income statement items are
translated at the average rates of exchange for the year. The resulting
translation adjustments are excluded from income and charged to a separate
component of stockholder's equity. Realized and unrealized exchange gains or
losses arising from transaction adjustments are reflected in operations and
are not material.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with maturities of
three months or less at date of purchase.
PROPERTY AND EQUIPMENT
Property and equipment is stated on the basis of cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
following estimated useful lives;
<TABLE>
<CAPTION>
<S> <C>
Computers and related equipment... 3 years
Furniture and fixtures............ 5 years
Motor vehicles.................... 4 years
Leasehold improvements............ Shorter of economic life or lease term
</TABLE>
Major additions and improvements are capitalized, while repairs and
maintenance are charged to expense as incurred. Upon retirement or
disposition, the cost and related accumulated depreciation are removed from
the account and the resulting gain or loss is included in the determination of
net income.
REVENUE RECOGNITION
Information Product revenues from events, publications, consulting and
economic forecasting are recognized as follows:
Events--revenues and associated expenses are recognized during the month
that the conference is held.
Publications--revenues from general and research reports are recognized
when the report is published. Newsletter revenues are recognized over
the subscription period.
Consulting Services--revenues are recognized based on the percentage of
the service that has been performed.
Econometric Forecasting--revenues are recognized based on the percentage
of the service that has been completed.
F-28
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Cash equivalents are financial instruments which potentially subject the
Predecessor Companies to concentrations of credit risk. The Predecessor
Companies invest the majority of their excess cash in overnight investments in
a money market account. The Predecessor Companies have not experienced any
losses on their investments. The Predecessor Companies offer services to a
diversified client base, many of which are large, well established companies.
Accordingly, there is no one customer or industry that represents a
significant portion of revenues or receivables.
INCOME TAXES
The Predecessor Companies account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which is a balance sheet approach for accounting for
income taxes (see Note 3). Under SFAS 109, deferred tax liabilities and assets
are recognized based on temporary differences between the financial statement
and tax bases of assets and liabilities using current statutory tax rates.
SFAS 109 also requires a valuation allowance against net deferred tax assets
if, based on the available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized.
For the period January 1, 1993 to December 15, 1993, NYNEX included BIS
Strategic Decisions, Inc.'s U.S. tax return in its consolidated U.S. tax
return. Income taxes pertaining to BIS Strategic Decisions, Inc. for the
period January 1, 1993 to December 15, 1993 were calculated as if BIS
Strategic Decisions, Inc. had filed a separate tax return. The Predecessor
Companies' foreign affiliates file separate tax returns.
From December 16, 1993 through April 15, 1995 the Predecessor Companies
(FHLP) filed separate tax returns for all periods presented.
GOODWILL
Goodwill represents the excess of cost over the fair value of the net assets
of companies acquired. This balance is amortized over 20 years using the
straight-line method.
3. PROPERTY AND EQUIPMENT
Property and equipment for continuing operations at December 31, 1994
consists of the following (in thousands):
<TABLE>
<S> <C>
Computer and related equipment....................................... $1,143
Furniture and fixtures............................................... 522
Motor vehicles....................................................... 794
Leasehold improvements............................................... 22
------
2,481
Less accumulated depreciation and amortization....................... (674)
------
Property and equipment, net.......................................... $1,807
======
</TABLE>
4. LIQUIDITY
In 1994, the Company made substantial changes in its operations and incurred
nonrecurring restructuring costs, predominately severance, of approximately
$905,000 of which $680,000 pertains to continuing operations. Further, in
March 1995, there was an additional reduction in force with related severance
costs of approximately $220,000 of which $198,000 pertains to continuing
operations. The budgets for 1995 anticipate a net use of cash
F-29
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
which is less than the December 31, 1994 cash balance, however, there are
several months where the forecasted cash balance is negative. The Company's
only bank financing arrangement expired on December 31, 1994 . The bank has,
however, continued to honor the line on an informal month-to-month basis. As
of March 13, 1995, all amounts outstanding under this agreement were paid.
Should the bank not continue to extend the line, the Company will need to
obtain alternative financing or modify the 1995 operating plan to meet its
obligations.
FHLP acquired 100% of the outstanding capital stock of each of the
Predecessor Companies (NYNEX) on December 16, 1993. FHLP has substantial
obligations to its limited partners which were due on December 31, 1994. FHLP
is in technical default of these obligations. Currently, FHLP management is in
the process of winding up its affairs. In connection therewith, on March 6,
1995, FHLP entered into a nonbinding letter of intent to sell the Predecessor
Companies. Among other things, the terms of the nonbinding letter of intent
includes a sales price of $1,800,000 (cash of $200,000 and a one-year note of
$1,600,000) and a requirement that the buyer infuse up to $1,800,000 into the
Predecessor Companies during the first year. Because of the terms of this
agreement, the Company has recorded an adjustment in 1994 to the carrying
value of goodwill of approximately $4,711,000 of which $2,617,000 is
attributable to discontinued operations.
5. CREDIT ARRANGEMENTS
One of the combined affiliates of the Company has a working capital line of
credit agreement with a bank under which it may borrow amounts which ranged
from $480,000 to $750,000. The line of credit bears interest at the bank's
base rate plus 1.5% and is secured by all assets owned or leased by the
affiliate. The agreement contains operational covenants and expired on
December 31, 1994; however, the bank has allowed the affiliate to extend the
line pending resolution of the sale of the affiliate. As of December 31, 1994,
there was approximately $345,000 outstanding on the line of credit. As of
March 13, 1995, all amounts outstanding under this agreement were paid.
The weighted average interest rates of outstanding borrowings were 4.0%,
4.4% 6.1% and 7.5% for the periods January 1, 1993 to December 15, 1993 and
December 16, 1993 to December 31, 1993, the year ended December 31, 1994 and
the period January 1, 1995 to April 5, 1995, respectively.
6. INCOME TAXES
At December 31, 1994, the Predecessor Companies have deferred tax assets of
approximately $2,035,000. For financial reporting purposes, a valuation
allowance of $2,035,000 has been recognized to offset the deferred tax assets.
During the period ended December 31, 1994, the valuation allowance was
increased by approximately $586,000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Predecessor Companies' deferred tax liabilities and assets as of
December 31, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Discontinued operations........................................... $ 1,025
Net operating loss carryforward................................... 1,116
Other, net........................................................ (106)
-------
Total deferred tax assets......................................... $ 2,035
Valuation allowance for deferred tax assets......................... (2,035)
-------
Net deferred tax assets............................................. $ 0
=======
</TABLE>
F-30
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
For financial reporting purposes, income taxes (benefit) from continuing
operations were based on the following components:
<TABLE>
<CAPTION>
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO
DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5,
1993 1993 1994 1995
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Pretax loss from continuing operations:
United States........................................................ $(1,609) $(338) $(1,458) $(497)
Foreign.............................................................. (1,567) (124) (4,702) (165)
------- ----- ------- -----
Total pretax loss from continuing operations....................... $(3,176) $(462) $(6,160) $(662)
- --------------------------------------------------
======= ===== ======= =====
</TABLE>
The Company had available net operating loss carryforwards of approximately
$2,722,000 which may be used to reduce future taxable income. Domestic
carryforwards of approximately $1,100,000 expire in 2008. These carryforwards
have been limited to approximately $450,000 due to the purchase of the
Predecessor Companies by Giga. Certain remaining foreign carryforwards expire
in 1998 while others may be carried forward indefinitely. The results of
continuing operations for January 1 to December 15, 1993, December 16 to
December 31, 1993, the year ended December 31, 1994 and January 1 to April 5,
1995 include foreign tax expense (benefit) of $(345,000), $0, $(512,000) and
$(3,000), respectively.
7. PENSION PLANS
North America--In 1987, the Predecessor Companies established CAP
International Savings and Retirement Plan (the 401(k) Plan), a profit sharing
plan under Section 401 of the Internal Revenue Code. Employees are eligible to
participate in the 401(k) Plan by meeting certain requirements, including
length of service and minimum age. The Predecessor Companies match the first
3% of an employee's contribution by 25% and the next 3% of an employee's
contribution by 50%. The Predecessor Companies may also make additional
contributions to the plan at the discretion of the Board of Directors. The
Predecessor Companies have not made any discretionary contributions to the
profit sharing plan. From January 1 to December 15, 1993, the Predecessor
Companies contributed $89,000 to the plan, $5,000 from December 16 to December
31, 1993, $101,000 in 1994 and $23,000 from January 1 to April 5, 1995.
Australia--BIS Shrapnel maintains a Superannuation fund (a defined
contribution plan) for its employees to which it contributes 5% of annual
salary. Long service leave is provided for when employees become eligible to
receive it (5 years).
8. LEASE COMMITMENTS
The Predecessor Companies lease certain office space and equipment under
operating lease agreements. Future minimum rental commitments under all leases
with noncancelable terms of one year or more are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES
YEAR ---------
<S> <C>
1995............................................................... $1,323
1996............................................................... 1,188
1997............................................................... 1,089
1998............................................................... 655
1999............................................................... 451
Thereafter......................................................... 3,271
------
Total lease commitments....................................... $7,977
======
</TABLE>
F-31
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Rent expense was $1,195,000, $62,000, $1,169,000 and $296,000 for the
periods January 1 to December 16, 1993 and December 16 to December 31, 1993,
the year ended December 31, 1994 and the period January 1 to April 6, 1995,
respectively.
9. JOINT VENTURE AGREEMENT
On October 18, 1991, the Predecessor Companies entered into a joint venture
agreement with a Japanese company. The purpose of the joint venture was to
provide additional market penetration in Japan for its products and services.
Under the terms of the joint venture agreement, the Predecessor Companies may
be required to pay its Japanese partner approximately $75,000 if cumulative
sales under the joint venture do not meet certain agreed upon levels by
December 31, 1995. In addition, on or prior to April 1, 1996, the Predecessor
Companies may be required to increase its investment in the joint venture by
approximately $23,000.
As of December 31, 1994, the Predecessor Companies had accounts receivable
from the joint venture in Japan totalling approximately $100,000.
10. RELATED--PARTY TRANSACTIONS
During 1994, management fees aggregating $236,000 were paid to FHLP. As of
December 31, 1994, $50,000 in unpaid management fees due to FHLP are included
in accounts payable.
In 1994, the Predecessor Companies acquired computer equipment from FHLP
(and one of its wholly-owned subsidiaries) for an aggregate purchase price of
$100,000. As of December 31, 1994, the entire $100,000 was included in
accounts payable.
During 1994, a note in the amount of $458,000 from FHLP was repaid with
interest of approximately $21,000.
For the period January 1 to December 15, 1993 the Predecessor Companies paid
to NYNEX a management fee of approximately $131,000. It was NYNEX's policy to
charge a management fee on the basis of annual sales regardless of the amount
of corporate services utilized by the Predecessor Companies.
11. GEOGRAPHIC MARKETS
The Predecessor Companies operate in one business segment and in the
geographical markets indicated in the table below. Revenues from continuing
operations are reflected in the market from which the sales are made. The
Other International market includes France, Italy and Germany.
PREDECESSOR COMPANIES (NYNEX)
JANUARY 1 TO DECEMBER 15, 1993
<TABLE>
<CAPTION>
NORTH UNITED OTHER
AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL
------- --------- ------- ------------- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Total revenues............ $4,209 $4,245 $1,275 $2,249 $11,978
Transfers between areas... (118) (8) (48) (433) (607)
------ ------ ------ ------ -------
Unaffiliated revenues..... 4,091 4,237 1,227 1,816 11,371
====== ====== ====== ====== =======
Income (loss) from opera-
tions...................... (1,625) 116 (1,390) (353) (3,252)
Total assets................ 6,318 1,628 2,585 2,015 12,546
</TABLE>
F-32
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
PREDECESSOR COMPANIES (FHLP)
DECEMBER 16, 1993 TO DECEMBER 31, 1993
<TABLE>
<CAPTION>
NORTH UNITED OTHER
AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL
------- --------- ------- ------------- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Total revenues............. $ 36 $ 187 $ 37 $ 90 $ 350
Transfers between areas.... (6) -- -- (15) (21)
------ ------ ------ ------ -------
Unaffiliated revenues...... 30 187 37 75 329
====== ====== ====== ====== =======
Income from operations....... (345) (12) (71) (37) (465)
Total assets................. 8,977 1,500 1,077 1,425 12,979
JANUARY 1, 1994 TO DECEMBER 31, 1994
Revenues:
Total revenues............. $4,722 $4,534 $1,831 $1,969 $13,056
Transfers between areas.... (61) -- (101) (194) (356)
------ ------ ------ ------ -------
Unaffiliated revenues...... 4,661 4,534 1,730 1,775 12,700
====== ====== ====== ====== =======
Income from operations....... (3,577) (406) (1,569) (685) (6,237)
Total assets................. 4,377 1,007 1,877 1,340 8,601
JANUARY 1, 1995 TO APRIL 5, 1995
Revenues:
Total revenues............. $1,113 $1,121 $499 $586 $3,319
Transfers between areas.... -- -- (19) (63) (82)
------ ------ ------ ------ -------
Unaffiliated revenues...... 1,113 1,121 480 523 3,237
====== ====== ====== ====== =======
Income from operations....... (537) 51 (22) (176) (684)
Total assets................. 5,684 1,340 1,747 1,660 10,431
</TABLE>
12. DISCONTINUED OPERATIONS
On June 25, 1996, Giga decided to discontinue the BIS Market Research
Business. The results of these operations have been classified as discontinued
operations and the financial statements have been restated to reflect the
discontinuance. The net liabilities of the BIS business have been segregated in
the consolidated balance sheet and as of December 31, 1994, consisted primarily
of deferred revenue ($7,002,000), accounts receivable ($3,763,000) and goodwill
($2,222,000). The operating results of the business are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO
DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5,
1993 1993 1994 1995
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues................ $14,204 $635 $15,608 $3,994
Pre-tax income (loss)... 2,037 44 (343) 876
Provision for income
taxes.................. 993 -- 1,126 279
Net income (loss)....... 1,044 44 (1,469) 597
</TABLE>
F-33
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 22
Management............................................................... 33
Certain Transactions..................................................... 41
Principal Stockholders................................................... 44
Description of Capital Stock............................................. 46
Shares Eligible for Future Sale.......................................... 49
Underwriting............................................................. 51
Legal Matters............................................................ 52
Experts.................................................................. 52
Additional Information................................................... 53
Index to Consolidated Financial Statements............................... F-1
</TABLE>
------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN AD-
DITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,000,000 SHARES
[LOGO]
COMMON STOCK
------------------
PROSPECTUS
, 1996
------------------
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
SALOMON BROTHERS INC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $ 17,449
NASD Filing Fee............................................... 5,560
Nasdaq Listing Fee............................................ 50,000
Blue Sky Fees and Expenses.................................... 25,000
Transfer Agent and Registrar Fees............................. 48,000
Accounting Fees and Expenses.................................. 100,000
Legal Fees and Expenses....................................... 350,000
Printing, Engraving and Mailing Expenses...................... 125,000
Premium for directors and officers insurance.................. 200,000
Miscellaneous................................................. 78,991
----------
Total..................................................... $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eight of the Registrant's Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") provides that no director of the
Registrant shall be personally liable for any monetary damages for any breach
of fiduciary duty as a director, except to the extent that the Delaware
General Corporation Law prohibits the elimination or limitation of liability
of directors for breach of fiduciary duty.
Article Eight of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right
of the Registrant) brought against him by virtue of his position as a director
or officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the Registrant, except that no indemnification shall be made with respect
to any matter as to which such person shall have been adjudged to be liable to
the Registrant, unless a court determines that, despite such adjudication but
in view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent
to the right of indemnification, the director or
II-1
<PAGE>
officer must give the Registrant notice of the action for which indemnity is
sought and the Registrant has the right to participate in such action or assume
the defense thereof.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.
The Board of Directors on April 26, 1996 approved, in accordance with Section
145 of Delaware General Corporation Law, a Directors and Officers
Indemnification Agreement to be entered into between the Registrant and each of
Registrant's directors and officers. Pursuant to the terms of the agreement,
the Registrant agrees to hold any director or officer harmless against any and
all expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such director or officer in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Registrant), to which the director or officer becomes a party at
any time or is threatened to be made a party, by reason of the fact that the
director or officer is a director, officer, employee or agent of the
Registrant, or serves at the request of the Registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; and otherwise to the fullest extent
as may be provided to the director or officer by the Registrant under the non-
exclusivity provisions of Article V of the Bylaws of the Registrant and the
Delaware General Corporation Law. The agreement also obligates the Registrant
under certain circumstances to advance amounts and contribute to any amounts
paid out by a director or officer as a result of his or her role as a director
or officer of the Registrant in cases where indemnification by the Registrant
is not available. This agreement is also intended to indemnify special advisors
of the Registrant.
Under Section Eight of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number of
shares of capital stock and other securities issued by the Registrant since the
Registrant's inception in March 1995. Further included is the consideration, if
any, received by the Registrant for such shares of capital stock and other
securities and information relating to the section of the Securities Act, or
rule of the Commission under which exemption from registration was claimed. All
awards of options did not involve any sale under the Securities Act and none of
these securities was registered under the Securities Act.
1. Since March 1995, the Registrant has issued options to purchase an
aggregate of 3,627,473 shares of Common Stock at a weighted average
exercise price of $0.61 per share. During this same time period, the
Registrant has issued a total of 3,933 shares of Common Stock pursuant to
the exercise of options previously granted.
2. In March 1995, the Registrant sold to its Chairman of the Board of
Directors and Chief Executive Officer 4,200,000 shares of Common Stock at a
purchase price of $0.02375 per share.
3. In April 1995, the Registrant issued to Friday Holdings, L.P. a 5%
$1.0 million principal amount Convertible Promissory Note in connection
with the Registrant's acquisition of BIS Strategic Decisions, Inc. and its
five foreign affiliates.
II-2
<PAGE>
4. In July 1995 and October 1995, the Registrant issued and sold an
aggregate of 410,000 shares of Series A Convertible Preferred Stock, $.001
par value ("Series A Preferred Stock") (1,640,000 shares on an as-converted
basis) to a group of investors, including certain employees and directors,
at a purchase price of $5.00 per share ($1.25 per share on as-converted
basis).
5. In July 1995, the Registrant issued 160,000 shares of Series A
Preferred Stock (640,000 on an as-converted basis) to its Chairman of the
Board of Directors and Chief Executive Officer and to its Senior Vice
President, Research & Technology in connection with the Registrant's
acquisition of a majority of the shares of ExperNet Corporation
("ExperNet") and in December 1995, the Registrant issued to its Senior Vice
President, Research & Technology, in connection with the Registrant's
acquisition of the remaining shares of ExperNet, a 6% $400,000 Convertible
Promissory Note.
6. In October 1995, the Registrant issued 2,080,000 shares of Common
Stock to a group of employees, consultants and directors at a purchase
price of $0.50 per share.
7. In November 1995 and February 1996, the Registrant issued and sold an
aggregate of 5,272,215 shares of Series B Convertible Preferred Stock,
$.001 par value ("Series B Preferred Stock") to a group of investors at a
purchase price of $3.50 per share.
8. In August 1995, the Registrant issued a warrant to purchase 285,714
shares of Series B Preferred Stock to an investor at an exercise price of
$2.345 per share.
9. In February 1996, the Registrant issued a warrant to purchase 107,876
shares of Series B Preferred Stock to Montgomery Securities in
consideration for certain placement agent services at an exercise price of
$4.5625 per share.
10. In August 1996, the Registrant issued 25,000 shares of Common Stock
to an employee in connection with the acquisition of his business.
Other than Montgomery Securities which served as placement agent in
connection with the November 1995 and February 1996 sales by the Registrant of
shares of its Series B Preferred Stock, no underwriters were engaged in
connection with any of the foregoing sales of securities. Montgomery
Securities was paid a placement agent fee of $695,105 and received a warrant
to purchase 107,876 shares of Series B Preferred Stock, exercisable at a price
of $4.5625 per share, in connection with its services as placement agent for
the sale of shares of the Registrant's Series B Preferred Stock.
The shares of capital stock and other securities issued in the above
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act or Regulation D or Rule
701 promulgated under the Securities Act, relative to sales by an issuer not
involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended to date.
3.2 Form of Restated Certificate of Incorporation of the Registrant (to be
filed with the State of Delaware upon the closing of the Offering to
which this Registration Statement relates).
3.3 By-Laws of the Registrant.
3.4 Form of Restated Bylaws of the Registrant (to become effective upon
the closing of the Offering to which this Registration Statement
relates).
4.1 Specimen Certificate for shares of Common Stock, $.001 par value, of
the Registrant.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
5* Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
10.1 Stock Purchase Agreement dated July 6, 1995, as amended, between the
Registrant and David L. Gilmour.
10.2 Series A Preferred Stock Purchase Agreement dated July 6, 1996 between
the Registrant and the investors named on Schedule I thereto.
10.3 Series B Preferred Stock Purchase Agreement dated November 13, 1995,
as amended, between the Registrant and the investors named on Exhibit
A thereto.
10.4 Convertible Note and Warrant Purchase Agreement dated August 1995
between the Registrant and RRE Giga Investors, L.P.
10.5 Series B Preferred Stock Purchase Warrant dated August 1995 registered
in the name of RRE Giga, L.P.
10.6 Registration Rights Agreement dated November 13, 1995 among the
Registrant, the investors named on Exhibit A thereto, Gideon I.
Gartner and David L. Gilmour.
10.7 Co-Sale and Stock Restriction Agreement dated November 13, 1995 among
the Registrant, Gideon I. Gartner and the stockholders named on the
signature pages thereto.
10.8* Series B Preferred Stock Purchase Warrant dated February 28, 1996
registered in the name of Montgomery Securities.
10.9 Registrant's 5% $1.0 Million Convertible Promissory Note dated April
5, 1995 naming Friday Holdings, L.P. as payee.
10.10 Registrant's 6% $400,000 Convertible Promissory Note dated December
31, 1995 naming David L. Gilmour as payee.
10.11 Employment Agreement dated February 1, 1996 between the Registrant and
Leander R. Jennings, Jr.
10.12 Employment Agreement dated December 1, 1995 between the Registrant and
Kenneth E. Marshall.
10.13 Employment Agreement dated July 6, 1995 between the Registrant and
David L. Gilmour.
10.14 Non-competition Agreement dated November 13, 1995 between the
Registrant and Gideon I. Gartner.
10.15 Consulting Agreement dated January 1, 1996 between the Registrant and
Neill H. Brownstein Corporation.
10.16 Promissory Note dated December 1, 1995 naming the Registrant as payee
issued by Kenneth E. Marshall.
10.17 Letter Agreement dated July 12, 1996 between the Registrant and
Richard L. Crandall.
10.18 Lease dated October 31, 1995 between the Registrant and Cambridge 1400
Limited Partnership.
10.19 Lease dated October 6, 1987, as amended, between BIS Strategic
Decisions, Inc. and Charles A. Pesko, Jr., as Trustee of Longwater
Circle Trust.
10.20+ Content Distribution Agreement dated May 21, 1996 between the
Registrant and Dow Jones and Company, Inc.
10.21+ Agreement dated August 1, 1996 between the Registrant and Peripheral
Insight, Inc.
10.22+ Agreement dated August 15, 1996 between the Registrant and Decision
Analytics, Inc.
11 Calculation of shares used in determining pro forma net loss per
common share.
21 Subsidiaries of the Registrant.
23.1* Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Coopers & Lybrand.
24 Powers of Attorney (included on page II-6).
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All other schedules have been omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Registrant and the laws
of the State of Delaware, or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CAMBRIDGE, COMMONWEALTH OF MASSACHUSETTS, ON THIS 10TH DAY OF SEPTEMBER, 1996.
Giga Information Group, Inc.
/s/ Gideon I. Gartner
By: _________________________________
GIDEON I. GARTNER
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Giga Information Group, Inc.,
hereby severally constitute and appoint Gideon I. Gartner, Kenneth E.
Marshall, Richard B. Goldman and Mark G. Borden, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly, to
sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-1 filed herewith and any and all pre-
effective and post-effective amendments to said Registration Statement (or any
other registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act), and generally
to do all such things in our names and on our behalf in our capacities as
officers and directors to enable Giga Information Group, Inc. to comply with
the provisions of the Securities Act of 1933, as amended, and all requirements
of the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to
said Registration Statement and any and all amendments thereto.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Gideon I. Gartner Chairman of the September 10,
- ------------------------------------- Board of Directors 1996
GIDEON I. GARTNER and Chief Executive
Officer (Principal
Executive Officer)
/s/ Kenneth E. Marshall President and Chief September 10,
- ------------------------------------- Operating Officer; 1996
KENNETH E. MARSHALL Director
/s/ Richard B. Goldman Senior Vice September 10,
- ------------------------------------- President, Chief 1996
RICHARD B. GOLDMAN Financial Officer;
Treasurer;
Secretary
(Principal
Financial and
Accounting Officer)
II-6
<PAGE>
SIGNATURE TITLE DATE
/s/ David L. Gilmour Senior Vice September 10,
- ------------------------------------- President, Research 1996
DAVID L. GILMOUR & Technology;
Director
/s/ Neill H. Brownstein Director September 10,
- ------------------------------------- 1996
NEILL H. BROWNSTEIN
/s/ Richard L. Crandall Director September 10,
- ------------------------------------- 1996
RICHARD L. CRANDALL
/s/ Irwin Lieber Director September 10,
- ------------------------------------- 1996
IRWIN LIEBER
/s/ James D. Robinson III Director September 10,
- ------------------------------------- 1996
JAMES D. ROBINSON III
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant, as amended to date.
3.2 Form of Restated Certificate of Incorporation of the Registrant
(to be filed with the State of Delaware upon the closing of the
Offering to which this Registration Statement relates).
3.3 By-Laws of the Registrant.
3.4 Form of Restated Bylaws of the Registrant (to become effective
upon the closing of the Offering to which this Registration
Statement relates).
4.1 Specimen Certificate for shares of Common Stock, $.001 par
value, of the Registrant.
5* Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
10.1 Stock Purchase Agreement dated July 6, 1995, as amended,
between the Registrant and David L. Gilmour.
10.2 Series A Preferred Stock Purchase Agreement dated July 6, 1996
between the Registrant and the investors named on Schedule I
thereto.
10.3 Series B Preferred Stock Purchase Agreement dated November 13,
1995, as amended, between the Registrant and the investors
named on Exhibit A thereto.
10.4 Convertible Note and Warrant Purchase Agreement dated August
1995 between the Registrant and RRE Giga Investors, L.P.
10.5 Series B Preferred Stock Purchase Warrant dated August 1995
registered in the name of RRE Giga, L.P.
10.6 Registration Rights Agreement dated November 13, 1995 among the
Registrant, the investors named on Exhibit A thereto, Gideon I.
Gartner and David L. Gilmour.
10.7 Co-Sale and Stock Restriction Agreement dated November 13, 1995
among the Registrant, Gideon I. Gartner and the stockholders
named on the signature pages thereto.
10.8* Series B Preferred Stock Purchase Warrant dated February 28,
1996 registered in the name of Montgomery Securities.
10.9 Registrant's 5% $1.0 Million Convertible Promissory Note dated
April 5, 1995 naming Friday Holdings, L.P. as payee.
10.10 Registrant's 6% $400,000 Convertible Promissory Note dated
December 31, 1995 naming David L. Gilmour as payee.
10.11 Employment Agreement dated February 1, 1996 between the
Registrant and Leander R. Jennings, Jr.
10.12 Employment Agreement dated December 1, 1995 between the
Registrant and Kenneth E. Marshall.
10.13 Employment Agreement dated July 6, 1995 between the Registrant
and David L. Gilmour.
10.14 Non-competition Agreement dated November 13, 1995 between the
Registrant and Gideon I. Gartner.
10.15 Consulting Agreement dated January 1, 1996 between the
Registrant and Neill H. Brownstein Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.16 Promissory Note dated December 1, 1995 naming the Registrant as
payee issued by Kenneth E. Marshall.
10.17 Letter Agreement dated July 12, 1996 between the Registrant and
Richard L. Crandall.
10.18 Lease dated October 31, 1995 between the Registrant and
Cambridge 1400 Limited Partnership.
10.19 Lease dated October 6, 1987, as amended, between BIS Strategic
Decisions, Inc. and Charles A. Pesko, Jr., as Trustee of
Longwater Circle Trust.
10.20+ Content Distribution Agreement dated May 21, 1996 between the
Registrant and Dow Jones and Company, Inc.
10.21+ Agreement dated August 1, 1996 between the Registrant and
Peripheral Insight, Inc.
10.22+ Agreement dated August 15, 1996 between the Registrant and
Decision Analytics, Inc.
11 Calculation of shares used in determining pro forma net loss
per common share.
21 Subsidiaries of the Registrant.
23.1* Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Coopers & Lybrand.
24 Powers of Attorney (included on page II-6).
27 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
GIGA INFORMATION GROUP, INC.
Giga Information Group, Inc., a corporation organized and existing under
the laws of the State of Delaware, does hereby certify that:
1. The name of the corporation is Giga Information Group, Inc. Giga
Information Group, Inc. was originally incorporated under the name Giga
Strategic Decisions, inc. and the original Certificate of Incorporation was
filed with the Secretary of the State of Delaware on March 17, 1995.
2. Pursuant to Sections 242 and 228 of the General Corporation Law of the
State of Delaware, this Amended and Restated Certificate of Incorporation has
been duly approved by the Board of Directors and stockholders of Giga
Information Group, Inc.
3. Pursuant to Section 245 of the General Corporation Law of the State of
Delaware, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation as previously filed.
4. The text of the Certificate of Incorporation is hereby restated and
further amended to read in its entirety as follows:
ARTICLE I
The name of this corporation is Giga Information Group, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE III
This corporation is authorized to issue two classes of shares designated
"Common Stock", respectively. The total number of shares which this corporation
shall have authority to issue is Thirty-eight Million (38,000,000), with a par
value of $.001 per share. The number of shares of Preferred Stock authorized to
be issued is Twenty-eight Million (28,000,000) and the number of shares of
Preferred Stock authorized to be issued is Ten Million (10,000,000), of which
Six Hundred and Fifty Thousand (650,000) shares shall be designated as "Series A
Preferred Stock", and Six Million Five Hundred Thousand (6,500,000) shares shall
be designated as "Series B Preferred Stock", having the rights, preferences,
privileges and restrictions set forth
<PAGE>
herein.
Subject to Section 6 of Article IV A hereof, the Board of Directors of the
corporation (the "Board of Directors") is expressly authorized to provide for
the issue of all or any of the remaining shares of the Preferred Stock in one or
more series, and to fix the number of shares and to determine or alter for each
such series, such voting powers, full or limited, or no voting powers, and such
designations, preferences, and relative, participating, optional or other rights
and such qualifications, limitations, or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such shares and as may be permitted by the
General Corporation Law of the State of Delaware. Subject to Section 6 of
Article IV A hereof, the Board of Directors is also expressly authorized to
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series, other than the Series A
Preferred Stock and Series B Preferred Stock, subsequent to the issue of shares
of the series. In case the number of shares of any such series shall be so
decreased, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE IV
A. Preferred Stock.
----------------
The rights, preferences, privileges and restrictions granted to or imposed
upon the Series A Preferred Stock and Series B Preferred stock are as follows:
1. Definitions. For purposes of this Article IV, the following
------------
definitions shall apply:
(a) "Board" shall mean the Board of Directors of the corporation.
(b) "Company" shall mean this corporation.
(c) "Common Stock" shall mean the Common Stock, $.001 par value, of the
Corporation.
(d) "Original Issue Date" shall mean the effective date of the initial
sale of each Series of Preferred Stock issued by the corporation.
(e) "Original Series A Purchase Price" shall mean $5.00 per share.
(f) "Original Series B Purchase Price" shall mean $3.50 per share.
(g) "Preferred Stock" shall mean, unless otherwise specified in this
2
<PAGE>
Amended and Restated Certificate of Incorporation, ratably both the Series A
Preferred Stock and the Series B Preferred Stock.
(h) "Series A Preferred Stock" shall mean the Series A Preferred Stock,
$.001 par value, of the Company.
(i) "Series B Preferred Stock" shall mean the Series B Preferred Stock,
$.001 par value, of the Company.
(j) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding voting stock is at the time owned directly or
indirectly by the corporation or by one or more other Subsidiaries.
2. Voting Rights. Except as otherwise required by law or provided by this
--------------
Amended and Restated Certificate of Incorporation, the holders of Preferred
Stock will be entitled to notice of any meeting of stockholders of the
corporation and to vote upon any matter submitted to stockholders or a class of
stockholders of the corporation on the basis that each holder of shares of
Preferred Stock will have the right to the number of votes equal to the number
of shares of Common Stock into which such shares determined on an aggregate
conversion basis being rounded to the nearest whole share). With respect to
such vote, each such holder shall have full voting rights and powers equal to
the voting rights and powers of the holders of Common Stock.
3. Dividends. The holders of the Series A Preferred Stock and Series B
----------
Preferred Stock shall be entitled to receive dividends from legally available
funds when and if declared by the Company's Board of Directors. In the event
this corporation shall declare a distribution (other than distributions payable
solely in shares of Common Stock) payable in cash, securities of other persons,
evidences of indebtedness issued by this corporation or other personal assets or
options or rights to purchase any such securities or evidences of indebtedness,
then, in each such case the holders of the Preferred Stock shall be entitled to
a proportionate share of any such distribution as though the holders of the
Preferred Stock were the holders of the number of shares of Common Stock of the
corporation into which their respective shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution. The
holders of Preferred Stock which may hereinafter be issued in compliance with
Section 6.
4. Liquidation Preference.
----------------------
(a) In the event of the liquidation, dissolution or winding up of the
corporation, either voluntarily or involuntarily, the holders of the Series A
Preferred Stock and Series B Preferred Stock will be entitled to receive out of
the assets of the
3
<PAGE>
corporation, prior and in preference to any distribution of any of the assets or
surplus ends of the corporation to the holders of the Common Stock by reason of
their ownership thereof, but after payment of any liquidation preference which
may hereafter be provided for any other series of Preferred Stock issued in
accordance with Section 6, an amount equal to the greater of (1) the Original
Series A Purchase Price for each outstanding shares of Series A Preferred Stock
and the Original Series B Purchase Price for each outstanding shares of Series B
Preferred Stock then held by them (as appropriately adjusted for stock splits
and combinations), plus all declared and unpaid dividends with respect thereto,
or (ii) such amount per share as would have been payable had each such share
been converted to Common Stock pursuant to paragraph 5 immediately prior to such
liquidation, dissolution and winding up, and the holders of Series A Preferred
Stock A and Series B Preferred Stock shall not be entitled to any further
payment. If upon the occurrence of an event referred to in the preceding
sentence the assets and funds thus distributed among the holders of the
Preferred Stock are insufficient to permit the payment to such holders of the
full preferential amount for each such series, then the entire assets and funds
of the corporation legally available for distribution will be distributed
ratably among the holders of the Preferred Stock of the full preferential
amounts referred to above, the holders of Series A Preferred Stock and Series B
Preferred Stock shall not participate with the Common Stock in any further
distributions.
(b) Unless otherwise agreed to by the holders of not less than a majority
of the Preferred Stock then outstanding, voting together as a single class, a
merger of this corporation with or into any other corporation or corporations,
or a sale, transfer or lease (other than a pledge or grant of a security
interest to a bona fide lender) of all or substantially all of the assets of
this corporation shall be deemed to be a liquidation, dissolution or winding up
for purposes of this subsection b, unless the stockholders of this corporation
immediately prior to such transaction own more than fifty (50) percent of the
voting power of the surviving entity held by holders of the capital stock of
this corporation acquired by means other than the exchange or conversion of the
capital stock of this corporation shall not be used in determining if the
stockholders of this corporation own more than fifty (50) percent of the voting
power of the surviving entity (or its parent), but shall be used for determining
the total outstanding voting power of the surviving entity).
(c) The corporation shall give each holder of record of Series A Preferred
Stock and Series B Preferred Stock written notice of an impending transaction
described in subsection 4(a) or 4(b) not later than fifteen (15) days prior to
the stockholders' meeting called to approve such transaction, or fifteen (15)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the corporation shall thereafter give such holders
prompt notice of any material changes. The transaction shall in no event take
place sooner than fifteen (15) days after the
4
<PAGE>
corporation has given the first notice provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of
the Series A Preferred Stock and Series B Preferred Stock which are entitled to
such notice rights or similar notice rights and which represents at least a
majority of the voting power of all then outstanding shares of such Series A
Preferred Stock and Series B Preferred Stock each voting together as a single
class.
(d) Whenever the distribution provided for in this Section 4 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the Board of
Directors.
5. Conversion Rights.
------------------
(a) Right to Convert. The holders of the Series A Preferred Stock and the
----------------
holders of the Series B Preferred Stock shall have conversion rights as follows:
(i) Optional Conversion. Each share of Series A Preferred Stock and Series
-------------------
B Preferred Stock will be convertible, at the option of the holder thereof, at
the office of the corporation or any transfer agent for the Preferred Stock,
into Common Stock. The number of shares of Common Stock into which each share
of Preferred Stock will be converted will equal the Original Series A Purchase
Price in the case of the Series A Preferred Stock or Original Series B Purchase
Price, in the case of the Series B Preferred Stock, divided by the Conversion
Price (as hereafter defined), such conversion ration being referred to hereafter
as the "Conversion Rate" for such series. The initial Conversion Price for
shares of Series A Preferred Stock and Series B Preferred Stock shall be $5.00
per share and $3.50 per share, respectively; provided, however, that such
Conversion Prices shall be subject to adjustment as set forth in subsection
5(c), (d) and (c). Upon any decrease or increase of the Conversion Price or the
Conversion Rate for the Preferred Stock as described in this Section 5, the
Conversion Rate or Conversion Price, as the case may be, for the Preferred Stock
will be increased or decreased proportionately.
(ii) Automatic Conversion. Each share of Series A Preferred Stock and
--------------------
Series B Preferred Stock will be converted automatically into shares of Common
Stock at the then effective Conversion Rate upon the earlier to occur of (A) the
approval by the holders of at least two-thirds (2/3) of the then outstanding
shares of Series A or Series B Preferred Stock, respectively, or (B) immediately
prior to the closing of a firmly underwritten public offering pursuant to a
registration statement (other than a registration statement relating either to
the sale of securities to employees of the corporation pursuant to a stock
option, stock purchase or similar plan or a transaction pursuant to Rule 145
under the Securities Act of 1933, as amended (the "Act")) under the Act covering
the corporation's Common Stock, which results in aggregate cash proceeds (prior
to underwriters' commissions and expenses)
5
<PAGE>
to the corporation and any selling stockholders of at least $15,000,00 and which
has a public offering price of not less than $5.25 per share (as adjusted for
any stock split, stock dividend, subdivision or combination of the Common
Stock).
(b) Mechanics of Conversion. Before any holder of Preferred Stock will be
-----------------------
entitled to covert the same into shares of Common Stock, such holder will
surrender the certificate or certificates therefor, duly endorsed, at the office
of the corporation or of any transfer agent for the Preferred Stock, and such
holder will give written notice to the corporation stating the name or names in
which he wishes the certificate or certificates for shares of Common Stock to be
issued. The corporation, as soon as practicable thereafter, will issue and
deliver at such office to such holder or to his nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which he
will be entitled as aforesaid. Such conversion will be deemed to have been made
immediately prior to the close of business on the date of notice of conversion
provided by the holder to the corporation, and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion will be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
(c) Adjustment for Subdivisions or Combinations of Common Stock. In the
-----------------------------------------------------------
event the corporation at any time or from time to time after the Series A
Original Issue Date effects a subdivision or combination of its outstanding
Common Stock into a greater or lesser number of shares without a proportionate
and corresponding subdivision or combination of its outstanding shares of the
Series A Preferred Stock then the Conversion Price of the Series A Preferred
Stock shall be decreased or increased, as applicable, so that the number of
shares into which each share of the Series A Preferred Stock is convertible will
be decreased or increased proportionately.
In the event the corporation at any time or from time to time after the
Series B Original Issue Date effects a subdivision or combination of its
outstanding Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of its outstanding
shares of the Series B Preferred Stock, then the Conversion Price of the Series
B Preferred Stock shall be decreased or increased, as applicable, so that the
number of shares into which each share of the Series B Preferred Stock is
convertible will be decreased or increased proportionately.
(d) Adjustment for Dividends, Distributions and Common Stock Equivalents.
--------------------------------------------------------------------
In the event the corporation at any time or from time to time after the Original
Issue Date for any series of Preferred Stock makes or issues, or fixes a record
date for the determination of holders of Common Stock (but not holders of the
Preferred Stock) entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights (hereinafter
referred
6
<PAGE>
to as "Common Stock Equivalents") convertible into or entitling the holder
thereof to receive additional shares of Common Stock without payment of any
consideration by such holder for such Common Stock Equivalents or the additional
shares of Common Stock, for the purpose of protecting the holders of the
Preferred Stock from any dilution in connection therewith, then and in each such
event the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable in payment of such dividend
or distribution or upon conversion or exercise of such Common Stock Equivalents
will be deemed to be issued and outstanding as of the time of such issuance or,
in the event such a record date has been fixed, as of the close of business on
such record date. In each such event the then existing Conversion Rate for each
series of the Series A Preferred Stock and Series B Preferred Stock will be
increased as of the time of such issuance or, in the event such a record date
has been fixed, as of the close of business on such record date, by multiplying
the Conversion Rate for such series of Preferred Stock by a fraction.
(i) the numerator of which will be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution or upon conversion or
exercise of such Common Stock Equivalents; and
(ii) the denominator of which will be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date; provided, however, (A) if such record
date has been fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Conversion Rate for such
series of Preferred Stock will be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Rate for such series
of Preferred Stock will be adjusted pursuant to this Section 5(d) as of the time
of actual payment of such dividends or distribution; (B) if such Common Stock
Equivalents provide, with the passage of time or otherwise, for any decreased in
the number of shares of Common Stock issuable upon conversion or exercise
thereof, the Conversion Rate for such series shall, upon any such decreased
becoming effective, be recomputed to reflect such decrease insofar as it affects
the rights of conversion or exercise of the Common Stock Equivalents then
outstanding, and (C) upon the expiration of any conversion rights or exercise
under any unexercised Common Stock Equivalents, the Conversion Rate for such
series computed upon the original issue thereof shall, upon such expiration, be
recomputed as if the only additional shares of Common Stock issued were the
shares of such stock, if any, actually issued upon the conversion or exercise of
such Common Stock Equivalents.
(e) Adjustment for Sale of Shares. If at any time after the Original
-----------------------------
7
<PAGE>
Issue Date for the Series A Preferred Stock or the Series B Preferred Stock the
corporation issues or sells any Additional Stock for a consideration per share
less than the Conversion Price for such series of Preferred Stock , then and in
each such case, the Conversion Price for such series of Preferred Stock will be
reduced to a price (calculated to the nearest cent) determined by multiplying
such applicable Conversion Price by a fraction (1) the numerator of which will
be the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of shares of Common Stock which the aggregate
consideration received by the corporation for such issue would purchase at such
applicable Conversion Price, and (2) the denominator of which will be the number
of shares of Common Stock outstanding immediately after the Additional Stock is
issued or sold; provided, however, that such fraction will in no event be
greater than one (1). Notwithstanding the foregoing, if after the Original
Issue Date for the Series B Preferred Stock and prior to the earlier of (a)
November 6, 1997 and (b) the consummation by the corporation of a sale or series
of related sales of any series or class of its Preferred Stock or Common Stock
at a price per share of not less than $4.00 and for aggregate proceeds to the
corporation of at least Six Million Five Hundred Thousand Dollars ($6,500,000),
the corporation issues or sells any Additional Stock for a consideration per
share less than the Conversion Price for the Series B Preferred Stock will not
be adjusted pursuant to the preceding sentence, but instead will be reduced to a
price (calculated to the nearest cent) equal to the consideration per share
received by the corporation for such Additional Stock, For purposes of this
Section 5(e), the shares of Common Stock issuable upon conversion of any Series
A Preferred Stock or Series B Preferred Stock and upon exercise or conversion of
all warrants, options or other securities exercisable or exchangeable for, or
convertible into, Common Stock, will be deemed to be outstanding on the Original
Issue Date for such Preferred Stock.
"Additional Stock" shall mean any shares of Common Stock issued (or deemed
to have been issued as provided herein) by this corporation after the Original
Issue Date for the Series B Preferred Stock other than:
(i) the issuance (or deemed issuance) of up to Five Million (5,000,000)
shares of Common Stock issuable or issued to officer, directors, employees,
advisors and consultants of the corporation, at not less than fair market value
(as determined by the corporation's Board of Directors) pursuant to the
corporation's 1995 Stock Option/Stock Issuance Plan or stock option or purchase
plans approved after the Original Issue Date for the Series B Preferred Stock by
the corporation's Board of Directors (including a majority of the directors who
are not then employees of the corporation nor purchasers or grantees of such
shares or options);
(ii) capital stock or warrants or options to purchase capital stock at not
less than fair market value (as determined by the corporation's Board of
Directors) issued in connection with bona fide acquisitions, licensing
transactions,
8
<PAGE>
mergers or similar transactions which do not violate clause (y) of Section 6, in
which the majority of the value of the consideration received therefor (as
determined by the corporation's Board of Directors) is not cash, and the terms
of which are approved by the Board of Directors of the corporation;
(iii) capital stock or warrants or options to purchase capital stock the
issuance of which is determined to be excluded from the definition of
"Additional Stock" upon the written consent of the holders of a least a majority
of the then outstanding Preferred Stock of any Series as to which such issuance
would otherwise result in an adjustment to the Conversion Price as provided
above (without any requirement of an amendment to these Amended and Restated
Certificate of Incorporation);
(iv) shares of Common Stock issued or issuable upon conversion of Preferred
Stock;
(v) shares of Common Stock issued or issuable in a public offering before
or in connection with which all outstanding shares of Preferred Stock are
converted to Common Stock;
(vi) except for any shares of Common Stock issued or issuable pursuant to
the Corporation's 1995 Stock Option/Stock Incentive Plan, any securities
issuable upon exercise of any options, warrants or rights to purchase any
securities of the Corporation outstanding on the Original Issue Date for the
Series B Preferred Stock ("Warrant Securities") and any securities issuable upon
the conversion of any Warrant Securities or other securities or instruments
outstanding on the Original Issue Date for the Series B Preferred Stock;
(vii) shares of the Corporation's Common Stock or Preferred Stock issued
in connection with any stock split or stock dividend with respect to which the
Conversion Price is adjusted pursuant to Section 5(d); and
(viii) shares of Common Stock issued (or deemed issued) in connection with
the acquisition by the Corporation of capital stock in ExperNet, Inc. in
accordance with the terms of the Stock Purchase Agreement between the
corporation and David Gilmour dated as of July 9, 1995.
For the purpose of making any adjustment in the Conversion Price as
provided above, the consideration received by the corporation for any issue or
sale of Common Stock will be computed:
(x) to the extent it consists of cash, as the amount of cash received by
the corporation before deduction of any offering expenses payable by the
corporation and any underwriting or similar commissions, compensation, or
9
<PAGE>
concessions paid or allowed by the corporation in connection with such issue or
sale;
(y) to the extent it consists of property other than cash, at the fair
market value of that property as determined in good faith by the corporation's
Board of Directors; and
(z) if Common Stock is issued or sold together with other stock or
securities or other assets of the corporation for a consideration which covers
both, as the portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to such
Common Stock.
If the corporation (1) grants any rights or options to subscribe for,
purchase, or otherwise acquire shares of Common Stock, or (2) issues or sells
any security convertible into shares of Common Stock (in either case, other than
rights or options issued to employees, officers, directors and consultants of
the corporation pursuant to paragraph (i) above), then, in each case, the price
per share of Common Stock issuable on the exercise of the rights or options or
the conversion of the securities will be determined by dividing the total
amount, if any, received or receivable by the corporation as consideration for
the granting of the rights or options or the issue or sale for the convertible
securities, plus the minimum aggregate amount of additional consideration
payable to the corporation on exercise or conversion of the securities, by the
maximum number of shares of Common Stock issuable on the exercise or conversion.
Such granting or issue or sale will be considered to be an issue or sale for
cash of the maximum number of shares of Common Stock issuable on exercise or
conversion at the price per share determined under this subsection, and the
Conversion Price for each series of Preferred Stock will be adjusted as and if
above so provided to reflect (on the basis of that determination) the issue or
sale. No further adjustment of the Conversion Price for any series of Preferred
Stock will be made as a result of the actual issuance of shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
convertible securities.
Upon the redemption or repurchase of any such securities or the expiration
or termination of the right to convert into, exchange for, or exercise with
respect to, Common Stock, the Conversion Price for each series of Preferred
Stock for which the Conversion Price had been adjusted upon the issuance of such
securities will be readjusted (giving effect to all provisions hereof and all
issuances after such original issuance) to such price as would have been
obtained had the adjustment made upon their issuance been made upon the basis of
the issuance of only the number of such securities as were actually converted
into, exchanged for, or exercised with respect to, Common Stock. If the
purchase price or conversion or exchange rate provided for in any such security
changes at any time, then, upon such change becoming effective, the Conversion
Price for each series of Preferred Stock for which
10
<PAGE>
it has been adjusted upon the issuance of such securities then in effect will be
readjusted (giving effect to all provisions hereof and all issuances after such
original issuance) forthwith to such price as would have been obtained had the
adjustment made upon the issuance of such securities been made upon the basis of
(1) the issuance of only the number of shares of Common Stock theretofore
actually delivered upon the conversion, exchange or exercise of such securities,
and the total consideration received therefor, and (2) the granting or issuance,
at the time of such change, of any such securities then still outstanding for
the consideration, if any, received by the Company therefor and to be received
on the basis of such changed price or rate.
(f) No Impairment. The corporation, whether by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issuance or sale of securities or any other voluntary
action, will not avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Section 5 by the corporation,
but at all times in good faith will assist in the carrying out of all of such
actions as may be necessary or appropriate in order to protect the conversion
rights pursuant to this Section 5 of the holders of Preferred Stock against
impairment.
(g) Certificate of Adjustments. Upon the occurrence of each adjustment or
--------------------------
readjustment of the Conversion Rate for the Preferred Stock pursuant to this
Section 5, the corporation at its expense promptly will compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of such Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation, upon the written request at any time of
any holder of Preferred Stock, will furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustment and readjustments,
(ii) the Conversion Rate for such Preferred Stock at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the
Preferred Stock held by such holder.
(h) Notices of Record Date. In the event of any taking by the corporation
----------------------
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any Common Stock Equivalents or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, the
corporation will mail to each holder of Preferred Stock at least then (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
rights, and the amount and character of such dividend, distribution or right.
11
<PAGE>
(i) Reservation of Stock Issuable Upon Conversion. The corporation at all
---------------------------------------------
times will reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the shares
of Preferred Stock such number of its shares of Common Stock is not sufficient
to effect the conversion of all then outstanding shares of Preferred Stock; and
if at any time the number of authorized but unissued shares of Common Stock is
not sufficient to effect the conversion of all then outstanding shares of
Preferred Stock, in addition to such other remedies as may be available to the
holders of Preferred Stock for such failure, the corporation will take such
corporate action as, in the opinion of its counsel, may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
will be sufficient for such purpose.
(j) Notices. Any notices required by the provisions of this Section 5 to
-------
be given to the holders of shares of any series of Preferred Stock shall be
given in writing and shall be conclusively deemed effectively given to persons
located in the United States five days after deposit in the United States mail
by registered or certified mail postage prepaid, or upon actual receipt if given
by any other method or to persons located outside of the United States,
addressed to such holder at his address appearing on the books of the
corporation. To persons located outside of the United States, such notice will
be sent by telex or facsimile in cases where the corporation has notice of a
telex or facsimile number of such person.
(k) Recapitalizations. If at any time or from time to time there shall be
-----------------
recapitalization of the Common Stock (other than a subdivision), combination or
merger or sale of assets transaction provided for elsewhere in Section 4 or in
this Section 5), provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of such shares of
such Preferred Stock the number of shares of stock or other securities or
property of the corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of such Preferred Stock would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 5 with respect to the
rights of the holders of the Preferred Stock after the recapitalizations to the
end that the provisions of this Section 5 (including adjustment of the
Conversion Price then in effect and the number of shares issuable upon
conversion of such Preferred Stock) shall be applicable after that event in as
nearly an equivalent manner as may be practicable.
6. Covenants. In addition to any other rights provided by law, so long as
---------
not less than an aggregate of 2,000,000 shares of Series A Preferred Stock and
Series B Preferred Stock are outstanding, the corporation, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, each voting together as a single class, will not:
12
<PAGE>
(a) amend or repeal any provision of, or add any provision to, this
corporation's Certificate of Incorporation if such action would adversely alter
or change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series A Preferred Stock or Series B Preferred
Stock;
(b) increase the number of shares of Series A Preferred Stock or Series B
Preferred Stock authorized hereby;
(c) reclassify any class or series of any Common Stock into shares having
any preference or priority as to dividends or in liquidation over the Series A
Preferred Stock or Series B Preferred Stock;
(d) create any new series of preferred stock having a preference as to
dividends or in liquidation over the Series A Preferred Stock or Series B
Preferred Stock;
(e) apply any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through subsidiaries or otherwise, of any
shares of any class or series of equity securities of the corporation, except
from (i) current or former employees, officers, directors, and consultants of
the corporation under the terms of any stock option or stock purchase plans or
agreements, upon or following termination of employment or association and (ii)
holders of any series of Preferred Stock which may be issued hereafter which has
a liquidation preference senior to that of the Series A Preferred Stock and
Series B Preferred Stock; and
(f) declare or pay any dividend or make any distribution on shares of
Common Stock or any series of Preferred Stock which may be issued hereafter
which is senior in dividend preference to the Series A Preferred Stock and
Series B Preferred Stock.
Notwithstanding the foregoing, if any of the actions referred to in clauses
(a) through (d) would adversely affect the rights, preference, privileges or
powers of either the Series A Preferred Stock or the Series B Preferred Stock in
a different manner than the other such series, then such action shall require
the approval of the holders of a majority of the then outstanding shares of
Series A Preferred Stock voting separately as a class and Series B Preferred
Stock voting separately as a class, and shall not require the approval of
holders of any such series not adversely affect by such action.
In addition to the foregoing and any other rights provided by law, so long
as an aggregate of 2,000,000 shares of Series B Preferred Stock are outstanding,
the corporation shall not without first obtaining the affirmative vote or
written consent of the holders of not less than a majority of the outstanding
shares of Series B Preferred Stock:
13
<PAGE>
(x) sell, convey, or otherwise dispose of or encumber all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation) or effect any
transaction or series of related transaction in which more than 50% of the
voting power of the corporation is transferred.
(y) enter into any transaction with any director or Affiliate (as defined
below) of the Company unless the terms of such transaction are at least as
favorable to the Company than those which might be obtained at the time from
persons who are not Affiliates and, in the case of a single transaction or
series of transactions involving more than $50,000, has been approved by a
written resolution duly adopted prior to such transaction by a majority of the
independent directors. For purposes hereof, an "Affiliate" shall mean a holder
of more than five percent of the existing Common Stock of the Company (on a
fully diluted basis after giving effect to the conversion of any outstanding
convertible Preferred Stock and the exercise of any exercisable warrants and
options) or a member of the Board of Directors of the Company.
(z) incur indebtedness for borrowed money in excess of $7,500,000 at any
one time outstanding (excluding short term or revolving credit borrowings the
proceeds of which are used to finance current assets, to repay current
liabilities or for working capital).
B. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all classes
---------------
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up of
------------------
the corporation, after payment has been made to the holders of Preferred Stock
having prior rights in liquidation, the remaining assets and funds of this
corporation legally available for distribution shall be distributed ratably
among holders of Common Stock.
3. Voting Rights. The holder of each share of Common Stock shall have the
-------------
right to one vote, and shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of this corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
14
<PAGE>
ARTICLE V
The address of the corporation's registered office in the State of Delaware
is National Corporate Research, Ltd., 9 East Loockerman Street, County of Kent,
Dover, 19901. The name of its registered agent at such address is National
Corporate Research, Ltd.,
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE VIII
The number of directors which will constitute the whole Board of Directors
of the Corporation shall be as specified in the Bylaws of the Corporation.
ARTICLE IX
The election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provided.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
ARTICLE XI
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director or otherwise. The
Corporation shall indemnify to the fullest extent permitted by law any person
made or threatened to be
15
<PAGE>
made a party to an action or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that he, his testator or intestate is or
was a director, officer or employee of the Corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation. Neither any amendment nor
repeal of this Article XI, nor the adoption of any provision of this
Certification of Incorporation inconsistent with this Article XI, shall
eliminate or reduce the effect of this Article XI in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article XI,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE XII
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as otherwise provided in this Amended
and Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
The undersigned, being the Vice President-Finance, does make, file and
record this Certificate, hereby declaring, certifying and acknowledging that the
foregoing Amended and Restated Certificate of Incorporation in his act and deed
and that the facts states therein are true, and has accordingly hereunto set his
hand this 28th day of February, 1996.
/s/ Michael J. Kolesar
-----------------------
Michael Kolsear
Attest:
/s/ Tomas C. Tovar
- ------------------
Tomas C. Tovar
Assistant Secretary
16
<PAGE>
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
GIGA INFORMATION GROUP, INC.
Pursuant to Sections 242 and 245
of the General Corporation Law
of the State of Delaware
GIGA INFORMATION GROUP, INC., (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "General Corporation Law"), hereby certifies as follows:
1. The name of the corporation is Giga Information Group, Inc. Giga
Information Group, Inc., was originally incorporated under the name Giga
Strategic Decisions, Inc., and the original Certificate of Incorporation was
filed with the Secretary of State of Delaware on March 17, 1995. An Amended and
Restated Certificate of Incorporation was filed with the Secretary of State of
Delaware on February 28, 1996.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Amended and Restated Certificate of Incorporation of the
Corporation, was duly adopted in accordance with the provisions of Sections 242
and 245 of the General Corporation Law, and was approved by written consent of
the stockholders of the Corporation given in accordance with the provisions of
Section 228 of the General Corporation Law (prompt notice of such action having
been given to those stockholders who did not consent in writing). The
resolution setting forth the Restated Certificate of Incorporation is as
follows:
RESOLVED: That the Amended and Restated Certificate of Incorporation of the
- --------
Corporation, as amended, be and hereby is amended and restated in its entirety
so that the same shall read as follows:
FIRST. The name of this Corporation is:
Giga Information Group, Inc.
SECOND. The address of the Corporation's registered office in the
State of Delaware is National Corporate Research, Ltd., 9 East Loockerman
Street, County of Kent, Dover, 19901. The name of its registered agent at such
address is National Corporate Research, Ltd.
THIRD. The nature of the business or purposes
to be conducted
<PAGE>
or promoted by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is [70,000,000] shares, consisting
of (i) 60,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.001 par value per
share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the
-------
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote
------
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
-----------
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series,
each of
<PAGE>
such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or this Certificate of
Incorporation. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law and this
Certificate of Incorporation. Except as otherwise provided in this Certificate
of Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers
conferred by statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation.
SEVENTH. Except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty, no director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of
law imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to
<PAGE>
any acts or omissions of such director occurring prior to such amendment.
EIGHTH. 1. Action, Suits and Proceedings Other than by or in the
-----------------------------------------------------
Right of the Corporation. The Corporation shall indemnify each person who was
- ------------------------
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) judgment, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---------------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation
<PAGE>
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---------------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to
---------------------------------
his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article.
<PAGE>
The Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6
-------------------
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expense incurred by an Indemnitee in
- -------- -------
advance of the final disposition of such matter shall be made only upon receipt
of an undertaking by or on behalf of the Indemnitee to repay all amounts so
advanced in the event that it shall ultimately be determined that the Indemnitee
is not entitled to be indemnified by the Corporation as authorized in this
Article. Such undertaking may be accepted without reference to the financial
ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
-----------------------------
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made
in each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (c) independent
legal counsel (who may be regular legal counsel to the Corporation), or (d) a
court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
--------
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless
<PAGE>
otherwise provided by law, the burden of proving that the Indemnitee is not
entitled to indemnification or advance of expenses under this Article shall be
on the Corporation. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation pursuant to
Section 6 that the Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee has
not met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal,
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
<PAGE>
11. Insurance. The Corporation may purchase and maintain insurance,
---------
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees) judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of
----------------------
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute and this Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
TENTH. This Article is inserted for the management of the business
and for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors shall be fixed from
-------------------
time to time by, or in the manner provided in, the Corporation's Bylaws.
<PAGE>
2. Classes of Directors. The Board of Directors shall be and is
--------------------
divided into three classes: Class I, Class II and Class III.
3. Election of Directors. Elections of directors need not be by
---------------------
written ballot except as and to the extent provided in the By-Laws of the
Corporation.
4. Terms of Office. Each director shall serve for a term ending on
---------------
the date of the third annual meeting following the annual meeting at which such
director was elected and until his successor is duly elected and qualified;
provided, that each initial director in Class I shall serve for a term ending on
- --------
the date of the annual meeting of stockholders in 1997 and until his successor
is duly elected and qualified; each initial director in Class II shall serve for
a term ending on the date of the annual meeting of stockholders in 1998 and
until his successor is duly elected and qualified; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 1999 and until his successor is duly elected and qualified; and
provided further, that the term of each director shall be subject to his earlier
- ----------------
death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any
-------------------------
time in office shall constitute a quorum for the transaction of business. In
the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the Bylaws of the
Corporation or by this Restated Certificate of Incorporation.
7. Removal. Directors of the Corporation may be removed only for
-------
cause
<PAGE>
by the affirmative vote of the holders of at least two-thirds of the
shares of the capital stock of the Corporation issued and outstanding and
entitled to vote.
8. Vacancies. Any vacancy in the Board of Directors, however
---------
occurring, including a vacancy resulting from an enlargement of the board, shall
be filled only by a vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director elected to fill
a vacancy shall be elected to hold office until the next election of the class
for which such director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc.
----------------------------------------------------------
Advance notice of stockholder nominations for election of directors and other
business to be brought by stockholders before a meeting of stockholders shall be
given in the manner provided by the bylaws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of
---------------------
law, this Restated Certificate of Incorporation or the Bylaws of the
Corporation, each as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least two-thirds of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article TENTH.
ELEVENTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Restated Certificate of Incorporation or the Bylaws of the Corporation,
each as amended, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least two-thirds of
the shares of capital stock of the Corporation issued and outstanding and
entitled to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article ELEVENTH.
TWELFTH. Special meetings of stockholders may be called at any time
by only the Chairman of the Board of Directors, the Chief Executive Officer (or
if there is no Chief Executive Officer, the President) or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Restated Certificate
of Incorporation or the Bylaws of the Corporation, each as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least two-thirds of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article TWELFTH.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be
<PAGE>
affixed hereto and this Restated Certificate of Incorporation to be signed by
its President and Chief Operating Officer this ____ day of ______________, 1996.
GIGA INFORMATION GROUP, INC.
By:______________________________
Kenneth Marshall
President and Chief Operating Officer
<PAGE>
EXHIBIT 3.3
BYLAWS OF
GIGA INFORMATION GROUP, INC.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES.................................................. 5
1.1 REGISTERED OFFICE.................................................... 5
1.2 OTHER OFFICES........................................................ 5
ARTICLE II -- MEETINGS OF STOCKHOLDERS......................................... 5
2.1 PLACE OF MEETINGS.................................................... 5
2.2 ANNUAL MEETING....................................................... 5
2.3 SPECIAL MEETING...................................................... 6
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................... 6
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES............................... 6
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................... 7
2.7 QUORUM............................................................... 7
2.8 ADJOURNED MEETING; NOTICE............................................ 8
2.9 CONDUCT OF BUSINESS.................................................. 8
2.10 VOTING............................................................... 8
2.11 WAIVER OF NOTICE..................................................... 9
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING.............................................................. 9
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS............................................................. 10
2.14 PROXIES.............................................................. 10
ARTICLE III -- DIRECTORS....................................................... 11
3.1 POWERS............................................................... 11
3.2 NUMBER OF DIRECTORS.................................................. 11
3.3 ELECTION, QUALIFICATION AND TERM OF
OFFICE OF DIRECTOR................................................... 11
3.4 RESIGNATION AND VACANCIES............................................ 11
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE............................. 12
3.6 REGULAR MEETINGS..................................................... 13
3.7 SPECIAL MEETINGS; NOTICE............................................. 13
3.8 QUORUM............................................................... 13
3.9 WAIVER OF NOTICE..................................................... 14
3.10 BOARD ACTION BY WRITTEN CONSENT
WITHOUT A MEETING.................................................... 14
3.11 FEES AND COMPENSATION OF DIRECTORS................................... 14
3.12 APPROVAL OF LOANS TO OFFICERS........................................ 14
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.13 REMOVAL OF DIRECTORS................................................. 15
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS................................... 15
ARTICLE IV -- COMMITTEES........................................................ 15
4.1 COMMITTEES OF DIRECTORS.............................................. 15
4.2 COMMITTEE MINUTES.................................................... 16
4.3 MEETINGS AND ACTION OF COMMITTEES.................................... 16
ARTICLE V -- OFFICERS........................................................... 17
5.1 OFFICERS............................................................. 17
5.2 APPOINTMENT OF OFFICERS.............................................. 17
5.3 SUBORDINATE OFFICERS................................................. 17
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................................. 17
5.5 VACANCIES IN OFFICES................................................. 18
5.6 CHIEF EXECUTIVE OFFICER.............................................. 18
5.7 PRESIDENT............................................................ 18
5.8 VICE PRESIDENTS...................................................... 18
5.9 SECRETARY............................................................ 18
5.10 CHIEF FINANCIAL OFFICER.............................................. 19
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................... 19
5.12 AUTHORITY AND DUTIES OF OFFICERS..................................... 20
ARTICLE VI -- INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS................................................ 20
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................ 20
6.2 INDEMNIFICATION OF OTHERS............................................ 20
6.3 INSURANCE............................................................ 21
ARTICLE VII -- RECORDS AND REPORTS.............................................. 21
7.1 MAINTENANCE AND INSPECTION OF RECORDS................................ 21
7.2 INSPECTION BY DIRECTORS.............................................. 21
7.3 ANNUAL STATEMENT TO STOCKHOLDERS..................................... 22
ARTICLE VIII -- GENERAL MATTERS................................................. 22
8.1 CHECKS............................................................... 22
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS..................... 22
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................... 22
8.4 SPECIAL DESIGNATION ON CERTIFICATES.................................. 23
8.5 LOST CERTIFICATES.................................................... 23
8.6 CONSTRUCTION; DEFINITIONS............................................ 24
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
8.7 DIVIDENDS............................................................ 24
8.8 FISCAL YEAR.......................................................... 24
8.9 SEAL................................................................. 24
8.10 TRANSFER OF STOCK.................................................... 24
8.11 STOCK TRANSFER AGREEMENTS............................................ 25
8.12 REGISTERED STOCKHOLDERS.............................................. 25
ARTICLE IX -- AMENDMENTS........................................................ 25
ARTICLE X -- DISSOLUTION........................................................ 25
ARTICLE XI -- CUSTODIAN......................................................... 26
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................... 26
11.2 DUTIES OF CUSTODIAN.................................................. 27
</TABLE>
-iii-
<PAGE>
BYLAWS
OF
GIGA INFORMATION GROUP, INC.
ARTICLE I
CORPORATE OFFICES
------------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
-------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year at such
date, time and place, either within or without the State of Delaware, as may be
designated by resolution of the board of directors from time to time. At the
meeting, directors shall be elected and any other proper business may be
transacted.
<PAGE>
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, the president, the chairman of the board, the president or
by one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the president or the chairman of the board, the request
shall be in writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, the president, any vice president, or the secretary of
the corporation. No business may be transacted at such special meeting otherwise
than specified in such notice. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting
will be held at the time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within twenty (20) days after the
receipt of the request, the person or persons requesting the meeting may give
the notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES
--------------------------------------
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of stockholders by or at the direction of the board of
directors or by any stockholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal
-2-
<PAGE>
executive offices of the corporation not less than sixty (60) days nor more than
ninety (90) days prior to the meeting; provided, however, that in the event that
less than sixty (60) days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (1) the name and address, as they appear on
the corporation's books, of such stockholder and (2) the class and number of
shares of the corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors any person nominated by the Board of
Directors for election as a director shall furnish to the secretary of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 2.5. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if he
or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his or her address as it appears on the records of the
corporation. An affidavit of the secretary or an assistant secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
2.7 QUORUM
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is
-3-
<PAGE>
not present or represented at any meeting of the stockholders, then either (i)
the Chairman of the meeting or (ii) the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 CONDUCT OF BUSINESS
-------------------
The Chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.14 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.10, or as
may be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been properly placed in
nomination (in accordance with these Bylaws) prior to commencement of the voting
and the stockholder requesting cumulative voting has given notice prior to
commencement of the voting of the stockholder's intention to cumulate votes. If
cumulative voting is
-4-
<PAGE>
properly requested, each holder of stock, or of any class or classes or of a
series or series thereof, who elects to cumulate votes shall be entitled to as
many votes as equals the number of votes which (absent this provision as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to his or her shares of stock multiplied by the number of directors
to be elected by him or her, and he or she may cast all of such votes for a
single director or may distribute them among the number to be voted for, or for
any two or more of them, as he or she may see fit.
2.11 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any
action required by this chapter to be taken at any annual or special meeting of
stockholders of the corporation, or any action that may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
-5-
<PAGE>
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
- -----------------
adjourned meeting.
2.14 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact.
-6-
<PAGE>
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Section 212(c) of the General Corporation Law
of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 NUMBER OF DIRECTORS/1/
-------------------
The Board of Directors shall consist of one (1) person until changed
by a proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTOR
------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the
attention of the secretary of the corporation. When one or more directors so
resigns and the
- ----------------------
/1/ AMENDED - SEE CERTIFICATE OF AMENDMENT ATTACHED.
-7-
<PAGE>
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
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Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
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<PAGE>
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
3.12 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this
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section shall be deemed to deny, limit or restrict the powers of guaranty or
warranty of the corporation at common law or under any statute.
3.13 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
--------
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire Board of Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the corporation, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power
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or authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
(ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of
the General Corporation Law of Delaware, (iii) recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the Bylaws of the
corporation; and, unless the board resolution establishing the committee, the
Bylaws or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these Bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those Bylaws as are necessary to substitute
the committee and its members for the Board of Directors and its members;
provided, however, that the time of regular meetings of committees may be
- --------
determined either by resolution of the Board of Directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the Board of Directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these Bylaws.
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ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, the chief executive officer of
the corporation shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the Board of Directors. The chief executive officer shall
have the general powers and duties of management usually vested in the office of
chief executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board or the chief executive officer,
the president shall have general supervision, direction, and control of the
business and other officers of the corporation. The President shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and
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stockholders. The minutes shall show the time and place of each meeting, the
names of those present at directors' meetings or committee meetings, the number
of shares present or represented at stockholders, meetings, and the proceedings
thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. The chief financial
officer shall disburse the funds of the corporation as may be ordered by the
Board of Directors, shall render to the president and directors, whenever they
request it, an account of all his or her transactions as chief financial officer
and of the financial condition of the corporation, and shall have other powers
and perform such other duties as may be prescribed by the Board of Directors or
the Bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any
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<PAGE>
other person authorized to do so by proxy or power of attorney duly executed by
such person having the authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
--------------------------------------
EMPLOYEES AND OTHER AGENTS
--------------------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a
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predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporat1on.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the
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exclusive jurisdiction to determine whether a director is entitled to the
inspection sought. The Court may summarily order the corporation to permit the
director to inspect any and all books and records, the stock ledger, and the
stock list and to make copies or extracts therefrom. The Court may, in its
discretion, prescribe any limitations or conditions with reference to the
inspection, or award such other and further relief as the Court may deem just
and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
----------------
8.1 CHECKS
------
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption
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of such a resolution by the Board of Directors, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by the chairman or vice-chairman of the Board of Directors, or the
chief executive officer or the president or vice president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
------------------
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the
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corporation and cancelled at the same time. The corporation may issue a new
certificate of stock or uncertificated shares in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession,
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assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the Board of Directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder
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entitled to vote thereon of the adoption of the resolution and of a meeting of
stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders are
so divided that they have failed to elect successors to directors whose terms
have expired or would have expired upon qualification of their successors; or
-22-
<PAGE>
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the Board of Directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
-23-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE BYLAWS OF
GIGA INFORMATION GROUP, INC.
The undersigned, being the Secretary of Giga Information Group, Inc., a
Delaware corporation, hereby certifies that the stockholders and the sole
director of the corporation approved the following amendment to the Bylaws of
the corporation, effective as of June 23, 1995 and June 26, 1995, respectively:
"3.2 NUMBER OF DIRECTORS
-------------------
The Board of Directors shall consist of three (3) persons until changed by
a proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires."
Date: July 6, 1995
/s/ Craig W. Johnson
---------------------------
Craig W. Johnson, Secretary
-24-
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
GIGA INFORMATION GROUP, INC.
<PAGE>
<TABLE>
<CAPTION>
AMENDED AND RESTATED BYLAWS
---------------------------
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE 1 - Stockholders 1
Section 1.1 Place of Meetings 1
Section 1.2 Annual Meeting 1
Section 1.3 Special Meetings 1
Section 1.4 Notice of Meetings 1
Section 1.5 Voting List 2
Section 1.6 Quorum 2
Section 1.7 Adjournments 2
Section 1.8 Voting and Proxies 2
Section 1.9 Action at Meeting 2
Section 1.10 Nomination of Directors 3
Section 1.11 Notice of Business at Annual Meetings 3
Section 1.12 Action without Meeting 4
Section 1.13 Organization 4
ARTICLE 2 - Directors 5
Section 2.1 General Powers 5
Section 2.2 Number; Election and Qualification 5
Section 2.3 Classes of Directors 5
Section 2.4 Terms of Office 5
Section 2.5 Allocation of Directors Among Classes in the
Event of Increases or Decreases in the Number of Directors 5
Section 2.6 Vacancies 6
Section 2.7 Resignation 6
Section 2.8 Regular Meetings 6
Section 2.9 Special Meetings 6
Section 2.10 Notice of Special Meetings 6
Section 2.11 Meetings by Telephone Conference Calls 7
Section 2.12 Quorum 7
Section 2.13 Action at Meeting 7
Section 2.14 Action by Consent 7
Section 2.15 Removal 7
Section 2.16 Committees 7
Section 2.17 Compensation of Directors 8
ARTICLE 3 - Officers 8
Section 3.1 Enumeration 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.2 Election 8
Section 3.3 Qualification 8
Section 3.4 Tenure 8
Section 3.5 Resignation and Removal 8
Section 3.6 Vacancies 9
Section 3.7 Chairman of the Board and Vice Chairman of the Board 9
Section 3.8 President 9
Section 3.9 Vice Presidents 9
Section 3.10 Secretary and Assistant Secretaries 10
Section 3.11 Treasurer and Assistant Treasurers 10
Section 3.12 Salaries 10
ARTICLE 4 - Capital Stock 11
Section 4.1 Issuance of Stock 11
Section 4.2 Certificates of Stock 11
Section 4.3 Transfers 11
Section 4.4 Lost, Stolen or Destroyed Certificates 11
Section 4.5 Record Date 12
ARTICLE 5 - General Provisions 12
Section 5.1 Fiscal Year 12
Section 5.2 Corporate Seal 12
Section 5.3 Waiver of Notice 12
Section 5.4 Voting of Securities 13
Section 5.5 Evidence of Authority 13
Section 5.6 Certificate of Incorporation 13
Section 5.7 Transactions with Interested Parties 13
Section 5.8 Severability 14
Section 5.9 Pronouns 14
ARTICLE 6 - Amendments 14
Section 6.1 By the Board of Directors 14
Section 6.2 By the Stockholders 14
Section 6.3 Certain Provisions 14
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
GIGA INFORMATION GROUP, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at
-----------------
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held within six months after the
end of each fiscal year of the corporation on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these Bylaws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called
----------------
at any time by the Chairman of the Board of Directors, the Chief Executive
Officer (or, if there is no Chief Executive Officer, the President) or the Board
of Directors. Business transacted at any special meeting of stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of
-----------
the corporation shall prepare, at least 10 days before every meeting of
stockholders, a
<PAGE>
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, at a place within the city where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time of the meeting, and may be inspected by any stockholder who is
present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to
------------
any other time and to any other place at which a meeting of stockholders may be
held under these Bylaws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for
------------------
each share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws. Each stockholder of record entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may vote or express such consent or dissent in person
or may authorize another person or persons to vote or act for him by written
proxy executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election.
<PAGE>
1.10 Nomination of Directors. Only persons who are nominated in
-----------------------
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
1.11 Notice of Business at Annual Meetings. At an annual meeting of
-------------------------------------
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before an annual meeting
by a stockholder. For business to be properly brought before an annual meeting
by a stockholder, if such business relates to the election of directors of the
corporation, the procedures in Section 1.10 must be complied with. If such
business relates to any other matter, the stockholder must have given timely
notice thereof in writing to the Secretary. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or
<PAGE>
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the date on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's books, of
the stockholder proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 1.11
and except that any stockholder proposal which complies with Rule 14a-8 of the
proxy rules (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended, and is to be included in the corporation's
proxy statement for an annual meeting of stockholders shall be deemed to comply
with the requirements of this Section 1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
1.12 Action without Meeting. Stockholders may not take any action by
----------------------
written consent in lieu of a meeting.
1.13 Organization. The Chairman of the Board, or in his absence the
------------
Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and shall act as chairman of such meeting; provided, however, that the Board of
--------
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall
act as secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation
--------------
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the
<PAGE>
powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors
----------------------------------
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the corporation.
2.3 Classes of Directors. The Board of Directors shall be and is
--------------------
divided into three classes: Class I, Class II and Class III.
2.4 Terms of Office. Each director shall serve for a term ending on
---------------
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
--------
serve for a term ending on the date of the annual meeting of stockholders in
1997; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 1998; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 1999; and provided further, that the term of each director shall
-------- -------
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases
---------------------------------------------------------------
or Decreases in the Number of Directors. In the event of any increase or
- ---------------------------------------
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.6 Vacancies. Any vacancy in the Board of Directors, however
---------
occurring, including a vacancy resulting from an enlargement of the Board, shall
be filled only by vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and a director chosen to fill a position resulting from an increase in the
number of directors shall hold office until the next election of the class for
which such director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or
<PAGE>
removal.
2.7 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.8 Regular Meetings. Regular meetings of the Board of Directors may
----------------
be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of stockholders.
2.9 Special Meetings. Special meetings of the Board of Directors may
----------------
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President, two or more
directors, or by one director in the event that there is only a single director
in office.
2.10 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
or telex, or delivering written notice by hand, to his last known business or
home address at least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
2.11 Meetings by Telephone Conference Calls. Directors or any
--------------------------------------
members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
2.12 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
<PAGE>
2.13 Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Bylaws.
2.14 Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.15 Removal. Directors of the corporation may be removed only for
-------
cause by the affirmative vote of the holders of two-thirds of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote.
2.16 Committees. The Board of Directors may, by resolution passed by
----------
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Dela ware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these Bylaws for the Board of Directors.
2.17 Compensation of Directors. Directors may be paid such
-------------------------
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
<PAGE>
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or
-------------
more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate
------
of Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering
-----------------------
his written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring
---------
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The Board
----------------------------------------------------
of Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and
<PAGE>
shall perform such other duties and possess such other powers as may from time
to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the
---------
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties
---------------
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
----------------------------------
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer
shall perform such
<PAGE>
duties and have such powers as are incident to the office of treasurer,
including without limitation the duty and power to keep and be responsible for
all funds and securities of the corporation, to deposit funds of the corporation
in depositories selected in accordance with these Bylaws, to disburse such funds
as ordered by the Board of Directors, to make proper accounts of such funds, and
to render as required by the Board of Directors statements of all such
transactions and of the financial condition of the corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders
-----------------
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
corporation or the whole or any part of any unissued balance of the authorized
capital stock of the corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of Directors in such
manner, for such consideration and on such terms as the Board of Directors may
determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
---------------------
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or
in the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Bylaws, applicable securities laws or any agreement among any number of
stockholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
<PAGE>
4.3 Transfers. Except as otherwise established by rules and
---------
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these Bylaws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these Bylaws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may
--------------------------------------
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as
-----------
a record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated by
-----------
the
<PAGE>
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as
--------------
shall beapproved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to
----------------
be given by law, by the Certificate of Incorporation or by these Bylaws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these Bylaws to
----------------------------
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum;
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon,
<PAGE>
and the contract or transaction is specifically approved in good faith by vote
of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these
------------
Bylaws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these Bylaws.
5.9 Pronouns. All pronouns used in these Bylaws shall be deemed to
--------
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These Bylaws may be altered, amended
-------------------------
or repealed or new bylaws may be adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise provided in Section
-------------------
6.3, these Bylaws may be altered, amended or repealed or new bylaws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the corporation issued and outstanding and entitled to vote
at any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new bylaws shall have been stated
in the notice of such regular or special meeting.
6.3 Certain Provisions. Notwithstanding any other provision of law,
------------------
the Certificate of Incorporation or these Bylaws, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least two-thirds of the shares of the capital stock of the
corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with Section 1.3,
Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or Article 6
of these Bylaws.
<PAGE>
EXHIBIT 4.1
GIGA
Number Shares
FBU GIGA INFORMATION GROUP, INC. ----------
-------
THIS CERTIFICATE IS INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN
TRANSFERABLE IN BOSTON, OF THE STATE OF DELAWARE DEFINITIONS
MA OR NEW YORK, NY
COMMON STOCK CUSIP
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR
VALUE OF ONE TENTH OF ONE CENT ($.001) EACH
GIGA INFORMATION GROUP, INC.
(hereinafter called the "Corporation") transferable upon the books of the
Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate
and the shares represented hereby are issued and shall be subject to all
the provisions of the Restated Certificate of Incorporation and the
Amended and Restated By-Laws of the Corporation as from time to time
amended (copies of which are on file with the Corporation) to all of
which the holder, by acceptance hereof, assents. This Certificate is not
valid unless countersigned and registered by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed by the facsimile signatures of its duly authorized officers
and its facsimile corporate seal to be hereunto affixed.
Dated:
/s/ Richard B. Goldman (Corporate Seal) /s/ Kenneth E. Marshall
SENIOR VICE PRESIDENT, PRESIDENT AND CHIEF OPERATING OFFICER
CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR
BY /s/ M. RINGIC
AUTHORIZED SIGNATURE
<PAGE>
(reverse side)
GIGA INFORMATION GROUP, INC.
The Corporation is authorized to issue more than one class of stock. A
statement of the powers, designations, preferences, and the relative
participating, optional or other rights of each class and series of stock and
the qualifications, limitations or restrictions thereon will be provided without
charge to each stockholder upon request to the Corporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws of regulations:
UNIF GIFT ACT -- Custodian
--------- ---------
TEN COMM-- as tenants in common (Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of Act
survivorship and not as tenants ------------------------
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received,____________________ hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSSIGNEE
- ----------------------------------------
- ----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the capital stock represented by the within Certificate, and to hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated,
-------------------- ---------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the Certificate, in every particular,
without alteration or enlargement, or any
change whatever.
SIGNATURE(S) GUARANTEED:
-------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.1
================================================================================
STOCK PURCHASE AGREEMENT
BETWEEN
GIGA INFORMATION GROUP, INC.,
A DELAWARE CORPORATION,
AND
DAVID GILMOUR,
AN INDIVIDUAL
_________________________
Dated as of July 6, 1995
_________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. SALE AND PURCHASE OF STOCK............................ 1
1.1 Purchase of Stock..................................... 1
1.2 Purchase Price........................................ 1
1.3 Tax-Free Transaction.................................. 2
1.4 Transfer Taxes........................................ 2
1.5 Other Agreements and Transactions..................... 3
1.6 Earn-Out of Second Stock Installment Payment.......... 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.............. 3
2.1 Title to Stock........................................ 3
2.2 Capitalization........................................ 4
2.3 Authority; Binding Nature of Agreements............... 4
2.4 Conflicts............................................. 4
2.5 Financial and Other Information About the Company..... 4
2.6 Seller's Access to Information About Purchaser........ 4
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
PURCHASER............................................. 5
3.1 Authority; Binding Nature of Agreements............... 5
3.2 Title to Stock........................................ 5
3.3 Access................................................ 5
3.4 Acquisition of Purchased Stock........................ 5
3.5 Preferred Stock Payment............................... 5
3.6 Brokers............................................... 5
3.7 Tax Treatment......................................... 5
3.8 Election to Board of Directors........................ 5
SECTION 4. CERTAIN SECURITIES MATTERS............................ 5
SECTION 5. CONDITIONS TO SECOND CLOSING.......................... 7
5.1 Obligations of Purchaser.............................. 7
5.2 Obligations of Seller................................. 7
SECTION 6. RIGHT OF REPURCHASE................................... 7
6.1 Purchaser Option to Repurchase Shares................. 7
6.2 Vesting of Stock...................................... 8
6.3 Exercise of Purchase Option........................... 8
6.4 Restrictions.......................................... 8
<PAGE>
6.5 Legends............................................... 8
SECTION 7. MISCELLANEOUS PROVISIONS.............................. 9
7.1 Termination of Agreement.............................. 9
7.2 Governing Law......................................... 9
7.3 Venue and Jurisdiction................................ 9
7.4 Notices............................................... 9
7.5 Headings.............................................. 10
7.6 Assignment............................................ 10
7.7 Parties in Interest................................... 10
7.8 Severability.......................................... 10
7.9 Entire Agreement...................................... 10
7.10 Waiver................................................ 10
7.11 Amendments............................................ 10
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of July
6, 1995 (the "Effective Date"), by and between GIGA INFORMATION GROUP, INC., a
Delaware corporation ("Purchaser"), and DAVID GILMOUR ("Seller"). Certain
capitalized terms used in this Agreement are defined on Exhibit A.
RECITALS
Seller owns 50% of the outstanding common stock of ExperNet Corporation, a
California corporation (the "Company"). Purchaser wishes to purchase such stock
from Seller on the terms set forth in this Agreement.
AGREEMENT
Purchaser and Seller, intending to be legally bound, agree as follows:
SECTION 1. SALE AND PURCHASE OF STOCK
1.1 PURCHASE OF STOCK. Seller shall sell to Purchaser, and
Purchaser shall purchase from Seller, four hundred fifty thousand (450,000)
shares of Common Stock of the Company as follows:
(a) Contemporaneously with the execution and delivery of this
Agreement, Seller shall sell to Purchaser, and Purchaser shall purchase from
Seller, two hundred fifty thousand (250,000) shares of Common Stock of the
Company (the "First Stock Installment") in accordance with this Agreement.
(b) Subject to the conditions set forth in Section 5 below, on the
Second Closing Date (as hereinafter defined), Seller shall sell to Purchaser,
and Purchaser shall purchase from Seller, two hundred thousand (200,000) shares
of Common Stock of the Company (the "Second Stock Installment") in accordance
with this Agreement. The First Stock Installment and the Second Stock
Installment are hereinafter referred to collectively as the "Purchased Stock."
As used in this Agreement, "Second Closing Date" shall mean a date, as mutually
agreed by the parties, after October 1, 1995 but no later than December 31,
1995, provided that if Purchaser requires that the Second Stock Installment
close after December 15, 1995, then the Second Closing Date shall be a date
determined at Seller's option up to and including January 2, 1996, but no later.
<PAGE>
1.2 PURCHASE PRICE. As consideration for the sale of the Purchased
Stock to Purchaser:
(a) Contemporaneously with the execution and delivery of this
Agreement, Purchaser shall:
(i) issue to Seller eighty thousand (80,000) shares of Series A
Preferred Stock of Purchaser (the "Preferred Stock Payment"); and
(ii) ensure that the Company immediately pays Seller all accrued and
unpaid salary owed to Seller by the Company, in the total amount of $54,475.96
(which Seller agrees and represents is the total accrued and unpaid salary).
(b) On the Second Closing Date, Purchaser shall deliver to Seller, at
Seller's option, either:
(i) the sum of four hundred thousand dollars ($400,000) by check or
wire transfer; or
(ii) an option to purchase forty thousand (40,000) shares of the
Common Stock of Purchaser, in the form attached hereto as Exhibit B (the
"Option"), which option will have an exercise price equal to the fair market
value of Purchaser's Common Stock as of the date of grant (as determined by
Purchaser's Board of Directors in accordance with its normal practice); or
(iii) a pro-rated combination of the consideration set forth in
Sections 1.2(b)(i) and 1 .2(b)(ii) above (for example, a $200,000 payment and an
option to purchase 20,000 shares).
(c) Within thirty (30) days from the closing of any equity or debt
financing by Purchaser (excluding the Preferred and Common Stock issuances
described in the first sentence of Section 1.2(d)), but in no event later than
January 2, 1996, Purchaser shall ensure that the Company pays Seller all unpaid
principal and interest due under that certain promissory note dated September
20, 1994, issued to Seller by the Company (a copy is attached as Exhibit C).
(d) Notwithstanding the provisions of this Section 1.2, Purchaser may
delay satisfying its obligation to pay Seller amounts owed under Section 1.2
(b)(i), Section 1 .2(b)(iii) and/or Section 1.2(c) to the extent that any such
payment obligation, when combined with previous payments made to Seller under
such sections (if any), would exceed 12.5% of the aggregate net
2.
<PAGE>
proceeds received by Purchaser in its equity financings (other than the sale and
issuance of the shares of Purchaser's Series A Preferred Stock for an aggregate
purchase price of up to $2.5 million and other than proceeds from sale of
Purchaser's Common Stock sold to employees, consultants and directors) through
the date that such payment is due. Any amounts owed Seller under Sections
1.2(b)(i), 1 .2(b)(iii) or 1.2(c) that are not paid by Purchaser when due under
such Sections, pursuant to operation of the limitation under this Section
1.2(d), shall be paid to Seller upon Purchaser receiving additional equity
financing, but subject to the same limitation of 12.5% of the aggregate net
proceeds of such financings. In the event Purchaser has not completed paying
Seller all such obligations under Section 1.2(b) and 1.2(c) by the second
anniversary of the date of the Agreement, the amount remaining to be paid shall
commence accruing interest at 10% per annum until paid in full. Purchaser shall
complete payment of all amounts owed Seller hereunder in any event by the third
anniversary of the Agreement.
1.3 TAX-FREE TRANSACTION. The sale of the First Stock Installment to
Purchaser and the Preferred Stock Payment to Seller is intended to be a tax-free
transaction under Section 351 of the Internal Revenue Code of 1986, as amended.
1.4 TRANSFER TAXES. Any transfer taxes, stamp duties, filing fees,
registration fees, recordation expenses, escrow fees or other similar taxes,
fees, charges or expenses incurred by Seller, the Company or any other party in
connection with the transfer of the Purchased Stock to Purchaser or in
connection with any of the other transactions contemplated by this Agreement
shall be borne and paid exclusively by Seller.
1.5 OTHER AGREEMENTS AND TRANSACTIONS. Contemporaneously with the
execution and delivery of this Agreement:
(a) Seller and Purchaser are entering into an Employment Agreement, of
even date herewith, in the form attached hereto as Exhibit D;
(b) Purchaser is issuing to Seller an option to purchase 30,000 shares
of Common Stock of Purchaser, in the form attached hereto as Exhibit B;
(c) Purchaser is selling eighty thousand (80,000) shares of its Series
A Preferred Stock to Gideon Gartner in exchange for his 450,000 shares of the
Company's common stock.
(d) Purchaser is issuing to Eric Sarjeant an option to purchase 1,500
shares of Common Stock of Purchaser.
3.
<PAGE>
(e) Gideon Gartner is terminating the warrant issued to Mr. Gartner to
purchase 555,556 shares of the Company's Series A Preferred Stock and is
delivering such original warrant marked "Canceled" to Seller.
(f) Seller, Mr. Gartner, and Neill Brownstein are entering into that
certain Voting Agreement in the form attached hereto as Exhibit F.
1.6 EARN-OUT OF SECOND STOCK INSTALLMENT PAYMENT. The parties agree
that the entire consideration paid by Purchaser to Seller under Section 1.2(b)
shall constitute the purchase price for the purchase by Purchaser of the Second
Stock Installment. The parties agree further that, if Seller voluntarily
terminates his employment by ExperNet (and is not thereafter employed by
Purchaser or an affiliate of Purchaser), then Seller shall be obligated to repay
to Purchaser one-half of the amount Purchaser pays to Seller in cash on the
Second Closing Date based on Seller's election under Section 1.2(b). On the
Second Closing Date and upon Purchaser's delivery to Seller of the amounts owed
under Section 1.2(b) (subject to the limitations in Section 1.2(d)), Seller
shall execute and deliver to Purchaser a promissory note in the form attached
hereto as Exhibit E, evidencing such obligation of Seller to repay. As set
forth in detail in such promissory note, the note shall not bear any interest,
shall be payable by Seller within 30 days after Seller voluntarily terminates
his employment with ExperNet (and is not hired by Purchaser or its affiliate),
and shall be forgiven by Purchaser upon earlier of the involuntary termination
of Seller's employment or the date two years after the date of the Agreement
provided that Seller remains employed by ExperNet, Purchaser or an affiliate of
Purchaser on such date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that the following statements
are accurate in all material respects:
2.1 TITLE TO STOCK. On the date hereof and on the Second Closing
Date, Purchaser will acquire good title to the First Stock Installment and
Second Stock Installment, respectively, free and clear of all liens and
encumbrances. There are no agreements or arrangements in effect that restrict
the transfer, voting or sale of the Purchased Stock, other than the stock
purchase agreement with the Company under which Seller acquired the Purchased
Stock.
2.2 CAPITALIZATION. The Purchased Stock represents all of capital
stock of the Company owned by Seller. The Purchased Stock and the shares held
of record by Gideon Gartner represent all of the issued and outstanding shares
of capital stock of the Company, and there are no options, warrants or other
securities exercisable for or convertible into shares of capital stock of the
Company (with the exception of the warrant referred to in Section 1.5(e)
hereof).
4.
<PAGE>
2.3 AUTHORITY; BINDING NATURE OF AGREEMENTS. Seller has the absolute
and unrestricted right, power and capacity to enter into and to perform his
obligations under each of the Transactional Agreements to which he is a party.
Each of the Transactional Agreements to which Seller is a party constitutes the
legal, valid and binding obligation of Seller and is enforceable against Seller
in accordance with its terms.
2.4 CONFLICTS. Seller is not subject to any order and is not bound
by any contract that may have an adverse effect on his ability to comply with or
perform any of his covenants or obligations under any of the Transactional
Agreements. There is no proceeding pending, and no Person has threatened to
commence any proceeding, that may have an adverse effect on the ability of
Seller to comply with or perform any of his covenants or obligations under any
of the Transactional Agreements. No event has occurred, and no claim, dispute
or other condition or circumstance exists, that might directly or indirectly
give rise to or serve as a basis for the commencement of any such proceeding.
2.5 FINANCIAL AND OTHER INFORMATION ABOUT THE COMPANY. Seller has
provided to Purchaser financial statements (including an income statement and
balance sheet) for and as of the end of the last completed fiscal year of the
Company and for and as of the end of the last calendar month preceding the date
of this Agreement, and such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied,
and, to the best of Seller's knowledge, fairly reflect the financial position
and operating results of the Company for the periods presented therein. To the
best of Seller's knowledge, the Company has no material liabilities (contingent
or otherwise) that are not reflected in such financial statements, except for
the liabilities created under the agreement with SIM. Seller has made available
to Purchaser true and complete copies of other books and records of the Company.
Except for the note described in Section 1.3(c) above and deferred salary as
described in Section 1 .2(a)(ii), the Company has not obligations of any kind to
Seller, relating to the payment of money, provision of benefits or otherwise.
2.6 SELLER'S ACCESS TO INFORMATION ABOUT PURCHASER. Seller further
represents that he has had an opportunity to ask questions and receive answers
from Purchaser regarding the organization and operations of Purchaser and the
terms and conditions of the offering of the Preferred Stock Payment and the
Option and has received and reviewed a copy of the "Giga Information Group, Inc.
Summary of Business Plan and Proposal." Seller acknowledges that (i) Purchaser
is in its development or start-up stage; (ii) Seller's investment is highly
speculative and risky and Seller could lose his entire investment; (iii) Seller
is relying upon not only the representations and covenants contained in this
Agreement and in the Series A Preferred Stock Purchase Agreement, but also his
own investigation of the contemplated project, and (iv) it is difficult to
estimate the likely revenues to be earned by Purchaser, and any specific
financial projections provided by Purchaser are based only on Purchaser's
reasonable assumptions regarding Purchaser's future results. Nothing in the
foregoing will limit
5.
<PAGE>
in any way Sellers right to rely on the representations and warranties of
Purchaser contained in the Agreement and in the Series A Preferred Stock
Purchase Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that the following statements are
accurate in all material respects:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENTS. Purchaser has the
absolute and unrestricted right, power and authority to enter into and perform
its obligations under the Transactional Agreements. The execution, delivery and
performance of the Transactional Agreements by Purchaser have been duly
authorized by all necessary action on the part of Purchaser and its board of
directors. The Transactional Agreements constitute the legal, valid and binding
obligations of Purchaser and are enforceable against Purchaser in accordance
with their terms. Purchaser's financial resources are sufficient to enable it
to purchase the Purchased Stock.
3.2 TITLE TO STOCK. On the date hereof, Seller will acquire good
title to the Preferred Stock Payment, free and clear of all liens and
encumbrances.
3.3 ACCESS. Prior to the First Closing, Seller has been given full
access to the assets, books, records, contracts and employees of the Purchaser,
and has been given the opportunity to meet with officers and other
representatives of Purchaser for the purpose of investigating and obtaining
information regarding Purchaser's business, operations and legal affairs.
3.4 ACQUISITION OF PURCHASED STOCK. Purchaser is acquiring the
Purchased Stock for its own account and for investment, and not with a view to,
or for sale in connection with, any distribution of any of such Purchased Stock.
3.5 PREFERRED STOCK PAYMENT. The Preferred Stock Payment being
issued by Purchaser has been duly authorized and, upon issuance, will be fully
paid and nonassessable.
3.6 BROKERS. Purchaser has not agreed or become obligated to pay,
and has not taken any action that might result in any Person claiming to be
entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the transactions contemplated by the
Transactional Agreements.
3.7 TAX TREATMENT. Purchaser shall not claim any amount of the
purchase price for the Purchased Stock, set forth in Section 1.2, as a tax
deduction from Purchaser's income.
6.
<PAGE>
3.8 ELECTION TO BOARD OF DIRECTORS. As of the date of this
Agreement, Seller has been elected to serve as a member of Purchaser's Board of
Directors.
In addition to the above representations and warranties, Purchaser
represents and warrants to and for the benefit of Seller that all of the
statements set forth under Section 2 of the Series A Preferred Stock Purchase
Agreement are accurate in all material respects as if made on the Effective
Date.
SECTION 4. CERTAIN SECURITIES MATTERS. Seller represents and warrants as
follows:
4.1 Seller is aware that the Preferred Stock Payment to be received
by Seller in connection with the Transactions is being issued under an exemption
from the registration requirements of the Securities Act;
4.2 Seller (i) is aware that because the issuance of the Preferred
Stock Payment to be received by Seller in connection with the transactions
contemplated by this Agreement has not been registered under the Securities Act,
such shares must be held indefinitely unless their resale or other disposition
is registered under the Securities Act or is exempt from the registration
requirements of the Securities Act, and (ii) is aware of the provisions of Rule
144 promulgated under the Securities Act which permits limited resales of shares
purchased in certain exempt transactions, subject to the satisfaction of various
requirements;
4.3 Seller realizes that, if the requirements of Rule 144 are not
satisfied, any disposition by Seller of the Preferred Stock Payment to be
received by Seller in connection with the transactions contemplated by this
Agreement may require registration under the Securities Act, and that Purchaser
is not under any obligation to take any action to register any of such Purchaser
Stock;
4.4 Seller is acquiring the Preferred Stock Payment that Seller is to
receive in connection with the Transactions for investment and for Seller's own
account and not with a view to, or for resale in connection with, any
unregistered distribution thereof, and Seller has no present intention to sell
or otherwise dispose of any interest in or risk related to the Preferred Stock
Payment that Seller is to receive in connection with the Transactions;
4.5 Seller understands that the certificates representing the
Preferred Stock Payment to be received by Seller may bear a legend identical or
similar in effect to the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED
7.
<PAGE>
UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION."
4.6 Seller is an accredited investor as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
4.7 Seller hereby agrees that during the one hundred eighty (180) day
period following the effective date of a registration statement of Purchaser
filed under the Securities Act in connection with Purchaser's initial public
offering of Securities, Seller will not, to the extent requested by Purchaser
and Purchaser's underwriters, sell, offer to sell, or otherwise transfer or
dispose of any Common Stock of the Company held by it at any time during such
period except Common Stock (if any) included in such registration. To enforce
the foregoing covenant, the Company may impose stop-transfer instructions with
respect to such securities of Seller until the end of such period. Seller
agrees to execute the form of such market stand-off agreement as may be
reasonably requested by the underwriters.
SECTION 5. CONDITIONS TO SECOND CLOSING
5.1 OBLIGATIONS OF PURCHASER. The obligation of Purchaser to
purchase the Second Stock Installment and otherwise consummate the transactions
that are to be consummated on the Second Closing Date is subject to the
satisfaction of the following conditions (any of which may be waived by
Purchaser in whole or in part):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller set forth in Sections 2.1, 2.3 and 2.4 shall be
accurate in all material respects as of the Second Closing Date.
(b) PERFORMANCE. Seller shall have performed, in all material
respects, all obligations required by this Agreement to be performed by Seller
on or before the Second Closing Date.
(c) NO INJUNCTION. There shall not be in effect, at the Second
Closing Date, any injunction or other binding order of any court or other
tribunal having jurisdiction over Purchaser that prohibits the purchase of the
Second Stock Installment by Purchaser.
5.2 OBLIGATIONS OF SELLER. The obligation of Seller to cause the
Second Stock Installment to be sold to Purchaser and otherwise consummate the
transactions
8.
<PAGE>
that are to be consummated on the Second Closing Date is subject to the
satisfaction of the following conditions (any of which may be waived by Seller
in whole or in part):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser set forth in Section 3 shall be accurate in all
material respects as of the date of this Agreement.
(b) PERFORMANCE. Purchaser shall have performed, in all material
respects, all obligations required by this Agreement to be performed by
Purchaser on or before the Second Closing Date.
(c) NO INJUNCTION. There shall not be in effect, at the Second
Closing Date, any injunction or other binding order of any court or other
tribunal having jurisdiction over Seller or the Company that prohibits the sale
of the Second Stock Installment to Purchaser.
SECTION 6. RIGHT OF REPURCHASE
6.1 PURCHASER OPTION TO REPURCHASE SHARES. All of the shares of
Purchaser's Series A Preferred Stock being acquired by Seller pursuant to
Section 1 .2(a)(i) of this Agreement (hereinafter sometimes collectively
referred to as the "Stock") shall be subject to the option set forth in this
Article 6 (the "Purchase Option"). In the event at any time prior to the third
anniversary of the date of this Agreement, (a) Seller shall voluntarily
terminate employment by ExperNet Corporation (and shall not within ten days
thereafter be employed by Purchaser or a parent or subsidiary of the Purchaser),
or (b) Seller's employment shall terminate as a result of Seller's death or
permanent disability, then Purchaser shall have the right, at any time within 30
days after the date of such termination of employment, to exercise the Purchase
Option, which consists of the right to purchase from the Seller or his personal
representative, as the case may be, at a purchase price per share equal to the
greater of $2.00 per share or the fair market value of a share of the Common
Stock of Purchaser at that time as determined in good faith by Purchaser's Board
of Directors (the "Option Price"), up to but not exceeding the number of shares
of Stock which have not vested under the provisions of Section 6.2 below, upon
the terms hereinafter set forth.
6.2 VESTING OF STOCK. The Purchaser may exercise the Purchase Option
as to the maximum portion of the Stock specified in the following table:
<TABLE>
<CAPTION>
PORTION OF THE STOCK
IF EMPLOYMENT TERMINATES SUBJECT TO
(AS DESCRIBED IN SECTION 6.1) PURCHASE OPTION
- --------------------------------- ---------------------
<S> <C>
</TABLE>
9.
<PAGE>
<TABLE>
<S> <C>
Within 12 months of the Date of
This Agreement 100%
After 12 months and within 24 75%
months
After 24 months and within 36 50%
months
After 36 months none
</TABLE>
6.3 EXERCISE OF PURCHASE OPTION. The Purchase Option shall be
exercised by written notice signed by an officer of Purchaser and delivered or
mailed as provided in Section 7.4. The Option Price shall be paid in cash (by
check or wire transfer). Purchaser may assign its rights under this Article 6.
6.4 RESTRICTIONS. Seller may not sell, assign, pledge or otherwise
transfer (by operation of law or otherwise) any Sock that remains subject to the
Purchase Option; any attempted transfer in violation of the foregoing shall be
void. The Secretary of Purchaser will hold in escrow the certificates
representing the shares of Stock subject to the Purchase Option, until such
Purchase Option lapses as to such shares. The Secretary of Purchaser will issue
promptly to Seller a certificate representing the shares of Stock that no longer
are subject the Purchase Option, under the provisions of Sections 6.1 and 6.2
above. Seller will be solely responsible for determining whether to make an
election under Internal Revenue Code Section 83(b), and to effect such election.
Seller will take all actions reasonably requested by Purchaser relating to
Purchaser's obtaining insurance, at Purchaser's cost, on Seller's life
(including submitting to a relevant medical exam).
6.5 LEGENDS. All certificates representing any shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) The shares represented by this certificate are subject to an
option set forth in an agreement between the Corporation and the registered
holder, or the predecessor in interest, a copy of which is on file at the
principal office of this corporation. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares.
(b) The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"). They may not be sold
or offered for sale or otherwise distributed unless the securities are
registered under the Act or an exemption therefrom is available.
(c) Any legend required to be placed thereon by the Purchaser's
10.
<PAGE>
Bylaws.
(d) Any legend required to be placed thereon by appropriate Blue Sky
officials.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 TERMINATION OF AGREEMENT. This Agreement may be terminated prior
to the Second Closing Date: (a) by the mutual agreement of Seller and
Purchaser; (b) by Purchaser, if any condition set forth in Section 5.1 shall not
have been satisfied or waived; provided that Seller shall have been provided
with written notice of such failure of condition and such failure shall not have
been cured or remedied within ten (10) business days following such notice; or
(c) by Seller, if any condition set forth in Section 5.2 shall not have been
satisfied or waived; provided that Purchaser shall have been provided with
written notice of such failure of condition and such failure shall not have been
cured or remedied within ten (10) business days following such notice.
7.2 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of law).
7.3 VENUE AND JURISDICTION. If any legal proceeding or other legal
action relating to this Agreement is brought or otherwise initiated, the venue
therefor shall be in Santa Clara County, California, which shall be deemed to be
a convenient forum. Purchaser and Seller hereby expressly and irrevocably
consent and submit to the jurisdiction of the courts in Santa Clara County,
California.
7.4 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given and
duly delivered when received by the intended recipient at the following address
(or at such other address as the intended recipient shall have specified in a
written notice given to the other party hereto):
if to Purchaser:
---------------
Giga Information Group, Inc.
146 West 57th Street
New York, NY 10019
with a copy to:
--------------
Venture Law Group
2800 Sand Hill Road
11.
<PAGE>
Menlo Park, CA 94025
Attn: Craig W. Johnson, Esq.
if to Seller:
------------
David Gilmour
331 South El Monte Avenue
Los Altos, CA 94022
with a copy to:
--------------
Cooley Godward Castro Huddleson & Tatum
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Andrei M. Manoliu, Esq.
7.5 HEADINGS. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.6 ASSIGNMENT. Neither party hereto may assign any of its rights or
delegate any of its obligations under this Agreement to any other Person without
the prior written consent of the other party hereto.
7.7 PARTIES IN INTEREST. Nothing in this Agreement is intended to
provide any rights or remedies to any Person (including any employee or creditor
of the Company) other than the parties hereto.
7.8 SEVERABILITY. In the event that any provision of this Agreement,
or the application of such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be affected and shall
continue to be valid and enforceable to the fullest extent permitted by law.
7.9 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of Purchaser and Seller and supersedes all other agreements and
understandings between Purchaser and Seller relating to the subject matter
hereof.
7.10 WAIVER. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of
12.
<PAGE>
either party hereto in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver thereof; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or remedy.
7.11 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented except by means of a written instrument executed on behalf of
both Purchaser and Seller.
13.
<PAGE>
Purchase and Seller have caused this Agreement to be executed as of July 6,
1995.
GIGA INFORMATION GROUP, INC.
By: /s/ Gideon Gartner
-----------------------------------------
Gideon Gartner
Chairman and Chief Executive Officer
/s/ David Gilmour
--------------------------------------------
DAVID GILMOUR
14.
<PAGE>
EXHIBIT A
DEFINED TERMS
For purposes of this Agreement:
"AGREEMENT" shall mean the Stock Purchase Agreement to which this
Exhibit A is attached.
"COMPANY" shall mean ExperNet Corporation, a California corporation.
"FIRST STOCK INSTALLMENT" shall have the meaning specified in Section
1.1(b).
"OPTION" shall have the meaning specified in Section 1.2(b).
"PERSON" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"PREFERRED STOCK PAYMENT" shall have the meaning specified in Section
1.2(a).
"PURCHASED STOCK shall have the meaning specified in Section 1.1(b).
"PURCHASER" shall mean Giga Information Group, Inc., a Delaware
corporation.
"SECOND CLOSING DATE" shall have the meaning set forth in Section
1.1(b).
"SECOND STOCK INSTALLMENT" shall have the meaning set forth in
Section 1.1(b).
"SELLER" shall mean David Gilmour, an individual.
"SERIES A PREFERRED STOCK PURCHASE AGREEMENT" shall mean that
agreement to be entered into between Purchaser and the purchasers of Purchaser's
Series A Preferred Stock, which agreement shall be substantially in the form
attached hereto as Exhibit 6.
"TRANSACTIONAL AGREEMENTS" shall mean this Agreement, the
Employment Agreement and the Option.
15.
<PAGE>
AMENDMENT NUMBER ONE TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NUMBER ONE TO STOCK PURCHASE AGREEMENT (this
"Amendment") is entered into as of December 29, 1995 (the "Effective Date") by
and between GIGA INFORMATION GROUP, INC., a Delaware corporation ("Purchaser"),
and DAVID GILMOUR ("Seller") in order to amend the Stock Purchase Agreement
dated as of July 6, 1995 (the "Purchase Agreement") between the Purchaser and
the Seller. Certain capitalized terms used in this Amendment are defined on
Exhibit A to the Purchase Agreement.
WHEREAS the Purchaser and the Seller have entered into the Purchase
Agreement to provide for the purchase by the Purchaser of all of the Common
Stock of ExperNet, Inc. ("ExperNet") held by Seller, subject to certain
conditions precedent; and
WHEREAS the Purchaser purchased certain of such shares on July 6,
1995, and the Purchase Agreement provides for the purchase by the Purchaser of
the remainder of such shares on a Second Closing Date;
WHEREAS as there has existed between the Purchaser and the Seller a
dispute as to (1) the required date of the Second Closing Date, and (2) whether
certain conditions precedent to the Second Closing Date have been satisfied; and
WHEREAS as the Purchaser and the Seller have agreed to settle such
dispute by amending the terms of the Purchase Agreement as set forth herein;
NOW THEREFORE, the Purchaser and the Seller agree as follows:
1. The third sentence of Section 1.1(b) of the Agreement is hereby
amended to read in its entirety as follows: "As used in this Agreement, "Second
Closing Date" shall mean December 29, 1995."
2. Section 1.2(b) of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"(b) On the Second Closing Date, Purchaser shall deliver to
Seller a Convertible Note in the form attached hereto as Exhibit A to
---------
that certain Amendment Number One to this Agreement, dated December
29, 1995, in the principal amount of $400,000 (the "Convertible Note")
3. Section 1.6 of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"1.6 EARN-OUT OF SECOND STOCK INSTALLMENT PAYMENT. The parties
agree that
16.
<PAGE>
the entire consideration paid by Purchaser to Seller under Section l.2(b) shall
constitute the purchase price for the purchase by Purchaser of the Second Stock
Installment. The parties agree further that, if Seller voluntarily terminates
his employment by ExperNet or Purchaser (and is not thereafter employed by
Purchaser or an affiliate of Purchaser) prior to July 6, 1997, then Seller shall
be obligated to repay to Purchaser one-half of any amount paid in cash by
Purchaser to Seller as payment of principal of or interest on the Convertible
Note. Prior to Purchaser's payment to Seller of any principal or interest under
the Convertible Note before July 6,1997, Seller shall execute and deliver to
Purchaser a promissory note in the form attached hereto as Exhibit E, evidencing
---------
such obligation of Seller to repay. As set forth in detail in such promissory
note, the note shall not bear any interest, shall be payable by Seller within 30
days after Seller voluntarily terminates his employment with ExperNet (and is
not hired by Purchaser or its affiliate), and shall be forgiven by Purchaser
upon earlier of the involuntary termination of Seller's employment or July
7,1997 provided that Seller remains employed by ExperNet, Purchaser or an
affiliate of Purchaser on such date."
4. Section 3.7 Of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"3.7 TAX TREATMENT. Purchaser shall not claim any amount of the
purchase price for the Purchased Stock, set forth in Section 1.2 (except for the
accrued interest in the Convertible Note), as a tax deduction from Purchaser's
income."
5. Section 4 of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"SECTION 4. CERTAIN SECURITIES MATTERS. Seller represents and warrants
as follows:
4.1 Seller is aware that the Preferred Stock Payment, the
Convertible Note and the shares of Preferred Stock issuable upon conversion of
the Convertible Note (the "Conversion Shares") are being issued under an
exemption from the registration requirements of the Securities Act;
4.2 Seller (i) is aware that because the issuance of the
Preferred Stock Payment, the Convertible Note and the Conversion Shares have not
been registered under the Securities Act, such securities must be held
indefinitely unless their resale or other disposition is registered under the
Securities Act or is exempt from the registration requirements of the Securities
Act, and (ii) is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resales of securities purchased in certain
exempt transactions, subject to the satisfaction of various requirements;
4.3 Seller realizes that, if the requirements of Rule 144 are
not satisfied, any
17.
<PAGE>
disposition by Seller of the Preferred Stock Payment, the Convertible Note or
the Conversion Shares may require registration under the Securities Act, and
that Purchaser is not under any obligation to take any action to register any of
such Preferred Stock Payment, the Convertible Note or the Conversion Shares;
4.4 Seller is acquiring the Preferred Stock Payment, the
Convertible Note and the Conversion Shares for investment and for Seller's own
account and not with a view to, or for resale in connection with, any
unregistered distribution thereof, and Seller has no present intention to sell
or otherwise dispose of any interest in or risk related to the Preferred Stock
Payment, the Convertible Note or the Conversion Shares;
4.5 Seller understands that the certificates representing the
Preferred Stock Payment, the Convertible Note and the Conversion Shares may bear
a legend identical or similar in effect to the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION."
4.6 Seller is an accredited investor as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act.
4.7 Seller hereby agrees that during the one hundred eighty
(180) day period following the effective date of a registration statement of
Purchaser filed under the Securities Act in connection with Purchaser's initial
public offering of Securities, Seller will not, to the extent requested by
Purchaser and Purchaser's underwriters, sell, offer to sell, or otherwise
transfer or dispose of any Common Stock of the Company held by it at any time
during such period except Common Stock (if any) included in such registration.
To enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to such securities of Seller until the end of such
period. Seller agrees to execute the form of such market stand-off agreement as
may be reasonably requested by the underwriters."
6. Section 6.1 of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"6.1 PURCHASER OPTION TO REPURCHASE SHARES. All of the shares of
Purchaser's Series A Preferred Stock being acquired by Seller pursuant to
Section l.2(a)(i) of this
18.
<PAGE>
Agreement and all of the Conversion Shares (hereinafter sometimes collectively
referred to as the "Stock") shall be subject to the option set forth in this
Article 6 (the "Purchase Option"). In the event at any time prior to the third
anniversary of the date of this Agreement, (a) Seller shall voluntarily
terminate employment by ExperNet Corporation (and shall not within ten days
thereafter be employed by Purchaser or a parent or subsidiary of the Purchaser),
or (b) Seller's employment shall terminate as a result of Seller's death or
permanent disability, then Purchaser shall have the right, at any time within 30
days after the date of such termination of employment, to exercise the Purchase
Option, which consists of the right to purchase from the Seller or his personal
representative, as the case may be, at a purchase price (the "Option Price") per
share (i) of the Series A Preferred Stock equal to the greater of (A) $2.00 per
share or the fair market value of a share of the Common Stock of Purchaser at
that time as determined in good faith by Purchaser's Board of Directors, or (ii)
of the Series B Preferred Stock equal to the greater of $3.50 per share or the
fair market value of a share of the Common Stock of Purchaser at that time as
determined in good faith by Purchaser's Board of Directors up to but not
exceeding the number of shares of Stock which have not vested under the
provisions of Section 6.2 below, upon the terms hereinafter set forth."
7. Section 7.4 of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"7.4 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given and
duly delivered when received by the intended recipient at the following address
(or at such other address as the intended recipient shall have specified in a
written notice given to the other party hereto):
if to Purchaser:
---------------
Giga Information Group, Inc,
One Longwater Circle
Norwell, MA 02061
with a copy to:
--------------
Brobeck, Phleger & Harrison
One Market, Spear Street Tower
San Francisco, California 94105
Attn: Thomas A. Bevilacqua, Esq.
19.
<PAGE>
if to Seller:
-------------
David Gilmour
331 South El Monte Avenue
LosAltos, CA 94022
with a copy to:
--------------
Cooley Godward Castro Huddles & Tatum
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Andrei M. Manoliu, Esq."
8. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
9. Purchaser agrees to close the purchase of the Second Stock
Installment as of the Second Closing Date.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Amendment
to be executed as of December 29, 1995.
GIGA INFORMATION GROUP, INC.
By: /s/ Kenneth Marshall
-----------------------------------------
Kenneth Marshall
President and Chief Operating Officer
/s/ David Gilmour
--------------------------------------------
DAVID GILMOUR
20.
<PAGE>
EXHIBIT 10.2
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
AMONG
GIGA INFORMATION GROUP, INC.
AND
THE PURCHASERS SHOWN ON SCHEDULE 1
JULY 6, 1995
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made
as of July 6, 1995 by and among Giga Information Group, Inc., a Delaware
corporation (the "COMPANY"), and the persons listed on Schedule I hereto (the
"PURCHASERS").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series A Preferred Stock.
---------------------------------------------
1.1 Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of the
State of Delaware on or before the Closing (as defined below) the Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit A
(the "CERTIFICATE OF INCORPORATION").
(b) Subject to the terms and conditions of this Agreement, the Purchasers
agree to purchase and the Company agrees to sell and issue to the Purchasers at
the Closing (as defined below), an aggregate of up to 550,000 shares of the
Company's Series A Preferred Stock (the "SHARES") at a purchase price of $5.00
per share, for an aggregate amount of up to $2,750,000 (the "PURCHASE PRICE").
The number of Shares and the Purchase Price to be paid by each Purchaser is
shown on Schedule 1 hereto. The Purchase Price shall be paid by way of cash or
other consideration as agreed upon by the parties.
1.2 Closing.
-------
(a) The purchase and sale of the Shares shall take place at the offices of
Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, concurrently
with the execution and delivery of this Agreement by the parties (the
"CLOSING"), or at such other time and place as the Company and the Purchasers
mutually agree upon, orally or in writing. At the Closing, the Company shall
deliver to the Purchasers certificates representing the Shares being purchased
against delivery to the Company by the Purchasers of the Purchase Price.
1.3 Additional Closings. The Company may, if the Company and any
-------------------
Purchaser so agree, delay the sale of Shares to such Purchaser hereunder until
July 31, 1995, and the Company may, in its sole discretion, issue Shares to
additional purchasers at the Purchase Price specified above, at any time prior
to such date. In such event, one or more further closings ("ADDITIONAL
CLOSINGS") shall take place at such time and place as the Company and such
additional purchasers agree, each such additional purchaser shall execute this
Agreement and be included on Schedule 1 hereto, the Company's representations
and warranties set forth in Section 2 shall be
<PAGE>
deemed to be restated solely with respect to such additional purchasers as of
the Additional Closing, and each reference herein to "Purchaser" and "Shares"
shall include such additional purchasers and the shares purchased by them.
2. Representations, and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to the Purchasers that:
2.1 Organization Good Standing and Qualification. The Company is a
--------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or
--------------
will consist, immediately prior to the Closing, of:
(a) Preferred Stock. 1,000,000 shares of Series A Preferred Stock, 160,000
---------------
shares of which are outstanding prior to closing, the rights, privileges and
preferences of which are as stated in the Certificate of Incorporation.
(b) Common Stock. 5,000,000 shares of Common Stock, of which 1,050,000
------------
shares will be issued and outstanding immediately prior to the Closing.
(c) Except for the conversion privileges and other rights of the Shares
issued pursuant to this Agreement and the rights of holders of options or
proposed options to purchase up to 70,000 shares of Common Stock committed to
employees or future employees of the Company, there are no outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements,
orally or in writing, for the purchase or acquisition from the Company of any
shares of its capital stock. Notwithstanding the foregoing, the Company's Board
of Directors has approved option grants and Common Stock purchases by employees
and consultants for approximately 804,500, in each case at a purchase price of
exercise price of $2.00 per share.
2.3 Authorization. All corporate action on the part of the Company, and
-------------
each of its officers, directors and shareholders, necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Shares and the Common Stock issuable upon
conversion of the Preferred Shares (collectively, the "SECURITIES") has been
taken or will be taken prior to the Closing. The Agreements, when executed and
delivered by the Company, shall constitute
-2-
<PAGE>
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms.
2.4 Valid Issuance of Securities. The Shares being issued to the
----------------------------
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration provided for herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under the Agreements and applicable state and
federal securities laws. Subject to the provisions of Section 2.5 below, the
Shares will be issued in compliance with all applicable state and federal
securities laws. The Common Stock issuable upon conversion of the Shares has
been duly and validly reserved for issuance, and upon issuance in accordance
with the terms of the Certificate of Incorporation, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under the Agreements and applicable state and
federal securities laws
2.5 Governmental Consents. No consent, approval, order or authorization
---------------------
of or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for appropriate state securities filings and for the
filing pursuant to Rule 503 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), which filing will be effected in
accordance with such rule.
2.6 Litigation. There is no material action, suit, proceeding or
----------
investigation pending or currently threatened against the Company. The Company
is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit, proceeding or investigation by the Company currently pending
or which the Company intends to initiate.
2.7 Compliance with Other Instruments. The Company is not in violation or
---------------------------------
default in any material respect of any provisions of its Certificate of
Incorporation or Bylaws or of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound or of any provision of
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of the Agreements and the consummation of
the transactions contemplated hereby or thereby will not result in any such
violation or be in material conflict with or constitute, with or without the
passage of time and giving of notice, either a material default under any such
provision, instrument, judgment, order, writ, decree or contract or an event
which results in the creation of any material lien, charge or encumbrance upon
any assets of the Company.
-3-
<PAGE>
2.8 Corporate Documents. The Certificate of Incorporation and Bylaws of
-------------------
the Company are in the forms attached hereto as Exhibit A.
3. Representations and Warranties of the Purchasers. Each Purchaser,
------------------------------------------------
severally but not jointly, hereby represents and warrants to the Company that:
3.1 Authorization. He has full power and authority to enter into this
-------------
Agreement, and this Agreement constitutes his valid and legally binding
obligation, enforceable against the Purchaser in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement the Purchaser hereby confirms,
that the Securities to be acquired by the Purchaser will be acquired for
investment for the Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser understands that this sale of the Securities has not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the Purchaser's
investment intent and the accuracy of the Purchaser's representations as
expressed herein.
3.3 Disclosure of Information. The Purchaser believes he has received all
-------------------------
the information he considers necessary or appropriate for deciding whether to
acquire the Securities. The Purchaser further represents that he has had an
opportunity to ask questions and receive answers from the Company regarding the
organization and operations of the Company and the terms and conditions of the
offering of the Securities and has received and reviewed a copy of the "Giga
Information Group, Inc. Summary of Business Plan and Proposal" as supplemented
June 26, 1995. Purchaser acknowledges that (i) the Company is in its
development or start-up stage; (ii) Purchaser's investment is highly speculative
and risky and Purchaser could lose his entire investment; (iii) Purchaser is
relying upon not only the representations and covenants contained in this
Agreement but also his own investigation of the contemplated project; and (iv)
it is difficult to estimate the likely revenues to be earned by the Company, and
any specific financial projections provided by the Company are based only on the
Company's reasonable assumptions regarding the Company's future results.
-4-
<PAGE>
3.4 Investment Experience. Purchaser has substantial experience in
---------------------
evaluating and investing in private placement transactions and in the securities
of companies in the development or startup stage, and Purchaser acknowledges
that Purchaser is capable of evaluating the merits and risks of Purchaser's
investment in the Company. Purchaser, by reason of his business or financial
experience or the business or financial experience of his professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, has the
capacity to protect his own interests in connection with the purchase of the
Securities hereunder. Purchaser acknowledges that he can bear the economic risk
and complete loss of his investment.
3.5 Restricted Securities. Purchaser understands that the Securities are
---------------------
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Securities may be resold without registration under the Securities Act only
in certain limited circumstances. In this respect, the Purchaser represents
that he is familiar with Rule 144 promulgated under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
otherwise by the Securities Act.
3.6 Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement, or
(b) (i) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, the Purchaser shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the Securities Act.
3.7 Legends. It is understood that the Securities, and any securities
-------
issued in respect thereof or exchange therefor, may bear one or all of the
following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
-5-
<PAGE>
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the laws of the State of Delaware.
(c) Any legend required by the Blue Sky laws of any other state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.8 Accredited Investor. Purchaser is an accredited investor as defined
-------------------
in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Conditions of the Purchasers' Obligations at Closing. The obligations
----------------------------------------------------
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in Section 2 shall be true on the Closing with the same
effect as though such representations and warranties had been made on and as of
such date.
4.2 Performance. The Company shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. At the Closing, the President of the Company
----------------------
shall deliver to the Purchasers a certificate certifying that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled.
4.4 Proceedings and Documents. At the Closing, all corporate and other
-------------------------
proceedings in connection with the transactions contemplated under this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchaser, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Purchaser under this Agreement are subject to the
fulfillment. on or before each respective Closing, of each of the following
conditions:
5.1 Representations and Warranties. The representations and warranties of
------------------------------
the Purchaser contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of such date.
-6-
<PAGE>
5.2 Payment of Purchase Price. Each Purchaser shall have delivered the
-------------------------
purchase price for such Purchaser's respective Shares specified in Section 1.1
and shown on Schedule 1 hereto.
6. Miscellaneous.
-------------
6.1 Survival of Warranties. Except as otherwise provided herein, the
----------------------
warranties, representations and covenants of the Company and the Purchasers
contained in or made pursuant to this Agreement shall survive the Closing.
6.2 Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware in the United States of America.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.6 Notices.
-------
(a) All notices, requests, demands and other communications under this
Agreement or in connection herewith shall be given to or made upon as follows:
If to a Purchaser: To the address shown next to such Purchaser's name on
Schedule 1 hereto.
If to the Company: Giga Information Group, Inc.
c/o Gideon Gartner
BIS Strategic Decisions, Inc.
One Longwater Circle
Norwell, MA 02061
-7-
<PAGE>
with a copy to: Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Craig Johnson, Esq.
(b) All notices, requests, demands and other communications given or made
in accordance with the provisions of this Agreement shall be in writing, and
shall be sent by airmail, return receipt requested, or by telex or telecopy
(facsimile) with confirmation of receipt, and shall be deemed to be given or
made when receipt is so confirmed.
(c) Any party may, by written notice to the other, alter its address or
respondent, and such notice shall be considered to have been given ten (10) days
after the airmailing, telexing or telecopying thereof.
6.7 Finder's Fee. Each party represents that it neither is nor will be
------------
obligated for any finder's fee or commission in connection with this
transaction. Each party agrees to indemnify and hold harmless the other party
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the first party or any of its officers, employees
or representatives is responsible.
6.8 Expenses. The Company and each Purchaser shall bear their own
--------
respective expenses incurred with respect to this Agreement and the transactions
contemplated hereby.
6.9 Amendments and Waivers. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Purchaser. Any amendment or waiver
effected in accordance with this Section shall be binding upon each transferee
of any Securities, each future holder of all such Securities, and the Company.
6.10 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto pertaining to the subject matter hereof, and any and
all other prior written or oral agreements existing between the parties hereto
are expressly canceled.
-8-
<PAGE>
6.12 "Market Stand-Off" Agreement. Each Purchaser hereby agrees that
---------------- ----------
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act in
connection with the Company's initial public offering of Securities, it shall
not, to the extent requested by the Company and the Company's underwriter, sell,
offer to sell, or otherwise transfer or dispose of any Common Stock of the
Company held by it at any time during such period except Common Stock (if any)
included in such registration. To enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Registrable Securities
of the Purchaser (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period. Each Purchaser agrees
to execute the form of such market stand-off agreement as may be reasonably
requested by the underwriters.
COMPANY:
GIGA INFORMATION GROUP, INC. PURCHASER:
By:/s/Gideon Gartner /s/Neill H. Brownstein
------------------------------ ------------------------------
Title: CEO
---------------------------
PURCHASER:
/s/Richard J. Crandall Trust
------------------------------
UAD June 13, 1986
Richard J. Crandall, Trustee
PURCHASER:
/s/M E Faherty, General PTR.
------------------------------
Faherty Properties Co., Ltd.
PURCHASER:
/s/Bert Fingerhut
------------------------------
PURCHASER:
/s/Gideon Gartner
------------------------------
PURCHASER:
/s/David Gilmour
------------------------------
PURCHASER:
/s/Seymour Goldblatt
------------------------------
Yale University Endowment
S Squared Technology for
Yale University Endowment
PURCHASER:
/s/Bernard Goldstein
------------------------------
PURCHASER:
/s/George J. W. Goodman
------------------------------
PURCHASER:
/s/Stewart H. Greenfield
------------------------------
PURCHASER:
/s/Michael J. Kolesar
------------------------------
PURCHASER:
/s/Stephen R. Levy
------------------------------
PURCHASER:
/s/Thomas W. Malone
------------------------------
PURCHASER:
/s/James D. Robinson III
------------------------------
PURCHASER:
/s/Hugh M. Tietjen
------------------------------
PURCHASER:
/s/Cornelius T. Ryan
------------------------------
PURCHASER:
/s/Arno Schefler
------------------------------
PURCHASER:
/s/Scott M. Smith
------------------------------
PURCHASER:
/s/Peter A. Wright
------------------------------
-9-
<PAGE>
SCHEDULE 1
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
PURCHASERS SHARES PURCHASED PURCHASE PRICE
- ---------------------------------------------------------------------
<S> <C> <C>
Neill H. Brownstein 60,000 $ 300,000.00
536 West Crescent Drive
Palo Alto, CA 94301
- ---------------------------------------------------------------------
Richard L. Crandall Trust 15,000 $ 75,000.00
U/A/D 6/13/86, Richard L.
Crandall, Trustee
2129 Devonshire Road
Ann Arbor, MI 48104
- ---------------------------------------------------------------------
Faherty Properties Co., Ltd. 10,000 $ 50,000.00
6133 Higate Lane
Dallas, TX 75214
- ---------------------------------------------------------------------
Bert Fingerhut 10,000 $ 50,000.00
1520 Silver King Drive
Aspen, CO 81611
- ---------------------------------------------------------------------
Gideon Gartner 80,000 $ 400,000.00/1/
64 Bermuda Road 60,000 $ 300,000.00
Westport, CT 06880
- ---------------------------------------------------------------------
David Gilmour 80,000 $ 400,000.00/1/
c/o ExperNet
350 Second Street
Los Altos, CA 94022
- ---------------------------------------------------------------------
Yale University 48,000 $ 240,000.00
c/o Seymour L. Goldblatt
S Squared Technology Corp.
515 Madison Avenue
New York, NY 10022-5474
- ---------------------------------------------------------------------
Bernard Goldstein 20,000 $ 100,000.00
Broadview Associates
1 Bridge Plaza
Fort Lee, NJ 07024
- ---------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C>
George J.W. Goodman 5,000 $ 25,000.00
45 W 45th Street, 15th Floor
New York, NY 10036
- ------------------------------------------------------------------
Stewart H. Greenfield 40,000 $ 200,000.00
279 Sturges Highway
Westport, CT 06880
- ------------------------------------------------------------------
Michael J. Kolesar 5,000 $ 25,000.00
35 Park Avenue
Ardsley, NY 10502
- ------------------------------------------------------------------
Stephen R. Levy 20,000 $ 100,000.00
Bolt Beranek & Newman, Inc.
150 Cambridge Park Drive
Cambridge, MA 02140
- ------------------------------------------------------------------
Thomas W. Malone 5,000 $ 25,000.00
50 Memorial Drive
E53-333
Cambridge, MA 02142
- ------------------------------------------------------------------
James R. Robinson III 10,000 $ 50,000.00
RRE Investors
126 E. 56th Street, 22nd Floor
New York, NY 10022
- ------------------------------------------------------------------
Rutherford Group 20,000 $ 100,000.00
Attn: Hugh M. Tietjen
5514 Calumet Avenue
La Jolla, CA 92037
- ------------------------------------------------------------------
Cornelius T. Ryan 10,000 $ 50,000.00
315 Post Road West
Westport, CT 06880
- ------------------------------------------------------------------
Arno D. Schefler 10,000 $ 50,000.00
2049 McLain Flats Road
Aspen, CO 81611
- ------------------------------------------------------------------
Scott M. Smith 5,000 $ 25,000.00
Camelot Capital
10 Glenville Street
Greenwich, CT 06831
- ------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C>
Peter A. Wright 12,000 $ 60,000.00
P.A.W. Partners, L.P.
10 Glenville Street
Greenwich, CT 06831
- ------------------------------------------------------------------
================ ==============
- ------------------------------------------------------------------
525,000 $ 1,825,000.00
- ------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
EXHIBIT 10.3
GIGA INFORMATION GROUP, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
NOVEMBER 13, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
1. AGREEMENT TO PURCHASE AND SELL STOCK ........................ 1
1.1 Authorization .......................................... 1
1.2 Agreement to Purchase and Sell ......................... 1
2. CLOSING ..................................................... 2
2.1 The Closing ........................................... 2
2.2 Additional Closing .................................... 2
(a) Conditions of Additional Closing ................ 2
(b) Amendments ...................................... 2
(c) Status of New Investors ......................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 3
3.1 Organization, Good Standing and Qualification ......... 3
3.2 Authorization ......................................... 3
3.3 Valid Issuance of Preferred and Common Stock .......... 4
3.4 Capitalization ........................................ 4
(a) Preferred Stock ................................. 4
(b) Common Stock .................................... 4
(c) Options, Warrants, Reserved Shares .............. 4
(d) Outstanding Security Holders .................... 5
(e) Valid Issuance .................................. 5
3.5 Subsidiaries .......................................... 5
3.6 Governmental Consents ................................. 6
3.7 Contracts and Other Commitments ....................... 6
3.8 Litigation ............................................ 6
3.9 Invention Assignment and Confidentiality Agreement .... 6
3.10 Proprietary Assets .................................... 7
3.11 Compliance with Law and Charter Documents ............. 7
3.12 Registration Rights ................................... 7
3.13 Financial Statements .................................. 7
3.14 Disclosure ............................................ 8
3.15 Certain Actions ....................................... 8
3.16 Activities Since Balance Sheet Date ................... 8
3.17 Employee Benefit Plans ................................ 8
3.18 Tax Returns, Payments and Elections ................... 9
3.19 Related Party Transactions ............................ 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
4. REPRESENTATIONS WARRANTIES AND CERTAIN
AGREEMENTS OF INVESTORS ........................................ 9
4.1 Authorization ............................................ 9
4.2 Purchase for Own Account ................................. 9
4.3 Disclosure of Information ................................ 10
4.4 Investment Experience .................................... 10
4.5 Accredited Investor Status ............................... 10
4.6 Restricted Securities .................................... 10
4.7 Further limitations on Disposition ....................... 11
4.8 Legends .................................................. 11
4.9 Waiver of Conflicts ...................................... 12
5. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING ................ 12
5.1 Representations and Warranties True ...................... 13
5.2 Performance .............................................. 13
5.3 Restated Articles Effective .............................. 13
5.4 Compliance Certificate ................................... 13
5.5 Securities Exemptions .................................... 13
5.6 Proceedings and Documents ................................ 13
5.7 No Material Change ....................................... 13
5.8 Registration Rights Agreement; Voting Agreement; Co-Sale
Agreement ................................................ 13
5.9 Opinion of Counsel ....................................... 14
5.10 Directors ................................................ 14
5.11 Minimum Shares Purchased ................................. 14
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING ............. 14
6.1 Representations and Warranties ........................... 14
6.2 Payment of Purchase Price ................................ 14
6.3 Restated Certificate Effective ........................... 14
6.4 Securities Exemptions .................................... 14
6.5 Registration Rights Agreement ............................ 14
6.6 Minimum Shares Purchased ................................. 15
7. COVENANTS OF THE COMPANY ....................................... 15
7.1 Delivery of Financial Statements ......................... 15
7.2 Inspection ............................................... 16
8. MISCELLANEOUS .................................................. 16
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
8.1 Survival of Warranties and Covenants ............. 16
8.2 Successors and Assigns ........................... 16
8.3 Governing Law .................................... 17
8.4 Counterparts ..................................... 17
8.5 Headings ......................................... 17
8.6 Notices .......................................... 17
8.7 Expenses ......................................... 17
8.8 No Finder's Fees ................................. 18
8.9 Amendments and Waivers ........................... 18
8.10 Severability ..................................... 18
8.11 Entire Agreement ................................. 18
8.12 Further Assurances ............................... 18
</TABLE>
Exhibit A - Schedule of Investors
Exhibit B - Amended and Restated Certificate of Incorporation
Exhibit C - Schedule of Exceptions
Exhibit D - List of Stockholders
Exhibit E - List of Subsidiaries
Exhibit F - Non Competition Agreement
Exhibit G - Registration Rights Agreement
Exhibit H - Voting Agreement
Exhibit I - Co-Sale Agreement
Exhibit J - Opinion of Brobeck, Phleger & Harrison
iii
<PAGE>
GIGA INFORMATION GROUP, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of November 13, 1995 by and among Giga Information
Group, Inc., a Delaware corporation (the "COMPANY"), and the parties listed on
the Schedule of Investors attached to this Agreement as Exhibit A (each
---------
hereinafter individually referred to as an "Investor" and collectively referred
to as the "INVESTORS").
RECITAL
A. The Company desires to sell to the Investors, and the Investors
desire to purchase from the Company, shares of the Company's Series B Preferred
Stock on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
-------------------------------------
1.1 Authorization. As of the Closing (as defined below) the Company
-------------
will have authorized the issuance, pursuant to the terms and conditions of this
Agreement, of the shares of the Company's Series B Preferred Stock, $.001 par
value (the "SERIES B STOCK") to be sold by it pursuant to this Agreement, having
the rights, preferences, privileges and restrictions set forth in the Amended
and Restated Certificate of Incorporation of the Company attached to this
Agreement as Exhibit B (the "RESTATED CERTIFICATE").
---------
1.2 Agreement to Purchase and Sell. The Company agrees to sell to
------------------------------
each Investor at the Closing, and each Investor agrees, severally and not
jointly, to purchase from the Company at the Closing, the number of shares of
Series B Stock set forth beside such Investor's name on Exhibit A at a price of
---------
$3.50 per share. The shares of Series B Stock purchased and sold pursuant to
this Agreement will be collectively hereinafter referred to as the "PURCHASED
SHARES" and the shares of the Company's Common Stock, $.001 par value per share,
issuable upon conversion of the Purchased Shares will be hereinafter referred to
as the "CONVERSION SHARES".
1
<PAGE>
2. CLOSING.
-------
2.1 The Closing. The purchase and sale of the Purchased Shares will
-----------
take place at the offices of Brobeck, Phleger & Harrison, Spear Street Tower,
One Market, San Francisco, California 94105, at 10:00 a.m. Pacific Time,
November 13, 1995 or at such other time and place as the Company and Investors
who have agreed to purchase a majority of the Purchased Shares listed on Exhibit
-------
A mutually agree (which time and place are referred to in this Agreement as the
"CLOSING"). At the Closing, the Company will deliver to each Investor a
certificate representing the number of Purchased Shares that such Investor has
agreed to purchase hereunder as shown on Exhibit A, and each Investor shall pay
---------
to the Company the full purchase price of such Purchased Shares, by (i) a check
payable to the Company's order, or (ii) wire transfer of funds to the Company.
2.2 Additional Closing.
------------------
(a) Conditions of Additional Closing. At any time or times within
--------------------------------
thirty (30) days immediately following the Closing, the Company may, at one or
more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature,
consent or permission of any of the Investors, offer and sell to other investors
("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that
number of shares of Series B Stock that is equal to 5,142,856 shares of Series B
Stock less the number of shares of Series B Stock actually issued and sold by
the Company prior to such Additional Closing pursuant to this Agreement and upon
conversion of the Convertible Note (as defined in Section 3.4(c)). New Investors
may include persons or entities who are already Investors under this Agreement.
(b) Amendments. The Company and the New Investors purchasing Series B
----------
Stock at any Additional Closing will execute counterpart signature pages to this
Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-
Sale Agreement (each as defined in Section 5.8), and such New Investors will,
upon delivery to the Company of such signature pages, become parties to, and
bound by, this Agreement, the Registration Rights Agreement, the Voting
Agreement and the Co-Sale Agreement, each to the same extent as if they had been
Investors at the Closing. Immediately after any Additional Closing, Exhibit A to
---------
this Agreement will be amended by the Company to list the New Investors
purchasing shares of Series B Stock hereunder and the number of shares of Series
B Stock purchased by each New Investor under this Agreement at the Additional
Closing.
(c) Status of New Investors. Upon the completion of the Additional
-----------------------
Closing as provided in this Section 2, each New Investor will be deemed to be an
"INVESTOR" for all purposes of this Agreement, the Registration Rights
2
<PAGE>
Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of
the Voting Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth in the
Schedule of Exceptions ("SCHEDULE OF EXCEPTIONS") attached to this Agreement as
Exhibit C the statements in the following paragraphs of this Section 3 are all
- ---------
true and correct in all material respects:
3.1 Organization, Good Standing and Qualification. The Company and
----------------------------------------------
each Significant Subsidiary (as defined below) is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, and, in the case of the Company, to
execute and deliver this Agreement, the Registration Rights Agreement and the
Voting Agreement, to issue and sell the Series B Stock, to issue the Conversion
Shares, and to carry out the provisions of this Agreement, the Registration
Rights Agreement, the Voting Agreement and the Restated Certificate. The
Company and each Significant Subsidiary are duly qualified to transact business
and are in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on the business, properties, financial
condition or prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). As used in this Agreement, the term "Significant
Subsidiary" shall have the meaning set forth in Regulation S-X under the
Securities Act of 1933, as amended (the "Securities Act"), except that all
references therein to 10% shall be deemed to refer to 20%; provided, that the
term "Significant Subsidiary" shall include ExperNet, Inc.
3.2 Authorization. All corporate action on the part of the Company
-------------
and its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Registration Rights Agreement and
the Voting Agreement, the performance of all obligations of the Company
hereunder and thereunder, as the case may be, and the authorization, issuance,
sale, and delivery of the Purchased Shares and the authorization and
registration for issuance of Conversion Shares has been duly taken or will be
taken prior to the closing or the applicable Additional Closing, as the case may
be, and this Agreement, the Registration Rights Agreement and the Voting
Agreement constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
3
<PAGE>
3.3 Valid Issuance of Preferred and Common Stock.
--------------------------------------------
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement, the Registration Rights Agreement and the Voting Agreement and
under applicable state and federal securities laws. The Conversion Shares have
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Restated Certificate, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Registration Rights
Agreement and the Voting Agreement, and under applicable state and federal
securities laws.
(b) Based in part on the representation made by the Investors in
Section 4 hereof, the Purchased Shares and (assuming no change in applicable law
and no unlawful distribution of Purchased Shares by Investors or other parties)
the Conversion Shares will be issued in full compliance with applicable U.S.
state and federal securities laws (provided that with respect to the Conversion
-------- ----
Shares, no commission or other remuneration is paid or given, directly or
indirectly, for soliciting the issuance of Conversion Shares upon the conversion
of the Purchased Shares and no additional consideration is paid for the
Conversion Shares other than surrender of the applicable Purchased Shares upon
conversion thereof in accordance with the Restated Certificate).
3.4 Capitalization. Immediately prior to the Closing the
--------------
capitalization of the Company will consist of the following:
(a) Preferred Stock. A total of Ten Million (10,000,000) authorized
---------------
shares of preferred stock, $.001 par value per share (the "PREFERRED STOCK"),
consisting of Six Hundred Fifty Thousand (650,000) shares designated as Series A
Preferred Stock (the "SERIES A STOCK"), not more than 590,000 of which will be
issued or outstanding and Six Million (6,000,000) shares designated as Series B
Preferred Stock ("SERIES B STOCK"), none of which will be issued and
outstanding. The rights of the Series A Stock are, and the rights, preferences
and privileges of the Series B Stock will be, as stated in the Restated
Certificate and as provided by law.
(b) Common Stock. A total of Twenty-Eight Million (28,000,000)
------------
authorized shares of common stock, $.001 par value per share (the "COMMON
STOCK"), of which not more than 6,172,000 shares will be issued and outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Stock and Series B Stock; (ii) the Five
Million
4
<PAGE>
(5,000,000) shares of Common Stock reserved for issuance under the Company's
1995 Stock Option/Stock Issuance Plan (of which Two Hundred Thousand (200,000)
shares have been issued and options have been granted to purchase an additional
One Million Seven Hundred Thirty-Two Thousand (1,732,000) shares); (iii) options
to purchase Seven Hundred Eighty Thousand (780,000) shares granted under
contractual arrangements and not under such plan; (iv) a Convertible Promissory
Note of the Company with an aggregate principal amount of $2,000,000 which is
convertible into Five Hundred Seventy-One Thousand Four Hundred Twenty-Eight
(571,428) shares of the Company's Series B Stock at the Closing (the
"CONVERTIBLE NOTE"); (v) warrants to purchase an aggregate of Two Hundred
Eighty-Five Thousand Seven Hundred Fourteen (285,714) shares of Series B Stock
issued in connection with the Convertible Note at a price equal to 66-2/3% of
the purchase price for the Purchased Shares; (vi) a warrant to purchase 100,000
shares of Series B Preferred Stock to be issued to Montgomery Securities in
connection with its services as placement agent; (vii) a convertible note dated
April 5, 1995 payable to Friday Holdings, L.P.; and (viii) up to 160,000 shares
of Common Stock issuable to David Gilmour pursuant to the terms of the Stock
Purchase Agreement dated July 6, 1995, between the Company and Mr. Gilmour;
there are not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities convertible into or
ultimately exchangeable or exercisable for any shares of the Company's capital
stock. Apart from the exceptions noted in this Section 3.4(c), and except for
rights of repurchase and rights of first refusal held by the Company to
repurchase shares of its stock issued to founders of the Company, no shares of
the Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options, warrants or rights, or other stock issuable
by the Company, are subject to any preemptive rights or rights of first refusal
or other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the Company, and, to
the Company's knowledge, no officer, director or holder of the Company's Common
Stock is a party to any voting agreement or voting trust other than the Voting
Agreement.
(d) Outstanding Security Holders. Exhibit C attached hereto contains
---------------------------- ---------
a listing of all holders of the outstanding Common Stock and Series A Stock
immediately prior to the Closing.
(e) Valid Issuance. The outstanding Series A Preferred Stock and
--------------
Common Stock referred to in Section 3.4(a) and (b) are duly and validly issued,
fully paid and nonassessable.
3.5 Subsidiaries. Exhibit E attached hereto contains a listing of
------------ ---------
all of the Company's subsidiaries. The Company beneficially owns or has the
right to acquire all of the outstanding capital stock of each of its
subsidiaries.
5
<PAGE>
3.6 Governmental Consents. No consent, approval, qualification,
---------------------
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series B Stock by the Company or the issuance of
Common Stock upon conversion of the Series B Preferred Stock, except (i) the
filing of the Restated Certificate with the Secretary of State of the State of
Delaware, and (ii) such filings as have been or will be made prior to the
Closing, except that any notices of sale required to be filed with the
Securities and Exchange Commission under Regulation D of the Securities Act, or
such post-closing filings as may be required under applicable state securities
laws, which will be timely filed within the applicable periods therefor.
3.7 Contracts and Other Commitments. Neither the Company nor any of
-------------------------------
its Significant Subsidiaries has any material contract, agreement, lease,
commitment or proposed transaction, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that do not
involve more than $100,000, and do not extend for more than one (1) year beyond
the date hereof, (ii) contracts entered into in the ordinary course of business,
(iii) contracts terminable at will by the Company on no more than thirty (30)
days, notice without cost or liability to the Company which are not material to
the conduct of the Company's business, (iv) contracts described in the Placement
Memorandum (as defined in Section 3.13 and leases of offices and facilities
identified therein), and (v) employment or consulting agreements with persons
who are not directors or executive officers of the Company. Neither the Company
nor any of its Significant Subsidiaries has a collective bargaining agreement
with any of its United States employees.
3.8 Litigation. There is no action, suit, proceeding, claim,
----------
arbitration or investigation ("ACTION") pending (or, to the best of the
Company's knowledge, currently threatened) against the Company or any of its
subsidiaries, or their activities, properties or assets or, to the best of the
Company's knowledge, against any officer or director of the Company or its
subsidiaries in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company or any of its
subsidiaries or questioning the validity of this Agreement or any action taken
or to be taken in connection herewith that could reasonably be expected to have
a Material Adverse Effect. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality and there is no Action by the Company
currently pending or which the Company has threatened, and intends, to initiate.
3.9 Invention Assignment and Confidentiality Agreement. Each
--------------------------------------------------
employee and contractor of the Company, BIS Strategic Decisions, Inc. ("BIS")
and ExperNet, Inc. ("ExperNet") who is engaged in information technology
research and analysis, or software development, has entered into and executed an
agreement
6
<PAGE>
containing confidentiality obligations in the form attached to this Agreement as
Exhibit F or an agreement containing substantially similar terms, or terms no
- ---------
less favorable to the Company.
3.10 Proprietary Assets. The Company and its Significant Subsidiaries
------------------
have full title and ownership of, or are duly licensed under or otherwise
authorized to use, all patents, patent applications, trademarks, service marks,
trade names, copyrights, trade secrets, confidential and proprietary
information, designs and proprietary rights necessary to enable them to carry on
their business as now conducted (the "PROPRIETARY ASSETS") and have or expect in
good faith to be able to obtain or create the Proprietary Assets necessary to
carry on their business as proposed to be conducted, without, to the best of
their knowledge, any conflict with or infringement of the rights of others,
where the same would have a Material Adverse Effect. Neither the Company nor,
to its knowledge, any of its subsidiaries, has granted any options, licenses or
agreements of any kind giving any third party any exclusive rights to any
material Proprietary Assets of the Company. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as now conducted and as proposed to be conducted, would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights of any other person or entity.
3.11 Compliance with Law and Charter Documents. Neither the Company
-----------------------------------------
nor any of its Significant Subsidiaries is in violation or default of any
provisions of their Certificate or Articles of Incorporation or Bylaws, both as
amended (or foreign equivalents thereof), and to the best of the Company's
knowledge, except for any violations that would have no Material Adverse Effect,
the Company and its Significant Subsidiaries are in compliance with all material
indentures, instruments or agreements by which it is bound, all applicable
statutes, laws, regulations and executive orders of the United States of America
and all states, foreign countries or other governmental bodies and agencies
having jurisdiction over their business or properties.
3.12 Registration Rights. Except as provided in the Registration
-------------------
Rights Agreement, the Company has not granted or agreed to grant to any person
or entity any rights (including piggyback registration rights) to have any
securities of the Company registered with the United States Securities and
Exchange Commission ("SEC") or any other governmental authority.
3.13 Financial Statements. The statements of operations and balance
--------------------
sheets of BIS as of December 31, 1994 and June 30, 1995 and for the twelve (12)
and six (6) month periods then ended (the "Financial Statements"), of BIS,
included in the Private Placement Memorandum dated September 15, 1995 and
previously delivered to the Investors (the "Placement Memorandum") are in
accordance with the books and records of BIS and fairly set forth the
consolidated operating results and financial
7
<PAGE>
condition of BIS for the twelve-month and six-month periods then ended and as of
December 31, 1994 and June 30, 1995, respectively, on the basis described in the
Placement Memorandum. The Financial Statements as of, and for the twelve months
ended, December 31, 1994 have been prepared in accordance with generally
accepted accounting principles ("GAAP"). The statement of operations data
(shown on a pro forma basis) and balance sheet data (shown on an actual basis)
of the Company, BIS and ExperNet as of June 30, 1995 and for the six-month
period then ended, included in the Placement Memorandum, are in accordance with
the books and records of the Company, BIS and ExperNet. Except as set forth or
reserved for in the Financial Statements or as disclosed in the Placement
Memorandum, the Company has no material liabilities, other than (i) liabilities
incurred in the ordinary course of business subsequent to June 30, 1995, (ii)
liabilities not in excess of $100,000 in the aggregate, and (iii) liabilities
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements.
3.14 Disclosure. This Agreement and the statements made in the
----------
Placement Memorandum, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
herein or therein, under the circumstances under which they were made, not
misleading when taken as a whole; provided, that with respect to the
-------- ----
projections, forecasts and expressions of opinion included therein and the
statements set forth therein under the caption "Investment Considerations," the
Company represents only that such projections, forecasts, expressions of opinion
and statements were made in good faith and that the Company believes there is a
reasonable basis therefor.
3.15 Certain Actions. Since June 30, 1995, (i) the Company has not
---------------
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock and (ii) except as
disclosed in the Placement Memorandum, neither the Company nor any Significant
Subsidiary has (A) sold, exchanged or otherwise disposed of any material assets
or rights other than in the ordinary course of business, or (B) entered into any
material transactions with any of its officers, directors or employees or any
entity controlled by any of such individuals.
3.16 Activities Since Balance Sheet Date. To the best of the
-----------------------------------
Company's knowledge, since June 30, 1995, there has not been any event or
condition of any type that has had or would reasonably be expected to have a
Material Adverse Effect.
3.17 Employee Benefit Plans. None of the Company, BIS or ExperNet has
----------------------
any outstanding liabilities or accrued and unpaid funding obligations with
respect to any Employee Benefit Plan (as defined in Section 3 of the Employee
Retirement Income Security Act of 1974).
8
<PAGE>
3.18 Tax Returns. Payments and Elections. The Company and each
-----------------------------------
Significant Subsidiary has filed all United States federal and, to its
knowledge, state tax returns and reports as required by law, and, to its
knowledge, these returns and reports are true and correct in all material
respects, except in each case where the same would not have a Material Adverse
Effect or where adequate reserves therefor have been reflected in the Financial
Statements. The Company and its Significant Subsidiaries have not been
notified, nor do they otherwise have knowledge that, they are currently the
subject of any ongoing audit by federal or state tax authorization. The Company
has paid all taxes and other assessments shown on such returns as due, except
those contested by it in good faith.
3.19 Related Party Transactions. Except as described in the
--------------------------
Placement Memorandum, (i) no executive officer or director of the Company or
member of his or her immediate family is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them; and (ii) to the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a material
business relationship, or any firm or corporation that competes with the
Company, except through ownership of stock in publicly traded companies.
4. REPRESENTATIONS WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each
--------------------------------------------------------------
Investor hereby represents and warrants to, and agrees with, the Company,
severally and not jointly, that:
4.1 Authorization. This Agreement, the Voting Agreement and the
-------------
Registration Rights Agreement constitute such Investor's valid and legally
binding obligations, enforceable in accordance with their respective terms
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the effect of rules of law
governing the availability of equitable remedies. Each Investor represents that
such Investor has full power and authority to enter into this Agreement, the
Registration Rights Agreement and the Voting Agreement.
4.2 Purchase for Own Account. This Agreement is made with each
------------------------
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series B Stock to be purchased by such Investor and the Conversion
Shares issuable upon conversion thereof are being acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Investor further
represents that such Investor does not have any
9
<PAGE>
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Series B Stock and/or the Conversion Shares.
4.3 Disclosure of Information. Such Investor has received or has had
-------------------------
full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Purchased Shares to be
purchased by such Investor under this Agreement. Such Investor further has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Purchased Shares and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to such Investor or to which such Investor had access.
The foregoing, however, does not in any way limit or modify the representations
and warranties made by the Company in Section 3.
4.4 Investment Experience. Such Investor understands and
---------------------
acknowledges that the purchase of the Purchased Shares involves substantial
risk. Such Investor: (i) has experience as an investor in securities of
companies in the development stage and acknowledges that such Investor is able
to fend for itself, can bear the economic risk of such Investor's investment in
the Purchased Shares and has such knowledge and experience in financial or
business matters that such Investor is capable of evaluating the merits and
risks of this investment in the Purchased Shares and protecting its own
interests in connection with this investment and/or (ii) has a preexisting
personal or business relationship with the Company and certain of its officers,
directors or controlling persons of a nature and duration that enables such
Investor to be aware of the character, business acumen and financial
circumstances of such persons.
4.5 Accredited Investor Status. Unless otherwise expressly indicated
--------------------------
on Exhibit A to this Agreement, such Investor is an "accredited investor" within
the meaning of Regulation D promulgated under the Securities Act.
4.6 Restricted Securities. Each Investor understands that the
---------------------
Purchased Shares and the Conversion Shares are characterized as "restricted
securities" under the Securities Act inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under the
Securities Act and applicable regulations thereunder such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, such Investor represents that such Investor
is familiar with Rule 144 of the U.S. Securities and Exchange Commission, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act. Such Investor understands that the Company is under no
obligation to register any of the securities sold hereunder (or any securities
issuable upon conversion thereof) except
10
<PAGE>
as provided in the Registration Rights Agreement. Such Investor understands
that no public market now exists for any of the Purchased Shares or the
Conversion Shares and that it is uncertain whether a public market will ever
exist for the Purchased Shares or the Conversion Shares.
4.7 Further Limitations on Disposition. Without in any way limiting
-----------------------------------
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Purchased Shares or the Conversion
Shares unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) such Investor shall
have furnished the Company, at the expense of such Investor or its transferee,
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required: (i) for any
transfer of any Purchased Shares or Conversion Shares in compliance with SEC
Rule 144 or Rule 144A, or (ii) for any transfer of Purchased Shares or
Conversion Shares by an Investor that is a partnership or a corporation to (A) a
partner of such partnership or shareholder of such corporation, (B) a retired
partner of such partnership who retires after the date hereof, (C) the estate of
any such partner or shareholder, or (iii) for the transfer by gift, will or
interstate succession by any Investor to his or her spouse or lineal descendants
or ancestors or any trust for any of the foregoing; provided that in each of the
--------
foregoing cases the transferee agrees in writing to be subject to the terms of
this Section 4 (other than Section 4.5) to the same extent as if the transferee
were an original Investor hereunder.
4.8 Legends. It is understood that the certificates evidencing the
-------
Purchased Shares and the Conversion Shares will bear the legends set forth
below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
11
<PAGE>
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required by the laws of the State of Delaware or any
other state securities laws, including a legend substantially in the form of the
following:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE INTO
SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER AT ANY TIME
PRIOR TO AUTOMATIC CONVERSION THEREOF, AND (2) AUTOMATICALLY CONVERT INTO COMMON
STOCK OF THE COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN
REQUIREMENTS OR UPON CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED
STOCK; ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE
COMPANY'S CERTIFICATE OF INCORPORATION. A COPY OF SUCH CERTIFICATE OF
INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL
OFFICE.
The legend set forth in (a) above shall be removed by the Company from any
certificate evidencing Purchased Shares or Conversion Shares upon delivery to
the Company of an opinion by counsel, reasonably satisfactory to the Company,
that a registration statement under the 1933 Act is at that time in effect with
respect to the legended security or that such security can be freely transferred
in a public sale without such a registration statement being in effect and that
such transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Purchased Shares or Conversion Shares.
4.9 Waiver of Conflicts. Each Investor acknowledges that Morrison &
-------------------
Foerster has represented other Investors in connection with transactions other
than this Agreement and may represent others having interests adverse to the
Investors in connection with matters unrelated to this Agreement. Each Investor
hereby waives any conflict or alleged conflict arising as a result of such
representation.
5. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING. The obligations of
-----------------------------------------------
each Investor under Section 2 of this Agreement are subject to the fulfillment
or waiver, on or before the Closing, of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
to such waiver.
12
<PAGE>
5.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Company contained in Section 3 shall be true and correct
on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Restated Articles Effective. The Restated Certificate shall have
---------------------------
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and stockholders, and shall have been duly filed with and accepted
by the Secretary of State of the State of Delaware.
5.4 Compliance Certificate. The Company shall have delivered to each
----------------------
Investor at the Closing a certificate signed on its behalf by its President,
Chief Executive Officer, or Vice President-Finance certifying, on behalf of the
Company, that the conditions specified in Sections 5.1, 5.2 and 5.3 have been
fulfilled and stating that there shall have been no material adverse change in
the business, affairs, prospects, operations, properties, assets or condition of
the Company not previously disclosed to the Investors in writing.
5.5 Securities Exemptions. The offer and sale of the Purchased
---------------------
Shares to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
5.6 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor's special counsel, Morrison & Foerster, which shall
have received all such counterpart originals and certified or other copies of
such documents as it may reasonably request.
5.7 No Material Change. There shall have been no material adverse
------------------
change in the business, affairs, prospects, operations, properties, assets or
condition of the Company.
5.8 Registration Rights Agreement: Voting Agreement: Co-Sale
--------------------------------------------------------
Agreement. The Company and each Investor shall have executed and delivered the
- ---------
Registration Rights Agreement in the form attached to this Agreement as Exhibit
-------
G (the "REGISTRATION RIGHTS AGREEMENT"); the Company, Gideon Gartner and each
- -
13
<PAGE>
Investor shall have executed and delivered the Amended and Restated Investor
Rights and Voting Agreement in the form attached as Exhibit H (the "VOTING
---------
AGREEMENT"); and the Company, Gideon Gartner and each Investor shall have
executed and delivered the Co-Sale and Stock Restriction Agreement in the form
attached as Exhibit I (the "CO-SALE AGREEMENT").
---------
5.9 Opinion of Counsel. The Investors shall have received the
------------------
opinion of Brobeck, Phleger & Harrison, dated the date of the Closing, as to the
matters set forth in Exhibit J.
---------
5.10 Directors. The Company's Bylaws shall provide for at least six
---------
Directors and the Company's Board of Directors shall have resolved to appoint
Irwin Lieber to the position of Director effective as of the Closing.
5.11 Minimum Shares Purchased. A minimum of 2,285,696 shares of
------------------------
Series B Stock shall be purchased by the Investors at the Closing under this
Agreement for a minimum aggregate purchase price of $8,000,000 and, effective as
of the Closing, the Convertible Note shall be converted into an aggregate of
571,428 shares of Series B Stock.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
--------------------------------------------------
the Company to each Investor under this Agreement are subject to the fulfillment
or waiver on or before the Closing of each of the following conditions by such
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of such Investor contained in Section 4 shall be true and correct on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 Payment of Purchase Price. Each Investor shall have delivered to
-------------------------
the Company the purchase price specified for such Investor on Exhibit A in
---------
accordance with the provisions of Section 2.
6.3 Restated Certificate Effective. The Restated Certificate shall
------------------------------
have been accepted by the Secretary of State of the State of Delaware.
6.4 Securities Exemptions. The offer and sale of the Purchased
---------------------
Shares to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
6.5 Registration Rights Agreement. Each Investor shall have
-----------------------------
14
<PAGE>
executed and delivered the Registration Rights Agreement and the Voting
Agreement.
6.6 Minimum Shares Purchased. A minimum of 2,285,696 shares of
------------------------
Series B Stock shall be purchased by the Investors at the Closing under this
Agreement for a minimum aggregate purchase price of $8,000,000.00 and, effective
as of the Closing, the Convertible Note shall be converted into an aggregate of
571,428 shares of Series B Stock.
7. COVENANTS OF THE COMPANY.
------------------------
7.1 Delivery of Financial Statements.
--------------------------------
(a) The Company shall furnish to each Investor as soon as
practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company (one hundred and twenty days in the case of the
fiscal year ending December 31, 1995), an income statement for such fiscal year,
a balance sheet of the Company and statement of stockholders' equity as of the
end of such year, and a schedule as to the sources and applications of funds for
such year, such year-end financial reports to be in reasonable detail, prepared
in accordance with GAAP, and audited by a nationally recognized firm of
independent public accountants selected by the Company and approved by its Board
of Directors.
(b) The Company shall deliver to each Investor as soon as
practicable, but in any event within sixty (60) days after the end of each of
the first three (3) quarters of each fiscal year of the Company, an unaudited
income statement, schedule as to the sources and application of funds for such
fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter.
(c) The Company shall furnish to each Investor who (together with
Investors which control it, are controlled by it, or are under common control
with it) holds at least 800,000 shares of Series B Preferred Stock or Common
Stock issued upon conversion thereof (each a "Major Investor") as soon as
practicable, but in any event within thirty (30) days after the end of each
month, an unaudited income statement and balance sheet as of the end of such
month, in reasonable detail.
(d) The Company shall furnish to each Major Investor as soon as
practicable, but in any event thirty (30) days after the end of each fiscal year
(sixty (60) days in the case of the fiscal year ended December 31, 1995), a
budget and business plan for the next fiscal year; provided, however, that the
Company's obligation to furnish a business plan may be waived by the Board of
Directors (either by express waiver or by the failure of the Board of Directors
to request preparation of a business plan).
15
<PAGE>
(e) Notwithstanding any provisions contained in this Section 7.1 to
the contrary, the Company shall not be obligated under this Section 7.1 to
provide information which it deems in good faith to be a trade secret or similar
confidential information.
7.2 Inspection. The Company shall permit each Major Investor, at
----------
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, and shall provide such other
information as may reasonably be requested by such, all at such reasonable times
as may be requested by the Major Investor; provided, however, that the Company
-------- -------
shall not be obligated pursuant to this Section 8.2 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information except to Major Investors who execute a confidentiality
agreement in such form as the Company may reasonably request.
8. MISCELLANEOUS.
-------------
8.1 Survival of Warranties and Covenants. The representations,
------------------------------------
warranties and covenants of the Company and the Investors contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of any of the Investors,
their counsel or the Company, as the case may be. The Company's obligations
under Section 7.1 and 7.2 shall terminate (a) immediately prior to the closing
of an underwritten public offering pursuant to a registration statement (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a transaction pursuant to Rule 145 under the Securities Act of 1933, as
amended (the "Act")) under the Act covering the Company's Common Stock, which
results in aggregate cash proceeds (prior to underwriters' commissions and
expenses) to the Company and any selling stockholder of at least $15,000,000,
and which has a public offering price of not less than $5.25 per share (as
appropriately adjusted for stock splits, combinations, reclassifications and the
like), or (b)upon an acquisition of the Company by another corporation or entity
by consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) or more of the voting power of the corporation or other entity
surviving such transaction.
8.2 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
16
<PAGE>
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the internal laws of the State of New York as applied to agreements among
New York residents entered into and to he performed entirely within New York,
without reference to principles of conflict of laws or choice of laws.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Headings. The headings and captions used in this Agreement are
--------
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on Exhibit A or, in the case of the Company, at
---------
Giga Information Group, Inc.
One Longwater Circle
Norwell, MA 02061
Attention: Vice President - Finance
with a copy to:
Thomas A Bevilacqua, Esq.
Brobeck, Phieger & Harrison
One Market, Spear Street Tower
San Francisco, CA 94105
or at such other address as any party or the Company may designate by giving ten
(10) days advance written notice to all other parties.
8.7 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for all of the Investors not to exceed $18,000.
17
<PAGE>
8.8 No Finder's Fees. Each party represents that it neither is nor
----------------
will be obligated for any finder's or broker's fee or commission in connection
with this transaction, except as disclosed in the Placement Memorandum. Each
Investor agrees to indemnity and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' or broker's fee
(and any asserted liability) for which the Investor or any of its officers,
partners, employees, or representatives is responsible. The Company agrees to
indemnity and hold harmless each Investor from any liability for any omission or
compensation in the nature of a finder's or broker's fee (and any asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
8.9 Amendments and Waivers. Except as specified in Section 2.2, any
----------------------
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of Purchased Shares and/or Conversion Shares representing at
least a majority of the aggregate number of shares of Common Stock into which
the Purchased Shares then are convertible and/or have been converted (excluding
any of such shares that have been sold to the public or pursuant to SEC Rule
144). Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any Purchased Shares and/or Conversion Shares at the
time outstanding, each future holder of such securities, and the Company;
provided, however, that no condition set forth in Section 5 may be waived with
- --------- -------
respect to any Investor who does not consent thereto; and provided further, that
-------- -------
New Investors may become parties to this Agreement in accordance with Section
2.2 without any amendment of this Agreement or any consent or approval of any
Investor.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
8.11 Entire Agreement. This Agreement, together with all exhibits and
----------------
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
8.12 Further Assurances. From and after the date of this Agreement,
------------------
upon the request of any Investor or the Company, the Company and the Investors
shall execute and deliver such instruments, documents or other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
18
<PAGE>
SIGNATURE PAGE TO THE
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
- -----------
GIGA INFORMATION GROUP, INC.
(A DELAWARE CORPORATION)
By: /s/ Gideon Gartner
-------------------
Title:
----------------
19
<PAGE>
SIGNATURE PAGE TO THE
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THE INVESTORS:
- -------------
Name of Investor:
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
Montsol Investments NV
By: S/2/ Technology Corp.
By: /s/ Seymour L. Goldblatt
-----------------------------------
Title: President S/2/ Technology Corp.
--------------------------------
Executive Technology L.P.
By: S/2/ Technology Corp. its General Partner
By: /s/ Seymour L. Goldblatt
-----------------------------------
Title: President S/2/ Technology Corp.
--------------------------------
which is the GP of Executive Technology
- ---------------------------------------
Core Technology Fund Inc.
By: /s/ Seymour L. Goldblatt
-----------------------------------
Title: Managing Director
--------------------------------
Sci Tech Investment Partners L.P.
By: S/2/ Technology Corp., its General Partner
By: /s/ Seymour L. Goldblatt
-----------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
which is the GP of Sci-Tech Investment
- --------------------------------------
Partner
- --------------------------------------
The Matrix Technology Group NV
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: Managing Director
---------------------------------
Yale University
By: S/2/ Technology Corp.
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
Yale University Retirement Plan for Staff Employees
By: S/2/ Technology Corp.
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
20
<PAGE>
SG Partners L.P.
By: S/2/ Technology Corp., its General Partner
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
which is the GP of SG Partners
- ---------------------------------------
Derek Lemke-von Ammon
/s/ Derek Lemke-von Ammon
--------------------------
(Derek Lemke-von Ammon)
Haussmann Holdings
By: /s/ Dana Schmidt
-----------------------------------
Title: Principal
---------------------------------
Montgomery Growth Partners, L.P.
By: /s/ Dana Schmidt
-----------------------------------
Title: Principal
--------------------------------
Its General Partner, Montgomery Asset Management, L.P.
Montgomery Growth Partners, II, L.P.
By: /s/ Keith High
-----------------------------------
Title: Keith High
--------------------------------
Its General Partner
Nosrob Investments, Ltd.
By: /s/ Dana Schmidt
-----------------------------------
Title: Principal
--------------------------------
Quota Fund, N.V.
By: /s/ Dana Schmidt
------------------------------------
Title: Principal
---------------------------------
Montgomery Small Cap Partners III, L.P.
By: /s/ Keith High
------------------------------------
Title: Keith High
---------------------------------
Its General Partner
21
<PAGE>
Lagunitas Partners, L.P.
By: /s/ John D. Gruber
------------------------------------
Gruber & McBaine International
By: /s/ J. Patterson McBaine
------------------------------------
Jon D. Gruber
/s/ John D. Gruber
--------------------------------------
J. Patterson McBaine
/s/ J. Patterson McBaine
--------------------------------------
(J. Patterson McBaine)
Kensington Partners L.P.
By: /s/ Dick Keim , its General Partner
-----------------------------
By: Dick Keim
Title:
---------------------------------
Acorn Investment Trust
By:/s/ Roger Wagner
------------------------------------
Title: Chief Executive Officer
---------------------------------
22
<PAGE>
EXHIBIT A
---------
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- -------
<S> <C> <C> <C>
CLOSING OF NOVEMBER 9, 1995
1. Geo Capital
21st Century Communications Partners, L.P. 968,615 $ 3,390,150.00 11/14
767 Fifth Avenue
New York, NY 10153
Attention: Mr. Matthew Smith
21st Century Communications Foreign Partners, L.P. 130,397 $ 456,390.00 11/14
767 Fifth Avenue
New York, NY 10153
Attention: Mr. Matthew Smith
21st Century Communications T-E Partners, L.P. 329,560 $ 1,153,460.00 11/14
767 Fifth Avenue
New York, NY 10153
Attention: Mr. Matthew Smith
2. S. Squared
Montsol Investments N.V. 26,460 $ 92,610.00 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
Executive Technology L.P. 66,080 $ 231,280.00 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
Core Technology Fund Inc. 184,339 $ 645,186.50 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
</TABLE>
A-1
<PAGE>
<TABLE>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- ------
<S> <C> <C> <C>
Sci-Tech Investment Partners L.P. 98,058 $ 343,203.00 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
The Matrix Technology Group N.V. 39,746 $ 139,111.00 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
Yale University 332,581 $ 1,164,033.50 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
Yale University Retirement Plan for Staff Employees 25,752 $ 90,132.00 11/14
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
SG Partners L.P. 84,127 $ 294,444.50 11/13
c/o S/2/ Technology Corp.
515 Madison Avenue, Suite 4200
New York, NY 10022
Attention: Ms. Nancy Sprague
3. Wanger
Acorn Fund 600,000 $ 2,100,000.00 11/08
c/o Wagner Asset Management
227 West Monroe Street
Chicago, IL 60606
Attention: Ms. Ellie Giorgis
4. Montgomery
</TABLE>
A-2
<PAGE>
<TABLE>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- ------
<S> <C> <C> <C>
Montgomery Small Cap Partners III, L.P. 40,000 -$140,000.00 11/08
c/o Fiduciary Trust (Cayman) Limited
One Capital Place
P.O. Box 1062
George Town, Grand Cayman, Cayman Islands
Attention: Dana Schmidt
Montgomery Asset Management 224,000 $ 784,000.00 11/08
600 Montgomery Street
San Francisco, CA 94111
Attention: Dana Schmidt
Haussmann Holdings 288,000 $ 1,008,000.00 11/08
c/o Montgomery Asset Management
600 Montgomery Street
San Francisco, CA 94111
Attention: Dana Schmidt
Montgomery Growth Partners, L.P. 400,000 $ 140,000.00 11/08
c/o Montgomery Asset Management
600 Montgomery Street
San Francisco, CA 94111
Attention: Dana Schmidt
Montgomery Growth Partners II, L.P. 96,000 $ 336,000.00 11/08
c/o Fiduciary Trust (Cayman) Limited
One Capital Place
George Town, Grand Cayman, Cayman Islands
Attention: Dana Schmidt
Nosrob Investments Ltd. 48,000 $ 168,000.00 11/08
c/o Montgomery Asset Management
600 Montgomery Street
San Francisco, CA 94111
Attention: Dana Schmidt
Derek Lemke-von Ammon 2,857 $ 9,999.50 11/10
c/o Montgomery Asset Management
600 Montgomery Street
San Francisco, CA 94111
5. Kensington Partners
</TABLE>
A-3
<PAGE>
<TABLE>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- ------
<S> <C> <C> <C>
Kensington Partners, L.P. 88,000 -$308,000.00 11/13
237 Park Avenue
New York, New York 10017
Attention: Dick Kine
6. Gruber & McBaine
Lagunitas Partners, L.P. 221,400 $ 774,900.00 11/09
c/o Gruber and McBaine Capital Management
50 Osgood Place
San Francisco, CA 94133
Gruber & McBaine International 35,680 $ 124,880.00 11/09
c/o Gruber and McBaine Capital Management
50 Osgood Place
San Francisco, CA 94133
Jon D. Gruber 28,560 $ 99,960.00 11/09
c/o Gruber and McBaine Capital Management
50 Osgood Place
San Francisco, CA 94133
J. Patterson McBaine 28,560 $ 99,960.00 11/09
c/o Gruber and McBaine Capital Management --------------
50 Osgood Place
San Francisco, CA 94133
Total: $14,093,700.00
==============
</TABLE>
A-4
<PAGE>
AMENDMENT NO. 1 TO SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 dated as of December 5, 1995 to the Series B Preferred
Stock Purchase Agreement, dated November 13, 1995 (the "Purchase Agreement") by
and among Giga Information Group, Inc. (the "Company"), and the purchasers
listed on Exhibit A thereto (the "Purchasers").
WHEREAS, Section 2.2(a) of the Purchase Agreement, as executed on November
13, 1995, provides that:
Conditions of Additional Closing. At any time or times within thirty (30)
--------------------------------
days immediately following the Closing, the Company may, at one or more closings
(each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or
permission of any of the Investors, offer and sell to other investors ("NEW
INVESTORS"), at a price of not less than $3.50 per share, up to that number of
shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock
less the number of shares of Series B Stock actually issued and sold by the
Company prior to such Additional Closing pursuant to this Agreement and upon
conversion of the Convertible Note (as defined in Section 3.4(c)). New
Investors may include persons or entities who are already Investors under this
Agreement.
WHEREAS, the Company has requested an extension of the period in which it
may hold an Additional Closing to enable it to offer and sell shares of its
Series B Preferred Stock ("Series B Stock") to certain persons who are currently
stockholders, directors, or officers of, or advisors to, or who have other
business relationships with, the Company;
WHEREAS, the parties hereto wish to amend the Series B Purchase Agreement
pursuant to Section 8.9 thereof, to provide for such an extension, as
hereinafter provided;
NOW THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. The Company and each of the Purchasers signing below hereby agree that
Section 2.2(a) of the Purchase Agreement is hereby amended to read in its
entirety as follows:
Conditions of Additional Closing. At any time or times on or before January
--------------------------------
20, 1996, the Company may, at one or more closings (each an "ADDITIONAL
CLOSING"), without obtaining the signature, consent or permission
A-5
<PAGE>
of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at
a price of not less than $3.50 per share, up to that number of shares of Series
B Stock that is equal to 5,142,856 shares of Series B Stock less the number of
shares of Series B Stock actually issued and sold by the Company prior to such
Additional Closing pursuant to this Agreement and upon conversion of the
Convertible Note (as defined in Section 3.4(c)); provided that each New Investor
shall have been, as of November 13, 1995: (i) an employee of, or advisor to,
the Company, (ii) an individual specified in Exhibit I to Amendment No. 1 to the
---------
Purchase Agreement, or (iii) an affiliate of any of the foregoing. New
Investors may include persons or entities who are already Investors under this
Agreement.
Wherever the Purchase Agreement is itself referred to in the Purchase
Agreement, it shall mean the Purchase Agreement as amended by this Amendment No.
1.
2. The Company and the New Investors purchasing Series B Stock at any
Additional Closing will execute counterpart signature pages to this Agreement,
the Registration Rights Agreement, the Voting Agreement and the Co-Sale
Agreement (each as defined in the Purchase Agreement), and such New Investors
will, upon delivery to the Company of such signature pages, become parties to,
and bound by, this Agreement, the Registration Rights Agreement, the Voting
Agreement and the Co-Sale Agreement, each to the same extent as if they had been
Investors at the Closing. Immediately after any Additional Closing, Exhibit A to
---------
the Purchase Agreement will be amended by the Company to list the New Investors
purchasing shares of Series B Stock hereunder and the number of shares of Series
B Stock purchased by each New Investor under the Purchase Agreement at the
Additional Closing.
3. Upon the completion of an Additional Closing as provided in the
Purchase Agreement as amended hereby, each New Investor will be deemed to be an
"INVESTOR" for all purposes of the Purchase Agreement, the Registration Rights
Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of
the Voting Agreement.
4. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
A-6
<PAGE>
IN WITNESS WHEREOF, the undersigned (or sufficient of them) have executed
this Amendment No. 1 to the Series B Preferred Stock Purchase Agreement as of
the date first written above.
THE COMPANY:
- -----------
GIGA INFORMATION GROUP, INC.
(a Delaware corporation)
By:/s/Gideon Gartner
------------------------------
Title:
---------------------------
A-7
<PAGE>
SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THE INVESTORS:
- -------------
Name of Investor:
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
------------------------------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------------------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------------------------
Irwin Lieber
Title: Treasurer
A-8
<PAGE>
Montsol Investments NV
By: S/2/ Technology Corp.
By:/s/Seymour L. Goldblatt
-----------------------------------
Title: President S/2/ Technology Corp.
--------------------------------
Executive Technology L.P.
By: S/2/ Technology Corp. its General Partner
By:/s/Seymour L. Goldblatt
-----------------------------------
Title: President S/2/ Technology Corp.
--------------------------------
which is the GP of Executive Technology
- ---------------------------------------
Core Technology Fund Inc.
By: /s/Seymour L. Goldblatt
-----------------------------------
Title: Managing Director
--------------------------------
A-9
<PAGE>
Sci Tech Investment Partners L.P.
By: S/2/ Technology Corp., its General Partner
By: /s/Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
which is the GP of Sci-Tech Investment
- ---------------------------------------
Partner
- -------
The Matrix Technology Group NV
By:/s/Seymour L. Goldblatt
------------------------------------
Title: Managing Director
---------------------------------
Yale University
By: S/2/ Technology Corp.
By:/s/Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
Yale University Retirement Plan for Staff Employees
By: S/2/ Technology Corp.
By:/s/Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
A-10
<PAGE>
SG Partners L.P.
By: S/2/ Technology Corp., its General Partner
By:/s/Seymour L. Goldblatt
-------------------------------------
Title: President, S/2/ Technology Corp.
----------------------------------
which is the GP of SG Partners
- ----------------------------------------
A-11
<PAGE>
Derek Lemke-von Ammon
/s/ Derek Lemke-von Ammon
--------------------------
(Derek Lemke-von Ammon)
A-12
<PAGE>
Kensington Partners L.P.
By:/s/Dick Keim
------------------------------------
By: Dick Keim
Title:
---------------------------------
Acorn Investment Trust
By: /s/Roger Wagner
------------------------------------
Title: Chief Executive Officer
--------------------------------
A-13
<PAGE>
AMENDMENT NO.2 TO SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 dated as of February 19, 1996 to the Series B
Preferred Stock Purchase Agreement, dated November 13, 1995 (the "Purchase
Agreement") by and among Giga Information Group, Inc. (the "Company"), and the
purchasers listed on Exhibit A thereto (the "Purchasers").
WHEREAS, Section 2.2(a) of the Purchase Agreement, as executed on November
13, 1995, provides that:
Conditions of Additional Closing. At any time or times within thirty (30)
--------------------------------
days immediately following the Closing, the Company may, at one or more closings
(each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or
permission of any of the Investors, offer and sell to other investors ("NEW
INVESTORS"), at a price of not less than $3.50 per share, up to that number of
shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock
less the number of shares of Series B Stock actually issued and sold by the
Company prior to such Additional Closing pursuant to this Agreement and upon
conversion of the Convertible Note (as defined in Section 3.4(c)). New
Investors may include persons or entities who are already Investors under this
Agreement.
WHEREAS, the Company has requested an extension of the period in which it
may hold an Additional Closing to enable it TO OFFER and sell shares of its
Series B Preferred Stock ("Series B Stock") to certain persons who are currently
stockholders, directors, or officers of, or advisors to, or who have other
business relationships with, the Company;
WHEREAS, the parties hereto wish to amend the Series B Purchase Agreement
pursuant to Section 8.9 thereof, to provide for such an extension, as
hereinafter provided;
NOW THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. The Company and each of the Purchasers signing below hereby agree that
Section 2.2(a) of the Purchase Agreement is hereby amended to read in its
entirety as follows:
Conditions of Additional Closing. At any time or times on or before
--------------------------------
February 29, 1996, the Company may, at one or more closings (each an "ADDITIONAL
CLOSING"), without obtaining the signature, consent or permission
A-14
<PAGE>
of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at
a price of not less than $3.50 per share, up to that number of shares of Series
B Stock that is equal to 5,400,000 shares of Series B Stock less the number of
shares of Series B Stock actually issued and sold by the Company prior to such
Additional Closing pursuant to this Agreement and upon conversion of the
Convertible Note (as defined in Section 3.4(c)); provided that each New Investor
shall have been, as of November 13, 1995: (i) an employee of, or advisor to,
the Company, (ii) an individual specified in Exhibit I to Amendment No. 2 to the
---------
Purchase Agreement, or (iii) an affiliate of any of the foregoing. New Investors
may include persons or entities who are already Investors under this Agreement.
Wherever the Purchase Agreement is itself referred to in the Purchase
Agreement, it shall mean the Purchase Agreement as amended by this Amendment
No.2.
2. The Company and the New Investors purchasing Series B Stock at any
Additional Closing will execute counterpart signature pages to this Agreement,
the Registration Rights Agreement, the Voting Agreement and the Co-Sale
Agreement (each as defined in the Purchase Agreement), and such New Investors
will, upon delivery to the Company of such signature pages, become parties to,
and bound by, this Agreement, the Registration Rights Agreement, the Voting
Agreement and the Co-Sale Agreement, each to the same extent as if they had been
Investors at the Closing. Immediately after any Additional Closing, Exhibit A to
---------
the Purchase Agreement will be amended by the Company to list the New Investors
purchasing shares of Series B Stock hereunder and the number of shares of Series
B Stock purchased by each New Investor under the Purchase Agreement at the
Additional Closing.
3. Upon the completion of an Additional Closing as provided in the
Purchase Agreement as amended hereby, each New Investor will be deemed to be an
"INVESTOR" for all purposes of the Purchase Agreement, the Registration Rights
Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of
the Voting Agreement.
4. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
A-15
<PAGE>
IN WITNESS WHEREOF, the undersigned (or sufficient of them) have executed
this Amendment No. 2 to the Series B Preferred Stock Purchase Agreement as of
the date first written above.
THE COMPANY:
- -----------
GIGA INFORMATION GROUP, INC.
(a Delaware corporation)
By: /s/ Kenneth E Marshall
------------------------------------
Title: President & CEO
-----------------------------
A-16
<PAGE>
SIGNATURE PAGE TO AMENDMENT NO.2 TO THE
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THE INVESTORS:
- -------------
Name of Investor:
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-------------------------------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-------------------------------------
Irwin Lieber
Title: Treasurer
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
------------------------------------
Irwin Lieber
Title: Treasurer
A-17
<PAGE>
Montsol Investments NV
By: S/2/ Technology Corp.
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: President S/2/ Technology Corp.
---------------------------------
Executive Technology L.P.
By: S/2/ Technology Corp. its General Partner
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: President S/2/ Technology Corp.
---------------------------------
which is the GP of Executive Technology
- ---------------------------------------
Core Technology Fund Inc.
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: Managing Director
---------------------------------
A-18
<PAGE>
Sci Tech Investment Partners L.P.
By: S/2/ Technology Corp., its General Partner
By: /s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
which is the GP of Sci-Tech Investment
- ---------------------------------------
Partner
- ---------------------------------------
The Matrix Technology Group NV
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: Managing Director
--------------------------------
Yale University
By: S/2/ Technology Corp.
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
Yale University Retirement Plan for Staff Employees
By: S/2/ Technology Corp.
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
A-19
<PAGE>
SG Partners L.P.
By: S/2/ Technology Corp., its General Partner
By:/s/ Seymour L. Goldblatt
------------------------------------
Title: President, S/2/ Technology Corp.
---------------------------------
which is the GP of SG Partners
- ---------------------------------------
A-20
<PAGE>
Derek Lemke-von Ammon
/s/ Derek Lemke-von Ammon
--------------------------
(Derek Lemke-von Ammon)
A-21
<PAGE>
Kensington Partners L.P.
By: /s/ Dick Keim
-------------------------------------
By: Dick Keim
Title: General Partner
---------------------------------
Acorn Investment Trust
By:/s/ Roger Wagner
------------------------------------
Title: Cheif Executive Officer
---------------------------------
A-22
<PAGE>
<TABLE>
<CAPTION>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- ------
<S> <C> <C> <C>
CLOSING OF FEBRUARY 29, 1996
Neill and Linda Brownstein 16,000 $ 56,000.00 2/29
536 West Crescent Drive
Palo Alto, CA 94301
Adam J. Brownstein 6,000 $ 21,000.00 2/29
536 West Crescent Drive
Palo Alto, CA 94301
Todd D. Brownstein 6,000 $ 21,000.00 2/29
536 West Crescent Drive
Palo Alto, CA 94301
Will P. Gordon 6,000 $ 21,000.00 2/29
536 West Crescent Drive
Palo Alto, CA 94301
Emily G. Hamilton 6,000 $ 21,000.00 2/29
536 West Crescent Drive
Palo Alto, CA 94301
Richard J. Foudy 14,286 $ 50,001.00
780 Cedar Brook Lane
Southport, CT 06490
Cornelius T. Ryan 14,286 $ 50,001.00
315 Post Road West
Westport, CT 06880
Frederick G. Smith 57,143 $ 200,000.50
435 East 57th Street, Apt. 5C
New York, NY 10022
Michael J. Kolesar 20,000 $ 70,000.00 2/28
Giga Information Group, Inc.
1 Longwater Circle
Norwell, MA 02061
Christopher J. DiVecchio 6,000 $ 21,000.00 2/28
254 Main Street, #1C
Southport, CT 06490
</TABLE>
A-23
<PAGE>
<TABLE>
Shares Cash Date
Investor Name Purchased Tendered Rec'd
------------- --------- --------- ------
<S> <C> <C> <C>
Martin P. DuRoss 1,300 $ 4,550.00 2/28
15120 Eclipse Drive
Manassas, VA 22111
Susan Tracy Wheeler 25,000 $ 87,500.00 2/28
2 Bonnie Brook Road
Westport, Connecticut 06880
John B. Landry 28,571 $ 99,998,50
62 Old Connecticut Path
Wayland, MA 01778
RRE Giga Investors II, L.P. 288,571 $ 1,009,998.50 2/28
126 East 56th Street, 22nd Floor
New York, New York 10022
Attention: Mr. Stuart Ellman
Harry Edelson 14,286 $ 50,001.00
Edelson Technology Partners
Whiteweld Centre
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Edelson Technology Partners III 85,715 $ 300,002.50
Whiteweld Centre
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Attention: Mr. Harry Edelson
Derek Lemke-von Ammon 2,857 $ 9,999.50 2/28
Montgomery Securities
600 Montgomery Street
San Francsico, CA 94111
Gilo Family Partnership 16,000 $ 56,000.00 2/28
100 Why Worry Lane
Woodside, CA 94062
Attention: Davidi Gilo
Robert E. Cook 60,000 $ 210,000.00 2/28
572 Park Avenue, 2nd Floor --------------
Park City, UT 84060
Total: $ 2,359,052.50
==============
</TABLE>
A-24
<PAGE>
THE INVESTORS:
- -------------
Name of Investor:
Neill and Linda Brownstein
- --------------------------------------
By: /s/ Neill H. Brownstein
----------------------------------
Name:
----------------------------------
Title:
---------------------------------
Name of Investor:
Adam J. Brownstein
- ---------------------------------------
By:/s/ Adam J. Brownstein
------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
Name of Investor:
Robert E. Cook
- ---------------------------------------
By:/s/ Robert E. Cook
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-25
<PAGE>
Name of Investor:
Christopher J. DiVecchio
- ------------------------
By: /s/ Christopher J. DiVecchio
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Name of Investor:
By: /s/ Martin P. DuRoss
------------------------------------
Name: Martin P. DuRoss
----------------------------------
Title:
---------------------------------
Name of Investor:
Harry Edelson
- ---------------------------------------
By:/s/ Harry Edelson
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Name of Investor:
Edelson Technology Partners III
- ---------------------------------------
By: /s/ Harry Edelson
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-26
<PAGE>
Name of Investor:
Richard J. Foudy
- ----------------------------------------
By: /s/ Richard J. Foudy
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Name of Investor:
Gilo Family Partnership
- ---------------------------------------
By: /s/ Davidi Gilo
----------------------------------
Name: Davidi Gilo
----------------------------------
Title:
----------------------------------
Name of Investor:
Michael J. Kolesar
- --------------------------------------
By:/s/ Michael J. Kolesar
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-27
<PAGE>
Name of Investor:
/s/ John B. Landry
- ---------------------------------------
By: John B. Landry
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Name of Investor:
Derek Lemke-von Ammon
- ---------------------------------------
By: /s/ Derek Lemke-von Ammon
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Name of Investor:
RRE GIGA INVESTORS II, L.P.
By: RRE PARTNERS, L.L.C.,
as General Partner
- ---------------------------------------
By: RRE Investors, L.L.C.,
as Managing Member
By: /s/ Stuart J. Ellman
----------------------------------
Name: Stuart J. Ellman
-----------------------------------
Title: Class A Member
-----------------------------
Name of Investor:
Cornelius T. Ryan
- ---------------------------------------
By: /s/ Cornelius T. Ryan
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-28
<PAGE>
Name of Investor:
Frederick G. Smith
- ---------------------------------------
By: /s/ Frederick G. Smith
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Name of Investor:
Susan Tracy Wheeler
- ---------------------------------------
By: /s/ Susan Tracy Wheeler
----------------------------------
Name:
----------------------------------
Title:
---------------------------------
Name of Investor:
Will P. Gordon
- ---------------------------------------
By: /s/ Will P. Gordon
----------------------------------
Name of Investor:
Todd D. Brownstein
- ---------------------------------------
By: /s/ Todd D. Brownstein
----------------------------------
Name of Investor:
Emily G. Hamilton
- ---------------------------------------
By: /s/ Neill H. Brownstein
----------------------------------
Father
A-29
<PAGE>
EXHIBIT 10.4
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement")
is made as of August ___, 1995 by and between Giga information Group, inc., a
Delaware corporation (the "Company"), and RRE Giga investors, L.P. (the
"Purchaser"/1/).
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Notes and Warrants.
---------------------------------------
1.1 Sale and issuance of Notes and Warrants. Subject to the terms and
---------------------------------------
conditions of this Agreement, the Purchaser agrees to purchase from the Company,
and the Company agrees to sell and issue to the Purchaser, at the Closing (as
defined below), its convertible promissory note, in an aggregate principal
amount of $2,000,000, in the form attached as Exhibit I (the "Note"") and a
warrant to purchase shares of its Series B Preferred Stock in the form attached
as Exhibit II (the "Warrant"), for an aggregate purchase price of $2,000,000
(the "Purchase Price"), of which $1,990,000 shall be allocable to the Note and $
10,000 shall be allocable to the Warrant.
1.2 Closing. The purchase and sale of the Notes and Warrants shall
-------
take place at the offices of Brobeck, Phleger & Harrison, One Market, Spear
Street Tower, San Francisco, California, 94105, concurrently with the execution
and delivery of this Agreement by the parties (the "Closing"), or at such other
time and place as the Company and the Purchaser mutually agree upon, orally or
in writing. At the Closing, the Company shall deliver the Note and Warrants to
the Purchaser against delivery to the Company by the Purchaser of the Purchase
Price.
2. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Purchasers that:
2.1 Organization. Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
-1-
<PAGE>
2.2 Capitalization. The authorized capital of the Company consists,
--------------
or will consist, immediately prior to the Closing, of:
(a) Preferred Stock. 1,000,000 shares of Preferred Stock, of which
---------------
945,000 shares are designated as Series A Preferred Stock, 545,000 of which
shares
of Series A Preferred Stock will be issued and outstanding immediately prior to
the Closing, and the rights, privileges and preferences of which are as stated
in the Restated Certificate of incorporation.
(b) Common Stock. 5,000,000 shares of Common Stock, of which no more
------------
than 1,493,000 shares will be issued and outstanding immediately prior to the
Closing.
(c) immediately prior to the Closing, and assuming the conversion of
the Series A Preferred Stock, the granting of any stock options then committed
to be granted and the acceleration of vesting and exercise of options to
purchase shares of Common Stock granted or committed to employees, future
employees, directors or consultants of the Company, the number of shares of
Common Stock outstanding would not exceed 2,558,500. There are no outstanding
options, warrants, rights (including conversion or preemptive rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock, other than (a) those options,
warrants, rights and agreements the exercise or conversion of which is assumed
in the preceding sentence, (b) a warrant to purchase 25,000 shares of Preferred
Stock agreed to be issued to Montgomery Securities in connection with its
services as placement agent, (c) convertible note dated April 5,1995 payable to
Friday Holdings, L.P. or it successors and assigns, a copy of which has been
provided to counsel for the Purchaser, and (d) up to 40,000 shares of Common
Stock issuable to David Gilmour pursuant to the terms of the Stock Purchase
Agreement dated July 6,1995, between Giga and Mr. Gilmour (a copy of which has
been provided to counsel for the Purchaser).
2.3 Authorization. All corporate action on the part of the Company,
-------------
and each of its officers, directors and shareholders, necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Note and Warrants, the Series A Preferred Stock
initially issuable upon conversion of the Note (the "Preferred Shares") and the
Common Stock issuable upon conversion of the Preferred Shares (collectively, the
"Securities") has been taken or will be taken prior to the Closing. This
Agreement constitutes, and when executed and delivered by the Company, the Note
and Warrants shall constitute, valid and
-2-
<PAGE>
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
2.4 Valid issuance of Securities. The Preferred Shares, when issued,
----------------------------
sold and delivered in accordance with the terms of the Warrants for the
consideration provided for therein or upon conversion of the Note, will be duly
and validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under applicable state and federal
securities laws. The Common Stock issuable upon conversion of the Preferred
Shares has been duly and validly reserved for issuance, and upon issuance in
accordance with the terms of the Restated Certificate of Incorporation, will be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer UNDER applicable state and
federal securities laws.
2.5 Governmental Consents. No consent, approval, order or
---------------------
authorization of or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for appropriate state securities filings
and for the filing pursuant to Rule 503 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), which filing will be
effected in accordance with such rule.
2.6 Corporate Documents. The Restated Certificate of incorporation
-------------------
and Bylaws of the Company are in the forms attached hereto as Exhibit ill.
2.7 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default in any material respect of any provision of its Restated
Certificate of incorporation or Bylaws, or any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound, or, to
the best of its knowledge, of any provision of any federal or state statute,
rule or regulation applicable to the Company, in each case which violation or
default could reasonably be expected to have a material adverse effect on the
business, operations or prospects of the Company. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company.
2.8 Litigation. To the Company's knowledge, there is no action, suit,
----------
proceeding or investigation pending or currently threatened against the Company
that questions the validity of this Agreement, the Warrant or the Note, or the
right of
-3-
<PAGE>
the Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that could reasonably be expected to have a
material adverse effect on the business, operations or prospects of the Company.
2.9 Not an investment Company. The Company is not an "investment
-------------------------
company" or an entity "controlled" by an "investment company," as such terms are
defined in the investment Company Act of 1940, as amended.
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
hereby represents and warrants to the Company that:
3.1 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser understands that this sale of the Note and Warrants
has not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the Purchaser's
investment intent and the accuracy of the Purchaser's representations as
expressed herein.
3.2 Disclosure of information. The Purchaser believes it has received
-------------------------
all the information it considers necessary or appropriate for deciding whether
to acquire the Securities. The Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
organization, operations and plans of the Company and the terms and conditions
of the offering of the Securities. The Purchaser acknowledges that (i) the
Company is in its start-up stage; (ii) Purchaser's investment is highly
speculative and risky and Purchaser could lose its entire investment; and (iii)
the Purchaser is relying upon not only the representations and covenants
contained in this Agreement but also its own investigation of the Company. The
Purchaser has received a draft dated August 3, 1995 of the Company's Private
Placement Memorandum relating to its private placement of its Series B
Convertible Preferred Stock (the "Draft Memorandum"), and acknowledges that the
Draft Memorandum is only a draft and is subject to revision,
-4-
<PAGE>
which may materially change the information and projections set forth therein,
and that no representation is made with respect thereto.
3. Investment Experience. The Purchaser has substantial experience in
---------------------
evaluating and investing in private placement transactions and in the securities
of companies in the development stage, and the Purchaser acknowledges that
Purchaser is capable of evaluating the merits and risks of the Purchaser's
investment in the Company. The Purchaser, by reason of its business or financial
experience or the business or financial experience of its professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, has the
capacity to protect its own interests in connection with the purchase of the
Note and Warrants hereunder. The Purchaser acknowledges that it and its partners
can bear the economic risk and complete loss of its investment.
3.4 Restricted Securities. Purchaser understands that the Note and
---------------------
Warrants are "restricted securities" under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations the Note and
Warrants may be resold without registration under the Securities Act only in
certain limited circumstances. in this respect, the Purchaser represents that it
is familiar with Rule 144 promulgated under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and otherwise by
the Securities Act.
3.5 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, the Purchaser further agrees not to make
any disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement, or
(b) (i) The Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a description of
the proposed disposition, and (ii) if requested by the Company, the Purchaser
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Securities Act.
3.6 Legends. it is understood that the Notes and Warrants, and any
-------
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
-5-
<PAGE>
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Covenants of the Company. The Company agrees that subject to
------------------------
Section 7.1:
4.1 Registration and Other Contractual Rights. The Company shall, at
-----------------------------------------
such time as it shall consummate a Qualified Series B Financing (as defined in
the Note), offer to the Purchaser the right to become a party, as a holder of
Series B Preferred Stock, to any agreement that the Company may enter into with
purchasers of the Series B Preferred Stock, in their capacity as such, in the
Qualified Series B Financing that sets forth rights and obligations of such
purchasers, including any stock purchase agreement, registration rights
agreement or stockholders' agreement.
4.2 Information Rights. The Company shall furnish the Purchaser with
------------------
the following financial statements for so long as the Purchaser shall hold a
Note or Notes with an aggregate principal amount of at least $500,000:
(a) Within 120 days after the end of each fiscal year, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such fiscal year, and consolidated statements of income and consolidated
statements of cash flows of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles,
audited by independent public accountants selected by the Company.
(b) Within 60 days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, by beginning
with the third quarter of 1995, a consolidated balance sheet of the company and
its subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries for such period and for the current fiscal year
to date, prepared in
-6-
<PAGE>
accordance with generally accepted accounting principles (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments.
4.3 Board of Directors. For so long as the Purchaser shall hold a
------------------
Note or Notes with an aggregate principal amount of at least $2,000,000 (or the
Preferred Stock issuable upon conversion of such principal amount), the
Purchaser will have the right to elect one member to the Board of Directors;
provided that such person must be approved by the Company (which approval shall
be deemed granted if such person is James D. Robinson III or, if James D.
Robinson III is not reasonably able to so serve, if such person is James D.
Robinson IV or Stuart Ellman).
4.4 Insurance. The Company will use its best efforts to obtain, no
---------
later than January 31, 1996, key man life insurance on Gideon Gartner in an
amount of at least $3 million, naming the Company as beneficiary. The Company
shall thereafter maintain such insurance for so long as both (a) the Purchaser
shall hold a Note or Notes with an aggregate principal amount of at least
$500,000 (or the Preferred Stock issuable upon conversion thereof) and (b)
Gideon Gartner shall remain an officer of the Company.
4.5 Employment/Non-Compete Agreement. The Company will execute an
--------------------------------
employment contract with Gideon Gartner no later than September 30, 1995. The
terms of such agreement shall be determined by the Company's Board of Directors
and Mr. Gartner; provided, that such agreement shall in any event provide for a
three-year employment term and shall include a three-year non-competition
provision.
4.6 Right to Additional Warrant. In the event that the Company shall
---------------------------
issue warrants ("Series B Financing Warrants") to purchasers of its Series B
Preferred Stock in a Qualified Series B Financing, then the Company shall issue
to the Purchaser a warrant (the "Additional Warrant") of like terms and
exercisable for the same class of stock (the "Additional Warrant Stock") as are
the Series B Financing Warrants. The number of shares issuable upon exercise of
the Additional Warrant shall equal the product of (i) the quotient of 2,000,000
divided by the gross proceeds to the Company from the sale for cash of its
Series B Preferred Stock on or before February 28, 1996 in such Qualified Series
B Financing (other than the stock issued or issuable on conversion of this
Promissory Note), multiplied by (ii) the number of shares of Additional Warrant
Stock initially issuable upon exercise of the Series B Financing Warrants. For
the purpose of any calculation hereunder or under the Note or Warrant of the
purchase price of the Series B Preferred Stock, no portion of the proceeds of
the Qualified Series B Financing shall be allocated to any Series B Financing
Warrant.
-7-
<PAGE>
5. Conditions of the Purchasers' Obligations at Closing. The
----------------------------------------------------
obligations of the Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on the Closing
with the same effect as though such representations and warranties had been made
on and as of such date.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Directors. The Company's Bylaws shall provide for five Directors
---------
and the Company's Board of Directors shall have resolved to appoint James
Robinson III to the position of Director effective as of the Closing.
5.4 Voting Agreement. A Voting Agreement in the form attached hereto
----------------
as Exhibit IV shall have been executed by the parties thereto.
6. Conditions of the Company's Obligations at Closing. The
--------------------------------------------------
obligations of the Company to the Purchaser under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of such date.
6.2 Payment of Purchase Price. The Purchaser shall have delivered
-------------------------
the Purchase Price specified in Section 1.1.
7. Miscellaneous.
-------------
7.1 Survival. Except as otherwise provided herein, the warranties,
--------
representations and covenants of the Company and the Purchaser contained in or
made pursuant to this Agreement shall survive the Closing; provided, that (a)
the covenants set forth in Section 4 (other than Sections 4.3 and 4.6) shall
terminate immediately prior to the earlier of (i) the consummation of a
Qualified Series B Financing or (ii) the closing eof a firm underwritten public
offering pursuant to a registration statement (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or
-8-
<PAGE>
similar plan or a transaction pursuant to Rule 145 under the Securities Act of
1933, as amended (the "Act")) under the Act covering the Company's Common Stock,
which results in aggregate cash proceeds (prior to underwriters' commissions and
expenses) to the Company and any selling stockholder of at least $7,500,000, and
which has a public offering price of not less than $7.50 per share (as
appropriately adjusted for stock splits, combinations, reclassifications and the
like) (a "Qualifying Public Offering), (b) the covenant set forth in Section 4.3
shall terminate immediately prior to the consummation of a Qualifying Public
Offering, and (c) the covenant set forth in Section 4.6 shall terminate
concurrently with the consummation of a Qualified Series B Financing.
7.2 Transfer: Successors and Assigns. The terms and conditions of
--------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices.
-------
(a) All notices, requests, demands and other communications under this
Agreement or in connection herewith shall be given to or made upon as follows:
If to the Purchaser: RRE Investors, L.L.C.
126 East 56th Street, 22nd Floor
New York, N.Y. 10022
Attention: Stuart Ellman
If to the Company: Giga Information Group, Inc.
c/o Michael Kolesar
-9-
<PAGE>
BIS Strategic Decisions, Inc.
One Longwater Circle
Norwell, MA 02061
with a copy to: Brobeck, Phleger & Harrison
One Market
Spear Street Tower
San Francisco, CA 94105
Attn: Thomas Bevilacqua, Esq.
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
and shall be sent by airmail, return receipt requested, or by telex or telecopy
(facsimile) with confirmation of receipt, and shall be deemed to be given or
made when receipt is so confirmed.
(c) Any party may, by written notice to the other, alter its address
or respondent, and such notice shall be considered to have been given ten (10)
days after the airmailing, telexing or telecopying thereof.
7.7 Finder's Fee. Each party agrees to indemnify and hold harmless
------------
the other party from any liability for any commission or compensation in the
nature of a finder's or broker's fee or commission (and the costs and expenses
of defending against such liability or asserted liability) for which the first
party or any of its officers, employees or representatives is responsible.
7.8 Expenses. The Company and the Purchaser shall bear their own
--------
respective expenses incurred with respect to this Agreement and the transactions
contemplated hereby, except that the Company will reimburse the Purchaser for
reasonable legal and related expenses not to exceed $20,000.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Purchaser. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
transferee of any Notes and Warrants, each future holder of the Notes and
Warrants, and the Company.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this
-10-
<PAGE>
Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Entire Agreement. This Agreement constitutes the entire
----------------
agreernent between the parties hereto pertaining to the subject matter hereof,
andy and all other prior written or oral agreements existing between the parties
hereto are expressly cancelled.
7.12 "Market Stand-Off" Agreement. The Purchaser hereby agrees that
----------------------------
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act in
connection with the Company's initial public offering of securities, it shall
not, to the extent requested by the Company and the Company's undewriter, sell,
offer to sell, or otherwise transfer or dispose of any Common Stock or preferred
stock of the Cornpany held by it at any time during such period except Common
Stock (if any) included in such registration To enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to the Common
Stock and prcferred stock held by the Purchaser (and the shares or securities of
every other person subject to the foregoing restriction) until the end of such
period. Each Purchaser agrees to execute the form of such market stand-off
agreement as may be reasonably requested by the underwriters.
COMPANY:
GIGA INFORMATION GROUP, INC. PURCHASER:
By: /s/ Michael J. Kolesar /s/ Stuart Ellman
----------------------------- ------------------------------
Title: Vice President - Finance RRE Giga Investors, L.P.
-------------------------- By: Stuart Ellman
Managing Director
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<PAGE>
EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.
Warrant No. 1 Void after
February 28, 2001
GIGA INFORMATION GROUP, INC.
PREFERRED STOCK PURCHASE WARRANT
--------------------------------
This Warrant is issued, for good and valuable consideration, receipt of
which is hereby acknowledged, to RRE Giga Investors, LP. (the "Holder") by Giga
Information Group, Inc., a Delaware corporation (the "Company"), in connection
with and as part of the issuance of a Convertible Promissory Note of even date
herewith (the "Note"). Each capitalized term not defined herein shall have the
meaning ascribed to it in the Note.
1. Purchase of Shares. Subject to the terms and conditions hereinafter
------------------
set forth, if a Qualified Series B Financing (as defined below) shall have
occurred on or before February 28, 1996, the Holder shall be entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the Holder hereof in writing), to
purchase from the Company such number of shares (the "Shares") of Series B
Preferred Stock ("Series B Preferred Stock") as shall equal the quotient
obtained by dividing 1,000,000 by the average price per share of the Series B
Preferred Stock issued as of the time the Company first consummates a Qualified
Series B Financing (excluding from the calculation of such price per share the
shares issued or issuable hereunder or upon conversion of the Note). For
example, if the Company shall consummate a Qualified Series B Financing with an
average price per share of $ 15, the aggregate number of shares issuable upon
exercise of this Warrant shall be 1,000,000/15, or 66,667 shares of Series B
Preferred Stock. In the event that the Company shall issue warrants ("Series B
Financing Warrants") to purchasers of its Series B Preferred Stock in a
Qualified Series B Financing, then the Company shall issue to the Holder a
warrant (the "Anti-Dilution Warrant") of like terms and exercisable for the same
class of stock as are the Series B Financing Warrants. The number of shares
issuable upon exercise of the Anti- Dilution Warrant shall equal the product of
the quotient of (i) 1,000,000 divided by the sum of (A) the gross proceeds to
the Company from the sale for cash of its Series B Preferred Stock on or before
February 28, 1996 in such Qualified Series B Financing (other than the
1
<PAGE>
stock issued or issuable on conversion of the Note or exercise of this Warrant)
plus (B) the aggregate initial exercise price of the Series B Financing
Warrants, multiplied by (ii) the number of shares of capital stock initially
issuable upon exercise of the Series B Financing Warrants (excluding shares of
capital stock issuable pursuant to any Additional Warrant issued pursuant to
Section 4.6 of the Purchase Agreement). For the purpose of any calculation
hereunder, of the purchase price of the Series B Preferred Stock, no portion of
the proceeds of the Qualified Series B Financing shall be allocated to any
Series B Financing Warrant. A "Qualified Series B Financing" shall mean the
sale, on or before February 28, 1996, for cash, in one or a series of
transactions, of shares of its Preferred Stock having terms no less favorable,
take as a whole, to the purchasers than those set forth in Exhibit I hereto, for
gross proceeds to the Company of at least $8 million (excluding the proceeds
from the sale of the Note upon its initial issuance).
2. Exercise Price. The exercise price for the Shares shall be 67% of the
--------------
average per share price (prior to expenses and commissions) at which the Company
shall sell shares of its Series B Preferred Stock in a Qualified Series B
Financing (excluding from the calculation of such price per share the shares
issued or issuable hereunder or upon conversion of the Note). Such price shall
be subject to adjustment pursuant to Section 7 hereof (such price, as adjusted
from time to time, is herein referred to as the "Exercise Price"). Fractional
shares will be payable by the Company in cash.
3. Exercise Period. This Warrant is exercisable at any time and from time
---------------
to time, in whole or in part following the consummation by the Company of a
Qualified Series B Financing and, except as provided below, shall remain so
exercisable until and including the earlier of February 28, 2001 and the date
five years from which the Company shall have first consummated a Qualified
Series B Financing. If not otherwise exercised pursuant to Section 4 hereof,
this Warrant shall immediately terminate upon (a) the closing of the issuance
and sale of shares of Common Stock of the Company in the Company's first
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, (the "Initial Public Offering"),
(b) the sale of all or substantially all the assets of the Company or (c) the
merger of the Company into or consolidation with any other entity in which at
least 50% of the voting power of the Company is transferred (an "Acquisition").
In the event of a transaction of the kind described above in this paragraph, the
Company shall notify the Holder at least ten (10) days prior to the consummation
of such event or transaction.
4. Method of Exercise.
------------------
(a) Exercise for Cash. The purchase right represented by this Warrant may
-----------------
be exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit B duly executed) at
---------
the principal office of the Company and by the payment to the Company, by check,
of an amount equal to the then applicable Exercise Price per share multiplied
by the number of Shares then being purchased. The person or
2
<PAGE>
persons in whose name(s) any certificate(s) representing Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty (30) days of receipt of such notice and, unless this Warrant
has been fully exercised or expired, a new warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
(b) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant, the holder hereof may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder hereof a number of shares of Series B Preferred Stock computed using
the following formula:
X = Y(A-B)
-----
A
Where X = The number of shares of Series B Preferred Stock to be issued to
the holder hereof.
Y = the number of shares of Series B Preferred Stock purchasable under
this Warrant.
A = the fair market value of one share of Series B Preferred Stock.
B = Exercise Price (as adjusted to the date of such calculations).
(ii) For purposes of this Section, fair market value of the Company's
Preferred Stock shall mean the price determined by the Company's Board of
Directors, acting in good faith upon a review of all relevant factors; provided,
however, that if this Warrant is exercised in conjunction with the Company's
Initial Public Offering, the fair market value of the Series B Preferred Stock
shall be equal to the offering price less any applicable underwriters' discounts
and commissions.
5. Reservation of Shares. The Company covenants that it will, at all times
---------------------
after the Qualified Series B Financing, keep available such number of authorized
shares of its Series B Preferred Stock and Common Stock, free from all
preemptive rights with respect thereto, which will be sufficient to permit the
exercise of this Warrant for the full number of Shares
3
<PAGE>
specified herein and the conversion of the Shares, if any, upon exercise of this
Warrant. The Company further covenants that such Shares, when issued pursuant to
the exercise of this Warrant, will be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof.
6. Adjustment of Exercise Price and Number of Shares. The number of and
-------------------------------------------------
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Conversion or Redemption of Series B Preferred Stock. Should all of
----------------------------------------------------
the Company's Series B Preferred Stock be, at any time prior to the expiration
of this Warrant, redeemed or converted into shares of the Company's Common Stock
in accordance with the Company's Articles of Incorporation, as amended and/or
restated and effective immediately prior to the redemption or conversion of all
of the Company's Series B Preferred Stock, then this Warrant shall immediately
become exercisable for that number of shares of the Company's Common Stock equal
to the number of shares of Common Stock which would have been received if this
Warrant had been exercised in full and the Shares received thereupon had been
simultaneously converted into Common Stock immediately prior to such event. The
Exercise Price per share of Common Stock shall be immediately adjusted to equal
the quotient obtained by dividing (x) the aggregate purchase price of the number
of shares of Series B Preferred Stock for which this Warrant was exercisable
immediately prior to such conversion or redemption by (y) the number of shares
of Common Stock for which this Warrant is exercisable immediately after such
conversion or redemption.
(b) Subdivisions and Combinations. If the Company shall at any time prior
-----------------------------
to the expiration of this Warrant subdivide its Series B Preferred Stock, by
split up or otherwise, or combine its Series B Preferred Stock, the number of
Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the purchase price payable per share, but the aggregate purchase price
payable for the total number of Shares purchasable under this Warrant (as
adjusted) shall remain the same. Any adjustment under this Section 7(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(c) Stock Dividends and Distributions. In case the Company shall at any
---------------------------------
time while this Warrant is outstanding and unexpired pay a dividend with respect
to Series B Preferred Stock, payable in shares of such stock (except any
distribution provided for in Section 6(b) or 6(d) herein), then the Exercise
Price in effect immediately prior to the record date for distribution of such
dividend or in the event that no record date is fixed, upon the making of such
dividend shall be adjusted to that price determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction (i) the
numerator of which shall be the total number of shares of such stock outstanding
immediately prior to such dividend and (ii) the denominator of which shall be
the total number of shares of such stock outstanding immediately after such
dividend.
4
<PAGE>
(d) Reclassification, Reorganization and Consolidation. In case of any
--------------------------------------------------
reclassification, conversion of Series B Preferred Stock into Common Stock, or
capital reorganization or change in the Series B Preferred Stock, of the Company
(other than as provided for in Sections 6(a), (b) and (c) above), then, as a
condition of such reclassificonversion, reorganization or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder of this Warrant,
so that such Holder shall have the right at any time prior to the expiration of
this Warrant to purchase, at a total price equal to that payable upon the
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such reclassification,
conversion, reorganization or change by a holder of the same number of shares of
Series B Preferred Stock as were purchasable by the Holder of this Warrant
immediately prior to such reclassification, conversion, reorganization or
change. In any such case appropriate provisions shall be made with respect to
the rights and interest of the Holder of this Warrant so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
(e) Notice of Adjustment. When any adjustment is required to be made in
--------------------
the number or kind of shares purchasable upon exercise of the Warrant, or in the
Warrant Price, the Company shall promptly notify the Holder of such event and of
the number of shares of Series B Preferred Stock or other securities or property
thereafter purchasable upon exercise of the Warrant.
7. No Fractional Shares. No fractional shares shall be issued upon the
--------------------
exercise of this Warrant, and the number of shares of stock issued upon exercise
of this Warrant shall be rounded to the nearest whole share. In lieu of the
Company issuing any fractional shares to the Holder upon a net exercise under
Section 4(b) hereof, the Company shall pay to the Holder the fair market value
of such fractional share, as determined in good faith by the Company's Board of
Directors.
8. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
---------------------
shall not be entitled to any rights of a shareholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
shareholder meetings, and such Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
9. Exchange of Warrant. Subject to any restriction upon transfer set
-------------------
forth in this Warrant, each Warrant may be exchanged for another Warrant or
Warrants of like tenor and representing in the aggregate a like number of
Warrants. Any Holder desiring to exchange a Warrant or Warrants shall make such
request in writing delivered to the Company, and
5
<PAGE>
shall surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant or Warrants, as the case may be, as so requested.
10. Mutilated or Missing Warrants. In case any Warrant shall be
-----------------------------
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of such Warrant and indemnity or bond, if requested, also
reasonably satisfactory to the Company. An applicant for such substitute Warrant
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
11. Payment of Taxes. The Company will pay all taxes (other than any
----------------
income taxes or other similar taxes), if any, attributable to the initial
issuance of the Warrant and the issuance of the Shares upon the exercise of the
Warrant, provided, however, that the Company shall not be required to pay any
-------- -------
tax or taxes which may be payable in respect of the issuance or delivery of any
Warrant, or the transfer thereof, and no such issuance, delivery or transfer
shall be made unless and until the person requesting such issuance or transfer
has paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that no such tax is payable or such tax has been
paid.
12. Registration. The Warrants shall be numbered and shall be registered
------------
in a Warrant Register as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other person,
and shall not be liable for any registration of transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
13. Transfer of Warrants. The Warrants shall be transferable on the books
--------------------
of the Company (the "Warrant Register") only upon delivery thereof duly endorsed
by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer, and only with the prior written consent of the Company. In all cases
of transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants
6
<PAGE>
to be transferred on its books to any person, unless the Holder of such Warrants
shall furnish to the Company evidence of compliance with the Securities Act of
1933, as amended and applicable state blue sky laws.
14. Successors and Assigns. The terms and provisions of this Warrant
----------------------
shall inure to the benefit of, and be binding upon, the Company and the holders
hereof and their respective successors and assigns.
15. Amendments and Waivers. Except for the number of shares purchasable
----------------------
under this Warrant and except for the "Purchase Price" (as set forth in Section
2 hereof), any term of this Warrant may be amended and the observance of any
term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of the
Company and the holders of this Warrant and other warrants of like tenor and
effect issued of even date herewith entitled to a majority of the total number
of Shares issuable pursuant to this Warrant and such other warrants (except that
such consent will not be required for variations necessary to express the name
of the holder). Any waiver or amendment effected in accordance with this section
shall be binding upon each holder of this Warrant and any such other warrants at
the time outstanding, each future holder of all such warrants, and the Company.
16. Governing Law. This Warrant shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Delaware without regard to
the possible application of principles of conflict of laws.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby executes this Stock Purchase
Warrant as of August ___, 1995.
GIGA INFORMATION GROUP, INC.
By: /s/ Michael J. Kolesar
_________________________________________
Michael Kolesar, Vice President - Finance
8
<PAGE>
EXHIBIT 10.6
GIGA INFORMATION GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
-----------------------------
NOVEMBER 13, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Amendment .............................................. 1
1.1 Amendment and Waiver.................................. 1
Section 2. Registration Rights .................................... 2
2.1 Definitions........................................... 2
2.2 Requested Registration................................ 3
2.3 Company Registration.................................. 5
2.4 Obligations of the Company............................ 5
2.5 Furnish Information................................... 6
2.6 Expenses of Demand Registration....................... 6
2.7 Expenses of Company Registration...................... 7
2.8 Underwriting Requirements............................. 7
2.9 Delay of Registration................................. 8
2.10 Indemnification....................................... 8
2.11 Reports Under Securities Exchange Act of 1934......... 10
2.12 Form S-3 Registration................................. 10
2.13 Assignment of Registration Rights..................... 11
2.14 "Market Stand-Off" Agreement.......................... 12
2.15 Termination of Registration Rights.................... 12
Section 3. Miscellaneous .......................................... 12
3.1 Assignment............................................ 12
3.2 Third Parties......................................... 12
3.3 Governing Law......................................... 12
3.4 Counterparts.......................................... 13
3.5 Notices............................................... 13
3.6 Severability.......................................... 13
3.7 Rights of Holders..................................... 13
3.8 Delays or Omissions................................... 13
3.9 Attorney's Fees....................................... 13
</TABLE>
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REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 9th day of November, 1995, by and among Giga Information Group, Inc., a
Delaware corporation (the "Company"), the investors listed on Exhibit A hereto
---------
(collectively, the "Investors") and those key members of the Company's
management listed on Exhibit B hereto as may be designated from time to time by
---------
the Board of Directors (collectively, the "Management Persons").
RECITALS
WHEREAS, as of the date hereof each of the Investors is acquiring the
number of shares of the classes and series of the Company's capital stock set
forth opposite its name on Exhibit A hereto;
---------
WHEREAS, as of the date hereof each of the Management Persons owns the
number of shares of the classes and series of the Company's capital stock set
forth opposite his or her name on Exhibit B hereto (which, collectively with any
---------
additional shares of the Company's securities acquired by the Management Persons
after the date of this Agreement, shall be deemed to be "Management Shares");
WHEREAS, the execution of this Agreement is a condition precedent to
the consummation of the transactions contemplated by the Series B Preferred
Stock Purchase Agreement dated as of November 13, 1995 among the Company and the
Investors (the "Series B Purchase Agreement");
NOW, THEREFORE, the parties agree as follows:
Section 1. Amendment.
---------
1.1 Amendment and Waiver. Except as expressly provided herein,
--------------------
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of all of (i) the Company, (ii) the
Holders of at least a majority of the Registrable Securities, excluding the then
outstanding Management Shares; and (iii) the Holders of at least a majority of
the then outstanding Management Shares; provided further that the inclusion of
additional purchasers of the Company's Common Stock, as agreed from time to time
by the Company's Board of Directors, as "Management Persons" hereunder shall not
be deemed an amendment to this Agreement. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities, and the Company.
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Section 2. Registration Rights.
-------------------
2.1 Definitions. As used in this Agreement:
-----------
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act")
and the subsequent declaration or ordering of the effectiveness of such
registration statement.
(b) The term "Registrable Securities" means:
(i) Management Shares, except for purposes of the registration rights
set forth under Sections 2.2 and 2.12 to which the Management Persons shall not
be entitled under this Agreement, except that the Management Persons may request
the inclusion of the Management Shares held by them upon receipt of the notice
from the Company to all Holders as specified in Section 2.2(a);
(ii) the shares of Common Stock issuable or issued upon conversion of
the Company's Series B Preferred Stock (the shares of Common Stock referred to
in clauses (i) and (ii) hereof are collectively referred to hereafter as the
"Stock"); and
(iii) any other shares of Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned;
provided, however, that:
(i) Common Stock or other securities shall only be treated as
Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, (B) sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act so that all transfer
restrictions, and restrictive legends with respect thereto, if any, are removed
upon the consummation of such sale, or (C) sold, assigned or otherwise
transferred in a transaction in which the rights under this Section 2 have not
been assigned in accordance with Section 2.13; and
(ii) if the Company shall have consummated a Qualified Public
Offering, Common Stock that is eligible to be sold pursuant to Rule 144(b)
promulgated under the Securities Act (or any successor rule).
2
<PAGE>
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(d) The term "Holder" means any person owning of record Registrable
Securities who acquired such Registrable Securities in a transaction or series
of transactions not involving any registered public offering or pursuant to Rule
144.
(e) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Securities and Exchange Commission ("SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(f) The term "Qualified Public Offering" means an underwritten initial
public offering pursuant to a registration statement (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a transaction
pursuant to Rule 145 under the Securities Act) under the Securities Act covering
the Company's Common Stock, which results in aggregate cash proceeds (prior to
underwriters' commissions and expenses) to the Company and any selling
stockholder of at least $15,000,000, and which has a public offering price of
not less than $5.25 per share (as appropriately adjusted for stock splits,
combinations, reclassifications and the like).
(g) Capitalized terms used herein and not otherwise defined shall have
the respective meanings assigned to them in the Series B Purchase Agreement.
2.2 Requested Registration.
----------------------
(a) If the Company shall receive at any time after the earlier of (i)
November 1, 1999, or (ii) six (6) months after the effective date of the first
registration statement for a Qualified Public Offering, a written request from
the Holders of at least forty percent (40%) of the Registrable Securities then
outstanding (excluding the Management Shares, for which the Management Persons
shall not be entitled to initiate a request under this Section 2.2(a)), that the
Company file a registration statement under the Securities Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding (excluding the Management Shares), and for which the anticipated
aggregate gross proceeds to the Company and any selling stockholder would exceed
$5,000,000, then the Company shall, within ten (10) days of the receipt thereof,
give written notice of such request to all Holders (including Management
Persons, who shall be entitled to request registration of the Management Shares
held by them pursuant to this sentence) and shall, subject to the limitations of
subsection 2.2(b), effect as soon as practicable, and in any event within ninety
(90) days
3
<PAGE>
of the receipt of such request, the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered within twenty
(20) days of the mailing of such notice by the Company in accordance with
Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 2.2 and the Company
shall include such information in the written notice referred to in subsection
2.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in subsection 2.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Company in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting that are held by Holders other than the Management Persons shall
not be reduced unless all Management Shares are first entirely excluded from the
underwriting; provided, further, that the number of shares of Registrable
Securities (including Management Shares) to be included in such underwriting
shall not be reduced unless all other securities proposed to be sold by persons
other than the Holders (including the Management Persons) and the Company are
first entirely excluded from the underwriting.
(c) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 2.2 and, in any event, no more than one (1) such
registration in any twelve (12) month period.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the Initiating
4
<PAGE>
Holders; provided, however, that the Company may not utilize this right more
than twice in any twelve month period nor for a total of more than 120
consecutive days.
2.3 Company Registration. If the Company proposes to register
--------------------
(including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its Common Stock or other securities
under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating either to the
sale of securities to participants in a Company stock option, stock purchase or
similar plan or in an SEC Rule 145 transaction, or a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 2.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section
--------------------------
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective until the distribution contemplated in the
Registration Statement has been completed (but not for more than 270 days).
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to
5
<PAGE>
qualify to do business or, except as required under the Securities Act, to file
a general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 2, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 2, if such securities are being
sold through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such registration,
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed.
2.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
2.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and
6
<PAGE>
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 2.2.
2.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
2.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the written opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters believe will not jeopardize the success of the offering
(the securities so included to be apportioned pro rata among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders, provided that (i) if the
number of shares of Registrable Securities to be included in any such offering
shall be reduced, such reduction shall first be made by a reduction of the
number of Management Shares to be so sold; (ii) the number of shares of
Registrable Securities included in any such offering shall not be so reduced
unless all other securities proposed to be sold by persons other than (A) the
Holders (including the Management Persons), (B) the Company, and (C) Pari Passu
Holders (as defined below) are first entirely excluded from the underwriting.
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing
7
<PAGE>
persons shall be deemed to be a single "selling stockholder," and any pro rata
reduction with respect to such "selling stockholder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "selling stockholder," as defined in this
sentence. "Pari Passu Holders" means persons who are contractually entitled to
inclusion in the offering, on a pari passu basis with the Holders, of shares of
Common Stock issued or issuable to such persons, which shares will be subject to
reduction of the number to be included in the registration on a pro rata basis
with the Registrable Securities held by the Investors; provided that the Company
may not grant such rights to Pari Passu Holders with respect to an aggregate of
more than 50% of the number of Registrable Securities (excluding Management
Shares) issued or issuable upon conversion of the aggregate number of Shares of
the Company's Series B Preferred Stock issued pursuant to the Series B Purchase
Agreement without the written consent of the Holders of at least a majority of
the Registrable Securities (excluding Management Shares).
2.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law; and the Company will pay as incurred
to each such Holder, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 2.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the
8
<PAGE>
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 2.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 2.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided that in no event shall any indemnity under this subsection
2.10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, only if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.10, but the omission
9
<PAGE>
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.10.
(d) The obligations of the Company and Holders under this Section 2.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
10
<PAGE>
2.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders owning in the aggregate at least 20% of the Registrable
Securities a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 20 days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 2.12, (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $500,000; (3) if the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than sixty (60) days after receipt of the request of the
Holder or Holders under this Section 2.12; provided, however, that the Company
shall not utilize this right more than once in any twelve month period; (4) if
the Company has, within the six month period preceding the date of such request,
already effected one registration on Form S-3 for the Holders pursuant to this
Section 2.12; (5) if the Company has already effected a total of six
registrations on Form S-3 for the Holders pursuant to this Section 2.12; or (6)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 2.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees, auditing
expenses and the fees and disbursements of counsel for the Company shall be
borne by the Company, but excluding underwriting discounts and commissions
relating to Registrable Securities and the fees and disbursements of counsel
11
<PAGE>
to the selling Holder or Holders. Registrations effected pursuant to this
Section 2.12 shall not be counted as demands for registration or registrations
effected pursuant to Section 2.2 or 2.3.
2.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of all of such Holder's
Registrable Securities or at least 400,000 shares (as adjusted to reflect stock
splits, stock dividends or recapitalizations) of such securities provided the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act. The foregoing 400,000 share
limitation shall not apply, however, to transfers by a Holder to stockholders,
partners or retired partners of the Holder, or to spouses, ancestors, lineal
descendants and siblings of the Holder, if all such transferees or assignees of
a single Holder agree in writing to appoint a single representative as their
attorney in fact for the purpose of receiving any notices and exercising their
rights under this Section 2.
2.14 "Market Stand-Off" Agreement. The Holder hereby agrees that
---------------------------
during the period of duration specified by the Company and an underwriter of
Company Common Stock or other securities of the Company following the effective
date of a registration statement of the Company filed under the Securities Act,
it shall not, to the extent requested by the Company and such underwriter, sell
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any Common Stock of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements; and
(b) such market stand-off period shall not exceed 180 days.
To enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of the Investor (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.15 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 2 after the later of (a)
three (3) years following the consummation of a Qualified Public Offering or (b)
such time following the Company's initial public offering as such Holder is
entitled under Rule 144 to
12
<PAGE>
dispose of all the Registrable Securities held by such Holder during any 90-day
period.
Section 3. Miscellaneous.
-------------
3.1 Assignment. Subject to the provisions of Section 2.13 hereof,
----------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
3.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of New York in the United States of America as
applied to agreements among New York residents entered into and to be performed
entirely within New York.
3.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, addressed to the other party at the address shown
below or at such other address for which such party gives notice hereunder.
Such notice shall be deemed to have been given three (3) days after deposit in
the mail.
3.6 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Rights of Holders. Each holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.8 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an
13
<PAGE>
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
3.9 Attorney's Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the day and year first above written.
COMPANY:
GIGA INFORMATION GROUP, INC.
a Delaware corporation
By: /s/ Gideon Gartner
-------------------------
Title:
----------------------
MANAGEMENT PERSONS:
/s/ Gideon Gartner
- ----------------------------
(Gideon Gartner)
/s/ David Gilmour
- ----------------------------
(David Gilmour)
14
<PAGE>
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
THE INVESTORS:
- -------------
Name of Investor:
Neill & Linda Brownstein
- ------------------------
By:/s/ Neill & Linda Brownstein
----------------------------
Name of Investor:
Todd D. Brownstein
- ------------------
By:/s/ Todd D. Brownstein
----------------------
Name of Investor:
Emily G. Hamilton
- -----------------
By: /s/ Neill H. Brownstein
------------------------
Father
Name of Investor:
Will P. Gordon
- --------------
By:/s/ Will P. Gordon
------------------
Name of Investor:
Robert E. Cook
- --------------
By: /s/ Robert E. Cook
-------------------
15
<PAGE>
Name of Investor:
Christopher J. DiVecchio
- ------------------------
By:/s/ Christopher J. DiVecchio
----------------------------
Name of Investor:
Martin P. DuRoss
- ----------------
By:/s/ Martin P. DuRoss
--------------------
Name of Investor:
Harry Edelson
- -------------
By:/s/ Harry Edelson
-----------------
Name of Investor:
Edelson Technology Partners III
- -------------------------------
By:/s/ Harry Edelson
-----------------
Name: Harry Edelson
--------------
Title: General Partner
---------------
Name of Investor:
Richard J. Foudy
- ----------------
By:/s/ Richard J. Foudy
--------------------
16
<PAGE>
Name of Investor:
Gilo Family Partnership
- -----------------------
By:/s/ Davidi Gilo
---------------
Name: Davidi Gilo
-----------
Title: President of Davidi and Shamaja
-------------------------------
Gilo Inc., General Partner
--------------------------
Name of Investor:
Michael J. Kolesar
- ------------------
By:/s/ Michael J. Kolesar
----------------------
Name of Investor:
John B. Landry
- --------------
By:/s/ John B. Landry
------------------
Name of Investor:
Derek Lemke-von Ammon
- ---------------------
By:/s/ Derek Lemke-von Ammon
-------------------------
17
<PAGE>
Name of Investor:
RRE GIGA INVESTORS II, L.P.
By: RRE PARTNERS, L.L.C.,
as General Partner
------------------
By: RRE Investors, L.L.C.,
as Managing Member
By:/s/ Stuart J. Ellman
--------------------
Name: Stuart J. Ellman
-----------------
Title: Class A Member
--------------
Name of Investor:
Cornelius T. Ryan
- -----------------
By:/s/ Cornelius T. Ryan
---------------------
Name of Investor:
Frederick G. Smith
- ------------------
By:/s/ Frederick G. Smith
----------------------
Name of Investor:
Susan Tracy Wheeler
- -------------------
By:/s/ Susan Tracy Wheeler
-----------------------
18
<PAGE>
Name of Investor:
Adam J. Brownstein
- ------------------
By: /s/ Adam J. Brownstein
-----------------------
Name: Adam J. Brownstein
-------------------
Name of Investor:
21st Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
21st Century Communications Foreign Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
21st Century T-E Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
-----------------
Irwin Lieber
Title: Treasurer
Name of Investor:
Executive Technology L.P.
- -------------------------
By: /s/ Seymour L. Goldblatt
-------------------------------------
Title: President of S/2/ Technology Corp
----------------------------------
which is the General Partner of
Executive Technology L.P.
19
<PAGE>
Name of Investor:
Monstol Investments NV
- ----------------------
By: /s/ Seymour L. Goldblatt
---------------------------------
Seymour L. Goldblatt
Title:
------------------------------
President S/2/ Technology Corp
Name of Investor:
Core Technology Fund Inc.
- -------------------------
By: /s/ Seymour L. Goldblatt
-------------------------
Seymour L. Goldblatt
Title:
----------------------
Managing Director
Name of Investor:
Sci-Tech Investment Partners L.P.
- ---------------------------------------
By: /s/ Seymour L. Goldblatt
------------------------------------
Seymour L. Goldblatt
Title:
---------------------------------
President of S/2/ Technology Corp
which is the General Partner
of SciTech Investment Ptr.
Name of Investor:
The Matrix Technology Group NV
- ------------------------------
By: /s/ Seymour L. Goldblatt
-------------------------
Seymour L. Goldblatt
Title:
----------------------
Managing Director
20
<PAGE>
Name of Investor:
Yale University
- ---------------
By: /s/ Seymour L. Goldblatt
---------------------------------
Seymour L. Goldblatt
Title:
------------------------------
President S/2/ Technology Corp
Name of Investor:
Yale University Retirement Plan for Staff Employees
- ---------------------------------------------------
By: /s/ Seymour L. Goldblatt
----------------------------------
Seymour L. Goldblatt
Title:
-------------------------------
President, S/2/ Technology Corp
Name of Investor:
SG Partners, L.P.
- -----------------
By: /s/ Seymour L. Goldblatt
------------------------------------
Seymour L. Goldblatt
Title:
---------------------------------
President of S/2/ Technology Corp
which is the General Partner
of SG Partners L.P.
Haussmann Holdings
By: /s/ Dana Schmidt
-----------------
Title: PRINCIPAL
--------------
Montgomery Growth Partners, L.P.
By: Montgomery Asset Management, L.P., Its General Partner
-------------------------------------------------------
By: /s/ Dana Schmidt
-----------------
Title: PRINCIPAL
--------------
Montgomery Growth Partners II, L.P.
By: /s/ Keith High
-------------------
Title: GENERAL PARTNER
----------------
21
<PAGE>
Nosrob Investments, Ltd.
By: /s/ Dana Schmidt
-----------------
Title: PRINCIPAL
--------------
Quota Fund, N.V.
By: /s/ Dana Schmidt
-----------------
Title: PRINCIPAL
--------------
Montgomery Small Cap Partners III, L.P.
By: /s/ Keith High, Its General Partner
----------------
By: KEITH HIGH
------------------------------------
TITLE: GENERAL PARTNER
---------------------------------
RRE Giga Investors, L.P.
By: RRE Investors L.L.C., its General Partner
By: /s/ Stuart Ellman
------------------------------------
Title: Managing Director
---------------------------------
22
<PAGE>
Lagunitas Partners, L.P.
By: /s/ John D. Gruber, its General Partner
--------------------
Gruber & McBaine International
By: /s/ J. Patterson McBaine
-------------------------
Jon D. Gruber
/s/ John D. Gruber
- ----------------------------
(Jon D. Gruber)
J. Patterson McBaine
/s/ J. Patterson McBaine
- ----------------------------
(J. Patterson McBaine)
Kensington Partners L.P.
By: /s/ Richard Keim, its General Partner
------------------
By: Dick Keim
Title: G.P.
----------------------------------
Acorn Investment Trust
By: /s/ Ralph Wanger
-------------------------------------
Ralph Wanger
Title: President
23
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
EXHIBIT A
---------
INVESTORS
21st Century Communications Partners, L.P. Sci-Tech Investment Partners, L.P.
767 5th Avenue c/o S/2/ Technology
New York, NY 10153 515 Madison Avenue, Suite 4200
Attention: Irwin Lieber New York, NY 10022
Attention: Sy Goldblatt
21st Century Communications The Matrix Technology Group, N.V.
Foreign Partners, L.P. c/o S/2/ Technology
767 5th Avenue 515 Madison Avenue, Suite 4200
New York, NY 10153 New York, NY 10022
Attention: Irwin Lieber Attention: Sy Goldblatt
21st Century Communications Yale University
T-E Partners, L.P. c/o S/2/ Technology
767 5th Avenue 515 Madison Avenue, Suite 4200
New York, NY 10153 New York, NY 10022
Attention: Irwin Lieber Attention: Sy Goldblatt
Montsol Investments N.V. Yale University Retirement Plan for
c/o S/2/ Technology Staff Employees
515 Madison Avenue, Suite 4200 c/o S/2/ Technology
New York, NY 10022 515 Madison Avenue, Suite 4200
Attention: Sy Goldblatt New York, NY 10022
Attention: Sy Goldblatt
Executive Technology L.P. SG Partners L.P.
c/o S/2/ Technology c/o S/2/ Technology
515 Madison Avenue, Suite 4200 515 Madison Avenue, Suite 4200
New York, NY 10022 New York, NY 10022
Attention: Sy Goldblatt Attention: Sy Goldblatt
Core Technology Fund Inc. Acorn Fund Investment Trust
c/o S/2/ Technology c/o Wanger Asset Mgmt.
515 Madison Avenue, Suite 4200 227 West Monroe Street
New York, NY 10022 Chicago, IL 60606
Attention: Sy Goldblatt Attention: Ralph Wanger
A-1
<PAGE>
Montgomery Small Cap Partners III, L.P. Derek Lemke-von Ammon
c/o Fiduciary Trust (Cayman) Limited c/o Montgomery Securities
One Capital Place 600 Montgomery Street
P.O. Box 1062 San Francisco, CA 94111
George Town, Grand Cayman, Cayman
Islands
Attention: Keith High
Quota Fund N.V. Kensington Partners L.P.
c/o Montgomery Asset Management 237 Park Avenue
600 Montgomery Street New York, NY 10017
San Francisco, CA 94111 Attention: Dick Kline
Attention: Dana Schmidt
Haussmann Holdings Lagunitas Partners, L.P.
c/o Montgomery Asset Management c/o Gruber and McBaine Capital
600 Montgomery Street Management
San Francisco, CA 94111 50 Osgood Place
Attention: Dana Schmidt San Francisco, CA 94133
Montgomery Growth Partners, L.P. Gruber & McBaine International
c/o Montgomery Asset Management c/o Gruber and McBaine Capital
600 Montgomery Street Management
San Francisco, CA 94111 50 Osgood Place
Attention: Dana Schmidt San Francisco, CA 94133
Montgomery Growth Partners, II, L.P. Jon D. Gruber
c/o Fiduciary Trust (Cayman) Limited c/o Gruber and McBaine Capital
One Capital Place Management
P.O. Box 1062 50 Osgood Place
George Town, Grand Cayman, Cayman San Francisco, CA 94133
Islands
Attention: Keith High
Nosrob Investments Ltd. J. Patterson McBaine
c/o Montgomery Asset Management c/o Gruber and McBaine Capital
600 Montgomery Street Management
San Francisco, CA 94111 50 Osgood Place
Attention: Dana Schmidt San Francisco, CA 94133
A-2
<PAGE>
Neill and Linda Brownstein Martin P. DuRoss
536 West Crescent Drive 15120 Eclipse Drive
Palo Alto, CA 94301 Manassas, VA 22111
Adam J. Brownstein Susan Tracy Wheeler
536 West Crescent Drive 2 Bonnie Brook Road
Palo Alto, CA 94301 Westport, Connecticut 06880
Todd D. Brownstein John B. Landry
536 West Crescent Drive 62 Old Connecticut Path
Palo Alto, CA 94301 Wayland, MA 01778
Will P. Gordon RRE Giga Investors II, L.P.
536 West Crescent Drive 126 East 56th Street, 22nd Floor
Palo Alto, CA 94301 New York, New York 10022
Attention: Mr. Stuart Ellman
Emily G. Hamilton Harry Edelson
536 West Crescent Drive Edelson Technology Partners
Palo Alto, CA 94301 Whiteweld Centre
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Richard J. Foudy Edelson Technology Partners III
780 Cedar Brook Lane Whiteweld Centre
Soutport, CT 06490 300 Tice Boulevard
Woodcliff Lake, NJ 07675
Cornelius T. Ryan Attention: Mr. Harry Edelson
315 Post Road West Derek Lemke-von Ammon
Westport, CT 06880 Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
Frederick G. Smith Gilo Family Partnership
435 East 57th Street, Apt. 5C 100 Why Worry Lane
New York, NY 10022 Woodside, CA 94062
Attention: Davidi Gilo
A-3
<PAGE>
Michael J. Kolesar Robert E. Cook
Giga Information Group, Inc. 572 Park Avenue, 2nd Floor
1 Longwater Circle Park City, UT 84060
Norwell, MA 02061
Christopher J. DiVecchio
254 Main Street, #1C
Southport, CT 06490
A-4
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
EXHIBIT B
---------
MANAGEMENT PERSONS
Gideon Gartner
David Gilmour
B-1
<PAGE>
EXHIBIT 10.7
GIGA INFORMATION GROUP, INC.
CO-SALE AND STOCK RESTRICTION AGREEMENT
---------------------------------------
This Co-Sale and Stock Restriction Agreement (the "Agreement") is made as
of the 13th day of November, 1995 by and among Gideon Gartner ("Founder"), Giga
Information Group, Inc., a Delaware corporation (the "Company"), and the
undersigned holders of Series B Preferred Stock (the "Stockholders").
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. Definitions.
------------
(a) "Stock" shall mean, on a fully diluted basis, the shares of the
Company's Common Stock now owned by the Founder, including any shares of Common
Stock issuable upon conversion or exercise of any warrants, options or Preferred
Stock held by the Founder.
(b) "Preferred Stock" shall mean the Company's outstanding Series B
Preferred Stock, $.001 par value.
(c) "Common Stock" shall mean the Company's Common Stock, $.001 par value.
2. Sales by Founder.
-----------------
(a) Except in the case of any sale or transfer pursuant to the provisions
of paragraphs 4(a) or 4(b) of this Agreement, if the Founder proposes to sell or
transfer shares of Stock in one or more transactions then the Founder shall
promptly give written notice (the "Notice") to the Company and the Stockholders
at least twenty (20) days prior to the closing of such sale or transfer. The
Notice shall describe in reasonable detail the terms of such proposed sale or
transfer including, without limitation, the number of shares of Stock to be sold
or transferred, the nature of such sale or transfer, the consideration to be
paid, and the name and address of each prospective purchaser or transferee.
(b) Each Stockholder shall have the right, exercisable upon written notice
to such Founder within fifteen (15) days after receipt of the Notice, to
participate pro-rata in such sale of Stock on the same terms and conditions. To
the extent one or more of the Stockholders exercise such right of participation
in accordance with the terms and conditions set forth below, the number of
shares of Stock that the Founder may sell in the transaction shall be
correspondingly reduced subject to the proviso in the preceding sentence.
-------
<PAGE>
(c) Each Stockholder may sell all or any part of that number of shares of
Preferred Stock, or Common Stock then owned by it, or Common Stock issuable upon
conversion of Preferred Stock then owned (the "Stockholder Shares") equal to the
product obtained by multiplying (i) the aggregate number of shares of Stock
covered by the Notice by (ii) a fraction the numerator of which is the number of
Stockholder Shares owned by such Stockholder at the time of the sale or transfer
and the denominator of which is the total number of shares of Preferred Stock
and Common Stock then held by the Stockholders and the Founder (subject to
Section 2(e)).
(d) If any Stockholder fails to elect to fully participate in such
Founder's sale pursuant to this Section 2, the Founder shall give notice of such
failure to the Stockholders who did so elect (the "Participants"). Such notice
may be made by telephone if confirmed in writing within two (2) days. The
Participants shall have five (5) days from the date such notice was given to
agree to sell their pro rata share of the unsold portion. For purposes of this
paragraph, and subject to Section 2(e), a Participant's pro rata share shall be
the ratio of (x) the number of shares of Common Stock or Preferred Stock held by
such Participant to (y) the total number of shares of Common Stock and Preferred
Stock held by all Participants and the Founder.
(e) In the event that the Founder shall sell Stock in one or more exempt
trans actions pursuant to clause (a) of Section 4 representing the full amount
of Stock permitted to be sold under such clause, then as to any subsequent
proposed sales of Stock by the Founder representing up to the lesser of (a)
200,000 shares or (b) shares sold or to be sold for aggregate proceeds of up to
$1,000,000, then for purposes of Section 2(c), a Stockholder's pro rata share
shall be the ratio of (x) the number of shares of Common Stock, and Common Stock
issuable upon conversion of Preferred Stock, held by such Stockholder to (y) the
total number of shares of Common Stock, and Common Stock issuable upon
conversion of Preferred Stock, held by all Stockholders.
(f) Each Participant shall effect its participation in the sale by promptly
delivering to the Founder for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which such Participant
elects to sell; or
(ii) that number of shares of Series A or Series B Preferred Stock which is
at such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series A or Series B Preferred Stock in lieu of
Common Stock, such Participant shall convert such Preferred Stock into Common
Stock and deliver Common Stock as provided in subparagraph 2(e)(i) above. The
-2-
<PAGE>
Company agrees to make any such conversion concurrent with the actual transfer
of such shares to the purchaser.
(g) The stock certificate or certificates that the Participant delivers to
the Founder pursuant to paragraph 2(e) shall be transferred to the prospective
purchaser in consummation of the sale of the Stock pursuant to the terms and
conditions specified in the Notice, and the Founder shall concurrently therewith
remit to such Participant that portion of the sale proceeds to which such
Participant is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment or
otherwise refuses to purchase shares or other securities from a Participant
exercising its rights of co-sale hereunder, the Founder shall not sell to such
prospective purchaser or purchasers any Stock unless and until, simultaneously
with such sale, the Founder shall purchase such shares or other securities from
such Participant.
(h) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Stock made by the Founder shall
not adversely affect their rights to participate in subsequent sales of Stock
subject to paragraph 2(a).
3. Right Of First Offer.
---------------------
3.1 General. Each Stockholder has the right of first offer to purchase
-------
such Stockholder's Pro Rata Share (as defined below), of all (or any part) of
any stock that the Founder may from time to time propose to sell after the date
of this Agreement. A Stockholder's "Pro Rata Share" for purposes of this right
of first offer is the ratio of (x) the number of shares of Common Stock and
Preferred Stock held by such Stockholders to (y) the total number of shares of
Common Stock and Preferred Stock held by the Stockholders and the Founder.
3.2 Subordination. The right of first offer granted herein to the
-------------
Stockholders under this Section 3 shall be subject to any right of first offer,
or similar right, granted by the Founder to the Company relating to the Common
Stock of the Company pursuant to any agreements or instruments executed by the
Founder in connection with the grant to the Founder or exercise by the Founder
of any options, or the purchase by the Founder of any Common Stock.
3.3 Procedures. In the event that the Founder proposes to sell Stock, it
----------
shall give to each Stockholder written notice of his intention to sell Stock
(the "Notice"), describing the type of Stock and the price and the general terms
upon which the Founder proposes to sell such Stock. Each Stockholder shall have
ten (10) business days from the date of receipt of any such Notice to agree in
writing to purchase such Stockholder's Pro Rata Share of such Stock for the
price and upon the general terms specified in the Notice by giving written
notice to the Founder and
-3-
<PAGE>
stating therein the number of shares of Stock to be purchased (not to exceed
such Stockholder's Pro Rata Share). If any Stockholder fails to so agree in
writing within such ten (10) day period to purchase such Stockholder's full Pro
Rata Share of a sale of Stock (a "Nonpurchasing Stockholder"), then such
Nonpurchasing Stockholder shall forfeit the right hereunder to purchase that
part of his Pro Rata Share of such Stock that he did not so agree to purchase,
and the Founder shall give notice of such failure to the Stockholders who did so
elect (the "Purchasing Stockholders"). Such notice may be made by telephone if
confirmed in writing within two (2) days. The Purchasing Stockholders shall have
five (5) days from the date such notice was given to agree to sell their pro
rata share of the unsold portion. For purposes of this paragraph, and subject to
Section 2(e), a Participant's pro rata share shall be the ratio of (x) the
number of shares of Common Stock or Preferred Stock held by such Participant to
(y) the total number of shares of Common Stock and Preferred Stock held by all
Purchasing Stockholders and the Founder.
3.4 Failure to Exercise. In the event that the Stockholders fail to
-------------------
exercise in full their rights of first offer as set forth in this Section 3
within the prescribed period, then the Founder shall have 120 days thereafter to
sell the Stock with respect to which the Stockholders' rights of first offer
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Founder's Notice
to the Stockholders. In the event that the Founder has not sold the Stock within
such 120-day period, then the Founder shall not thereafter sell any Stock
without again first offering such Stock to the Stockholders pursuant to this
Section 3.
4. Exempt Transfers. Notwithstanding the foregoing:
----------------
(a) Section 2 hereof shall not apply to (i) sale of Stock if, after giving
effect thereto, the Founder shall have sold less than an aggregate of the lesser
of (a) 200,000 shares or (b) shares for aggregate proceeds of less than
$1,000,000 after the date of this Agreement, or (ii) any sale of Stock to the
Company;
(b) neither Section 2 nor Section 3 hereof shall apply to (i) sales and
transfers of not more than 200,000 shares in any year to employees, directors or
strategic partners of the Company or its subsidiaries in connection with bona
fide compensation arrangements, licensing transactions, consulting arrangements
and the like; (ii) any pledge of Stock made pursuant to a bona fide loan
transaction that creates a mere security interest; (iii) any transfer to the
ancestors, descendants or spouse of the Founder or to trusts for the benefit of
such persons or the Founder; or (iv) any bona fide gift; provided that (A) the
Founder shall inform the Stockholders of such sale, pledge, transfer or gift
prior to effecting it and (B) in the case of transfers or gifts under clauses
(iii) and (iv), the transferee or donee shall furnish the Stockholders with a
written agreement to be bound by and comply with all provisions of Sections 2
and 3;
-4-
<PAGE>
(c) upon and after the consummation of a Qualified Public Offering (as
defined in Section 7.4), the provisions of Section 2 and Section 3 hereof shall
only apply to privately negotiated sales, and shall not apply to offers and
sales to the public; and
(d) the provisions of Section 2 and Section 3 hereof shall not apply to the
sale of any Stock (i) to the public pursuant to a registration statement filed
with, and declared effective by, the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"), or (ii) if prior
to such sale, the Founder held less than 5% of the Company's outstanding shares.
In the case of a transfer pursuant to clauses (b)(iii) or (iv), such
transferred Stock shall remain "Stock" hereunder, and such pledgee, transferee
or donee shall be treated as a "Founder" for purposes of this Agreement.
5. Prohibited Transfers.
---------------------
(a) Notwithstanding any other provision set forth herein, the Founder
agrees that he will not sell or transfer more than an aggregate of 800,000
shares of Stock during the three year period ending November 1, 1998 except in
transactions permitted by Section 4.
(b) In the event the Founder sells any Stock in contravention of the terms
of this Agreement (a "Prohibited Transfer"), the Stockholders, in addition to
such other remedies as may be available at law, in equity or hereunder, shall
have the put option provided below, and the Founder shall be bound by the
applicable provisions of such option.
(c) In the event of a Prohibited Transfer, each Stockholder shall have the
right to sell to the Founder the type and number of shares of Stock equal to the
number of shares each Stockholder would have been entitled to transfer to the
purchaser under Section 2(c) hereof had the Prohibited Transfer been effected
pursuant to and in compliance with the terms hereof. Such sale shall be made on
the following terms and conditions:
(i) The price per share at which the shares are to be sold to the Founder
shall be equal to the price per share paid by the purchaser to the Founder in
the Prohibited Transfer.
(ii) Within ninety (90) days after the later of the dates on which the
Stockholder (A) received notice of the Prohibited Transfer or (B) otherwise
become aware of the Prohibited Transfer, each Stockholder shall, if exercising
the option created hereby, deliver to the Founder the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
-5-
<PAGE>
(iii) The Founder shall, upon receipt of the certificate or certificates
for the shares to be sold by a Stockholder, pursuant to this subparagraph 5(b),
pay the aggregate purchase price therefor, in cash or by other means acceptable
to the Stockholder.
(iv) Notwithstanding the foregoing, any attempt by the Founder to transfer
Stock in violation of Section 2 of this Agreement shall be void and the Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Stockholders.
6. Legend.
-------
(a) Each certificate representing shares of Stock now or hereafter owned by
the Founder or issued to any person in connection with a transfer pursuant to
Section 4(a) hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
CO-SALE AND STOCK RESTRICTION AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(b) The Founder agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in Section 6(a) above to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.
7. Miscellaneous.
--------------
7.1 Governing Law. This Agreement shall be governed by and construed under
-------------
the laws of the State of New York.
7.2 Amendment. Any provision may be amended and the observance thereof may
---------
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by the written consent of (i) as to the Company, only by
the Company, (ii) as to the Stockholders, by persons holding more than fifty
percent (50%) in interest of the Common Stock and Preferred Stock held by the
Stockholders and their assignees, pursuant to Section 7.3 hereof, and (iii) as
to the Founder, only by the Founder, provided that any Stockholder may waive any
of his
-6-
<PAGE>
rights hereunder without obtaining the consent of any other Stockholder. Any
amendment or waiver effected in accordance with clauses (i), (ii) and (iii) of
this paragraph shall be binding upon each Stockholder, its successors and
assigns, the Company and the Founder.
7.3 Assignment of Rights. This Agreement and the rights and obligations of
--------------------
the parties hereunder shall inure to benefit of, and be binding upon, the
parties hereto and their respective successors, assigns and legal
representatives. The rights of the Stockholders hereunder are only assignable
(i) by each of such Stockholders to any other person or entity who, immediately
prior to such transfer, is a Stockholder or (ii) to an assignee or transferee
who acquires the lesser of (a) at least one hundred percent (100%) of the Common
Stock and Preferred Stock held by a Stockholder or (b) 800,000 shares of Common
Stock or Preferred Stock.
7.4 Term. This Co-Sale and Stock Restriction Agreement shall terminate
----
upon the earlier of (i) the date two years following the closing of a firmly
underwritten public offering (a "Qualified Public Offering") pursuant to a
registration statement (other than a registration statement relating either to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a transaction pursuant to Rule 145 under the
Securities Act of 1933, as amended (the "Act")) under the Act covering the
Company's Common Stock, which results in aggregate cash proceeds (prior to
underwriters' commissions and expenses) to the Company and any selling
stockholders of at least $15,000,000 and which has a public offering price of
not less than $5.25 per share (as adjusted for any stock split, stock dividend,
subdivision or combination of the Common Stock), or (ii) the closing of the
Company's sale of all or substantially all of its assets or the acquisition of
the Company by another entity by means of merger or consolidation resulting in
the exchange of the outstanding shares of the Company's capital stock for
securities or consideration issued, or caused to be issued, by the acquiring
entity or its subsidiary. If, at any time, any Stockholder sells or contracts to
sell, in one or more transactions, an aggregate of 50% or more of the Stock held
by such Stockholder, this Agreement shall terminate with respect to such
Stockholder upon the consummation of any such sale.
7.5 Ownership. The Founder represents and warrants that he is the sole
---------
legal and beneficial owner of the shares of stock subject to this Co-Sale and
Stock Restriction Agreement and that no other person has any interest (other
than a community property interest) in such shares.
7.6 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five days after deposit in the United States mail, by
registered or certified mall, postage prepaid and properly addressed to the
party to be notified (a) as set forth on Annex A to the Series B Preferred Stock
-------
Purchase Agreement, dated as
-7-
<PAGE>
of November 17, 1995 among the Company and the Stockholders, in the case of the
Stockholders, (b) to the Founder at 146 West 57th Street, New York, N.Y. 10019;
(c) to the Company at 1 Longwater Circle, Norwell, MA 02061, attention: Vice
President-Finance; or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties hereto. Notwithstanding
the foregoing, the telephone notice permitted by Section 2(d) shall be effective
at the time it is given.
7.7 Severability. In the event one or more of the provisions of this Co-
------------
Sale and Stock Restriction Agreement should, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Co-Sale and Stock
Restriction Agreement, and this Co-Sale and Stock Restriction Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
7.8 Attorney Fees. In the event that any dispute among the parties to this
-------------
Co- Sale and Stock Restriction Agreement should result in litigation, the
prevailing party in such dispute shall be entitled to recover from the closing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Co-Sale and Stock Restriction Agreement,
including without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
7.9 Counterparts. This Co-Sale and Stock Restriction Agreement may be
------------
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
-8-
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
GIGA INFORMATION GROUP, INC.
By /s/ Gideon Gartner
---------------------------------
Title _____________________________
Address __________________________
__________________________
__________________________
FOUNDER:
-----------------------------------
/s/ Gideon Gartner
-----------------------------------
Gideon Gartner
Address ___________________________________
___________________________________
___________________________________
-9-
<PAGE>
SIGNATURE PAGE TO THE
CO-SALE AND STOCK RESTRICTION AGREEMENT
THE STOCKHOLDERS:
- ----------------
Name of Stockholder:
Neill & Linda Brownstein
- ------------------------------------
By: /s/ Neill H. Brownstein
-------------------------------
Name of Stockholder:
Robert E. Cook
- ------------------------------------
By: /s/ Robert E. Cook
-------------------------------
Name of Stockholder:
Christopher J. DiVecchio
- ------------------------------------
By: /s/ Christopher J. DiVecchio
-------------------------------
Name of Stockholder:
Martin P. DuRoss
- ------------------------------------
By: /s/ Martin P. DuRoss
-------------------------------
-10-
<PAGE>
Name of Stockholder:
Harry Edelson
- ------------------------------------
By: /s/ Harry Edelson
-------------------------------
Name of Stockholder:
Edelson Technology Partners III
- ------------------------------------
By: /s/ Harry Edelson
-------------------------------
Title: General Partner
----------------------------
Name of Stockholder:
Richard J. Foudy
- ------------------------------------
By: /s/ Richard J. Foudy
-------------------------------
Name of Stockholder:
Gilo Family Partnership
- ------------------------------------
By: /s/ Davidi Gilo
-------------------------------
-11-
<PAGE>
Name of Stockholder:
Michael J. Kolesar
- ------------------------------------
By: /s/ Michael J. Kolesar
-------------------------------
2/29/96
-------------------------------
Name of Stockholder:
/s/ John B. Landry
- ------------------------------------
By: John B. Landry
-----------------------------
Name of Stockholder:
Derek Lemke-von Ammon
- ------------------------------------
By: /s/ Derek Lemke-von Ammon
-------------------------------
-12-
<PAGE>
Name of Stockholder:
RRE GIGA INVESTORS II, L.P.
By: RRE PARTNERS, L.L.C.,
as General Partner
- ------------------------------------
By: RRE Investors, L.L.C.,
as Managing Member
By: /s/ Stuart J. Ellman
-------------------------------
Title: Class A Member
----------------------------
Name of Stockholder:
Cornelius T. Ryan
- ------------------------------------
By: /s/ Cornelius T. Ryan
-------------------------------
Title: Individual
----------------------------
Name of Stockholder:
Frederick G. Smith
- ------------------------------------
By: /s/ Frederick G. Smith
-------------------------------
Title: Sup. Sales
----------------------------
Name of Stockholder:
Susan Tracy Wheeler
- ------------------------------------
By: /s/ Susan Tracy Wheeler
-------------------------------
-13-
<PAGE>
21st. Century Communications Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
----------------------------
Irwin Lieber
Title: Treasurer
21st. Century Communications Foreign Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
----------------------------
Irwin Lieber
Title: Treasurer
21st. Century Communications T-E Partners, L.P.
By: Infomedia Associates, Ltd., a General Partner
By: /s/ Irwin Lieber
----------------------------
Irwin Lieber
Title: Treasurer
Name of Stockholder:
S.G. Partners L.P.
- --------------------------------
By: /s/ Seymour Goldblatt
----------------------------
Title:
--------------------------
-14-
<PAGE>
Lagunitas Partners, L.P.
By: /s/ John Gruber, Its General Partner
----------------
Gruber & McBaine International
By: /s/ J. Patterson McBaine
---------------------------------------
Jon D. Gruber
/s/ John Gruber
- -----------------------------------------
(Jon D. Gruber)
J. Patterson McBaine
/s/ J. Patterson McBaine
- -----------------------------------------
(J. Patterson McBaine)
Derek Lemke-von Ammon
/s/ Derek Lemke-von Ammon
- -----------------------------------------
(Derek Lemke-von Ammon)
Haussmann Holdings:
By: /s/ Dana Schmidt
--------------------------------------
Title: Dana Schmidt
-----------------------------------
Montgomery Growth Partners, L.P.
By: Montgomery Asset Management, its G.P.
-------------------------------------
By: /s/ Dana Schmidt
-------------------------------------
Title: Principal
----------------------------------
-15-
<PAGE>
Quota Fund, N.V.
By: /s/ Dana Schmidt
----------------------------
Title: Principal
-------------------------
Montgomery Small Cap Partners III, L.P.
By: /s/ Keith High , its General Partner
----------------------------
By: Keith High
----------------------------
Title: General Partner
-------------------------
RRE Giga Investors, L.P.
By: RRE Investors L.L.C., its General Partner
By: /s/ Stuart Ellman
----------------------------
Title: Managing Director
-------------------------
Kensington Partners L.P.
By: /s/ Richard Keim, , Its General Partner
----------------------------
By: Dick Keim
----------------------------
Title: G.P.
-------------------------
-16-
<PAGE>
Name of Stockholder:
The Matrix Technology Group N.V.
- --------------------------------------
By: /s/ Seymour Goldblatt
-----------------------------------
Title: Managing Director
-------------------------------
Name of Stockholder:
Core Technology Fund Inc.
- --------------------------------------
By: /s/ Seymour Goldblatt
----------------------------------
Title: Managing Director
-------------------------------
Name of Stockholder:
Executive Technology L.P.
- --------------------------------------
By: /s/ Seymour Goldblatt
----------------------------------
Title: Pres. of S/2/ Tech which is
--------------------------------
Gen'l Ptr. of Exec. Tech.
Name of Stockholder:
Yale University
- --------------------------------------
By: /s/ Seymour Goldblatt
----------------------------------
Title: President of S/2/ Tech
-------------------------------
-17-
<PAGE>
Name of Stockholder:
Yale University Retirement Plan for Staff Employees
- -------------------------------------------------
By: /s/ Seymour Goldblatt
---------------------------------------------
Title: President of S2 Tech
------------------------------------------
Name of Stockholder:
Sci-Tech Investment Partners L.P.
- -------------------------------------------------
By: /s/ Seymour Goldblatt
---------------------------------------------
Title: President of S2 Tech
------------------------------------------
which is Gen'l Ptr of Sci-Tech
Name of Stockholder:
Montsol Investments N.V.
- -------------------------------------------------
By: /s/ Seymour Goldblatt
---------------------------------------------
Title: Managing Director
------------------------------------------
Montgomery Small Cap
Partners II, L.P.
By: /s/ Keith High
---------------------------------------------
-18-
<PAGE>
Name of Stockholder:
Acorn Fund
- ------------------------------------
By: /s/ Bruce H. Lauer
--------------------------------
Title: Treasurer
-----------------------------
Name of Stockholder:
Nosrob Investments Ltd.
- ------------------------------------
By: /s/ Dana Schmidt
--------------------------------
Title: Dana Schmidt - Principal
-----------------------------
Name of Stockholder:
Adam J. Brownstein
- ------------------------------------
By: /s/ Adam J. Brownstein
--------------------------------
Name of Stockholder:
Todd D. Brownstein
- ------------------------------------
By: /s/ Todd D. Brownstein
--------------------------------
Name of Stockholder:
Emily G. Hamilton
- ------------------------------------
By: Neill H. Brownstein, Father
Name of Stockholder:
Will P. Gordon
- ------------------------------------
By: /s/ Will P. Gordon
--------------------------------
-19-
<PAGE>
EXHIBIT 10.9
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
5% CONVERTIBLE NOTE
$1,000,000 New York, New York
April 5, 1995
FOR VALUE RECEIVED, Giga Information Group, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to the order of Friday Holdings, L.P. or
its successors and assigns (the "Payee" or "Holder"), the principal sum of
$1,000,000 on April 5, 1998 (the "Maturity Date"), and to pay interest on the
unpaid principal amount hereof from the date hereof until such principal is paid
at the rate of five percent (5%) per annum, non-compounded, payable as set forth
below. All amounts referred to in this Note are expressed and payable in United
States dollars.
Section 1. Interest.
--------
Interest (computed on the basis of a 360 day year for the actual number of
days elapsed in the period for which interest is being computed) shall be
payable on the Maturity Date. If the Maturity Date shall not be a business day,
then the interest that would otherwise become due and payable on such date shall
instead become due and payable on the next succeeding business day; provided,
--------
however, that such extension of time shall be included in the computation of
- -------
interest due in conjunction with such payment.
Section 2. Prepayment.
----------
The Company may, at its option at any time and from time to time, upon 20
days' prior written notice to the Holder, prepay the principal amount of this
Note, in whole or in part, without premium or penalty. Such prepayment of
principal shall be accompanied by the payment of all accrued and unpaid interest
on the amount so prepaid to the date of prepayment.
Section 3. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Company of this Note are
within the Company's corporate powers, have been duly authorized by all
<PAGE>
necessary corporate action, and do not contravene (i) the Company's charter or
by-laws or (ii) any law or any contractual restriction binding on or affecting
the Company.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Company of this Note.
(d) This Note is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
Section 4. Conversion of Note.
------------------
Section 4.1. Conversion. From the date hereof until the Maturity Date (or
----------
such earlier date, if this Note is prepaid in accordance with Section 2 hereof),
at the election of the Holder, $1,000,000 principal amount of this Note may be
converted at any time and from time to time, in whole or in part, on a pro rata
basis, into 2.67% of the fully paid and nonassessable shares of the Common Stock
of the Company based upon an equity capitalization for the company of up to $5
million. To the extent the equity capitalization of the Company exceeds $5
million, all shareholders of the Company will be diluted proportionately.
Section 4.2. Manner of Conversion. This Note may be converted in whole or
--------------------
in part by the Holder as provided above by surrender of the Note (the "Converted
Note") together with a written notice from the Holder (a "Conversion Notice")
addressed to the Company at the address set forth in Section 7. The Conversion
Notice shall specify the principal amount of the Note as to which the Holder
elects to exercise its conversion right and, if other than the Holder, the name
and address of the person or persons to whom share certificates for the shares
of Common stock to be issued upon such conversion are to be issued. The
conversion shall be deemed to have been effected at the close of business on the
date on which the converted Note shall have been so surrendered to the Company,
and at such time the rights of the Holder shall, to the extent of the principal
amount thereof converted, cease and the person or persons in whose name or names
any certificate or certificates for shares of Common stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record thereof. Upon such conversion, the accrued but unpaid interest on the
Note shall be cancelled to the extent of the pro rata portion of the Note so
converted.
Section 4.3. Partial Conversion. Upon a conversion, the Company shall, at
------------------
its expense, issue to the Holder a new note in substantially the form of this
Note representing the principal amount not so converted.
2
<PAGE>
Section 4.4. Delivery of Share Certificates; Fractional Shares. As
-------------------------------------------------
promptly as practicable after the surrender of the converted Note, the Company
at its expense will cause to be issued in the name of and delivered to the
Holder (or in the name of and to the person or persons specified in the
Conversion Notice) a certificate or certificates representing the number of
shares of Common stock to which the Holder shall be entitled upon such
conversion. No fractional shares of Common stock or scrip representing such
fractional shares shall be issued upon any such conversion hereunder. If any
fractional shares otherwise would be deliverable upon conversion, such fraction
shall be rounded up if one-half or more, or otherwise rounded down, to the
nearest whole number.
Section 4.5. Adjustment Upon Merger, etc. If any capital reorganization
----------------------------
or reclassification of the capital stock of the Company or any consolidation or
merger of the Company with another corporation, or the sale of all or a material
amount of the Company's assets to another corporation shall be effected in such
a way that holders of the Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for the Common Stock, then
lawful and adequate provision shall be made whereby the Holder shall thereafter
have the right to receive upon the basis and upon the terms and conditions
specified in this Section 4.5 and in lieu of the shares of the Common Stock
immediately theretofore receivable upon the conversion of this Note, securities
or assets as may be issued or distributable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such Common stock immediately theretofore receivable upon conversion of this
Note had such reorganization, reclassification, consolidation, merger or sale
not taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end that the provisions
hereof shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the conversion
of this Note.
Section 4.6. Notice of Adjustment. In case at any time:
--------------------
(a) there shall be any capital reorganization, or classification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its stock or assets to, another person or
persons; or
(b) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder at the address set forth in
Section 7, (1) at least 30 days' prior written notice of the date on which the
books of the Company shall close or a record date shall be selected for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
3
<PAGE>
liquidation or winding up, and (2) in the case of any such reorganization,
reclassification, consolidation, merger, sale dissolution, liquidation, winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause shall also specify
the date on which the holders of the Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. The failure to give any such
notice shall not invalidate any such corporate action.
Section 5. Events of Default; Remedies.
---------------------------
Section 5.1. Events of Default. An "Event of Default" occurs if:
-----------------
(a) there is a default in the payment of the principal or interest of this
Note when the same becomes due and payable at maturity or otherwise;
(b) any representation or warranty made by the Company (or any of its
officers) under or in connection with this Note shall prove to have been
incorrect in any material respect when made;
(c) the Company shall fail to perform or observe any other term, covenant
or agreement contained in this Note on its part to be performed or observed and
any such failure shall remain unremedied for 10 days after written notice
thereof sh all have been given to the Company by the Holder;
(d) the Company or any subsidiary of the Company pursuant to or within the
meaning of any Bankruptcy Law;
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(e) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any subsidiary of the
Company in an involuntary case,
4
<PAGE>
(ii) appoints a Custodian of the Company or any subsidiary of
the Company or for all or substantially all of its property, or
(iii) orders the liquidation of the Company or any subsidiary
of the Company,
and, in each case, the order or decree remains unstayed and in effect for 60
days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 5.2. Acceleration. If any Event of Default (other than an Event
------------
of Default in respect of the company specified in clause (d) or (e) of Section
5.1) occurs and is continuing, the Holder may, by written notice to the Company,
declare the unpaid principal of and any accrued interest on this Note to be due
and payable. Upon such declaration the principal and interest shall be due and
payable immediately. If an Event of Default specified in clause (d) or (e) of
Section 5.1 occurs in respect of the Company, such an amount shall become and be
immediately due and payable without any declaration or other act on the part of
the Holder. The Holder may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree of a court or
governmental agency and if all existing Events of Default except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived. No such rescission shall affect any subsequent
default or Event of Default or impair any right consequent thereto.
Section 6. No Distributions.
----------------
The Company will not, so long as the Note remains unpaid, pay any cash
dividends or make any cash distributions in respect of its capital stock.
Section 7. Replacement of Note.
-------------------
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Note and, in the case of any
loss, theft or destruction, upon delivery of an appropriate indemnification
agreement rom the Holder, or, in the case of any such mutilation, upon surrender
and cancellation of such Note, the Company at its expense will execute and
deliver, in lieu thereof, a new Note of like tenor, dated the date to which
interest on such lost, stolen, destroyed or mutilated Note has been paid.
5
<PAGE>
Section 8. Notices.
-------
Any notice or communication hereunder is duly given if in writing and
delivered in person or mailed by first-class mail (registered or certified,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Company:
Gideon Gartner
64 Bermuda Road
Westport, CT 06880
Telecopy: (303) 544-0536
If to the Holder:
Friday Holdings, L.P.
c/o Kenneth H. Heitner
Weil, Gotshal & Manges
767 Fifth Avenue
New York, N.Y. 10153
Attention: Paul Zazzera
Telecopy: (212) 310-8007
The Company or the Holder by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Section 9. No Waiver.
---------
No failure on the part of the Holder to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Holder or any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy. The rights and remedies provided herein are cumulative
and not exclusive and are in addition to all others that may be provided by
application of law and other agreements and documents.
Section 10. Successors and Assigns.
----------------------
This Note may be assigned (including, without limitation, distributing this
Note to the partners of Holder or their respective affiliates) or pledged as
security by the Holder from time to time without the consent of the Company, and
in the event
6
<PAGE>
of any such assignment, the obligations of the company hereunder shall inure to
the benefit of all such assigns and successors thereto.
Section 11. Severability.
------------
The terms and provisions of this Note are severable, and if any term or
provision shall be determined to be superseded, illegal, invalid or otherwise
unenforceable in whole or in part pursuant to applicable law by a governmental
authority having jurisdiction, such determination shall not in any manner impair
or otherwise affect the validity, legality or enforceability of that term or
provision in any other jurisdiction or any of the remaining terms and provisions
of this Note in any jurisdiction.
Section 12. Amendment.
---------
This Note may not be changed or terminated orally, and in any event no
amendment, modification or waiver of any term or provision of this Note, shall
be effective unless in writing and signed by the Holder.
Section 13. Governing Law. This Note is made and delivered in New York,
-------------
and shall be construed in accordance with and governed by the internal laws of
New York.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered to the Holder by a duly authorized officer on the date and year first
above written.
GIGA INFORMATION GROUP, INC.
By: /s/ Michael J. Kolesar
-----------------------
Name: MICHAEL KOLESAR
---------------------
Title: PRESIDENT & CFO
-------------------
7
<PAGE>
EXHIBIT 10.10
EXHIBIT A
---------
THE SECURITIES EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO GIGA
INFORMATION GROUP, INC., SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN FULL COMPLIANCE THEREWITH.
GIGA INFORMATION GROUP, INC.
6% CONVERTIBLE NOTE
Giga Information Group, Inc., a Delaware corporation (the "Company"), for
value received, promises to pay to David Gilmour (the "Holder"), in lawful money
of the United States, on December 31, 2005 (the "Maturity Date") subject to the
right of the Holder to require prepayment of all or part of the principal
pursuant to paragraph 1 hereof, the principal sum of Four Hundred Thousand
Dollars ($400,000), plus interest thereon from December 31, 1995 (the date of
issuance) until paid at the rate of six percent (6%) per annum, compounded
annually. The Company may, at its option, defer the payment of accrued interest
until the date of repayment. The Company waives presentment, notice of dishonor
and protest.
The following is a statement of the rights of the holder of this Note and
the conditions to which this Note is subject, to which the holder hereof, by the
acceptance of this Note, agrees:
1. Prepayment at Option of Holder.
------------------------------
The Holder shall be entitled to require that the Company prepay (i) up to
$150,000 principal amount hereof at any time between July 1, 1997 and July 1,
1999, and (ii) all or any part of the principal amount hereof at any time or
after January 1, 1999, in each case to the extent such principal amount shall
then be outstanding, and shall not have been previously converted. In order to
require any such prepayment, the Holder must deliver a written notice to the
Company at least thirty (30) days before the date of prepayment, specifying the
date of prepayment and the amount of principal to be prepaid. On the date so
specified for prepayment, the Company shall pay to the Holder such amount of
principal, together with interest accrued thereon.
<PAGE>
2. Conversion.
----------
2.1 The Holder of this Note may, at his option, at any time on or after
December 31, 1996, convert all or part of the unpaid principal amount of this
Note into the lesser of (i) that number of shares of the Company's Series B
Preferred Stock arrived at by dividing such unpaid principal being converted by
$3.50 (the "Conversion Price") and (ii) the amount of such unpaid principal
amount being converted, expressed as a fraction of the total unpaid principal
amount of this Note, multiplied by the Maximum Conversion Amount. The "Maximum
Conversion Amount" shall initially mean an aggregate of 28,576 shares, which
number shall be increased by an additional 2,857 shares on the sixth day of each
of the thirty (30) months after January 1996.
In order to convert this Note in whole or in part, the holder hereof must
duly complete, execute and deliver to the Company a Conversion Notice, in the
form attached hereto as Attachment 1 (a "Conversion Notice"). Such Conversion
Notice shall be delivered to the Company by registered mail not less than five
(5) days prior to the date fixed for the conversion to the Company at the
address indicated on the signature page hereof, or at such other address as the
Company may designate from time to time by written notice to the Holder.
In case of the conversion of only part of this Note, the Conversion Notice
shall specify the portion of the face amount being converted; and upon
conversion of the specified portion, the Note shall be cancelled and a new Note
issued for the unpaid balance of the principal, which new Note shall also allow
for conversion.
Should any change be made to the Series B Preferred Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Series B Preferred Stock as
a class without the Company's receipt of consideration, appropriate adjustments
shall be made to (i) the Maximum Conversion Amount and (ii) the Conversion Price
in order to reflect such change and thereby preclude a dilution or enlargement
of benefits hereunder. The adjustments determined by the Board of Directors
shall be final, binding and conclusive. In the event of the conversion of all
of the outstanding Series B Preferred Stock into Common Stock of the Company,
all references herein to Series B Preferred Stock shall thereafter be deemed to
refer to Common Stock.
Upon conversion, the accrued by unpaid interest on this Note attributable
to the portion of the principal amount converted in accordance with this
subsection shall no longer be payable to the Holder.
<PAGE>
2.2 No fractional shares will be issued on exchange of this Note, but in
lieu thereof, the Company will pay the cash value of such fractional share
calculated on the basis of the conversion price provided above.
The Company covenants and agrees that so long as this Note is outstanding,
the Company shall reserve a sufficient number of shares of Series B Preferred
Stock (and shares of Common stock of the Company (the "Common Stock") issuable
upon conversion of the Series B Preferred Stock) sufficient to enable the holder
hereof to exercise the conversion rights contained herein with respect to an
amount equal to 100% of the principal outstanding under this Note.
3. Events of Default. Any of the following events shall constitute an
-----------------
Event of Default, and holders hereof may declare the entire unpaid principal and
accrued interest on this Note immediately due and payable, by a notice and in
writing to the Company:
3.1 The institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or
consent seeking reorganization or release under the Federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it to the filing or
any such petition or the appointment of a receiver, liquidator, assignee,
trustee, or other similar official, of the Company, or any substantial part of
its property, or the making by it of any assignments for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the consent by it to any liquidation,
dissolution or winding-up of the Company, or the taking of corporate action by
the Company in furtherance of any such action;
3.2 If, within 60 days after the commencement of any action against the
Company seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be se
aside, or if, within 60 days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company, such
appointment shall not have been vacated; or
3.3 The Company fails to pay any amounts owing hereunder when due or fails
to provide the Holder the conversion rights specified hereunder.
4. Registration. The Company may deem and treat the person in whose name
------------
this note shall be registered as the absolute owner of such Note for the purpose
<PAGE>
of receiving payment of principal and interest and for all other purposes and
the Company shall not be affected by any notice to the contrary.
5. Transfer of Note. This Note may be transferred only upon surrender of
----------------
the original Note for registration of transfer, duly endorsed, or accompanied by
a duly executed written instrument of transfer in form satisfactory to the
Company. Thereupon, a new Note for like principal amount and interest will be
issued to, and registered in the name of, the transferee. Interest and
principal are payable only to the registered holder of the Note.
6. Expenses. The Company agrees to pay the holder's costs and expenses in
--------
collecting and enforcing its rights under this Note, including attorneys' fees.
7. Severability. If one or more provisions of this Note are hold to be
------------
unenforceable under applicable law, such provision shall be excluded from this
Note, and the remaining provisions of this Note shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with their
terms, with the effect of the excluded provision being taken into consideration
and the remaining terms construed in accordance with the intent of this Note.
8. Governing Law. This Note shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name this 31st day of December, 1995.
GIGA INFORMATION GROUP, INC.
- -Seal-
By: /s/ Kenneth E. Marshall
--------------------------------
Kenneth Marshall, President
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of February, 1996 by and between Giga
Information Group, Inc. a Delaware corporation (the "Company") and Leander
Jennings (the "Executive").
WHEREAS, the Company and the Executive, desire that the Executive serve as
the Senior Vice President, Worldwide Sales of the Company on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
herein contained, it is mutually agreed between the parties hereto as follows:
ARTICLE I. TERM OF EMPLOYMENT
----------
Section 1.1. The company hereby employs the Executive and the Executive
hereby accepts employment with the Company for a period (the "Period of
Employment") commencing February 1, 1996 and ending on June 30, 1997 (or such
earlier date on which the Period of Employment may be terminated pursuant to
Article V hereof).
ARTICLE II. DUTIES OF EXECUTIVE
------
Section 2.1. General. The Executive shall serve as Senior Vice President,
-------
Worldwide Sales of the Company. Consistent with this position Executive shall
perform all services and do all things necessary or advisable to oversee the
sales operation of the Company, subject always to the authority of the Board of
Directors of the Company (the "Board of Directors") and the President and Chief
Operating Officer of the Company.
Section 2.2. Duties. Executive will be responsible for overseeing the
------
sales operation of the Company and will perform such duties as are consistent
with his position as the Senior Vice President, Worldwide Sales of the Company
and shall have such powers and authorities as may be needed to carry out those
duties and as set forth in the Company's Bylaws. In addition, Executive shall
perform such other duties and undertake responsibilities as are reasonably
assigned to him by the President and Chief Operating Officer or the Board of
Directors. The Executive agrees to devote substantially all of his business
time, attention and services to the diligent, faithful and competent discharge
of such duties for the successful operation of the Company's business.
Section 2.3. Vacations. The Executive shall be entitled to such paid
---------
vacation time as is consistent with the Company's vacation policy for senior
executives as it exists from time to time.
<PAGE>
ARTICLE III. COMPENSATION
------------
Section 3.1. Salary. During the Period of Employment, as compensation for
------
his services hereunder, the Executive shall receive a per annum base salary (the
"Base Salary") of at least (i) $120,000 for the twelve (12) months ended June
30, 1997, and (ii) thereafter such amount per annum [but not less than $120,000
per annum] as may be approved by the Compensation Committee of the Board of
Directors. The Base Salary shall be payable in periodic installments on the
dates of the company's usual payroll which shall be at least once per calendar
month, and shall be paid pro-rata for any periods of less than twelve (12)
months.
Section 3.2. Commission. The Executive shall be on an annualized
----------
commission plan based upon a worldwide sales quota. In 1996, the amount of the
overall commission earnings target at 100% of plan shall equal $120,000 on a
worldwide quota of $15.5M in NAVI. For each year after 1996, the Executive's
bonus shall be redefined based upon the the business plan.
Section 3.3. Expenses. The Company shall reimburse Executive, upon
--------
receipt from Executive if appropriate documentation for reasonable costs and
expenses incurred by him during the Period of Employment in connection with his
services and duties to the Company, including travel expenses, monthly fees and
usage fees payable for his cellular phone and other telecommunications services
(excluding usage fees solely attributable to personal matters), and his
automobile operating expenses.
ARTICLE IV. EXECUTIVE BENEFITS
------------------
Section 4.1. Stock Options. Company has granted to the Executive an
-------------
incentive stock option ("ISO") to purchase 120,000 shares of Common Stock of the
Company at an exercise price of $.60 per share, subject to vesting and subject
to the Board's approval. In addition, the Executive will receive 30,000
additional stock options at the then current price, subject to the Board of
Directors' approval, once the Executive has achieved 100% of the Executive's
assigned 1996 quota; and 30,000 additional stock options upon achievement of
your assigned 1997 quota, also at the then current price, subject to the Board
of Directors' approval. Further in addition, the Company will grant to the
Executive ISOs to purchase such number of shares of Common Stock of the Company
as shall be determined from time to time by the Board of Directors or such
committee. All options granted to Executive shall have an exercise price equal
to the then fair market value of the Company's Common Stock, as determined in
good faith by the Board of Directors or a duly authorized committee thereof,
shall be ISOs, and shall be subject to the terms and condition as set forth in
an option agreement in substantially the form as may be generally in
2
<PAGE>
effect for options granted to employees of the Company at the time of the grant
to the Executive.
Section 4.2. Location: Relocation Expenditures. The Executive's
----------------------------------
principle place of business shall be either Norwell, Massachusetts or Cambridge,
Massachusetts, as determined by the President of the Company. The Company shall
reimburse Executive for the reasonable expenses of moving Executive and his
immediate family to such location in accordance with the Company's practice as
in effect for its senior executives generally (See Attached).
Section 4.3. Life Insurance. The Company or an affiliate thereof shall
--------------
provide term life insurance payable to a beneficiary or beneficiaries designated
by Executive in accordance with the Company's practice from time to time in
effect for its senior executives generally.
Section 4.4. Other Benefits. The Executive shall be eligible to
--------------
participate in such other employee benefit programs (including pension benefits,
and medical, dental, life and disability insurance) as the Company shall
maintain or establish from time to time for the benefit of its other senior
executives generally.
ARTICLE V. TERMINATION OF AGREEMENT
------------------------
Section 5.1. Company Termination for Cause. Notwithstanding anything to
-----------------------------
the contrary herein, the Period of Employment, and the Company's employment of
the Executive, may be terminated by the Board of Directors at any time for cause
immediately upon written notice to the Executive, if any of the following events
occur:
(a) The Executive is convicted of a felony or a misdemeanor involving moral
turpitude and having a material impact on the Company by a court of competent
jurisdiction;
(b) The Executive breaches a fiduciary duty owed to the Company, or engages
in acts of gross misconduct or personal dishonesty toward the Company;
(c) The Executive materially breaches any of his obligations under this
Agreement and fails to correct the same within thirty (30) days after written
notice thereof from the Company to the Executive.
3
<PAGE>
(d) The Executive engages in habitual absenteeism or drug addiction and
fails to correct the same within (30) days after written notice thereof from the
Company to the Executive.
The Executive shall be entitled to a full hearing before a quorum of the
Board of Directors at a Board of Directors' meeting prior to any termination of
his employment under this Section 5.1.
Section 5.2. Unconditional Termination.
-------------------------
(a) By Company. The company may terminate the Period of Employment, and
----------
the Company's employment of the Executive, for any reason, or for no reason, by
giving at least twenty-eight (28) days' prior written notice thereof to the
Executive.
(b) By Executive. The Executive may terminate the Period of Employment and
------------
the Company's employment of the Executive, for any reason, or for no reason, by
giving at least twenty-eight (28) days' prior written notice thereof to the
Company.
Section 5.3. Rights upon Termination.
-----------------------
(a) Termination by Company Not For Cause. Upon any termination of the
------------------------------------
Period of Employment under Section 5.3(a) prior to June 30, 1997, the Company
shall pay the Executive the greater of (i) the amount of Base Salary which the
Executive would have received under Section 3.1 (exclusive of any increase in
Base Salary not yet approved by the Board of Directors and committed to the
Executive) had the Period of Employment not been terminated, and (ii) the amount
that would be payable to Executive as follows: the greater of the remainder of
Executive's term of employment or six months. Any payment under clause (i)
shall be paid on the Company' normal payroll schedule, and any payment under
clause (ii) shall be paid at such times as shall be in accordance with such
severance policy. [In the event that the Company shall elect to exercise any
rights it may have to repurchase any shares of capital stock of the Company held
by the Executive following termination of the Period of Employment, it shall be
entitled to apply any amount paid by it pursuant to this paragraph as a credit
against any amount it is required to pay to repurchase such shares]. The
Company's obligations in this Section 5.3 shall constitute Executive's exclusive
remedy for termination during the Period of Employment by the Company under
Section 5.2(a). Except as expressly set forth in this Section 5.3(a), upon
termination under Section 5.2(a), all compensation and benefits (except the
ability to exercise options, to the extent then vested, in
4
<PAGE>
accordance with, and during the period provided under, the terms thereof) shall
immediately cease.
(b) Termination by Company for Cause. Upon termination by the Company for
--------------------------------
cause under Section 5.1, or termination by the Executive pursuant to Section
5.2(b), the Executive shall not be entitled to any severance or similar
payments, and all compensation and benefits (except the ability to exercise
options, to the extent then vested, in accordance with, and during the period
provided under, the terms thereof) shall immediately cease. Termination for
cause under this Section 5.3 shall be without prejudice to any other remedy to
which the Company may be entitled either at law or in equity or under this
Agreement.
[ARTICLE VI. NON-COMPETITION]
---------------
(Section 6.1 Agreement Not to Compete.)
------------------------
[(a) During the Period of Employment and for a twelve-month period
beginning on the last day of the Period of Employment the Executive will not,
directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer, employee,
director, joint venture, investor, lender, or in any other capacity whatsoever
(other than as the holder of not more than five percent (5%) of the total
outstanding stock of a publicly held company), engage in the business of
developing, providing and marketing Continuous IT Information Services (as
defined in Section 6.1(d).
(ii) recruit, solicit or induce, or attempt to induce any employee or
employees to the Company to terminate their employment with, or otherwise cease
their relationship with the Company or any subsidiary thereof; or
(iii) solicit, divert or take away, or attempt to divert or to take away,
the business or patronage of any of the clients, customers, subscribers, or
accounts, or prospective clients, customers or accounts, of the Company or any
subsidiary thereof which were contacted, solicited, or served by the Company
while the Executive was employed by the Company.]
(b) The parties acknowledge that the type and period of restriction
imposed pursuant to this Section 6.1 are fair and reasonable and are reasonably
required for the protection of the Company and the goodwill associated with the
business of the Company. The parties desire that
5
<PAGE>
the restrictions be reasonable both now and at any time they are sought to be
enforced, and accordingly agree that if any restriction set forth in this
Section 6.1 is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be interpreted to extend
only over the maximum period of time, range of activities or geographic area as
to which it may be enforceable. The Executive agrees that any remedy available
to the Company at law for the breach of this Section 6.1 may be inadequate and
therefore, in the event of any such breach, in addition to such other remedies
which may be available, the Company shall have the right to seek specific
performance and injunctive relief.
(c) The Executive's obligations under Section 6.1 shall terminate upon the
Company's termination of the Period of Employment pursuant to Section 5.2(a).
(d) For the purposes of this Section 6, "Continuous IT Information
Services" mean the performance or development of original or synthesized
research or analysis with respect to information technologies or information
technology industries and the marketing and sale of the results of such research
and analysis through subscription or retainer relationships which (i) have a
stated term (which may be subject to renewal or extension) or which may be open-
ended and (ii) involve the delivery of products and services on an ongoing basis
throughout the term through a number of different means including one or more of
(A) oral, written and/or on-line delivery; (B) collaboration with analysts or
experts and/or (C) events; provided that Continuous IT Information Services
shall not include consulting services of an engagement nature intended to
provide advice or solutions addressing specific problems or issues of specific
clients.
ARTICLE VII. GENERAL PROVISIONS
------------------
Section 7.1. Confidentiality Agreement. The Executive agrees to adhere to
-------------------------
the invention and Non-Disclosure Agreement attached hereto as Exhibit A.
---------
Section 7.2. Successors. The Company will require any successor (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the company to Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
6
<PAGE>
Section 7.3. Governing Law. This Agreement shall be construed and
-------------
enforced in accordance with and be governed by the laws of the State of
Massachusetts.
Section 7.4. Entire Agreement. This Agreement sets forth the entire
----------------
agreement and understanding between the Executive and the Company, and
supersedes any other negotiations, agreements, understandings, oral agreements,
representations and past or future practices whether written or oral.
Section 7.5. Severability and Interpretation. In the event that pay
-------------------------------
provision or any portion of this Agreement is held invalid or unenforceable by a
court of competent jurisdiction, such provision or portion thereof shall be
considered separate, and apart from the remainder of this Agreement and the
other provisions shall remain fully valid and enforceable. In the event that
any provision is held to be overly broad as written such provision shall be
deemed amended to narrow its application to the extent necessary to make the
provision enforceable according to applicable law and enforced as amended.
Section 7.6. Notices. All notices required by this Agreement shall be
-------
given in writing either by personal delivery or by first class mail return
receipt requested, to the then most current address of the parties notified to
the other. Notice given by mail shall be deemed given five (5) days following
the date of mailing.
Section 7.7. Waivers and Modifications. This Agreement may be modified,
-------------------------
and the rights and remedies of any provision hereof may be waived, only in
accordance with Section 7.7. No modification or waiver by the Company shall be
effective without the consent of at least a majority of the Board of Directors
then in office at the time of such modification or waiver. No waiver by either
party of any breach by the other or any provision hereof shall be deemed to be a
waiver of any later or other breach thereof as a waiver of any other provision
of this Agreement. This Agreement sets forth all of the terms of the
understandings between the parties with reference to the subject matter set
forth herein and may not be waived, changed, discharged or terminated orally or
by any course of dealing between the parties, but only by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
Section 7.8. Attorneys' Fee. In the event either party shall bring any
--------------
action or legal proceeding of an alleged breach of any provision of this
Agreement or to enforce, protect or establish any term or covenant of this
Agreement or right of either party under this Agreement the prevailing party
shall be entitled to recover as part of such action or proceeding, or in a
separate action brought for that purpose, reasonable attorneys' fees and court
costs as may be fixed by the court.
7
<PAGE>
Section 7.9. Withholding Taxes. All amounts payable to Executive under
-----------------
this Agreement shall be subject to applicable withholding of income, wage and
other taxes, and such other deductions or withholdings as may be required by
law.
Section 7.10. Indemnification. The Executive shall be entitled to the
---------------
benefit of the indemnification provisions contained on the date hereof in the
Bylaws of the Company as the same may hereafter be amended, and of any
indemnification provisions that may hereafter by added to the Certificate of
Incorporation of the Company (not including any amendments or additions that
limit or narrow, but including any that add to or broaden, the protection
afforded to the Executive by those provisions), or, if greater, to the full
extent permitted by applicable law at the of the assertion of any liability
against the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
GIGA INFORMATION GROUP, INC.
By: /s/ Kenneth E. Marshall
-----------------------------
Ken Marchall
EXECUTIVE
/s/ Leander Jennings
-----------------------------
Leander Jennings
8
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of December, 1995 by and between Giga
Information Group, Inc., a Delaware corporation (the "Company") and Kenneth
Marshall (the "Executive").
WHEREAS, the Company and the Executive desire that the Executive serve as
the President and Chief Operating Officer of the Company on the terms and
conditions contained herein.
NOW THEREFORE, in consideration of the mutual covenants and obligations
herein contained, it is mutually agreed between the parties hereto as follows:
ARTICLE 1. TERM OF EMPLOYMENT
------------------
Section 1.1. The Company hereby employs the Executive and the Executive
hereby accepts employment with the Company for a period (the "Period of
Employment") commencing December 1, 1995 and ending on November 30, 2000 (or
such earlier date on which the Period of Employment may be terminated pursuant
to Article V hereof); provided, however, that commencing on November 30, 2000
-------- -------
and on November 30 of each year thereafter, the Period of Employment shall
automatically be extended for one additional year unless, at least thirty (30)
days prior to any such December 31, the Executive or the Company shall have
given notice to the other that he or it does not wish to extend this Agreement.
ARTICLE II. DUTIES OF EXECUTIVE
-------------------
Section 2.1. General. The Executive shall serve as President and Chief
-------
Operating Officer of the Company. Consistent with this position Executive shall
perform all services and do all things necessary or advisable to oversee the
operations and business of the Company, subject always to the authority of the
Chairman and the Board of Directors of the Company (the "Board of Directors").
The Company shall increase the number of members of the Board of Directors by
two and the Executive shall be appointed to fill one of such vacancies. During
the Period of Employment, the Executive shall remain a member of the Board of
Directors, and shall be entitled to recommend to the Board of Directors one
additional person, who is not an employee or officer of the Company, for
nomination or appointment as a director. The Company shall use its best efforts
to communicate with its stockholders, and take such other actions, as are
necessary so that the Executive shall continue to be a member of the Board of
Directors for the Period of Employment.
Section 2.2. Duties. Executive will be responsible for overseeing the
------
business of the Company and will perform such duties as are consistent with his
position as the President and Chief Operating Officer of the Company and shall
have such
<PAGE>
powers and authorities as may be need to carry out those duties and as set forth
in the Company's Bylaws. In addition, Executive shall perform such other duties
and undertake responsibilities as are reasonably assigned to him by the Chairman
or the Board of Directors. The Executive agrees to devote substantially all of
his business time, attention and services to the diligent, faithful and
competent discharge of such duties for the successful operation of the Company's
business, except that Executive may continue to serve on the Board of Directors
of VISIX Software.
Section 2.3. Vacations. The Executive shall be entitled such paid
---------
vacation time as is consistent with the Company's vacation policy for senior
executives as it exists from time to time.
ARTICLE III. COMPENSATION
------------
Section 3.1. Salary. During the Period of Employment, as compensation for
------
his services hereunder (including his services as a member of the Board of
Directors), the Executive shall receive a per annum base salary (the "Base
Salary") of at least (i) $160,000 plus the aggregate amount of interest paid by
Executive to the Company on the Note (as defined below in Section 3.5), for the
twelve (12) months ended December 31, 1996, (ii) $192,000 for the twelve (12)
months ended December 31, 1997, and (iii) thereafter such amount per annum (but
not less than $192,000 per annum) as may be approved by the Board of Directors.
The Base Salary shall be payable in periodic installments on the dates of the
Company's usual payroll, which shall be at least once per calendar month, and
shall be paid pro rata for any periods of less than twelve (12) months.
Section 3.2. Bonus. The Executive shall be entitled to receive a cash bonus
-----
for the twelve (12) months ended December 31, 1996 of $80,000 (prorated in the
case of a partial year of employment). Thereafter, the Executive shall receive
annual cash bonuses for each year based upon the degree to which the Company has
achieved the cash flow, net annual value increase in subscriptions ("NAVI"),
operating income and qualitative goals set for the in the budget or business
plan approved by the Board of Directors for such year. In 1997, the amount of
the bonus payable shall be not less than $46,500, (the "1997 Minimum Bonus")
regardless of degree to which such goals shall have been met, and the amount of
the bonus payable if such goals shall be achieved in full in 1997 shall equal
$96,000. For each year after 1997, Executive's bonus shall be in such amount as
shall be determined by the Board of Directors (or a duly authorized committee
thereof). The bonus payable in 1996 shall be payable in four monthly
installments of $20,000 each, payable in advance on each of January 1, 1996,
April 1, 1996, July 1, 1996 and October 1, 1996. If the Period of Employment
shall terminate prior to December 31, 1996, then the Executive shall repay to
the Company an amount equal to $20,000 divided by a fraction of which the
numerator is the number of days since the most recent of January 1, 1996, April
1, July 1,
2
<PAGE>
1996 or October 1, 1996 that were included in the Period of Employment and the
denominator of which shall equal 92. Any bonus payable for 1997 in excess of the
1997 Minimum Bonus, and any bonus payable for any year after 1996, shall be
payable promptly following the availability to the Company of audited financial
statements with respect to such year, but in no event later than April 30 of the
following year.
Section 3.3. Expenses. The Company shall reimburse Executive, upon receipt
--------
from Executive of appropriate documentation, for reasonable costs and expenses
incurred by him during the Period of Employment in connection with his services
and duties to the Company, including travel expenses, monthly fees and usage
fees payable for his cellular phone and other telecommunications services
(excluding usage fees solely attributable to personal matters), and his
automobile operating expenses.
Section 3.4. Loan. The Company will make an interest-free loan to the
----
Executive of $20,00 on December 1, 1995. Such loan shall be evidenced by a note
(the "Note") in the form of Exhibit A to this Agreement, and Executive agrees to
---------
execute such Note as a condition to receiving such loans.
ARTICLE IV. EXECUTIVE BENEFITS
------------------
Section 4.1. Stock Options. The Company has previously granted to the
-------------
Executive an incentive stock option to purchase 600,000 shares of Common Stock
of the Company at an exercise price of $.50 per share, subject to vesting. In
addition to such option, the Company will grant to the Executive incentive stock
options ("ISOs") to purchase such number of shares of Common Stock of the
Company as shall be determined from time to time by the Board of Directors or a
duly authorized committee thereof, at such times as shall be determined by the
Board of Directors or such committee. By March 31, 1996, the Board of Directors
will approve the Company's business plan for 1996, which plan will include goals
for cash flow, NAVI, and such qualitative and other matters, as may be
determined by the Board of Directors. If the Company's performance for the year
ending December 31, 1996 meets or exceeds the goals contained in such business
plan, the Executive shall, in 1997, receive an option to purchase an additional
80,000 shares of Common Stock. All options granted to Executive shall have an
exercise price equal to the then-fair market value of the Company's Common
Stock, as determined in good faith by the Board of Directors or a duly
authorized committee thereof, shall be ISOs, and shall be subject to the terms
and conditions set forth in an Option Agreement in substantially the form of
attached as Exhibit B hereto or on such other terms as may be generally in
---------
effect for options granted to employees of the Company at the time of the grant
to the Executive.
3
<PAGE>
Section 4.2. Relocation Expenditures. If the Board of Directors shall
-----------------------
require that the principal place of business of the Executive be located more
than thirty (30) miles from Boston or Cambridge, Massachusetts, the Company
shall reimburse the Executive in amounts which, after provision of the net
amount of all income taxes payable by Executive with respect to the receipt of
such amounts (taking into account any moving expense or other deductions
available to Executive), shall be equal to all reasonable expenses of moving
Executive and his personal effects to such location, including closing costs of
acquiring a new residence and temporary housing costs.
Section 4.3. Life Insurance. The Company or an affiliate thereof or a trust
--------------
funded by the Company shall provide term life insurance payable to a beneficiary
or beneficiaries designated by Executive in the amount of three times the Base
Salary, inclusive of any life insurance or death benefit coverage provided
Executive under any of the benefit plans or arrangements of the Company.
Section 4.4. Other Benefits. The Executive shall be eligible to participate
--------------
in such other employee benefit programs (including pension benefits, and
medical, dental, life and disability insurance) as the Company shall maintain or
establish from time to time for the benefit of its other executive officers, on
the same basis as such other executive officers. The Executive may receive such
other and additional benefits as the Board of Directors may determine from time
to time in its sole discretion.
ARTICLE V. TERMINATION OF AGREEMENT
------------------------
Section 5.1. Company Termination for Cause. Notwithstanding anything in the
-----------------------------
contrary herein, the Period of Employment, and Company's employment of the
Executive, may be terminated by the Board of Directors at any time for cause
immediately upon written notice to the Executive, if any of the following events
occur:
(a) The Executive is convicted of a felony or a misdemeanor involving
moral turpitude and having a material impact on the Company by a court of
competent jurisdiction;
(b) The Executive breaches a fiduciary duty owed to the Company, or
engages in acts of gross misconduct or personal dishonesty toward the Company;
(c) The Executive materially breaches any of his obligations under the
Agreement and fails to correct the same within thirty (30) days after written
notice thereof from the Company (which notice shall have been approved by the
Board of Directors) to the Executive; or
4
<PAGE>
(d) The Executive engages in habitual absenteeism or drug addiction
and fails to correct the same within thirty (30) days after written notice
thereof from the Company (which notice shall have been approved by the Board of
Directors) to the Executive.
The Executive shall be entitled to a full hearing before a quorum of
the Board of Directors at a Board of Directors meeting prior to any termination
of his employment under this Section 5.1.
Section 5.2. Executive Termination for Cause. Notwithstanding anything to
-------------------------------
the contrary herein, the Period of Employment, and the Company's employment of
the Executive, may be terminated by the Executive at any time for cause
immediately upon written notice to the Company in the event of any adverse
change in the Executive's title, any material reduction by the Company (or its
successor) in the Executive's responsibilities specified hereunder (or those
otherwise assumed by Executive in the ordinary course of the Company's
business), any requirement that Executive's place of employment be more than 30
miles from Boston or Cambridge, Massachusetts are or any material breach by the
Company of its obligations hereunder, in each case which continues for thirty
(30) days after written notice thereof by the Executive identifying such change
in title, reduction in responsibility, change in place of employment or breach.
Section 5.3. Unconditional Termination.
-------------------------
(a) By Company. The Company may terminate the Period of Employment,
----------
and the Company's employment of the Executive, for any reason, or for no reason,
by giving at least twenty-eight (28) days' prior written notice thereof to the
Executive.
(b) By Executive. The Executive may terminate the Period of
------------
Employment, and the Company's employment of the Executive, for any reason, or
for no reason, by giving at least twenty-eight (28) days' prior written notice
thereof to the Company.
Section 5.4. Rights upon Termination.
-----------------------
(a) Upon any termination of the Period of Employment under Section 5.2
or 5.3(a), the Company shall pay the Executive an aggregate amount equal to (i)
$160,000 in the event that such termination occurs prior to January 31, 1997 or
(ii) fifty percent (50%) of the average annual Base Salary paid to the Executive
during the twelve months ending on the last day of the last full month of the
Employment Period, in the event that such termination occurs on or following the
date January 31, 1997 one year from the date hereof. Such amount shall be paid
over a period of one year commencing with the date of termination, in the case
of termination prior to
5
<PAGE>
January 31, 1997, and over a period of six months in the case of termination
after January 31, 1997, on the Company's normal payroll schedule in
approximately equal installments. In the event that the Company shall elect to
exercise any rights it may have to repurchase any shares of capital stock of the
Company held by the Executive following termination of the Period of Employment,
it shall be entitled to apply any amount paid by it pursuant to this paragraph
as a credit against any amount it is required to pay to repurchase such shares
unless such termination shall have been effected pursuant to Section 5.3(a) and
the notice referred to therein shall have been delivered after January 31, 1997.
Except as expressly set forth in this Section 5.4(a), upon termination
of the Period of Employment by the Company under Section 5.3(a), all
compensation and benefits (except the ability to exercise options, to the extent
then vested, in accordance with, and during the period provided under, the terms
thereof) shall immediately cease. The Company's obligations in this Section 5.4
shall constitute Executive's exclusive remedy for termination during the Period
of Employment by the Company under Section 5.3(a).
(b) Upon termination by the Company for cause under Section 5.1, or
termination by the Executive pursuant to Section 5.3(b), all compensation and
benefits (except the ability to exercise options, to the extent then vested, in
accordance with, and during the period provided under, the terms thereof) shall
immediately cease. Termination for cause under this Section 5.4 shall be without
prejudice to any other remedy to which the Company may be entitled either at law
or in equity or under this Agreement.
Section 5.5. Resignation upon Termination. If the Company or the
----------------------------
Executive exercises its or his right to terminate the Period of Employment under
this Article V, Executive shall resign voluntarily as a member of the Board of
Directors, as a member of the board of directors of any of the Company's
subsidiaries and as an employee of the Company and any of its subsidiaries on
the date such termination of employment becomes effective as provided in this
Article V.
ARTICLE VI. NON-COMPETITION
---------------
Section 6.1. Agreement Not to Compete.
------------------------
(a) During the Period of Employment and for a twelve-month period
beginning on the last day of the Period of Employment, the Executive will not,
directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venture, investor, lender, or in any other capacity
6
<PAGE>
whatsoever (other than as the holder of not more than five percent (5%) of the
total outstanding stock of a publicly held company), engage in the business of
developing, providing and marketing Continuous IT Information Services (as
defined in Section 6.1(d)).
(ii) recruit, solicit or induce, or attempt to induce, any employee or
employees of the Company to terminate their employment with, or otherwise cease
their relationship with, the Company or any subsidiary thereof; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers,
subscribers or accounts, or prospective clients, customers or accounts, of the
Company or any subsidiary thereof which were contacted, solicited or served by
the Company while the Executive was employed by the Company.
(b) The parties acknowledge that the type and period of restriction
imposed pursuant to this Section 6.1 are fair and reasonable and are reasonably
required for the protection of the Company and the goodwill associated with the
business of the Company. The parties desire that the restrictions be reasonable
both now and at any time they are sought to be enforced, and accordingly agree
that if any restriction set forth in this Section 6.1 is found by any court of
competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities of in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable. The Executive agrees that any remedy available to the Company at
law for the breach of this Section 6.1 may be inadequate and therefore, in the
event of any such breach, in addition to such other remedies which may be
available, the Company shall have the right to seek specific performance and
injunctive relief.
(c) The Executive's obligations under this Section 6.1 shall terminate
upon the termination of the Period of Employment by the Executive for "cause"
pursuant to Section 5.2, or the Company's termination of the Period of
Employment pursuant to Section 5.3(a).
(d) For the purposes of this Section 6, "Continuous IT Information
Services" means the performance or development of original or synthesized
research or analysis with respect to information technologies or information
technology industries and the marketing and sale of the results of such research
and analysis through subscription or retainer relationships which (i) have a
stated term (which may be subject to renewal or extension) or which may be open-
ended and (ii) involve the delivery of products and services on an ongoing basis
throughout the term through a number of different means including one or more of
(A) oral, written
7
<PAGE>
(A) oral, written and/or on-line delivery; (B) collaboration with analysts or
experts, and/or (C) events; provided that Continuous IT Information Services
shall not include consulting services of an engagement nature intended to
provide advice or solutions addressing specific problems or issues of specific
clients.
ARTICLE VII. GENERAL PROVISIONS
------------------
Section 7.1. Confidentiality Agreement. The Executive agrees to adhere to
-------------------------
the Invention and Non-Disclosure Agreement attached hereto as Exhibit C.
---------
Section 7.2. Successors. The Company will require any successor (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
Section 7.3. Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with and be governed by the laws of the State of Massachusetts.
Section 7.4. Entire Agreement. This Agreement sets forth the entire
----------------
agreement and understanding between the Executive and the Company, and
supersedes any other negotiations, agreements, understandings, oral agreements,
representations and past or future practices whether written or oral.
Section 7.5. Severability and Interpretation. In the event that any
-------------------------------
provision or any portion of this Agreement is held invalid or unenforceable by a
court of competent jurisdiction, such provision or portion thereof shall be
considered separate and apart from the remainder of this Agreement and the other
provisions shall remain fully valid and enforceable. In the event that any
provision is held to be overly broad as written, such provision shall be deemed
amended to narrow its application to the extent necessary to make the provision
enforceable according to applicable law and enforced as amended.
Section 7.6 Notices. All notices required by this Agreement shall be given
-------
in writing either by personal delivery or by first class mail, return receipt
requested, to the then most current address of the parties notified to the
other. Notice given by mail shall be deemed given five (5) days following the
date of mailing.
Section 7.7. Waivers and Modifications. This Agreement may be modified, and
-------------------------
the rights and remedies of any provision hereof may be waived, only in
accordance with this Section 7.7. No modification or waiver by the Company
shall be effective without the consent of at least a majority of the Board of
Directors (excluding the Executive) then in office at the time of such
modification or waiver. No waiver by either party of any breach by the other or
any provision hereof shall be
8
<PAGE>
deemed to be a waiver of any later or other breach thereof or as a waiver of any
other provision of this Agreement. This Agreement sets forth all of the terms of
the understandings between the parties with reference to the subject matter set
forth herein and may not be waived, changed, discharged or terminated orally or
by any course of dealing between the parties, but only by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.
Section 7.8. Attorneys' Fees. In the event either party shall bring any
---------------
action or legal proceeding of an alleged breach of any provision of this
Agreement or to enforce, protect or establish any term or covenant of this
Agreement or right of either party under this Agreement, the prevailing party
shall be entitled to recover as part of such action or proceeding, or in a
separate action brought for that purpose, reasonable attorneys' fees and court
costs as may be fixed by the court.
Section 7.9. Withholding Taxes. All amounts payable to Executive under this
-----------------
Agreement shall be subject to applicable withholding of income, wage and other
taxes, and such other deductions or withholdings as may be required by law.
Section 7.10. Indemnification. The Executive shall be entitled to the
---------------
benefit of the indemnification provisions contained on the date hereof in the
Bylaws of the Company as the same may hereafter be amended, and of any
indemnification provisions that may hereafter be added to the Certificate of
Incorporation of the Company (not including any amendments or additions that
limit or narrow, but including any that add to or broaden, the protection
afforded to the Executive by those provisions), or, if greater, to the full
extent permitted by applicable law at the time of the assertion of any liability
against the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
as of the day and year first above written.
GIGA INFORMATION GROUP, INC.
By /s/ Neill H. Brownstein
---------------------------------
Compensation Committee
EXECUTIVE
/s/ Kenneth E. Marshall
-----------------------------------
Kenneth Marshall
9
<PAGE>
EXHIBIT 10.13
EXPERNET CORPORATION
July 6, 1995
Mr. David Gilmour
331 S. El Monte Avenue
Los Altos, CA 94022
Dear Mr. Gilmour:
Coincident with the acquisition of a majority of the outstanding shares of the
capital stock of ExperNet Corporation (the "Company") by GIGA Information Group,
Inc. ("GIGA"), and in consideration for the termination of that certain
employment agreement between you and the Company dated September 20, 1994, and
the substitution of this agreement in its stead, the Company is pleased to offer
you the position of President. This letter embodies the terms of our offer of
employment to you and, if you accept such offer under these terms by signing on
the indicated line below, will constitute the employment agreement between you
and the Company.
As the President, you will be responsible for the general management and
oversight of all the Company's activities and strategic development. You will
report to and be given general direction by the Chief Executive Officer or Chief
Operating Officer of GIGA. Of course, the Company may change your
responsibilities and duties from time to time as it deems necessary.
Your starting salary will be $90,000 per year through August, 1995, and
commencing on September 1, 1995 your salary shall be at an annualized rate of
$160,000.
This employment agreement has a term of two years. During the term of this
agreement, the Company may terminate your employment hereunder for Cause, as
defined below, or without Cause for any reason, provided, however, that if the
Company terminates your employment without Cause hereunder, you shall receive
compensation as set forth below.
1. If such termination without Cause occurs within one year after the date of
this agreement, the Company shall pay you one year's salary at the rate then in
effect (payable at regular payroll intervals), and all unvested options to
purchase common stock of GIGA granted to you shall immediately vest under all
stock option agreements between you and GIGA.
2. If such termination without Cause occurs more than one year but less than
two years after the date of this agreement, the Company shall pay you one year's
salary (payable at regular payroll intervals) at the rate then in effect, and
30% of the remaining unvested options under all stock option agreements between
you and GIGA shall immediately vest.
<PAGE>
Mr. David Gilmour
Page 2
3. If, without your consent, you are demoted or forced to relocate to an area
outside the San Francisco bay area, such action will be deemed termination
without Cause, provided, however, that if you perform the role of President of
ExperNet as an operating unit GIGA or of another entity owned by GIGA, or if you
continue to report directly to the GIGA CEO or COO in a substantive role, such
role will not be considered a demotion hereunder. The term "Cause" shall mean
only: a material breach of the employment agreement by you; conviction of a
felony or a misdemeanor involving moral turpitude having a material impact on
the Company; breach of fiduciary duty owed to or personal dishonesty towards
the Company; or habitual absenteeism or drug addiction.
Subsequent to your termination without Cause, you agree to provide the Company
consultation at one-quarter time for one year after such termination. You
further agree that after such termination you will not to engage in any
activities that are designed to impact ExperNet negatively in the marketplace.
Such agreement regarding your post-termination activities shall terminate on the
later to occur of: the end of the one year salary continuation after such
termination, or the date when you divest yourself of all shares of GIGA capital
stock that you own. The Company and you hereby agree that the vesting of
options and continued salary, pursuant to the termination provisions above,
shall be allocated specifically as follows: 25% to pursuant to the termination
provisions above, shall be allocated specifically as follows: 25% to the
consulting services hereunder, and 75% for your agreement restricting your
post-termination activities.
You will be provided three weeks of paid vacation per year. It is agreed (and
you represent and warrant) that you have accrued 12.1 days of vacation pursuant
to your earlier employment by the Company that such accrued vacation shall be
carried forward under this agreement. In addition, you will be eligible for the
standard package of employee benefits provided by the Company, including medical
insurance, sick leave, and holidays. You also shall be considered for receiving
such bonuses and other performance incentives as may provided to other GIGA
senior management employees (i.e., those who report directly to GIGA's CEO or
COO). You should note that the Company may modify the other benefits from time
to time as it deems necessary.
Promptly after execution of this agreement, you will be elected to the Board of
Directors of GIGA.
You will be expected to abide by Company rules and regulations.
<PAGE>
Mr. David Gilmour
Page 3
If you wish to accept continued employment at the Company under the terms set
out above, please sign and date this letter on the line below. We look forward
to your favorable reply and to a productive and exciting work relationship.
Sincerely,
/s/ Gideon I. Gartner
- ---------------------
Gideon I. Gartner
Chairman of the Board
Accepted and Agreed to:
/s/ David L. Gilmour 7/6/95
- -------------------- ------------
David L. Gilmour Date
GIGA Information Systems, Inc.
By: /s/ Gideon I. Gartner CEO
---------------------- ------------
Date
<PAGE>
EXHIBIT 10.14
November 13, 1995
Mr. Gideon Gartner
0126 Magnifico Drive
Aspen, CO 81611
Re: Non-Competition
---------------
Dear Gideon:
As you know, Giga Information Group, Inc. (the "Company") has agreed to
sell shares of its Series B Preferred Stock (the "Shares") to certain investors
(the "Investors") under the Series B Preferred Stock Purchase Agreement between
the Company and such Investors. One condition of the Investors' obligation to
purchase the Shares is your agreement to be bound by the terms of this letter
agreement; the Investors will make their investment in the Company in reliance
upon your agreement to be so bound. Please signify your acceptance of the terms
of this letter agreement and your understanding that the Investors will purchase
Shares in reliance upon this agreement by counter-signing this letter agreement
in the place indicated.
1. For the Non-Competition Period (as defined below), you will not,
directly or indirectly:
a. as an individual proprietor, partner, stockholder, officer, employee,
director, joint venture, investor, lender, or in any other capacity
whatsoever (other than as the holder of less five percent (5%) of the total
outstanding stock of a publicly held company), engage in the business of
developing, providing, marketing or selling Continuous IT Information
Services.
b. recruit, solicit or induce, or attempt to induce, any employee or
employees to the Company or any subsidiary thereof to terminate their
employment with, or otherwise cease their relationship with, the Company or
any subsidiary thereof; or
c. solicit, divert or take away, or attempt to divert or to take away,
the business or patronage of any of the clients, customers, subscribers or
accounts, or prospective clients, customers or accounts, of the Company or
any subsidiary thereof which were contacted, solicited or served by you
while you were employed by the Company.
2. For the purposes of this letter agreement:
<PAGE>
(a) "Continuous IT Information Services" means the performance or
development of original research or analysis with respect to information
technology industries and the marketing and sales of the results of such
research and analysis through subscription or retainer relationships which
(i) have a stated term (which may be subject to renewal or extension) and
(ii) which involve the delivery of analysis in a number of formats and
vehicles, including oral, written, and on-line vehicles and through events;
provided that Continuous IT Information Services shall not include
consulting services intended to address specific problems or issues of
specific clients.
(b) the "Non-Competition Period" shall mean (i) the period for which you
are employed by the Company or a subsidiary thereof, and (ii) so long
thereafter as the Company continues to pay to you compensation of at least
$120,000 per year (whether as an employee, a consultant or in the form of
severance or post-employment benefits, but excluding dividends, interest or
other income or gains attributable to your investment in the Company or
upon the exercise of stock options).
3. You acknowledge that the type and period of restriction imposed
pursuant to this letter agreement are fair and reasonable and are reasonably
required for the protection of the Company and the goodwill, trade secrets,
proprietary information and other intangible assets associated with the business
of the Company. The parties desire that the restirctions be reasonable both now
and at any time they are sought to be enforced, and accordingly agree that if
any restriction set forth in this agreement is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable. You agree that
any remedy available to the Company at law for the breach of this agreement may
be inadequate and therefore, in the event of any such breach, in addition to
such other remedies which may be available, the Company shall have the right to
seek specific performance and injunctive relief.
<PAGE>
4. This letter agreement will be construed and enforced in accordance with
and governed by the law of the State of Massachusetts.
Very truly yours,
GIGA INFORMATION GROUP, INC.
By: /s/ Michael J. Kolesar
--------------------------------------
Name: Michael Kolesar
Title: Vice President-Finance
ACCEPTED AND AGREED
/s/ Gideon Gartner
- -------------------------------
Gideon Gartner
<PAGE>
EXHIBIT 10.15
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT, dated as of January 1, 1996, by and between GIGA
INFORMATION GROUP, INC., a Delaware corporation (the "Company"), and Neill H.
Brownstein Corporation, at 536 West Crescent Drive, Palo Alto, California 94301
(the "Consultant").
INTRODUCTION
------------
A. The Consultant has expertise which would be of benefit to the Company
and, as a director of the Company, has extensive knowledge of the operations of
the Company, as well as its personnel and prospects.
B. The Company now desires to retain the Consultant as a consultant in
order to make the expertise of the Consultant more fully available to the
Company, and the Consultant desires to be so retained by the Company.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
---------
SERVICES; TERM; DUTIES
----------------------
1.1. Services. The Company hereby agrees to retain the Consultant upon
--------
the terms and conditions hereinafter set forth to provide, as an independent
contractor and not as an employee, consulting and advisory services with respect
to the business and affairs of the Company as requested, from time to time by
the Board of Directors of the Company or a duly appointed officer of the
Company, and the Consultant hereby agrees to provide such services.
1.2. Term. The service of the Consultant hereunder shall be provided for
----
a period (the "Term") of one (1) year commencing on the date hereof.
1.3. Extent of Services. During the term, Consultant shall, if and when
------------------
so requested by the Company, and at a time and place mutually convenient to the
parties hereto, furnish to the Company, consulting and advisory services with
respect to the Company's business and affairs. The Consultant shall devote 25%
of his working time to the services rendered under this Agreement. Nothing
herein shall preclude Consultant from rendering any services, whether as a
consultant or otherwise, to any person, firm or corporation; provided, however,
that Consultant shall not engage in any activities in contravention of (i) the
provision of any other agreement with the Company to which he is a party or (ii)
his fiduciary duties as a member of the Company's board of directors.
1
<PAGE>
ARTICLE II
----------
COMPENSATION
------------
2.1. Compensation. For all services rendered by the Consultant hereunder
------------
and all covenants and conditions undertaken by him pursuant to this Agreement,
the Company shall pay a consulting fee (the "fee") at the rate of $60,000 per
annum, payable no less frequently than quarterly in arrears.
2.2. Deductions. The Company shall deduct from the fee described in this
----------
Article II any federal, state or local withholding taxes, social security
contributions and any other amounts which are required to be deducted or
withheld by the Company pursuant to any federal, state or local laws, rules or
regulations.
ARTICLE III
-----------
DEATH; DISABILITY
-----------------
3.1. Death or Disability. In the event of the death or disability of
-------------------
Consultant during the term hereof, or in the event that the parties hereto
mutually agree that the Consultant will not render services during a portion of
a quarter, the Consultant shall be paid for services rendered in such quarter on
a pro-rated basis.
ARTICLE IV
----------
CONFIDENTIALITY
---------------
4.1. Confidentiality. Consultant covenants and agrees that during the
---------------
period that he provides services hereunder and for a period of one year
thereafter (the "Effective Period") he will not use for his own account,
directly or indirectly, any of the proprietary information, customer lists,
trade names, goodwill or trade secrets owned or used by the Company in its
business as of the date hereof, or directly or indirectly, disclose or furnish
to any other person, firm, corporation or entity, the methods by which the
business of the Company is conducted, any of the methods of which the customers
or business of the Company is obtained, or any confidential or proprietary
information of the Company, including without limitation, the names of any of
the customers or prospective customers of the Company; provided, however, the
foregoing shall not apply to the extent such information is general public
knowledge or to the extent Consultant is compelled to disclose it by subpoena or
by applicable law.
2
<PAGE>
ARTICLE V
---------
MISCELLANEOUS
-------------
5.1. Independent Contractor. Under this Agreement, Consultant shall, at
----------------------
all times, be an independent contractor and not an employee. This Agreement
does not grant Consultant any authority to bind or commit the Company, including
any subsidiary or any affiliate of the Company, with respect to any matter.
5.2. Waiver. A waiver by a party hereto of a breach of any term, covenant
------
or condition of this Agreement by the other party hereto shall not operate or be
construed as a waiver of any other or subsequent breach by such party of the
same or any other term, covenant or condition hereof.
5.3. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the substantive laws of the State of Washington without giving
effect to principles relating to conflicts of law.
5.4. Expenses. During the Term, the Consultant shall be entitled to incur
--------
reasonable expenses in the performance of his duties in accordance with Company
policies in effect from time to time. Upon presentation by the Consultant of
appropriate supporting documentation to the Company, the Consultant shall be
entitled to reimbursement of such expenses.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
GIGA INFORMATION GROUP, INC.
By: /s/ Kenneth E. Marshall
------------------------------
Name: Kenneth E. Marshall
Title: President & COO
CONSULTANT
/s/ Neill H. Brownstein
---------------------------------
Neill H. Brownstein Corporation
By: Neill H. Brownstein
President
<PAGE>
EXHIBIT 10.17
PROMISSORY NOTE
---------------
$20,000
December 1, 1995
Cambridge, Massachusetts
FOR VALUE RECEIVED, Kenneth Marshall, a Massachusetts resident (the
"Maker") hereby promises to pay to Giga Information Group, Inc., a Delaware
corporation ("Lender"), the principal sum of Twenty Thousand Dollars ($20,000)
on December 1, 1996 upon demand of Lender, together with interest on such
principal sum from the date of this note until paid in full.
Interest shall accrue on the unpaid balance of this Note at the minimum per
annum rate, compounded annually, required to avoid the imputation of income to
the Maker under the Federal tax law which on the date hereof is five and 73/100
percent (5.74%) per annum.
All payments shall be made in lawful money of the United States of America
to the Lender at Cambridge, Massachusetts or at such other place as the Lender
may from time to time designate in writing to the Maker. Payment shall be
credited first to the accrued interest then due and payable and the remainder
applied to principal. Prepayment of principal, together with accrued interest,
may be made at any time without penalty.
The entire unpaid balance of the principal sum of this Note, together with
accrued and unpaid interest on that balance, shall become immediately due and
payable upon the demand of the Lender or upon the execution by the Maker of a
general assignment for the benefit of creditors, the filing by or against the
Maker of any petition in bankruptcy or any petition for relief under the
provisions of the Federal Bankruptcy Act or any other state or federal law for
the relief of debtors and the continuation of such petition without dismissal
for a period of thirty (30) days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of the Maker (together
"Events of Default").
Acceptance by Lender of any partial payment shall not be deemed to
constitute a waiver by Lender to require prompt payment of all sums when
demanded.
In the event of any action to enforce payment of this Note, in addition to
all other relief, the prevailing party in such action shall be entitled to
reasonable attorneys' fees and expenses. The Maker hereby waives presentment,
protest and demand, notice of protest, demand, nonpayment and dishonor.
<PAGE>
This Note is to be governed by and construed in accordance with the laws of
the State of Massachusetts as applied to agreements among Massachusetts
residents entered into and to be performed entirely within Massachusetts.
/s/ Kenneth E. Marshall
-------------------------------
Kenneth Marshall
2
<PAGE>
EXHIBIT 10.18
July 12, 1996
Mr. Richard Crandall
2129 Devonshire Road
Ann Arbor, MI 48401
Dear Rick:
Effective July 1, 1996, you will be granted 20,000 non-qualified stock
options at the then current exercise price subject to the Board of Directors'
approval, in exchange for your services for the next twelve months as an
Advising Cabinet member to Giga Information Group. These options will be issue
under the 1995 Stock Option/Stock Issuance Plan, exercisable to purchase shares
of Common Stock and will provide for 25% vesting after one year from initial
date of grant (July 1, 1996) and continued monthly vesting thereafter over the
next thirty-six (36) months ensuring that you will be fully vested after forty-
eight (48) months. In the event that you discontinue your role as a cabinet
member, but continue as a board member, your shares will continue to vest at
this rate.
You will receive the formal Stock Option Agreement following approval of
this grant after the next board meeting.
If you have any questions, please call me at 617-577-4800.
Sincerely,
/s/ Kenneth E. Marshall
Kenneth Marshall
President & COO
Giga Information Group, Inc.
<PAGE>
EXHIBIT 10.19
LEASE
-----
1. PARTIES. CAMBRIDGE 1400 LIMITED PARTNERSHIP, a Massachusetts limited
-------
partnership, ("LESSOR"), which expression shall include its successors and
assigns where the context so permits, do hereby lease to GIGA INFORMATION GROUP,
INC., a Massachusetts corporation, ("LESSEE"), which expression shall include
its successors and assigns, and the LESSEE hereby leases and shall peaceably
hold and enjoy the following described premises.
2. LEASED PREMISES. On the Commencement Date, or such earlier date as
---------------
LESSEE shall take occupancy thereof, the "Leased Premises" shall consist of that
portion of the first floor in Building No. 1400 (the "Building"), located at One
Kendall Square, Cambridge, Massachusetts, located in the mixed use retail and
office complex known as "One Kendall Square" (the "Complex") which first floor
space contains Seven Thousand Eight Hundred and Sixty-Eight (7,868) square feet
of space, more or less, and outlined on the sketch contained in Exhibit A1
(herein called the "Leased Premises").
The Leased Premises shall have as appurtenant thereto: (a) the right to use
in common with others entitled thereto, the entrances, lobbies, hallways,
stairways, walkways, sidewalks, driveways, loading docks, elevators and other
common facilities in the Building containing any portion of the Leased Premises
and on the land constituting the Lot more particularly described in Exhibit B
hereto (herein called the "Lot") necessary for access to and enjoyment of the
Leased Premises, or portion, and (b) the pipes, conduits, wires, and appurtenant
equipment serving the
<PAGE>
Leased Premises, or portion thereof, in common with other portions of the
Building containing any part of the Leased Premises, subject, however, to the
following rights which are expressly excepted and reserved by LESSOR: (i) the
right, from time to time, to install, maintain, use, repair, relocate, place and
replace utility lines, pipes, ducts, conduits, wires, gas, electric, or any
other meters and fixtures located on or passing through any portion of the
Leased Premises to serve other portions of the LESSOR's property of which the
Leased Premises, or a portion thereof, are a part, provided, however, LESSOR
shall not unreasonably interfere with LESSEE's occupancy and use of the Leased
Premises; (ii) the right to enter into, upon and across any portion of the
Leased Premises to exercise any reserved right of LESSOR hereunder or to
complete LESSOR's construction of the Leased Premises, or part thereof, and the
Building, provided, however, LESSOR shall not unreasonably interfere with
LESSEE's occupancy and use of the Leased Premises; and (iii) the right from time
to time to make alterations or additions to the Building and to construct other
buildings or improvements on the Lot and to make additions to such buildings or
improvements, and to permit others to do so from time to time all as LESSOR may
determine in its sole discretion, and without LESSEE's consent in any instance;
any such alterations or additions or construction of other buildings or
improvements on the Lot, being performed to the greatest possible extent in a
manner so as not unreasonably to interfere with the LESSEE's use and occupancy
of the Leased Premises.
Subject to LESSOR's reserved rights specified above, there shall be
appurtenant
2
<PAGE>
to the Leased Premises the right to park forty (40) passenger motor vehicles in
the One Kendall Square parking garage. LESSOR reserves the right to designate
the locations of the spaces to be utilized for such parking rights by written
notice to LESSEE, and to change the location of any or all of such spaces by
notice to LESSEE at any time and from time to time as LESSOR shall reasonably
determine. The parking spaces provided hereunder need not be contiguous.
3.1 TERM. The term (the "Term") of this Lease shall be for a period of
----
five (5) years following the "Commencement Date." The "Commencement Date" shall
be the later to occur of (a) November 1, 1995 or (b) the completion of LESSOR's
work on the initial Five Thousand Five Hundred (5,500) square feet of space as
outlined in Exhibit C. Notwithstanding the above, base rent, and common
area/real estate tax reimbursements on Two Thousand Three Hundred and Sixty-
Eight (2,368) rentable square feet of the Leased Premises shall not commence
until all of the LESSOR's work under Paragraph 3.2 is complete or until LESSEE
has occupied that portion of the Leased Premises.
As soon as may be convenient after the Commencement Date has been
determined, the LESSOR and the LESSEE agree to join with each other in the
execution, in recordable form, of a written declaration in which the
Commencement Date shall be stated.
3.1.1 PHASED OCCUPANCY. In the event a portion of the Leased Premises are
----------------
substantially completed and ready for occupancy, and LESSOR shall have given
notice to LESSEE thereof, then LESSEE shall have the right to commence use and
3
<PAGE>
occupancy of such portion of the Leased Premises subject to the terms and
conditions of this Lease. During the period of such partial use and occupancy,
Base Rent and additional rent payable under Paragraphs 4 and 5 hereof shall be
payable on a pro rata basis in the same proportion as the square footage of the
space being used and occupied bears to the total square footage of the Leased
Premises, and LESSEE shall perform, comply with and abide by all of its
obligations, undertakings and covenants as if, and to the same extent, as though
the Term had commenced.
3.2 COMPLETION OF IMPROVEMENTS. The Two Thousand Three Hundred and Sixty-
--------------------------
Eight (2,368) rentable square feet of the Leased Premises that will be rebuilt
shall be considered "ready for occupancy" on the date upon which the
improvements described in Exhibit C - Column 2 hereto to be constructed by
LESSOR with respect to the Leased Premises are substantially completed, and
LESSEE is given a copy of a certificate of occupancy issued by the City of
Cambridge Building Department covering the Leased Premises. The Leased Premises
shall be deemed substantially completed notwithstanding that completion of work
and adjustment of equipment and fixtures or minor items of uncompleted work (so-
called "punch list" work items) remain to be done, if such work can be completed
after occupancy has been taken without causing unreasonable interference with
LESSEE's use of the Leased Premises. Except for latent defects and except to
the extent to which the LESSEE shall have given the LESSOR written notice, not
later than thirty (30) days after LESSEE occupies the Two Thousand Three Hundred
and Sixty-Eight (2,368) square feet of space, of matters or items as to which
the LESSOR has not
4
<PAGE>
properly performed its obligations with respect to the construction and
installation of the improvements called for under the Lease, the LESSEE shall
have no claim that the LESSOR has failed to perform such obligations, and
LESSEE's taking possession shall be conclusive evidence as against LESSEE that
said space and improvements were in good order and satisfactory condition when
LESSEE took possession. The LESSOR shall complete all items of work not properly
performed as to which the LESSEE shall have given the LESSOR such timely written
notice as soon as conditions practicably permit thereafter in such a manner as
not to unreasonably disturb the LESSEE or its business operations carried out in
the Leased Premises.
4. RENT. LESSEE covenants and agrees to pay to LESSOR annual base rent
----
("Base Rent") in the amounts set forth or provided for below, by equal payments
of one-twelfth (1/12) of such annual rate on the first day of each calendar
month in advance, the first monthly payment to be made on the Commencement Date,
and by payment in advance of a pro-rata portion of a monthly payment for any
portion of a month at the beginning or end of the Term based on the actual
number of days in any such month; all payments to be made to LESSOR or such
agent, and at such place, as LESSOR shall from time to time in writing
designate, the following being now so designated:
CAMBRIDGE 1400 LIMITED PARTNERSHIP
c/o THE ATHENAEUM GROUP
215 First Street
Cambridge, MA 02142-1268
The annual Base Rent for each of the first and second years of the Term
shall be One Hundred and Ten Thousand and One Hundred Fifty-Two Dollars
5
<PAGE>
($110,152.00). The annual Base Rent for third year of the Term shall be One
Hundred and Sixteen Thousand and Fifty-Three Dollars ($116,053.00). The annual
Base Rent for each of the fourth and fifth years of the Term shall be One
Hundred and Twenty-One Thousand Nine Hundred and Fifty-Four Dollars
($121,954.00). In addition, on a monthly basis the LESSEE shall pay to the
LESSOR the fair rental value of LESSEE's parking spaces (currently $115.00 per
month per space) in the parking garage as reasonably determined by LESSOR
("Garage Parking").
5. RENT ADJUSTMENTS.
----------------
5.1 RENT ADJUSTMENT - COMMON AREA OPERATING EXPENSES FOR THE LOT.
------------------------------------------------------------
Commencing as of the Commencement Date but as limited by the provisions of
Paragraph 3.1 and with respect to any calendar year or any fraction of a
calendar year thereafter falling within the Term, the LESSEE shall pay to the
LESSOR as additional rent, the "LESSEE's Proportionate CAO Lot Share" (defined
below) of all costs and expenses incurred by the LESSOR in connection with the
maintenance, repair, upkeep, and cleaning of those common areas and facilities
of the Lot delineated or described in Exhibit B hereto, which LESSEE has the
right to use in common with others such as but not limited to common walkways,
accessways and parking facilities and the costs of heating and electricity,
snow-plowing and snow and ice removal, trash removal services, janitorial and
security services, landscaping and lawn care services, walkway, driveway,
parking, and common entryway upkeep and paving costs, and all other costs
reasonably incurred by or for LESSOR in connection with the insurance,
maintenance and operation of the common areas and
6
<PAGE>
facilities of the Lot to keep the same in safe, secure and first-class order and
condition (hereinafter called "CAO Lot").
LESSEE's Proportionate CAO Lot Share means that percentage which is equal
to the ratio of the square footage of space constituting the Leased Premises to
the aggregate square footage of space within the Complex which is completed and
as to which a Certificate of Occupancy has issued. As additional buildings are
completed within the Complex, LESSEE'S Proportionate CAO Lot Share shall be
adjusted to that percentage which is equal to the ratio of the square footage
constituting the Leased Premises to the aggregate square footage of space within
the complex which is completed and as to which a certificate of occupancy has
issued. As of the date hereof, the parties have agreed that LESSEE's
Proportionate CAO Lot Share (on the 7,868 rentable square feet) shall initially
be l.29%.
Notwithstanding anything contained in this Lease to the contrary, LESSEE
shall not be responsible for any costs, fees or expenses associated with
construction of additional buildings in the Complex, including, but not limited
to, demolition and grading costs, management fees, contractor fees,
architectural fees, material and building costs, permit fees and costs incurred
due to damage to the existing Complex and Common Areas caused by such new
construction.
5.2 RENT ADJUSTMENT - COMMON AREA OPERATING EXPENSES FOR THE BUILDING.
-----------------------------------------------------------------
Commencing as of the Commencement Date but as limited by the provisions of
Paragraph 3.1 and with respect to any calendar year falling within the term, or
fraction of a calendar year at the beginning or end of the term, the
7
<PAGE>
LESSEE shall pay to the LESSOR, as additional rent, the "LESSEE's Proportionate
Building Share" (defined below) of operating expenses attributable to the
Building ("CAO Building"). CAO Building shall include, but is not limited to
the following: all costs and expenses incurred by the LESSOR in connection with
the insurance, operation, repair, maintenance and cleaning of or for the
Building and heating, plumbing, elevators, electrical, air-conditioning and
other systems thereof, trash removal, janitorial services, security systems and
general expenses incurred by the LESSOR in connection with the insurance,
operation and maintenance of the Building, to keep the same in safe, secure and
first-class order and condition.
LESSEE's Proportionate Building Share shall be that percentage, which is
equal to the ratio of the square footage of space constituting the Leased
Premises to the aggregate square footage of space in the Building.
The LESSEE's Proportionate Building Share with respect to the Leased
Premises is 6.26%.
The following shall not constitute Common Area Operating Expenses for the
Lot or Common Area Operating Expenses for the Building (collectively, "Common
Area Operating Expenses") for the purposes of this Lease, and nothing contained
herein shall be deemed to require LESSEE to pay any of the following as Common
Area Operating Expenses: (i) damage and repairs attributable to condemnation,
fire or other casualty; (ii) damage and repairs covered under any warranty or
insurance policy carried by LESSOR in connection with the Building, Complex or
Common Areas; (iii) damage and repairs necessitated by the negligence or willful
misconduct
8
<PAGE>
of LESSOR or LESSOR's employees, contractors or agents; (iv) executive salaries
of LESSOR; (v) LESSOR's general overhead expenses not related to the Building;
(vi) payments of principal or interest on any mortgage or other encumbrance
including ground lease payments and points, commissions and legal fees
associated with financing; (vii) depreciation; (viii) any cost or expense
related to the testing for, removal, transportation or storage of hazardous
materials from the Leased Premises, Building, Complex or Common Areas; and (ix)
interest, penalties or other costs arising out of LESSOR's failure to make
timely payments of its obligations.
LESSOR shall not collect in excess of one hundred percent (100%) of Common
Area Operating Expenses for the Lot or Common Area Operating Expenses for the
Building or any item of cost more than once. Any Common Area Operating Expenses
charged LESSOR by any of its affiliates for goods and service provided to the
Building, Leased Premises, Complex or Common Areas shall not exceed the
prevailing cost thereof that would be charged to LESSOR by non-affiliated
parties. All Common Area Operating Expenses shall be directly attributable to
the operations, maintenance, management and repair of the Leased Premises,
Building, Complex or Common Areas.
5.3 MONTHLY PAYMENTS. Beginning with the calendar year in which the
----------------
Commencement Date occurs, and in subsequent years during the Term of this Lease,
the LESSEE shall pay to the LESSOR pro rata monthly installments of amounts due
under Paragraphs 5.1 and 5.2 on account of projected CAO Lot and CAO Building
for such year, calculated by the LESSOR on the basis of the best and most
9
<PAGE>
recent budget or data available. Appropriate adjustments of estimated amounts
shall be made between LESSOR and LESSEE promptly after the close of each
calendar year to account for actual CAO Lot and CAO Building for such year,
except that LESSOR may, at its option, credit any amounts due from it to LESSEE
as provided above against any sums then due from LESSEE to LESSOR under this
Lease. The balance of any amounts due shall be paid within thirty (30) days
after written notice thereof.
5.4 RENT ADJUSTMENT - TAXES.
-----------------------
5.4.1 LESSOR TO PAY TAXES. The LESSOR shall be responsible for the
-------------------
payment, before the same becomes delinquent, of all general and special taxes of
every kind and nature, including assessments for local improvements, and other
governmental charges which may be lawfully charged, assessed or imposed (herein
collectively called the "Taxes") upon the Building and the Lot.
If at any time during the Term the present system of ad valorem taxation of
real property shall be changed to that in lieu of the whole or any part of the
ad valorem tax on real property, there shall be assessed on LESSOR a capital
levy or other tax on the gross rents received with respect to the Lot or the
Building or a federal, state, county, municipal, or other local income,
franchise, excise or similar tax, assessment, levy or charge (distinct from any
now in effect) measured by or based, in whole or in part, upon any such gross
rents, then any and all of such taxes, assessments, levies or charges to the
extent so measured or based, shall be deemed to be included within the term
"Taxes" but only to the extent that the same would be payable if the Lot and the
Building were the only property of LESSOR.
10
<PAGE>
5.4.2 LESSEE'S SHARE OF TAXES. As limited by the provisions of
-----------------------
Paragraph 3.1, the LESSEE shall pay to the LESSOR, as additional rent, the
LESSEE's Proportionate Building Share of that portion of the Taxes solely
attributable to the Building and LESSEE's Proportionate CAO Lot Share of that
portion of the Taxes solely attributable to the land which constitutes the Lot.
Notwithstanding anything to the contrary in this Lease, the following shall
not constitute Taxes for the purpose of this Lease, and nothing contained herein
shall be deemed to require LESSEE to pay any of the following: (i) any
franchise, succession or transfer taxes, or (ii) interest on taxes or penalties
resulting from LESSOR's failure to pay taxes. LESSOR shall cause any Taxes
which may be evidenced by improvement or other bonds or which may be paid in
annual or other periodic installments to be paid in installments over the
maximum period provided by law.
5.4.3 RENT ADJUSTMENT - PAYMENT. Beginning with the calendar year in
-------------------------
which the Commencement Date occurs and in subsequent years during the Term of
this Lease, LESSEE shall pay to the LESSOR monthly installments of one-twelfth
(1/12) of the amounts due to LESSOR under Paragraphs 5.4.1 and 5.4.2 on account
of projected Taxes for such year, calculated by the LESSOR on the basis of the
best and most recent data available as set forth in a statement from LESSOR
(and, when available, based upon the real estate tax bill covering any such
period). Appropriate adjustments of estimated amounts shall be made between
LESSOR and LESSEE promptly after LESSOR shall have received the tax bill
covering any such period.
11
<PAGE>
5.4.4 TAX ADJUSTMENT. If the LESSOR or any other tenant (excluding
--------------
LESSEE) in the Building shall construct an addition to the Building, or
construct improvements within the Building of unusual value so as to result in
an increase in Taxes over the Taxes which would have been assessed to that
Building but for such construction, there shall not be included in Taxes for
purposes of this Lease the amount of such increase in Taxes unless such
additions or improvements directly benefit the LESSEE. If the LESSEE, or the
LESSOR at the direction of the LESSEE, shall construct improvements within the
Leased Premises, or any part thereof, of unusual value so as to result in an
increase in Taxes over the Taxes which would have been assessed to the Building,
or part, but for such unusually valuable improvements, the LESSEE shall be
responsible for the payment of the full amount of such increase.
6. UTILITIES AND OTHER SERVICES.
----------------------------
(a) The LESSOR shall provide and the LESSEE shall pay charges for all heat,
air-conditioning, electricity, and water and sewer use charges and all other
utilities separately metered or sub-metered to the Leased Premises, and LESSEE
shall be responsible for all utility company deposits applicable to the supply
of such services to the Leased Premises. LESSEE shall also be responsible for
the payment of its proportionate share of such utilities not separately metered
or sub-metered to the Leased Premises but which serve the Leased Premises, all
as reasonably determined by LESSOR. Upon request by the LESSOR, the LESSEE
shall provide the LESSOR with evidence of payment of such charges. LESSEE shall
defend, indemnify and hold
12
<PAGE>
LESSOR harmless from and against any claim or liability arising out of LESSEE's
failure to pay for such charges for which LESSEE is responsible.
(b) LESSOR agrees to furnish reasonable heat to the stairways, elevators
and other common areas in the Building, or portions thereof, as necessary for
comfortable occupancy twenty-four (24) hours, seven (7) days per week of the
heating season of each year and to provide lighting to passageways and stairways
and all parking areas and walkways providing access from the Building to the
parking area in the evening twenty-four (24) hours, seven (7) days per week and
to furnish ordinary repairs and cleaning of the common areas and facilities of
the Complex and removal of snow and ice reasonably promptly after snowfall and
ice accumulation have ended to all walkways, accessways and approaches to the
Building and the parking facility as is customary in or about similar buildings
in Cambridge. LESSOR shall not be liable to LESSEE for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from the necessity of LESSOR or its agents entering the Leased
Premises, or for LESSEE's repairing the Leased Premises if such repair is not
performed by LESSOR, or for making repairs or renovations to any portion of the
Building, however the necessity may occur. In case LESSOR is prevented or
delayed from making any such repairs or alterations, or supplying the utilities
or services provided for herein, or performing any other covenant or duty to be
performed on LESSOR's part, by reason of any cause beyond LESSOR's control,
LESSOR shall not be liable to LESSEE therefor, nor shall LESSEE be entitled to
any abatement or reduction of rent by reason thereof, nor
13
<PAGE>
shall the same give rise to a claim in LESSEE's favor that such failure
constitutes actual or constructive, total or partial, eviction from the Leased
Premises, or any portion thereof. LESSOR reserves the right to stop any service
or utility system, when necessary by reason of accident or emergency, until
necessary repairs have been completed.
(c) LESSOR has installed at its own expense separate meters for all
utilities including heat, electricity, water and sewer, and air conditioning.
The LESSEE shall pay its utility chargzes directly to the suppliers of such
utility services, as billed by the LESSOR within ten (10) days of receipt of
said bill and at least before the same become delinquent. The LESSEE and LESSOR
shall have the right to audit said charges and payments upon reasonable notice.
7. USE OF LEASED PREMISES. The LESSEE may use the Leased Premises only
----------------------
for the purpose of general office.
8. COMPLIANCE WITH LAWS. The LESSEE acknowledges that no trade or
--------------------
occupation shall be conducted in the Leased Premises or use made thereof which
shall be unlawful, improper, noisy or offensive, or be contrary to any law or
any municipal by-law or ordinance in force in the City of Cambridge. LESSEE
shall keep the Leased Premises equipped with all safety appliances and shall
procure and keep in force all licenses and permits required by law or ordinance
of any public authority because of the uses made of the Leased Premises by
LESSEE and shall maintain in good condition on the Leased Premises all safety
and fire protection devices required by the Board of Fire Underwriters, or other
body having similar functions, and of
14
<PAGE>
every insurance company and policy by which LESSOR or LESSEE is insured. If any
use of the Leased Premises by LESSEE results in the cancellation of any
insurances carried by LESSOR, or increases the cost thereof, the LESSEE shall on
demand reimburse the LESSOR all extra insurance premiums incurred as a result of
such use of the Leased Premises by the LESSEE.
9. RISK OF LOSS OF PERSONAL EFFECTS. LESSEE acknowledges and agrees that
--------------------------------
all of the furnishings, equipment, effects and property of LESSEE and of all
persons claiming by, through or under LESSEE which may be on the Leased Premises
or elsewhere in any building in the Complex, shall be at the sole risk and
hazard of LESSEE and if the whole or any part thereof shall be destroyed or
damaged by fire, water or otherwise, or by the leakage or bursting of water
pipes, steam pipes, or other pipes, by theft or from any other cause, no part of
said loss or damage is to be charged to or to be borne by LESSOR, except that
LESSOR shall in no event be indemnified or held harmless or exonerated from any
liability to LESSEE or to any other person, arising from any injury, loss,
damage or liability caused by LESSOR's negligence or willful misconduct.
9A. INSURANCE - WAIVER OF SUBROGATION. LESSOR agrees to keep the Building
---------------------------------
and LESSEE agrees to keep the Leased Premises, and all equipment, machinery and
fixtures therein insured in amounts equal to the actual cash value of the same,
against fire and other perils included in a standard extended coverage
endorsement, and against breakdown of boilers and other machinery and equipment,
and LESSEE agrees to procure and keep in force comprehensive general liability
15
<PAGE>
insurance indemnifying LESSOR against all claims and damages for any injury to
or death of person or damage to property which may be claimed to have occurred
upon or to have been caused by activities or conditions within the Leased
Premises and indemnifying LESSOR to the extent any such claims and demands are
the responsibility or obligation of LESSEE pursuant to this Lease or as a matter
of law, in amounts not less than One Million Dollars ($1,000,000) for property
damage, Five Hundred Thousand Dollars ($500,000) for injury or death of one
person, and One Million Dollars ($1,000,000) for injury or death of more than
one person in a single accident.
All insurance required hereunder shall be written by insurance carriers
qualified to do business and in good standing in Massachusetts and approved by
LESSOR, which approval shall not be unreasonably withheld. All policies of
insurance, shall name LESSOR and LESSEE as the insured parties. Each required
policy of insurance shall provide that, notwithstanding any act or omission of
LESSEE which might otherwise result in forfeiture of said insurance: (a) it
shall not be cancelled nor its coverage reduced without at least ten (10) days
prior written notice to each insured named therein, and (b) any proceeds shall
be first payable to LESSOR or to the holder of any mortgage encumbering the
Leased Premises, as their respective interests may appear.
As of the commencement of the Term hereof, and thereafter not less than
fifteen (15) days prior to the expiration dates of the expiring policies, the
original policies to be obtained by LESSEE hereto issued by the respective
insurers or
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certificates thereof including photocopies of the original policies, shall be
delivered to LESSOR.
Any insurance carried by either party with respect to the Leased Premises
or property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrence of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury of loss due to
hazards covered by such insurance to the extent of the indemnification received
thereunder.
10. MAINTENANCE OF LEASED PREMISES. The LESSEE agrees to maintain the
------------------------------
Leased Premises in the same condition as they are at the commencement of the
Term or as they may be put in during the Term of this Lease, reasonable wear and
tear, damage by fire, other casualty and eminent domain, and matters for which
the LESSOR is responsible hereunder only excepted, to provide its own interior
janitorial service, to install and maintain its own security system as it
considers appropriate and, whenever necessary, to replace plate glass and other
glass therein with that of the same quality as that damaged or injured. LESSOR
shall maintain and LESSEE shall pay its proportionate share of the maintenance
of the HVAC System servicing the Leased Premises, but LESSEE shall be
responsible for all repairs and replacements to said system if the same is
caused by any act or omission of LESSEE or its agents. The LESSEE shall not
permit the Leased Premises to be overloaded, damaged, stripped, or defaced, nor
suffer any waste. LESSEE shall
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obtain written consent of LESSOR before erecting any sign on or about the Leased
Premises, which consent shall not be unreasonably withheld or delayed. LESSEE
further covenants and agrees: to take all reasonably necessary actions to insure
that smoke, fumes, vapors and odors will not permeate any building containing
the Leased Premises and will not be removed only through the exhaust and
ventilating system servicing the Leased Premises; to keep all trash garbage and
debris stored on the Leased Premises (and not in any other portions of the Lot
or the Building) in adequate covered containers, approved by LESSOR and placed
in locations or areas approved by LESSOR in writing and to arrange for the
regular removal thereof once each day; to provide for the frequent and adequate
cleaning of the Leased Premises and all walls, floors, fixtures and equipment
therein consistent with its use. LESSOR shall maintain in good condition the
structural elements and the roof of the Building, the mechanical equipment and
systems in the Building (other than such equipment and systems which are located
within or exclusively serve the Leased Premises, and other than LESSEE's
maintenance obligations otherwise provided herein), and the common areas of the
Building. LESSEE shall pay its proportionate share for these expenses and
services as set out in Paragraph 5 above.
Notwithstanding anything to the contrary in this Lease, in no event shall
LESSEE's obligation to repair under this section extend to (i) damage and
repairs covered under any insurance policy carried by LESSOR in connection with
the Leased Premises or Building; (ii) damage caused by any defects in the
design, construction or materials of the Building, including the Leased
Premises, and
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improvements installed therein by LESSOR; (iii) damage caused in whole or in
part by the negligence or willful misconduct of LESSOR or LESSOR's agents,
employees, invitees or licensees; (iv) repairs covered under any Common Area
Operating Expenses; (v) reasonable wear and tear; (vi) conditions covered under
any warranties of LESSOR's contractors.
11. ALTERATIONS - ADDITIONS. The LESSEE shall not make structural
-----------------------
alterations or additions to the Leased Premises, but may make nonstructural
alterations and improvements, provided the LESSOR consents thereto in advance in
writing in each instance, which consent shall not be unreasonably withheld or
delayed provided that LESSOR is furnished with detailed plans and specifications
reasonably approved by LESSOR. Notwithstanding the foregoing, LESSEE shall not
be required to obtain LESSOR's consent (but will provide LESSOR with prior
written notice of, and to the extent required, permits for) any alterations to
the Leased Premises by LESSEE that (i) cost less than Ten Thousand Dollars
($10,000), (ii) do not affect the electrical, mechanical, plumbing, sewage,
heating, ventilating or air conditioning systems serving the Building, and (iii)
are not structural in nature. All such allowed alterations or additions shall
be at LESSEE's expense and shall be in quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens,
to remain upon the Leased Premises for labor and materials furnished to LESSEE
or claimed to have been furnished to LESSEE in connection with the work of any
character performed or claimed to have been performed at the direction of
LESSEE, and shall cause any such lien to be released of
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record forthwith without cost to LESSOR. Any alterations, additions or
improvements made by the LESSEE, except for moveable partitions and furnishings,
installed at the LESSEE's cost, shall become the property of the LESSOR at the
termination of the Lease as provided herein.
With respect to all such LESSEE work, LESSEE further agrees as follows:
that such work shall commence only after all required municipal and other
governmental permits and authorizations have been obtained (the LESSOR agreeing
to join in any application therefor at the LESSEE's expense, whenever necessary)
and all such work shall be done in a good and workmanlike manner in compliance
with building and zoning laws and with all other laws, ordinances, regulations
and requirements of all federal, state and municipal agencies, and in accordance
with the requirements and policies issued by any insurer of LESSOR or LESSEE;
that all such work shall be prosecuted with reasonable dispatch to completion;
that at all times when any such work is in progress, LESSEE shall maintain or
cause to be maintained adequate workers' compensation insurance for those
employed in connection therewith with respect to whom death or injury claims
could be asserted against LESSOR, the LESSEE or the Leased Premises and
comprehensive general liability or builder's risk insurance (for mutual benefit
of LESSEE and LESSOR) in coverages reasonably approved by LESSOR: and that all
such work of LESSEE shall be coordinated with any work being performed by LESSOR
and other tenants of the Building in which the work is taking place in such
manner as to maintain harmonious labor relations and not to interfere with the
operation of the Building or the Complex or the construction
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work of others.
12. ASSIGNMENT - SUBLETTING. The LESSEE shall not assign or sublet the
-----------------------
whole or any part of the Leased Premises without the LESSOR's prior written
consent, which consent shall not be unreasonably withheld or delayed.
Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this Lease (which following assignment shall be joint and several with
assignee). Notwithstanding the foregoing, LESSOR's consent shall not be required
in the event LESSEE transfers this Lease to an entity which purchases all or
substantially all of the assets of LESSEE. In the event LESSEE sub-leases all
or a portion of the Leased Premises and the rent to be paid by the Sublessor is
greater than the rent paid by LESSEE pursuant to the Lease, LESSEE and LESSOR
shall share in such excess rent on a 50/50 basis; provided LESSEE is first
reimbursed out of such excess rent for any expenses associated with the sublease
of the Leased Premises, including but not limited to brokerage commission,
attorneys' fees and alterations.
12. QUIET ENJOYMENT, COVENANT OF TITLE. The LESSEE, on paying the rent
----------------------------------
and other charges hereunder, as and when the same shall become due and payable
and observing and performing the covenants, conditions and agreements contained
in this Lease on the part of the LESSEE to be observed and performed, all as
herein provided, shall and may lawfully, peaceably and quietly have, hold and
enjoy the Leased Premises during the Term, subject to all of the terms and
provisions hereof, without hindrance, ejection or disturbance by the LESSOR by
or by any
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person or persons claiming by, through or under the LESSOR or by anyone claiming
paramount title.
13. SUBORDINATION. The Lease and LESSEE's interest hereunder, subject to
-------------
the provisions of this Paragraph 13, shall be subordinate to the lien of any
present or future mortgage or mortgages upon the Leased Premises or any property
of which the Leased Premises are a part, irrespective of the time of execution
or the time of recording of any such mortgage or mortgages, and to each advance
made or to be made thereunder and to all renewals, modifications,
consolidations, and extensions thereof, and all substitutions therefor. Any
subordination of this Lease pursuant to the provisions of this Paragraph 13 is
made and granted upon the condition that, in the event of any entry by the
holder of any such mortgage to foreclose, a default under any such mortgage, a
foreclosure of any such mortgage of LESSOR'S interest under this Lease or in the
Leased Premises through foreclosure or otherwise, the LESSEE shall (provided the
LESSEE is not then in default beyond any applicable cure period) peaceably hold
and enjoy the Leased Premises as a lessee of such holder, during the Term upon
the terms, covenants and conditions as set forth in this Lease without any
hindrance or interruption from such holder. In the event of such entry,
foreclosure, acquisition or other action by such holder, LESSEE shall recognize
the holder of the mortgage with respect to which such action is taken as the
LESSOR under this Lease. As used in this Paragraph 13, the word "holder"
includes any person claiming through or under any such mortgage, including any
purchaser at a foreclosure sale, and the word "LESSEE" shall include LESSEE's
successors and
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assigns. The word "mortgage" as used in this Paragraph shall mean mortgages,
deeds of trust, and other similar instruments held by any institutional lender
and all modifications, extensions, renewals and replacements thereof. This
Paragraph 13 is self-operative, and no further instrument of subordination shall
be required.
Notwithstanding the self-operative effect of this Paragraph 13, the LESSEE
agrees to execute such further documents in recordable form as the LESSOR or any
lender may reasonably require, consistent with the terms of this Paragraph 13
and 21. Should the LESSEE fail to execute and deliver to the LESSOR any such
reasonable document within twenty (20) days of a written notice requesting the
LESSEE to execute and deliver such document, LESSEE shall pay to LESSOR (as
liquidated damages and not as a penalty) the sum of Five Hundred Dollars ($500)
per day for each day after such twentieth (20th) day during which such failure
to deliver such instrument continues.
14. LESSOR'S ACCESS. The LESSOR or agents of the LESSOR may, at
---------------
reasonable times and upon twenty-four (24) hours reasonable prior written notice
to the LESSEE, (and in a manner so as not to unreasonably interfere with
LESSEE's business operation), enter to view the Leased Premises, or any part
thereof and may remove placards and signs not approved and affixed as herein
provided, and make repairs and alterations which LESSOR may deem necessary or
desirable and, at LESSEE's expense, to remove any alterations, additions, signs,
or other improvements made by LESSEE and not consented to by LESSOR; to show
the Leased Premises to others, upon twenty-four (24) hours reasonable prior
written notice, in a manner so
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as not to unreasonably interfere with the normal conduct of the LESSEE's
business, at any time within the four (4) month period prior to the expiration
of the Term; to affix to any suitable part of the Leased Premises a notice for
letting or selling the Leased Premises are a part and keep the same so affixed
without hindrance or molestation.
15. INDEMNIFICATION AND LIABILITY. The LESSEE shall defend, save harmless
-----------------------------
and indemnify LESSOR from any claims of liability for injury, loss, accident or
damage to any person or property while on the Leased Premises, if not due to the
negligence or willful misconduct of LESSOR, or LESSOR's employees or agents, and
to any persons or property while in the Building or Complex occasioned by any
omission, fault, negligence or other willful misconduct of LESSEE and persons
for whose conduct LESSEE is legally responsible.
LESSOR shall defend, hold harmless and indemnify LESSEE from any claims of
liability for injury, loss, accident or damage to any person or property while
in the Building, Complex or Common Areas, unless due to the omission, fault,
negligence or willful misconduct of LESSEE or LESSEE's employees or agents.
16. HOLDING OVER. LESSEE agrees to pay to LESSOR one and one-half times
------------
the total of the Base Rent set forth in Paragraph 4 in effect for the period
immediately prior to LESSEE's holding over and one and one-half times the
additional rent provided for under this Lease then applicable for each month or
portion thereof LESSEE shall retain possession of the Leased Premises or any
part thereof after the termination of this Lease, whether by lapse of time or
otherwise, and also to pay all damages sustained by LESSOR on account thereof;
the provisions of
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this Paragraph shall not operate as a waiver by LESSOR of any right of re-entry
provided in this Lease.
16A. FURTHER LESSEE COVENANTS. LESSEE further covenants and agrees during
------------------------
the Term and such further time as LESSEE holds any part of the Leased Premises:
(a) to pay when due all rent and other sums herein specified, without
offset, deduction set off or counterclaim except as otherwise specifically
provided in this Lease;
(b) not to obstruct in any manner any portion of any building not hereby
leased or the sidewalks or approaches to such building or any inside windows or
doors;
(c) that neither the original LESSOR nor any successor LESSOR who or which
is trustee or a partnership, nor any beneficiary of the original LESSOR or any
successor LESSOR nor any partner, general or limited, of such partnership shall
be personally liable under any term, condition, covenant, obligation or
agreement expressed herein or implied hereunder or for any claim or damage or
cause at law or in equity arising out of the occupancy of the Leased Premises or
the use or maintenance of the Building and LESSEE specifically agrees to look
solely to the LESSOR's interest in the Complex for the recovery of any judgment
against LESSOR; and
(d) if any payment of rent or other sums due hereunder is not paid within
ten days of when due, LESSEE shall pay to LESSOR a late charge equal to five
(5%)
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percent of the unpaid amount per month, or part thereof, that such amount
remains unpaid.
17. FIRE, CASUALTY.
--------------
17.1 DEFINITION OF "SUBSTANTIAL DAMAGE" AND "PARTIAL DAMAGE". The term
-------------------------------------------------------
"substantial damage", as used herein, shall refer to damage which is of such a
character that the same cannot, in ordinary course, be expected to be repaired
within ninety (90) calendar days from the time that such repair work would
commence. Any damage which is not "substantial damage" is "partial damage." In
the event of substantial damage to the Building, the LESSOR shall notify the
LESSEE as soon as is practicable and in no event later than thirty (30) days
after such damage of LESSOR's estimated time for repair of such damage.
17.2 PARTIAL DAMAGE TO THE BUILDING. If during the Lease Term there shall
------------------------------
be partial damage to the Building by fire or other casualty and if such damage
shall materially interfere with the LESSEE's use of the Leased Premises as
contemplated by this Lease, the LESSOR shall, to the extent insurance proceeds
are available to LESSOR, promptly proceed to restore the Building to
substantially the condition in which it was immediately prior to the occurrence
of such damage. Notwithstanding the foregoing, if there shall be partial damage
to the Building, and if such damage shall materially interfere with the LESSEE's
use of the Leased Premises as contemplated by this Lease occurring during the
last twelve (12) months of the Lease Term of such a character that the same
cannot, in ordinary course, be expected to be repaired within thirty (30) days
from the time such repair work would begin,
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the LESSOR or LESSEE may, withing ten (10) days of the date of such damage,
elect to terminate this Lease. If such election is not made, the LESSOR shall
promptly proceed with such restoration.
17.3 SUBSTANTIAL DAMAGE TO THE BUILDING. If during the Lease Term there
----------------------------------
shall be substantial damage to the Building by fire or other casualty and if
such damage shall materially interfere with the LESSEE's use of the Leased
Premises as contemplated by this Lease, the LESSOR shall, to the extent
insurance proceeds are available to LESSOR, promptly restore the Building to an
architectural unit that is not less suitable than that which existed prior to
such fire or casualty, unless the LESSOR or the LESSEE, within forty-five (45)
days after the occurrence of such damage, shall give notice to the other of its
election to terminate this Lease. If at any time during such forty-five (45)
day period the LESSOR notifies the LESSEE of its intention to restore the
Building, the LESSEE must then give notice to the LESSOR, within ten (10) days
of its receipt of the LESSOR's notice of intention to restore the Building, as
to whether the LESSEE will elect to terminate the Lease. Should the LESSEE fail
to elect to terminate the Lease within such ten (10) day period, the LESSEE's
right to terminate under this Paragraph 17.3 shall expire. If the LESSOR
proceeds with the restoration of the Building and if such damage shall not have
been repaired to the extent necessary for the LESSEE to resume its normal
business operations at the Leased Premises by the end of the 180th day following
the date of such fire or casualty, or if the LESSOR shall fail diligently to
cause such repair and restoration work to be performed, then the LESSEE may, at
any time thereafter while
27
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the damage remains unrepaired, terminate this Lease upon notice to the LESSOR.
If the LESSOR or the LESSEE shall give such notice of termination, then this
Lease shall terminate as of the date of such notice with the same force and
effect as if such date were the date originally established as the expiration
date hereof.
17.4 ABATEMENT OF RENT. If during the Lease Term the Building shall be
-----------------
damaged by fire or casualty and if such damage shall materially interfere with
the LESSEE's use of the Leased Premises as contemplated by this Lease, a just
proportionate amount of the rent, additional rent and other charges payable by
the LESSEE hereunder shall abate proportionately for the period in which, by
reason of such damage, there is such interference with the LESSEE's use of the
Leased Premises.
17A. EMINENT DOMAIN. If the Building is totally taken by condemnation or
--------------
right of eminent domain, this Lease shall terminate as of the date of such
taking. If the Building, or such portion thereof as to render the balance (if
reconstructed to the maximum extent practicable in the circumstances) physically
unsuitable in the LESSEE's reasonable judgment for the LESSEE's purposes, shall
be taken by condemnation or right of eminent domain (including a temporary
taking in excess of 180 days), the LESSEE or the LESSOR shall have the right to
terminate this Lease by notice to the other of its desire to do so, provided
that such notice is given not later than ten (10) days after the LESSEE has been
deprived of possession.
Should any part of the Building be so taken or condemned or receive such
damage and should this Lease not be terminated in accordance with the foregoing
28
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provisions, the LESSOR shall, to the extent condemnation proceeds are available
to LESSOR, promptly restore the Leased Premises to an architectural unit that is
suitable to the uses to the LESSEE permitted hereunder.
In the event of a taking described in this Paragraph 17A, the rent,
additional rent, and other charges payable hereunder, or a fair and just
proportion thereof according to the nature and extent of the loss of use, shall
be suspended or abated.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which
the LESSEE may have for damages or injury to the Leased Premises for any taking
by eminent domain, except for damage to the LESSEE's trade fixtures, personal
property or equipment, if any, the LESSEE's right to relocation expenses, if
any, and the LESSEE's right for business interruption, if any.
18. DEFAULT AND BANKRUPTCY. In the event that:
----------------------
(a) The LESSEE, or any guarantor of LESSEE's obligations hereunder, shall
default in the payment of any installment of rent or other sum herein specified;
or
(b) The LESSEE shall default in the observance or performance of the
LESSEE's covenants, agreements, or obligations hereunder (except as provided in
Paragraph 18(a) above) and the LESSEE shall not cure such default within thirty
(30) days after written notice thereof or if such default cannot be cured within
thirty (30) days, then if LESSEE shall not commence to cure the same within
thirty (30) days and diligently pursue the curing of the same; or
(c) LESSEE or any guarantor of LESSEE's obligations under this Lease makes
any assignment for the benefit of creditors, commits any act of bankruptcy or
29
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files a petition under any bankruptcy or insolvency law; or if such a petition
is filed against LESSEE or any guarantor of LESSEE's obligations under this
Lease and is not dismissed within ninety (90) days; or if a receiver or similar
officer becomes entitled to LESSEE's leasehold hereunder and it is not returned
to LESSEE within ninety (90) days, or if such leasehold is taken on execution or
other process of law in any action against LESSEE;
then in any such case the LESSOR shall have the right thereafter, while
such default continues, to re-enter and take complete possession of the Leased
Premises, to declare the Term of this Lease ended, and remove the LESSEE's
effects at LESSEE's sole cost and expense, without prejudice to any remedies
which might be otherwise used for arrears of rent or other default. The LESSEE
shall indemnify the LESSOR against all loss and reasonable payment of rent and
other payments which the LESSOR may incur by reason of such termination during
the residue of the Term. In the event of default, LESSOR shall use its
reasonable efforts to re-let the Leased Premises so as to mitigate any damages
to the LESSEE hereunder. If LESSOR re-lets the Leased Premises, LESSEE may off-
set its payable rent by the amount of rent received by LESSOR.
If the LESSEE shall default, after written notice thereof as provided
herein, in the observance or performance of any conditions or covenants on its
part to be observed or performed under or by virtue of any of the provisions of
this Lease and after the expiration of any period within which the LESSEE is
entitled to cure such default as is provided above in this Paragraph 18, the
LESSOR, without being under
30
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any obligation to do so and without thereby waiving such default, may remedy
such default for the account and at the expense of the LESSEE. If the LESSOR
makes any expenditures or incurs any obligations for the payment of money in
connection therewith, including, but not limited to, reasonable attorneys' fees
(except for unsuccessful suits against the LESSEE) in instituting, prosecuting
or defending any action or proceeding, such sums paid or obligations incurred,
with interest at the rate of twelve (12%) percent per annum and costs, shall be
paid to the LESSOR by the LESSEE as additional rent.
Nothing contained in this Lease shall limit or prejudice the right of
LESSOR to claim and obtain in proceedings for bankruptcy, insolvency or like
proceedings by reason of the termination of this Lease an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which the damages are to be claimed or proved,
whether or not the amount be greater, equal to, or less than the amount of the
loss or damages referred to above.
19. RULES AND REGULATIONS. The LESSOR shall have the right to institute
---------------------
and to change from time to time, rules and regulations for the use of the
Building and the Lot by commercial office lessees, and by commercial retail
lessees, which shall be reasonable in all instances and shall be uniformly
applicable to all commercial lessees in the Building and the LESSEE agrees to
abide thereby.
19A. PARAGRAPH HEADINGS. The paragraph headings throughout this
------------------
instrument are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation,
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construction or meaning of the provisions of this Lease.
20. BROKER. The LESSOR and LESSEE each represent and warrant to the other
------
that each has had no dealings with any Brokers concerning this Lease, except
Spaulding and Slye (Robert Burr) and ROBERT A. JONES AND COMPANY and each party
agrees to indemnify and hold the other harmless for any damages occasioned to
the other by reason of a breach of this representation and warranty. LESSOR
shall pay a commission to Spaulding & Slye.
21. ESTOPPEL CERTIFICATE. LESSOR and LESSEE each agree at any time from
--------------------
time to time, upon not less than ten (10) days' prior notice to execute,
acknowledge and deliver to the other, a statement in writing, certifying to the
extent possible that this Lease is unmodified and in full force and effect, or
if there have been modifications, that the same is in full force and effect as
modified and stating such modifications and otherwise certifying if there exists
any default under the terms of this Lease and such other information as may be
reasonably requested concerning this Lease by the other party or any other third
party with a bona fide interest. Should either party fail to deliver to the
other party any such statement within twenty (20) days of receipt of a written
notice requesting any such statement, the party failing to deliver any such
statement shall pay to the requesting party, the sum of Five Hundred Dollars
($500) per day (as liquidated damages and not as a penalty), for each day after
such twentieth (20th) day during which such failure continues.
22. NOTICE. Any notice from the LESSOR to the LESSEE relating to the
------
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Leased Premises or to the occupancy thereof shall be deemed duly served, if in
writing and mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to the LESSEE,
GIGA Information Group, Inc.
One Kendall Square - Building 1400
Cambridge, MA 02139
Any notice from the LESSEE to the LESSOR relating to the Leased Premises or to
the occupancy thereof, shall be deemed duly served, if in writing and mailed to
the LESSOR by registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSOR at such address as the LESSOR may from time to
time advise in writing, the following now being designated:
CAMBRIDGE 1400 LIMITED PARTNERSHIP
c/o THE ATHENAEUM GROUP
215 First Street
Cambridge, MA 02142-1268
23. SURRENDER. The LESSEE shall at the expiration or other termination of
---------
this Lease yield up and peaceably surrender all portions of the Leased Premises
to LESSOR and shall remove all LESSEE's goods and effects therefrom (including,
without hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by the LESSEE, either inside or outside the Leased Premises).
LESSEE shall deliver to the LESSOR the Leased Premises and all keys, locks
thereto, and all fixtures, alterations and additions made to or upon the Leased
Premises, except for moveable partitions and furnishings installed at the
LESSEE's expense, in the same condition as they were at the commencement of the
term, or as they were put in during the Term hereof, reasonable wear and tear
and damage by fire, other casualty
33
<PAGE>
or eminenet domain and matters for which the LESSOR is responsible hereunder
only excepted. All moveable partitions and furnishings, installed in the Leased
Premises at the LESSEE's expense prior to or during the Term of the Lease may be
removed by the LESSEE at the expiration or other termination of the Lease. The
LESSEE shall, at its expense, promptly repair any and all damage to the Leased
Premises resulting from such removal. In the event of the LESSEE's failure to
remove any of the LESSEE's property from the Leased Premises, LESSOR is hereby
authorized, upon fifteen (15) days' written notice to the LESSEE without
liability to LESSEE for loss or damage thereto, and at the sole risk of LESSEE,
to remove and store any of the property at LESSEE's sole cost and expense.
24. OPTION TO EXTEND. If the LESSEE is not then in default, LESSOR does
----------------
hereby grant to LESSEE the option to extend this Lease for one (1) additional
five (5) year term, commencing on the expiration of the initial Term upon the
same terms and conditions as herein contained except the annual base rent set
forth in Paragraph 4 hereof shall be at the fair market rate. The option shall
be exercised by written notice from LESSEE and received by LESSOR at least four
(4) months prior to the expiration of the initial term.
In the event LESSEE gives timely extension notice in accordance with the
provisions of this Paragraph 24 and the parties are unable to agree as to the
fair market rent within thirty (30) days after the receipt of LESSEE's extension
notice, then LESSOR and LESSEE may initiate the appraisal process provided for
herein by giving notice to that effect to the other, and the party so initiating
the appraisal
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process (the "Initiating Party") shall specify in such notice the name and
address of the person designated to act as an appraiser on its behalf. Within
thirty (30) days after the designation of the appraiser, the other party (the
"Other Party") shall give notice to the Initiating Party specifying the name and
address of the person designated to act as an appraiser on its behalf. The two
appraisers as chosen shall meet within ten (10) days after the second appraiser
is appointed and if, within ten (10) days after the second appraiser is
appointed, the two appraisers shall not agree on a fair market rent, then on the
second Business Day following the close of such ten (10) day period, the two
appraisers shall, within thirty (30) days after the second appraiser is
appointed, together appoint a third appraiser. In the event of their being
unable to agree upon such appointment within forty (40) days after the
appointment of the second appraiser, the third appraiser shall be selected by
the parties themselves if they can agree thereon within a further period of
fifteen (15) days. If the parties do not so agree, then either party, on behalf
of both and on notice to the other, may request such appointment by the Boston
Office of the American Arbitration Association (or successor organization) in
accordance with its rules then prevailing. Within five (5) days after the
appointment of the third appraiser, the first appraiser and second appraiser
shall submit to such third appraiser their respective determinations of the fair
market rent as described in the immediately preceding clause. Such third
appraiser shall, within fifteen (15) days after the end of such five (5) day
period, choose the fair market rent specified by either the first appraiser or
the second appraiser in such submissions and the fair market rent selected by
the
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third appraiser from the fair market rents submitted by the first appraiser
and the second appraiser shall conclusively be deemed to be the fair market
rent.
Each party shall pay the fees and expenses of the appraiser selected by it.
The fees and expenses of the third appraiser and all other expenses (not
including the attorney's fees, witness fees and similar expenses of the parties
which shall be borne equally by the parties thereto) shall be borne equally
50/50 by the parties.
Under no circumstances may the appraisers modify or disregard any provision
of this Lease and the jurisdiction of the appraisers is restricted accordingly.
The appraisers shall include the fair market rent such cost escalators as are
then customary and appropriate. Fair Market Rental Value is intended to be
calculated in a fair and comprehensive manner so that Landlord shall achieve,
and Tenant shall pay based upon, an amount which is no less than the same net
rental which Landlord would actually receive upon a re-letting of the applicable
space in an arms'-length transaction to an unrelated third party tenant where
neither party is under any compulsion or undue influence. Fair Market Value
shall not include alterations or improvements made to the Leased Premises at
LESSEE's expense during the initial Lease Term.
In the event LESSOR or LESSEE initiates the appraisal process pursuant to
this Paragraph and as of the commencement of the Extension Term the amount of
the fair market rent has not been determined, LESSEE shall pay the amount
specified by the LESSOR's appraiser, and when such determination has been made,
it shall be retroactive as of the commencement date of the Extension Term and
any excess shall
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be credited by LESSOR to LESSEE as against the next monthly Base Rent payment or
payments.
25. SECURITY DEPOSIT. Not required.
----------------
26. SIGNAGE ALLOWANCE. LESSOR shall provide LESSEE with a Two Thousand
-----------------
Dollar ($2,000) signage allowance to be used at Leased Premises. All signage
shall be subject to LESSOR's reasonable approval.
27. MISCELLANEOUS.
-------------
(a) Upon LESSOR's request, LESSEE shall submit annual financial statements
to the LESSOR containing statements of cash flow. If the LESSEE is a publicly
traded corporation it shall supply LESSOR, on a quarterly basis, with its 10Q
filings.
(b) The LESSOR reserves the right to assign or transfer any and all of its
right, title and interest under the Lease, including but not limited to the
benefit of all covenants of the LESSEE hereunder. Notwithstanding anything
contained in this Lease to the contrary, it is specifically understood and
agreed that the obligations imposed upon the LESSOR hereunder shall be binding
upon the LESSOR and LESSOR's successors' ownership of LESSOR's interest
hereunder the LESSOR and its said successors in interest shall not be liable for
acts and occurrences arising from and after the transfer of their interest as
LESSOR hereunder, provided such successor fully assumes the obligations of the
LESSOR hereunder from and after the date of such assignment or transfer.
(c) This Lease shall be governed by and construed in accordance with the
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laws of the Commonwealth of Massachusetts, as the same may from time to time
exist.
(d) This Lease contains all of the agreements of the parties with respect
to the subject matter thereof and supersedes all prior oral and written
negotiations and dealings between them with respect to such subject matter. The
agreement of the parties contained in this Lease shall not be modified or
amended unless such modification or amendment is in writing and signed by the
parties.
(e) The LESSEE acknowledges that LESSEE has not been influenced to enter
into this Lease nor has it relied upon any warranties or representations not set
forth or incorporated in this Lease or previously made in writing.
The undersigned General Partner of CAMBRIDGE 1400 LIMITED PARTNERSHIP does
hereby certify that it is authorized by all of the beneficiaries of said
Partnership to execute and acknowledge the within Lease on behalf of the
Partnership.
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and
common seals this 31st day of October, 1995.
CAMBRIDGE 1400 LIMITED PARTNERSHIP
By Its General Partner
CAMBRIDGE 1400 INC.
/s/ Allen R. Jones /s/
- ------------------------------ ------------------------------
By: Allan R. Jones, President Witness
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GIGA INFORMATION GROUP, INC.
/s/ David Thor /s/ Kathleen M. Doyle
- ------------------------------ ------------------------------
By: David Thor, President Witness
Duly Authorized
/s/ Michael J. Kolesar /s/ Kathleen M. Doyle
- ------------------------------ ------------------------------
By: Vice President, Finance Witness
Duly Authorized
39
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EXHIBIT 10.20
LEASE
Lease made this 6th day of October, 1987 by Charles A. Pesko, Jr. as he is
Trustee of Longwater Circle Trust established u/d/t dated October 6, 1987, and
not individually, of Marshfield, Plymouth County, Massachusetts, as landlord
(hereinafter called "Landlord"), and CAP International, Inc., a Massachusetts
corporation having a business office in Marshfield, Massachusetts as tenant
(hereinafter called "Tenant").
PREMISES 1. In consideration of the rents, agreements and conditions
herein reserved and contained on the part of Tenant to be paid,
performed and observed, Landlord does hereby demise and lease to
Tenant, for the term hereinafter set forth, premises hereinafter
described ("the demised premises") in Norwell, Plymouth County,
Massachusetts, as shown upon a certain plan ("the lease plan")
attached to this lease and marked Exhibit A. The demised premises
consist of the building shown upon the lease plan containing
approximately 27,100 square feet of floor area ("the Building")
and the area outlined by a bold line on the lease plan and are
more fully described in Exhibit A-1 hereto.
CONSTRUCTION 2.1 Landlord agrees that the work described in Exhibit B
attached hereto as "Landlord's construction work" will be
prosecuted to completion with due diligence and that said work,
except as provided in Exhibit B, will be done at its own cost and
expense. Landlord agrees that Landlord's construction work shall
be substantially completed and the demised premises suitable for
occupancy on or before April 4, 1988. The demised premises shall
be deemed "substantially completed" when (i) the Building shall be
completely enclosed with all openings secure; (ii) heating, air
conditioning, electric, gas (if any), sprinkler and water systems
of the demised premises shall be installed and operational; (iii)
parking areas and walkways shown upon the lease plan shall be
paved; (iv) interior ceilings, floors, floor coverings, lighting
and toilet facilities of the demised premises shall be installed;
and (v) a temporary or permanent certificate of occupancy shall
have been issued for the demised premises by the appropriate
authority of the Town of Norwell; provided, however, if any
construction which shall not be part of Landlord's construction
work shall be required upon the demised premises as a condition
precedent to the issuance of any such certificate of occupancy,
the issuance of such certificate of occupancy shall not be a
requirement for substantial completion of the demised premises.
Landlord shall deliver possession of the demised premises to
Tenant upon subtantial completion of Landlord's construction work
by delivering the keys to the demised premises to Tenant.
<PAGE>
2.2 Landlord agrees to give Tenant at least ten (10) days prior
written notice of the date upon which Landlord estimates that
Landlord's construction work shall be substantially completed.
Landlord further agrees that Landlord shall diligently proceed to
fully complete Landlord's construction work if the same shall not
have been fully completed prior to delivery of possession of the
demised premises to Tenant.
TERM 3.1 The original term of this lease shall be a period of ten
(10) years commencing upon the first to occur of (i) May 1, 1988,
(ii) the date that Landlord's construction work shall be
substantially completed or (iii) the date upon which Tenant shall
commence business operations upon the demised premises and
expiring upon the tenth (10th) anniversary of such commencement
date.
3.2 Tenant agrees that it will not record this lease. Upon the
written request of either party hereto, Landlord and Tenant will
execute an instrument, recordable in form, setting forth the term
and commencement date and such other information as may be
necessary to constitute a "Notice of Lease" under Massachusetts
laws. Tenant will pay the cost of recording said notice of lease.
If this lease is terminated before the expiration of the term
hereof, the parties shall execute, deliver and record an
instrument acknowledging such fact and the actual date of
termination of this lease and Tenant hereby appoints Landlord its
attorney-in-fact in its name and behalf to execute such
instrument.
SECURITY 4. Landlord acknowledges that it has received from Tenant the
sum of Thirty Thousand Dollars ($30,000) as security for the
payment of rents and the performance and observance of the
agreements and conditions in this lease contained on the part of
Tenant to be performed and observed. In the event of any default
or defaults in such payment, performance or observance Landlord
may apply said sum or any part thereof towards the curing of any
such default or defaults. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber said sum
or any part thereof and that neither Landlord nor its successors
or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. Upon the yielding
up of the demised premises at the expiration or other termination
of the term of this lease, if Tenant shall not then be in default
or otherwise liable to
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Landlord, the unapplied balance of said sum shall be returned to
Tenant. It is understood and agreed that Landlord shall always
have the right to apply said sum, or any part thereof, as
aforesaid, in the event of any such default or defaults, without
prejudice to any other remedy or remedies which Landlord may
have, or Landlord may pursue any other such remedy or remedies in
lieu of applying said sum or any part thereof. No interest shall
be payable on said sum or any part thereof. If Landlord shall
apply said sum or any part thereof as aforesaid, Tenant shall
upon demand pay to Landlord the amount so applied by Landlord, to
restore the security in its full amount. Whenever the holder of
Landlord's interest in this lease, whether it be the Landlord
named in this lease or any transferee of said Landlord, immediate
or remote, shall transfer its interest in this lease, said holder
shall turn over to its transferee said sum or the unapplied
balance thereof, and thereafter such holder shall be released
from any and all liability to Tenant with respect to said sum or
its application or return, it being understood that Tenant shall
thereafter look only to such transferee with respect to said
mortgage upon property which includes the demised premises shall
never be responsible to Tenant for said sum or its application or
return unless said sum shall actually have been received in hand
by such holder.
MINIMUM RENT 5.1 During the first five years of the original term of this
lease Tenant agrees to pay to Landlord a minimum rent at the rate
of Three Hundred Fifty-Nine Thousand Seventy-Five Dollars
($359,075.00), per year. During the second five years of this
lease Tenant agrees to pay to Landlord a minimum rent at the rate
above as such amount may be adjusted pursuant to the provisions
of Section 5.2 hereof. All such minimum rent shall be payable in
equal monthly installments of one-twelfth thereof and shall be
payable in advance upon the first day of each calendar month
included within the term of this lease. Rent for any fraction of
a month at the commencement or termination of the term of this
lease shall be prorated. If the original term shall commence on a
day other than the first day of a month, the installment of
minimum rent payable for the months during which each additional
period, if any, for which the original term of this lease may be
extended, as aforesaid, shall occur shall be prorated on a per
diem basis to reflect the change, if any, in annual rate becoming
effective during that month. All rent and other payments to be
made by Tenant to Landlord shall be made payable to Landlord and
sent to Landlord at the place in which
3
<PAGE>
notices to Landlord are required to be sent unless Landlord shall
direct otherwise by notice to Tenant. If any installment of
minimum rent or additional rent payable under this lease shall
not be paid within fifteen (15) days after the due date thereof,
Tenant shall pay to Landlord together with such late payment, as
a late charge, in additional to all other amounts payable under
this lease, an amount equal to four (4) percent of the amount not
paid within such fifteen (15) day period.
5.2 The first day of the sixth year of this lease is herein
referred to as an "Adjustment Date." As of each Adjustment Date
the minimum rent (referred to in Section 5.1) shall be increased,
but not decreased, to reflect changes in the Consumer Price Index
for Urban Consumers, Seasonally Adjusted U.S. City Average, All
Items (1967=100) as published by the Bureau of Labor ("the Price
Index") in the same proportion that the Price Index as last
reported prior to such Adjustment Date has increased above the
Price Index for the month of May, 1988 ("Base Year Price Index
Number"). If the Price Index shall cease to use the 1967 average
of 100 as the basis of calculation, or if a substantial change is
made in the terms or number of items contained in the Price
Index, the Base Year Price Index Number shall be adjusted to the
figure that would have been arrived at if the manner of computing
the Base Year Price Index Number had not been altered. If the
Price Index is not available, a reliable governmental or other
non-partisan publication evaluating the information theretofore
used in determining the Price Index shall be used. If the parties
shall be unable to agree upon the dollar amount of the minimum
rent, they shall promptly resolve such dispute by arbitration in
Boston, Massachusetts, by the American Arbitration Association or
its successor, and such arbitration shall be submitted,
commenced, held and determined in accordance with the rules and
regulations of said Arbitration Association or its successors at
the time of any such submission. The expenses thereof shall be
borne equally between Landlord and Tenant unless the arbiters
determine that some other division shall under the circumstances
be more equitable and the determination of the arbiters shall be
conclusive and binding upon the parties. Until the dollar amount
of the minimum rent for any period shall be determined,[??] Until
the dollar amount of the minimum rent after an Adjustment Date is
determined, Tenant shall pay rent at the rate provided in this
Lease immediately prior to such Adjustment Date, and when rent is
determined in accordance with this Section 5.2, Tenant shall pay
Landlord any excess rent
4
<PAGE>
due for the period which shall have expired since the Adjustment
Date. Tenant shall thereafter pay rent at the rate determined in
accordance with this Section 5.2.
REAL ESTATE 6.1 Tenant shall pay to Landlord as additional rent the
TAXES real estate taxes upon the demised premises for each tax year
included within the term of this lease and a pro rata part of
said real estate taxes for the tax years during which the term of
this lease shall commence and terminate. The expression "real
estate taxes" used herein shall mean all ad valorem taxes and
betterment assessments (and all taxes substituted therefor at any
time during the term hereof) imposed or assessed upon or against
real estate by any public authority having jurisdiction, except
only that if any betterments assessment is payable in
installments, the real estate taxes for any tax year shall
include only such installments of such betterments assessment as
are payable during such tax year; provided only in the case of
each respective betterments assessment that Landlord shall have
elected to pay such assessment in installments over the longest
period permitted by law but not otherwise.
6.2 Promptly upon receipt of any tax bill for any tax year the
party receiving the same shall deliver a copy of the same to the
other party hereto but failure to do so shall not constitute a
default hereunder unless such failure continues for 10 days after
written notice thereof. Tenant shall pay directly to the taxing
authority the amount of real estate taxes payable by Tenant
pursuant to this Article at least ten (10) days prior to the time
that such real estate taxes shall be required to be paid to the
taxing authority for said tax year without the accrual of
interest or the payment of a penalty, but, if Tenant shall not
have received a tax bill therefor at least twenty (20) days prior
to said time for payment, Tenant shall not be required to make
payment until ten (10) days after the receipt of said bill. (If
real estate taxes are payable to any tax authority for any tax
year in installments, the amount payable by Tenant hereunder
shall be payable in similar installments. If real estate taxes
are payable to different taxing authorities for any tax year at
different times, an appropriate apportionment shall be made if
the amount payable by Tenant for said tax year and the
apportioned amount shall be payable at such times). Tenant shall
provide Landlord with a copy of each such tax bill receipted by
the taxing authority to indicate full payment of the amount due
not more than fifteen (15) days after the due date of each
installment of real estate taxes
5
<PAGE>
payable hereunder, it being understood and agreed that if Tenant
shall fail to provide a copy of any such tax bill so receipted
and Tenant has not made timely payment of such taxes, Landlord
shall thereafter have the right to require Tenant to make all
payments of real estate taxes payable under this lease to
Landlord, rather than the taxing authority, within the aforesaid
time periods. If the time for payment of taxes with respect to
any real estate taxes payable in whole or in part by Tenant
hereunder shall have occurred prior to commencement of the term
or shall occur after termination of the term, Tenant shall pay to
Landlord upon commencement or termination of the term, as the
case may be, the portion of such tax bill payable by Tenant
pursuant to this lease.
Notwithstanding the foregoing, in the event that the holder of
a mortgage on the demised premises requires that real estate
taxes be paid to it in escrow by Landlord, Tenant shall pay,
together with each monthly payment of minimum rent, an amount
equal to one-twelfth (1/12) of the amount of real estate taxes
upon the demised premises and Landlord shall pay the real estate
taxes directly to the taxing authority from the escrowed funds.
Appropriate adjustments shall be made after receipt of the tax
bill for any tax year during the term of this lease for any
increase or decrease in said real estate taxes with a
reconciliation to be made within 10 days after receipt of such
tax bill.
6.3 The real estate taxes upon the demised premises for any tax
year shall mean such amounts as shall be finally determined,
after deducting abatements, refunds or rebates, if any, to be the
real estate taxes payable with respect to the demised premises
for said tax year. For the purposes of determining payments due
from Tenant to Landlord in accordance with the provisions of this
Article 6, the real estate taxes upon the demised premises for
any tax year shall be deemed to be the real estate taxes assess
for such year until such time as an abatement, refund or rebate
shall be made for any tax year, and, if any abatement, rebate or
refund shall be made for any tax year, an appropriate adjustment
or refund shall be made in the amount payable from or paid by
Tenant to Landlord on account real estate taxes dependent upon
the amount of such abatement, rebate or refund less the cost and
expense of obtaining the same.
6.4 If at least twenty (20) days prior to the last day for
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<PAGE>
filing application for abatement of real estate taxes for any tax
year Tenant shall give notice to Landlord that it desires to file
an application for abatement of real estate taxes for said tax
year and, if within ten (10) days after the receipt of said
notice Landlord shall not give notice to Tenant that Landlord
shall file such notice by Tenant, Landlord shall give Tenant
notice that it shall file such application, Landlord shall file
same prior to the expiration of the time for filing of the same
at its own cost and expense. If Tenant shall file an application
for the abatement pursuant to the provisions of this Section,
Tenant will prosecute the same to final determination with due
diligence and shall not, without Landlord's consent, settle,
compromise or discontinue the same except, however, Tenant may
discontinue prosecution of the same at any time after giving
Landlord reasonable notice thereof and an opportunity to take
over prosecution of the same. If Landlord shall file an
application for abatement for any tax year after having received
notice from Tenant that Tenant desires to file an application for
abatement for said tax year, Landlord shall prosecute the same to
final determination with due diligence and shall not, without
Tenant's written consent, settle, compromise or discontinue the
same except, however, Landlord may discontinue the prosecution of
the same at any time after giving Tenant notice thereof and an
opportunity to take over the prosecution of the same.
6.5 All taxes levied on the personal property of Tenant shall
be the obligation of and be paid by Tenant, whether the same
shall be considered part of the realty or personalty and Tenant
agrees to indemnify Landlord against and hold harmless the
Landlord from any loss, damage, debt or claim resulting
therefrom.
REPAIRS AND 7.1 Landlord agrees to make all necessary repairs or
ALTERNATIONS alternations to the property which Landlord is required to
maintain, as hereinafter set forth. The property which Landlord
is required to maintain is the foundation, the roof, the exterior
walls (excluding glass, windows, doors, window sashes and frames
or door frames) and the structural columns, members and beams of
the Building. Notwithstanding the foregoing, if any of said
repairs or alterations shall be made necessary by reason of
repairs, installations, alterations, additions or improvements
made by Tenant or anyone claiming under Tenant, by reason of the
fault or negligence of Tenant or anyone claiming under Tenant, by
reason of a default on the performance or observance of any
7
<PAGE>
agreements, conditions or other provisions on the part of Tenant
to be performed or observed, or by reason of any special use to
which the demised premises may be put, Tenant shall make all such
repairs or alterations as may be necessary. Landlord shall not be
deemed to have committed a breach of any obligation to make
repairs or alterations or perform any other act unless (1) it
shall have made such repairs or alterations or performed such
other act negligently, or (2) it shall have received notice from
Tenant designating the particular repairs or alterations needed
or the other act of which there has been failure of performance
and shall have failed to make such repairs or alterations or
performed such other act within a reasonable time after the
receipt of such notice; and in the latter event Landlord's
liability shall be limited to the cost of making such repairs or
alterations or performing such other act.
7.2 Tenant agrees that it will during the term of this lease
make all repairs and alterations to the property which Tenant is
required to maintain, as hereinafter set forth, which may be
necessary to maintain the same in good repair and condition or
which may be required by any laws, ordinances, regulations or
requirements of any public authorities having jurisdiction,
subject only to the provisions of Article 9 and 10. Tenant agrees
that it will upon the expiration or other termination of the term
of this lease remove its property and that of all persons
claiming under it and will yield up peaceably to Landlord the
demised premises and all property therein other than property of
Tenant or persons claiming under Tenant, broom clean and in good
repair and condition, subject only to the provisions of Articles
9 and 10 and that Tenant's obligation to perform and observe this
covenant shall survive the expiration or termination of the term
of this lease. The property which Tenant is required to maintain
is the demised premises and every part thereof including but
without limitation all walls, floors and ceilings, the heating
system, the air-conditioning system, including rooftop heating
and air-conditioning units if the same are used, all utilities
(water, gas, electricity, drainage, and septic) conduits,
fixtures and equipment within the demised premises, all meters
and all other fixtures and equipment within or appurtenant to the
demised premises, all Tenant's signs (interior and exterior), all
interior and exterior glass, windows, doors, window sashes and
frames and door frames and all driveways, walkways, parking areas
and landscaped areas. Tenant agrees to enter into maintenance
contracts with experienced maintenance
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contractor(s) for the performance of periodic maintenance upon
the heating, ventilating and air conditioning systems of the
Building and to provide Landlord with inspection reports from
such contractors at least annually, the first report to be
furnished not later than the first anniversary of the
commencement of the original term of this lease. Tenant shall
provide Landlord with copies of reinspection reports or holes.
Tenant agrees to pay promptly when due all charges for labor and
materials in connection with any work done by Tenant or anyone
claiming under Tenant upon the demised premises so that the
demised premises shall at all times be free of liens. Tenant
agrees to save Landlord harmless from, and indemnify Landlord
against, any and all claims for injury, loss or damage to person
or property caused by or resulting from the doing of any such
work.
UTILITIES 8.1 Landlord agrees that as of the date of delivery of
possession of the demised premises the Building shall be
connected to the electric and gas lines serving the municipality
wherein the demised premises are located and to the water system
of said municipality. Tenant agrees to pay (or to reimburse
Landlord for) all meter fees assess by such utilities and said
municipality for the connection or metering of the demised
premises.
8.2 Tenant agrees to pay all charges for heat, air-
conditioning, water, gas, electricity and other utilities used by
the demised premises. If a charge shall be made from time to time
by the public authority having jurisdiction for the use of the
sanitary sewer system and/or for the use of the storm sewer
system, Tenant shall pay the same. Tenant agrees that it will at
all times keep sufficient heat in the demised premises to prevent
the pipes therein from freezing. Tenant shall also pay for any
sprinkler stand-by service charge apportionable to the demised
premises.
FIRE OR OTHER 9.1 If the demised premises, or any part thereof, shall
CASUALTY be damaged or destroyed by fire or other casualty, then Tenant
shall promptly thereafter give Landlord written notice thereof
and Landlord shall within a reasonable time after its receipt of
such notice from Tenant, repair or restore the demised premises
to substantially the same condition they were in immediately
prior to the casualty. Landlord shall not be obligated to expend
an amount in excess of the insurance proceeds or damages payable
on account of such damage or destruction in making
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such repair or restoration. In the event of any such damage or
destruction by fire or other casualty, the insurance proceeds or
damages recovered on account of any damage or destruction shall
be made available for the payment of the cost of the aforesaid
repair or restoration. If the insurance proceeds shall be greater
than the cost of repair or restoration, the excess shall belong
to Landlord. A just proportion of the minimum rent according to
the nature and extent of the injury to the demised premises shall
be suspended or abated until the demised premises shall be
repaired or stored by Landlord as aforesaid.
9.2 Insurance against any or all of the risks, including, but
without limitation, fire insurance with extended coverage in an
amount at least equal to the replacement cost of the Building,
insurance against loss or rental income, insurance against loss
or damage from sprinklers, leakage, explosion or cracking of
boilers, pipes, or both, and insurance against such other
casualties as shall be required by the holder of any mortgage
upon the demised premises, may be maintained by Landlord and the
same may be maintained under a blanket policy covering the
demised premises and other real estate of Landlord and/or its
affiliated business organizations. The policies of such insurance
shall be payable in case of loss to the holders of any mortgages
upon the property of which the demised premises are a part as
their interests may appear. Nothing in reasonable evidence that
repairs or replacements were made, if any such repairs or
replacements were recommended in any such inspection report, with
ninety (90) days after the issuance of any such report.
Notwithstanding the foregoing, Tenant shall not be under any
obligation to make any repairs or alterations to the foundation,
the roof, the exterior walls or structural columns, members or
beams of the Building except to the extent provided in Section
7.1. Tenant specifically agrees to replace all glass damaged with
glass of the same kind and quality. Tenant also agrees to paint,
varnish and otherwise redecorate the Interior and exterior of the
building when required to keep the Building attractive in
appearance, but at least once during the first five years and
thereafter on a maintenance basis.
7.3 Tenant agrees that neither it nor anyone claiming under it
will make any installations, alterations, additions or
improvements to or upon the demised premises, except only the
installations, alterations, additions and improvements
specifically described in Exhibit B-1 hereto, without the prior
written
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approval of Landlord. All installations, alterations, additions
and improvements made to or upon the demised premises whether
made by Landlord or Tenant or any other person (except only signs
and movable trade fixtures and equipment installed in the demised
premises prior to or during the term of this lease at the cost of
Tenant or any person claiming under Tenant), shall be deemed part
of the demised premises and upon the expiration or other
termination of the term of this lease shall be surrendered with
the demised premises as a part thereof without disturbance,
molestation or injury unless Landlord shall give notice to Tenant
within fifteen (15) days after termination of the term of this
lease that it elects to have Tenant remove any of the same, in
which event Tenant shall remove those installations, alterations,
additions and improvements so designated within fifteen (15) days
of the giving of such notice or upon termination of the term of
this lease, whichever shall first occur. Said signs, movable
trade fixtures and equipment shall not be deemed part of the
demised premises and may be removed by Tenant at any time or
times during the term of this lease or upon the termination of
the term of this lease, if, and only if, Tenant shall not then be
in default in the performance or observance of any of the
agreements or conditions in this lease contained on the part of
Tenant to be performed or observed. Movable trade fixtures and
equipment shall include trade fixtures, equipment and other
installations not affixed to the realty and trade fixtures,
equipment and other installations affixed only by nails, screws
or other similar means. Movable trade fixtures shall not include
linoleum or other floor covering cemented or otherwise adhesively
affixed to the floor.
7.4 Tenant agrees that it will procure all necessary permits
before making any repairs, installations, alterations, additions,
improvements or removals. Landlord agrees it will cooperate with
Tenant in obtaining such permits. Tenant agrees that all repairs,
installations, alterations, improvements and removals done by it
or anyone claiming under it shall be done in a good and
workmanlike manner, that the same shall be done in conformity
with all laws, ordinances and regulations of all public
authorities and all insurance inspection or rating bureaus having
jurisdiction, that the structure of the Building will not be
endangered or impaired and that Tenant will repair any and all
damage caused by or resulting from any such repairs,
installations, alterations, additions, improvements or removals,
including, but without limitation, the filling of holes. Tenant
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agrees to pay promptly when due all charges for labor and
materials in connection with any work done by Tenant or anyone
claiming under Tenant upon the demised premises so that the
demised premises shall at all times be free of liens. Tenant
agrees to save Landlord harmless from, and indemnify Landlord
against, any and all claims for injury, loss or damage to person
or property caused by or resulting from the doing of any such
work.
UTILITIES 8.1 Landlord agrees that as of the date of delivery of
possession of the demised premises the Building shall be
connected to the electric and gas lines serving the municipality
wherein the demised premises are located and to the water system
of said municipality. Tenant agrees to pay (or to reimburse
Landlord for) all meter fees assessed by such utilities and said
municipality for the connection or metering of the demised
premises.
8.2 Tenant agrees to pay all charges for heat, air-
conditioning, water, gas, electricity and other utilities used by
the demised premises. If a charge shall be made from time to time
by the public authority having jurisdiction for the use of the
sanitary sewer system and/or for the use of the storm sewer
system, Tenant shall pay the same. Tenant agrees that it will at
all times keep sufficient heat in the demised premises to prevent
the pipes therein from freezing. Tenant shall also pay for any
sprinkler stand-by service charge apportionable to the demised
premises.
FIRE OR OTHER 9.1 If the demised premises, or any part thereof, shall
CASUALTY be damaged or destroyed by fire or other casualty, then Tenant
shall promptly thereafter give Landlord written notice thereof
and Landlord shall within a reasonable time after its receipt of
such notice from Tenant, repair, or restore the demised premises
to substantially the same condition they were in immediately
prior to the casualty. Landlord shall not be obligated to expend
an amount in excess of the insurance proceeds or damages payable
on account of such damage or destruction in making such repair or
restoration. In the event of any such damage or destruction by
fire or other casualty, the insurance proceeds or damages
recovered on account of any damage or destruction shall be made
available for the payment of the cost of the aforesaid repair or
restoration. If the insurance proceeds shall be greater than the
cost of repair or restoration, the excess shall belong to
Landlord. A just proportion of the minimum rent
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according to the nature and extent of the injury to the demised
premises shall be suspended or abated until the demised premises
shall be repaired or restored by Landlord as aforesaid.
9.2 Insurance against any or all of the risks, including, but
without limitation, fire insurance with extended coverage in an
amount at least equal to the replacement cost of the Building,
insurance against loss or rental income, insurance against loss
or damage from sprinklers, leakage, explosion or cracking of
boilers, pipes, or both, and insurance against such other
casualties as shall be required by the holder of any mortgage
upon the demised premises, may be maintained by Landlord and the
same may be maintained under a blanket policy covering the
demised premises and other real estate of Landlord and/or its
affiliated business organizations. The policies of such insurance
shall be payable in case of loss to the holders of any mortgages
upon the property of which the demised premises are a part as
their interests may appear. Nothing in this lease contained shall
be deemed to create in Tenant any interest in said insurance
policies or the proceeds thereof or any right to participate in
the adjustment of loss. Tenant agrees to pay to Landlord, as
additional rent, the cost to Landlord of keeping the demised
premises insured under the coverages hereinabove mentioned.
Payment on account of such cost shall be paid, as part of
Tenant's total rent, monthly, and at the times and in the fashion
herein provided for the payment of minimum rent. For an initial
period from the commencement of the term of this lease until the
December 31st of the calendar year in which the term hereof shall
commence, the amount so to be paid shall be one-twelfth (1/12) of
the product of ten cents ($.10) and the number of square feet of
floor area in the demised premises. Promptly after the end of
said partial calendar year and promptly after the end of each
calendar year thereafter, Landlord shall make a determination of
such cost on the basis hereinabove set forth, and if the
aforesaid payments theretofore made for such period by Tenant
exceed such cost, Landlord shall make a suitable refund to
Tenant; and if such cost is greater than such payments
theretofore made on account for such period, Tenant shall make a
suitable payment to Landlord. The initial monthly payment on
account of such cost shall be replaced after Landlord's
determination of the preceding accounting period's cost by a
payment which is one-twelfth (1/12) of such immediately preceding
period's cost, with adjustments as appropriate where such
preceding period is less than a full twelve (12) month period.
Appropriate adjustments
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shall be made for any partial month at the commencement of the
term and for any partial month or year at the end of the term.
9.3 Notwithstanding anything in this Article to the contrary,
it is agreed and understood that (i) if during the second annual
period preceding the expiration of the term of this lease the
demised premises shall be damaged or destroyed by fire or other
casualty to the extent of thirty Percent (30%) or more of their
insurable value, or (ii) if during the annual period preceding
the expiration of the term of this lease the demised premises
shall be damaged or destroyed by fire or other casualty to the
extent of twenty percent (20%) or more of their insurable value,
either Landlord or Tenant may, if either shall so elect,
terminate the term of this lease by notice to the other within
thirty (30) days after such damage or destruction. It is further
agreed that if at any time during the term of this lease the
demised premises shall be substantially damaged or destroyed as
aforesaid, Landlord, at its election, may terminate the term of
this lease by a notice to Tenant within thirty (30) days after
such damage or destruction. For purposes of this Article, the
demised premises shall be deemed to have been substantially
damaged or destroyed if the damage or destruction is of such a
character that the same cannot reasonably be expected to be
repaired or restored within thirty (30) days after the repair or
restoration work would be commenced. In the event of any
termination of the term of this lease pursuant to the provisions
of this Section, the termination shall become effective on the
twentieth (20th) day after the giving of the notice or
termination, rent shall be apportioned and adjusted as of the
time of termination, Landlord shall not be obligated to repair or
restore any damage or destruction caused by fire or other
casualty and the insurance proceeds shall belong to Landlord.
EMINENT 10.1 If after the execution of this lease and prior to
DOMAIN the expiration of the term of this lease the whole of the demised
premises shall be taken under the power of eminent domain, then
the term of this lease shall cease as of the time when Landlord
shall be divested of its title in the demised premises, and rent
shall be apportioned and adjusted as of the time of termination.
10.2 If only a part of the demised premises shall be taken
under the power of eminent domain and if as a result thereof the
floor area of the Building shall be reduced by more than thirty
percent, or if more than thirty percent of the parking areas of
the
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demised premises shall be taken and not replaced by Landlord
within sixty (60) days thereafter, either Landlord or Tenant may,
at its election, terminate the term of this lease by giving
notice of the exercise of its election to the other of them
within twenty (20) days after it shall receive notice of such
taking (or in the case of a taking of parking areas within twenty
days after such sixty day period), and the termination shall be
effective as of the time that possession of the part so taken
shall be required for public use (or in the case of parking areas
being taken upon the tenth day after the giving of such notice),
and rent shall be apportioned and adjusted as of the time of
termination. If only a part of the demised premises shall be
taken under the power of eminent domain and if the term of this
lease shall not continue in full force and effect and Landlord
shall, within a reasonable time after possession is required for
public use, repair and rebuild what may remain of the demised
premises and the remainder of the Building so as to put the same
into condition for use and occupancy by Tenant, and a just
proportion of the minimum rent according to the nature and extent
of the injury to the demised premises shall be suspended or
abated until what may remain of the demised premises shall be put
into such condition by Landlord, and thereafter a just proportion
of the minimum rent according to the nature and extent of the
part so taken shall be abated for the balance of the term of this
lease.
10.3 Landlord reserves to itself, and Tenant grants and assigns
to Landlord, all rights to damages accruing on account of any
taking under the power of eminent domain or by reason of any act
of any public or quasi-public authority for which damages are
payable irrespective of the form in which recovery may be had by
law. Tenant agrees to execute such instruments by assignment as
may be reasonably required by Landlord in any proceeding for the
recovery of such damages if requested by Landlord, and to turn
over to Landlord any damages that may be recovered in such
proceedings. It is agreed and understood, however, that Landlord
does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for movable trade fixtures
installed by Tenant or anybody claiming under Tenant at its own
cost and expense or for relocation expenses; provided that the
same do not reduce the damages which Landlord would otherwise
recover.
INDEMNITY AND 11.1 Tenant agrees to save Landlord harmless from,
INSURANCE and indemnify Landlord against, to the extent permitted by law,
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any and all injury, loss or damage and any and all claims for
injury, loss or damage of whatever nature (i) caused by or
resulting from, or claimed to have been caused by or to have
resulted from, any act, omission or negligence of Tenant or
anyone claiming under Tenant (including, but without limitation,
subtenants and concessionaires of Tenant and employees and
contractors of Tenant or its subtenants or concessionaires), no
matter where occurring, or (ii) occurring upon about the demised
premises, no matter how caused. This indemnity and hold harmless
agreement shall include indemnity against all costs, expenses and
liabilities, incurred in connection with any such injury, loss or
damage or any such claim, or any proceeding brought thereon or
the defense thereof. To the maximum extent that this agreement
may be made effective according to law, Tenant agrees to use and
occupy the demised premises at its sole risk. Without limiting
the generality of the immediately preceding sentence, if Tenant
or anyone claiming under Tenant or the whole or any part of the
property of Tenant or anyone claiming under Tenant shall be
injured, lost or damaged by theft, fire, water or steam or in any
other way or manner, whether similar or dissimilar to the
foregoing, no part of said injury, loss or damage is to be borne
by Landlord or its agents. Tenant agrees that Landlord shall not
be liable to Tenant or anyone claiming under Tenant for any
injury, loss or damage that may be caused by or result from the
fault or negligence of any persons occupying adjoining premises.
11.2 Tenant will maintain general comprehensive public
liability insurance, with respect to the demised premises and its
appurtenances, issued by insurance companies acceptable to
Landlord and authorized to do business in the Commonwealth of
Massachusetts, naming Landlord and Tenant as insureds, in amounts
which shall, at the beginning of the term, be not less than One
Million Dollars ($1,000,000.00) with respect to injuries to any
one person and not less than One Million Dollars ($1,000,000.00)
with respect to injuries suffered in any one accident, and not
less than One Million Dollars ($1,000,000.00) with respect to
property and, from time to time during the term of this lease,
such insurance coverage shall be in such higher amounts, if any,
as are customarily carried in the metropolitan Boston area on
property similar to the demised premises used for similar
purposes or as required by the mortgagee. Tenant shall deliver to
Landlord the policies of such insurance, or certificates thereof,
at least fifteen (15) days prior to the commencement of
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the term of this lease, and each renewal policy or certificate
thereof, at least fifteen (15) days prior to the expiration of
the policy it renews. Tenant may maintain such insurance under a
blanket policy affecting other premises of Tenant and/or its
affiliated business organizations.
ACCESS TO 12. Landlord shall have the right to enter upon the
PREMISES demised premises or any part thereof without charge at all
reasonable times and in case of emergency, at any time, to
inspect the same, to show the demised premises to prospective
purchasers or tenants, to make or facilitate any repairs,
alterations, additions or improvements to the demised premises
and other portions of the Building (but nothing in this Article
12 contained shall obligate Landlord to make any repairs,
alterations, additions or improvements); and Tenant shall not be
entitled to any abatement or reduction of rent or damages by
reason of any of the foregoing. No forcible entry shall be made
by Landlord unless such entry shall be reasonably necessary to
prevent serious injury, loss or damage to persons or property.
Landlord shall repair any damage to property by Tenant or anyone
claiming under Tenant caused by or resulting from Landlord's
making any such repairs, alterations, additions or improvements
except only such damage as shall result from the making of such
repairs, alterations, additions or improvements which Landlord
shall make as a result of the default, fault or negligence of
Tenant or anyone claiming under Tenant. For the period commencing
nine months prior to the expiration of the term of this lease,
Landlord may maintain "For Rent" signs on the demised premises.
DEFAULTS 13.1 If Tenant shall default in the payment of rent or other
payments required of Tenant, and if Tenant shall fail to cure
said default within seven (7) days after the giving of notice of
said default by Landlord, or (2) if Tenant shall default in the
performance or observance of any other agreement or condition on
its part to be performed or observed and if Tenant shall fail to
cure said default within fifteen days after the giving of notice
of said default by Landlord, or (3) if any person shall levy
upon, or take this leasehold interest or any part thereof upon
execution, attachment or other process or law, or (4) if Tenant
shall make an assignment of its property for the benefit of
creditors, or (5) if Tenant shall be declared bankrupt or
insolvent according to law, or (6) if any bankruptcy or
insolvency proceedings shall be commenced by or against Tenant or
(7) if a receiver, trustee or assignee shall be appointed for the
whole or any part of Tenant's
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property, then in any of said cases, Landlord lawfully may
immediately, or at any time thereafter, and without any further
notice or demand, enter into and upon the demised premises or any
part thereof in the name of the whole, by force or otherwise, and
hold the demised premises as if this lease had not been made, and
expel Tenant and those claiming under it and remove its or their
property (forcibly, if necessary) without being taken or deemed
to be guilty of any manner of trespass (or Landlord may send
written notice to Tenant of the termination of the term of this
lease), and upon entry as aforesaid (or in the event that
Landlord shall send to Tenant notice of termination as above
provided, on the fifth (5th) day next following the date of the
sending of the notice), the term of this lease shall terminate.
Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the
event Landlord terminates this lease as provided in this Article.
13.2 In case of any such termination, Tenant will indemnify
Landlord each month against all loss of rent and all obligations
which Landlord may incur by reason of any such termination
between the time of termination and the expiration of the term of
this lease; or at the election of Landlord, exercised at the time
of the termination or at any time thereafter, Tenant will
indemnify Landlord each month until the exercise of the election
against all loss of rent and other obligations which Landlord may
incur by reason of such termination during the period between the
time of the termination and the exercise of the election, and
upon the exercise of the election Tenant will pay to Landlord as
damages such amount as at the time of the exercise of the
election represents the amount by which the rental value of the
demised premises for the period from the exercise of the election
until the expiration of the term shall be less than the amount of
rent and other payments provided herein to be paid by Tenant to
Landlord during said period. In any event, Tenant shall indemnify
the Landlord against all loss of rent and all obligations which
Landlord may incur by reason of Tenant's default hereunder prior
to such entry or termination, whichever shall first occur. It is
understood and agreed that at the time of the termination or at
any time thereafter Landlord may rent the demised premises, and
for a term which may expire after the expiration of the term of
this lease, without releasing Tenant from any liability
whatsoever, that Tenant shall be liable for any expenses incurred
by Landlord in connection with obtaining
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possession of the demised premises, with removing from the
demised premises property of Tenant and person claiming under it
(including warehouse charges), with putting the demised premises
into good condition for reletting, and with any reletting,
including but without limitation, reasonable attorneys' fees and
brokers' fees, and that any monies collected from any reletting
shall be applied first to the foregoing expenses and then to the
payment of rent and all other payments due from Tenant to
Landlord.
14.1 Tenant agrees that upon the request of Landlord it will
subordinate this lease and the lien hereof to the lien of any
present or future mortgage or mortgages upon the demised premises
of any property of which the demised premises are a part,
irrespective of the time of execution or time of recording of any
such mortgage or mortgages; provided that the holder of any such
mortgage shall agree with Tenant that this lease and the rights
of Tenant hereunder shall not be disturbed except in accordance
with the terms of this lease. Tenant agrees that it will upon the
request of Landlord execute, acknowledge and deliver any and all
instruments deemed by Landlord necessary or desirable to give
effect to or notice of such subordination. The word "mortgage" as
used herein includes mortgages, deeds of trust or other similar
instruments and modifications, consolidations, extensions,
renewals, replacements and substitutes thereof. Whether the lien
of any mortgage upon the demised premises or any property of
which the demised premises are a part shall be superior or
subordinate to this lease and the lien hereof, Tenant agrees that
it will, upon request, attorn to the holder of such mortgage or
any one claiming under such holder and their respective
successors and assigns in the event of foreclosure of or similar
action taken under such mortgage.
14.2 After the commencement of the term of this lease and
within five (5) days after written request therefore by Landlord,
Tenant agrees to execute, acknowledge and deliver to Landlord or
to any mortgagee a certificate stating that Tenant has entered
into occupancy of the demised premises in accordance with the
provisions of this lease, that this lease is unmodified and in
full force and effect, that Landlord has performed Landlord's
construction work, that Tenant has no defenses, offsets or
counterclaims against its obligations to pay the minimum rent and
additional rent and any other charges and to perform its other
covenants under this lease (or, if there has been any
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modifications, that the same is in full force and effect as
modified and stating the modifications and, if there are any
defenses, offsets or counterclaims, setting them forth in
reasonable detail), and the dates to which the minimum and
additional rent and other charges have been paid. Any such
statement delivered pursuant to this Section 14.2 may be relied
upon by any prospective purchaser or mortgagee of the demised
premises, or one or more of them, or any prospective assignee of
any such mortgage.
14.3 After receiving notice from Landlord or from any person,
firm or other entity that such person, firm or other entity holds
a mortgage, as hereinbefore defined, which includes the demised
premises as part of the mortgaged premises, no notice from Tenant
to Landlord shall be effective unless and until a copy of the
same is given by certified or registered mail to such holder, and
the curing of any of Landlord's defaults by such holder shall be
treated as performance by Landlord, it being understood and
agreed that such holder shall be afforded a reasonable period of
time after the receipt of such notice in which to effect such
cure.
WAIVER OF 15. Both Landlord and Tenant hereby releases the
SUBROGATION other, to the extent of its insurance coverage, from any and all
liability for any loss or damage caused by fire or any of the
extended coverage casualties or any other casualty insured
against, even if such fire or other casualty shall be brought
about by the fault or negligence of the other party or its
agents, provided, however, this release shall be in force and
effect only with respect to loss or damage occurring during such
time as releasor's policies covering such loss or damage shall
contain a clause to the effect that this release shall not affect
said policies or the right of releasor to recover thereunder, it
being understood and agreed that the waiving party reserves any
rights with respect to any excess loss or injury over the amount
recovered by such insurance. Each of Landlord and Tenant agrees
that its fire and other casualty insurance policies will include
such a clause so long as the same is includable without extra
cost, or if extra cost is chargeable therefor, so long as the
other party pays such extra cost. If extra cost is chargeable
therefor, each party will advise the other thereof and the amount
thereof. The other party at its election, may pay the same, but
shall not be obligated to do so.
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FAILURE OF 16.1 If Tenant shall default in the performance of any
PERFORMANCE agreement or condition in this lease contained on its part to
AND WAIVERS be performed or observed other than an obligation to pay money,
and shall not cure such default within ten (10) days after notice
from Landlord specifying the default (or shall not within said
period commence to cure such default and thereafter prosecute the
curing of such default to completion with due diligence),
Landlord may, at its option, without waiving any claim for
damages for breach of agreement, at any time thereafter cure such
default for the account of Tenant and any amount paid or any
contractual liability incurred by Landlord in so doing shall be
deemed paid or incurred for the account of Tenant and Tenant
agrees to reimburse Landlord therefor or save Landlord harmless
therefrom; provided that Landlord may cure any such default as
aforesaid prior to the expiration of said waiting period but
after notice to Tenant, if the curing of such default prior to
the expiration of said waiting period is reasonably necessary to
protect the real estate or Landlord's interest therein, or to
prevent injury or damage to persons or property. All amounts so
paid by Landlord, all contractual liabilities so incurred by
Landlord and all necessary incidental costs and expenses in
connection with the performance of any such act by Landlord shall
be deemed to be additional rent under this lease and shall be
payable by Tenant to Landlord immediately on demand.
16.2 Failure of either party to complain of any act or omission
on the part of the other party, no matter how long the same may
continue, shall not be deemed to be a waiver by said party of any
of its rights hereunder. No waiver by either party at any time,
express or implied, of any breach of any provision of this lease
shall be deemed a waiver of a breach of any other provision of
this lease or a consent to any subsequent breach of the same or
any other provision. If any action by either party shall require
the consent or approval of the other party, the other party's
consent to or approval of such action on any one occasion shall
not be deemed a consent to or approval of said action on any
subsequent occasion or any consent to or approval of any other
action on the same or any subsequent occasion. Any and all rights
and remedies which either party may have under this lease or by
operation of law, either at law or in equity, upon any breach,
shall be distinct, separate and cumulative and shall not be
deemed inconsistent with each other; and no one of them, whether
exercised by said party or not, shall be deemed to be in
exclusion of any other; and any two or more or all of such rights
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and remedies may be exercised at the same time.
BROKERS 17. Tenant hereby represents and warrants to Landlord that,
except to the extent, if any, hereinafter set forth, it has dealt
with no broker in connection with this lease and there are no
brokerage commissions or other finders' fees in connection
herewith. Tenant hereby agrees to hold Landlord harmless from,
and indemnified against, all loss or damage (including, without
limitation, the cost of defending same) arising from any claim by
any broker claiming to have dealt with Tenant.
HOLDING OVER If Tenant or anyone claiming under Tenant shall remain in
possession of the demised premises or any part thereof after the
expiration of the term of this lease without any agreement in
writing between Landlord and Tenant with respect thereto, prior
to acceptance of rent by Landlord, the person remaining in
possession shall be deemed a tenant at sufferance and after
acceptance of rent by Landlord the person remaining in possession
shall be deemed a tenant at will, subject to the provisions of
this lease insofar as the same may be made applicable to a
tenancy at will; provided, however, that if minimum rent shall be
payable during the term of this lease at different rates at
different times, minimum rent during such period as such person
shall continue to hold the demised premises or any part thereof
shall be payable at twice the highest rate payable during the
term hereof.
QUIET 19. Landlord agrees that upon Tenant's paying the rent
ENJOYMENT and performing and observing the agreements, conditions and other
provisions on its part to be performed and observed, Tenant shall
and may peaceably and quietly have, hold and enjoy the demised
premises during the term of this lease without any manner of
hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this lease and any
instruments having a prior lien.
USE 20. Tenant agrees that during the term of this lease the
demised premises will be used and occupied for the following
purposes and for no other purposes without the written consent of
Landlord, which Landlord may withhold at Landlord's sole
discretion: general business offices.
ASSIGNMENT 21. Tenant agrees that it will not assign, mortgage,
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pledge or otherwise encumber this lease or any interest therein,
or sublet the whole or any part of the demised premises without
obtaining on each occasion the written consent of the Landlord,
which Landlord may withhold at Landlord's sole discretion.
DELAYS 22. In any case where either party hereto is required to do any
act, delays caused by or resulting from Act of God, war, civil
commotion, fire or other casualty, labor difficulties, shortages
of labor, materials or equipment, government regulations or other
causes beyond such party's reasonable control shall not be
counted in determining the time during which such work shall be
completed, whether such time be designated by a fixed date, a
fixed time or "a reasonable time." In any case where work is to
be paid for out of insurance proceeds or condemnation awards, due
allowance shall be made, both to the party required to perform
such work and to the party required to make such payment, for
delays in the collection of such proceeds and awards.
NOTICES 23. All notices and other communications authorized or required
hereunder shall be in writing and shall be given by mailing the
same by certified or registered mail, return receipt requested,
postage prepaid. If given to Tenant the same shall be mailed to
Tenant at One Snow Road, Marshfield, Massachusetts 02050, or to
such other person at such other address as Tenant may hereafter
designate by notice to Landlord; and if given to Landlord the
same shall be mailed to Landlord at 366 Moraine Street,
Marshfield, Massachusetts 02050, or to such other person or at
such other address as Landlord may hereafter designate by notice
to Tenant.
DEFINITIONS 24.1 The words "Landlord" and "Tenant" and the
AND INTERPRE- pronouns referring thereto, as used in this lease, shall mean,
TATIONS where the context requires or admits, the persons named herein as
Landlord and as Tenant, respectively, and their respective heirs,
legal representatives, successors and assigns, masculine,
feminine or neuter. Except as hereinafter provided otherwise, the
agreements and conditions in this lease contained on the part of
Landlord to be performed and observed shall be binding upon
Landlord and its heirs, legal representatives, successors and
assigns and shall enure to the benefit of Tenant and its heirs,
legal representatives, successors and assigns; and the agreements
and conditions on the part of Tenant to be performed and observed
shall be binding upon Tenant and its heirs, legal
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representatives, successors and assigns and shall enure to the
benefit of Landlord and its heirs, legal representatives,
successors and assigns. The word "Landlord", as used herein,
means only the owner for the time being of Landlord's interest in
this lease, that is, in the event of any transfer of Landlord's
interest in this lease the transferor shall cease to be liable,
and shall be released from all liability for the performance or
observance of any agreements or conditions on the part of
Landlord to be performed or observed subsequent to the time of
said transfer, it being understood and agreed that from and after
said transfer the transferee shall be liable for the performance
and observance of said agreements and conditions.
24.2 It is agreed that if any provisions of this lease shall be
determined to be void by any court of competent jurisdiction then
such determination shall not affect any other provisions of this
lease, all of which other provisions shall remain in full force
and effect; and it is the intention of the parties hereto that if
any provision of this lease is capable of two constructions, one
of which would render the provision void and the other which
would render the provision valid, then the provision shall have
the meaning which renders it valid.
24.3 This instrument contains the entire and only agreement
between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have
any force or effect. This lease shall not be modified in any way
except by a writing subscribed by both parties.
24.4 Wherever in this lease provision is made for the doing of
any act by any person it is understood and agreed that said act
shall be done by such person at its own cost and expense unless a
contrary intent is expressed.
24.5 If all or any part of Landlord's interest in this lease
shall be held by a trust, no trustee, shareholder or beneficiary
of said trust shall be personally liable for any of the
covenants, or agreements, express or implied, hereunder.
Landlord's covenants and agreements shall be binding upon the
trustees of said trust as trustees as aforesaid and not
individually and upon the trust estate. Without limiting the
generality of the foregoing, and whether or not all or any part
of Landlord's interest in this lease shall be held by a trust,
Tenant specifically agrees to look solely
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to Landlord's interest in the demised premises for recovery of
any judgment from Landlord; it being specifically agreed that
Landlord shall never otherwise be personally liable for any such
judgment.
24.6 Wherever in this lease provision is made that either party
shall have the right to terminate this lease, then, unless in
said provision it is expressly provided otherwise, neither party
hereto shall thereafter have any claim against the other under
this lease or on account of the termination thereof.
24.7 The marginal notes used as headings for the various
articles of this lease are used only as a matter of convenience
for reference, and are not to be considered a part of this lease
or to be used in determining the intent of the parties of this
lease. Whenever in this lease any portion, or part thereof, has
been stricken out, whether or not any provision has been
substituted therefor, this lease shall be read and construed as
if the words so stricken out were never included herein and no
implication shall be drawn from the words so stricken out.
24.8 This lease shall be governed by the laws of the
Commonwealth of Massachusetts.
TENANTS 25. Tenant agrees that during the term of this lease:
COVENANTS no nuisance will be permitted on or about the demised premises;
nothing will be done upon or about the demised premises which
shall be unlawful, improper, noisy or offensive or contrary to
any public authority or insurance inspection or rating bureau or
similar organization having jurisdiction, or which may be
injurious to or adversely affect the quality or tone of the
demised premises or any abutting or adjacent property of the
Landlord; the demised premises will not be overloaded, damaged or
defaced; Tenant will not drill or make any holes in the stone or
brickwork; Tenant will not permit the omission of any
objectionable noise or odor from the demised premises; no placard
or sign shall be placed on the exterior of the Building or
elsewhere on the demised premises without the prior written
consent of Landlord; Tenant will procure all licenses and permits
which may be required for any use made of the demised premises;
and all waste and refuse will be stored upon and removed from the
demised premises in accordance with all applicable governmental
codes and regulations. Tenant will not do, or suffer to be done,
or keep, or suffer to be kept, or omit to
25
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do anything in, upon or about the demised premises which may
prevent the obtaining of any insurance on the demised premises or
on any property therein, including, but without limitation, fire,
extended coverage and public liability insurance, or which may
make void or voidable any such insurance, or which may create any
extra premiums for, or increase the rate of, any such insurance.
If anything shall be done or kept or omitted to be done in, upon
or about the demised premises which shall create any extra
premiums for, or increase the rate of, any such insurance, Tenant
will pay the increased cost of the same to Landlord upon demand.
EXPANSION 26.1 Subject to all then applicable building and zoning codes
and the requirements of the subdivision restrictions contained in
the deed of the demised premises to Landlord, and provided Tenant
shall not then be in default under this lease, Tenant shall have
the right, exercisable by notice to Landlord, by January 31,
1990, to request that Landlord construct upon the demised
premises an addition (the "Addition") to the Building within the
Expansion Area. The Addition shall contain at least twenty-five
thousand (25,000) square feet. Such notice shall be accompanied
by outline plans and specifications for the construction of the
Addition and information concerning the exact size and location
thereof desired by Tenant. Within one hundred twenty (120) days
after the receipt by Landlord of such notice from Tenant,
Landlord shall obtain from the current holder of the first
mortgage upon the demised premises and alternate financing
sources, estimates of terms which would be granted to finance the
Addition, shall prepare detailed plans and detailed
specifications for the construction of the Addition, shall use
its reasonable efforts to obtain two competitive bids from
contractors of Landlord's choice for construction of the Addition
and shall present the same to Tenant; provided, however, that
Landlord shall have the right to select the contractor to be used
for construction of the Addition, in Landlord's reasonable
discretion. Landlord agrees to use reasonable efforts to obtain
the lowest possible estimates of such financing terms. If Tenant
shall be unwilling to accept the bid selected by Landlord,
Landlord shall not be obliged to construct the Addition; this
lease shall continue in full force and effect unmodified by the
provision of this Article 26; and Tenant shall reimburse to
Landlord upon being billed therefor for Landlord's reasonable
out-of-pocket expenses incurred in obtaining any such bid of
bids, including but without limitation the cost to Landlord of
preparing said detailed plans
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and detailed specifications in connection therewith as additional
rent under this lease. Tenant shall accept or reject any such bid
within thirty (30) days of its receipt thereof by written notice
to Landlord. If Tenant shall be unwilling to accept such
financing terms, Tenant shall have the right to abandon the
Addition, in which event the provisions of the immediately
preceding sentence shall apply. If Tenant shall accept such bid
and give Landlord notice thereof as aforesaid, then (i) the date
upon which Landlord shall substantially complete construction of
the Addition (substantial completion being defined as in Section
2.1 hereof provided) or (ii) the date that Tenant shall first
commence to utilize the Addition in connection with its business,
whichever shall first occur, shall be known as the "effective
date", and from and after the effective date the Addition shall
constitute a portion of the demised premises and be subject to
and have the benefit of the provisions of this lease, except as
hereinafter provided.
26.2 From and after the effective date the annual rate of
minimum rent payable hereunder shall be increased by an amount
which shall be the Determined Percentage (hereinafter defined) of
the product obtained by multiplying (a) the Financed Amount by
(b) the "new annual constant" (hereinafter defined). The
Determined Percentage shall be: one hundred thirty-five (135%) it
being understood and agreed, however, that 135% is based upon the
assumption that the entity providing such financing will adjust
the annual minimum rent payable with respect to the Addition
downward by an aggregate of 9% to reflect a structural reserve,
management costs and a vacancy factor and will require such
annual minimum rent, as so adjusted downward, to be equal to 123%
or more of new annual constant and that if such entity shall
require a smaller downward adjustment in such annual minimum rent
and/or a lower percentage of coverage with respect to the new
annual constant, the 135% amount provided for in this section
shall be reduced to that percentage which shall satisfy the lower
requirements of such entity. Notwithstanding the provisions of
the previous sentence to the contrary, in no event shall the rent
under this Lease be less on a square foot basis than $15.00 per
square foot per annum, triple net. In no event shall said rent be
less than that currently being paid on a per square foot basis on
the current lease. The Financed Amount shall be the "total cost
of constructing the Addition" (hereinafter defined). The new
annual constant shall be the product obtained by multiplying the
Financed Amount by that percentage which will produce the sum
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of twelve equal monthly installments of principal and interest
(at the rate per annum initially payable under such mortgage
loan) --required to fully liquidate the Financed Amount if one
such installment is paid each month, in arrears, over the longer
of (i) the term of said loan for the Financed Amount, (ii) the
amortization period utilized in such loan for the Financed Amount
to compute the monthly constant payments required to be paid by
the Borrower thereunder or (iii) if such loan shall initially
provide for the payment of interest only, a period equal to the
length of time for which no principal payments are required plus
the amortization period utilized in such loan for the Financed
Amount to compute the monthly constant payments required to be
paid once amortization of principal commences. The loan for the
Financed Amount shall be Landlord's proposed financing for the
total cost of constructing the Addition. The total cost of
constructing the Addition shall be the sum of the cost to
Landlord of all "hard" and "soft" costs of every kind and nature,
direct and indirect, incurred by Landlord in constructing the
Addition, including without limitation, (i) construction work for
the Addition, including but without limitation, site work and
additional utilities and parking areas required therefor paid to
the contractors whose bids were accepted as aforesaid, (ii)
construction interest and loan commitment fees upon money
borrowed to finance construction of the Addition, (iii) insurance
premiums and real estate taxes with respect to the Addition for
any period prior to the effective date, (iv) a reasonable
development fee to Landlord or any affiliate of Landlord, (v)
architect's and engineering fees, relating to the Addition, (vi)
Landlord's attorneys' fees incurred in connection with obtaining
permits and approvals for the Addition, the construction and
architects contract for the Addition and such loan for the
Financed Amount, (vii) fees for permits and approvals in
connection with the Addition; (viii) other direct and indirect
out-of-pocket expenses of Landlord paid by Landlord for the
construction of the Addition and (ix) the Expansion Area Value as
at the effective date.
26.3 It is agreed that, notwithstanding anything in the Lease
to the contrary, the minimum rent payable on account of the
Addition (or any phase thereof) shall never exceed fair market
rent for such Addition (or phase) by more than 10%. If Landlord
or Tenant dispute whether the minimum rent payable on account of
the Addition (or phase) exceeds fair market rent by more than
10%, then either party may submit the matter to arbitration
28
<PAGE>
before a panel of 3 arbitrators chosen by the American
Arbitration Association, Boston office, and the decision of such
arbitrators shall resolve the matter.
26.4 In connection with the construction of the Addition
Landlord may use any adjoining wall as a party or petition wall,
may close any opening in any adjoining wall and may demolish any
part of any adjoining wall of the Building and also tie into the
sewer, water and utility lines of the Building so as to integrate
the Addition and the remainder of the Building.
26.5 Landlord's plans and specifications for the Addition (or
any phase thereof) shall be subject to Tenant's prior approval,
which approval shall not be unreasonably withheld or delayed.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as a sealed instrument as of the day and year first above written.
As Trustee )
of Longwater )
Circle Trust, )
and not )
Individually. )
/s/ Charles A. Pesko, Jr.
------------------------------
Charles A. Pesko, Jr., Trustee
CAP International, Inc.
By: /s/ Charles A. Pesko, Jr.
---------------------------
President
By: /s/ Charles A. Pesko, Jr.
---------------------------
Treasurer
29
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June 21, 1993
Mr. Graham Cooper
Chief Executive Officer
BIS Strategic Decisions
One Longwater Circle
Norwell, Massachusetts 02061
Re: Second Five Year Term of Original Lease
One Longwater Circle
Norwell, Massachusetts
Dear Graham:
The BIS Strategic Decisions lease at One Longwater Circle entered its sixth year
of a ten year term on June 1, 1993. The lease provided for a rent increased
based upon the change in the CPI Index from May 1988 to May 1993. That increase
was the subject of my proposal to BIS back in January to mitigate the rent
increase in return for a lease extension (copy enclosed). We are still open to
discussion of that proposal. In the interim, however, we must institute the
rent increase as provided for in the lease.
The CPI base being utilized is the May, 1988 Urban Consumer's U.S. City Average
(1982-84 = 100). That base is 117.5. The May 1993 CPI Index was 144.2, giving
us a 1.227 multiplier factor (144.2 / 117.5 = 1.227 factor). The current base
rent of $359,075 times 1.227 equals a new rent of $440,669.06 or $36,722.42 per
month.
Please adjust your payment systems accordingly to pay the $36,722.42 amount
beginning July 1, 1993 and remit the $6,799.50 difference due for June, 1993.
We thank you for your cooperation in this matter and look forward to discussing
our January proposal.
Very truly yours,
/s/ Ronald A. Davis
Ronald A. Davis
RAD/ca
cc: Pam Sullivan
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EXHIBIT 10.21
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
CONTENT DISTRIBUTION AGREEMENT
THIS is an AGREEMENT dated as of April 24, 1996 (the
"Effective Date"), by and between DOW JONES & COMPANY, INC., a
Delaware corporation with offices at U.S Highway 1 at Ridge Road,
South Brunswick, New Jersey 08852 ("Dow Jones"), and GIGA
INFORMATION GROUP, INC., a Massachusetts corporation with offices
at One Kendall Square, Building 1400W, Cambridge, MA 02139
("GIGA").
GIGA is developing, and will own and Operate, GIGAWeb, a
subscription-based electronic information service intended for
information technology professionals and further defined on
Exhibit A ("GIGAWeb"). Dow Jones wants to grant rights to GIGA to
distribute certain content provided by Dow Jones to GIGAWeb
subscribers, subject to the terms and conditions set forth in this
Agreement. Therefore, the parties hereby agree as follows:
1. Certain Definitions. When used in this Agreement, the
following terms shall have the following meaning:
(a) Dow Jones Proprietary Content shall mean that content
listed on Exhibit B-1
(b) Dow Jones Non-Proprietary Content shall mean that
content listed on Exhibit B-2.
(c) Dow Jones Information shall mean, collectively, the Dow
Jones Proprietary Content and the Dow Jones Non-Proprietary
Content.
(d) DJN/R shall mean Dow Jones News/Retrieval , Dow Jones'
electronic business and financial information research service.
(e) WSJIE shall mean The Wall Street Journal Interactive
Edition, an electronic edition of The Wall Street Journal accessed
from the World Wide Web portion of the Internet.
(f) Dow Jones Services shall mean DJN/R, WSJIE, and any
other Dow Jones information services that Dow Jones and GIGA
mutually agree to make accessible to GIGAWeb Subscribers through
the DJ Branded Area.
(g) DJ Branded Area shall mean that area within the GIGAWeb
service that contains browsable access to Dow Jones Proprietary
Content and access to the Dow Jones Services.
<PAGE>
(h) GIGAWeb Subscriber shall mean both: (i) an individual
who subscribes directly to GIGAWeb, is legally bound by the
GIGAWeb Subscription Agreement (as defined below), and has access
to any part of the Dow Jones Information or the Dow Jones Services
via GIGAWeb (an "Individual GIGAWeb Subscriber"); and (ii) any
legal entity that enters into a GIGAWeb Subscription Agreement or
other legally binding written or online agreement with GIGA, to
permit individuals directly employed by such legal entity, or for
whom the legal entity otherwise takes direct legal responsibility
for such individuals' actions in connection with the use of
GIGAWeb and the Dow Jones Information or Dow Jones Services, to
access any part of the Dow Jones Information or Dow Jones Services
via GIGAWeb (a "Corporate GIGAWeb Subscriber").
(i) GIGAWeb Subscription Agreement shall mean a written or
online agreement with GIGA permitting access to GIGAWeb, which is
legally binding upon and enforceable against the parties to such
agreement, and is substantially in the form set forth on
Exhibit C, or as amended from time to time subject to Section 6
hereof.
2. Receipt and Distribution of Dow Jones Information by GIGA.
(a) Composite Feed. Dow Jones shall make available from its
South Brunswick, New Jersey facility the Dow Jones Information via
a terrestrial based communications line utilizing x.25
communications protocols (the "Composite Feed"). Dow Jones shall
acquire, install and maintain, at GIGA's expense, all
telecommunications lines, services, and equipment necessary to:
(i) receive the Composite Feed, (ii) process, code and store the
Dow Jones Information on host computers owned by GIGA and located
within the United States (excluding Alaska and Hawaii) (the "GIGA
Host Computers"), and (iii) distribute the Dow Jones Information
to GIGAWeb Subscribers as part of the GIGAWeb service. GIGA shall
acquire, install and maintain, at GIGA's expense, all software and
related technology necessary to receive the Composite Feed;
process, code and store the Dow Jones Information on GIGA Host
Computers; and distribute the Dow Jones Information. GIGA shall
inform Dow Jones of the number and location of all GIGA Host
Computers. GIGA shall not receive the Composite Feed other than at
locations disclosed to Dow Jones. Immediately upon receipt of the
Composite Feed, GIGA shall cause its computer systems to dispose
of, and shall not store, all content contained on the Composite
Feed not included within the definition of Dow Jones Information,
including, without limitation, all content not coded with the
codes set forth on Exhibit B-1.
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(b) Distribution of Dow Jones Information. GIGA shall permit
GIGAWeb Subscribers to access and receive the Dow Jones
Information only as part of GIGAWeb and only by means of direct
telecommunications line access to the GIGA Host Computers through
and using TCP/IP connections, or connection to the GIGA Host
Computer through telecommunications line and through a third party
Internet access provider.
(c) Content Specifications. GIGA shall not store the Dow
Jones Proprietary Content on the GIGA Host Computers for more than
thirty (30) days after receiving such Dow Jones Proprietary
Content. GIGA shall not store the Dow Jones Non-Proprietary
Content on the GIGA Host Computer for more than ninety (90) days
after receiving such Dow Jones Non-Proprietary Content. GIGA
shall use its best efforts to make the Dow Jones Information
available within GIGAWeb within fifteen (15) minutes after
receiving the Dow Jones Information via the Composite Feed. GIGA
shall comply with the Dow Jones Content Specifications, as amended
from time to time by Dow Jones (the "Content Specifications").
GIGA acknowledges receiving the current version of the Content
Specifications, Revision 4.1 of the Dow Jones News Retrieval
Service Broadcast Composite Feed Specification dated March 1,
1996. Dow Jones shall deliver any amendments to the Content
Specifications to GIGA at least 15 business days prior to the
effective date of any such amendment. In the event of an
ambiguity or conflict between a term in this Agreement and a term
in the Content Specifications, the term in this Agreement shall be
deemed to be the term agreed upon by the parties and supersede the
term in the Content Specifications in meaning and interpretation.
(d) Metadata. Dow Jones owns certain proprietary materials
used to code, organize, and permit searching and retrieval of
content, referred to as "Metadata." During the Term, Dow Jones
will deliver to GIGA current versions of the Metadata, which GIGA
may use, subject to the terms and conditions in this Agreement, to
build and create a system facilitating coding, organizing and
searching ("Topic Mapping") of Dow Jones Information and third
party content distributed via GIGAWeb. GIGA shall be responsible
for all costs and expenses incurred in coding and organizing the
Dow Jones Information and third party content using the Metadata.
Dow Jones shall have the right to review and examine the Topic
Mapping being used by GIGA, at Dow Jones' request and expense, but
no more frequently than once each calendar quarter. Should Dow
Jones exercise such right of review and examination, GIGA shall
make available to Dow Jones, at no cost to Dow Jones, individuals
with reasonably sufficient knowledge and understanding of the
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Topic Mapping to explain the coding, organization and search logic
being used.
(e) Dow Jones Telephone Support. At no additional charge to
GIGA, Dow Jones will make available to GIGA personnel a reasonable
amount of time from Dow Jones personnel to provide telephone
advice and assistance concerning connectivity support, GIGA's
development efforts using the Content Specification, Metadata and
Dow Jones toolkit, and general questions regarding the Composite
Feed and Metadata (the "Telephone Support"). Attached as
Exhibit E is the current list of individuals to contact for
Telephone Support, and Dow Jones will update Exhibit E as
necessary during the Term. GIGA shall use reasonable commercial
efforts to diagnose problems using its own personnel. GIGA shall
comply with the "escalation" procedure set forth on Exhibit E when
contacting Dow Jones for Telephone Support. When GIGA initiates a
call or sends an electronic notification to Dow Jones of an
alleged problem with the Composite Feed or server, which GIGA has
used reasonable efforts to diagnose and has reason to believe may
be the responsibility of Dow Jones, Dow Jones will respond as
promptly as possible and will use commercially reasonable efforts
to respond to GIGA within one hour. GIGA shall provide Dow Jones
with sufficient information to enable Dow Jones to reproduce and
diagnose any alleged problems. If Dow Jones determines that the
alleged problem with the Composite Feed or server is not the
responsibility of Dow Jones, Dow Jones may elect to bill GIGA for
any out-of-pocket expenses incurred by Dow Jones, if any.
3. Dow Jones Branded Area and Access to WSJIE and DJN/R.
(a) Editorial and Design Control. Dow Jones shall have sole
control over the design of and editorial content contained in the
DJ Branded Area, subject to Dow Jones' substantial compliance with
reasonable requests from GIGA to make the on-screen appearance of
the DJ Branded Area consistent with the on-screen appearance of
any similar third party branded areas included within GIGAWeb.
Dow Jones and GIGA shall collaborate on the design of the screen
displays for the DJ Branded Area.
(b) DJN/R Access Software. GIGA shall make DJN/R front-end
access software available as a download from the DJ Branded Area
by clicking on an icon designed and approved by Dow Jones, located
within the DJ Branded Area. GIGA shall cause such download, of
DJN/R front-end access software as soon as practicable after Dow
Jones delivers a "golden master" version of such DJN/R front-end
access software to GIGA, but in no event later than ninety days
after delivery of such "golden master." If, during the Term, Dow
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Jones issues an update, enhancement, modification, new release or
new version of such DJN/R access software, GIGA shall use
reasonable commercial efforts to permit GIGAWeb Subscribers to
download such new software as soon as practicable after Dow Jones
delivers a "golden master" version of such update, enhancement,
modification, new release or new version. Dow Jones will permit
each GIGAWeb Subscriber who agrees to comply with the then-current
applicable Subscription Agreement to download one copy of the
DJN/R access software. In order to access DJN/R information, each
user must have a password. Dow Jones shall assign to all GIGAWeb
Subscribers who subscribe to DJN/R pursuant to this Agreement the
access passwords. In order to help track the number of GIGAWeb
Subscribers who are accessing DJN/R using access software
downloaded from GIGAWeb, specific phone numbers for individuals
calling Dow Jones for passwords using software downloaded via
GIGAWeb will be used. Dow Jones shall bill all GIGAWeb
Subscribers directly for all fees and expenses in connection with
subscriptions to DJN/R pursuant to this Agreement. GIGA shall
cooperate with Dow Jones to provide any information necessary to
enable Dow Jones to bill such GIGAWeb Subscribers directly, such
as billing names and addresses.
(c) WSJIE Access Method. GIGA shall permit GIGAWeb
Subscribers to access WSJIE only by means of one or more "links"
from areas within GIGAWeb to WSJIE, currently located at http://
update.wsj.com. GIGA shall make WSJIE available as a separate,
distinct service accessible from the DJ Branded Area by clicking
on icons designed and approved by Dow Jones, to be located within
the DJ Branded Area and elsewhere within GIGAWeb.
(d) WSJIE Subscription and Software License. At no
additional charge to GIGA other than the Base Monthly Fee, and at
no additional charge to a GIGAWeb Subscriber, Dow Jones will
permit each GIGAWeb Subscriber, who has not previously registered
as a subscriber to WSJIE to register to subscribe to WSJIE,
without payment of the then-current, applicable Annual
Subscription Fee, provided that:
(1) such GIGAWeb Subscriber continues to be a GIGAWeb Subscriber
(i.e., once the person or entity ceases to be a GIGAWeb
Subscriber, the free subscription to WSJIE ceases); (2) such
GIGAWeb Subscriber accesses WSJIE through GIGAWeb as a "gateway"
to WSJIE, and does not terminate his or her use of GIGAWeb and
access WSJIE directly or through another third-party service; (3)
such GIGAWeb Subscriber complies at all times with all generally
applicable WSJIE subscription policies and procedures and the
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WSJIE Subscription Agreement; and (4) GIGA is not in breach of a
term of this Agreement.
If a GIGAWeb Subscriber wants to obtain any WSJIE Extended
Services or other items not included within the then-current
Annual Subscription Fee for WSJIE, Dow Jones shall bill such
GIGAWeb Subscriber directly at Dow Jones' then-current domestic or
international rates, as the case may be. GIGA shall cooperate
with Dow Jones to provide any information necessary to enable Dow
Jones to bill such GIGAWeb Subscribers directly.
(e) Subscriber Relations. GIGA shall promptly refer all
inquiries or complaints from GIGAWeb Subscribers regarding WSJIE
or DJN/R to the appropriate Dow Jones customer service
representatives, which shall be provided to GIGA from time to time
by Dow Jones. GIGA shall not attempt to respond to any GIGAWeb
Subscriber's inquiry or complaint regarding DJN/R or WSJIE.
(f) Blocked or Altered Content. GIGA acknowledges and
agrees that access to certain information within WSJIE and/or
DJN/R licensed by Dow Jones from third parties is subject to the
continuing consent of the owner thereof and that if at any time
during the Term such consent is withdrawn, Dow Jones may be
required to block distribution of such content to GIGA, or may
require GIGA to block a GIGAWeb Subscriber's access to such
content within WSJIE or DJN/R. GIGA shall use reasonable
commercial efforts to block a GIGAWeb Subscriber's access to such
content within forty-eight (48) hours after receiving notice from
Dow Jones. GIGA acknowledges that GIGAWeb Subscribers located in
Japan and Saudi Arabia may not subscribe to DJN/R pursuant to the
terms in this Agreement.
4. Grant of Rights.
During the Term, and subject to the terms and conditions in
this Agreement, Dow Jones grants to GIGA a limited, nonexclusive,
nontransferable worldwide right to: (a) receive the Composite Feed
and store the Dow Jones Information on the GIGA Host Computers in
accordance with the terms in this Agreement; (b) use the Metadata
to code, organize, and permit searching and clipping of Dow Jones
Information and third party content appearing within GIGAWeb; (c)
distribute the Dow Jones Information to GIGAWeb Subscribers; and
(d) make the Dow Jones Services available to GIGAWeb Subscribers.
All rights not expressly granted to GIGA in this Agreement are
hereby expressly reserved by Dow Jones.
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5. Restrictions on Rights.
(a) Nonexclusive Rights. The rights granted in this
Agreement are nonexclusive, and no provision of this Agreement
shall be deemed to restrict or limit Dow Jones' right to sell,
deliver or otherwise provide access to the Dow Jones Information
or Dow Jones Services directly or indirectly in any territory or
to any customers, or to permit third parties to do the same.
(b) No Advertising. GIGA shall not, and shall not permit
any third party to, offer, sell, license or otherwise authorize or
include any third party advertisements, promotions and promotional
materials, or similar marketing materials, as part of, or appended
to, or in conjunction with or proximity to, any Dow Jones
Proprietary Content, Dow Jones Service, or the DJ Branded Area.
(c) Blocked or Altered Dow Jones Non-Proprietary Content.
GIGA acknowledges and agrees that distribution of Dow Jones
Non-Proprietary Content, and access to such Dow Jones
Non-Proprietary Content by GIGAWeb Subscribers via GIGAWeb, is
subject to the continuing consent of the owner thereof and that if
at any time during the Term such consent is withdrawn, Dow Jones
may be required to block distribution of such Dow Jones
Non-Proprietary Content to GIGA, or may require GIGA to block a
GIGAWeb Subscriber's access to such Dow Jones Non-Proprietary
Content. GIGA shall use reasonable commercial efforts to block a
GIGAWeb Subscriber's access to such Dow Jones Non-Proprietary
Content within forty-eight (48) hours after receiving notice from
Dow Jones.
(d) Dow Jones as Source of Content. GIGA shall not make
available as part of GIGAWeb any portion of the Dow Jones
Information that GIGA may obtain from a third party source, unless
such portion of the Dow Jones Information: (i) was available to
GIGAWeb Subscribers via GIGAWeb prior to the Effective Date; or
(ii) is no longer included as part of the Dow Jones Information
pursuant to Section 5(c).
(e) [intentionally deleted]
(f) Limitations on Use. Except as specifically set forth in
this Agreement, GIGA shall not use, store, reproduce, manipulate,
distribute, display, perform, or otherwise make available, or
permit any other party (including GIGAWeb Subscribers) to use,
store, reproduce, manipulate, distribute, display, perform, or
otherwise make available, any Dow Jones Information or Dow Jones
Service, without the prior written consent of Dow Jones. GIGA
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shall not alter, amend, add or delete any content or other item or
information in the DJ Branded Area, Dow Jones Services or the Dow
Jones Information, without Dow Jones' prior written consent.
(g) Limitations on Services and Means of Distribution. GIGA
shall not distribute or permit access to any Dow Jones Information
or Dow Jones Services other than through telecommunications lines,
such as, but not limited to, through magnetic disk, optical disc
or tape, CD-ROM, cable, satellite, fm sideband, radio or
television broadcast, wireless digital technologies, or personal
digital assistants. GIGA shall not distribute or permit access to
any Dow Jones Information or Dow Jones Services through any
"gateway" or any online or electronic information service other
than GIGAWeb, such as, but not limited to, America Online, Global
Network Navigator, Microsoft Network, Prodigy, AT&T Interchange,
Europe Online, Telebase System, Inc. or CompuServe.
(h) No Distribution to Anyone Other Than GIGAWeb
Subscribers. GIGA shall not distribute or make available any Dow
Jones Information or Dow Jones Service to any person or entity,
other than a GIGAWeb Subscriber who is legally bound by the terms
of the GIGAWeb Subscription Agreement and the DJ Terms and
Conditions (as defined below). Notwithstanding the foregoing
sentence, during the Term, GIGA may permit up to seventy-five (75)
individuals employed by GIGA to access the Dow Jones Information
via GIGAWeb, solely for the purposes of performing GIGA's
obligations pursuant to this Agreement and to promote licensing of
GIGAWeb, without payment of any additional Base Monthly Fee (as
defined below) for the 75 individuals, provided such individuals
agree to comply with the restrictions on redistribution of Dow
Jones Information and other applicable terms and conditions in the
GIGAWeb Subscription Agreement and DJ Terms and Conditions as if
such individuals were GIGAWeb Subscribers.
(i) Subcontracting. Without Dow Jones' prior written
consent, GIGA shall not transfer, assign, or contract for a third
party to perform, any of GIGA's rights or obligations pursuant to
this Agreement. Dow Jones shall have the right to refuse its
consent to any such transfer, assignment or contract with a third
party until such transferee, assignee or third party agrees in
writing to comply with all of the applicable terms and conditions
in this Agreement in relation to such right or obligation.
6. Dow Jones Terms and Conditions. Notwithstanding anything in
this Agreement to the contrary, GIGA shall cause each GIGAWeb
Subscriber to be legally bound by the Dow Jones Terms and
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<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
Conditions, a current copy of which is attached hereto as Exhibit
D (the "DJ Terms and Conditions"), and shall cause each individual
accessing any Dow Jones Information via GIGAWeb to be legally
bound by the DJ Terms and Conditions through, at a minimum, an
online agreement containing such DJ Terms and Conditions. Prior
to amending or revising the GIGAWeb Subscription Agreement, GIGA
shall deliver a copy of the proposed changes to Dow Jones. Dow
Jones shall have the right to revise the DJ Terms and Conditions
at any time in its sole discretion, and GIGA shall display or
reprint, as the case may be, such revised DJ Terms and Conditions,
so that each existing and new GIGAWeb Subscriber, and each
existing and new individual accessing any Dow Jones Information
via GIGAWeb, will be legally bound thereto. In the event of any
conflict between the GIGAWeb Subscription Agreement and the DJ
Terms and Conditions, the term in the DJ Terms and Conditions
shall control in meaning and interpretation.
7. Proprietary Rights.
(a) Ownership; Copyright and Proprietary Rights Notices.
GIGA acknowledges and agrees that all ownership and proprietary
rights (including, without limitation, copyright) to the Dow Jones
Information and Dow Jones Services are and shall remain the
property of Dow Jones or its licensors. GIGA shall give notice to
GIGAWeb Subscribers of Dow Jones' or its licensors' ownership of
the copyrights to the Dow Jones Information and Dow Jones
Services, in the form in which such copyright or other proprietary
rights notice is sent to GIGA with such Dow Jones Information and
Dow Jones Services, and GIGA shall not remove or alter or fail to
deliver or display any such copyright or other proprietary rights
notice appearing in the Dow Jones Information or Dow Jones
Services.
(b) Infringement. GIGA shall promptly advise Dow Jones of
any possible infringement of which GIGA becomes aware of any of
Dow Jones' trademarks, copyrights, trade secrets or other
proprietary rights related to the Dow Jones Information or Dow
Jones Services, or any use of the Dow Jones Information or Dow
Jones Services in violation of this Agreement, the GIGA
Subscription Agreement or the DJ Terms and Conditions.
8. Fees.
(a) Calculation of Base Monthly Fee. GIGA shall pay Dow
Jones a monthly fee (the "Base Monthly Fee") equal to the greater
of: (i) the ********************************** (as defined below);
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
and (ii) ******************************************** for each
Individual GIGAWeb Subscriber and for each individual who elects
to access any Dow Jones Proprietary Content pursuant to a GIGAWeb
Subscription Agreement with a Corporate GIGAWeb Subscriber.
(b) Definition of [*****] shall be as follows:
(1) During Calendar year 1996:
Calendar Month Dollar Amount per Month
-------------- -----------------------
Months One and Two *******
Month Three *******
Month Four *******
Month Five and Each Additional
Month in 1996 *******
Month One shall be defined as the earlier of: (i) the calendar
month in which the Dow Jones Information is first available for
access on GIGAWeb, or (ii) July, 1996. For example, no matter
when the Dow Jones Information is first available on GIGAWeb, GIGA's
obligation to pay the [*****] for Month One, 1996, shall accrue no
later than July, 1996.
(2) During Calendar year 1997: ******* per month.
(c) DJN/R Fee. During the Term, Dow Jones shall pay GIGA a
fee (the "DJN/R Fee") equal to ***************** of DJN/R Net
Revenues received by Dow Jones from GIGAWeb Subscribers who
subscribe to DJN/R as a result of downloading DJN/R access
software from GIGAWeb and subscribe to DJN/R using a password
obtained by calling the GIGA-specific telephone numbers, provided
that: (1) such GIGAWeb Subscriber continues to be a GIGAWeb
Subscriber (i.e. once the person or entity ceases to be a GIGAWeb
Subscriber, the DJN/R Fee ceases); (2) such GIGAWeb Subscriber is
not an existing DJN/R subscriber accessing DJN/R either directly
or through another third party or third party service; (3) such
GIGAWeb Subscriber is not located in Japan or Saudi Arabia; and
(4) GIGA is not in breach of a term in this Agreement. "DJN/R Net
Revenues" shall mean all amounts billed by Dow Jones to such
subscriber, except for: (i) an amount reasonably accrued for
anticipated bad debt, amounts credited for refunds, and other
billing adjustments made by Dow Jones in the ordinary course of
business; (ii) sales and other taxes or duties billed, if any; and
(iii) any amounts billed to the subscriber as "Special Fees,"
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<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
initial subscription fees, annual subscription fees, connect-time
charges, or similar charges other than "standard component prices"
and "information unit" prices for content.
(d) Timing of Payments. Within thirty (30) days after the
end of each calendar month during the Term, GIGA shall pay Dow Jones:
(i) the [*****]; and (ii) any other amounts incurred and outstanding
which GIGA owes Dow Jones pursuant to this Agreement. On or before each
January 31st, GIGA shall pay Dow Jones any amount by which the Base
Monthly Fee for the previous twelve calendar months exceeded the
Guaranteed Minimum Monthly Payments received by Dow Jones for the
previous twelve calendar months. Within thirty (30) days after the end
of each calendar month during the Term, Dow Jones shall pay GIGA the
DJN/R Fee for such calendar month. There shall be no right of setoff
pursuant to this Agreement.
(e) Subscriber Fees. GIGA shall be solely responsible for
billing and collecting the fees and charges to be imposed on
GIGAWeb Subscribers for access to GIGAWeb or the Dow Jones
Information. Dow Jones shall be solely responsible for billing
and collecting the fees and charges to be imposed on GIGAWeb
Subscribers who subscribe to DJN/R pursuant to this Agreement, or
who subscribe to WSJIE pursuant to this Agreement and incur
additional charges. In addition, each party shall bill and
collect from GIGAWeb Subscribers the respective applicable sales,
use or other taxes for the services for which such party is
responsible for billing, and shall remit to the appropriate
government agency the taxes collected.
(f) Taxes. GIGA shall pay, and shall hold Dow Jones
harmless from, all taxes arising out of or in connection with or
related to the amounts received by GIGA from GIGAWeb Subscribers
or the rights granted to GIGA in this Agreement, and applicable
income taxes in connection with GIGA's receipt of the DJN/R Fee,
but excluding applicable income taxes imposed on Dow Jones in
connection with Dow Jones' receipt of Base Monthly Fees. Dow
Jones shall pay, and shall hold GIGA harmless from, all taxes
arising out of or in connection with or related to the amounts
received by Dow Jones from GIGAWeb Subscribers or the rights
granted to Dow Jones in this Agreement, and applicable income
taxes imposed on Dow Jones in connection with Dow Jones' receipt
of Base Monthly Fees, but excluding applicable income taxes
imposed on GIGA in connection with GIGA's receipt of the DJN/R
Fee.
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(g) Reports. With each monthly payment it makes to Dow
Jones, GIGA shall deliver to Dow Jones a report listing the
current number of GIGAWeb Subscribers, country of the principal
place of business or residence of each individual accessing or
receiving GIGAWeb, and such other information agreed upon by GIGA
and Dow Jones to enable Dow Jones to determine the accuracy of
payments being made by GIGA and amounts Dow Jones owes, if any, to
licensors. With each monthly payment it makes to GIGA, Dow Jones
shall deliver to GIGA a report identifying the names of those
individuals subscribing to DJN/R for whom Dow Jones believes GIGA
is entitled to the DJN/R Fee, and information sufficient for GIGA
to determine the accuracy of payment being made to GIGA. Within
fifteen (15) days after receiving such report, GIGA shall return a
copy of such report to Dow Jones, indicating which individuals
subscribing to DJN/R are no longer GIGAWeb Subscribers and,
therefore, for whom GIGA is no longer entitled to the DJN/R Fee
for such DJN/R subscriber. If Dow Jones does not receive this
report from GIGA within 15 days after delivering such report, Dow
Jones may delay payment of additional DJN/R Fees to GIGA until Dow
Jones receives such report. Any breach of this Section shall be
deemed to be a material breach of this Agreement.
(h) Records. Each party shall maintain complete and
accurate books and records, in accordance with generally accepted
accounting practices, of all matters in connection with its
obligations hereunder ("Records"). Upon at least 30 days' prior
written notice to the other party, each party shall have the right
itself or through its authorized representatives to inspect the
Records during normal business hours, no more than once per year.
All information gained by a party from such inspection will be
kept in strict confidence and will be used solely for the purpose
of verifying compliance with the terms hereof. In the event a
discrepancy is found between payments made and payments owed,
which exceeds five percent (5%), the other party shall promptly
pay all additional amounts due and reimburse such party for its
reasonable costs and expenses incurred in conducting such review
of the Records.
9. Disclaimer of Warranties; Indemnification.
(a) Disclaimer. DOW JONES PROVIDES THE DOW JONES
INFORMATION AND DOW JONES SERVICES "AS IS." DOW JONES DOES NOT
WARRANT THE ACCURACY, TIMELINESS, COMPLETENESS, ADEQUACY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW
JONES INFORMATION OR DOW JONES SERVICES, AND DOW JONES SHALL NOT
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<PAGE>
BE LIABLE TO GIGA OR TO ANY THIRD PARTY IN RESPECT OF ANY ACTUAL
OR ALLEGED INACCURACY, UNTIMELINESS, INADEQUACY, UNMERCHANTABILITY
OR UNFITNESS. DOW JONES HEREBY DISCLAIMS ALL EXPRESS OR IMPLIED
WARRANTIES REGARDING ANY OF THE DOW JONES INFORMATION AND DOW
JONES SERVICES, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. GIGA SHALL
NOT MAKE ANY STATEMENT RESPECTING THE DOW JONES INFORMATION OR DOW
JONES SERVICES THAT IS CONTRADICTORY OR INCONSISTENT WITH THE
FOREGOING STATEMENT OR WITH THE DJ TERMS & CONDITIONS.
(b) Indemnification By Dow Jones. Dow Jones shall indemnify
and hold harmless GIGA against all liabilities, costs and expenses
(including reasonable attorneys' fees) incurred by GIGA that arise
out of any claim asserted by an unaffiliated third party that
involves, relates to or concerns (i) any Dow Jones Information or
Dow Jones Service furnished to GIGAWeb Subscribers pursuant to
this Agreement (other than claims for which Dow Jones may seek
indemnification from GIGA under Section 9(c)); or (ii) any claim
alleging that the Dow Jones Information or Dow Jones Service
infringes any patent, trade secret, copyright or other
intellectual property rights of any third party; provided that
GIGA, upon receipt of a notice of a claim that could result in Dow
Jones indemnifying GIGA pursuant to this subsection, gives prompt
written notice to Dow Jones of the existence of such claim and
permits Dow Jones, if it so requests, either to conduct the
defense of such claim or to participate with GIGA in the defense
thereof and in any settlement negotiations relating thereto;
provided, however, that Dow Jones shall not be required to pay any
settlement amount that it has not approved in advance.
(c) Indemnification by GIGA. GIGA shall indemnify and hold
harmless Dow Jones against all liabilities, costs and expenses
(including reasonable attorneys' fees) incurred by Dow Jones that
arise out of any claim asserted by a third party (including,
without limitation, a GIGAWeb Subscriber or licensor of Dow Jones
Non-Proprietary Content) that involves, relates to or concerns (i)
any distribution or delivery of the Dow Jones Information or Dow
Jones Service in violation of this Agreement; (ii) any use by GIGA
of any Dow Jones Information or Dow Jones Service in violation of
this Agreement; or (iii) any claim alleging that GIGAWeb infringes
any patent, trade secret, copyright or other intellectual property
right of any third party; provided that Dow Jones, upon receipt of
notice of a claim that could result in GIGA indemnifying Dow Jones
pursuant to this subsection, gives prompt written notice to GIGA
of the existence of such claim and permits GIGA, if it so
requests, either to conduct the defense of such claim or to
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<PAGE>
participate with Dow Jones in the defense thereof and in any
settlement negotiations relating thereto; provided, however, that
GIGA shall not be required to pay any settlement amount that it
has not approved in advance.
10. Confidential Information. GIGA and Dow Jones understand and
agree that in the performance of this Agreement each party may
have access to private or confidential information of the other
party, including, but not limited to, trade secrets, marketing and
business plans, and proprietary software, which is designated as
confidential by the disclosing party in writing, whether by letter
or by the use of a proprietary stamp or legend, prior to or at the
time it is disclosed to the other party ("Confidential
Information"). Both parties agree that the terms of this
Agreement shall be deemed Confidential Information owned by the
other party hereto. GIGA agrees that the Metadata shall be deemed
Confidential Information owned by Dow Jones. In addition,
information that is orally disclosed to the other party may
constitute Confidential Information if within 10 days after such
disclosure the disclosing party delivers to the receiving party a
written document describing such Confidential Information and
referencing the place and date of such oral disclosure and the
names of the employees of the party to whom such disclosure was
made. Each party agrees that: (i) all Confidential Information
shall remain the exclusive property of the owner; (ii) it shall
maintain, and shall use prudent methods to cause its employees and
agents to maintain, the confidentiality and secrecy of the
Confidential Information; (iii) it shall not, and shall use
prudent methods to ensure that its employees and agents do not,
copy, publish, disclose to others or use (other than pursuant to
the terms hereof) the Confidential Information; and (iv) it shall
return or destroy all copies of Confidential Information upon
request of the other party. Notwithstanding the foregoing,
Confidential Information shall not include any information to the
extent it (i) is or becomes a part of the public domain through no
act or omission on the part of the receiving party, (ii) is
disclosed to third parties by the disclosing party without
restriction on such third parties, (iii) is in the receiving
party's possession, without actual or constructive knowledge of an
obligation of confidentiality with respect thereto, at or prior to
the time of disclosure under this Agreement, (iv) is disclosed to
the receiving party by a third party having no obligation of
confidentiality with respect thereto, (v) is independently
developed by the receiving party without reference to the
disclosing party's Confidential Information or (vi) is released
from confidential treatment by written consent of the disclosing
party.
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<PAGE>
11. Term and Termination.
(a) Term. The initial term of this Agreement (the "Initial
Term") shall commence on the Effective Date and shall expire on
December 31, 1997, unless terminated earlier pursuant to the terms
set forth below. This Agreement shall automatically be extended
for additional one-year periods upon the terms of Agreement then
in effect at the end of the then-current term (each, a "Renewal
Term") unless either party sends written notice to the other of
its election not to renew at least ninety (90) days prior to the
end of the Initial Term or the then-current Renewal Term, as the
case may be. The "Term" of this Agreement shall mean the Initial
Term and all Renewal Terms.
(b) Default. If either party shall default in the
performance of or compliance with any provision contained in this
Agreement and such default shall not have been cured within 30
days after written notice thereof shall have been given to the
appropriate party, the party giving such notice may then give
further written notice to such other party terminating this
Agreement, in which event this Agreement and all rights granted
hereunder shall terminate on the date specified in such further
notice.
(c) Insolvency. In the event that either party hereto shall
be adjudged insolvent or bankrupt, or upon the institution of any
proceedings by it seeking relief, reorganization or arrangement
under any laws relating to insolvency, or if an involuntary
petition in bankruptcy is filed against such party and said
petition is not discharged within 60 days after such filing, or
upon any assignment for the benefit of its creditors, or upon the
appointment of a receiver, liquidator or trustee of any of its
assets, or upon the liquidation, dissolution or winding up of its
business (an "Event of Bankruptcy"), then the party affected by
any such Event of Bankruptcy shall immediately give notice thereof
to the other party, and the other party at its option may
terminate this Agreement and the rights granted hereunder, upon
written notice.
(d) Change of Control. If there occurs during the Term any
change in the effective ownership or voting control of GIGA or any
merger into or acquisition by any third party of GIGA, or the sale
or transfer of GIGAWeb or all or substantially all of the assets
comprising GIGAWeb to any third party (a "Control Event"), GIGA
shall notify Dow Jones in writing of such Control Event within ten
(10) days after its effectiveness, and
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Dow Jones shall have the right, within thirty (30) days after receipt of such
written notice of such Control Event, to terminate this Agreement upon at least
sixty (60) days notice to GIGA. GIGA may notify Dow Jones in writing of any
proposed Control Event prior to its proposed effectiveness, and Dow Jones shall
within thirty (30) days after receipt of such notice, notify GIGA in writing
whether Dow Jones would exercise its right to terminate this Agreement if such
proposed Control Event were consummated. Dow Jones shall treat any information
regarding any proposed Control Event as Confidential Information.
(e) Effect of Termination. Upon the expiration or termination of this
Agreement for any reason, GIGA shall immediately inhibit all access to the Dow
Jones Information and Dow Jones Services through GIGAWeb and each party, at its
expense, shall promptly return to the other all copies of the other party's
Confidential Information. Immediately upon the expiration or termination of this
Agreement for any reason, GIGA shall cease advertising and promoting the
availability of the Dow Jones Information and Dow Jones Services via GIGAWeb and
shall remove and discontinue all uses of Dow Jones' trade names or trademarks.
Upon the expiration or termination of this Agreement for any reason, GIGA may
continue to use the Metadata for up to thirty (30) days to code, organize, and
permit the searching and retrieval of third party content available through
GIGAWeb, while Dow Jones and GIGA negotiate an agreement for the use of the
Metadata after the termination of this Agreement. If GIGA and Dow Jones are
unable to reach agreement within such thirty day period, GIGA shall immediately
cease all use of the Metadata (and any modifications or derivatives of the
Metadata).
(f) Survival of Certain Provisions. Notwithstanding the termination or
expiration of this Agreement, the rights and obligations in Sections 7, 8(e),
8(f), 8(g), 8(h), 9, 10 and 11 shall survive.
12. Miscellaneous.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be delivered in person, or sent by certified mail,
return receipt requested, overnight courier service, or by facsimile to the
address or facsimile number of the party set forth below, or to such other
addresses or numbers as may be stipulated in writing by the parties pursuant
hereto. Each notice shall be deemed delivered and received on the
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date on which it is officially recorded as delivered by return receipt or
equivalent, or by facsimile confirmation date:
If to Dow Jones: Dow Jones & Company. Inc.
U.S. Highway One at Ridge Road
South Brunswick, New Jersey 08852
Attn.: Executive Director, Content and Distribution
FAX: 609-520-4072
with a copy to: Dow Jones & Company, Inc.
U.S. Highway One at Ridge Road
South Brunswick, New Jersey 08852
Attn.: Legal Department
FAX: 609-520-4021
If to GIGA: Giga Information Group, Inc.
One Kendall Square, Building 1400W
Cambridge, Massachusetts 02139
Attn: President
(c) Promotional Materials. Neither party shall make, publish or distribute
any public announcements, press releases, advertising, marketing or promotional
materials ("Materials") regarding the execution of this Agreement or GIGAWeb or
the Dow Jones Information or Dow Jones Services, that use the other party's
trade names, trademarks, service marks, or logos, without the prior written
consent of the other party, which consent shall not be unreasonably withheld. If
within ten (10) days after delivery of samples of such Material, the receiving
party has not notified the sending party of its disapproval, such Material shall
be deemed approved.
(d) Amendment, Assignment. This Agreement may not be amended except by
written instrument executed by an authorized representative of GIGA and Dow
Jones. Neither party may assign this Agreement, or sublicense, assign or
delegate any right or duty hereunder, by operation of law or otherwise, without
the prior written consent of the other, and any such purported assignment,
delegation or transfer without such prior written consent shall be void. This
Agreement shall be binding upon and shall inure to the benefit of the
undersigned parties and their respective successors and permitted assigns.
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(e) Customer Service. GIGA shall be responsible for providing all customer
service to GIGAWeb Subscribers regarding GIGAWeb (excluding the Dow Jones
Services).
(f) Force Majeure. The time period within which a party to this Agreement
is required to perform any obligation shall be delayed by an amount of time
equal to the delay caused by any event, condition or occurrence beyond the
reasonable control of such party, provided the delayed party provides prompt
written notice of such delay to the other party hereto, and makes reasonable
commercial efforts to end the cause of such delay.
(g) Waiver. All waivers of a term or breach of a term hereunder must be in
writing and signed by the party against whom such waiver is asserted. Failure or
delay by either party to enforce compliance with any term of this Agreement or
pursue any breach hereof shall not constitute a waiver of the term itself, any
other term of this Agreement, or such breach. A written waiver of a breach under
this Agreement shall not be a waiver of any other or subsequent breach.
(h) Separability. If any provision of this Agreement or the application
thereof to any person or circumstances shall to any extent be held to be invalid
or unenforceable, the remainder of the Agreement, or the application of such
provisions to persons or circumstances as to which it is not held to be invalid
or unenforceable, shall not be affected thereby, and each provision shall be
valid and be enforced to the fullest extent permitted by law.
(i) Relationship of the Parties. This Agreement does not and shall not be
deemed to constitute a partnership or joint venture between the parties and
neither party nor any of their respective directors, officers, employees or
agents shall, by virtue of the performance of their obligations under this
Agreement, be deemed to be an agent or employee of the other.
(j) Specific Performance. The parties hereby agree that the terms set
forth in Sections 5(b), 5(e), 5(f) and 5(g) of this Agreement are material terms
of this Agreement, and that, should GIGA breach any obligations set forth in
Section 5(b), 5(e), 5(f) or 5(g) of this Agreement, Dow Jones shall be entitled
to obtain the remedy of specific performance of such obligation, in addition to
and not in lieu of all other rights and remedies available to Dow Jones pursuant
to this Agreement or at law or in equity.
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(k) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, United States, applicable to
contracts wholly made and wholly performed in the State of New York, and without
regard to the principles of conflicts of law under New York law.
(l) Entire Agreement. All Exhibits shall be deemed part of this Agreement
as if set forth in full in the body of this Agreement. This Agreement contains
the final and entire agreement of the parties on the subject matter herein and
supersedes all previous verbal and written statements, negotiations, and
agreements on the subject matter herein.
IN WITNESS WHEREOF, parties have executed this Agreement, through their
respective authorized representatives, as of the Effective Date.
GIGA DOW JONES
GIGA INTERNATIONAL GROUP, INC. DOW JONES & COMPANY, INC.
/s/Ken Marshall /s/Jessica Perry
- ---------------------------- ----------------------------
By: Ken Marshall By: Jessica Perry
Title: President Title: Assistant Director
Date: May 21, 1996 Date: April 24, 1996
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EXHIBIT A
DETAILED DESCRIPTION OF GIGAWeb SERVICE
GigaWeb is Giga Information Group's web-based product portfolio for information
technology (IT) professionals. GigaWeb is both a distribution mechanism and a
product. The product is built around content provided to Giga by its internal
resources of analysts, as well as incremental third party content. The
distribution mechanism is the Internet itself, which Giga Information Group is
relying on for access to its on-line content.
Giga Information Group's target market is varied. It includes: IT Managers
within Global 1000 type companies, Product and Executive Management within the
IT vendor community, Wall Street and market analysts as well as large consulting
firms. It is Giga's intent to reach broad and deep within the user and vendor
communities.
The content for GigaWeb is meant to serve its broad and diverse market. GigaWeb
will include original Giga content in the form of Planning Assumptions and
Catalyst, Questions Answers (CQA's). CQA's are the genesis of original research
from Giga. CQA's often spawn the Planning Assumptions which are the major body
of original research performed by Giga Information Group Analysts.
In addition to CQA's and Planning Assumptions, the service includes the ability
for GigaWeb members to participate in Forums. GigaWeb members can communicate
with other GigaWeb members as well as Giga's research body within a forum
environment. To enhance the usability of the service, GigaWeb users can submit
inquiries to the Knowledge Center. The Knowledge Center is the central
repository for all inquiries within Giga. The web application contains a
tracking system whereas users can track the status of their inquires to the
Knowledge Center.
To provide users with maximum information and exposure, Giga offers the services
of industry experts. ExperNet, a division of Giga Information Group, provides
access to industry experts through GigaWeb. These experts are typically
practitioners, rather than analysts. GigaWeb members can speak to an expert, or
contract consulting services of an expert through GigaWeb.
Finally, Giga offers its members the ability to attend conferences, and
participate in Gigatels and Expertels. Conferences are typically industry events
that Giga members and
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non-members may participate in. Gigatels and Expertels are multi-client, audio
tele-conferences, broadcasted by Giga analysts and experts about a particular
topic. The topics for Gigatels and Expertels, are typically driven by a CQA or
Planning Assumption.
Giga has a direct sales force and a telesales group that sells its services to
its constituents. Typically, Giga receives an annual subscription fee for the
services it provides. ExperNet services may or may not be included with a Giga
subscription. ExperNet services can be sold separately or in conjunction with
Giga subscriptions.
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EXHIBIT B-1
DOW JONES PROPRIETARY CONTENT
1. Dow Jones Online News ("DJON"), a proprietary news service
containing approximately 400 to 500 news stories each business
day, covering corporate America, Washington, Wall Street and
foreign markets, technology, Asian business news, and European
business news, containing the DJON category codes set forth on the
following pages.
2. Stories appearing in the print version of The Wall Street
Journal classified by Dow Jones as within the information
technology industry segments and containing the codes set forth on
the following pages (the "WSJ Information Technology
Information").
Dow Jones reserves the right during the Term to add to, delete
from, or change any aspect of the Dow Jones Proprietary Content or
its coding, with at least ten (10) days prior written notice to
GIGA, provided, however, that following any such change, the
volume and overall content of the Dow Jones Proprietary Content
will remain comparable in breadth and depth of coverage, and the
categories of coding will be replaced with similar categories of
coding.
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Dow Jones Online News
Giganet
The following is a list of all authorized DJON category codes.
These codes will be found in the "Category Code List" part of the
composite feed format data (see Broadcast Composite Feed
------------------------
Specification, page 3-25) in the Product/Service Code area. In
-------------
addition to these codes, there will be Company codes that can be
searched. The Company Code values are the same as the company's
ticker symbol (another list will be supplied on disk with all of
their values).
DJON Code DJON Category/Content Update Frequency
--------- --------------------- ----------------
TOP BUSINESS NEWS
P/DFP Top Business Headlines Throughout the day
P/DHL Headline Only "
P/DBZ Business Financial Summary "
INDUSTRIES
P/DAI Airlines Throughout the day
P/DAU Autos "
P/DBK Banking "
P/DCH Chemicals "
P/DCO Computer Hardware "
P/DCS Computer Software "
P/DCN Construction "
P/DCP Consumer Products "
P/DDE Defense & Aerospace "
P/DEL Electrical Parts & Systems "
P/DES Environmental Services "
P/DFT Food & Tobacco "
P/DHC Health Care "
P/DIG Industrial Goods & Services "
P/DIR Insurance "
P/DIS Investment Services "
P/DLE Leisure "
P/DME Media "
P/DGA Oil & Gas "
P/DPH Pharmaceuticals "
P/DRL Real Estate "
P/DRE Retailing "
P/DSE Semiconductors "
P/DTE Telecommunications "
P/DTR Transportation "
P/DUT Utilities "
-23-
<PAGE>
Economy
P/DEC General Economic Stories "
P/DWV Washington News and Views "
International
P/DAS Asian Update Daily
P/DEU European Update "
P/DAA Asian Focus Weekly
P/DEE European Focus "
Best of Dow Jones
P/DER Careers Weekly
P/DPF Personal Finance "
P/DTH Health "
P/DSB Small Business "
P/DAV Travel "
P/DWF Work & Family "
Markets
U.S. Markets
P/DST U.S. Financial Summary Hourly
P/DSS U.S. Stock Update "
P/DDJ Dow Jones Averages "
Dow Jones Industrial Average
Dow Jones Utilities Average
Dow Jones Transportation Average
Dow Jones Composite Average
P/DMD U.S. Stock Market Index Hourly
NYSE
S&P 100 & 500
NASDAQ Composite
NASDAQ Computer
AMEX Composite
AMEX Major Markets
Russell 2000
P/DBM Bonds 3x
P/DDM Dollar "
P/DCE Currency Prices "
British Pound
Canadian Dollar
Japanese Yen
German Mark
-24-
<PAGE>
ECU
French Franc
Hong Kong dollar
Italian Lire
Dutch Guilder
Mexican Peso
Swiss Franc
Spanish Peseta
P/DGM Precious Metals 3x
P/DCM Commodity Prices "
CRB Index
Crude Oil
Cattle
Hogs
Wheat
Soybeans
Cotton
Orange Juice
Coffee
Sugar
P/DWM ADR Report Closing Comment Daily
P/DRT ADR Trading (list) "
P/DON Money Rates 3x
Prime Rate
Fed Funds Rate
Discount Rate
Labor Rate
3-Month T-Bill
6-Month T-Bill
1-Year Bill
2-Year Bill
5-Year Bill
10-Year Bill
30-Year Bill
Most Actives
P/DNY NYSE Hourly
P/DNA NASDAQ "
P/DEX AMEX "
Market Analysis
P/DHS Hot Stocks Throughout the Day
P/DAC Analysts' Comments "
P/DAR Analysts' Ratings "
P/DSN Wall Street News and Views "
-25-
<PAGE>
International Stocks
P/DSU International Market Summary 6x
P/DWI World Stock Index Daily
P/DTO Toronto "
P/DMC Mexico City "
P/DLO London "
P/DFR Frankfurt "
P/DHK Hong Kong "
P/DTK Tokyo "
P/DSI International Stock Indexes 3x
Toronto
Mexico City
London
Frankfurt
Paris
Hong Kong
Tokyo
Singapore
Sydney
P/DAD ADR Report Closing Comment Daily
P/DDR ADR Trading (list) "
-26-
<PAGE>
WSJ CODE WSJ CATEGORY/CODE
Technology-Specific Codes for
The Domestic Wall Street Journal
J/PTK Personal Technology Column
J/TCH Technology Page
N/ITP Information Technology and Policy
N/SCN Science and Technology
N/IAS Interactive and Online Services
N/NET Internet
The following 11 industries are part of the
technology market sector:
I/MDV Advanced Technology Medical Devices
I/BTC Biotechnology
I/CMT Communications Technology
I/ITC Industrial Technology
I/MTC Medical and Biological Technology
I/ARO Aerospace and Defense
I/CPR Computers
I/DTC Diversified Technology
I/OFF Office Equipment
I/SEM Semiconductors
I/SOF Software
<PAGE>
EXHIBIT B-2
DOW JONES NON-PROPRIETARY CONTENT
1. PR Newswire
2. Business Wire
3. Canada NewsWire
<PAGE>
EXHIBIT C
GIGAWeb Subscription Agreement
<PAGE>
Contract No:
------------
Customer No:
------------
Dated:
------------
MASTERS TERMS AND CONDITIONS
----------------------------
This agreement (the "Agreement") is entered into by and
between Giga Information Group, Inc., a Delaware corporation
("Giga"), and _______________ ("Customer"). From time to time the
Customer may purchase or subscribe for services or materials from
Giga and its subsidiaries. The services so purchased (the
"Services") may be provided by Giga or by one or more third
parties, and may include access to databases and on-line networks,
research, administrative and inquiry support, advisory services,
conferences, referral services and knowledge networking services.
The materials so purchased (the "Materials") may include articles,
reports, responses to inquiries (including oral, written and
electronic responses), data, user documentation and other work-
product. Any such purchase or subscription will be evidenced by a
written instrument signed by both Customer and Giga (an "Order
Form") identifying the Materials or Services to be delivered, the
pricing terms and any other term specific to the transaction. In
connection with any Services or Materials, Giga may license
software to the Customer (the "Software"), which may include
software developed or owned by Giga, or software licensed from
third parties. The Materials and Services may be delivered (i)
through the Internet or other on-line vehicles, including
information or communications networks or services operated or
maintained by Giga ("Giga Networks"), (ii) orally (over telephone
or videophone, at conferences, in person or otherwise), (iii) in
written form and/or (iv) through other delivery vehicles. Any
such purchase, subscription or license by Customer, and the
Customer's use of the Services, Materials and Software, shall be
subject to the terms and conditions of this Agreement and any
applicable Order Form and to such disclaimers and restrictions on
use that may be published by Giga and/or its licensors from time
to time.
1. Designation of Users; Additional Users. Within fifteen
--------------------------------------
(15) days of delivery of an Order Form to Giga, the Customer shall
advise Giga in writing or electronically of the names and business
addresses of its employees whom it desires to have access to the
Services or Materials purchased (the "Users"). All Users must (i)
be employees of the Customer, (ii) be employed by the same
division and legal entity and (iii) have their primary business
<PAGE>
location in the same Site. As used herein, the term "Site" means
any one building, or group of geographically adjacent buildings,
in which Customer conducts operations. Customer agrees to provide
a copy of this Agreement to its Users upon their request, and to
require and be responsible for their compliance with the terms
hereof. Customer may designate additional Users at any time upon
payment of the then applicable fee. The Customer shall be
entitled to substitute new Users for Users previously identified
in the event of a material change in the prior User's employment
status or responsibilities, or otherwise with the prior consent of
Giga (confirmed by Giga in writing or electronically).
2. Licenses. If Customer receives Software from or through
--------
Giga (including by downloading), Customer's Users shall have,
subject to the terms and conditions of this Agreement and payment
of the applicable fees therefor, a revocable, non-transferable,
non-sublicensable, non-exclusive license for the Term (as defined
in Section 13) to use the Software for the sole purpose of
obtaining and accessing information, and communicating with Giga
and third parties, through the Services in accordance with this
Agreement. If any such Software is licensed to Giga by a third
party, in addition to the foregoing license, the Customer agrees
to be bound by and to comply with the terms of the license to
Giga.
3. Use Restrictions.
----------------
(a) General Use Restrictions. The Services, Materials
------------------------
and Software are for Customer's internal use only and may not be
disclosed, disseminated or distributed to any other party.
Customer agrees not to (i) reverse engineer, decompile,
disassemble, translate, convert or attempt to derive the source
code of the Software; (ii) circumvent any encryption or gain
access to Materials for which it has not been expressly granted
the appropriate rights to access by Giga and any other party
specified with respect thereto; (iii) use Giga's name or
trademarks (or those of its subsidiaries, licensors or third party
information providers) or any excerpts from the Services or
Materials in the promotion of its business, products or service
without prior written consents; (iv) alter, modify or adapt the
Materials or Software, including translating, decompiling or
creating derivative works; (v) use any Services, or any network,
system or World Wide Web site provided or maintained by Giga in a
manner that jeopardizes or threatens to jeopardize the integrity
thereof or interferes or threatens to interfere with its or other
persons' privacy or proprietary rights or others' use of Giga's
-2-
<PAGE>
services or any Giga Network; (vi) use the Services or Materials
as a component or basis for a database or information product or
service offered for commercial sale or distribution outside of
Customer's organization; (vii) use the Services or Materials for
the purpose of, or as a basis for, making investment decisions or
recommendations with respect to securities of any company; or
(viii) use the Services, Materials or Software in any manner which
violates this Agreement or any applicable laws (including, but not
limited to, any laws relating to copyrights, trademarks, trade
secrets or libel). In addition, the use of any Software shall be
governed by any software license agreement accompanying such
Software.
(b) Rules of Use. Access to and use of the Services,
------------
Materials, Giga Networks and Software are subject to any rules or
use or restrictions that may be made available electronically or
delivered in writing to Customer or the Users (the "Rules of
Use"). Such Rules of Use may be amended from time to time by Giga
without prior notice, and are incorporated herein by reference.
Customer and each User shall agree to be bound by and to observe
the Rules of Use. Customer shall be responsible for Users'
compliance with the Rules of Use.
(c) Reproduction; Access to Copies. Except as
------------------------------
permitted in the following sentence, Customer may not, without the
prior written or electronic consent of Giga, copy, download, post,
reproduce, modify, retransmit, rent, license, lease or distribute,
or create derivative works of, any of the Services, Materials or
Software in any form or by any means, in whole or in part,
including but not limited to information storage and retrieval
systems, recordings and retransmittals, use in any bulletin board,
home page or similar arrangement or public display or any computer
or communications network to which persons other than Users have
access. The Customer shall, however, be permitted, in the
ordinary course of its business, to make on or more written copies
of any Materials for personal use only by its employees if (i) the
Materials so copied represent an insubstantial portion of the
Materials provided to Customer taken as a whole, (ii) such copying
is not systematic and regular, (iii) such copying does not provide
any person who is not a User with a substantial substitute for the
rights of a User or for the purchase of or subscription to a
service or product offered by Giga or one of its information
providers, (iv) such copied Materials retain any and all copyright
notices, trademark legends and other proprietary rights notices,
(v) any such copies are kept and used only at the same Site, (vi)
such Materials do not include a notice prohibiting copying, and
-3-
<PAGE>
(vii) any person to whom any such copies are provided complies
with, and uses them only in accordance with, the terms of this
Agreement and the Rules of Use as if such person were a User.
Such copies may not be further reproduced or distributed to any
party in any manner or form. Reprints of Materials may be ordered
from Giga at Giga's then-current rates.
(d) Customer Information and Materials. Customer
----------------------------------
represents and agrees that any information, content or other
materials provided or transmitted by Customer to Giga or any of
its customers, licensees, licensors or third party information
providers or entered or uploaded by Customer onto any Giga Network
or other database, World Wide Web site, or other computer system
or network established or used in connection with the Services and
Materials will not (i) violate any local, state, federal or other
law or regulation, (ii) contain any libelous, defamatory,
disparaging, pornographic or obscene materials, (iii) contain, or
introduce to any system or database of Giga or any of its
customers, licensors or third party information providers, any
virus or similar destructive programs, codes, routines or
algorithms or other materials that will interfere with use of such
databases, systems or networks or will cause any system, network
or database to become erased, contaminated, inoperable or
otherwise incapable or being used in the manner in which they were
used prior to introduction of such materials (collectively
"Viruses"), (iv) be inaccurate or misleading, (v) infringe any
copyright, trademark or other proprietary right of any person or
(vi) give rise to any civil liability. Subject to Section 15
hereof, Customer hereby grants Giga a worldwide, non-exclusive,
perpetual, fully-paid, royalty-free right and license to use,
reproduce, disclose, modify, distribute, translate, and publicly
perform and display and otherwise fully exploit such materials,
content and information, and to incorporate them in other works,
in any form, media or technology.
4. Access to Services and Materials; Support.
-----------------------------------------
(a) Hardware and Software. Customer shall be
---------------------
responsible for providing all computer, telephone and other access
or communications equipment, hardware and software (including any
World Wide Web browser software or workgroup software) necessary
to access the Services and any Giga Network, and any installation,
maintenance, and performance thereof. Customer agrees that it
will only use computer systems employing reasonable means to check
for and prevent (i) the spread of Viruses and (ii) use or access
by unauthorized persons.
-4-
<PAGE>
(b) User Codes and Passwords. Giga will assign
------------------------
Customer and the Users with such password(s), user code(s),
number(s) or other special identifying or system features
(collectively "User Codes") as it may deem appropriate to ensure
access to the Services and any Giga Network and to limit access to
the Services and any Giga Network to the Users. Customer shall
take appropriate steps to protect the confidentiality of such User
Codes and to ensure that only Users access the Services and the
Materials and any Giga Network except as expressly permitted by
Section 3(c). Customer shall not provide access, without Giga's
prior express approval or as expressly permitted by Section 3(c),
to any Giga Network or to any Materials or Services that are
delivered in electronic form to any person to whom Giga has not
assigned a User Code authorizing such access. Customer shall be
responsible for charges or damages incurred due to unauthorized
access or use of any Services, Materials or Giga Network by any
person unless (i) Giga is notified in writing that a User Code
provided to Customer by Giga has been lost or obtained by an
unauthorized party and (ii) such charges or damages are due to
Giga's failure to cancel the User Code.
(c) Support. Giga will provide telephone and on-line
-------
support during its normal business hours to respond to Customer's
reasonable inquiries concerning the use of any Services and
Materials purchased by Customer and any Giga Network which the
Users may be authorized to access.
5. Changes, Enhancements and Improvements. Giga shall have
--------------------------------------
the right to make changes in the Services, the Materials, any Giga
Network, and the Software, including, without limitation,
scheduled hours of operation, access periods and levels, User
identification procedures and types of equipment and protocols
required or used in providing or accessing the Services, provided,
that if Giga shall materially change the level or nature of
Services to be provided to Customer (other than for breach of any
of Customer's obligations hereunder), (i) Giga shall notify
Customer thereof in writing or through electronic or on-line
media, and (ii) such change must be generally applicable to all of
Giga's customers purchasing similar Services on similar terms.
6. Payment. The purchase price or fee set forth in any
-------
Order Form for any Services or Materials purchased by Customer
shall be due and payable within thirty (30) days of invoice by
Giga. Customer shall be solely responsible for any additional
fees or charges incurred by Customer and/or Customer's Users in
connection with use of Services, Materials and Software not
included in such fees paid by Customer, including any fees based
-5-
<PAGE>
on levels of usage of the applicable Service, and any telephone or
other charges associated with connecting to a Giga Network. All
invoiced amounts are payable in U.S. dollars upon receipt. Any
unpaid amounts shall bear interest at the lesser of 1.5% per month
or the maximum rate allowed by law. Customer understands that
Giga is not obligated to provide any refunds for unused Services.
7. Audit and Inspection. Customer shall provide Giga with
--------------------
such information and access to Customer's facilities and records
as reasonably requested by Giga in order to verify or audit
compliance with the terms of this Agreement.
8. Proprietary Rights.
------------------
(a) Customer agrees that all Services, Materials and
Software are the sole and exclusive property of Giga and/or its
licensors and independent third party information providers and
agrees not to infringe or violate its or their copyrights and
other proprietary rights therein. Ownership of all copyrights and
other proprietary rights in the Materials and Software are
retained by Giga and its licensors and information providers.
Except as expressly provided herein, Giga does not convey and
Customer does not obtain any right in the Services, Materials,
Software or any data or materials utilized or provided by Giga in
the performance of this Agreement. All rights not granted
hereunder are expressly reserved to Giga. Without limiting the
foregoing, Giga and it licensors and third party information
providers retain all rights in all of their respective trademarks,
trade names and service marks (collectively, "Trademarks").
Customer shall have no right to use any Trademarks.
(b) Customer shall take all necessary action, whether
by instruction, agreement or otherwise, to restrict, control, and
limit the use of and access to the Services, Materials and
Software to those uses expressly permitted hereunder and shall
protect and secure the Services, Materials and Software, and all
portions thereof, to prevent unauthorized copying, transfer or
use.
(c) Customer acknowledges that unauthorized copying,
transfer or use may cause Giga and/or its licensors and third
party information providers irreparable injury that cannot be
adequately compensated for by means of monetary damages. It is
therefore agreed that any breach hereof by Customer may be
enforced by any of such persons, and may be enforced by equitable
relief in addition to any other rights and remedies that may be
available.
-6-
<PAGE>
9. Warranty Disclaimer. ALL SERVICES, MATERIALS AND
-------------------
SOFTWARE, AND ACCESS TO ANY GIGA NETWORKS, ARE PROVIDED ON AN "AS
IS," "AS AVAILABLE" BASIS. GIGA AND ITS LICENSORS AND THIRD PARTY
INFORMATION PROVIDERS EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS
OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,
ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND WARRANTIES AS TO NONINFRINGEMENT,
ACCURACY, COMPLETENESS OR ADEQUACY OF INFORMATION. NO
COMMUNICATION OF GIGA OR ANY OF ITS EMPLOYEES, LICENSORS OR THIRD
PARTY INFORMATION PROVIDERS SHALL CREATE ANY WARRANTY.
THE SERVICES AND MATERIALS ARE INTENDED SOLELY AS A RESEARCH
AND INFORMATION TOOL AND MAY REFLECT ONE OR A LIMITED NUMBER OF
PERSPECTIVES THAT MAY NOT REPRESENT PREVAILING OPINIONS, AND ARE
NOT MEANT AS SPECIFIC GUIDES TO ACTION. THE SERVICES AND
MATERIALS SHOULD NOT BE RELIED ON AS A SOLE BASIS FOR DECISION-
MAKING. ALL MATERIALS SPEAK AS OF THE DATE OF PUBLICATION AND
GIGA DOES NOT UNDERTAKE TO ADVISE CUSTOMER OF ANY CHANGE IN THE
INFORMATION OR VIEWS CONTAINED THEREIN.
CUSTOMER UNDERSTANDS THAT MATERIALS AND SERVICES MAY BE
PROVIDED BY, OR MAY INCLUDE OR INCORPORATE INFORMATION OR
MATERIALS PROVIDED BY, THIRD PARTIES. ALTHOUGH GIGA MAY AUTHORIZE
OR RECRUIT THIRD PARTIES TO PROVIDE INFORMATION, MATERIALS OR
SERVICES, MAY REFER CUSTOMER OR USERS TO THIRD PARTIES AND MAY
PROVIDE THIRD PARTIES MATERIALS OR SERVICES TO CUSTOMER OR USERS,
GIGA DOES NOT CONTROL THE CONTENT OR QUALITY OF INFORMATION,
MATERIALS AND SERVICES PRODUCED OR PROVIDED BY SUCH THIRD PARTIES.
GIGA MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY,
COMPLETENESS OR TIMELINESS OF MATERIALS OR INFORMATION PROVIDED BY
THIRD PARTIES, OR WHETHER THEY MAINTAIN THE LEVEL OF SKILL
REPRESENTED BY THEM. GIGA MAKES NO REPRESENTATIONS OR WARRANTIES
AS TO, AND EXPRESSLY DISCLAIMS RESPONSIBILITY FOR, THE
INFORMATION, VIEWS OR OTHER ACTIVITIES OF ANY PERSON OR ENTITY
(OTHER THAN ITS EMPLOYEES WHILE ACTIVE IN THEIR OFFICIAL
CAPACITIES), OR THE CONTENTS OF ANY MATERIALS OR INFORMATION
PROVIDED OR INPUT BY ANY OTHER PERSON.
GIGA AND ITS LICENSORS AND THIRD PARTY INFORMATION PROVIDERS
DO NOT WARRANT THAT ANY MATERIALS, SERVICES, SOFTWARE OR GIGA
NETWORKS WILL MEET CUSTOMER'S NEEDS OR BE FREE FROM ERRORS,
OMISSIONS, DEFECTS OR VIRUSES, OR THAT THE OPERATION THEREOF WILL
BE UNINTERRUPTED.
-7-
<PAGE>
10. Limitation of Liability. GIGA'S AND ITS EMPLOYEES',
-----------------------
LICENSORS' AND THIRD PARTY INFORMATION PROVIDERS' TOTAL LIABILITY
ARISING OUT OF THIS AGREEMENT AND THE SERVICES AND MATERIALS UNDER
ALL THEORIES OF LIABILITY SHALL BE LIMITED, WITH RESPECT TO ANY
PARTICULAR SERVICES OR MATERIALS, TO THE FEE PAID BY CUSTOMER TO
GIGA FOR SUCH SERVICES AND/OR MATERIALS IN THE MOST RECENT ONE-
YEAR PERIOD PRIOR TO THE DATE ON WHICH THE CLAIM FOR DAMAGES IS
FIRST ASSERTED TO GIGA IN WRITING. NEITHER GIGA, ITS LICENSORS
NOR THIRD PARTIES PROVIDING INFORMATION, ANALYSIS OR OTHER INPUT
TO THE SERVICES OR MATERIALS SHALL BE LIABLE FOR CONSEQUENTIAL,
INDIRECT, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES. IN ADDITION,
GIGA SHALL NOT BE LIABLE FOR ANY DAMAGES OCCURRING BY REASON OF
ANY CIRCUMSTANCES BEYOND ITS REASONABLE CONTROL.
OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CUSTOMER
BY SIGNING THIS AGREEMENT WAIVES ANY AND ALL CLAIMS RELATING TO
THE USAGE OF THE SERVICES, MATERIALS OR GIGA NETWORKS, WHETHER
SUCH CLAIMS ARE AGAINST GIGA OR ANY OF ITS LICENSORS OR THIRD
PARTY INFORMATION PROVIDERS.
11. Indemnity. Customer agrees to indemnify and hold Giga
---------
and its licensors harmless from any claim or loss and all
liabilities, costs and expenses (including attorney's fees)
arising as a result of Customer's and Users' use of the Services,
Materials or Software or the materials, information or programs
Customer or Users upload, enter, distribute, transmit or post in
connection with the use of the Services.
12. Responsibility for Submissions by Customer and Third
----------------------------------------------------
Parties; Right of Removal. Customer acknowledges that Giga
-------------------------
assumes no responsibility for the contents of materials posted,
entered, uploaded or otherwise distributed by Customer or any
other persons. Any opinions, advice, statements, Services,
offers, or other information or Materials expressed or made
available by third parties, including third party information
providers, licensors, or any Giga customer or user of Services,
are those of such third party and not of Giga. Giga neither
endorses nor is responsible for the accuracy or reliability of any
opinion, advice or statement made by anyone other than authorized
Giga employee spokespersons while acting in their official
capacities. It is the responsibility of customer to evaluate the
accuracy, completeness or usefulness of any information, opinion,
advice or other Materials or Services available through or from
Giga.
-8-
<PAGE>
Customer agrees that Giga has the right, in its sole
discretion, but not the obligation, to (i) remove, or direct
Customer to remove, any materials posted, entered, uploaded or
otherwise distributed by Customer, (ii) limit, restrict or block
the access to the Services, Materials, Networks and Software of
Customer or any of its users not complying with the Rules of Use
and (iii) review, edit or refuse to post any material or
information submitted for display or posted on the Giga Network.
Giga reserves the right to remove any content that it deems in its
sole discretion to be unacceptable, undesirable or in violation of
the Rules of Use or Section 3(d) above.
13. Term and Cancellation. The term of any Services
---------------------
purchased under this Agreement (the "Term") shall initially be as
set forth in the applicable Order Form for such Services. Unless
the applicable Order Form under which any Services were initially
purchased shall expressly state that such Services are not subject
to automatic renewal, the Term shall automatically renew, unless
notice of cancellation is received at least sixty (60) days prior
to expiration, for subsequent twelve (12) month periods, for the
same level of access to Services and Materials as was provided
during the previous term, unless different Services are set forth
in an updated Order Form or written notice from Customer (as
provided in Section 16(h)) received by Giga at least sixty (60)
days prior to termination. The fee for such Services and
Materials upon any such renewal shall be Giga's then current
standard rates for comparable services for a comparable duration.
Such renewal will not be deemed to extend the availability of any
credits for Services which by their terms have a limited duration.
14. Termination.
-----------
(a) Termination by Customer. This Agreement may be
-----------------------
terminated by Customer prior to its scheduled expiration as to any
one or more Services or as to the entire Agreement at any time.
If Customer elects to terminate this Agreement or any Service
following a breach of any term of this Agreement by Giga, and Giga
has failed to remedy such breach within thirty (30) days following
notice thereof by Customer, Customer shall be entitled to a
prorated refund of those fees previously paid to Giga with respect
thereto based on the remaining period of the Term for which
payment had previously been made to Giga (such refund to be
reduced to the extent Customer has accrued or outstanding
obligations to pay Giga arising under this Agreement or
otherwise). If Customer terminates as to any Services or as to
the entire Agreement for any reason other than pursuant to the
immediately preceding sentence, Customer shall not be entitled to
-9-
<PAGE>
any refund of or credit for fees previously paid and shall be
responsible for all fees accrued prior to the time Giga receives
written notice of Customer's intent to terminate.
(b) Termination by Giga. This Agreement may be
-------------------
terminated by Giga (a) if Customer has breached any term of this
Agreement, the Rules of Use or any Order form and has failed to
remedy such breach within thirty (30) days following notice
thereof; (b) immediately if Customer shall have breached Section 3
hereof; or (c) if the Customer shall have failed to pay any amount
due hereunder within ten (10) days following written demand.
(c) Effect of Termination. Upon the cancellation,
---------------------
termination or expiration of this Agreement or any Service by
either party for any reason whatsoever, Customer shall return to
Giga all written Materials and copies thereof, and shall destroy
all electronic copies of Materials and Software, received in
connection therewith. Upon the request of Giga, Customer shall
certify in writing that Customer has complied with all of the
provisions hereof and has not retained any such Materials or
Software. In the event of termination of this Agreement in its
entirety, Giga shall no longer be obligated to deliver any
materials, or provide any Services purchased by Customer, whether
pursuant to an Order Form or otherwise. In the event of
termination of one or more, but not all, of the Services purchased
by Customer, Giga shall continue to deliver and perform all non-
terminated Services unless a terminated Service was a condition to
Giga's performance of such other Service.
(d) Survival. In addition to any payment obligations
--------
which have accrued hereunder, Sections 3 and 7 through 16 shall
survive the termination or expiration of this Agreement pursuant
to Section 13 or this Section 14.
15. Confidential Information. Giga and Customer each agrees
------------------------
to use reasonable efforts to protect the confidentiality of any
information communicated by one to the other that the
communicating party desires be kept confidential ("Confidential
Information"), provided that such material is clearly marked
confidential (or proceded by a statement that such information is
confidential, if provided in oral form, which statement must be
confirmed in writing by written notice as provided in Section
16(h)). The receiving party shall not be obligated to maintain
the confidentiality of any information not so marked or
identified. "Confidential Information" shall not include
information (a) already lawfully known to or independently
developed by the receiving party without access to or use of the
-10-
<PAGE>
other party's Confidential Information, (b) disclosed in published
materials, (c) generally known to the public, (d) lawfully
obtained from any third party, or (e) required to be disclosed by
law. Notwithstanding the foregoing, no party shall have any
responsibility for the confidentiality of any information posted
by the other party or its employees in a forum that is accessible
by persons other than the Users and Giga's employees, licensors
and third party information providers. The parties obligations
under this Section 15 are in addition to any other obligations
under this Agreement and any Rules of Use.
16. Miscellaneous.
-------------
(a) Taxes. The amounts payable under this Agreement
-----
are in addition to all local, state or federal sales, use, excise
or personal property or other similar taxes or duties, and any
such taxes shall be assumed and paid by the Customer except those
taxes based on the net income of Giga.
(b) Export Restrictions. Customer acknowledges that
-------------------
the Services and Materials constitute technical data, the re-
export of which is subject to restrictions under the Export
Administration Regulations of the U.S. Department of Commerce, the
Customer agrees not to export or re-export outside the U.S. (by
electronic transmission or otherwise) the Services or Materials
except in compliance with these regulations.
(c) Securities Industry. Customer represents that its
-------------------
principal business activities, and the principal business
activities of any affiliate or User covered hereunder, are outside
the "investor market." As used herein, the term "investor market"
shall mean an individual/entity whose principal use of the
Services and/or Materials is for the purpose of making investment
decisions in the securities of companies covered directly or
indirectly by such material.
(d) Relationship of the Parties. For all purposes of
---------------------------
this Agreement each party shall be and act as an independent
contractor and not as partner, joint venturer or agent of the
other and shall not bind or attempt to bind the other to any
contract.
(e) Assignability. This Agreement may not be assigned
-------------
by Customer without the written consent of Giga, which consent in
the case of merger, acquisition or other transfer of substantial
ownership shall not be unreasonably withheld.
-11-
<PAGE>
(f) Arbitration. Any dispute hereunder shall be
-----------
decided by three arbitrators in Boston, Massachusetts or San
Francisco, California under the rules of the American Arbitration
Association. Their decision shall be final and binding, and their
award may be entered in any court having jurisdiction. Giga shall
have the right to obtain injunctive relief in any court of
competent jurisdiction in the event of any breach of this
Agreement. Any proceeding or claim by Customer or any User with
respect to any Service, Materials, Software or Giga Network must
be commenced within one (1) year after such cause of action arose,
or such proceeding or claim shall be barred.
(g) Applicable Law. This Agreement shall be governed
--------------
by and construed in accordance with the laws of the State of
Massachusetts without reference to conflict of law principles.
(h) Notice. All notices and approvals under this
------
Agreement shall be in writing, or by e-mail or fax with confirmation of
delivery, and shall be deemed given when personally delivered, or five
(5) days after being sent by prepaid certified or registered U.S. mail
or upon confirmation of receipt after being sent by commercial
overnight courier service, e-mail or fax, to the address of the party
to be noticed as set forth on the Order Form or such other address as
such party last provided to the other by written notice. All such
notices and approvals delivered to Giga shall be directed to the
attention of the Chief Financial Officer.
(i) Entire Agreement. This Agreement, as amended or
----------------
supplemented by any Order Form and Rules of Use, constitutes the
entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior discussions, documents and
agreements, and shall not be effective until signed by both
parties. No modifications may be made except in a writing signed
by both parties; provided, however, that Customer and the Users
-------- -------
shall be bound by any changes in the Rules of Use which are made
available on-line or delivered in writing from time to time (which
amended Rules of Use shall be deemed incorporated by reference
herein). Any Order Form, confirmation, purchase order or other
document submitted by Customer which purports to vary, or which
conflicts with, this Agreement shall be of no effect unless such
varying terms and conditions are expressly agreed to in writing by
Giga. Notwithstanding the immediately preceding sentence, in the
event of a conflict between the terms of an Order Form executed by
Giga and the Customer and the terms of this Agreement, the terms
of such Order Form shall govern with respect to the Services and
Materials purchased thereunder, but shall not govern in any other
respect.
-12-
<PAGE>
(j) Waiver. The failure of either party to enforce its
------
rights under this Agreement at any time for any period shall not
be construed as a waiver of such rights.
(k) Force Majeure. Except for payment obligations
-------------
hereunder, nonperformance by either party shall be excused to the
extent that performance is rendered impossible by strike, acts of
God, governmental acts or restrictions, failure of suppliers, or
any other reason where failure to perform is beyond the control of
the nonperforming party.
(l) Severability. Any provision of this Agreement that
------------
is unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such unenforceability without invalidating
the remaining provisions hereof, and any unenforceability in any
jurisdiction shall not render unenforceable such provision in any other
jurisdiction.
(m) Publicity. Customer grants Giga permission to use
---------
Customer's name in Giga subscriber or customer lists. Both parties
agree that all other terms and conditions of this Agreement shall be
treated as confidential information of the parties and shall not be
disclosed without the written agreement of the other party.
(n) Third Party Beneficiaries. Giga's licensors and
-------------------------
information providers are intended beneficiaries of this Agreement
and shall be entitled to enforce the provisions of this Agreement
directly and on their own behalf as if they were a party hereto.
(o) Attorney's Fees. In the event either party brings
---------------
any action or proceeding to enforce any right hereunder as a result of
a breach hereof by the other party, the enforcing party shall be
entitled (in addition to any relief awarded in such action) to
reimbursement by the other party of the costs and expenses of its
attorneys.
(p) Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument.
-13-
<PAGE>
IN WITNESS WHEREOF, Customer and Giga have executed and
delivered this Agreement as of the date first written above.
CUSTOMER
By:
-------------------------
Name:
Title:
GIGA INFORMATION GROUP, INC.
By:
-------------------------
Name:
Title:
-14-
<PAGE>
EXHIBIT D
DJ TERMS AND CONDITIONS
[none as of the Effective Date]
-15-
<PAGE>
EXHIBIT E
ESCALATION LIST
-16-
<PAGE>
Dow Jones Online News (DJON)
Escalation List
First Level Support
-------------------
Global Operations Help Desk
(7 days X 24 hours) Coverage............ 609 520-4599
609 520-4492
Critical Problem Escalation
---------------------------
Critical First Level
--------------------
Management Escalation (Mon-Fri 9am - 5pm)
Dan Thomas.............................. Operations Supervisor
609 520-7595
Tim McGlone............................. Production Support Supervisor
609 520-4705
Bob Levine.............................. Operations Manager
609 520-4598
Craig Conlon............................ Network Support Manager
609 520-4714
Critical - Second Level
-----------------------
Management Escalation (Mon-Fri 9am - 5pm)
John Delorenzo.......................... Operations Asst. Director
609 520-4437
Dan Yannarella.......................... Operations Director
609 520-4491
-17-
<PAGE>
EXHIBIT 10.22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
Agreement
between
Giga Information Group, Inc.
and
Peripheral Insight, Inc.
Effective Date: August 1, 1996
<PAGE>
Agreement
between
Giga Information Group, Inc.
and
Peripheral Insight
This Agreement (this "Agreement") is made and entered into as of August 1,
1996 by and between Giga Information Group Inc., a Delaware corporation with
offices at One Longwater Circle, Norwell, MA 02061 ("Giga"), and Peripheral
Insight, Inc., a New Hampshire corporation with offices at 9 Reservoir Street,
Nashua, NH 03060 ("PI").
WITNESSETH:
WHEREAS, Giga develops, markets and publishes continuous information
technology services to a broad range of clients in the field of information
technology, including users of technology, vendors and investors;
WHEREAS, PI has expertise in the segment of information services relating
to computer peripherals and supplies, such as printers, fax machines, scanners,
plotters, copiers, multifunction machines and related supplies (the "Peripherals
and Supplies Field" or the "Field");
WHEREAS, Giga desires to retain PI as an independent contractor to provide
Giga's clients with research and support services with respect to the
Peripherals and Supplies Field, including deliverables including, but not
limited to, written research documents, White Paper documents and market
forecasts (the "Deliverables");
WHEREAS, PI desires to hire certain employees of Giga who have previously
provided Giga's clients such research services in the Field, to continue such
services as employees of PI;
WHEREAS, Giga desires that PI serve as a "Giga Partner," one of a group of
independent companies with whom Giga has entered into a strategic alliance to
provide information services to Giga clients which are complementary to the
services Giga provides directly; and
WHEREAS, in addition to the foregoing, PI desires to serve as a Giga
Partner by providing as an independent contractor to Giga the services described
in this Agreement and by acting as an agent for Giga in expanding Giga's client
base, all on the terms and conditions set forth in this Agreement.
-2-
<PAGE>
NOW, THEREFORE, Giga and PI hereby agree as follows:
1. Services Provided by PI. Giga hereby retains PI to provide ongoing
-----------------------
research and support to current Giga clients (the "Clients") with respect to the
Peripheral and Supplies Field. Such services of PI shall be referred to herein
as "Applicable Giga Advisory Services" or the "Services." It is understood by PI
that the Clients typically have entered into renewable one-year contracts with
Giga (or Giga's predecessor, BIS), and the Services to be provided by PI to the
Clients have previously been provided to the Clients directly by Giga. Many of
the Clients are subscribers to the Giga Advisory Services, which are a
comprehensive set of continuous information technology services which cover
other areas of information technology in addition to the Services to be provided
under the terms of this Agreement by PI. It is intended that the Services
provided to Clients by PI under the terms of this Agreement will be
complementary to other services which will be provided directly by Giga or by
other independent contractors which serve as Giga Partners in related fields of
expertise.
1.1 PI's Status as an Independent Contractor; Employment of Former
--------------------------------------------------------------
Giga Personnel. In providing Services to Clients under this Agreement, PI will
- --------------
serve as an independent contractor and agrees to employ or retain as employees
or subcontractors qualified personnel, including the current Giga employees
listed on Exhibit A attached hereto, each of whom has formerly provided Services
---------
to Clients as Giga employees. PI shall be responsible for the supervision and
quality control of the Services it provides to Clients hereunder.
1.2 Description of PI Deliverables. The Services provided by PI
------------------------------
hereunder will include Deliverables including, but not limited to, written
research documents, White Paper documents, market forecasts and other materials
as determined to be necessary and appropriate by Giga and PI. PI further agrees
to provide telephone inquiry support for Clients based on the guidelines
established, from time to time, by Giga. It is also anticipated that PI shall
provide teleconferences with Clients and prospective clients on a regular basis,
in response to the interest and requirements of Clients.
1.3 Means of Delivery. Giga has developed an Internet delivery
-----------------
channel for its services, known as GigaWeb, which will be made available to PI
for use in PI's delivery of the Services to Clients. PI agrees to use GigaWeb in
the delivery of the Services, in addition to other means of delivery appropriate
to the needs of the Clients, such as printing and furnishing hard copies of
reports and other documents.
1.4 Costs and Expenses of Providing Services. Consistent with its
----------------------------------------
role as an independent contractor, PI shall be responsible for all the costs and
expenses of providing and delivering Services under this Agreement, including
without limitation the following: the wages, benefits and payroll taxes for PI's
employees; all compensation to PI's subcontractors; printing and other physical
preparation of Deliverables; postage and other delivery costs except for the
cost of GigaWeb, which shall be the responsibility of Giga; travel,
entertainment and marketing expenses; legal, accounting and other administrative
expenses; and all income and other taxes relating to PI's business.
-3-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
1.5 Temporary United Kingdom Office Space. Giga shall provide
-------------------------------------
temporary office space and telephone support to PI in Giga's Luton, U.K.
facility through the earlier of (i) the remainder of 1996 or (ii) such earlier
time as Giga vacates such premises in its sole discretion.
1.6 European and United States Knowledge Centers. PI shall establish
--------------------------------------------
and maintain a Knowledge Center in Europe, commencing as of the Effective Date
of this Agreement. The staff of the Knowledge Center shall serve as a first line
of response to Clients, receiving calls for information and advice, answering
administrative questions, and referring technical requests to the appropriate
analysts at Giga or PI. It is anticipated that PI will staff the Knowledge
Center with its own personnel as of the Effective Date, however if PI is not
able to staff the Knowledge Center with its own personnel as of the Effective
Date, Giga agrees for the balance of 1996 to provide Knowledge Center support to
PI for PI's European operations.
1.7 Warranty of Authorship. PI represents and warrants to Giga that
----------------------
the research provided hereunder to Giga by PI and its subcontractors shall be
original writing, not published elsewhere, except for quotes properly attributed
to third parties, and that such research to the best of PI's knowledge shall be
accurate in all respects and contain no misrepresentations.
2. Term. The Services provided by PI under the terms of this Agreement
----
shall commence on August 1, 1996 (the "Effective Date") and shall continue for
the duration of this Agreement, including an initial period of 12 months (the
"Initial Term"), subject to the termination provisions set forth herein. It is
understood that Giga is relying on PI to provide on an ongoing basis the
Services as described herein to Clients commencing on the Effective Date, and PI
agrees to make every effort to satisfy such Clients and to continue and expand
both its client base and the client base of Giga. At the conclusion of the
Initial Term, this Agreement shall be renewed for successive one-year terms
unless terminated by either party pursuant to Section 13.
3. Compensation to PI. PI understands that most Clients are parties to
------------------
contracts with Giga pursuant to the terms of which the Clients prepay Giga on an
annual basis for the provision of continuous information technology services
which Giga makes available to the Clients over the ensuing 12 months. The
revenue received by Giga at the outset of each contract period is referred to by
Giga as the "Deferred Revenue", since it is earned by Giga by providing the
contracted services over the contract period.
3.1 PI Share of Deferred Revenues. For all contracts with Clients in
-----------------------------
effect as of the Effective Date and for which PI provides Services hereunder,
Giga shall pay to PI **** of the portion of the Deferred Revenue attributable to
the provision of Services for the balance of the contract term remaining as of
the Effective Date. A schedule of the existing contracts with Clients, including
the amount of monthly Deferred Revenue earned thereunder, is attached as
Exhibit B.
- ---------
-4-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
3.2 Allocation of Deferred Revenue. In the case of Clients which were
------------------------------
BIS clients prior to the acquisition of BIS by Giga in July 1995, the portion of
the Deferred Revenue attributable to the provision of Services is deemed to be
***. In the case of Clients entering into contracts with Giga subsequent to July
1995, ******* of the Deferred Revenue is deemed to be attributable to the
provision of Services. The allocation of Deferred Revenue for all existing
contracts subject to this Agreement is set forth in Exhibit B.
---------
3.3 Timing of Payment. Giga shall pay PI the compensation provided in
-----------------
this Section 3 on the first business day of each month, beginning with the
Effective Date. For purposes hereof, a "business day" shall be a normal work
day, Monday to Friday, other than a Federal or Massachusetts state legal
holiday.
3.4 New PI Contracts with Giga Clients; Royalty to Giga. At the
---------------------------------------------------
expiration of any contract with a Client that is not continuing to subscribe to
the Applicable Giga Advisory Services, PI shall be free to enter into a new
contract with that party to supply Services to the former Client for PI's own
account and at PI's own expense (a "New Contract"). PI shall give prompt notice
to Giga of all New Contracts under the New Contract, payable to Giga within 30
days of the receipt of payment to PI from the former Client. Such royalty shall
be applicable to the *************** of any New Contract or, if the contract
period is longer than *********************** contract periods. No royalty shall
be payable to Giga with respect to a New Contract entered into by PI with a
party which was not a Client during a period of at least 90 days prior to the
commencement of the New Contract.
3.5 New Giga Advisory Subscriptions; Extension of Giga Contracts.
------------------------------------------------------------
Giga hereby appoints PI as Giga's agent with the authority to market to Clients
and prospective clients subscriptions for Giga Advisory Services or extensions
or renewals of existing subscriptions therefor. Giga will pay PI a commission
for such new or renewed contract equal to *** the incremental Deferred Revenue
for the first year over the previous annual amount (the "Net Annual Value
Increase" or "NAVI") under any such renewed contract or the entire amount of
Deferred Revenue (all of which constitutes NAVI) for a contract with a new
client. This commission shall be in addition to any share of the Deferred
Revenue due to PI under Section 3.1 hereof if PI is providing Services with
respect to such contract. For purposes of PI's service as Giga's agent in
obtaining new business, Giga and PI agree to the following terms:
3.5.1 Sales Support. In order to coordinate Giga's direct
-------------
sales activities with PI's efforts as an agent for Giga, Giga's sales
supervisors shall maintain close contact with PI and shall furnish PI with
brochures, sales support information, rate schedules, contract forms and
conditions and other information and support. PI agrees to coordinate marketing
leads and opportunities with Giga. Giga will provide at its discretion
incentives to its own sales personnel with respect to new and additional
business initiated by PI, in order to encourage a cooperative and coordinated
sales effort.
-5-
<PAGE>
3.5.2 Contract Rates and Documentation. PI agrees to use
--------------------------------
Giga's prescribed forms of contracts, including its master terms and conditions,
when renewing or expanding Giga Advisory Services contracts. PI shall also
coordinate with Giga's supervisory sales staff the current rates to be charged
for such services.
3.6 Client Invoices. New clients and renewal Clients obtained by
---------------
PI for PI's own account may be invoiced directly by PI, and PI shall remit the
appropriate royalty payments to Giga as provided in Section 3.4. Future
contracts entered into for the provision of Giga's new Relevance Services shall
be invoiced by Giga, although PI may be entitled to the receipt of a commission
from Giga (as provided in Section 3.5) for its role as agent of Giga in
obtaining any such contracts.
4. Nature of Relationship between Giga and PI. PI is providing Services
------------------------------------------
under this Agreement as an independent contractor and shall not be considered an
employee, agent (except as expressly provided herein) or representative of Giga
(nor shall PI's employees or subcontractors be considered employees of Giga).
While it is intended that PI shall be identified as a "Giga Partner" (as
described more specifically in Section 4.1 hereof) to indicate the close working
relationship between Giga and PI, this Agreement shall not constitute a legal
partnership between Giga and PI. Neither Giga nor PI shall have any share in the
profits of the other or any liability for the actions of the other except as
specifically provided in this Agreement.
4.1 Nature of PI's Status as a "Giga Partner". PI and certain other
-----------------------------------------
independent firms working closely with Giga shall be authorized by Giga to refer
to themselves as a "Giga Partner." PI agrees, during the term of this Agreement,
to use the term a "Giga Partner" on its brochures, marketing materials,
letterhead, reports and other Deliverables, newsletters, promotional materials
and other similar materials; provided, however, that PI shall provide Giga with
examples of all of its uses of the term a "Giga Partner" (or any other reference
to Giga or use of the Giga name or logo) at least ten (10) business days prior
to PI's initial use thereof, and Giga shall have the right to review and approve
such material in writing prior to its use by PI.
4.2 Transition; Problem Resolution. It is the intent and objective
------------------------------
to ensure a smooth transition in the delivery of Services to Clients, preserving
the good will of Clients and enhancing the business relationship of both Giga
and PI with such Clients. To that end, Giga and PI agree to work together to
resolve conflicts that may arise from time to time and to address any relevant
business issues in a timely and professional manner.
5. Business Development Opportunities. Giga and PI agree to form a
----------------------------------
Planning Group (the "Planning Group") consisting of at least one senior member
of PI and one from Giga to consider and coordinate business development
opportunities beyond those specifically outlined in this Agreement which may be
pursued by Giga and PI. The Planning Group shall communicate by teleconference
on a monthly basis to ensure coordination of business development opportunities
under the general guidelines outlined in this Section 5.
-6-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
5.1 Independent Consulting Businesses of Giga and PI. It is understood
------------------------------------------------
that Giga and PI shall be free to operate independent consulting businesses
outside the scope of the cooperative activities covered by this Agreement,
provided that, in the case of PI, such consulting does not compete with the
areas of expertise covered by Giga as of the Effective Date and does not focus
on high technology businesses. Giga shall have the right to develop new lines of
consulting services independent of PI.
5.2 New Business for Giga Consulting Originated by PI. In its capacity
-------------------------------------------------
as a Giga Partner, PI shall respond in a timely manner to leads from prospects
for custom consulting work within the areas of expertise of Giga Consulting, and
Giga shall pay a commission to PI for originating new consulting work for Giga
and shall provide opportunities for PI to participate in such work, as provided
in this Section 5. It is understood that all such leads shall be forwarded by PI
to Giga Consulting, which will be responsible for pursuing such leads and
structuring consulting projects with the assistance of PI when and to the extent
determined by Giga; provided, however, PI shall not be responsible for
-------- -------
forwarding to Giga Consulting any leads and Giga shall not be responsible for
structuring consulting projects for any projects that in the estimation of PI,
made in good faith, will not result in a fee being paid by the client to Giga
which equals or exceeds **********.
5.3 Commissions for Origination of New Consulting Business. Giga and PI
------------------------------------------------------
shall each pay the other a commission for new consulting business performed by
Giga or PI and originated by the other. Such commission shall be (1) for a new
contract, *** the fee paid by the client to the party performing the consulting
services during the first year of any new contract and (2) for a renewed
contract, the sum of (i) *** of the fee paid by the client to the party
performing the consulting services for the renewal term and (ii) *** of the NAVI
for any expanded business under the renewed contract. Such commission shall be
payable within 30 days after the payment is received from the client.
5.4 Participation by PI in Giga Consulting Engagements. For Giga
--------------------------------------------------
Consulting engagements in the U.S. and France which have been originated by PI
as contemplated in this Section 5, Giga agrees to make available to PI the
opportunity to participate in performing a minimum of *** of the wholesale value
of the project provided that the services are within PI's areas of expertise.
Giga would have the right to perform a minimum of *** of the wholesale value of
the project. It is understood, however, that the *** and *** shares are averages
for the typical month and typical engagement, and the parties agree to cooperate
in coordinating the work in an equitable manner consistent with efficient and
high quality service to clients.
The wholesale value of the project for purposes of this Section 5.4 shall
be *** of the price to the Client (e.g., the wholesale value of a **********
project for a Client would be *******).
Outside of the U.S. and France, Giga agrees to include PI personnel in
consulting projects as appropriate at agreed upon package rates.
-7-
<PAGE>
6. Taxes. PI acknowledges and agrees that it shall report as income
-----
all compensation, including commissions, received from Giga pursuant to this
Agreement. PI also agrees to indemnify and hold Giga harmless from any
obligation to pay any withholding taxes, social security, unemployment or
disability insurance or similar items in connection with any payments made to PI
pursuant to this Agreement .
7. Insurance. PI represents and warrants to Giga that PI maintains
---------
appropriate comprehensive liability, casualty, and workers' compensation
insurance coverage for PI and all of PI's employees, representatives and agents
who perform or will perform duties under this Agreement. PI agrees to provide
Giga with proof of appropriate insurance coverage, if reasonably requested by
Giga.
8. Audit Rights. Both parties shall have the right, upon reasonable
------------
notice, to audit the books and records of the other party as such books and
records pertain to the Services to be performed under the terms of this
Agreement in order to verify the terms of contracts and revenues received by the
audited party.
9. Ownership and Use of Information; License to Giga. All software,
-------------------------------------------------
plans, methodologies, planning or programming documentation, sketches, drawings
models, samples, records, works of authorship or other creative works, ideas,
knowledge or plans, whether written, oral or otherwise expressed, originated and
developed by PI prior to the Effective Date of this Agreement, or furnished to
Giga or any Clients by PI in the performance of its obligations under this
Agreement (the "Information"), shall remain the sole property of PI, except in
those cases where PI has performed specific work on Giga's behalf or on behalf
of a Client under the direction of or assignment from Giga. All Information
shall be disclosed as such in advance to Giga and shall be identified
specifically as such in writing from PI to Giga.
Giga understands and agrees that the entire rights, title and
interest, including any copyrights, in any such Information originated or
developed by PI as part of the performance of the Services shall be the sole
property of PI; however, PI hereby grants a perpetual, royalty-free license to
Giga to use, copy, modify and distribute all Information; provided, however,
-------- -------
when feasible, Giga credits PI as being the owner of the Information. For any
and all such Information described in this paragraph, PI agrees to provide
documentation satisfactory to Giga to assure the license of the Information to
Giga.
Title to all materials or documentation including, but not limited
to, systems specifications, furnished by one party to the other in connection
with the performance of Services contemplated by this Agreement, shall remain
the property of the party furnishing such materials and documentation and,
whenever such materials or documentation are delivered by one party to the
other, the party receiving such materials or documentation shall return the
same forthwith at the owner's request.
-8-
<PAGE>
10. Confidentiality/Disclosure of Information. In order for PI to
-----------------------------------------
render the Services contemplated by this Agreement, Giga or one of its Clients
may need to disclose information to PI that is considered to be secret or
proprietary ("Confidential Information"). PI understands and agrees that unless
such Confidential Information was previously known to PI free of any obligation
to keep it confidential, or unless it has subsequently been made public by Giga
or one of its Clients free of any obligation to keep it confidential, then such
Confidential Information shall be kept confidential by PI and shall be used only
in performing the Services contemplated by this Agreement and may be used for no
other purpose except upon such terms as may be agreed upon between PI and Giga
in writing. PI further agrees to be bound by the terms of any Nondisclosure
Agreement which PI separately executes with Giga and/or one of its Clients.
PI understands and agrees that no information furnished to Giga by PI
under the terms of this Agreement will be Confidential Information unless such
information is identified by PI as such in advance and any limitations on the
use of such information are made a part of this Agreement.
11. Assignment. This Agreement may not be assigned or transferred by
----------
either party without the prior written consent of the other.
12. Restrictions on Solicitation of Employees. PI agrees that it will
-----------------------------------------
not solicit the services of or employ any employees of Giga or its Clients, and
Giga agrees that it will not solicit the services of or employ any employees of
PI for the period beginning with the Effective Date hereof and ending twelve
(12) months after the expiration of this Agreement, unless prior express written
authorization to do so is obtained from the appropriate party or authorization
to do so has been expressly set forth in this Agreement.
13. Termination of Agreement; Limitations on Liability. Either Giga or
--------------------------------------------------
PI may terminate this Agreement for its own convenience and without cause at any
time by giving the other party written notice at least six months (180 days)
prior to the effective date of the termination. Giga's liability to PI in the
event of termination shall not exceed amounts due for services performed prior
to the effective date of the termination. PI's liability to Giga in the event of
termination shall not exceed the amounts received from Giga hereunder.
In addition, if, in Giga's judgment, PI has failed to comply with
its obligations under this Agreement, Giga may elect to give written notice of
such failure to PI, in which case PI shall have a period of 30 days in which to
resolve such failure. If such failure has not been resolved within such period
to Giga's reasonable satisfaction, Giga shall be entitled to terminate this
Agreement on written notice to PI of not less than 30 days. In the event of such
termination, the following terms shall apply:
(a) PI shall be entitled to payments under this Agreement
for its services for the period through the effective date of
termination as full compensation for all its Services hereunder, and
Giga shall not be obligated to make any further payments to PI.
-9-
<PAGE>
(b) PI shall provide Giga with all research data,
analyses, and written material (including completed interview forms,
research contact lists, etc.) gathered and prepared prior to the
effective date of termination;
(c) Giga may at its option (i) continue to research,
publish and market continuous information technology services to the
client base served by PI, or (ii) identify an alternative contractor
to fulfill the outstanding and future client requirements.
(d) Upon the effective date of termination hereunder, PI's
right to act as an agent for Giga with respect to the direct sales
activities conducted on behalf of Giga shall terminate.
14. Identification or Reference to the Other Party or its Related
-------------------------------------------------------------
Parties. The parties hereto agree that no reference shall be made to the other
- -------
party, its management, shareholders or employees, to Giga Partners, or to any
clients, or to their trademarks, service marks, codes, drawings, specifications
or information of a proprietary nature in any advertising or promotional efforts
with respect to activities contemplated by this Agreement without the prior
written authorization of the other party. The parties hereto agree to indemnify
and hold the other harmless against any and all claims (including costs,
expenses and reasonable attorneys' fees on account thereof) arising out of the
failure to obtain such prior written authorization and to defend the other, at
its request, against any such claims. Each party agrees to notify the other
promptly of any such claims or demands against it for which the other party is
responsible hereunder.
15. Liability/Indemnification. PI acknowledges that its relationship to
-------------------------
Giga under the terms of this Agreement is exclusively that of an independent
contractor and not any other relationship including, but not limited to,
partner, employee or agent, except in specific cases identified for the sales of
Giga Advisory Services to PI accounts. PI agrees to act in a manner consistent
with this status and to make no representation to the contrary to any person.
PI and Giga each agree to indemnify and hold the other harmless
against any and all claims (including costs, expenses and reasonable attorney's
fees on account thereof) that may be made by anyone for (i) injuries, including
death, to persons or damage to property, including theft, or (ii) errors or
omissions in the delivery of Services resulting from the acts or omissions of
the indemnifying party, including those of its employees or agents. The
indemnifying party agrees to defend the other party, at its request, against any
such claims and the party seeking to be indemnified agrees to notify the
indemnifying party promptly of any such claims or demands against it for which
the indemnifying party is responsible hereunder.
16. Non-Waiver. No failure on behalf of either Giga or PI to strictly
----------
enforce any term, right or condition of this Agreement shall be construed as a
waiver by that party of such term, right or condition.
-10-
<PAGE>
17. Severability. If any provision of this Agreement is found for any
------------
reason to be void or unenforceable, the remainder of this Agreement shall
continue in full force and effect.
18. Survival of Obligations. PI's representations, warranties and
-----------------------
obligations to Giga under this Agreement set forth in Sections 6, 9, 10, 12, 14
and 15 shall survive the termination, cancellation or expiration of this
Agreement.
19. Choice of Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to the principles of conflicts of laws thereof.
20. Force Majeure. Neither Giga nor PI will be liable to the other for
-------------
failure to perform any of its duties under this Agreement due to circumstances
beyond its reasonable control. The party whose performance is affected by such
circumstances shall notify the other in writing as soon as practicable
concerning its inability to perform its duties hereunder and shall thereafter
exercise it best efforts to resume the performance of its obligations under the
terms of this Agreement.
21. Headings. The headings used herein are for convenience only and are
--------
not intended to affect the meaning or interpretation of this Agreement.
22. Complete Understanding. This Agreement constitutes the full and
----------------------
complete understanding and agreement of the parties hereto and supersedes any
and all prior understandings and agreements, whether written or oral, with
respect to the subject matter hereof. Any waiver, modification or amendment of
any provision of this Agreement shall be effective only if made in writing and
signed by Giga and PI.
23. Notice. Any notice or demand required or permitted herein shall be
------
hand delivered or sent by certified or registered mail addressed to the
respective parties as follows:
If to Giga:
----------
Barry S. Gilbert, Vice President
Market Strategies Division
Giga Information Group, Inc.
One Longwater Circle
Norwell, MA 02061
If to PI:
--------
John Henry
Peripheral Insight, Inc.
9 Reservoir Street
Nashua, NH 03060
-11-
<PAGE>
or at such other address as the party shall subsequently specify to the other in
writing. Such notice or demand shall be deemed given or made when received in
the case of hand delivery, or when deposited, postage prepaid, with the U.S.
Postal Service in the case of certified or registered mail.
IN WITNESS of their acceptance of the terms of this Agreement, Giga and
PI, by their duly authorized representatives, hereby sign and date this
agreement as of the date first above written.
GIGA INFORMATION GROUP, INC. PERIPHERAL INSIGHT, INC.
By:/s/ Kenneth Marshall By:/s/ John Henry
------------------------- ------------------------
Title: Title:
---------------------- ---------------------
Tax I.D.#
------------------
-12-
<PAGE>
Exhibit A
Staffing Plan
PI's organization at the outset of this Agreement will consist
of John Henry, General Manager, some current Giga employees who
will become PI employees or subcontractors, and additional PI
personnel. The proposed personnel for inclusion include:
_ Catherine Charlery - Current Giga employee to address the
European fax and MFP markets as Senior Analyst.
_ Matt Checkley - Current Giga employee to address the European
printer market as Senior Analyst.
_ Nora Seery - Current Giga employee to address the European
supplies market as Senior Analyst.
_ Andrew Johnson - Current Giga employee to address the US market
for Fax and MFP products as Senior Analyst.
_ Norman McLeod - Current Giga employee to address the US market
for supplies as Senior Analyst.
_ Robert Leahey - Current Giga employee to address the US market
for printers and supplies as Senior Analyst.
Additional employees and/or sub-contractors will be added to
meet requirements with respect to Deliverables in the printer and
scanner markets. It is further understood that while the Giga
employees named above have expressed interest in pursuing
opportunities with PI, there is no guarantee, express or implied
on Giga's behalf, that any or all of the employees listed above
will become PI employees. In the event that some or all of the
employees indicated above decide not to become PI employees, PI
will have the sole responsibility of finding qualified
replacements and incur such costs associated therewith.
-13-
<PAGE>
Exhibit B
Deferred Revenue Schedule
Page 1 through Page 2 of Exhibit B contain Confidential
Materials which have been omitted and filed separately
with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.23
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
Agreement
between
Giga Information Group, Inc.
and
Decision Analytics, Inc.
Effective Date: August 15, 1996
<PAGE>
Agreement
between
Giga Information Group, Inc.
and
Decision Analytics, Inc.
This Agreement (this "Agreement") is made and entered into as of August
15, 1996 by and between Giga Information Group, Inc., a Delaware corporation
with offices at One Longwater Circle, Norwell, MA 02061 ("Giga"), and Decision
Analytics, Inc., a research and consulting firm with offices at 33 Martha's
Lane, Brookline, MA 02167 ("DA").
WITNESSETH:
WHEREAS, Giga develops, markets and publishes continuous information
technology services to a broad range of clients in the field of information
technology, including users of technology, vendors and investors;
WHEREAS, DA has expertise in the segment of information services relating
to the provision of on-going research-oriented advanced network services,
electronic messaging, as well as consumer electronics, automotive electronics
and certain gallium arsenide integrated circuits ("Specialty Field") and mobile
computing and mobile communications service ("Mobile Computing and
Communications Field") (collectively, the "Field").
WHEREAS, Giga desires to retain DA as an independent contractor to
provide Giga's clients with research-oriented deliverables, which consist of
written Planning Assumptions, White Paper documents, market forecasts, and other
related deliverables including, but not limited to, telephone inquiry support
and teleconferences ("Deliverables") and inquiry support with respect to Giga's
vendor-focused continuous information technology services in the Field;
WHEREAS, DA desires to hire certain employees of Giga who have previously
provided Giga's clients with such research-oriented Deliverables and inquiry
support, to continue such services as employees of DA;
WHEREAS, Giga seeks to establish and provide to its clients and
prospective clients a new enhanced level of services including, but not limited
to, Mobile Computing Business Services and Mobile Communications Business
Services, collectively called "Relevance Services";
WHEREAS, DA wishes to assist Giga in the research and development
necessary to establish and provide to Clients and prospective clients such
Relevance Services;
-2-
<PAGE>
WHEREAS, in addition to the foregoing, Giga desires that DA serve as a
"Giga Partner," one of a group of independent companies with whom Giga has
entered into a strategic alliance to provide information services to Giga
clients which are complementary to the services Giga provides directly; and
WHEREAS, DA desires to serve as a Giga Partner by providing as an
independent contractor to Giga the services described in this Agreement and by
acting as an agent for Giga in expanding Giga's client base, all on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, Giga and DA hereby agree as follows:
1. Services Provided by DA. Giga hereby retains DA to provide on-going
-----------------------
research-oriented Deliverables and inquiry support to current Giga clients (the
"Clients") associated with Giga's vendor-focused continuous information services
in the Field. Collectively, such services of DA in the Field shall be referred
to as the "Applicable Giga Advisory Services" or the "Services". It is
understood by DA that the Clients typically have entered into renewable one-year
contracts with Giga (or Giga's predecessor, BIS), and the Services to be
provided by DA to the Clients have previously been provided directly to the
Clients by Giga. Many of the Clients are subscribers to Giga Advisory Services,
which are a comprehensive set of continuous information technology services
which cover other areas of information technology in addition to the Applicable
Giga Advisory Services to be provided under the terms of this Agreement by DA.
It is intended that the Services provided to Clients by DA under the terms of
this Agreement will be complementary to other services which will be provided
directly by Giga or by other independent contractors which serve as Giga
Partners in related fields of expertise .
1.1 DA's Status as an Independent Contractor; Employment of Former
--------------------------------------------------------------
Giga Personnel; Indemnification with respect to Certain Employees. In providing
- -----------------------------------------------------------------
Services to Clients under this Agreement, DA will serve as an independent
contractor and agrees to employ as employees or retain as subcontractors
qualified personnel. DA shall be responsible for the supervision and quality
control of the Services it provides to Clients hereunder.
Furthermore, DA agrees to extend an offer to employ or to retain as a
subcontractor the current Giga employees listed on Exhibit A attached hereto,
each of whom has formerly provided Applicable Giga Advisory Services to Clients
as Giga employees or subcontractors. DA also agrees to indemnify and hold Giga
harmless from any obligation to pay any withholding taxes, social security,
unemployment or disability insurance or similar items in connection with any
payments made to DA pursuant to this Agreement.
1.2 Description of DA Deliverables. The Services provided by DA
------------------------------
hereunder will include Deliverables including, but not limited to, written
research documents, White Paper documents, market forecasts and other materials
as determined to be necessary and appropriate by Giga and DA. DA further agrees
to provide telephone inquiry support for Clients based on the guidelines
established, from time to time, by Giga, so long as such guidelines are
established in a manner that is reasonable
-3-
<PAGE>
and consistent with the past practices of Giga. It is also anticipated that DA
shall provide teleconferences with Clients and prospective clients on a regular
basis, in response to the interest and requirements of Clients.
1.3 Means of Delivery. Giga has developed an Internet delivery
-----------------
channel for its services, known as GigaWeb, which will be made available to DA
for use in DA's delivery of the Services to Clients. DA agrees to use GigaWeb in
the delivery of the Services, in addition to other means of delivery appropriate
to the needs of the Clients, such as printing and furnishing hard copies of
reports and other documents.
1.4 Costs and Expenses of Providing Services. Consistent with its
----------------------------------------
role as an independent contractor, DA shall be responsible for all the costs and
expenses of providing and delivering Services under this Agreement, including
without limitation the following: the wages, benefits and payroll taxes for DA's
employees; all compensation to DA's subcontractors; printing and other physical
preparation of Deliverables (with the exception of the printing and distribution
of Planning Assumptions, which shall be the responsibility of Giga); postage and
other delivery costs except for the cost of GigaWeb, which shall be the
responsibility of Giga; travel, entertainment and marketing expenses; legal,
accounting and other administrative expenses; and all income and other taxes
relating to DA's business.
1.5 Temporary United Kingdom Office Space. Giga shall provide
-------------------------------------
temporary office space and access to telephone service to DA in Giga's Luton,
U.K. facility through the earlier of (i) the remainder of 1996 or (ii) such
earlier time as Giga vacates such premises in its sole discretion. In connection
with the provisions of this Section 1.5, Giga agrees to pay the telephone bills
of DA, so long as such bills are reasonable.
1.6 Temporary Norwell, Massachusetts Office Space. Giga shall
---------------------------------------------
provide temporary office space and access to telephone service for up to two (2)
employees of DA in Giga's facility in Norwell, Massachusetts through the earlier
of (i) February 1, 1998 or (ii) such earlier time as Giga vacates such premises
in its sole discretion. In connection with the provisions of this Section 1.6,
Giga agrees to pay the telephone bills of DA, so long as such bills are
reasonable.
1.7 European Knowledge Center. DA shall establish and maintain a
-------------------------
Knowledge Center in Europe, commencing as of the Effective Date of this
Agreement. The staff of the Knowledge Center shall serve as a first line of
response to Clients, receiving calls for information and advice, answering
administrative questions, and referring technical requests to the appropriate
analysts at Giga or DA. It is anticipated that DA will staff the Knowledge
Center with its own personnel as of the Effective Date, however if DA is not
able to staff the Knowledge Center with its own personnel as of the Effective
Date, Giga agrees for the balance of 1996 to provide Knowledge Center support to
DA for DA's European operations.
-4-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
1.8 Warranty of Authorship. Each party hereto represents and
----------------------
warrants to the other that the research provided hereunder by it shall be
original writing, not published elsewhere, except for quotes properly attributed
to third parties, and that such research to the best of that party's knowledge
shall be accurate in all respects and contain no misrepresentations; provided,
--------
however, that neither of the parties hereto makes any representations or
- -------
warranties with respect to research provided by it to the other party that is
not represented to be research originally authored by one of the employees of
the party furnishing the research.
2. Term. The Services provided by DA under the terms of this Agreement
----
shall commence on August 15, 1996 (the "Effective Date") and shall continue for
the duration of this Agreement, including an initial period of 12 months (the
"Initial Term"), subject to the termination provisions set forth herein. It is
understood that Giga is relying on DA to provide on an ongoing basis the
Services as described herein to Clients commencing on the Effective Date, and DA
agrees to make every reasonable effort to satisfy such Clients and continue and
expand both its client base and the client base of Giga. At the conclusion of
the Initial Term, this Agreement shall be renewed for successive one-year terms
unless terminated by either party pursuant to Section 14.
3. Compensation to DA. DA understands that most Clients are parties to
------------------
contracts with Giga pursuant to the terms of which the Clients prepay Giga on an
annual basis for the provision of continuous information technology services
which Giga makes available to the Clients over the ensuing 12 months. The
revenue received by Giga at the outset of each contract period is referred to by
Giga as "Deferred Revenue", since it is earned by Giga by providing the
contracted services over the contract period. It has been the policy of Giga to
recognize the Deferred Revenue on a pro rata basis.
3.1 DA Share of Deferred Revenues. For all contracts with Clients
-----------------------------
in effect as of the Effective Date and for which DA provides Services hereunder,
Giga shall pay to DA **** of the portion of the Deferred Revenue attributable to
the provision of Services for the balance of the contract term remaining as of
the Effective Date. A schedule of the existing contracts with Clients, including
the amount of monthly Deferred Revenue projected to be earned thereunder, is
attached as Exhibit B. The parties hereto acknowledge and agree the amounts set
---------
forth in Exhibit B are not final and the parties shall make a good faith effort
---------
within thirty (30) days after the Effective Date hereof to determine the final
amounts of Deferred Revenue projected to be earned with respect to existing
contracts for Clients (the "Final Amounts"). The parties agree that DA shall be
entitled to the Final Amounts, subject only to any claims of any nature brought
after the determination of the Final Amounts by any of the Clients set forth on
Exhibit B in connection with the contracts or agreements referenced on Exhibit B
- --------- ---------
with respect to any services provided by Giga thereunder. Furthermore, Giga
agrees to make a good faith effort to provide to DA as soon as practicable all
of the available contracts set forth on Exhibit B.
---------
3.2 Allocation of Deferred Revenue. In the case of Clients which
------------------------------
were BIS clients prior to the acquisition of BIS by Giga, the portion of the
Deferred Revenue attributable to the provision of Services is deemed to be ****
(e.g., for a ******** contract
-5-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
entered into before July 1995, the monthly revenue attributable to the provision
of Services would be ********, of which DA would be entitled to ****, or ****).
In the case of Clients which were not BIS clients prior to the acquisition of
BIS by Giga, the portion of the Deferred Revenue attributable to Services is
deemed to be *******. However, for contracts with Clients for the provision of
automotive electronics, gallium arsenide integrated circuits, and consumer
electronics, the portion of Deferred Revenue attributable to Services is ****.
The allocation of Deferred Revenue for all existing contracts subject to this
Agreement is set forth in Exhibit B.
---------
3.3 Timing of Payment. Giga shall pay DA the compensation provided
-----------------
in this Section 3 on the first business day of each month in advance, beginning
with the Effective Date. For purposes hereof, a "business day" shall be a normal
work day, Monday to Friday, other than a Federal or Massachusetts state legal
holiday.
3.4 New DA Contracts with Giga Clients; Royalty to Giga. At the
---------------------------------------------------
expiration of any contract with a Client for Applicable Giga Advisory Services,
DA shall have the right to pursue and enter into a new contract with that party
to supply Services to the former Client for DA's own account and at DA's own
expense (a "New Contract"). DA shall give prompt notice to Giga of all New
Contracts and shall pay to Giga a royalty equal to **** of the dollar amount of
the contract for the Services to be provided by DA under the New Contract. DA
shall prepare on a monthly basis a report that sets forth all of the amounts due
to Giga under this provision, and such report shall be delivered to Giga on the
fifteenth day of each month for the month directly preceding it, along with all
amounts due to Giga by DA as reflected in such report. Such royalty shall be
applicable to the ************** of any New Contract or, if the contract period
is longer than ******************** of the contract term. No royalty shall be
payable to Giga with respect to a New Contract entered into by DA with a party
which was not a Client during a period of at least 90 days prior to the
commencement of the New Contract.
3.5 New Giga Advisory Subscriptions; Extension of Giga Contracts.
------------------------------------------------------------
Giga hereby appoints DA as Giga's agent with the authority to market to Clients
and prospective clients subscriptions for Giga Advisory Services or extensions
or renewals of existing subscriptions therefor; provided, however, that all
-------- -------
payments received with respect to such subscriptions shall be paid directly to
or forwarded promptly to Giga. Giga will pay DA a commission for such new or
renewed contract equal to **** of the incremental Deferred Revenue for the first
year over the previous annual amount (the "Net Annual Value Increase" or "NAVI")
under any such renewed contract or the entire amount of Deferred Revenue (all of
which constitutes NAVI) for a contract with a new client. Giga shall prepare on
a monthly basis a report that sets forth all of the amounts due to DA under this
provision, and such report shall be delivered to DA on the fifteenth day of each
month for the month directly preceding it, along with all amounts due to DA by
Giga as reflected in such report. This commission shall be in addition to any
share of the Deferred Revenue due to DA under Section 3.1 hereof if DA is
providing Services with respect to such contract. For purposes of DA's service
as Giga's agent in obtaining new business, Giga and DA agree to the following
terms:
-6-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
3.5.1 Sales Support. In order to coordinate Giga's direct sales
-------------
activities with DA's efforts as an agent for Giga, Giga's sales supervisors
shall maintain close contact with DA and shall furnish DA with brochures, sales
support information, rate schedules, contract forms and conditions and other
information and support. DA agrees to coordinate marketing leads and
opportunities with Giga. Giga will provide at its discretion incentives to its
own sales personnel with respect to new and additional business initiated by DA,
in order to encourage a cooperative and coordinated sales effort.
3.5.2 Contract Rates and Documentation. DA agrees to use Giga's
--------------------------------
prescribed forms of contracts, including its master terms and conditions, when
seeking the renewal or expansion of Giga Advisory Services contracts; provided,
--------
however, that the foregoing in no way obligates Giga to accept any contract
- -------
presented to it by DA for renewal. DA shall also coordinate with Giga's
supervisory sales staff the current rates to be charged for such services.
3.6 Establishment and Deliver of Relevance Services by DA. If DA
-----------------------------------------------------
accepts the pricing structure set forth by Giga with respect to DA's involvement
in the establishment and delivery of Relevance Services, DA agrees to assist
Giga with the establishment and delivery, including the marketing and sales of,
Relevance Services, which DA understands are designed to provide Clients and
prospective clients in marketing, business planning, strategic planning, and
product management with strategic and tactical insights. Furthermore, DA
understands that each Relevance Service is designed to provide basic information
pertaining to (1) product and market forecasts and analyses, (2) competitive
analysis and positioning, (3) technology trends and issues, and (4)
business/financial analysis. To that end, DA will provide writing, editing,
project management and research, of but not limited to "Management Insight"
reports and "Prospectives" briefs, along with inquiry support, automated
teleconferences and presentations as requested by Clients.
3.7 Compensation with Respect to the Development of Relevance
---------------------------------------------------------
Services. For Clients that upgrade their accounts to include Relevance Services
- --------
from any existing continuous information technology service contracts, DA will
provide Giga with a royalty of **** of the dollar amount of the contract if DA
is primarily responsible for the sale to the Client of the Relevance Services.
If Giga is responsible for the sale, DA will receive [***] of the dollar amount
of the contract that Giga executes as compensation for the Services provided by
DA to the Client under the contract in relation to the design, performance,
execution, and delivery of the research underlying such Services. In either
case, DA is fully responsible for all expenses associated with providing the
Deliverables for a given Relevance Service unless agreed to otherwise by Giga in
advance of any such expenditure. Both parties shall prepare on a monthly basis a
report that sets forth all of the amounts due to the other party under this
provision, and such report shall be delivered to the other party on the
fifteenth day of each month for the month directly preceding it, along with all
amounts due by each party to the other as reflected in their respective report.
-7-
<PAGE>
3.8 Client Invoices. New clients and renewal Clients obtained by DA
---------------
for DA's own account may be invoiced directly by DA, and DA shall remit the
appropriate royalty payments to Giga as provided in Section 3.4. Future
contracts entered into for the provision of Relevance Services shall be invoiced
by Giga, although DA may be entitled to the receipt of a commission from Giga
(as provided in Section 3.5) for its role as agent of Giga in obtaining any such
contracts.
4. Nature of Relationship between Giga and DA. DA is providing Services
------------------------------------------
under this Agreement as an independent contractor and shall not be considered an
employee, agent (except as expressly provided herein) or representative of Giga
(nor shall DA's employees or subcontractors be considered employees of Giga).
While it is intended that DA shall be identified as a "Giga Partner" (as
described more specifically in Section 4.1 hereof) to indicate the close working
relationship between Giga and DA, this Agreement shall not constitute a legal
partnership between Giga and DA. Neither Giga nor DA shall have any share in the
profits of the other or any liability for the actions of the other except as
specifically provided in this Agreement.
4.1 Nature of DA's Status as a "Giga Partner". DA and certain other
-----------------------------------------
independent firms working closely with Giga shall be authorized by Giga to refer
to themselves as a "Giga Partner." DA agrees, during the term of this Agreement,
to use the term "Giga Partner" on its brochures, marketing materials,
letterhead, reports and other Deliverables, newsletters, promotional materials
and other similar materials; provided, however, that DA shall provide Giga with
-------- -------
examples of all of its uses of the term "Giga Partner" (or any other reference
to Giga or use of the Giga name or logo) at least ten (10) business days prior
to DA's initial use thereof, and Giga shall have the right to review and approve
such material in writing prior to its use by DA. Giga agrees that its approval
shall not be unreasonably withheld.
The parties hereto agree that no written or printed reference shall be made
to the other party, its management, shareholders or employees, or to any Clients
or clients, or to their trademarks, service marks, codes, drawings,
specifications or information of a proprietary nature in any advertising or
promotional efforts with respect to activities contemplated by this Agreement
without the prior written authorization of the other party. The parties hereto
agree to indemnify and hold the other harmless against any and all claims
(including costs, expenses and reasonable attorneys' fees on account thereof)
arising out of the failure to obtain such prior written authorization and to
defend the other, at its request, against any such claims. Each party agrees to
notify the other promptly of any such claims or demands against it for which the
other party is responsible hereunder.
4.2 Transition; Problem Resolution. It is the intent and objective
------------------------------
to ensure a smooth transition in the delivery of Services to Clients, preserving
the good will of Clients and enhancing the business relationship of both Giga
and DA with such Clients. To that end, Giga and DA agree to work together in
good faith to resolve conflicts that may arise from time to time and to address
any relevant business issues in a timely and professional manner.
-8-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
5. Business Development Opportunities. Giga and DA agree to form a
----------------------------------
Planning Group (the "Planning Group") consisting of at least one senior member
of DA and one from Giga to consider and coordinate business development
opportunities beyond those specifically outlined in this Agreement which may be
pursued by Giga and DA, as well as to serve as a forum for the resolution of
disputes between the parties with respect to the terms of this Agreement. Both
parties agree to negotiate in good faith to resolve all disputes, disagreements
or controversies arising out of this Agreement; provided, however, that if the
-------- -------
parties are not able to resolve an issue or issues arising out of this
Agreement, the parties shall consult Jeffrey Swartz, present Senior Vice
President, Marketing Operations, Events and Publications of Giga, who shall in
good faith appraise the nature of the dispute, disagreement or controversy and,
after consideration, if possible, lend his support in favor of either Giga or DA
in an attempt to resolve the issue or issues. The Planning Group shall
communicate by teleconference on a monthly basis to ensure coordination of
business development opportunities and conflict resolution under the general
guidelines outlined in this Section 5.
5.1 Independent Consulting Businesses of Giga and DA. It is
------------------------------------------------
understood that Giga and DA shall be free to operate independent consulting
businesses outside the scope of the cooperative activities covered by this
Agreement, provided that, in the case of DA, such consulting does not compete
with the areas of expertise presently covered by Giga, including, but not
limited to, Relevance Services, and does not focus on the computers and
communication businesses. DA represents and warrants that it will execute an
agreement in a form acceptable to Giga between DA and Harvey Cohen ("Cohen")
that expressly binds Cohen in his capacity as a director and/or officer of DA,
from offering consultation services which compete with the area of expertise
covered by Giga and which focus on the computers and communication businesses.
DA represents that at the time of execution of this Agreement, it has obtained
Cohen's consent to become a party to such an agreement. Both parties shall have
the right to develop new lines of consulting services independent of the other.
5.2 New Business for Giga Consulting Originated by DA. In its
-------------------------------------------------
capacity as a Giga Partner, DA shall respond in a timely manner to leads from
prospects for custom consulting work within the areas of expertise of Giga
Consulting, and Giga shall pay a commission to DA for originating new consulting
work for Giga and shall provide opportunities to DA to participate in such work,
as provided in this Section 5. It is understood that all such leads shall be
forwarded by DA to Giga Consulting, which will be responsible for pursuing such
leads and structuring consulting projects.
5.3 Commissions for Origination of New Consulting Business. Giga
------------------------------------------------------
and DA shall each pay the other a commission for new consulting business
performed by Giga or DA and originated by the other, so long as such consulting
business is not originated in or to be performed in Germany. Such commission
shall be (1) for a new contract, **** of the fee paid by the client to the party
performing the consulting services during the ******** of any new contract and
(2) for a renewed contract, the sum of (i) **** of the fee paid by the client to
the party performing the consulting services for the renewal term and (ii) ****
of the NAVI for any expanded business under the renewed contract. Such
commission shall be payable within 30 days after the payment is received from
the client. With respect to all new consulting business that Giga receives with
-9-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
respect to the Services, it shall include DA in the development and execution,
as appropriate, of projects relating to the provision of Services. If DA is
involved in any manner, including the sales or development of such new
consulting business with respect to the provision of Services, DA is entitled to
the receipt of a commission as set forth herein.
5.4 Participation by DA in Giga Consulting Engagements. For Giga
--------------------------------------------------
Consulting engagements in the U.S. and France which have been originated by DA
as contemplated in this Section 5, Giga agrees to make available to DA the
opportunity to participate in performing a ******************* of the wholesale
value of the project provided that the services are within DA's areas of
expertise. It is understood, however, that the **** and **** shares are averages
for the typical month and typical engagement, and the parties agree to cooperate
in coordinating the work in an equitable manner consistent with efficient and
high quality service to clients. The parties agree, with respect to the
calculation of amounts due to DA, that DA shall be paid by Giga only for that
work actually performed by DA with respect to such consulting engagements.
The wholesale value of the project for purposes of this Section 6.4 shall
be **** of the price to the Client (e.g., the wholesale value of a *******
project for a Client would be *******).
Outside the U.S. and France, Giga agrees to include DA personnel in
consulting projects as appropriate at agreed upon package rates.
5.5 DA Contracts in Germany. In Germany, where Giga's European
-----------------------
consulting operations are based, Giga's established sales personnel shall assist
in the marketing of Services to be performed by DA. Accordingly, DA shall, for
the balance of 1996, pay a commission to Giga equal to **** of the dollar amount
of all renewals or existing contracts by DA and **** of the dollar amount of any
New Contracts. For 1997 and beyond, said commissions payable by DA to Giga shall
be at the rates of **** and ****, respectively. DA shall prepare on a monthly
basis a report that sets forth all of the amounts due to Giga under this
provision, and such report shall be delivered to Giga on the fifteenth day of
each month for the month directly preceding it, along with all amounts due to
Giga by DA as reflected in such report.
6. Taxes. Each party hereto acknowledges and agrees that it shall report
-----
as income all compensation, including commissions, received from the other
pursuant to this Agreement.
7. Insurance. DA represents and warrants to Giga that DA maintains
---------
appropriate comprehensive liability, casualty, and workers' compensation
insurance coverage for DA and all of DA's employees, representatives and agents
who perform or will perform duties under this Agreement. DA agrees to provide
Giga with proof of appropriate insurance coverage if reasonably requested by
Giga. Giga shall use its best efforts to secure and maintain appropriate
comprehensive liability insurance that names as additional insured parties the
Giga Partners. If Giga is unable to secure such coverage, it shall promptly
notify DA.
-10-
<PAGE>
8. Audit Rights. Both parties shall have the right, upon reasonable
------------
notice, to audit the books and records of the other party as such books and
records pertain to the Services to be performed under the terms of this
Agreement in order to verify the terms of contracts and revenues received by the
audited party.
9. Ownership and Use of Information; License to Giga. All software,
-------------------------------------------------
plans, methodologies, planning or programming documentation, sketches, drawings
models, samples, records, works of authorship or other creative works, ideas,
knowledge or plans, whether written, oral or otherwise expressed (the
"Information"), originated and developed by DA prior to the Effective Date of
this Agreement, and furnished to Giga or any Clients by DA in the performance of
its obligations under this Agreement, shall remain the sole property of DA,
except in those cases where DA has performed specific work on behalf of Giga or
on behalf of a Client under the direction of or assignment from Giga. All
Information shall be disclosed as such to Giga and shall be identified
specifically as such in writing from DA to Giga. DA agrees that Giga owns all
Information, as well as any copyrights or other intellectual property rights,
that underlie or are incorporated into the procedures or systems concerning the
establishment or provision of Relevance Services or future Relevance Services,
and shall be the sole property of Giga.
Notwithstanding anything else in this Section 9, DA hereby grants a
perpetual, royalty-free license to Giga to use, copy, modify and distribute for
clients subscribing to the Services or for Giga's internal consumption all
Information for the term of this Agreement with respect to the Services to be
performed by DA under the terms of this Agreement. For any and all such
Information described in this paragraph, DA agrees to provide documentation
satisfactory to Giga to assure the license of the Information to Giga.
Title to all materials or documentation including, but not limited to,
systems specifications furnished by one party to the other in connection with
the performance of Services contemplated by this Agreement, shall remain the
property of the party furnishing such materials or documentation and, if such
materials or documentation are delivered to one party by the other, the party
receiving such materials and documentation shall return the same forthwith at
the owner's request.
10. Confidentiality/Disclosure of Information. In order for each party to
-----------------------------------------
render the Services contemplated by this Agreement, each respective party or one
of its Clients or clients may need to disclose information to the other that is
considered to be secret or proprietary ("Confidential Information"). Each party
understands and agrees that unless such Confidential Information was previously
known to it free of any obligation to keep it confidential, or unless it has
subsequently been made public by the other party or one of its Clients or
clients free of any obligation to keep it confidential, then such Confidential
Information shall be kept confidential and shall be used only in performing the
Services contemplated by this Agreement and may be used for no other purpose
except upon such terms as may be agreed upon between the parties in writing.
Each party further agrees that all Deliverables associated with the
establishment or delivery of Relevance Services and future Relevance Services
constitute Confidential
-11-
<PAGE>
Information and must be treated as such. The parties hereto further agree to be
bound by the terms of any Nondisclosure Agreement which the other party
separately executes with the other party and/or one of its Clients or clients.
11. Assignment. This Agreement may not be assigned or transferred by
----------
either party without the prior written consent of the other.
12. Arbitration. Any dispute, disagreement or controversy at the time of
-----------
the dispute, disagreement or controversy which is not settled by the Planning
Group pursuant to Section 5 shall be resolved by one (1) arbitrator in
accordance with the Commercial Arbitration Rules in effect at the time of the
dispute, disagreement or controversy of the American Arbitration Association,
including, but not limited to, the rule(s) with respect to the selection of an
arbitrator. All expenses in connection with such arbitration shall be shared
equally by the parties hereto; provided, however, if one party maintains that
-------- -------
such arbitration was unnecessarily or unreasonably initiated, and it provides
notice thereof to the other, the issue of the cost of the arbitration may in
such cases also be submitted to the arbitrator for resolution. The final
decision of the arbitrator shall constitute a conclusive determination of any
such dispute, disagreement or controversy, and shall be binding onto the parties
hereto, and shall not be contested by either party. Such decision may be used in
a court of law only for the purposes of seeking enforcement of the arbitrator's
award.
13. Restrictions on Solicitation of Employees. Each party hereto agrees
-----------------------------------------
that it will not solicit the services of or employ any employees of the other or
its Clients or clients, for the period beginning the Effective Date hereof and
ending twelve (12) months after the expiration or termination of this Agreement,
unless prior written authorization is obtained from the appropriate party;
provided, however, that no written authorization must be obtained from Giga by
- -------- -------
DA with respect to the employment of the employees listed on Exhibit A.
---------
14. Termination of Agreement; Limitations on Liability. Either Giga or DA
--------------------------------------------------
may terminate this Agreement for its own convenience and without cause at any
time by giving the other party written notice at least six months (180 days)
prior to the effective date of the termination. Giga's liability to DA in the
event of termination shall not exceed amounts due for Services performed prior
to the effective date of the termination. DA's liability to Giga in the event of
termination shall not exceed the amounts received from Giga hereunder.
In addition, if, in Giga's reasonable judgment, DA has failed to
comply with its obligations under this Agreement, Giga may elect to give written
notice of such failure to DA, in which case DA shall have a period of 30 days in
which to resolve such failure. If such failure has not been resolved within such
period to Giga's reasonable satisfaction, Giga shall be entitled to terminate
this Agreement on written notice to DA of not less than 30 days. In the event of
such termination, the following terms shall apply:
-12-
<PAGE>
(a) DA shall be entitled to payments under this
Agreement for its services for the period through the
effective date of termination as full compensation for
all its Services hereunder, and Giga shall not be
obligated to make any further payments to DA.
(b) DA shall provide Giga with all research data,
analyses, and written material (including completed
interview forms, research contact lists, etc.) gathered
and prepared prior to the effective date of termination;
(c) Giga may at its option (i) continue to
research, publish and market Services to the Giga client
base served by DA, or (ii) identify an alternative
contractor to fulfill the outstanding and future client
requirements.
(d) Upon the effective date of termination
hereunder, DA's right to act as an agent for Giga
with respect to the direct sales activities
conducted on behalf of Giga shall terminate.
15. Liability/Indemnification. Each party hereto
-------------------------
acknowledges that its relationship to the other under the terms of
this Agreement is exclusively that of an independent contractor
and not any other relationship including, but not limited to,
partner, employee or agent, except in specific cases identified
for the sales of Giga Advisory Services to DA accounts. Each
party agrees to act in a manner consistent with this status and to
make no representation to the contrary to any person.
DA and Giga each agree to indemnify and hold the other
harmless against any and all claims (including costs, expenses and
reasonable attorney's fees on account thereof) that may be made by
anyone for (i) injuries, including death, to persons or damage to
property, including theft, or (ii) errors or omissions in the
delivery of Services, including the delivery of such Services by
Giga before the Effective Date or by DA after the Effective Date,
resulting from the acts or omissions of the indemnifying party,
including those of its employees, agents or representatives,
provided however, nothing contained in this Agreement shall be
-------- -------
construed to be or to constitute an employment agreement between
either or both of the parties hereto and the persons set forth on
Exhibit A, and, as such, with respect to liability or otherwise,
---------
the persons listed on Exhibit A shall have no rights arising from
---------
this Agreement. The indemnifying party agrees to defend the other
party, at its request, against any such claims and the party
seeking to be indemnified agrees to notify the indemnifying party
promptly of any such claims or demands against it for which the
indemnifying party is responsible hereunder.
16. Non-Waiver. No failure on behalf of either Giga or DA
----------
to strictly enforce any term, right or condition of this Agreement
shall be construed as a waiver by that party of such term, right
or condition.
17. Severability. If any provision of this Agreement is
------------
found for any reason to be void or unenforceable, the remainder of
this Agreement shall continue in full force and effect.
-13-
<PAGE>
18. Survival of Obligations. DA's representations,
-----------------------
warranties and obligations to Giga under this Agreement set forth
in Sections 7, 10, 11, 13, 15 and 16 hereof shall survive the
termination, cancellation or expiration of this Agreement.
19. Choice of Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of
conflicts of laws thereof.
20. Force Majeure. Neither Giga nor DA will be liable to
-------------
the other for failure to perform any of its duties under this
Agreement due to circumstances beyond its reasonable control. The
party whose performance is affected by such circumstances shall
notify the other in writing as soon as practicable concerning its
inability to perform its duties hereunder and shall thereafter
exercise it best efforts to resume the performance of the
obligations under the terms of this Agreement.
21. Headings. The headings used herein are for convenience
--------
only and are not intended to affect the meaning or interpretation
of this Agreement.
22. Complete Understanding. This Agreement constitutes the
----------------------
full and complete understanding and agreement of the parties
hereto and supersedes any and all prior understandings and
agreements, whether written or oral, with respect to the subject
matter hereof. Any waiver, modification or amendment of any
provision of this Agreement shall be effective only if made in
writing and signed by Giga and DA.
23. Notice. Any notice or demand required or permitted
------
herein shall be hand delivered or sent by certified or registered
mail addressed to the respective parties as follows:
if to Giga:
----------
Barry S. Gilbert
Vice President, Market Strategies Division
Giga Information Group, Inc.
One Longwater Circle
Norwell, MA 02061
if to Decision Analytics, Inc.:
------------------------------
Harvey Cohen
Decision Analytics, Inc.
33 Martha's Lane
Brookline, MA 02167
or at such other address as the party shall subsequently specify
to the other in writing. Such notice or demand shall be deemed
given or made when received in the case of hand delivery, or when
deposited, postage prepaid, with the U.S. Postal Service in the
case of certified or registered mail.
-14-
<PAGE>
IN WITNESS of their acceptance of the terms of this
Agreement, Giga and DA, by their duly authorized representatives,
hereby sign and date this agreement as of the date first above
written.
GIGA INFORMATION GROUP, INC. DECISION ANALYTICS, INC.
By:/s/ Barry Gilbert By:/s/ Harvey Cohen
--------------------------- ---------------------
Title: Title:
------------------------ ------------------
Tax I.D.#
---------------
-15-
<PAGE>
Exhibit A
Staffing Plan
DA's organization at the outset of this Agreement will
consist of Harvey Cohen, General Manager, some current Giga
employees who will become DA employees or subcontractors, and
additional DA personnel. The proposed personnel for inclusion
include:
o David Kerr - Current Giga employee to address the North
American Mobile Communications Services Practice as
Director.
o Mark Holden - Current Giga employee to address the
European Communications Services Practice as Director.
o Jeff Henning - Former BIS employee and present DA
consultant to serve the Mobile IT Practice as Director.
o George Boomer - Current DA employee specializing in
quantitative methods as Senior Consulting Partner.
o Joanne Downie - Current Giga employee to address
European wireline services and support PTT applications
as Director of Wireline Service.
o Declan Lonergan - Current Giga employee in the
communications area.
o Frances Northcott - Current Giga subcontractor in the
communications area.
o Richard Endersby - Current Giga employee to address GaAs
applications in Europe.
o Steve Entwistle - Current Giga employee in support of
the GaAs Program.
o Chris Webber - Current Giga employee and Director of the
Automotive Program.
o Ian Riches - Current Giga employee in support of
Automotive Service.
o Guy DiPiazza - Current Giga employee and Director of the
Consumer Electronics Program.
Additional employees and/or subcontractors will be added to
meet the requirements with respect to Deliverables as future
budgets allow. It is further understood that while the Giga
employees named above have expressed interest in pursuing
opportunities with DA, there is no guarantee, express or implied
on Giga's behalf, that any or all of the employees listed above
will become DA employees. In the event that some or all of the
employees indicated above decide not to become DA employees, DA
will have the sole responsibility of finding qualified
replacements and incur such costs associated therewith.
-16-
<PAGE>
Exhibit B
Deferred Revenue Schedule
Page 1 through Page 2 of Exhibit B contains
Confidential Materials which have been omitted
and filed separately with the Securities and
Exchange Commission
<PAGE>
EXHIBIT 11
GIGA INFORMATION GROUP, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 17 TO (UNAUDITED) SIX MONTHS
DECEMBER 31, MARCH 17 TO ENDED JUNE 30,
1995 JUNE 30, 1995 1996
------------ ------------- --------------
<S> <C> <C> <C>
Historical
Loss from continuing operations.... $ (5,116) $ (733) $ (9,913)
Net loss available to common stock-
holders........................... $ (3,626) $ (432) $ (12,303)
========== ========== ==========
Weighted average common and common
equivalent shares outstanding..... 4,787,368 3,600,000 5,480,867
Cheap stock(1)..................... 8,699,420 8,699,420 8,699,420
---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding..... 13,486,788 12,299,420 14,180,287
========== ========== ==========
Loss per common and common equivalent
share:
Loss per common and common equiva-
lent share from continuing opera-
tions............................. $ (0.38) $ (0.06) $ (0.70)
Net loss per common and common
equivalent share.................. $ (0.27) $ (0.04) $ (0.87)
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MARCH 17 TO SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1995 1996
------------ --------------
<S> <C> <C>
Pro forma:
Loss from continuing operations $ (5,116) $ (9,913)
Net loss available to common stockholders........ $ (3,626) $ (12,303)
========== ==========
Weighted average common and common equivalent
shares outstanding(2)........................... 6,155,789 7,660,867
Potentially dilutive instruments under SAB No.
83(1)........................................... 8,699,420 8,699,420
---------- ----------
Pro forma weighted average common and common
equivalent shares
outstanding..................................... 14,855,209 16,360,287
========== ==========
Pro forma loss per common share:
Pro forma loss per common and common equivalent
share from continuing operations................ $ (0.34) $ (0.61)
Pro forma net loss per common and common equiva-
lent share...................................... $ (0.24) $ (0.75)
========== ==========
</TABLE>
- --------
(1) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83 ("SAB No. 83"), all common equivalent shares and other
potentially dilutive instruments (including stock options and warrants)
issued during the twelve month period prior to the initial filing date of
the Company's initial public offering Registration Statement have been
included in the calculation as if they were outstanding for all periods
presented.
(2) Pro forma weighted average common and common equivalent shares outstanding
reflect the conversion of outstanding shares of redeemable Series A
Preferred Stock into shares of Common Stock.
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name Jurisdiction of Organization/Incorporation
---- ------------------------------------------
<S> <C>
Giga Information Group Investment Corporation Massachusetts
Giga Information Group Ltd. England
BIS Shrapnel PTY Limited Australia
Giga Information Group GmbH Germany
Giga Information Group Italy SRL Italy
Giga Information Group S.A.R.L. France
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Giga
Information Group, Inc. on Form S-1 to register 4,000,000 shares of Common
Stock of our report dated August 31, 1996 on our audits of the consolidated
financial statements of Giga Information Group, Inc. as of December 31, 1995
and June 30, 1996 and the periods March 17, 1995 to December 31, 1995 and
January 30, 1996 to June 30, 1996. We also consent to the references to our
firm under the captions "Selected Financial Data" and "Experts."
We also consent to the inclusion in this Registration Statement of our
report dated August 31, 1996 on our audit of the combined statements of
operations, stockholder's equity and cash flows of BIS Strategic Decisions for
the period January 1, 1995 to April 5, 1995.
Coopers & Lybrand L.L.P
Boston, Massachusetts
September 10, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and the use of our report dated March 13, 1995,
except with respect to the matters described in Note 12, as to which the date
is September 6, 1996, with respect to the financial statements of BIS
Strategic Decisions as of December 31, 1994 and for the year ended December
31, 1994, the period from December 16, 1993 to December 31, 1993 and the
period from January 1, 1993 to December 15, 1993, in the Registration
Statement on Form S-1 and Related Prospectus of Giga Information Group, Inc.
Ernst & Young L.L.P.
Boston, Massachusetts
September 6, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Giga Information
Group, Inc. on Form S-1 to register 4,000,000 shares of Common Stock of our
report dated 27 July 1994, on our audits of the financial reporting packages
of BIS Shrapnel Pty Limited as of 15 December 1993 and 31 December 1993 and
the periods 1 January 1993 to 15 December 1993 and 16 December 1993 to 31
December 1993. We also consent to the reference to our firm under the caption
"Experts".
Coopers &
Lybrand
Sydney, Australia
9 September 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 JUN-30-1996
<PERIOD-START> JAN-01-1995 JAN-01-1995
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 16,906 9,331
<SECURITIES> 0 0
<RECEIVABLES> 2,259 3,116
<ALLOWANCES> 79 925
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,582 14,857
<PP&E> 2,756 3,852
<DEPRECIATION> 562 1,136
<TOTAL-ASSETS> 24,684 19,220
<CURRENT-LIABILITIES> 8,516 10,557
<BONDS> 1,037 1,060
0 0
4 6
<COMMON> 6 6
<OTHER-SE> 17,921 20,556
<TOTAL-LIABILITY-AND-EQUITY> 24,684 19,220
<SALES> 0 0
<TOTAL-REVENUES> 10,706 6,482
<CGS> 0 0
<TOTAL-COSTS> 8,445 9,648
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 100 52
<INCOME-PRETAX> (6,209) (10,170)
<INCOME-TAX> (1,093) (257)
<INCOME-CONTINUING> (5,116) (9,913)
<DISCONTINUED> 1,490 (2,390)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,626) (12,303)
<EPS-PRIMARY> (0.244) (0.752)
<EPS-DILUTED> (0.244) (0.752)
</TABLE>
