<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1998
REGISTRATION NO. 333-52899
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GIGA INFORMATION GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8732 06-1422860
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATED OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
ONE LONGWATER CIRCLE, NORWELL, MASSACHUSETTS 02061 (781) 982-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GIDEON I. GARTNER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
GIGA INFORMATION GROUP, INC.
ONE LONGWATER CIRCLE
NORWELL, MASSACHUSETTS 02061 (781) 982-9500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
GERALD S. BACKMAN, P.C. ALEXANDER D. LYNCH, ESQ.
WEIL, GOTSHAL & MANGES LLP LUCI STALLER ALTMAN, ESQ.
767 FIFTH AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NEW YORK 10153-0119 1633 BROADWAY, 47TH FLOOR
(212) 310-8000 NEW YORK, NEW YORK 10019
(212) 581-1600
</TABLE>
------------------------
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. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 JULY 7, 1998
3,000,000 SHARES
[LOGO]
COMMON STOCK
------------------------
All of the 3,000,000 shares of Common Stock, par value $0.001 per share
(the 'Common Stock'), offered hereby are being sold by Giga Information Group,
Inc., a Delaware corporation (together with its subsidiaries, 'Giga' or the
'Company'). Prior to this offering (the 'Offering'), there has been no public
market for the Common Stock. It is currently anticipated that the initial public
offering price will be between $12.00 and $14.00 per share. See 'Underwriting'
for a discussion of 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.'
------------------------
SEE 'RISK FACTORS' ON PAGES 7 THROUGH 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS.
------------------------
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.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
(1) See 'Underwriting' for information relating to indemnification of the
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option exercisable within 30
days of the date hereof, to purchase up to an aggregate of 450,000
additional shares of Common Stock, solely to cover over-allotments, if any.
If the Underwriters exercise such option 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 are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor at the offices of Friedman, Billings, Ramsey & Co., Inc.,
Arlington, Virginia, or in book entry form through the book entry facilities of
the Depositary Trust Company, on or about , 1998.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC. PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus is , 1998
<PAGE>
[PHOTO DEPICTING THE COMPANY'S GIGAWEB USER INTERFACE]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
'UNDERWRITING.'
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Company's
Consolidated Financial Statements (the 'Consolidated Financial Statements') and
notes thereto appearing elsewhere in this Prospectus. Unless the context
otherwise requires, references in this Prospectus to 'Giga' or the 'Company' are
to Giga Information Group, Inc., a Delaware corporation, and its direct and
indirect subsidiaries. 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, Series B, Series C and Series D Preferred Stock (the
'Convertible Preferred Stock') into an aggregate of 4,686,784 shares of Common
Stock upon the closing of the Offering (the 'Preferred Conversion'), (iii)
reflects the repayment (the 'Bridge Repayment') of convertible promissory notes
in the aggregate principal amount of $10.0 million (the 'Bridge Notes') issued
in April 1998, (iv) reflects the filing by the Company, upon the closing of the
Offering, of an amended and restated certificate of incorporation (the 'Restated
Certificate'), (v) reflects a one-for-three reverse stock split of the Common
Stock (the 'Reverse Stock Split') to be effected prior to the closing of this
Offering and (vi) has been adjusted to reflect a four-for-one stock split of the
Common Stock effected as a stock dividend in November 1995 (the 'Stock Split').
THE COMPANY
The Company provides objective analyses and advice relating to developments
and trends in the computing, telecommunications and related industries
(collectively, the 'Information Technology' or 'IT' industries) to assist its
customers in making technology-related decisions. IT is critical to the
competitiveness and long-term viability of a wide range of organizations. The
Company believes information overload, confusion and anxiety exists among IT
decision-makers. As a result, an increasing number of organizations are turning
to Continuous Information Service ('CIS') providers to monitor and analyze IT
developments and to identify trends to support such organization's IT
decision-making needs.
Giga was founded by Gideon I. Gartner, who in 1979 founded Gartner Group,
Inc., a CIS provider. Building on his extensive experience and success in the
CIS industry, Mr. Gartner formed Giga with the objective of creating a new
approach toward addressing the CIS needs of users and vendors of IT products and
services. Giga has developed a range of innovative Continuous Information
Services, as well as an effective, electronic information delivery mechanism,
designed to provide integrated IT analyses and advice.
Foremost among these innovations is the Company's unified advisory service
('Advisory Service') through which IT research and analysis are offered to
customers as a single service intended to encompass the variety of IT coverage
offered by other CIS providers through multiple and fragmented services. This
original research and advice is provided by a staff of experienced industry
analysts. To complement Giga's analysts, the Company provides its Advisory
Service customers with access to an extensive network of external IT
practitioners ('ExperNet'). These practitioners have current experience in
diversified segments of the IT industry, which the Company believes cannot be
efficiently covered by the traditional CIS approach.
The Company also provides 'Continuous Advisory Consulting' services, a
valuable complement to Giga's Advisory Service inquiry process, which enable
customers to request more in-depth analysis targeted at the application of
technology to their specific situation. Continuous Advisory Consulting services,
which are provided on an on-going basis, may include assessments of strategic
technology planning, implementation issues surrounding a major technology
migration, or a vendor's marketing plan.
The Company has also introduced its 'IT Practice Services,' which integrate
the results of documented surveys of the successful operating practices and
techniques of IT professionals ('best practices') with strategic consulting, to
allow customers to leverage the proven practices of their peers. Each IT
Practice Service is designed to address issues faced by an executive in a
specific job function within an organization. For example, the Company's 'Year
2000 Practices' is designed for the executive in charge of an organization's
year 2000 activities.
The Company organizes and sponsors a range of events on significant IT
industry issues and trends, and produces publications based on conference topics
or current IT issues (collectively, 'Events and Publications'). For example, the
Company hosts its flagship annual conference, GigaWorld IT Forum, at which
Giga's analysts present and update their most important research findings and
recommendations and meet one-on-one in advisory sessions with clients.
3
<PAGE>
Giga has designed its innovative Advisory Service model to capitalize on
the capabilities of the Internet. Advisory Service research is accessed and
customized through the Company's intelligent, Internet-based information
delivery interface ('GigaWeb'). 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, together with access to human
expertise. In addition, the Company maintains an authoring environment and
advanced client interface designed for electronic delivery and encourages
collaboration among analysts and clients, which is facilitated through the
Internet.
Giga's objective is to become the leading third generation CIS provider,
offering a significant price/performance advantage over its competitors. Key
elements of the Company's strategy are to (i) utilize and enhance its
price/performance advantage to increase the range of companies which can afford
CIS products, (ii) leverage its existing customer base by providing non-advisory
additional services such as IT Practice Services and Continuous Advisory
Consulting, (iii) increase the number of Advisory Service subscribers within an
organization and (iv) expand its worldwide distribution both domestically and
internationally.
The Company's executive offices are located at One Longwater Circle,
Norwell, Massachusetts 02061 and its telephone number is (781) 982-9500.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. These risk factors include, but are not limited to, the following: the
Company's prior losses and anticipation of future losses; the Company's need to
attract and retain qualified personnel; the Company's dependence on sales and
renewals of subscription-based services; the Company's ability to manage growth;
the Company's future capital needs and the risks of working capital deficiency;
the Company's dependence on key personnel; competition; the risks associated
with the development of new services and products; the potential for significant
fluctuations in quarterly operating results; uncertainties relating to
proprietary rights; the Company's dependence on the Internet infrastructure; the
risk of system failure; the risks related to content; and the risks associated
with international operations. For a discussion of these and other risks, see
'Risk Factors' beginning on page 7.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby........................ 3,000,000 shares
Common Stock to be outstanding after the
Offering......................................... 9,871,338 shares(1)
Use of Proceeds.................................... To repay indebtedness, and for capital expenditures,
working capital and other general corporate purposes. See
'Use of Proceeds.'
Proposed Nasdaq National Market symbol............. GIGX
</TABLE>
- ------------------
(1) Based on shares outstanding as of June 30, 1998. Excludes (i) 1,278,977
shares of Common Stock issuable upon exercise of options outstanding as of
June 30, 1998, with a weighted average exercise price of $2.91 per share;
(ii) 856,755 shares of Common Stock reserved for issuance, as of June 30,
1998, under the Company's stock plans and (iii) 166,666, 35,959, 551,574 and
102,857 shares of Common Stock issuable upon exercise of warrants
outstanding as of June 30, 1998, with exercise prices of $3.00, $13.875,
$13.50 and $13.50 per share, respectively. See 'Management--Executive
Compensation' and 'Description of Capital Stock.'
------------------------
GigaTel(Registered) is a registered trademark of the Company. The Company
has several trademarks including, the GiGa Giga Information Group (and
design)(Trademark), Giga Advisory Service(Trademark), GigaWeb(Trademark),
Gigabots(Trademark), GigaNotes(Trademark), GigaWorld IT Forum(Trademark),
IntraGiga(Trademark), IdeaBytes(Trademark) and ExperNet(Trademark). All other
trademarks or trade names referred to in this Prospectus are the property of
their respective owners.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'seeks,'
'estimates' and variations of such words and similar expressions are intended to
identify such forward-looking statements. These forward-looking statements are
based on current expectations, estimates and projections about the Company's
business, and beliefs and assumptions made by management, all of which involve
risks and uncertainties. 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>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES(1)
COMPANY
------------------------ -----------------------------------------------------------------------
YEAR JANUARY 1 MARCH 17 YEAR ENDED THREE MONTHS ENDED
ENDED TO TO DECEMBER 31, MARCH 31,
DECEMBER 31, APRIL 5, DECEMBER 31, -------------------------- ---------------------------
1994 1995 1995 1996 1997 1997 1998
------------ --------- ------------ ------------ ----------- ---------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Continuous information
services.................... $ -- $ -- $ -- $ 3,149 $ 14,600 $ 2,570 $ 6,804
Other services................ 7,366 1,833 5,517 6,043 4,715 1,276 1,693
Publications.................. 800 283 1,442 946 344 180 55
------------ --------- ------------ ------------ ----------- ---------- --------------
Total revenues.............. 8,166 2,116 6,959 10,138 19,659 4,026 8,552
Costs and expenses:
Cost of services.............. 5,143 1,182 4,707 12,336 12,477 3,202 4,391
Cost of publications.......... 446 240 346 790 174 75 71
Sales and marketing........... 1,438 167 1,016 6,706 19,617 4,158 5,781
Research and development...... -- -- 348 1,789 1,975 659 339
General and administrative.... 4,027 1,047 5,760 9,739 6,419 1,061 1,339
Depreciation and
amortization................ 2,943 215 1,387 2,391 2,810 634 385
------------ --------- ------------ ------------ ----------- ---------- --------------
Total costs and expenses.... 13,997 2,851 13,564 33,751 43,472 9,789 12,306
------------ --------- ------------ ------------ ----------- ---------- --------------
Loss from continuing operations,
net of taxes.................. (4,663) (503) (5,366) (22,702) (23,130) (5,689) (3,807)
Income (loss) from discontinued
operations, net of taxes...... (1,870) 651 1,644 (2,688) 1,313 -- --
------------ --------- ------------ ------------ ----------- ---------- --------------
Net income (loss)............... (6,533) 148 (3,722) (25,390) (21,817) (5,689) (3,807)
------------ --------- ------------ ------------ ----------- ---------- --------------
------------ --------- ------------ ------------ ----------- ---------- --------------
Historical results per common
share-basic and diluted:
Loss from continuing
operations.................. (11.16) (1.80)
Income from discontinued
operations.................. -- --
Income from disposal of
discontinued operations..... 0.63 --
----------- --------------
Net loss...................... (10.53) (1.80)
----------- --------------
----------- --------------
Historical weighted average
number of common shares
outstanding:.................. 2,072,837 2,115,837
Pro forma results per common
share-basic and diluted(4):
Loss from continuing
operations.................. (3.42) (0.56)
Income from discontinued
operations.................. -- --
Income from disposal of
discontinued operations..... 0.19 --
----------- --------------
Net loss...................... (3.23) (0.56)
----------- --------------
----------- --------------
Pro forma weighted average
number of common shares
outstanding(4):............... 6,759,621 6,802,621
<CAPTION>
MARCH 31, 1998
-----------------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(2) ADJUSTED(2)(3)
----------- ---------- --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 1,753 $ 3,753 $ 29,148
Working capital (deficit)............................................................... (13,821) (11,821) 13,574
Total assets............................................................................ 15,673 17,673 43,068
Deferred revenues....................................................................... 19,458 19,458 19,458
Long-term debt, less current portion.................................................... 848 848 848
Total stockholders' equity (deficit).................................................... (12,750) (10,750) 24,645
</TABLE>
(Footnotes on next page)
5
<PAGE>
- ------------------
(1) 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.'
(2) Presented on a pro forma basis to give effect to the Series D Financing (as
defined herein) and the Preferred Conversion. See 'Certain Transactions' and
Note 20 to the Consolidated Financial Statements.
(3) Adjusted to give effect to the sale by the Company of 3,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$13.00 per share and the application of the estimated net proceeds
therefrom. See 'Use of Proceeds' and 'Capitalization.'
(4) The pro forma results per common share and pro forma weighted average common
shares outstanding reflect the conversion of all outstanding shares of
Convertible Preferred Stock into Common Stock upon the closing of the
Offering.
6
<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. This Prospectus contains certain statements of a
forward-looking nature all of which involve risks and uncertainties and actual
events or results may differ materially from the results discussed in such
forward-looking statements.
PRIOR LOSSES AND ANTICIPATION OF FUTURE LOSSES
Since its inception, the Company has incurred substantial costs to develop
its Continuous Information Services, establish its GigaWeb system, build a
management team and recruit, employ and train research analysts, sales personnel
and support staff for its business. As a consequence, the Company has incurred
substantial operating losses since its inception and, at March 31, 1998, had an
accumulated deficit of $54.7 million. The Company expects to incur significant
losses through at least fiscal 1998 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,
principally the risk factors described below. In addition, the Company has
significantly increased its operating expenses and expects to continue such
increases in the future, primarily to expand its staff of research analysts and
sales and support personnel and to further develop and enhance its services and
its GigaWeb system. 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.'
NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
The Company's success will depend, in part, 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 has experienced in the past, and may experience in the
future, high levels of turnover of its personnel, particularly sales and
marketing personnel. The Company has also experienced, and expects to continue
to experience, intense competition for professional personnel with, among
others, producers of IT services and products, management consulting firms and
systems 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.
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 from which the Company derived 74% and 80% of total revenues for the year
ended December 31, 1997 and the three months ended March 31, 1998, respectively.
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 on a timely basis to
withstand competition. There can be no assurance that the Company will be able
7
<PAGE>
to achieve and sustain high subscription renewal rates or that the Company's
employees will be able to achieve desired sales productivity levels. Any
material decline in subscriptions and subscription renewal rates or the
inability of the Company's employees to achieve desired 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.'
ABILITY TO MANAGE 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 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.
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 on capital and operating expenditures which have contributed to an
accumulated deficit of $54.7 million as of March 31, 1998. Furthermore, the
Company expects capital and operating expenditures to increase due to numerous
factors, including the Company's plans to increase marketing efforts for its
Continuous Information Services, the expected costs to attract and retain
qualified employees, including research and sales personnel, on a timely basis
and the related costs of such efforts, the response of competitors to the
Company's services, the Company's plans to develop and market new services and
products, the further enhancement of the GigaWeb system and the Company's
expansion of its international operations, 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
anticipates funding its ongoing working capital needs principally through the
net proceeds to the Company from the Offering. The Company believes that the net
proceeds from the Offering (after repayment of the Bridge Notes described
herein), together with the Company's existing cash and cash equivalents and cash
generated from operations, after the repayment of other debt as it becomes due,
will be sufficient to fund the Company's cash needs until at least the end of
1999. 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. As of May 31, 1998, the Company had,
excluding the Bridge Notes, approximately $1.2 million of equipment financing
debt and had access to an invoice factoring arrangement with a commercial bank
under which the Company could borrow up to $3,000,000 or 80% of eligible
accounts receivable, whichever is less. If necessary, the Company would consider
various other sources of financing, including, but not limited to, private
placements, the sale of assets and strategic alliances, but there can be no
assurance that such financing 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 services or products, any of which 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.'
DEPENDENCE ON KEY PERSONNEL
The extent of 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
8
<PAGE>
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 one or more of the Company's other key personnel would have a
material adverse effect on the Company. There are no employment contracts
currently in force with key employees. The Company does not maintain key person
insurance for any of its key employees.
SIGNIFICANT COMPETITION
The Company competes in the market for IT services and products directly
with other independent providers of Continuous Information Services, including
Gartner Group, Inc., META Group, Inc. and Forrester Research Inc., and the
internal planning, research and marketing staffs of corporations and IT vendors.
Gartner Group, Inc., one of the Company's competitors, was founded by Gideon I.
Gartner, the Company's Chairman, President and Chief Executive Officer. Mr.
Gartner has no current relationship with Gartner Group, Inc. The Company also
competes with other information providers, including market research firms, 'Big
Five' 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 be successful in establishing a
competitive research organization. Delays, difficulty in developing and
achieving market acceptance of Giga's Continuous Information Services, or
customer dissatisfaction would have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, new
competitors could 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. 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.'
RISKS ASSOCIATED WITH THE 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,
features and products that address the changing information, analysis, and
advice 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's business, financial
condition and results of operations. The future success of the Company's
Continuous Information Services will depend in part on the Company's ability to
expand the breadth and depth of its services through the addition of internal
analysts and consultants, content from third party sources and external
practitioners. 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 and other delivery mechanisms. 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 to 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 to make enhancements to existing services and products in a timely
manner in response to changing market conditions or customer requirements, or if
its Continuous Information Services or other service offerings do not achieve
market acceptance, the Company's business, financial condition and results of
operations would be materially adversely affected. See 'Business--Products and
Services.'
9
<PAGE>
POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS;
SEASONALITY
The Company's operating results may fluctuate significantly in the future
due to various factors, including the level and timing of new subscriptions and
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, foreign currency exchange rate
fluctuations, competitive conditions in the industry and general economic
conditions. A high percentage of the Company's operating expenses is based
primarily on sales forecasts and the Company may be unable to adjust spending in
a timely manner to compensate for any unexpected shortfalls in revenues. Any
significant shortfall in revenues in relation to the Company's expectations
would have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, a significant portion of the
Company's renewals and subscriptions are placed during the fourth quarter,
particularly the last month of such quarter, due primarily to customers'
purchasing patterns and the timing of certain sales performance quota cutoffs.
Due to the Company's limited operating history, and as a result of its revenue
growth, seasonal trends in the Company's results of operations have not clearly
emerged. However, the Company believes that its future operating results may
follow a pattern of seasonal fluctuation. Accordingly, the Company believes that
period to period comparisons of results of operations are not necessarily
meaningful and should not be relied upon as an indication of future results of
operations. Due to the foregoing factors, it is likely that in future quarters
the Company's operating results will be below the expectations of public market
analysts and investors. Such an event could 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
The Company's success and its ability to compete effectively is dependent
in part upon its proprietary rights. 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 rights. There can be no assurance that the measures taken by the
Company to protect its proprietary rights will be adequate to enforce its
proprietary rights, or prevent misappropriation or that others will not obtain
similar or superior proprietary rights.
The Company believes that its trademarks are important to its success and
its competitive position. The Company has certain common law trademarks, a U.S.
federal trademark registration and several U.S. federal trademark applications
pending, some of which involve a derivation of the first two letters of the name
Gideon Gartner (e.g. GiGa). The word 'Giga' is commonly used in the IT field to
denote 109 power or a very large amount, and the Company may be unable to obtain
registrations for its trademarks in the U.S. or in other countries for that or
other reasons, and its rights to its trademarks may be narrow in scope.
Registrations for trademarks in the U.S. provide no protection for such
trademarks in other countries. The Company has received initial Office Actions
from the United States Patent and Trademark Office (the 'PTO') indicating that
certain of its applications for U.S. federal trademark registrations for the
GiGa Giga Information Group (and design)(Trademark) trademark have been refused
based on the PTO's citation of other Giga-formative trademarks covered by
pending Federal applications and a registration held by third parties. The
Company plans to respond to this initial refusal, but there can be no assurance
that it will obtain a favorable decision from the PTO Examiner or that one of
these third parties will not successfully oppose registration or use. The
Company is aware of a Benelux trademark registration for the trademark GIGA
MEDIA, the application for which was filed in the Benelux in advance of the
Company's application to register the GiGa Giga Information Group (and
design)(Trademark) trademark with the PTO and the equivalent office in the
Benelux. The Company is also aware that the owner of the Benelux trademark has
filed a lawsuit in the Netherlands against the Company alleging tradename
infringement, and requesting a court order requiring the Company to use an
alternative tradename to Giga Information Group. There can be no assurance that
the tradename infringement lawsuit pending against the Company will result in a
decision that is favorable to the Company. In addition, there can be no
assurance that other parties (i) do not have superior rights to certain of the
Company's trademarks, (ii) will not oppose the Company's applications for
registrations,
10
<PAGE>
(iii) will not seek and obtain cancellation of any of the Company's trademark
registrations and (iv) will not allege that the Company's use of its trademarks
infringes such third parties trademarks. Failure by the Company to establish its
rights to use its trademarks, to overcome the PTO or other country's trademark
office's refusal of certain of its applications, or any loss of its rights to
use its trademarks, could result in damages payable to third parties, the loss
of its rights to prohibit others from using confusingly similar trademarks, the
need to invest substantial resources in building brand identity for a new
trademark, and the loss of market awareness and revenues to the Company.
DEPENDENCE ON THE INTERNET INFRASTRUCTURE
The Company's success will depend, in large part, upon the continued
operation of the Internet infrastructure, such as a reliable network backbone
with the necessary speed, data capacity and security, for providing reliable
GigaWeb access. To the extent that the Internet continues to experience
increased numbers of users, frequency of use or increased bandwidth requirements
of users, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed on it or that the performance
or reliability of the Internet will not be adversely affected. Furthermore, the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and such outages and delays could
adversely affect the customer's ability to access GigaWeb. Moreover, critical
issues concerning the commercial use and government regulation of the Internet
(including security, taxation cost, ease of use and access, intellectual
property ownership, data privacy and other legal liability issues) remain
unresolved and could materially and adversely impact both the growth of the
Internet and the Company's business, financial condition and results of
operations.
RISK OF SYSTEM FAILURE
The Company's Internet-based, information delivery interface, GigaWeb,
resides on a computer system located at the Company's headquarters. The
continuing and uninterrupted performance of GigaWeb is critical to the success
of the Company's business. Any system failure or capacity constraint that causes
interruptions in the Company's ability to service its customers could reduce
customer satisfaction and, if sustained or repeated, would reduce the
attractiveness of the Company's products and could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company maintains business interruption insurance. There is no assurance,
however, that this coverage would be sufficient in the event of a major system
failure.
RISKS RELATED TO CONTENT
As a publisher and distributor of original analyses and licensed
third-party content, the Company faces potential liability for defamation,
negligence, copyright and trademark infringement. Third party content includes
information created or provided by information service organizations, ExperNet
practitioners, and consultants retained by the Company and may be delivered in
writing, via the Internet or in print, or verbally to clients. There can be no
assurance that the Company will not be involved in litigation, which can be
expensive and time consuming, as a result of the creation and/or dissemination
of such content. Any such litigation, whether or not resulting in a judgment
requiring the payment of monetary damages, could have a material adverse affect
on the Company's business, financial condition, and results of operations.
IMPACT OF THE YEAR 2000 ISSUE
The Company has commenced efforts to ensure that the computer systems and
applications upon which it relies for internal operations and external
communications with clients and others will function properly beyond 1999. The
Company presently believes that the computer systems and programs upon which it
relies for its internal operations and external communications, and which the
Company presently expects to use following December 31, 1999, are, or will be,
Year 2000 compliant. There can be no assurance, however, that further assessment
of the Company's internal systems and applications will not reveal that
additional efforts to assure Year 2000 compliance are necessary, and such
efforts may be costly and may divert the Company's resources from product
development or infrastructure improvement programs. In addition, there can be no
assurance that the systems operated by other companies upon which the Company
relies will be Year 2000 compliant on a
11
<PAGE>
timely basis. For example, the Company is dependent on the Internet
infrastructure for providing reliable GigaWeb access. GigaWeb is an Internet
based information delivery interface and the primary delivery medium for the
Company's Continuous Information Services. Year 2000 issues could affect the
power grid and communications networks that provide the Internet's
infrastructure. The occurrence of such problems would be out of the Company's
control and could have a material adverse impact on the Company's ability to
deliver its Continuous Information Services. The Company's business, financial
condition or results of operations could be materially adversely affected by the
failure of either the Company's internal systems and applications or other
systems upon which the Company relies to properly operate or manage data beyond
1999.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Essentially all of the Company's current international operations are
located in the European Union and Canada. The Company operates in the European
Union primarily through wholly-owned subsidiaries in the United Kingdom, France
and Germany. These subsidiaries manage direct sales personnel and distributors
in other countries in the European Union as well. In Canada, the Company
utilizes a full-scale field sales force and provides business support to these
salespersons through its operations in the United States. While the Company
anticipates expanding its operations in the European Union in the future, it has
no current plans to do so. The Company believes there are certain risks inherent
in these international operations, including changes in demand resulting from
fluctuations in 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. Any expansion
in Europe could require considerable management and financial resources and may
negatively impact the Company's near-term results of operations. Essentially all
of the Company's international revenues from the European Union are expected to
continue to be denominated in foreign currencies, particularly the British
pound, while international revenues from Canada are expected to continue to be
denominated in U.S. dollars. Consequently, a decrease in the value of a relevant
foreign currency in relation to the United States dollar, or an adverse
development in any one of the foregoing factors, could have a material adverse
effect on the Company's business, financial condition or results of operations.
The Company does not currently hedge its exposure to foreign currency
fluctuations. The Company had revenues from international operations of $3.2
million in 1996, $2.4 million in 1997 and $700,000 in the quarter ended March
31, 1998. The Company also has begun marketing in Israel and Korea through
representatives. Revenues from these distributors have been and are expected to
continue to be denominated in U.S. dollars. To date, such revenues have been
insignificant.
CONTROL BY MANAGEMENT
Upon the closing of the Offering, Mr. Gartner will beneficially own
approximately 22.9% of the outstanding Common Stock (21.9% assuming the exercise
of the Underwriters' over-allotment option) and Mr. Gartner, together with the
Company's other executive officers, directors and director nominees, including
entities affiliated with them, will beneficially own approximately 35.8% of the
outstanding Common Stock (34.2% assuming the exercise of the Underwriters'
over-allotment option). 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, which could adversely affect the
market price of the Company's Common Stock. 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 will be 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 to be 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
12
<PAGE>
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 customers or competitors as well as other factors.
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. Additional dilution will occur upon exercise or conversion of outstanding
stock options or warrants. See 'Dilution' and 'Shares Eligible for Future Sale.'
SHARES ELIGIBLE FOR FUTURE SALE
The 3,000,000 shares offered hereby will be eligible for sale in the public
market immediately following the effective date of the Registration Statement.
There will be an additional approximate 355,292 shares eligible for sale in the
public market immediately following the effective date of the Registration
Statement, approximately 59,246 shares eligible for resale in the public market
90 days after the effective date of the Registration Statement, approximately
5,870,301 shares eligible for resale upon expiration of lock-up agreements 180
days after the effective date of the Registration Statement; and approximately
586,499 shares eligible for sale upon expiration of their respective one-year
holding periods, subject to certain limitations on sale pursuant to Rule 144
under the Securities Act ('Rule 144'). Holders of 6,261,451 shares (including
shares issuable upon exercise of warrants) have contractual rights to request to
have their shares registered with the Securities and Exchange Commission (the
'Commission') for resale to the public beginning June 30, 1998. In addition,
promptly following the effective date of the Registration Statement, the Company
intends to file a registration statement covering the shares of Common Stock
issued or reserved for issuance under the Company's 1995 Stock Option/Stock
Issuance Plan, as amended (the '1995 Stock Plan'), 1996 Stock Option Plan (the
'1996 Option Plan') and 1997 Director Option Plan (the 'Director Plan'), and
upon such filing any shares subsequently issued under such plans will be
eligible for sale in the public market, subject to Rule 144 compliance in the
case of affiliates of the Company. See 'Shares Eligible for Future Sale' and
'Description of Capital Stock.'
The Company and its executive officers, directors and certain stockholders
have agreed that, subject to certain limited exceptions, for a period ending 180
days after the consummation of the Offering, without the prior written consent
of Friedman, Billings, Ramsey & Co., Inc., they will not, directly or
indirectly, offer, pledge, sell, offer to sell, contract to sell, grant any
option to purchase or otherwise sell, dispose of, make any short sale of, loan
or grant any rights with respect to any shares of Common Stock or any options or
warrants to purchase any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, shares of Common Stock. The
stockholders who have agreed to these restrictions will hold in the aggregate
6,183,517 shares of Common Stock after the consummation of the Offering. See
'Underwriting' and 'Shares Eligible for Future Sale.'
The sale of a substantial number of shares held by existing stockholders,
whether pursuant to a subsequent public offering or otherwise, or the perception
that such sales could occur, could adversely affect the market price of the
Common Stock and could materially impair the Company's future ability to raise
capital through an offering of equity securities. See 'Shares Eligible for
Future Sale' and 'Underwriting.'
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Restated Certificate will be filed upon the closing of the Offering,
pursuant to which the Company's Board of Directors (the '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 such 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
13
<PAGE>
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 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.'
USE OF PROCEEDS
The net proceeds to Giga from the sale of the 3,000,000 shares of Common
Stock offered hereby are estimated to be $35,395,000 ($40,835,500 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 $13.00 per
share.
A portion of the net proceeds of the Offering will be used to repay in full
(the 'Bridge Repayment') the Bridge Notes in the aggregate principal amount of
$10.0 millon issued in April 1998, which notes accrue interest at the rate of
12% per annum. The proceeds of the issuance of the Bridge Notes were used for
general corporate purposes, including the repayment in full of the remaining
$1.2 million aggregate principal amount of convertible notes, which notes
accrued interest at a weighted average rate of 5.2% per annum, of which a note
in the principal amount of $200,000 was held by a director and former officer.
See 'Underwriting' and Notes 11 and 20 to the Consolidated Financial Statements.
The balance of the proceeds will be used for general corporate purposes,
including capital expenditures and working capital. Pending such use, the net
proceeds will be invested in short-term, investment-grade, interest-bearing
obligations.
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
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.
14
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
to give effect to the Series D Financing and the Preferred Conversion and (iii)
the pro forma capitalization of the Company as adjusted to give effect to (A)
the sale of 3,000,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $13.00 per share after deducting the
underwriting discount and estimated offering expenses payable by the Company and
(B) the Bridge Repayment. This information should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)
-------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Long term debt, less current portion.................................... $ 848 $ 848 $ 848
-------- ------------ --------------
Stockholders' Equity:
Convertible Preferred Stock........................................... 12 -- --
Preferred Stock, $.001 par value; 0 shares authorized (actual);
0 shares authorized (pro forma); 5,000,000 shares authorized (pro
forma as adjusted); none issued or outstanding on an actual, pro
forma or pro forma as adjusted basis............................... -- -- --
Common Stock, $.001 par value, 50,000,000 shares authorized (actual);
60,000,000 shares authorized (pro forma and pro forma as adjusted);
2,124,142 shares issued and outstanding (actual); 6,810,926 shares
issued and outstanding (pro forma);
9,810,926 shares issued and outstanding (pro forma as adjusted).... 2 7 10
Additional paid-in capital............................................ 42,588 44,595 79,987
Deferred Compensation................................................. (1,229) (1,229) (1,229)
Accumulated deficit................................................... (54,736) (54,736) (54,736)
Cumulative translation adjustments.................................... 613 613 613
-------- ------------ --------------
Total stockholders' equity (deficit)............................... (12,750) (10,750) 24,645
-------- ------------ --------------
Total capitalization (deficit)..................................... $(11,902) $ (9,902) $ 25,493
-------- ------------ --------------
-------- ------------ --------------
</TABLE>
- ------------------
(1) Based on shares outstanding as of March 31, 1998. Excludes (i) 1,295,781
shares of Common Stock issuable upon exercise of options outstanding as of
March 31, 1998, with a weighted average exercise price of $2.42 per share;
(ii) 893,691 shares of Common Stock reserved for issuance, as of March 31,
1998, under the Company's stock plans; (iii) 166,666, 35,959 and 551,574
shares of Common Stock issuable upon exercise of warrants outstanding as of
March 31, 1998, with exercise prices of $3.00, $13.875 and $13.50 per share,
respectively; (iv) 102,857 shares of Common Stock issuable upon exercise of
warrants issued by the Company between March 31, 1998 and June 30, 1998; and
(v) 60,407 shares of Common Stock issued by the Company to employees between
March 31, 1998 and June 30, 1998. See 'Management--Executive Compensation'
and 'Description of Capital Stock.'
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<PAGE>
DILUTION
The pro forma deficit in net tangible book value of the Company at March
31, 1998, was $10,750,000 or $(1.58) per share. Pro forma net tangible book
value per share represents the amount of total assets, excluding intangibles,
less total liabilities as of March 31, 1998, divided by the number of shares of
Common Stock outstanding on a pro forma basis after giving effect to the Series
D Financing and the Preferred Conversion. After giving effect to the receipt of
the net proceeds from the sale of the 3,000,000 shares of Common Stock offered
by the Company hereby and after deducting the estimated underwriting discount
and offering expenses to be paid by the Company, the pro forma net tangible book
value of the Company at March 31, 1998 would have been $24,645,000 or $2.51 per
share. This represents an immediate increase in net tangible book value of $4.09
per share of Common Stock to existing stockholders and an immediate dilution of
approximately $10.49 per share to new investors purchasing shares in the
Offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Proposed initial public offering price per share........................ $ 13.00
Pro forma net tangible book deficit per share before the Offering..... $(1.58)
Increase per share attributable to new investors...................... 4.09
-------
Pro forma net tangible book value per share after the Offering.......... 2.51
----------
Dilution per share to new investors..................................... $ 10.49
----------
----------
</TABLE>
The following table sets forth on a pro forma basis as of June 30,1998, 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 $13.00 per
share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 6,871,338 70.0% $42,478,000 52.2% $ 6.18
New investors....................................... 3,000,000 30.0% $39,000,000 47.8% $ 13.00
--------- ------- ----------- -------
Total.......................................... 9,871,338 100.0% $81,478,000 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
The foregoing assumes no exercise of any outstanding stock options or
warrants to purchase shares of Common Stock. As of June 30, 1998, there were
outstanding (i) 1,278,977 shares of Common Stock issuable upon exercise of
options at a weighted average exercise price of $2.91 per share, (ii) 166,666,
35,959, 551,574 and 102,857 shares of Common Stock issuable upon exercise of
warrants with exercise prices of $3.00, $13.875, $13.50 and $13.50 per share,
respectively. In addition, as of June 30, 1998, 856,755 shares of Common Stock
were reserved for future issuance pursuant to the Company's stock plans. To the
extent that the outstanding options and warrants are exercised 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.'
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated 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, 'BIS' or the 'Predecessor Companies'). For the period January 1
to December 15, 1993, the operations comprising BIS 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 BIS 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 BIS 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,
1996 and 1997 and for the period from March 17, 1995 to December 31, 1995 and
the years ended December 31, 1996 and 1997 included elsewhere in this Prospectus
have been audited by Coopers & Lybrand L.L.P., independent accountants. The
consolidated financial statements of the Company as of March 31, 1998 and for
the three months ended March 31, 1997 and 1998 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 period March 17, 1995 to December 31, 1995 and the
three months ended March 31, 1997 and 1998 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 BIS as of December
31, 1993 and 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
are derived from unaudited combined financial statements not included in this
Prospectus; 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 selected historical
financial data should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Consolidated
Financial Statements and notes thereto appearing elsewhere in this Prospectus.
17
<PAGE>
<TABLE>
<CAPTION>
COMPANY
----------------------
PREDECESSOR COMPANIES YEAR
---------------------------------------------------- PRO FORMA ENDED
JANUARY 1 DECEMBER 16 YEAR JANUARY 1 YEAR MARCH 17 DECEMBER
TO TO ENDED TO ENDED TO 31,
DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, DECEMBER 31, DECEMBER 31, --------
1993 1993 1994 1995 1995(1) 1995 1996
------------ ------------ ------------ ---------- ------------ ------------ --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Continuous information
services...................... $ -- $ -- $ -- $ -- $ -- $ -- $ 3,149
Other services.................. 5,815 91 7,366 1,833 8,543 5,517 6,043
Publications.................... 1,311 51 800 283 1,725 1,442 946
------------ ------------ ------------ ---------- ------------ ------------ --------
Total revenues................ 7,126 142 8,166 2,116 10,268 6,959 10,138
------------ ------------ ------------ ---------- ------------ ------------ --------
Costs and expenses:
Cost of services................ 4,268 267 5,143 1,182 7,172 4,707 12,336
Cost of publications............ 726 64 446 240 586 346 790
Sales and marketing............. 1,448 92 1,438 167 972 1,016 6,706
Research and development........ -- -- -- -- 348 348 1,789
General and administrative...... 3,431 140 4,027 1,047 6,934 5,760 9,739
Depreciation and amortization... 613 32 2,943 215 1,964 1,387 2,391
------------ ------------ ------------ ---------- ------------ ------------ --------
Total costs and expenses...... 10,486 595 13,997 2,851 17,976 13,564 33,751
------------ ------------ ------------ ---------- ------------ ------------ --------
Operating loss.................. (3,360) (453) (5,831) (735) (7,708) (6,605) (23,613)
Interest income................... 100 7 96 23 274 246 515
Interest expense.................. (38) (4) (26) (4) (134) (100) (95)
------------ ------------ ------------ ---------- ------------ ------------ --------
Loss from continuing operations
before income taxes
(benefit)..................... (3,298) (450) (5,761) (716) (7,568) (6,459) (23,193)
Income tax benefit (charge)....... (1,035) -- (1,098) (213) (1,311) (1,093) (491)
------------ ------------ ------------ ---------- ------------ ------------ --------
Loss from continuing
operations.................... (2,263) (450) (4,663) (503) (6,257) (5,366) (22,702)
------------ ------------ ------------ ---------- ------------ ------------ --------
Discontinued operations:
Income (loss) from the
discontinued BIS market
research business (net of tax
effect)....................... 2,972 44 (1,469) 597 2,097 1,490 (79)
Income (loss) from the
discontinued Shrapnel business
(net of tax effect)........... 70 (12) (401) 54 154 154 (134)
Income (loss) on disposal of
discontinued BIS market
research business (net of tax
effect)....................... -- -- -- -- -- -- (2,315)
Income (loss) on disposal of
discontinued Shrapnel business
(net of tax effect)........... -- -- -- -- -- -- (160)
------------ ------------ ------------ ---------- ------------ ------------ --------
Income (loss) from discontinued
operations.................... 3,042 32 (1,870) 651 2,251 1,644 (2,688)
------------ ------------ ------------ ---------- ------------ ------------ --------
Net income (loss)............... $ 779 $ (418) $ (6,533) $ 148 $ (4,006) $ (3,722) $(25,390)
------------ ------------ ------------ ---------- ------------ ------------ --------
------------ ------------ ------------ ---------- ------------ ------------ --------
Historical results per common and
common equivalent share:
Loss from continuing
operations..................
Income (loss) from
discontinued operations.....
Income (loss) from disposal of
discontinued operations.....
Net income (loss).............
Historical weighted average common
and common equivalent shares
outstanding.....................
Pro forma results per common
share(2):
Loss from continuing
operations..................
Income (loss) from
discontinued operations.....
Income (loss) from disposal of
discontinued operations.....
Net income (loss).............
Pro forma weighted average common
shares outstanding(2)...........
<CAPTION>
COMPANY
----------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------ ----------------------
1997 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Continuous information
services...................... $ 14,600 $ 2,570 $ 6,804
Other services.................. 4,715 1,276 1,693
Publications.................... 344 180 55
---------- ---------- ----------
Total revenues................ 19,659 4,026 8,552
---------- ---------- ----------
Costs and expenses:
Cost of services................ 12,477 3,202 4,391
Cost of publications............ 174 75 71
Sales and marketing............. 19,617 4,158 5,781
Research and development........ 1,975 659 339
General and administrative...... 6,419 1,061 1,339
Depreciation and amortization... 2,810 634 385
---------- ---------- ----------
Total costs and expenses...... 43,472 9,789 12,306
---------- ---------- ----------
Operating loss.................. (23,813) (5,763) (3,754)
Interest income................... 277 98 37
Interest expense.................. (235) (17) (86)
---------- ---------- ----------
Loss from continuing operations
before income taxes
(benefit)..................... (23,771) (5,682) (3,803)
Income tax benefit (charge)....... (641) 7 4
---------- ---------- ----------
Loss from continuing
operations.................... (23,130) (5,689) (3,807)
---------- ---------- ----------
Discontinued operations:
Income (loss) from the
discontinued BIS market
research business (net of tax
effect)....................... -- -- --
Income (loss) from the
discontinued Shrapnel business
(net of tax effect)........... -- -- --
Income (loss) on disposal of
discontinued BIS market
research business (net of tax
effect)....................... 1,101 -- --
Income (loss) on disposal of
discontinued Shrapnel business
(net of tax effect)........... 212 --
---------- ---------- ----------
Income (loss) from discontinued
operations.................... 1,313 -- --
---------- ---------- ----------
Net income (loss)............... $ (21,817) $ (5,689) $ (3,807)
---------- ---------- ----------
---------- ---------- ----------
Historical results per common and
common equivalent share:
Loss from continuing
operations.................. (11.16) (1.80)
Income (loss) from
discontinued operations..... -- --
Income (loss) from disposal of
discontinued operations..... 0.63 --
---------- ----------
Net income (loss)............. (10.53) (1.80)
---------- ----------
---------- ----------
Historical weighted average common
and common equivalent shares
outstanding..................... 2,072,837 2,115,837
Pro forma results per common
share(2):
Loss from continuing
operations.................. (3.42) (0.56)
Income (loss) from
discontinued operations..... -- --
Income (loss) from disposal of
discontinued operations..... 0.19 --
---------- ----------
Net income (loss)............. (3.23) (0.56)
---------- ----------
---------- ----------
Pro forma weighted average common
shares outstanding(2)........... 6,759,621 6,802,621
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES COMPANY
-------------------------- ------------------------
DECEMBER 31, DECEMBER 31,
-------------------------- ------------------------
1993 1994 1995 1996
------------ ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 2,639 $ 1,693 $ 16,876 $8,286
Working capital (deficit).............................................. 1,905 (1,503) 11,549 113
Total assets........................................................... 10,181 7,509 24,833 19,679
Deferred revenues...................................................... 762 1,232 2,201 6,832
Long term debt, less current portion................................... -- -- 1,437 1,511
Total stockholders' equity (deficit)................................... 6,942 2,017 14,972 1,659
<CAPTION>
COMPANY
--------------------------
DECEMBER 31,
------------ MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 3,539 $ 1,753
Working capital (deficit).............................................. (10,196) (13,821)
Total assets........................................................... 23,023 15,673
Deferred revenues...................................................... 20,604 19,458
Long term debt, less current portion................................... 937 848
Total stockholders' equity (deficit)................................... (9,090) (12,750)
</TABLE>
- ------------------
(1) 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
to the Consolidated Financial Statements.
(2) The pro forma results per common share and pro forma weighted average common
shares outstanding reflect the conversion of all outstanding shares of
Convertible Preferred Stock into Common Stock upon the closing of the
Offering.
19
<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. In April 1995, the Company
acquired BIS 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. In July 1995, the
Company acquired a majority equity interest in ExperNet Corporation ('ExperNet
Corporation'), which was owned by Gideon I. Gartner and David L. Gilmour, each
at the time a director and officer of the Company, and, in December 1995,
acquired the remaining 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 January 1, 1993 to December 15, 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 Corporation from July 6, 1995, their
respective dates of acquisition. Results of operations of ExperNet Corporation
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 $3.1 million was also recorded and
was amortized over two years. The acquisition of ExperNet Corporation was also
accounted for as a purchase with the related goodwill of approximately $1.4
million amortized over five years. During 1997, the unamortized portion of the
goodwill relating to the ExperNet acquisition was written off, resulting in a
charge to amortization expense of $1.0 million.
In June 1996, the Company discontinued the BIS market research business.
Results of operations from the discontinued BIS market research business are
reflected as discontinued operations in the Company's financial statements. The
Company continues to generate revenues from the events businesses acquired as
part of the acquisition of BIS, which are reflected in the statements of
operations as Other Services. As a result of the discontinuance of the BIS
market research business, Giga recorded a charge, net of taxes, of approximately
$2.3 million in the year ended December 31, 1996. The Company 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. In 1997, the Company recorded a gain of approximately $1.1 million
comprised mainly of a reversal of the provision for future lease commitments and
related expenses for two facilities in England and the provision which was
established for refunds to potentially dissatisfied customers. The Company does
not consider the historical results of BIS operations which have been
discontinued to be meaningful or indicative of the Company's future results of
operations.
In December 1996, the Company discontinued its econometric forecasting
business based in Australia, BIS Shrapnel, in anticipation of selling the
business to local management. The Company recorded a provision of $160,000 in
1996 for anticipated operating losses prior to the completion of the sale by the
Company. In July 1997, the operations were sold to local management for
approximately $293,000 in cash, and a gain of approximately $212,000, net of
taxes, was recorded and is reflected in disposal of discontinued operations. All
liabilities and business risks were transferred to the local management of BIS
Shrapnel. Results of operations from the discontinued BIS Shrapnel business are
included among Discontinued Operations in the Company's financial statements.
OVERVIEW
Giga provides objective analyses and advice relating to developments and
trends in the IT industries to assist its customers in making technology-related
decisions. The Company's four principal products and services are (i) Advisory
Service, (ii) IT Practice Services, (iii) Continuous Advisory Consulting and
(iv) Events and Publications. The Company provides its services primarily
through GigaWeb, its intelligent Internet-based information delivery interface.
20
<PAGE>
The Company introduced its Advisory Service and GigaWeb in April 1996. In
July 1996, the Company introduced its IT Practice Services. Advisory Consulting
was introduced in September 1997. The Company's Events and Publications product
line was acquired with the acquisition of BIS in April 1995. For financial
reporting purposes, revenues from (i) Advisory Service, IT Practice Services and
Continuous Advisory Consulting are aggregated into Continuous Information
Services, (ii) Events and other services, principally consulting, are aggregated
into Other Services and (iii) Publications are listed separately. The Company
expects that revenues from its Continuous Information Services will continue to
increase as a percentage of its total revenues.
The Company's Continuous Information Services are typically sold through
annual contracts that generally provide for payment at the commencement of the
contract period. A small number of CIS contracts, however, are billed quarterly.
Amounts received in advance of services provided are reflected in the Company's
financial statements as deferred revenues and are recognized monthly on a pro
rata basis over the term of the contract. Revenues from Other Services are
recognized as follows: events as they occur and consulting as such services are
performed. Revenues from Publications are recognized when publications are
delivered. Unbilled receivables are primarily generated as a result of
contractual quarterly billing terms offered in connection with the Company's
Continuous Information Services. The Company also records the related commission
obligation upon acceptance of a CIS contract and amortizes the corresponding
deferred commission over the contract period in which the related CIS revenues
are earned. Due to these accounting policies, trade accounts receivable,
deferred revenues, unbilled accounts receivable and deferred commissions are
expected to increase as the Company's CIS business grows.
Essentially all of the Company's current international operations are
located in the European Union and Canada. The Company operates in the European
Union primarily through wholly-owned subsidiaries in the United Kingdom, France
and Germany. These subsidiaries manage direct sales personnel and distributors
in other countries in the European Union as well. In Canada, the Company
utilizes a full-scale field sales force and provides business support to these
salespersons through its operations in the United States. Substantially all of
the Company's revenues from the European Union are denominated in foreign
currencies, particularly the British pound, while essentially all of the
Company's revenues from Canada are denominated in U.S. dollars. The Company has
begun marketing in Israel and Korea through representatives. Revenues from these
representatives have been and are expected to continue to be denominated in U.S.
dollars. To date, however, such revenues have been insignificant. As a result of
fluctuations in exchange rates, transactions denominated in foreign currencies
inherently have financial risk. To date, however, the Company's cumulative
translation adjustments have been slightly favorable, although there can be no
assurance that this trend will continue in the future. The Company does not
currently hedge its exposure to foreign currency adjustments.
The Company believes that a leading measure of the volume of its CIS
business is the annualized value ('Annualized Value') of its Continuous
Information Services agreements in effect at a given point in time. The Company
calculates Annualized Value each month as the cumulative annualized subscription
value payable under the agreements without regard to commencement date, duration
or risk of cancellation. The Company also measures its performance on the basis
of Net Annualized Value Increase ('NAVI') which is calculated on the basis of
new agreements plus upgrades, net of downgrades and cancellations. The sum of
all past NAVI equals Annualized Value. Historically, a substantial portion of
NAVI for a given year is generated by the Company in the last two calendar
quarters, and particularly in the last month of the last quarter. The following
table sets forth the Annualized Value and NAVI for the years ended December 31,
1996 and 1997 and the three months ended March 31, 1997 and 1998.
<TABLE>
<CAPTION>
UNAUDITED
---------------------------------------
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------- ------------------
1996 1997 1997 1998
------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Beginning Annualized Value............................................. $ -- $ 9,339 $ 9,339 $26,619
Net Annualized Value Increase.......................................... 9,339 17,280 2,384 2,878
------ ------- ------- -------
Ending Annualized Value................................................ $9,339 $26,619 $11,723 $29,497
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
21
<PAGE>
A majority of the Company's annual contracts renew automatically unless the
customer cancels the subscription. The Company's experience is that a
substantial portion of customers renew expiring contracts for an equal or
greater level of total CIS fees each year. As of March 31, 1998, approximately
66% of Giga's customers had renewed one or more contracts for Giga's services in
the past twelve months. The Company believes that a direct comparison of its
renewal rates and the renewal rates of its major competitors may not be
meaningful due in part to the Company's limited operating history and its
Advisory Service model (the focus of which is a unified, integrated approach
with fewer contracts/services per customer), in contrast to the multiple-service
model of the Company's major competitors.
The Company anticipates that Annualized Value, at a point in time, will be
a reliable indicator of the minimum next twelve months' CIS revenues. However,
the Company's current renewal rate is not necessarily indicative of the rate of
retention of the Company's revenue base, and Annualized Value at any given time
may not be indicative of future revenues or cash flows, especially if the rate
of renewal of existing agreements or the timing of new agreements were to
significantly change during the following 12 months compared to historical
experience. There can be no assurance that the Company will be able to sustain
or increase its current renewal rate or that Annualized Value will continue to
grow.
The Company's operating expenses consist of cost of services, cost of
publications, selling and marketing, research and development, general and
administrative, and depreciation and amortization. Cost of services consists
primarily of the direct costs associated with the delivery of the Company's
\Continuous Information Services and other services including personnel expenses
for analysts and other personnel, direct expenses for events and conferences,
and royalties to third party information providers. Cost of publications
consists of expenses to create, print and distribute publications. Sales and
marketing expenses include personnel expenses, promotional expenses, and sales
commissions. Sales commissions are typically deferred when paid and expensed as
the related revenue is recognized. Research and development expenses consist of
personnel, consulting and other expenses to develop, enhance and operate
GigaWeb. General and administrative expenses are primarily personnel costs and
fees for professional services supporting the administrative functions of the
Company.
Since its inception, the Company has incurred substantial costs to develop
its Continuous Information Services, establish its GigaWeb system, build a
management team and recruit, employ and train research analysts, sales personnel
and support staff for its business. The Company expects to incur significant
losses through at least fiscal 1998 as the Company expands and develops its
services and products.
The Company has incurred substantial tax loss carryforwards since
inception, and acquired tax loss carryforwards with its acquisition of BIS, all
of which totalled approximately $51.8 million in the aggregate at March 31,
1998. Due to the magnitude of these existing tax loss carryforwards, the
continuing anticipated losses through at least 1998 and the substantial
uncertainties associated with its business, the Company is unable to conclude
that it is more likely than not that the deferred tax associated with these tax
loss carryforwards will be realized. Accordingly, this deferred tax asset has
been fully reserved. This valuation allowance will be reduced and the deferred
tax asset will be recognized when and if it becomes more likely than not that
the deferred tax asset will be realized.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
total revenues for the periods indicated.
<TABLE>
<CAPTION>
PRO FORMA THREE MONTHS
------------ YEAR ENDED ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
DECEMBER 31, -------------- -------------
1995 1996 1997 1997 1998
------------ ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Continuous information services .............................. 31% 74% 64% 79%
Other services................................................ 83% 60 24 32 20
Publications.................................................. 17 9 2 4 1
------ ----- ----- ----- ----
Total revenues.............................................. 100 100 100 100 100
------ ----- ----- ----- ----
Costs and expenses:
Cost of services.............................................. 70 122 63 80 51
Cost of publications.......................................... 6 8 1 2 1
Sales and marketing........................................... 9 66 100 103 68
Research and development...................................... 3 18 10 16 4
General and administrative.................................... 68 96 33 26 16
Depreciation and amortization................................. 19 24 14 16 5
------ ----- ----- ----- ----
Total costs and expenses.................................... 175 333 221 243 144
------ ----- ----- ----- ----
Loss from operations.......................................... (75) (233) (121) (143) (44)
Interest income (expense), net.................................. 1 4 0 2 (1)
------ ----- ----- ----- ----
Loss from continuing operations before income taxes........... (74) (229) (121) (141) (45)
Income tax (benefit) charge..................................... (13) (5) (3) 0 0
------ ----- ----- ----- ----
Loss from continuing operations............................... (61) (224) (118) (141) (45)
Income (loss) from discontinued operations.................... 22 (27) 7 -- --
------ ----- ----- ----- ----
Net loss...................................................... (39)% (250)% (111)% (141)% (45)%
------ ----- ----- ----- ----
------ ----- ----- ----- ----
</TABLE>
In general, the decreases in the various operating expenses as a percentage
of total revenues are primarily due to leveraging those expenses over increased
revenues derived from a growing customer base.
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Revenues. Total revenues increased 112% to $8.6 million for the three
months ended March 31,1998 from $4.0 million for the same period in 1997. The
increase in total revenues was primarily due to the increase in revenues from
Continuous Information Services.
Revenues from Continuous Information Services increased 165% to $6.8
million for the three months ended March 31, 1998 from $2.6 million for the same
period in 1997. This increase in revenues was primarily due to growing market
acceptance of Giga's services and continued expansion of the Company's sales
force.
Revenues from Other Services increased 33% to $1.7 million for the three
months ended March 31, 1998 from $1.3 million for the same period in 1997. The
increase was primarily due to higher revenues from the planned expansion of the
Company's events and conferences activities net of a decrease in consulting
revenues associated with the phase-out of certain consulting activities.
Revenues from Publications decreased 69% to $55,000 for the three months
ended March 31, 1998 from $180,000 for the same period in 1997. The decrease was
due to a de-emphasis on this business activity.
Cost of services. Cost of services increased 37% to $4.4 million for the
three months ended March 31, 1998 from $3.2 million for the same period in 1997.
The increase in costs was primarily due to the expansion of the analyst staff
and other expenses associated with providing Continuous Information Services.
Cost of publications. Cost of publications decreased 5% to $71,000 for the
three months ended March 31, 1998 from $75,000 for the same period in 1997. The
decrease was primarily attributable to a continued reduction in the number of
publications produced.
Sales and marketing. Sales and marketing expenses increased 39% to $5.8
million for the three months ended March 31, 1998 from $4.2 million for the same
period in 1997. The increase was principally due to the
23
<PAGE>
continued expansion of the Company's direct sales organization and higher sales
commission expense from increased revenues.
Research and development. Research and development expenses decreased 49%
to $339,000 for the three months ended March 31, 1998 from $659,000 for the same
three-month period in 1997. The decrease was primarily due to the completion of
the development of the basic functionality of GigaWeb in 1997.
General and administrative. General and administrative expenses increased
26% to $1.3 million for the three months ended March 31, 1998 from $1.1 million
for the same period in 1997. The increase in expense was primarily due to
enhancements to infrastructure such as internal systems, additional personnel
and other items to support the Company's growth.
Depreciation and amortization. Depreciation and amortization expense
decreased 39% to $385,000 for the three months ended March 31, 1998 from
$634,000 for the same period in 1997. The decrease was primarily due to the
Company's practice in 1997 to rent, instead of purchase, computer equipment.
Interest income and expense. Interest income decreased to $37,000 for the
three months ended March 31, 1998 from $98,000 for the same period in 1997 due
to lower cash balances available for investment. Interest expense increased to
$86,000 from $17,000 for the same period in 1997 due to a long-term equipment
financing loan agreement entered into by the Company in June 1997.
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND 1995 (PRO FORMA)
For purposes of the following discussion, the results for the year ended
December 31, 1995 are presented on a pro forma basis to reflect (i) the
operations of the Predecessor Companies from January 1, 1995 to April 5, 1995,
(ii) the operations of the Company from March 17, 1995 to December 31, 1995 and
(iii) the operations of ExperNet and the amortization of goodwill incurred in
connection with the acquisition of the Predecessor Companies as though such
acquisitions occurred on January 1, 1995. The results of the BIS market research
business and the Australian econometric forecasting operation have been shown as
discontinued operations. The Company's activities from March 17, 1995 to April
5, 1995 were principally devoted to the acquisition of the Predecessor
Companies.
Revenues. Total revenues increased 94% to $19.7 million in 1997 from $10.1
million in 1996 and were essentially unchanged in 1996 from $10.3 million in
1995. These changes in total revenues were primarily due to increased revenues
from Continuous Information Services, offset by decreased revenues from Other
Services.
Revenues from Continuous Information Services increased 364% to $14.6
million in 1997 from $3.1 million in 1996. The Company began marketing its
Continuous Information Services in April 1996. The increase in revenues was
primarily due to growing market acceptance of Giga's services and continued
expansion of the Company's sales force.
Revenues from Other Services decreased 22% to $4.7 million in 1997 from
$6.0 million in 1996 and 29% in 1996 from $8.5 million in 1995. The decrease in
such revenues in 1997 was principally due to a planned phase-out of BIS's
consulting business offset by increased revenues from the Company's events and
conferences. The decrease in revenues in 1996 compared to 1995 was primarily due
to the decrease in certain consulting activities.
Revenues from Publications decreased 64% to $344,000 in 1997 from $946,000
in 1996 and 45% in 1996 from $1.7 million in 1995. The decreases were primarily
due to a de-emphasis on this business activity.
Cost of services. Cost of services decreased 1% to $12.5 million in 1997
from $12.3 million in 1996 and increased 72% in 1996 from $7.2 million in 1995.
The cost decrease in 1997 was primarily due to decreased expenses for the legacy
BIS consulting business being phased-out, offset by increased expenses to
provide Continuous Information Services to the Company's growing customer base.
The cost increase in 1996 was due to the Company's substantial investment to
build its research organization and retain consultants for the Company's
Continuous Information Services.
Cost of publications. Cost of publications decreased 78% to $174,000 from
$790,000 in 1996 and increased 35% in 1996 from $586,000 in 1995. The decrease
in 1997 was principally due to a planned decrease in the number of publications.
The increase in 1996 was primarily due to a change in the mix of publications
sold.
Sales and marketing. Sales and marketing expenses increased 193% to $19.6
million in 1997 from $6.7 million in 1996 and 590% in 1996 from $972,000 in
1995. The increase in 1997 was primarily due to the
24
<PAGE>
expansion of the Company's sales organization to sell its Continuous Information
Services and higher sales commission expense from increased revenues. The
increase in 1996 was principally attributable to the increased investment in
marketing programs and expansion of the Company's sales force in connection with
the introduction of its Continuous Information Services in April 1996.
Research and development. Research and development increased 10% to $2.0
million in 1997 from $1.8 million in 1996 and 414% in 1996 from $348,000 in
1995. The increase in 1997 was primarily due to the continued enhancement of
GigaWeb to meet evolving market needs. The increase in 1996 was due to the
investment required for the development of GigaWeb and ExperNet.
General and administrative. General and administrative expenses decreased
34% to $6.4 million in 1997 from $9.7 million in 1996 and increased 40% in 1996
from $6.9 million in 1995. The decrease in 1997 from 1996, and the increase in
1996 over 1995, was primarily due to one-time expenses in 1996 for internal
systems, facilities, personnel, and other items to build the infrastructure to
support the expansion of the Company's operations.
Depreciation and amortization. Depreciation and amortization expenses
increased 18% to $2.8 million in 1997 from $2.4 million in 1996 and 22% in 1996
from 2.0 million in 1995. The increase in 1997 was due primarily to the
write-off of the remaining amount of unamortized goodwill associated with the
ExperNet acquisition offset by the Company's practice in 1997 to rent rather
than purchase computer equipment.
Interest income and expense. Interest income was earned on cash balances,
in excess of then current operating needs, from the Company's equity financing
during 1996 and 1997. Interest expense is primarily from long-term debt for
equipment financing and acquisitions and varies with the outstanding balance.
Discontinued operations. In June 1996, the Company discontinued its BIS
market research business and, as a result, recorded a charge of approximately
$2.3 million, net of taxes, in the year ended December 31, 1996. In 1997, the
Company recorded income, net of taxes, of $1.1 million from the settlement of a
liability relating to a long-term, foreign lease and the reversal of a provision
established for refunds to potentially dissatisfied customers that had been part
of the aforementioned charge.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations primarily
through the private placement of equity securities and borrowings under
promissory notes. The Company has received aggregate net proceeds of $42.5
million from the private placement of equity securities and recently borrowed
$10.0 million under the Bridge Notes. At March 31, 1998, the Company had cash
and cash equivalents of $1.8 million. See Notes 11, 13 and 20 to the
Consolidated Financial Statements.
During 1997 and the three months ended March 31, 1998, the Company's
capital expenditures totaled approximately $559,000 and $261,000, respectively,
primarily for computer equipment. The Company expects that additional purchases
of computer equipment will be made as the Company's employee base and customer
base grow. As of March 31, 1998, the Company had no material commitments for
capital expenditures, and the Company does not currently expect the rate of
capital spending to vary significantly through the end of 1999.
Net cash used by continuing operations was approximately $17.7 million and
$14.5 million for the years ended December 31, 1996 and 1997, respectively, and
approximately $1.3 million for the three months ended March 31, 1998. Net cash
used by investing activities of approximately $206,000 for the year ended
December 31, 1997 and approximately $251,000 for the three months ended March
31, 1998 were primarily due to purchases of computer equipment. Cash provided
from financing activities of approximately $17.7 million for the period March
17, 1995 to December 31, 1995 and approximately $11.6 million and $11.7 million
for the years ended December 31, 1996 and 1997, respectively, were primarily
generated by the issuance of the Common Stock and Preferred Stock as previously
described. Cash used by financing activities for the three months ended March
31, 1998 of $231,000 was principally used to repay long-term debt.
In April 1998, the Company issued the Bridge Notes in the aggregate
principal amount of $10.0 million and warrants to purchase an aggregate of
166,666 shares of Common Stock at an exercise price of $3.00 per share. The
Bridge Notes accrue interest at the rate of 12% per annum. The obligations under
the Bridge Notes are collateralized by substantially all of the assets of the
Company. The outstanding principal amount of, and any unpaid accrued interest
on, the Bridge Notes is due and payable upon the consummation of the Offering
and may
25
<PAGE>
be prepaid in whole or in part at any time without penalty. In April 1998 and
May 1998, the Company issued an aggregate of $2.0 million of Series D Preferred
Stock. All outstanding shares of the Company's Series D Preferred Stock will
automatically convert into Common Stock upon the consummation of the Offering.
See 'Certain Transactions' and Note 20 to the Consolidated Financial Statements
for additional information concerning these transactions. The Company believes
that the net proceeds from the Offering (after repayment of the Bridge Notes
described herein), together with its existing cash and cash equivalents and cash
generated from operations, after the repayment of the Bridge Notes and the
repayment of other debt as it becomes due, will be sufficient to fund the
Company's cash needs until at least the end of 1999.
The Company has spent substantial amounts to date on capital and operating
expenditures which have contributed to an accumulated deficit of $54.7 million
as of March 31, 1998. Furthermore, the Company expects capital and operating
expenditures to increase due to numerous factors, including the Company's plans
to increase marketing efforts for its Continuous Information Services, the
expected costs to attract and retain qualified employees, including research and
sales personnel, on a timely basis and the related costs of such efforts, the
response of competitors to the Company's services, the Company's plans to
develop and market new services and products, the further enhancement of the
GigaWeb system and the Company's expansion of its international operations, 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 anticipates funding its ongoing working capital needs
principally through the net proceeds to the Company from the Offering. The
Company believes that the net proceeds from the Offering (after repayment of the
Bridge Notes described herein), together with the Company's existing cash and
cash equivalents and cash generated from operations, after the repayment of
other debt as it becomes due, will be sufficient to fund the Company's cash
needs until at least the end of 1999. 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. As of May 31,
1998, the Company had, excluding the Bridge Notes, approximately $1.2 million of
equipment financing debt and had access to an invoice factoring arrangement with
a commercial bank under which the Company could borrow up to $3,000,000 or 80%
of eligible accounts receivable, whichever is less. If necessary, the Company
would consider various other sources of financing, including, but not limited
to, private placements, the sale of assets and strategic alliances, but there
can be no assurance that such financing 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 services, any of which could have a material adverse
effect in the Company's business, financial condition and results of operations.
See 'Risk Factors--Substantial Future Capital Needs; Risks of Working Capital
Deficiency.'
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. The Company has
commenced efforts to ensure that the computer systems and applications upon
which it relies for internal operations and external communications, and
presently expects to use following December 31, 1999, are or will be year 2000
compliant. While uncertainty exists concerning the potential effects associated
with such compliance, the Company does not believe that year 2000 compliance
will result in a material adverse effect on its business, financial condition or
results of operations.
26
<PAGE>
BUSINESS
GENERAL
The Company provides objective analyses and advice relating to developments
and trends in the computing, telecommunications, and related industries
(collectively, the 'Information Technology' or 'IT' industries) to assist its
customers in making technology-related decisions. IT is critical to the
competitiveness and long-term viability of a wide range of organizations. The
Company believes information overload, confusion, and anxiety exists among IT
decision-makers. As a result, an increasing number of organizations are turning
to Continuous Information Service ('CIS') providers to monitor and analyze IT
developments and to identify trends to support such organizations' IT
decision-making needs. The Company's Continuous Information Services are
available to customers for an annual subcription fee billed and payable in
advance, which entitles members to (i) access all the Company's advisory service
information and analyses, (ii) inquiry privileges and (iii) participate in
briefings, a conference and teleconferences.
CIS MARKET
The CIS industry emerged in the 1960's in response to the complexity and
growth in the IT market. In the early stages of the CIS industry's development,
CIS providers primarily produced quantitative analyses of IT industry trends to
assist vendors with product planning and formulation of marketing and business
strategies. The IT industry continued to rapidly evolve and increasingly became
characterized by short product life cycles, highly complex, distributed
computing and telecommunications architectures and IT systems made up of
hardware and software from a wide variety of vendors. As a result,
decision-making by users of IT products and services became increasingly
complicated, straining the analytic resources within organizations. In response
to this opportunity, a second generation of CIS providers emerged by the 1980's,
offering analytical and decision-support information to users, in addition to
the quantitative information offered to vendors. These second generation
providers continued to be characterized by multiple information service
offerings, each of which focused on a specific aspect of the IT industry, such
as mainframes, personal computers, operating systems, application development
tools or relational databases. Over time, as IT became more complex, the number
of such services proliferated.
In the 1990's, the continuous expansion of technological choices has made
IT operations even more complex and diverse, particularly with the migration
from legacy mainframe systems to distributed client-server and other
architectures and the emergence of the Internet, together with advanced
telecommunications offerings. As a result, organizations are increasingly
turning to outside consultants for support. In addition to users and vendors, an
emerging segment of the CIS market includes business managers, who require
increased awareness of IT issues to heighten sensitivity to systems
opportunities, and small businesses, which are becoming more reliant on
technology.
The Company believes that the multiple-service model is not well positioned
to effectively address the critical and evolving IT needs of modern
organizations. Due to the complexity and interrelationships among the various
aspects of IT, the Company believes organizations require integrated advice that
is not limited to the boundaries of the second generation model. In addition,
since IT solutions also often require practical, hands-on experience, CIS
providers must complement the strategy-oriented consultative skills of many of
today's industry analysts with pragmatic real-world advice. Due to increasing
time and budget pressures, customers must also be able to quickly and
efficiently search through the voluminous resources and published content of CIS
providers to locate the particular analyses and expertise they require.
THE GIGA SOLUTION
Giga was founded by Gideon I. Gartner, who in 1979 founded Gartner Group,
Inc. Building on his extensive experience and success in the CIS industry, Mr.
Gartner formed Giga with the objective of creating a new approach toward
addressing the CIS needs of IT users and vendors. Giga has developed a range of
innovative Continuous Information Services, as well as an effective, electronic
information delivery mechanism, designed to provide integrated IT analyses and
advice.
27
<PAGE>
Foremost among these innovations is the Company's unified Advisory Service,
in which IT research and analysis is offered to customers as a single service
intended to encompass the variety of IT coverage offered by other CIS providers
through multiple and fragmented services. The Company believes that its Advisory
Service (i) delivers the comprehensive viewpoint required by customers, (ii)
offers a price/performance advantage over the second generation model since the
payment of one subscription fee provides access to all advisory research and
(iii) becomes increasingly cost effective over time as new advisory research is
added without increased subscription fees.
Giga's service approach was developed in response to the needs of the CIS
market. The Company's unified Advisory Service produces internal benefits which
the Company believes allows it to better service its customers, including (i)
flexibility of resource allocation, (ii) an orientation toward internal
collaboration and (iii) the development of experienced generalists, who are able
to diagnose broad client challenges and communicate effectively with clients.
Flexibility of resource allocation allows the Company to allocate its research
resources to address subjects of the greatest significance to its customers at
any particular time. The Company's orientation toward internal collaboration
eliminates the competition among different advisory areas that the Company
believes is customary at other IT providers. Instead, the Company encourages its
analysts to work together in a multi-disciplinary approach and present a unified
view to its customers. The process is also designed to be objective, by virtue
of several features built into Giga's methodologies, such as a requirement that
analysts articulate balanced opinions. In addition, research is available to
clients on a timely basis through GigaWeb's sophisticated authoring technology.
The customization features permitted by GigaWeb also make Giga's research more
relevant to specific client environments.
As part of its Continuous Advisory Consulting services, the Company also
enters into on-going retainer-based consulting arrangements with its customers
to assess various IT issues, including an organization's strategic technology
plan, a vendor's marketing plan, or the implementation issues surrounding a
major technology migration. Advisory Consulting is a valuable extension of the
Company's client inquiry process, enabling customers to request more in-depth
analysis targeted at the application of technology to their specific situation.
The Company also offers customers its innovative IT Practice Services to
complement its Advisory Service. Giga employs former IT operating executives to
survey leading IT organizations, document the techniques and methods ('best
practices') used by IT managers within these organizations, and deliver the
results to customers, which can be combined with consulting servies. Each of
these services focuses on a distinct job function within an IT organization,
permitting customers to benchmark their IT practices against those of peers and
to obtain new ideas.
The Company's Continuous Information Services are typically sold under
annual contracts that renew automatically unless the customer cancels the
subscription. The Company's experience has been that a substantial portion of
customers renew expiring contracts for an equal or greater level of total CIS
fees each year. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview.' The Company prices its services in a
manner designed to be competitive in the marketplace. A typical Advisory Service
contract currently has an Annualized Value of approximately $36,000 and a
typical IT Practice Services contract currently has an Annualized Value of
approximately $45,000.
GigaWeb, the Company's Internet-based information delivery interface allows
customers to easily and efficiently navigate through the full spectrum of
original research and third-party content available through the Advisory
Service. Through the use of intelligent software agents, the Company is able to
provide customized information to each customer and to allow customers to search
for and select the information that is most relevant to their particular needs.
GigaWeb also enables collaboration with Giga's clients and maintains rich
features which improve the usability of Giga research. In addition, to
complement the Company's research and inquiry access, Advisory Service customers
are provided access to ExperNet, the Company's network of external IT
practitioners who have practical experience in solving real-world IT problems.
28
<PAGE>
GIGA STRATEGY
Giga's objective is to become the leading third generation CIS provider,
offering a significant price/performance advantage over its competitors. The key
elements of Giga's strategy include:
o Utilizing and Enhancing its Price/Performance Advantage. The Company
intends to use its price/performance advantage to increase the range
of companies which can afford CIS products and services and to allow
customers to offer Giga's content for a wider group of employees than
has been affordable with competitors' products.
o Leveraging Existing Customer Base. The Company's services are used
by over 835 customers worldwide. Giga intends to expand its customer
relationships by providing additional non-advisory services, such as
IT Practice Services and Continuous Advisory Consulting. In addition,
the Company is focused on increasing the number of Advisory Service
subscribers within each customer's organization.
o Expanding and Capitalizing on Worldwide Distribution. Giga has
expanded its worldwide sales force from 49 on December 31, 1996 to
123 on June 30, 1998. The Company plans to continue to expand its
sales and marketing organization both domestically and
internationally. The Company has entered into agreements with
distributors located in Spain, Israel and Korea and intends to
develop additional international distribution arrangements.
PRODUCTS AND SERVICES
The Company's four principal product and service lines are (i) Advisory
Service, which includes ExperNet, (ii) IT Practice Services, (iii) Advisory
Consulting and (iv) Events and Publications. The Company's services are designed
to be accessed through GigaWeb, as well as through published reports and
consultation with the Company's analysts and consultants. Set forth below is a
schematic of Giga's principal product and service lines:
<TABLE>
<S> <C>
------------------------------------
| Giga Information Group |
------------------------------------
|
|
<S> <C> <C> <C>
___________________________________________|____________________________________________________
| | | |
| | | |
- ----------------------------------------------------------------------------------------------------------------------------------
| IT Practice Services || Advisory Service || Continuous Advisory || Events and Publications |
| || || Consulting || |
| Integration of best practice || Continuous subscription- || || Conferences on IT industry |
| surveys with consulting || based decision-support service || In-depth analysis and advice ||issues and trends, stand-alone|
| || ExpertNet network || provided on an on-going basis || reports and newsletters |
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
| GigaWeb |
| Internet-based information delivery interface |
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Advisory Service
Advisory Service, the principal CIS offering of the Company, is available
to customers for an annual subscription fee billed and payable in advance, which
entitles members to (i) access all of the Company's advisory service information
and analyses, (ii) inquiry privileges and (iii) participate in briefings, one
conference and teleconferences.
29
<PAGE>
Research
Giga employs a structured and consistent research methodology. The goal of
Giga research is to form original judgments and recommendations to support
client decision-making. Research topics are determined in part by examination of
customers' needs, which are identified by analysts through direct discussions
with clients. The Company's methodology enables it to rapidly analyze IT
markets, technologies, vendors, products and user issues. Analysts conduct
informal research by surveying the Company's client base and interviewing
vendors, consultants and other sources. These activities are supplemented with
searches of numerous trade, financial and other third-party source materials
compiled by the Company's research center. The Company believes its analysts
form original judgments and recommendations by applying their professional
experiences to their review of these combined materials. To ensure research
quality and consistency, all research is reviewed on an ongoing basis by the
Company's research management team, in conjunction with several senior analysts
who are designated research leaders.
The Company seeks to convey relevant and actionable information and
analyses, as well as practical advice, to its customers through a spectrum of
delivery mechanisms, including:
o IdeaBytes. IdeaBytes are one-page, published analyses that are
intended to provide customers with quick, up-to-date findings and
opinions on current issues that are authored by the Company's
analysts.
o Planning Assumptions. Planning Assumptions are multi-page and highly
formatted reports that provide customers with in-depth analyses of IT
topics and recommendations for action. Planning Assumptions are
designed to be responsive to the current needs of the market.
o Inquiry Support. The Company maintains a 'Knowledge Center,' which
consists of experienced research support 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 or ExperNet practitioners on-line through GigaWeb.
o GigaTels. GigaTels are audio teleconferences run by the Company's
analysts on selected topics and provide an open forum for questions,
exchanges and debate. There were 3,000 participants in the 91
hour-long GigaTels held in 1997.
o Third-Party Content. The Company provides customers with access
through GigaWeb to publications from information partners such as Dow
Jones and Information Access Corporation.
Examples of Giga research topics include 'Network-Centric Enterprise
Architectures,' 'Platforms for Enterprise Computing: The Emerging Role of NT in
the Enterprise' and 'Participating in Electronic Commerce.' Since these topics
are typically interdisciplinary, they are supported by research from multiple
analysts that cover different areas of IT. For example, the topic covering
enterprise platforms requires research contributions from analysts who cover the
mainframe, client-server, wide-area networks, database management systems and
operating systems areas, necessitating the active participation of five or more
analysts. The Company's research culture is designed to encourage collaboration
among analysts.
The Company currently employs approximately 60 research professionals and
plans to hire additional research professionals, as needed. The Company's
principal research offices are located in Cambridge, MA, Westport, CT and Santa
Clara, CA. Giga's analysts average 10 years of experience with backgrounds
ranging from consulting to vendor and user professional positions.
ExperNet
To complement the Company's research and inquiry access, customers have
access through GigaWeb to ExperNet, a network of over 1,000 external IT
practitioners. These practitioners have current experience in diversified
segments of the IT industry, which the Company believes cannot be efficiently
covered by the traditional CIS approach, and are available to assist clients in
solving real-world IT problems. Each practitioner responds to customer inquiries
at no additional charge in return for access to Giga information.
30
<PAGE>
GigaWeb and Other Delivery Mechanisms
Advisory Service research is customized in a personalized manner through
GigaWeb, the Company's proprietary, Internet-based information delivery
interface which provides on-line access to the Company's research reports,
third-party content, analysts and ExperNet. GigaWeb makes it possible for
members to obtain both a unified and complete view across all of Giga's advisory
content while matching customers' specific needs as determined by
self-administered profiles and prior inquiries. 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, together with access to human
expertise. Subscribers to Advisory Service are provided with a personalized home
page (the 'Virtual Office') which is accessed through Giga's password-protected
Internet site using a Web browser.
GigaWeb enables customers to search for relevant information using word
searches. Based on the individualized customer profile, GigaWeb automatically
selects the particular subset of Giga research and third-party content most
relevant to the customer and delivers it to the customer's Virtual Office or via
e-mail. In addition, customers who have shared objectives or interests can
interact with each other, as well as with Giga analysts and ExperNet
practitioners, through on-line discussion groups. Advisory Service clients may
provide GigaWeb access to large numbers of their IT professionals via
content-only seats and various site license practices.
The Company also has installed its content as an additional deliverable on
several corporate intranets, and expects the volume of such installations to
increase substantially. This service is called IntraGiga. For those companies
utilizing Lotus Notes, Giga offers access to its research via GigaNotes.
Customers can also request that Giga's research be provided via hard copy.
Continuous Advisory Consulting
The Company's Continuous Advisory Consulting services provide Giga
customers with support such as assessments of an organization's strategic
technology plan, the implementation issues surrounding a major technology
migration or a vendor's marketing plan. Advisory Consulting is a valuable
extension of the Company's client inquiry process, enabling customers to request
more in-depth analysis targeted at the application of technology to their
specific situation. When a customer inquiry requires on-going or periodic
assessments and updates, Giga analysts may construct a scheduled advisory
program.
IT Practice Services
The Company believes that its IT Practice Services enable Giga customers to
be more effective in solving IT problems by leveraging the best practices of
their peers. Senior Giga advisors with strong IT and management expertise
document the successful operating practices and techniques of IT managers in a
concise reference book. The insights gained from these best practices are
interpreted by the advisors and tailored to fit in the context of the customer's
organization. IT Practice Services are designed for specific job functions found
within the IT organization and address the issues that such individuals must
solve. Currently, the Company offers IT Practice Services in three areas: CIO
Practices, Year 2000 Practices and Security Practices. Each IT Practice Service
is available for an annual subscription fee. Each customer receives (i) three
in-depth studies documenting best practices, (ii) on-site consultations to guide
the client in applying the best practices that are most pertinent to the
customer and (iii) inquiry access to IT Practice Service advisors.
Events and Publications
The Company organizes and sponsors a range of events on significant IT
industry issues and trends. At GigaWorld IT Forum, the Company's flagship annual
conference, Giga analysts present and update their most important research
findings and recommendations and meet one-on-one in advisory sessions with
clients. Other conferences include the 'Business OnLine Symposia' and the
'Business and Process Workflow' conference series, both held in the United
States and Europe annually. In 1997, the Company organized and hosted 11 three-
day conferences, and sponsored an additional 9 conferences (hosted by partner
organizations).
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<PAGE>
The Company produces a series of off-the-shelf publications based on
conference topics or current IT issues which are identified through the Advisory
Service and marketed to IT professionals. The Company produced six publications
and one newsletter in 1997.
SALES AND MARKETING
Since inception, the Company has made substantial investments in sales and
marketing to sell its services, address additional markets and support its
growing customer base. The Company sells its services through a direct sales
force located in the United States, Canada, United Kingdom, France, Germany, the
Netherlands and Denmark. As of June 30, 1998, the Company's North American
direct sales force consisted of 104 field sales personnel, an increase from 42
personnel at December 31, 1996. The Company also had 19 international direct
sales personnel serving Europe, an increase from 7 personnel at December 31,
1996. The Company also sells its services through independent representatives in
Spain, Israel and Korea. These repesentatives are compensated based on the
contract value of the contracts generated by them. The representatives are
involved in other activities related to IT technology, mainly consulting, but
they do not represent any products or perform any services that conflict with
the Company's services. To date, revenues from these representatives have been
insignificant. The Company's internal marketing organization, primarily located
in the Company's Norwell, Massachusetts facility, provides public relations,
lead generation, direct mail support and other related services.
All Giga sales representatives participate in the Company's annual sales
compensation plan. Commissions are paid monthly based upon NAVI attainment
versus established quotas. Additional bonuses and other incentives are paid for
meeting and/or exceeding certain established targets and for special promotions.
The Company has over 835 customers. No single customer accounted for over
3% of the Company's revenues for the year ended December 31, 1997. The Company
serves customers across a broad array of industries, which include:
<TABLE>
<S> <C>
Allstate Harley Davidson
AT&T Wireless Services Heartland Health Systems
Barclays Bank Plc Hewlett-Packard Co.
BASF AG IBM
Blue Cross Blue Shield of Nebraska Microsoft
City of Cincinnati Netherlands Car BV
Deloitte & Touche Netscape
FedEx Corporation Pirelli Informatica S.p.A.
Ford Motor Company SAS Institute, Inc.
The Gillette Company State of North Carolina
Girl Scouts of the USA Taco Bell
Gouvernment du Quebec Conseil du Tresor United Nations International Computing Centre
</TABLE>
COMPETITION
The Company competes in the IT market directly with other independent
providers of Continuous Information Services, including Gartner Group, META
Group, Inc. and Forrester Research Inc., and the internal planning, research and
marketing staffs of corporations and IT vendors. The Company also competes with
other information providers, including market research firms, 'Big Five'
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.
See 'Risk Factors--Significant Competition.'
EMPLOYEES
As of June 30, 1998, the Company employed 341 persons, including 76 in
research and research support, 29 in events and publications, 180 in sales and
marketing, 10 in research and development and 46 in administration. Of such
employees, 99 are located in the Company's Norwell facility, 73 are located in
the Company's other domestic facilities, 61 are located internationally and 108
work from their homes. None of the Company's
32
<PAGE>
employees are represented by a collective bargaining arrangement and the Company
believes its relationship with its employees is good.
FACILITIES
The Company's headquarters are located in Norwell, Massachusetts and
consist of approximately 27,000 square feet. This facility and the Company's
approximately 8,000 square feet in its Cambridge, Massachusetts facility
together 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 was recently renewed and
expires in June 2001. The Company also leases office space for its research, and
sales and marketing efforts in three other U.S. and three primary international
locations. The Company believes that additional facilities will be available in
the future on commercially reasonable terms to meet future needs. See Note 7 to
the Consolidated Financial Statements for information regarding the Company's
annual rental costs.
LEGAL PROCEEDINGS
Giga Media BV, the owner of a Benelux trademark registration for the
trademark GIGA MEDIA, filed a lawsuit (docket number 81567 AL/98-509HH) on March
12, 1998 against the Company alleging tradename infringement, and requesting a
court order requiring the Company to use an alternative tradename to Giga
Information Group in the Netherlands. The matter is pending before the Cantonal
Judge at Haarlem, the Netherlands. Although the Company is contesting this
lawsuit, there can be no assurance that it will result in a decision that is
favorable to the Company. See 'Risk Factors--Uncertainties Relating to
Proprietary Rights.'
In addition to the proceeding described above, the Company from time to
time is involved in certain other litigation arising in the normal course of its
business. The Company does not believe that any such litigation, alone or in the
aggregate, would have a material adverse effect on the Company's financial
condition or results of operations.
33
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, and their ages as of
March 31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Gideon I. Gartner............................... 63 Chairman, President and Chief Executive Officer
James C. R. Graham.............................. 47 Executive Vice President
Daniel M. Clarke................................ 51 Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Keith R. Belton................................. 37 Senior Vice President, Research
Michael R. Mooradian............................ 40 Senior Vice President, Worldwide Sales
Neill H. Brownstein (1)(2)...................... 54 Director
David L. Gilmour................................ 40 Director
Richard L. Crandall (2)......................... 54 Director
Bernard Goldstein (2)........................... 67 Director
Irwin Lieber (1)................................ 58 Director
Josh S. Weston (3).............................. 69 Director Nominee
</TABLE>
- ------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) To be appointed a director upon closing of the Offering
Mr. Gartner has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since its inception in March 1995. In October
1997, he was also elected President. 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.S. in management from MIT's Sloan School of Management.
Mr. Graham has served as Executive Vice President of the Company since
October 1997. Prior to joining Giga, he was Vice President, Information Systems
of United States Fidelity & Guaranty Corporation, an insurance company, from
1994 to October 1997. From 1990 to 1994, he was Vice President, Marketing and
Product Management at Seer Technologies, a software company. From 1987 to 1990,
Mr. Graham was Vice President, Software Engineering Strategies at Gartner Group,
Inc. From 1982 to 1986, he was Executive Vice President of VenturCom, a software
company that he founded. Prior to that he was an Economic Advisor at The
Business Roundtable from 1977 to 1980. From 1976 to 1977, Mr. Graham was the
Special Assistant to the U.S. Secretary of Commerce and, from 1974 to 1976, he
was the Vice President and Executive Secretary of Industrial Energy Users Forum.
Mr. Graham received a B.A. in logic from Georgetown University and an M.S. in
finance and economics from MIT's Sloan School of Management.
Mr. Clarke has served as Senior Vice President, Chief Financial Officer,
Treasurer and Secretary since September 1997. From July 1996 to August 1997, Mr.
Clarke served as Vice President, Finance and Administration and Chief Financial
Officer for Dataware Technologies, Inc., a provider of software for professional
electronic publishing and knowledge management. From January 1995 to June 1996,
Mr. Clarke was an independent financial consultant. From 1990 to December 1995,
Mr. Clarke was an executive officer of Xyvision, Inc., a software and services
company that develops and markets advanced software for document management,
publishing and prepress. He served as Vice President, Chief Financial Officer
and Secretary of
34
<PAGE>
Xyvision until January 1994, and as President and Chief Operating Officer from
February 1994. From 1981 to 1989, Mr. Clarke served in a variety of senior
management positions with BBN Corporation, a diversified high technology
company. Mr. Clarke holds a B.S. Degree from Rensselaer Polytechnic Institute
and an M.B.A. from Harvard Business School.
Mr. Belton joined the Company in October 1997 as Vice President, Research
and was named Senior Vice President, Research in December 1997. From October
1996 to September 1997, Mr. Belton was Vice President, Marketing for Datamedic
Corp., a software company. From July 1994 to September 1996, he was a partner at
Benchmark Partners, a consulting company. From 1990 to 1994, he held various
positions with Kurzweil Applied Intelligence Inc., a software company, including
Director of Product Marketing from 1993 to 1994. From 1985 to 1989, he was the
Director, Manufacturing Automation Planning Service for the Yankee Group, a
consulting company. Mr. Belton holds a B.A. in Economics from Haverford College.
Mr. Mooradian has served as Senior Vice President, Worldwide Sales of the
Company since August 1997. From August 1996 to August 1997, Mr. Mooradian served
as Regional Vice President of Giga's central region. From January 1996 to July
1996, he served as Vice President of Sales, North America for Timeline, Inc., a
developer of client/server, financial management and reporting systems. From
1991 to January 1996, he held several management positions at Comshare, a
decision support software company. From 1989 to 1991, he served as a sales
representative for Ross Systems, Inc., a financial systems integrator. From 1987
to 1989, he served as a sales representative for Corporate Class Software, Inc.,
a software company. From 1985 to 1986, he served as a sales representative for
Information Resources, Inc., a software company, and, from 1984 to 1985, as a
sales representative for Hewlett-Packard. Mr. Mooradian received a B.S. in
Business Administration from DePaul University.
Mr. Brownstein has served as a director of the Company since July 1995.
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 III L.P. and Bessemer Venture
Partners II 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. Between
1979 and 1988, Mr. Brownstein also served as a director of Gartner Group, Inc.
Mr. Gilmour is a co-founder of the Company with Mr. Gartner. He served as
Senior Vice President and Chief Research Officer of the Company from April 1996
to February 1998 and has served as a director of the Company since July 1995.
Mr. Gilmour continues to be a special advisor to Giga on Research and Technology
and devotes approximately 25% of his time to the Company. From July 1995 to
April 1996, he served as Senior Vice President of Technology of the Company.
From July 1993 to July 1995, he served as Chief Executive Officer and a director
of ExperNet Corporation, 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 Development Corporation, a
software company. Mr. Gilmour received a B.A. in Applied Physics, an M.S. in
engineering, both from Harvard University, and an M.B.A., with distinction, from
Harvard Business School.
Mr. Crandall has served as a director of and consultant to the Company
since August 1995. He was founder of Comshare, Inc., a decision support software
company, serving as its Chief Executive Officer from 1970 until 1994 and
Chairman until April 1997. Mr. Crandall chairs the Enterprise Software
Roundtable, consisting of the CEO's and COO's of the twenty-five largest
enterprise software companies. He currently serves on the Board of Directors of
Comshare, Computer Task Group and Diebold and several privately held technology
companies. He serves on the National Advisory Board to the College of
Engineering of the University of Michigan. Mr. Crandall received a B.S. in
electrical engineering, a B.S. in mathematics and an M.S.E. in industrial
engineering from the University of Michigan.
35
<PAGE>
Mr. Goldstein has served as a director of the Company since April 1997. He
is a Director of Broadview Associates, LLC, which he joined in 1979. He is a
past President of the Information Technology Association of America, the
industry trade association of the computer service industry, and past Chairman
of the Information Technology Foundation. Mr. Goldstein was a director of Apple
Computer Inc. until August 1997, and is currently a Director of Franklin
Electronic Publishers, Inc., Sungard Data Systems, Inc., SPSS, Inc. and several
privately held companies. Mr. Goldstein received a B.S. from the Wharton School
of the University of Pennsylvania and an M.B.A. from Columbia University.
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, an 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. In
addition, he is a general partner of Applewood L.P. and Wheatley L.P. LLC.,
investment funds. 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.
Mr. Weston is Honorary Chairman of the Board of Automatic Data Processing,
Inc. ('ADP') and served as chairman from 1986 to April 1998. He was Chief
Executive Officer of ADP from 1982 to 1996. Mr. Weston is a director of J. Crew
Group Inc, Olsten Corporation, Public Service Enterprise Group Company, Shared
Medical Systems, Inc. and Vanstar Corporation. Mr. Weston received a B.S. from
City College of New York and an M.S. from the University of New Zealand where he
was a Fulbright Scholar.
Certain of the current directors of the Company were nominated and elected
in accordance with a stockholders voting agreement which will terminate upon the
consummation of the Offering. Each officer serves at the discretion of the Board
of Directors. There are no family relationships among or between any of the
directors and executive officers of the Company.
BOARD COMPENSATION
Each Non-Employee Director of the Company is reimbursed for expenses
incurred in connection with attendance at the meetings of the Board of Directors
and committees thereof and is entitled to receive stock options under the
Company's 1997 Director Option Plan. Directors who are employees of the Company
currently receive no compensation for serving as directors.
1997 Director Option Plan. The Director Plan, adopted in June 1997,
provides for the grant of stock options to directors of the Company who are not
full-time employees of the Company or any subsidiary ('Non-Employee Directors').
Only non-statutory options may be granted under the Director Plan. The maximum
number of shares of Common Stock as to which options may be granted under the
Plan is 50,000. Options are automatically granted to Non-Employee Directors as
follows: (i) on July 1st of each year, commencing July 1, 1997, options to
purchase 2,000 shares of Common Stock and (ii) unless such director was elected
pursuant to a certain stockholder voting agreement (which agreement terminates
upon consummation of the Offering), additional options to purchase 2,000 shares
of Common Stock upon such directors' initial election as a director after
adoption of the Plan. As of June 30, 1998, options to purchase 12,000 shares of
Common Stock at a weighted average price of $3.00 per share were outstanding
under the Director Plan (of which none were then exercisable). As of June 30,
1998, 38,000 shares of Common Stock were available for future grants under the
Director Plan.
The Director Plan is administered by the Board of Directors. The option
exercise price for each option granted under the Director Plan is the fair
market value of the Common Stock as of the date of grant. Options vest in four
equal annual installments beginning on the first anniversary of the date of
grant (subject to acceleration upon a 'change in control' as defined in the
Director Plan), provided the optionee continues to serve as a director. Payment
of the option exercise price is to be made in cash for the full exercise price
of the options. Options are not assignable or transferrable except by will or
the laws of descent and distribution and terminate on the earlier of ten years
after the date of grant or sixty days after the optionee ceases to serve as a
director, except in the event of death or disability.
36
<PAGE>
For a discussion of transactions between the Company and certain directors
of the Company, see 'Certain Transactions.'
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal year ended
December 31, 1997 of the Company's Chief Executive Officer and the Company's
other most highly compensated executive officers whose annual salary and bonus
compensation exceeded $100,000 (the Chief Executive Officer and such other
executive officers are hereinafter referred to as the 'Named Executive
Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($) OPTIONS COMPENSATION($)(2)
- ----------------------------------------- ------------ -------- --------------- ------------------
<S> <C> <C> <C> <C>
Gideon Gartner;
Chairman, CEO and President............ 160,000 30,000 -- --
David Gilmour;
Senior Vice President, Research;
Director(3)............................ 160,000 24,000(4) -- --
Henry Givray;
President and COO(5)................... 144,730(6) 30,000(7) 33,333 shares 125,097(8)
Jacques Bouvard;
Senior Vice President, Technology(9)... 104,167 30,000(10) 20,000 shares 47,668(11)
</TABLE>
- ------------------
<TABLE>
<S> <C>
(1) Includes amounts payable in 1997 and/or 1998 for services rendered by the Named Executive Officers in 1997.
(2) Other compensation in the form of perquisites and other personal benefits have been omitted because it
constitutes the lesser of $50,000 or ten percent of the total annual salary and bonus of each of the Named
Executive Officers in 1997.
(3) Mr. Gilmour became a non-employee consultant effective February 1, 1998 pursuant to a consulting agreement.
See 'Employment-Related Agreements.'
(4) The amount shown does not include $24,000 paid in 1997 for 1996 compensation.
(5) Mr. Givray resigned from the Company on November 5, 1997 pursuant to the Separation Agreement dated January
7, 1998 (the 'Givray Separation Agreement'). See 'Employment-Related Agreements.'
(6) The amount shown reflects salary and $9,205 for unused vacation but does not reflect $77,808 of salary
continuation paid for the period of November 6, 1997 to April 30, 1998.
(7) The amount shown does not reflect $30,000 paid in 1997 for 1996 bonus compensation. The amount reflects
$30,000 paid in 1998 for bonus pursuant to the Givray Separation Agreement.
(8) This amount reflects $77,808 for salary continuation for the period of November 6, 1997 to April 30, 1998,
$5,000 for an additional bonus awarded for signing the Givray Separation Agreement, $30,000 paid in 1997 for
relocation allowance and $12,289 reflecting certain travel and computer expenses. See 'Employment-Related
Agreements.'
(9) Mr. Bouvard's employment with the Company ceased on October 16, 1997 pursuant to the Bouvard Agreement (as
defined herein). See 'Employment-Related Agreements.'
(10) The amount reflects $30,000 for bonus paid in 1998 pursuant to the Bouvard Separation Agreement.
(11) This amount reflects $47,668 for salary continuation for the period of October 16, 1997 to March 15, 1998.
</TABLE>
37
<PAGE>
The following table sets forth certain information regarding options
granted by the Company to each of the Named Executive Officers during the fiscal
year ended December 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION
GRANTED FISCAL YEAR(%)(1) SHARE($) DATE
---------- ----------------- ------------ ----------
<S> <C> <C> <C> <C>
Gideon I. Gartner............. -- -- -- --
David L. Gilmour.............. -- -- -- --
Henry Givray.................. 33,333 6.44 3.00 2/11/2007
Jacques Bouvard............... 20,000 3.86 3.00 2/11/2007
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR
OPTION TERM($)(2)
------------------
5% 10%
--------- -------
<S> <C> <C>
Gideon I. Gartner............. -- --
David L. Gilmour.............. -- --
Henry Givray.................. 62,999 159,332
Jacques Bouvard............... 37,800 95,600
</TABLE>
- ------------------
(1) Based on an aggregate of 517,597 options granted to employees in fiscal
1997, including options granted to the Named Executive Officers.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, computed annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock, the optionholders' continued
employment through the option period and the date on which the options are
exercised.
The following table sets forth certain information concerning stock options
held as of December 31, 1997 by each of the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED OPTIONS
NUMBER OF AT FISCAL YEAR-END
SHARES ACQUIRED VALUE ----------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE/ UNEXERCISABLE
- ------------------------- --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Gideon I. Gartner........ -- -- 220,000 --
David L. Gilmour......... -- -- 24,167 15,833
Henry Givray............. 6,250 1,875 -- 47,083
Jacques Bouvard.......... -- -- 6,667 13,333
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(1)
---------------------------
NAME EXERCISABLE/ UNEXERCISABLE
- ------------------------------------- -------------
<S> <C> <C>
Gideon I. Gartner........ $ 2,530,000 $ --
David L. Gilmour......... $ 277,921 $ 182,080
Henry Givray............. $ -- $ 474,955
Jacques Bouvard.......... $ 66,670 $ 133,330
</TABLE>
- ------------------
(1) Represents the total gain which would be realized if all in-the-money
options held at December 31, 1997 were exercised, determined by multiplying
the number of shares underlying the options by the difference between the
assumed initial public offering price of $13.00 per share and the per share
option exercise price. An option is in-the-money if the fair market value of
the underlying shares exceeds the exercise price of the option.
38
<PAGE>
Employment-Related 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).
Henry Givray. The Company entered into a Separation Agreement with Mr.
Givray, dated January 7, 1998 (the 'Givray Agreement'), under the terms of which
Mr. Givray ceased working for the Company on November 5, 1997 and received
continuation of base salary (at an annualized rate of $160,000) and certain
other benefits through April 30, 1998. Mr. Givray also received $30,000 for 1997
bonus, a $5,000 bonus for signing the Givray Agreement and reimbursement of
certain other items. The Company agreed to allow Mr. Givray to retain 6,250
options shares which were vested as of November 5, 1997. In addition, the Givray
Agreement contains confidentiality and non-competition provisions which
terminate October 31, 1998.
Jacques Bouvard. The Company entered into a Separation Agreement with Mr.
Bouvard, dated October 2, 1997 (the 'Bouvard Agreement'), under the terms of
which Mr. Bouvard ceased working for the Company on October 15, 1997 and
received (i) continuation of base salary (at an annualized rate of $125,000) and
certain other benefits through March 15, 1998 and (ii) an annualized bonus of
$30,000. The Company agreed not to exercise its right to repurchase any shares
of Common Stock acquired by Mr. Bouvard under the 1996 Option Plan. As of March
15, 1998, Mr. Bouvard held 6,667 vested options under the 1996 Plan at an
exercise price of $3.00. In addition, the Bouvard Agreement contains
confidentiality and non-competition provisions which terminate February 15,
1999.
For a discussion of certain current and past consulting arrangements
between the Company and Messrs. Crandall, Brownstein and Gilmour, see 'Certain
Transactions--Consulting Agreements.'
Stock Plans
1995 Stock Option/Stock Issuance Plan. The Company's 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. As of June 30, 1998, options to purchase a total
of 343,561 shares of Common Stock at a weighted average exercise price of $2.17
per share were outstanding under the 1995 Stock Plan (of which options to
purchase 156,601 shares were then exercisable). As of June 30, 1998, 490,628
shares of Common Stock were available for future grant 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 will be entitled to
repurchase those shares which are not vested on the termination date at a price
equal to their original purchase price.
39
<PAGE>
1996 Stock Option Plan. The Company's 1996 Option Plan was adopted by the
Board of Directors in August 1996 and was approved by the stockholders in
September 1996. The 1996 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. The maximum number of shares
with respect to which options may be granted to any employee under the 1996
Option Plan shall not exceed 33,333 shares of Common Stock during any calendar
year. As of June 30, 1998, options to purchase a total of 663,416 shares of
Common Stock at a weighted average exercise price of $3.84 per share were
outstanding under the 1996 Option Plan (of which options to purchase 55,091
shares were then exercisable). As of March 31, 1998, 328,127 shares of Common
Stock were available for future grant under the 1996 Option Plan.
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).
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. Each employee may elect to reduce his or her
current compensation by up to 15% (on a pre-tax basis). 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 Neill H. Brownstein and Irwin
Lieber, neither of whom is or has been an officer or employee of the Company.
For information concerning certain transactions between the Company and certain
directors and concerning the former consulting relationship between the Company
and certain directors, including Mr. Brownstein, see 'Certain Transactions.'
40
<PAGE>
CERTAIN TRANSACTIONS
EARLY STAGES
In 1995, Mr. Gartner 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, 1,400,000 shares of Common Stock at a
purchase price of $0.07125 per share, (ii) in July 1995, 60,000 shares of Series
A Preferred Stock (80,000 shares of Common Stock on an as-converted basis) at a
purchase price of $5.00 per share (or $3.75 per share of Common Stock), and
(iii) in October 1995, 400,000 shares of Common Stock at a purchase price of
$1.50 per share. Also during 1995, Mr. Gartner incurred $186,000 of
disbursements on behalf of the Company in connection with operating expenses
prior to the incorporation of the Company, and for items related to the
acquisition of BIS. The Company reimbursed Mr. Gartner for these expenses,
without interest, in August 1995. In addition, Mr. Gartner made loans totalling
$221,000, bearing interest at the rate of 10% per annum, to ExperNet (a
subsidiary of the Company). These loans were repaid, together with unpaid
interest thereon, in December 1995.
EXPERNET ACQUISITION
In July 1995, the Company acquired (the 'ExperNet Acquisition') all of the
ExperNet Corporation shares owned by Mr. Gartner and a majority of the ExperNet
Corporation shares owned by Mr. Gilmour, aggregating 77.8% of ExperNet
Corporation's outstanding common stock, in exchange for (i) 160,000 shares of
Series A Preferred Stock (213,333 shares of Common Stock on an as-converted
basis) of the Company, 80,000 shares (106,667 shares on an as-converted basis)
of which were issued to Mr. Gartner and 80,000 shares (106,667 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 53,333 shares of Common
Stock at an exercise price of $1.50 per share. In December 1995, the Company
acquired Mr. Gilmour's remaining 22.2% interest in ExperNet Corporation in
exchange for a $400,000 6% Convertible Note due December 31, 2005 (the 'Gilmour
Note'). The Gilmour Note was repaid in full, together with interest thereon, by
the Company; one-half in February 1998 and the remainder in April 1998. See
'--Consulting Agreement--Gilmour Agreement.' In addition, Mr. Gilmour made loans
totalling $101,000 to ExperNet Corporation, which loans were repaid in full,
together with interest thereon, by ExperNet Corporation in December 1995.
FINANCINGS
Series A Preferred Stock Financing
In July 1995 and October 1995, the Company issued and sold (the 'Series A
Financing') an aggregate of 570,000 shares of Series A Preferred Stock (760,001
shares of Common Stock on an as-converted basis) at a purchase price of $5.00
per share (or $3.75 per share of Common Stock) to a limited number of investors,
including 60,000 shares (80,000 shares on an as-converted basis) to Mr.
Brownstein, 15,000 shares (20,000 shares on an as-converted basis) to Mr.
Crandall and 10,000 shares (13,333 shares on an as-converted basis) to James D.
Robinson III, a former director of the Company.
Series B Preferred Stock Financing
In August 1995, the Company entered into a Convertible Promissory Note and
Warrant Purchase 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 'RRE Note') in the principal amount of $2.0
million and a warrant (the 'RRE Warrant') to purchase 285,714 shares of Series B
Preferred Stock (95,238 shares of Common Stock on an as-converted basis) at an
exercise price of $2.345 per share (or $7.035 per share of Common Stock). In
November 1995, the RRE Note was converted into 571,428 shares of Series B
Preferred Stock (190,476 shares on an as-converted basis). In September 1996,
RRE Giga made a cashless exercise of the RRE Warrant and received 218,714 shares
of Series B Preferred Stock (72,905 shares on an as-converted basis). Mr.
Robinson, a former director of the Company, is Chairman and Chief Executive
Officer of RRE Investors, L.L.C., the General Partner of RRE Giga.
41
<PAGE>
In November 1995, February 1996 and December 1996, the Company issued and
sold (the 'Series B Financing') an aggregate of 7,354,500 shares of Series B
Preferred Stock (2,451,497 shares of Common Stock on an as-converted basis), at
a purchase price of $3.50 per share (or $10.50 per share of Common Stock), to a
limited number of investors, including 40,000 shares of Series B Preferred Stock
to Mr. Brownstein and certain members of his family for aggregate consideration
of $140,000. The following entities which are affiliates of directors and/or
principal stockholders of the Company also purchased Series B Preferred Stock:
<TABLE>
<CAPTION>
ENTITIES AFFILIATED WITH: NO. OF SHARES AGGREGATE CONSIDERATION PAID
- -------------------------------------------------------------- ------------- ----------------------------
<S> <C> <C>
21st Century Communications Partners, L.P..................... 1,714,286 $6,000,000
S(squared) Technology Corporation............................. 1,116,398 3,907,393
RRE Giga Investors, L.P....................................... 1,078,713 3,775,495
Montgomery Small Cap Partners, L.P............................ 1,029,714 3,604,000
Wanger Asset Management, L.P.................................. 885,714 3,100,000
</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. ('21-CCP'), 21st Century Communications T-E Partners, L.P.
('21-CCTEP') and 21st Century Communications Foreign Partners, L.P. ('21-CCFP').
Mr. Robinson, a former 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. ('RRE Giga II').
Series C Preferred Stock Financing
In May and December 1997, the Company issued and sold (the 'Series C
Financing') an aggregate of 2,609,491 shares of Series C Preferred Stock
(1,021,429 shares of Common Stock on an as-converted basis) at a purchase price
of $4.11 per share (or $10.50 per share of Common Stock). The Series C Preferred
Stock entitled investors to receive warrants to purchase up to 54% additional
shares of Series C Preferred Stock based upon the Company's NAVI for fiscal
1997. In January 1998, the Company issued warrants to purchase an aggregate of
an additional 1,409,127 shares of Series C Preferred Stock (551,574 shares of
Common Stock on an as-converted basis) at an exercise price of $5.28 per share
(or $13.50 per share of Common Stock). The following persons and entities who
are executive officers, directors, affiliates of directors and/or principal
stockholders of the Company invested in Series C Preferred Stock:
<TABLE>
<CAPTION>
SHARES OF AGGREGATE
SERIES C SERIES C CONSIDERATION
NAME STOCK WARRANTS PAID
- --------------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
Entities affiliated with Dawson-Samberg Capital Management,
Inc.......................................................... 1,946,473 1,051,095 $ 8,000,000
Gideon I. Gartner.............................................. 60,827 32,847 250,000
Richard Crandall Trust......................................... 30,414 16,424 125,000
Bernard Goldstein.............................................. 24,331 13,139 100,000
Neill H. Brownstein............................................ 60,827 32,847 250,000
Wheatley Partners, L.P......................................... 111,923 60,438 391,731
Wheatley Foreign Partners, L.P................................. 9,732 5,255 34,062
</TABLE>
Series D Preferred Stock Financing
In April and May 1998, the Company issued and sold (the 'Series D
Financing') an aggregate of 285,715 shares of Series D Preferred Stock (190,476
shares of Common Stock on an as-converted basis), at a purchase price of $7.00
per share (or $10.50 per share of Common Stock), and warrants to purchase an
additional 154,285 shares of Series D Preferred Stock (102,857 shares of Common
Stock on an as-converted basis), at an exercise price of $9.00 per share (or
$13.50 per share of Common Stock). Acorn Fund, a series of Acorn Investment
Trust, which is managed by Wanger Asset Management, L.P., purchased 71,429
shares of Series D Preferred Stock and received warrants to purchase an
additional 38,571 shares of Series D Preferred Stock for an aggregate
consideration of approximately $500,000.
42
<PAGE>
CONSULTING AGREEMENTS
Crandall Consulting Agreement
In August 1995, the Company entered into a consulting arrangement with Mr.
Crandall. 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 40,000 shares of Common Stock
at a purchase price of $1.50 per share. The shares are subject to vesting and
certain restrictions on transfer. In July 1996, as compensation for the
consulting services to be rendered by Mr. Crandall to the Company for the
twelve-month period ended June 30, 1997, the Company granted to Mr. Crandall an
option to purchase 6,667 shares of Common Stock at an exercise price of $1.80
per share. Twenty-five percent of the shares subject to the option vested one
year from the date of grant and one forty-eighth of the shares have vested
monthly thereafter. In February 1997, as compensation for the extension of Mr.
Crandall's consulting services through June 1998, and the devotion of one-third
of his time to such matters, the Company granted to Mr. Crandall, effective
January 1, 1997, 16,667 shares of Common Stock and an option to purchase 8,333
shares of Common Stock at an exercise price of $3.00 per share. One sixth of
such shares of Common Stock have vested quarterly since the effective date of
grant. Twenty-five percent of the shares subject to the option vested one year
from the effective date of grant and one thirty-sixth have vested monthly
thereafter.
Brownstein Financing and Consulting Agreement
In October 1995, the Company sold to Mr. Brownstein, a director of the
Company, 26,667 shares of Common Stock at a purchase price of $1.50 per share.
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 Mr. Brownstein, a director of the Company. Pursuant to the
consulting agreement, the Brownstein Corporation received a consulting fee of
$60,000, plus reasonable expenses, payable quarterly. The Brownstein Corporation
agreed that during the term of the agreement and for a period of one year
thereafter, the Brownstein Corporation would not use any of the Company's
proprietary or confidential information or disclose such proprietary and
confidential information to any third party.
Gilmour Agreement
In February 1998, the Company entered into an agreement (the 'Gilmour
Agreement') with Mr. Gilmour, a director and co-founder of the Company, relating
to Mr. Gilmour's continuing relationship with the Company in light of Mr.
Gilmour's desire to establish Tacit Knowledge Systems ('Tacit'), a company to be
engaged in the development and commercialization of various forms of software
related to the automatic capture of knowledge through messaging systems (the
'Software'). The Gilmour Agreement superseded Mr. Gilmour's employment
agreement, dated July 6, 1995, pursuant to which Mr. Gilmour served as Senior
Vice President, Research, was elected a director and received a salary at the
rate of $160,000 per annum commencing September 1, 1995. The Gilmour Agreement
provides that Mr. Gilmour will remain a director of the Company and, for at
least six months, will serve as a consultant to the Company, acting as chief
research officer and devoting approximately 25% of his time to such duties. Mr.
Gilmour will be compensated at the rate of $50,000 per annum for such services.
The Gilmour Agreement also provides that the Company will receive a 7.5%
equity interest in Tacit, will be entitled to participate in future Tacit
financings and will be granted an irrevocable, royalty-free, worldwide license
to use any and all software, products and technologies that Tacit develops
through January 2001. The Company has the option of extending the license for
two additional one-year periods for a fee of $50,000 per annum. The Company also
agreed that the Software shall not constitute 'Development' or 'Proprietary
Information' as such terms are defined in the Invention and Non-Disclosure
Agreement, dated July 6, 1995, between the Company and Mr. Gilmour. In addition,
the Gilmour Agreement contained non-competition and no-raid provisions, which
are to survive for one year following a voluntary termination by Mr. Gilmour of
his consulting relationship with the Company.
The Gilmour Agreement also resolved the status of certain of the Company's
securities held by Mr. Gilmour. The Company agreed not to exercise its rights to
repurchase the Series A Preferred Stock that was
43
<PAGE>
issued to Mr. Gilmour in connection with the ExperNet Acquisition. As of the
date of the Gilmour Agreement, of the options that had been granted to Mr.
Gilmour to purchase 40,000 shares of Common Stock at an exercise price of $1.50
per share, options to purchase 15,000 shares remained unvested. It was agreed
that these unvested options would vest at a revised rate of one ninety-sixth of
such options per month thereafter. Furthermore, the Company agreed to redeem the
Gilmour Note, including accrued interest thereon, one-half in February 1998 and
the remainder in April 1998.
CERTAIN STOCKHOLDER RIGHTS
For a description of certain other registration rights of, and stock
transfer restrictions imposed on, certain executive officers, directors,
affiliates of directors and/or principal stockholders of the Company, see
'Description of Capital Stock--Registration Rights Agreement' and '--Co-Sale
Agreement.'
CERTAIN EMPLOYMENT-RELATED ARRANGEMENTS
In March 1998, the Company granted options to purchase 100,000, 8,000,
8,000, and 8,000 shares of Common Stock to Messrs. Gartner, Graham, Clarke and
Crandall, respectively. The options were all granted at an exercise price of
$3.00 per share, except for the options granted to Mr. Gartner which were
granted at an exercise price of $3.30 per share. As a result of these option
grants, the Company will recognize compensation expense of $345,000, $30,000,
$30,000 and $30,000, respectively. See Note 15 to the Consolidated Financial
Statements.
For a description of certain other employment-related arrangements between
the Company and certain executive officers and directors of the Company, see
'Management--Executive Compensation' and 'Management--Employment-Related
Agreements.'
------------------------
The Company believes that the securities issued in the transactions
involving the Company described above (other than compensatory arrangements)
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) other than compensatory arrangements, 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.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 30, 1998 (assuming the
conversion of all outstanding shares of Convertible Preferred Stock into Common
Stock after giving effect to the Reverse Stock Split), 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 and director
nominees, (iii) each of the Named Executive Officers and (iv) all directors,
director nominees and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (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 Communications Partners, L.P......................... 571,429(3) 8.3% 5.8%
767 Fifth Avenue, 45th floor
New York, NY 10153
Entities affiliated with S(squared) Technology Corporation......... 443,897(4) 6.5% 4.5%
515 Madison Avenue, Suite 4200
New York, NY 10022
RRE Giga Investors, L.P........................................... 359,571(5) 5.2% 3.6%
126 East 56th Street, 22nd floor
New York, NY 10022
Funds managed by Wanger Asset Management, L.P..................... 368,570(6) 5.4% 3.7%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Pequot Private Equity Fund, L.P................................... 1,173,337(7) 17.1% 11.4%
354 Pequot Avenue
Southport, CT 06490-0760
Gideon I. Gartner................................................. 2,256,113(8) 32.8% 22.8%
c/o Giga Information Group, Inc.
One Longwater Circle
Norwell, MA 02061
Neill H. Brownstein............................................... 157,166(9) 2.3% 1.6%
Richard L. Crandall............................................... 103,310(10) 1.5% 1.0%
David L. Gilmour.................................................. 132,761(11) 1.9% 1.3%
Bernard Goldstein................................................. 42,334(12) * *
Irwin Lieber...................................................... 835,738(13) 12.2% 8.5%
Josh S. Weston.................................................... 0 -- --
Henry Givray...................................................... 6,250 * *
Jacques Bouvard................................................... 6,667 -- *
All directors, director nominees and executive officers as a group
(11 persons).................................................... 3,533,430(14) 51.4% 35.7%
</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 June 30, 1998 pursuant to the
exercise of options or warrants.
(2) On June 30, 1998, there were 6,871,338 shares of Common Stock outstanding,
assuming the conversion of all outstanding shares of all series of Preferred
Stock into Common Stock.
(Footnotes continued on next page)
45
<PAGE>
(Footnotes continued from previous page)
(3) Includes 387,443 shares of Common Stock held by 21-CCP, 131,853 shares of
Common Stock held by 21-CCTEP and 52,133 shares of Common Stock held by
21-CCFP.
(4) S Squared Technology Corporation ('S Squared'), an investment manager, is
the General Partner of (i) Sci-Tech Investment Partners L.P., which holds
32,686 shares of Common Stock, (ii) S.G. Partners, L.P., which holds 53,165
shares of Common Stock, and (iii) Executive Technology, L.P., which holds
22,027 shares of Common Stock. Seymour L. Goldblatt, the President of S
Squared, is the Managing Director of both The Matrix Technology Group N.V.,
which holds 13,249 shares of Common Stock, and Core Technology Fund, Inc.,
which holds 87,650 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 174,860 shares of Common
Stock, (ii) Yale University Retirement Plan for Staff Employees, which holds
8,584 shares of Common Stock, (iii) Montsol Investments N.V., which holds
8,820 shares of Common Stock, (iv) Alfred University, which holds 6,883
shares of Common Stock, (v) Foundation Partners, which holds 6,772 shares of
Common Stock, (vi) Tampsco II Partnership, which holds 3,772 shares of
Common Stock and (vii) Hare & Co., which holds 25,429 shares of Common
Stock.
(5) Includes 263,381 shares held by RRE Giga Investors, L.P. ('RRE Giga') and
96,190 shares of Common Stock held by RRE Giga Investors II, L.P. ('RRE Giga
II'). James D. Robinson III, a former director of the Company, is the record
owner of 13,333 shares of Common Stock. Mr. Robinson is a General Partner of
RRE Investors, L.L.C., 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 Parters of RRE Investors,
L.L.C.
(6) Includes 199,998 shares of Common Stock held by Akkad and 168,572 shares of
Common Stock held by Acorn Fund, a series of Acorn Investment Trust (25,715
shares of which are subject to the exercise of warrants). Wanger Asset
Management, L.P. serves as the investment manager to each of these entities
and possesses investment and voting power with respect to each such entity
but disclaims beneficial ownership. The natural person exercising investment
and voting power over the shares is Ralph Wanger, Chairman of the Board of
Wanger Asset Management, Ltd., the general partner of Wanger Asset
Management, L.P. Mr. Wanger disclaims beneficial ownership of the shares.
(7) Includes 1,041,474 shares of Common Stock held by Pequot Private Equity
Fund, L.P. (365,193 shares of which are subject to the exercise of warrants)
and 131,863 shares of Common Stock held by Pequot Offshore Private Equity
Fund, L.P. (46,238 shares of which are subject to the exercise of warrants).
Dawson-Samberg Capital Management, Inc. serves as the investment manager to
each of these entities and possesses investment and voting power with
respect to each such entity but disclaims beneficial ownership. The natural
person exercising investment and voting power over the shares is Arthur J.
Samberg of Dawson-Samberg Capital Management, Inc. Mr. Samberg disclaims
beneficial ownership of the shares.
(8) Includes options to purchase 220,000 shares of Common Stock and warrants to
purchase 12,857 shares of Common Stock. Also includes 220,335 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.
(9) Includes 8,000 shares of Common Stock held by Mr. Brownstein's children and
5,333 shares of Common Stock held by Mr. Brownstein and his spouse jointly.
Mr. Brownstein disclaims beneficial ownership of the 6,000 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 2,000 shares of Common Stock held by his minor child, Emily
Hamilton; however, Mr. Brownstein exercises investment and voting power over
these shares.
(Footnotes continued on next page)
46
<PAGE>
(Footnotes continued from previous page)
(10) Includes 38,334 shares of Common Stock held by R. Crandall Trust, of which
Mr. Crandall serves as trustee (6,429 shares of which are subject to the
exercise of warrants). Also includes options to purchase 8,312 shares of
Common Stock.
(11) Includes options to purchase 26,094 shares of Common Stock.
(12) Includes warrants to purchase 5,143 shares of Common Stock.
(13) Includes 286,840 shares of Common Stock held by 21-CCP, 131,853 shares of
Common Stock held by 21-CCTEP, 52,133 shares of Common Stock held by
21-CCFP, 246,646 shares of Common Stock held by Wheatley Partners, L.P.
('Wheatley') and 17,163 shares of Common Stock held by Wheatley Foreign
Partners, L.P. ('Wheatley Foreign'). Mr. Lieber, a director of the Company,
is a corporate officer of InfoMedia Associates Ltd., a General Partner of
21-CCP, 21-CCTEP, 21-CCFP and a General Partner of Wheatley LLC, a General
Partner of Wheatley and Wheatley Foreign. 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 Wheatley and Wheatley
Foreign and with the other officers of the General Partner of 21-CCP,
21-CCTEP and 21-CCFP.
(14) Includes 264,015 shares of Common Stock issuable upon exercise of options
and shares of Common Stock issuable upon exercise of warrants held by all
directors, director nominees and executive officers as a group.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At June 30, 1998, there were outstanding an aggregate of 2,184,554 shares
of Common Stock, 570,000 shares of Series A Preferred Stock, 8,144,642 shares of
Series B Preferred Stock, 2,609,491 shares of Series C Preferred Stock and
285,715 shares of Series D Preferred Stock of the Company. Upon the closing of
the Offering, all of such shares of Convertible Preferred Stock will
automatically be converted into an aggregate of 4,686,784 shares of Common
Stock, resulting in an aggregate of 6,871,338 shares of Common Stock
outstanding. All of the shares of Convertible Preferred Stock that have been
converted will cease to be outstanding and may not be reissued. See
'Capitalization.'
COMMON STOCK
The Restated Certificate, 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 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, 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 June 30, 1998, there were outstanding warrants to purchase (i) 500,000
shares of Common Stock at an exercise price of $1.00 per share (166,666 shares
of Common Stock at an exercise price of $3.00 per share on a post-split basis),
(ii) 107,876 shares of Series B Preferred Stock at an exercise price of $4.625
per share (35,959 shares of Common Stock at an exercise price of $13.875 per
share on a post-split, as-converted basis), (iii) 1,654,724 shares of Series C
Preferred Stock at an exercise price of $5.28 per share (551,574 shares of
Common Stock at an exercise price of $13.50 per share on a post-split,
as-converted basis) and (iv) 308,570 shares of Series D Preferred Stock at an
exercise price of $9.00 per share (102,857 shares of Common Stock at an exercise
price of $13.50 per share on a post-split, as-converted basis). The holders of
such warrants have no rights as stockholders until the exercise thereof.
REGISTRATION RIGHTS AGREEMENT
In connection with its preferred stock financings, the Company entered into
a Registration Rights Agreement, dated November 13, 1995, as amended (the
'Registration Rights Agreement'), with its preferred stockholders (the
'Investors') and Messrs. Gartner and Gilmour (the 'Management Persons'). The
Registration
48
<PAGE>
Rights Agreement provides that, following June 30, 1998, the holders of at least
30% of the Registrable Securities (as defined therein) then outstanding,
excluding shares held by Management Persons, shall have two demand registration
requests (no more than one within a twelve-month period). At such time as the
Company becomes eligible to file a registration statement under the Securities
Act on Form S-3, the holders of at least 20% of the Registrable Securities then
outstanding may make six additional demand registration requests (no more than
one within a six-month period). The Registration Rights Agreement also provides
the holders of Registrable Securities with unlimited piggyback registration
rights in the event the Company proposes to register its Common Stock under the
Securities Act in connection with a public offering. The Company has obtained a
waiver from the holders of Registrable Securities of their piggyback
registration rights in connection with the Offering.
Pursuant to the Registration Rights Agreement, the Company will pay all
expenses (other than underwriting discounts and commissions) incurred in
connection with demand registrations and piggyback registrations. In addition,
the Company has agreed to indemnify each holder of Registrable Securities and
any underwriter for such holder against certain liabilities, including
liabilities under federal or state securities laws. The Registration Rights
Agreement terminates with respect to each holder of Registrable Securities upon
the later of (i) three years following the consummation of a Qualified Public
Offering (as defined therein to include this Offering) or (ii) such time
following an initial public offering of the Company as such holder is entitled
under Rule 144 to dispose of all the Registrable Securities held by such holder
during any 90-day period.
CO-SALE AGREEMENT
In connection with its preferred stock financings, the Company also entered
into a Co-Sale and Stock Restriction Agreement, dated November 13, 1995, as
amended (the 'Co-Sale Agreement') with Mr. Gartner (the 'Founder') and the
holders of the Company's Series B and Series C Preferred Stock (collectively,
the 'Stockholders'). The holders of Series B Preferred Stock include, but are
not limited to, Neill H. Brownstein, Linda Brownstein, Adam J. Brownstein, Todd
D. Brownstein, Will P. Gordon, Emily G. Hamilton, S Squared, Wanger Asset
Management, L.P., RRE Giga, RRE Giga II, 21st Century Communications Partners,
L.P. and Montgomery Small Cap Partners, L.P. The holders of Series C Preferred
Stock include Neill H. Brownstein, R. Crandall Trust, Gideon I. Gartner, Bernard
Goldstein, Pequot Private Equity Fund L.P., Wheatley Partners, L.P., Wheatley
Foreign Partners L.P. and Allen & Company. The Co-Sale Agreement provides that,
except for certain limited sales and sales to the Company, if the Founder
proposes to sell or transfer shares of Common Stock (including shares of Common
Stock issuable upon conversion or exercise of any warrants, options or preferred
stock held by the Founder) ('Stock') in one or more transactions, the Founder
shall promptly give written notice to the Company and the Stockholders and each
Stockholder shall have the right to participate pro-rata in such sale on the
same terms and conditions. In addition, the Co-Sale Agreement provides that each
Stockholder has the right of first offer to purchase such Stockholder's pro-rata
share of all (or any part) of any Stock that the Founder may from time to time
propose to sell. Notwithstanding the foregoing provisions, the Co-Sale Agreement
provides that the Founder may not sell or transfer more than an aggregate of
266,667 shares of Stock during the three-year period ending November 1, 1998,
subject to limited exceptions, including sales to the Company. The Co-Sale
Agreement terminates upon the earlier of (i) two years following the closing of
a qualified public offering (as described therein to include this Offering) 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 by the acquiring
entity or its subsidiary.
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 the past three years did own, 15% or more of a
corporation's voting stock.
49
<PAGE>
The Restated Certificate 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
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, 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 Certificate 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 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 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.
The Restated Certificate 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 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 will be American
Stock Transfer & Trust Company.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, based on the number of shares
outstanding at June 30, 1998, there will be approximately 9,871,338 shares of
Common Stock outstanding. Of these shares, the 3,000,000 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, generally must be sold in compliance with
the limitations of Rule 144 described below. The remaining approximately
6,871,338 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) approximately 355,292 shares will
be available for immediate sale in the public market immediately following the
effective date of the Registration Statement; (ii) approximately 59,246 shares
will be eligible for resale 90 days after the effective date of the Registration
Statement; (iii) approximately 5,870,301 shares will be eligible for resale upon
expiration of lock-up agreements 180 days after the effective date of the
Registration Statement; and thereafter (iv) the remaining approximately 586,499
shares will be eligible for sale upon expiration of their respective one-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 one year, 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 (approximately 98,713 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
two 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 one year holding
period requirement.
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 one-year minimum holding period.
The Company and its executive officers, directors and stockholders (who in
the aggregate will beneficially own approximately 6,183,517 Restricted Shares,
have agreed that, subject to certain limited exceptions, for a period ending 180
days after the consummation of the Offering, without the prior written consent
of Friedman, Billings, Ramsey & Co., Inc., they will not, directly or
indirectly, offer, pledge, sell, offer to sell, contract to sell, grant any
option to purchase or otherwise sell, dispose of, make any short sale of, loan
or grant any rights with respect to any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, shares of Common Stock. See
'Underwriting.'
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 and the 1996 Option Plan. These registration statements are expected
to be filed promptly 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 of 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.
51
<PAGE>
As of June 30, 1998, the holders of 6,261,451 shares of Common Stock and
warrants to purchase 857,056 shares of Common Stock are entitled to certain
demand and/or piggyback registration rights with respect to such shares (the
'Registrable Shares'). See 'Description of Capital Stock--Registration Rights
Agreement.'
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.
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among the
Company and the Underwriters (the 'Underwriting Agreement'), the Underwriters
named below, through their Representatives, Friedman, Billings, Ramsey & Co.,
Inc. ('FBR') and Prudential Securities Incorporated ('Prudential Securities')
(which is acting as the 'qualified independent underwriter' pursuant to the
National Association of Securities Dealers, Inc. (the 'NASD') Conduct Rules with
respect to the Offering), have severally agreed to purchase from the Company the
following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc............................................
Prudential Securities Incorporated...............................................
---------
Total.......................................................................... 3,000,000
---------
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased. The offering of Common Stock is made for delivery
when, as and if accepted by the Underwriters and subject to prior sale and to
withdrawal, cancellation or modification of the Offering without notice. The
Underwriters reserve the right to reject an order for the purchase of shares in
whole or in part.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to certain other
dealers. The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
After the initial public offering of Common Stock, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters the over-allotment option,
exercisable no later than 30 days after the date of this Prospectus, to purchase
up to 450,000 additional shares of Common Stock at the initial public offering
price, less the underwriting discount, set forth on the cover page of this
Prospectus. To the extent the Underwriters exercise such over-allotment option,
each of the Underwriters will have a firm commitment to purchase approximately
the same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the table above bears to the total number of shares of
Common Stock offered hereby. The Company will be obligated, pursuant to the
over-allotment option, to sell shares to the Underwriters to the extent the
over-allotment option is exercised. The Underwriters may exercise the
over-allotment option only to cover over-allotments made in connection with the
sale of Common Stock offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof. The
Company will reimburse the Underwriters for their reasonable out-of-pocket
expenses, including legal fees and expenses, not to exceed $100,000 including
FBR's expenses in connection with the Bridge Financing (as described below).
Prior to the Offering, there has been no public market for Common Stock.
The initial public offering price for Common Stock will be determined by
negotiation among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price are prevailing
market conditions, revenues and earnings of the Company, market valuations of
other companies engaged in activities similar to the Company, estimates of the
business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this Prospectus is subject to change as a result of market conditions
and other factors. There can,
53
<PAGE>
however, be no assurance that the price at which the shares of Common Stock will
sell in the public market after the Offering will not be lower than the price at
which they are sold by the Underwriters.
Until the distribution of the Common Stock is completed, the rules of the
SEC may limit the ability of the Underwriters and certain selling group members
to bid for or purchase Common Stock. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of shares of Common Stock. Such transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of shares
Common Stock.
If the Underwriters create a short position in shares of Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing shares of Common Stock in the open
market. The Representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of shares of Common Stock, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold such shares of Common Stock as part of the Offering.
In general, purchases of securities for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of shares of Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Company, its directors, officers and certain securityholders have each
agreed that it or they will not, without the prior written consent of FBR,
directly or indirectly, offer, pledge, sell, offer to sell, contract to sell,
grant any option to purchase or otherwise sell, dispose of, make any short sale
of, loan or grant any rights with respect to any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, shares of Common Stock for
the period ending 180 days after the consummation of the Offering, except that
the Company may grant additional options and issue additional stock under its
stock plans and repurchase shares thereunder.
Up to 5% of the shares of Common Stock offered hereby may be reserved for
sale to certain employees and directors of the Company and their family members,
at a price equal to the initial public offering price per share. 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 terms as
the other shares offered hereby.
In April 1998, the Company engaged FBR to act as its financial advisor and
lead underwriter in connection with the Offering and to provide certain other
investment banking services to the Company for customary fees.
In April 1998, the Company entered into a Loan and Warrant Purchase
Agreement (the 'Loan Agreement') with certain affiliates of FBR (the 'Lenders'),
pursuant to which the Company borrowed $10.0 million from the Lenders (the
'Bridge Financing') (on which the Lenders received a $200,000 origination fee)
and issued the Lenders the Bridge Notes in the aggregate principal
amount of $10.0 million and warrants (the 'Bridge Warrants') to purchase an
aggregate of 166,666 shares of Common Stock at an exercise price of $3.00 per
share. The Bridge Notes accrue interest at the rate of 12% per annum on the
principal amount thereof outstanding during the period beginning on the date of
issuance and ending on the Maturity Date (as defined below). The obligations
under the Bridge Notes are collateralized by substantially all of the assets of
the Company. The outstanding principal amount of, and any unpaid accrued
interest on, the Bridge Notes is due and payable on the consummation of the
Offering (the 'Maturity Date') and may be prepaid in whole or in part at any
time without penalty.
54
<PAGE>
In July 1998, Prudential Securities became a customer of the Company.
Under the Conduct Rules of the NASD, due to the ownership interest in the
Company of FBR, the Company may be deemed to be an affiliate of FBR.
Accordingly, the public offering price can be no higher than that recommended by
a 'qualified independent underwriter' meeting certain standards. In accordance
with the requirement, Prudential Securities has agreed to serve in such role and
to recommend a price in compliance with the requirements of the Conduct Rules.
Prudential Securities, in its role as qualified independent underwriter, has
performed a due diligence investigation and has reviewed and participated in the
preparation of this Prospectus and the registration statement of which this
Prospectus forms a part. In accordance with the NASD Conduct Rules, no NASD
member participating in the distribution is permitted to confirm sales to
accounts over which it exercises discretionary authority without prior specific
written consent.
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Weil, Gotshal & Manges LLP, New York, New
York. Certain legal matters in connection with this Offering will be passed upon
for the Underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the consolidated statements of operations, changes in stockholders'
equity and cash flows for the period March 17, 1995 (the date of inception) to
December 31, 1995 and each of the years ended December 31, 1996 and 1997 and the
combined statements of operations and cash flows of BIS Strategic Decisions 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.
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.
55
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
----------------
<S> <C>
GIGA INFORMATION GROUP, INC.:
Report of Independent Accountants.................................................................. F-2
Consolidated Balance Sheets at December 31, 1996 and 1997 and March 31, 1998 (unaudited)........... F-3
Consolidated Statements of Operations for the period March 17, 1995 (date of inception) to December
31, 1995; the years ended December 31, 1996 and 1997 and the three months ended March 31, 1997
and 1998 (unaudited)............................................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the period March 17, 1995 (date of
inception) to December 31, 1995; the years ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)........................................................ F-5
Consolidated Statements of Cash Flows for the period March 17, 1995 (date of inception) to December
31, 1995; the years ended December 31, 1996 and 1997 and the three months ended March 31, 1997
and 1998 (unaudited)............................................................................. F-6
Notes to Consolidated Financial Statements......................................................... F-7 - F-25
BIS STRATEGIC DECISIONS:
Report of Independent Accountants.................................................................. F-26
Combined Statement of Operations for the period January 1, 1995 to April 5, 1995................... F-27
Combined Statement of Cash Flows for the period January 1, 1995 to April 5, 1995................... F-28
Notes to Combined Financial Statements............................................................. F-29 - F-32
</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, 1996 and 1997 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the period March 17, 1995 (date of inception) to December 31, 1995 and the years
ended December 31, 1996 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Giga Information
Group, Inc. as of December 31, 1996 and 1997 and the results of its operations
and its cash flows for the period March 17, 1995 (date of inception) to December
31, 1995 and the years ended December 31, 1996 and 1997 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 17, 1998, except for the information
in the final two paragraphs of Note 20, as to
which the date is May 11, 1998.
F-2
<PAGE>
GIGA INFORMATION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 8,286 $ 3,539 $ 1,753
Trade accounts receivable, net of allowance for uncollectible accounts of $536,
$483 and $405 at December 31, 1996 and 1997 and March 31, 1998,
respectively................................................................. 3,391 8,961 5,684
Unbilled accounts receivable................................................... 1,885 4,727 2,652
Prepaid expenses and other current assets...................................... 1,753 3,753 3,665
------- ------- -----------
Total current assets........................................................... 15,315 20,980 13,754
Property and equipment, net...................................................... 2,397 1,695 1,678
Leasehold intangible (Note 3).................................................... 603 177 71
Goodwill, net of accumulated amortization of $1,507, $2,692 and $2,692 at
December 31, 1996 and 1997 and March 31, 1998, respectively.................... 1,186 -- --
Note receivable.................................................................. 159 -- --
Other assets..................................................................... 19 171 170
------- ------- -----------
Total assets................................................................. $19,679 $23,023 $15,673
------- ------- -----------
------- ------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................... $ 1,319 $ 2,213 $ 1,304
Deferred revenues.............................................................. 6,832 20,604 19,458
Accrued expenses and other current liabilities................................. 5,557 6,385 5,033
Debt--other, current portion................................................... -- 1,526 1,556
Debt--related party, current portion........................................... -- 448 224
Net liabilities of discontinued operations, current portion.................... 1,494 -- --
------- ------- -----------
Total current liabilities...................................................... 15,202 31,176 27,575
Long-term debt--related party.................................................... 424 -- --
Long-term debt--other............................................................ 1,087 937 848
Net liabilities of discontinued operations, less current portion................. 1,307 -- --
------- ------- -----------
Total liabilities............................................................ 18,020 32,113 28,423
Commitments and other contingent liabilities (Note 12)
Stockholders' equity (deficit):
Preferred Stock, $.001 par value; 12,000,000, 16,500,000 and 16,500,000 shares
authorized at December 31, 1996 and 1997 and March 31, 1998, respectively:
650,000 shares designated as Series A Convertible Preferred Stock, 570,000
shares issued and outstanding (liquidation preference of $2,850,000)....... 1 1 1
9,000,000 shares designated as Series B Convertible Preferred Stock,
8,144,642 shares issued and outstanding (liquidation preference of
$28,506,000)............................................................... 8 8 8
4,500,000 shares designated as Series C Convertible Preferred Stock, 0,
2,609,491 and 2,609,491 shares issued and outstanding at December 31, 1996
and 1997 and March 31, 1998, respectively (liquidation preference of
$10,725,000)............................................................... -- 3 3
Common Stock, $.001 par value; 50,000,000 shares authorized, 2,026,738,
2,093,107 and 2,124,142 shares issued and outstanding at December 31, 1996
and 1997 and March 31, 1998, respectively.................................... 2 2 2
Additional paid-in capital....................................................... 30,642 41,286 42,588
Stock subscriptions receivable................................................... (25) -- --
Deferred Compensation............................................................ -- -- (1,229)
Accumulated deficit.............................................................. (29,112) (50,929) (54,736)
Cumulative translation adjustments............................................... 143 539 613
------- ------- -----------
Total stockholders' equity (deficit)............................................. 1,659 (9,090) (12,750)
------- ------- -----------
Total liabilities and stockholders' equity (deficit)......................... $19,679 $23,023 $15,673
------- ------- -----------
------- ------- -----------
</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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER
MARCH 17 TO 31, MARCH 31,
DECEMBER 31, ---------------------- --------------------
1995 1996 1997 1997 1998
------------ -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Continuous information services................... $ 3,149 $ 14,600 $ 2,570 $ 6,804
Other services.................................... $ 5,517 6,043 4,715 1,276 1,693
Publications...................................... 1,442 946 344 180 55
------------ -------- -------- ------- -------
Total revenues.................................... 6,959 10,138 19,659 4,026 8,552
Costs and expenses:
Cost of services.................................. 4,707 12,336 12,477 3,202 4,391
Cost of publications.............................. 346 790 174 75 71
Sales and marketing............................... 1,016 6,706 19,617 4,158 5,781
Research and development.......................... 348 1,789 1,975 659 339
General and administrative........................ 5,760 9,739 6,419 1,061 1,339
Depreciation and amortization..................... 1,387 2,391 2,810 634 385
------------ -------- -------- ------- -------
Total costs and expenses.......................... 13,564 33,751 43,472 9,789 12,306
------------ -------- -------- ------- -------
Loss from operations................................ (6,605) (23,613) (23,813) (5,763) (3,754)
------------ -------- -------- ------- -------
Interest income..................................... 246 515 277 98 37
Interest expense.................................... (100) (95) (235) (17) (86)
------------ -------- -------- ------- -------
Loss from continuing operations before income
taxes........................................... (6,459) (23,193) (23,771) (5,682) (3,803)
Income tax (benefit) charge......................... (1,093) (491) (641) 7 4
------------ -------- -------- ------- -------
Loss from continuing operations................... (5,366) (22,702) (23,130) (5,689) (3,807)
------------ -------- -------- ------- -------
Discontinued operations:
Income (loss) from the discontinued BIS market
research business, less applicable income taxes
of $1,497 and $114 for the period March 17 to
December 31, 1995 and the year ended December
31, 1996........................................ 1,490 (79) -- -- --
Income (loss) from the discontinued BIS Shrapnel
business, less applicable income taxes of $0.... 154 (134) -- -- --
Income (loss) on disposal of discontinued BIS
market research business, less applicable income
taxes of $158 and $568 for the years ended
December 31, 1996 and 1997, respectively........ -- (2,315) 1,101 -- --
Income (loss) on disposal of discontinued BIS
Shrapnel business, less applicable income taxes
of $0 and $109 for the years ended December 31,
1996 and 1997, respectively..................... -- (160) 212 -- --
------------ -------- -------- ------- -------
Income (loss) from discontinued operations........ 1,644 (2,688) 1,313 -- --
------------ -------- -------- ------- -------
Net loss............................................ $ (3,722) $(25,390) $(21,817) $(5,689) $(3,807)
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Results per common share (Note 2):
Historical--basic and diluted:
Loss from continuing operations................. $ (11.16) $ (1.80)
-------- -------
-------- -------
Net loss........................................ $ (10.53) $ (1.80)
-------- -------
-------- -------
Weighted average number of shares............... 2,072,837 2,115,837
-------- -------
-------- -------
Pro forma--basic and diluted (unaudited):
Loss from continuing operations................. $ (3.42) $ (0.56)
-------- -------
-------- -------
Net loss........................................ $ (3.23) $ (0.56)
-------- -------
-------- -------
Weighted average number of shares .............. 6,759,621 6,802,621
-------- -------
-------- -------
</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
FOR THE PERIOD MARCH 17, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995, THE
YEARS ENDED
DECEMBER 31, 1996 AND 1997 AND THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE ADDITIONAL STOCK
PREFERRED PREFERRED PREFERRED COMMON PAID-IN SUBSCRIPTION
STOCK STOCK STOCK STOCK CAPITAL RECEIVABLE
----------- ----------- ----------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of 2,036,002 shares of Common
Stock...................................... $ 2 $ 1,058 $ (350)
Issuance of 160,000 shares of Series A
Convertible Preferred Stock and convertible
note for acquisition of ExperNet
Corporation................................ 800
Issuance of 410,000 shares of Series A
Convertible Preferred Stock, net of
expenses................................... $ 1 2,049 (25)
Issuance of 4,026,772 shares of Series B
Convertible Preferred stock, net of
expenses................................... $ 4 13,212
Conversion of bridge financing to 571,428
shares of Series B Convertible Preferred
Stock...................................... 1,980
Net loss....................................
Translation adjustments.....................
----------- ----------- ----------- ------ ---------- -----
Balance at December 31, 1995................ 1 4 2 19,099 (375)
----------- ----------- ----------- ------ ---------- -----
Payment of stock subscription receivable.... 300
Issuance of 3,327,728 shares of Series B
Convertible Preferred Stock, net of
expenses................................... 4 11,546
Issuance of 36,458 shares of Common Stock... 70
Repurchase of 12,389 shares of Common
Stock...................................... (23)
Cancellation of 33,333 shares of Common
Stock issued............................... (50) 50
Exercise of warrant for 218,714 shares of
Series B Convertible Preferred Stock.......
Net loss....................................
Translation adjustments.....................
----------- ----------- ----------- ------ ---------- -----
Balance at December 31, 1996................ 1 8 2 30,642 (25)
----------- ----------- ----------- ------ ---------- -----
Issuance of 72,479 shares of Common Stock... 148
Repurchase of 6,110 shares of Common
Stock...................................... (38)
Issuance of 2,609,491 shares of Series C
Convertible Preferred Stock, net of
expenses................................... $ 3 10,534
Payment of stock subscription receivable.... 25
Net loss....................................
Translation adjustments.....................
----------- ----------- ----------- ------ ---------- -----
Balance at December 31, 1997................ 1 8 3 2 41,286 --
----------- ----------- ----------- ------ ---------- -----
Issuance of 31,035 shares of Common Stock... 73
Deferred Compensation....................... 1,229
Net loss....................................
Translation adjustments.....................
----------- ----------- ----------- ------ ---------- -----
Balance at March 31, 1998 (unaudited)....... $ 1 $ 8 $ 3 $ 2 $ 42,588 --
----------- ----------- ----------- ------ ---------- -----
----------- ----------- ----------- ------ ---------- -----
<CAPTION>
CUMULATIVE TOTAL
DEFERRED TRANSLATION ACCUMULATED STOCKHOLDERS'
COMPENSATION ADJUSTMENTS DEFICIT EQUITY
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Issuance of 2,036,002 shares of Common
Stock...................................... $ 710
Issuance of 160,000 shares of Series A
Convertible Preferred Stock and convertible
note for acquisition of ExperNet
Corporation................................ 800
Issuance of 410,000 shares of Series A
Convertible Preferred Stock, net of
expenses................................... 2,025
Issuance of 4,026,772 shares of Series B
Convertible Preferred stock, net of
expenses................................... 13,216
Conversion of bridge financing to 571,428
shares of Series B Convertible Preferred
Stock...................................... 1,980
Net loss.................................... $ (3,722) (3,722)
Translation adjustments..................... $ (37) (37)
------ --- ----------- -------------
Balance at December 31, 1995................ (37) (3,722) 14,972
------ --- ----------- -------------
Payment of stock subscription receivable.... 300
Issuance of 3,327,728 shares of Series B
Convertible Preferred Stock, net of
expenses................................... 11,550
Issuance of 36,458 shares of Common Stock... 70
Repurchase of 12,389 shares of Common
Stock...................................... (23)
Cancellation of 33,333 shares of Common
Stock issued............................... --
Exercise of warrant for 218,714 shares of
Series B Convertible Preferred Stock....... --
Net loss.................................... (25,390) (25,390)
Translation adjustments..................... 180 180
------ --- ----------- -------------
Balance at December 31, 1996................ 143 (29,112) 1,659
------ --- ----------- -------------
Issuance of 72,479 shares of Common Stock... 148
Repurchase of 6,110 shares of Common
Stock...................................... (38)
Issuance of 2,609,491 shares of Series C
Convertible Preferred Stock, net of
expenses................................... 10,537
Payment of stock subscription receivable.... 25
Net loss.................................... (21,817) (21,817)
Translation adjustments..................... 396 396
------ --- ----------- -------------
Balance at December 31, 1997................ 539 (50,929) (9,090)
------ --- ----------- -------------
Issuance of 31,035 shares of Common Stock... 73
Deferred Compensation....................... (1,229) 0
Net loss.................................... (3,807) (3,807)
Translation adjustments..................... 74 74
------ --- ----------- -------------
Balance at March 31, 1998 (unaudited)....... $ (1,229) $ 613 $ (54,736) $ (12,750)
------ --- ----------- -------------
------ --- ----------- -------------
</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>
THREE MONTHS ENDED
YEAR ENDED
MARCH 17 TO DECEMBER 31, MARCH 31,
DECEMBER 31, -------------------- ------------------
1995 1996 1997 1997 1998
------------ -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................. $ (3,722) $(25,390) $(21,817) $(5,689) $(3,807)
Adjustments to reconcile net loss to net cash used in
continuing operating activities:
(Income) loss from discontinued operations............. (1,644) 213 -- -- --
(Income) loss on disposal of discontinued operations... -- 2,475 (1,313) -- --
Depreciation and amortization.......................... 1,387 2,391 2,810 634 385
Net loss on write-down of investments.................. -- 200 179 -- --
Provision for doubtful accounts........................ 20 395 27 59 (79)
Decrease in deferred taxes............................. 50 61 -- -- --
Interest on long-term debt added to principal.......... 37 74 74 18 13
Interest on note receivable added to principal......... -- (9) (5) (3) --
Gain on sale of fixed assets........................... (3) (11) (2) (7) (9)
Other non-cash items................................... -- -- 87 8 8
Change in assets and liabilities net of effects of
acquisitions:
Decrease (increase) in accounts receivable............. 1,489 (4,092) (8,405) 563 5,321
Increase in prepaid expenses and other current
assets............................................... (1,509) (536) (1,755) (853) (53)
Increase (decrease) in accounts payable and accrued
liabilities.......................................... 1,988 1,928 1,894 (458) (2,045)
Increase (decrease) in deferred revenues............... 551 4,582 13,696 2,137 (1,023)
------------ -------- -------- ------- -------
Net cash provided by (used in) operating activities:
Net cash used in continuing operations................... (1,356) (17,719) (14,530) (3,591) (1,289)
Net cash provided by (used in) discontinued operations... 335 (571) (1,667) (145) (13)
------------ -------- -------- ------- -------
Net cash used in operating activities.................. (1,021) (18,290) (16,197) (3,736) (1,302)
------------ -------- -------- ------- -------
Cash flows from investing activities:
Acquisition of equipment and improvements................ (961) (1,799) (559) (151) (261)
Net cash acquired in BIS acquisition..................... 1,013 -- -- -- --
Net cash acquired in ExperNet acquisition................ 61 -- -- -- --
Issuance of note receivable.............................. -- (150) -- -- --
Proceeds from sale of Shrapnel........................... -- -- 293 -- --
Other, net............................................... 76 40 60 24 10
------------ -------- -------- ------- -------
Cash provided by (used in) investing activities........ 189 (1,909) (206) (127) (251)
------------ -------- -------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of Common Stock................... 710 70 61 8 65
Repurchase of common stock............................... -- (23) (38) -- --
Proceeds from issuance of Series A Convertible Preferred
Stock.................................................. 2,025 -- -- -- --
Proceeds from bridge financing, net of issuance costs
of $20................................................. 1,980 -- -- -- --
Proceeds from issuance of Series B Convertible
Preferred Stock, net of issuance costs of $90 and
$878................................................. 13,216 11,557 -- -- --
Proceeds from issuance of Series C Convertible
Preferred Stock, net of issuance costs of $188......... -- -- 10,537 -- --
Repayments of principal to related parties............... (321) -- -- -- (224)
Proceeds from stock subscriptions receivable............. -- 300 25 -- --
Net increase (decrease) in short-term borrowings......... 234 (294) (193) 56 --
Proceeds from long-term debt............................. -- -- 1,465 -- --
Principal payments on long-term debt..................... (97) (11) (139) -- (72)
------------ -------- -------- ------- -------
Cash provided by (used in) financing activities........ 17,747 11,599 11,718 64 (231)
------------ -------- -------- ------- -------
Effect of exchange rates on cash......................... (39) 10 (62) (28) (2)
Net increase (decrease) in cash and cash equivalents..... 16,876 (8,590) (4,747) (3,827) (1,786)
Cash and cash equivalents, beginning of period........... -- 16,876 8,286 8,286 3,539
------------ -------- -------- ------- -------
Cash and cash equivalents, end of period............... $ 16,876 $ 8,286 $ 3,539 $ 4,459 $ 1,753
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
Supplementary cash flow information:
Income taxes paid...................................... $ 39 $ 30 $ 15 $ 5 $ 5
Interest paid.......................................... $ 58 $ 22 $ 121 $ 0 $ 55
</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 AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 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 three sources; Continuous Information Services, which include its
Giga Advisory Service and IT Practices; Other Services, which include events and
consulting; and Publications. Continuous Information Services consist of
monitoring, research and analysis of IT developments and trends to support
customers' IT decisions, distributed through a variety of electronic and print
media, as well as inquiry access to analysts and practitioners and participation
in briefings and conferences, packaged into an annually renewable
subscription-based product. On April 5, 1995, the Company acquired BIS Strategic
Decisions, Inc. and its five foreign affiliates (collectively, 'BIS'). 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, then
a director and officer of the Company, and, on December 29, 1995, acquired the
remaining 22.2% interest.
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, competition from
other companies including those with greater resources than the Company,
dependence on key individuals, the development of new services and products, the
need to obtain additional financing, protection of proprietary information and
technology and the risks associated with international operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. Certain prior year amounts have
been reclassified to conform to the current year's presentation.
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.
Interim Financial Information
The consolidated financial statements of the Company at March 31, 1998 and
for the three months ended March 31, 1997 and 1998 are unaudited. All
adjustments (consisting only of normal recurring adjustments) have been made
which, in the opinion of management, are necessary for a fair presentation.
Results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for any future
period.
Cash and Cash Equivalents
Cash equivalents consist primarily of 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.
F-7
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
Foreign Currency Translation
The accounts of foreign subsidiaries are translated using exchange rates in
effect at period-end for assets and liabilities and at average exchange rates
during the period for results of operations. The local currency for all foreign
subsidiaries is the functional currency. The related translation adjustments are
reported as a separate component of stockholders' equity (deficit). Gains
(losses) resulting from foreign currency transactions are included in other
income (expense) and are immaterial for all periods presented.
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 funds and trade accounts receivable. 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. The Company
performs ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. Such losses have historically been within management's
expectations.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the Company's
consolidated financial statements. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using currently enacted tax
rates for the year in which the differences are expected to reverse. The Company
records a valuation allowance against net deferred tax assets if, based upon the
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
Revenue and Commission Expense Recognition
Subscription revenues from Continuous Information Services are deferred and
recognized on a pro rata 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. In the event the contract
is canceled by the customer, the commission is refundable with respect to the
portion related to the revenue which will not be recognized.
Revenues from (i) Advisory Service, IT Practice Services and Continuous
Advisory Consulting are aggregated into Continuous Information Services, (ii)
Events and other services, principally consulting, are aggregated into Other
Services and (iii) Publications are listed separately. Revenues from Other
Services are recognized as follows: events as they occur and consulting as such
services are performed. Revenues from Publications are recognized when
publications are delivered.
Unbilled accounts receivable pertain to the portion of a customer's service
period not yet invoiced in accordance with contractual quarterly billing terms
offered in conjunction with the Continuous Information Services.
F-8
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
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 date of acquisition. Expenditures for
maintenance and repairs are charged to expense; expenditures for additions,
renewals and betterments are capitalized.
Depreciation is computed for financial reporting purposes principally by
use of 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 improvements................. Shorter of economic life or remaining lease term
</TABLE>
Upon retirement or sale, the cost of assets disposed of and the related
accumulated depreciation are eliminated from the balance sheet and the resulting
gains or losses reflected in income.
Long-Lived Assets
The Company regularly reviews long-lived assets for impairment. Any
write-downs are treated as permanent reductions in the carrying amount of the
assets. Management's policy regarding long-lived assets is to evaluate the
recoverability of its assets when the facts and circumstances suggest that these
assets may be impaired. The test of such recoverability is a comparison of the
asset value to its expected undiscounted future cash flows over the remaining
life of the asset. This analysis relies on a number of factors including
operating results, business plans, budgets, economic projections and changes in
management's strategic direction or market emphasis.
Goodwill
Goodwill represents the excess of the purchase price of entities acquired
over the fair values of amounts assigned to the net tangible and intangible
assets acquired and liabilities assumed. Amortization is recorded using the
straight-line method over two years for the BIS acquisition and five years for
the ExperNet acquisition. The carrying value of goodwill is included in
management's evaluation of the recoverability of its long-lived assets. During
1996, approximately $666,000 of goodwill identifiable with the discontinuance of
the BIS market research business was written off to amortization expense in
connection with the disposition of this business. In 1997, the Company's
assessment of the recoverability of goodwill associated with the ExperNet
acquisition indicated a de-minimis level of future cash flows associated with
this business. As such, the Company wrote-off the remaining unamortized portion
of the goodwill resulting in a charge to amortization expense of $1,025,000.
Total amortization expense related to goodwill was approximately $578,000,
$929,000, $1,186,000, $231,000 and $0 for the period from March 17, 1995 to
December 31, 1995, the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1997 and 1998, 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.
F-9
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
Historical Net Loss per Common Share
The Company computes basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standard ('SFAS') No. 128, 'Earnings Per
Share.' Basic earnings per share is based upon the weighted average number of
common shares outstanding during the period. Common equivalent shares have been
excluded from the computation of diluted loss per share as their effect would be
anti-dilutive. Common equivalent shares result from the assumed exercise of
outstanding stock options and warrants, the proceeds of which are then assumed
to have been used to repurchase outstanding common stock using the treasury
stock method, and the conversion of convertible notes into Common Stock. As a
result, options and warrants to purchase 1,638,825 and 1,903,730 shares of
Common Stock and convertible notes convertible into 93,196 and 78,910 shares of
Common Stock outstanding during the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively, were excluded from the calculation of
diluted net loss per common share.
Pro Forma Net Loss Per Common Share (unaudited)
The pro forma basic and diluted net loss per common share is computed based
upon the weighted average number of common shares outstanding in accordance with
SFAS No. 128. In addition, all outstanding shares of convertible preferred
stock, which convert to Common Stock upon the closing of an initial public
offering of Common Stock at a price of at least $15.75 per share and having
aggregate proceeds of at least $15,000,000, are treated as if converted to
Common Stock (see Note 13).
Comprehensive Income (Loss)
The Company has adopted SFAS No. 130, 'Reporting Comprehensive Income,'
which establishes standards for the reporting and display of comprehensive
income and its components in general purpose financial statements for the year
ended December 31, 1998 and interim periods. The table below sets forth
'Comprehensive income (loss)' as defined by SFAS No. 130 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS
MARCH 17 TO 31, ENDED MARCH 31,
DECEMBER 31, ------------------- -----------------
1995 1996 1997 1997 1998
------------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net loss...................................................... $ (3,722) $(25,390) $(22,075) $(5,689) $(3,807)
Other Comprehensive income (loss), net of tax:
Foreign currency translation adjustment.................. (37) 180 396 99 74
------------ -------- -------- ------- -------
Comprehensive loss............................................ $ (3,759) $(25,210) $(21,679) $(5,590) $(3,733)
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
</TABLE>
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
'Disclosures about Segments of an Enterprise and Related Information.' This
statement supersedes SFAS No. 14, 'Financial Reporting for Segments of a
Business Enterprise.' SFAS No. 131 includes requirements to report selected
segment information quarterly and entity-wide disclosures about products and
services, major customers, and the material countries in which the entity holds
assets and reports revenues. The statement will be effective for annual periods
beginning after December 15, 1997 and the Company will adopt its provisions in
the year ended December 31, 1998. Reclassification for earlier periods is
required, unless impracticable, for comparative purposes. The Company is
currently evaluating the impact this statement will have on its financial
statements; however, because the statement requires only additional disclosure,
the Company does not expect the statement to have a material impact on its
financial position or results of operations.
F-10
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
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 11). BIS
was engaged in compiling and providing data intensive market research to vendors
for use primarily in planning their product operating and marketing programs.
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, including a leasehold for one of the
facilities, 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. In addition
the Company acquired current assets of approximately $8,700,000 and furniture
and equipment of approximately $2,000,000 offset by current liabilities assumed
of approximately $12,600,000 (of which approximately $9,100,000 were deferred
revenues), a note payable of $192,000 and a tax provision of approximately
$1,000,000. The excess of the purchase price over the net assets acquired of
approximately $3,059,000 was 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 (213,333 shares of
Common Stock on an as-converted basis), 80,000 shares (106,667 shares of Common
Stock on an as-converted basis) of which were issued to Mr. Gartner and 80,000
shares (106,667 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 53,333 shares of Common Stock at an exercise price of $1.50 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 11). ExperNet is
comprised of a network of external IT practitioners, and the related interactive
software, which respond to specific customer inquiries. In the transaction, the
Company acquired current assets of approximately $148,000 and furniture and
equipment of approximately $126,000, offset by current liabilities assumed of
approximately $96,000 and long-term debt of approximately $386,000. The
acquisition was accounted for as a purchase; accordingly, the excess of the
purchase price over the net assets acquired of approximately $1,408,000 has been
recorded as goodwill. The Company's statements of operations include the results
of operations of ExperNet from July 6, 1995.
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
Convertible 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.
During 1997, the Company awarded 17,778 shares of Common Stock at a fair
value of $3.00 per share to Mr. Gartner in lieu of a payment of cash for
services rendered during 1996 as Chief Executive Officer. The Company recorded
as compensation expense in 1996 the fair value of the Common Stock awarded to
Mr. Gartner.
F-11
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
In February 1998, the Company entered into an agreement with Mr. Gilmour, a
director and co-founder of the Company, relating to Mr. Gilmour's continuing
relationship with the Company. As part of this agreement, the Company agreed to
early prepayment of a note issued by the Company to Mr. Gilmour in December 1995
in connection with the acquisition by the Company of Mr. Gilmour's remaining
interest in ExperNet (see Note 3). In addition, the agreement also provided that
the Company would receive a 7.5% equity interest in a company newly formed by
Mr. Gilmour and would be granted an irrevocable, royalty-free, worldwide license
to use any software, products or technologies the new company develops during a
three year period commencing on February 1, 1998.
Certain of the Company's existing investors have represented that they
will, to the extent necessary, fund the Company through May 1999 on terms to be
mutually agreed upon.
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
Prepaid compensation..................................................... $1,126 $2,559 $ 2,422
Other.................................................................... 627 1,194 1,243
------ ------ ---------
Total.................................................................. $1,753 $3,753 $ 3,665
------ ------ ---------
------ ------ ---------
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation and
amortization, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
Computer and related equipment........................................... $2,849 $3,202 $ 3,463
Furniture and fixtures................................................... 781 827 771
Motor vehicles........................................................... 108 27 1
Leasehold improvements................................................... 119 119 119
------ ------ ---------
3,857 4,175 4,354
Less accumulated depreciation and amortization........................... 1,460 2,480 2,676
------ ------ ---------
Property and equipment, net.............................................. $2,397 $1,695 $ 1,678
------ ------ ---------
------ ------ ---------
</TABLE>
Depreciation and amortization expense was $525,000, $1,020,000, $1,190,000,
$293,000 and $278,000 for the period March 17, 1995 to December 31, 1995, the
years ended December 31, 1996 and 1997, and the three months ended March 31,
1997 and 1998, respectively.
F-12
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
7. LEASE COMMITMENTS
The Company leases certain office space and equipment under operating lease
agreements. Future minimum rental commitments under all operating leases with
remaining noncancelable terms of one year or more are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
April 1 through December 31, 1998.................................................. $ 685
1999............................................................................... 910
2000............................................................................... 590
2001............................................................................... 137
2002............................................................................... 80
Thereafter......................................................................... 39
---------
Total............................................................................ $ 2,441
---------
---------
</TABLE>
Rent expense, net of sublease income of approximately $60,000, $78,000,
$54,000, $11,000 and $6,000 was $482,000, $701,000, $725,000, $232,000 and
$189,000 for the period March 17, 1995 to December 31, 1995, the years ended
December 31, 1996 and 1997, and the three months ended March 31, 1997 and 1998,
respectively.
An agreement was entered into by and among the Company and two prior owners
of BIS providing for one of the prior owners, who had guaranteed all payments
under a lease, to pay an aggregate of $1,500,000 to the landlord for rent under
the lease, payable monthly in an amount of $36,722. The guaranteed payments end
at May 30, 1998.
8. INCOME TAXES:
The Company has deferred tax assets of approximately $11,148,000,
$20,216,000 and $21,862,000 at December 31, 1996 and 1997 and March 31, 1998,
respectively. For financial reporting purposes, valuation allowances of
$11,148,000, $20,216,000 and $21,862,000, respectively, have been recognized to
offset these deferred tax assets until the Company can conclude that it is more
likely than not that these deferred tax assets will be realized. During the
years ended December 31, 1996 and 1997, and the three months ended March 31,
1998, the valuation allowance increased by approximately $8,529,000, $9,068,000
and $1,646,000, 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,
------------------ MARCH 31,
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue.................................................... $ 742
Net operating loss carryforwards.................................... 9,112 $19,119 $20,604
Discontinued operations............................................. 474 24 --
Other--net.......................................................... 820 1,073 1,258
------- ------- ---------
Total deferred tax assets........................................ 11,148 20,216 21,862
Valuation allowance for deferred tax assets........................... 11,148 20,216 21,862
------- ------- ---------
Net deferred tax assets............................................... -- -- --
------- ------- ---------
------- ------- ---------
</TABLE>
F-13
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
For financial reporting purposes, income before income taxes includes the
following components (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
MARCH 17 TO 31, MARCH 31,
DECEMBER 31, -------------------- ------------------
1995 1996 1997 1997 1998
------------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Pretax loss for continuing operations:
United States............................. $ (5,068) $(20,688) $(21,006) $(5,120) $(3,005)
Non-United States......................... (1,391) (2,505) (2,765) (562) (798)
------------ -------- -------- ------- -------
Consolidated................................ $ (6,459) $(23,193) $(23,771) $(5,682) $(3,803)
------------ -------- -------- ------- -------
------------ -------- -------- ------- -------
</TABLE>
The income tax expense(benefit) of the loss from continuing operations,
substantially all of which is deferred, consists of the following components (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED MARCH 31,
MARCH 17 TO DECEMBER 31,
DECEMBER 31, -------------- ----------------------------------
1995 1996 1997 1997 1998
------------ ----- ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
U.S. Federal....................................... $ (754) $(239) $(554) $ 7 $ 4
Foreign............................................ (339) (252) (87) -- --
-- --
------------ ----- -----
$ (1,093) $(491) $(641) $ 7 $ 4
-- --
-- --
------------ ----- -----
------------ ----- -----
</TABLE>
The income tax benefit of the loss from continuing operations differs from
the amount of income tax benefit determined by applying the applicable U.S.
statutory income tax rate to pretax loss from continuing operations as a result
of the following differences:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
MARCH 17 TO DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, ---------------- ----------------
1995 1996 1997 1997 1998
------------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Income tax at the statutory rate................... (34.0)% (34.0)% (34.0)% (34.0)% (34.0)%
Foreign subsidiary losses with no benefit
recognized....................................... 3.5 1.7 4.0 3.4 7.1
Foreign income taxed at different rates............ (1.4) 0.9 0.4 (0.2) (0.4)
Nondeductible goodwill............................. 3.1 1.4 1.7 -- --
U.S. losses with no benefit recognized............. 12.3 27.8 24.9 30.5 26.9
Other items (net).................................. (0.4) 0.1 0.3 0.4 0.5
------------ ----- ----- ----- -----
(16.9)% (2.1)% (2.7)% 0.1% 0.1%
------------ ----- ----- ----- -----
------------ ----- ----- ----- -----
</TABLE>
The Company has available net operating loss carryforwards of approximately
$47,988,000 and $51,791,000 at December 31, 1997 and March 31, 1998 which may be
used to reduce future taxable income. Of this amount, at December 31, 1997 U.S.
carryforwards of approximately $43,081,000 expire in various years through 2012,
certain non-U.S. carryforwards of approximately $2,367,000 expire in various
years through 2002 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, as amended.
F-14
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
9. JOINT VENTURE AGREEMENT:
In 1991, BIS entered into a joint venture agreement with a Japanese company
(the 'Joint Venture') to provide additional market penetration in Japan for the
Company's products and services. BIS's initial equity ownership was 40%.
Pursuant to the terms of the agreement, the Company was required to purchase 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. In December
1996, the Company notified its partner, pursuant to the terms of the agreement,
of its desire to dissolve the Joint Venture. The Company does not expect any
proceeds from the dissolution and, as such, wrote off to expense its investment
of approximately $125,000. The net earnings of the joint venture to date have
been de minimis. At December 31, 1996 and 1997 and March 31, 1998 the Company
had accounts receivable due from the Joint Venture of $125,000, $0 and $0,
respectively.
10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
Accrued compensation and benefits........................................ $1,675 $2,260 $ 1,101
Sales tax payable........................................................ 1,110 1,198 1,026
Other.................................................................... 2,772 2,927 2,906
------ ------ ---------
Total.................................................................. $5,557 $6,385 $ 5,033
------ ------ ---------
------ ------ ---------
</TABLE>
11. BORROWINGS AND LONG-TERM DEBT:
In connection with the Company's acquisition of BIS, the seller received a
$1,000,000, 5% convertible note due April 5, 1998. The note was convertible into
185,298 shares of Common Stock. The note plus accrued interest was fully repaid
on April 17, 1998.
In connection with the Company's acquisition of ExperNet, the Company
issued a $400,000, 6% convertible note to Mr. Gilmour (see also Note 3). The
note plus accrued interest was repaid in two installments, the last of which was
in April 1998.
In June 1997, the Company entered into a loan agreement with a lending
institution collateralized by certain equipment, machinery and fixtures. Under
this agreement the Company received a $1,465,000 loan due in June 2000 with an
effective interest rate of 17.133%. Principal payments required on this loan in
the years 1998 through 2000 are $389,000, $461,000 and $444,000.
The weighted average interest rates of outstanding short-term borrowings
were 7.3%, 6.9%, 7.1%, 0% and 8.1% for the period March 17, 1995 to December 31,
1995, the years ended December 31, 1996 and 1997 and the three months ended
March 31, 1997 and 1998, respectively.
12. COMMITMENTS AND CONTINGENT LIABILITIES:
In October 1997, the Company entered into an invoice factoring arrangement
with a commercial bank under which the Company could borrow up to $1,250,000.
Under the arrangement, the bank charges an administrative fee of 0.5% of each
factored invoice and a monthly factoring management fee of 1.25% of the gross
average monthly factored invoices. Borrowings under the arrangement are
collateralized by all the Company's assets. Upon the initial utilization of the
factoring arrangement, the bank will receive warrants equal to the value of
$125,000 for a class of stock to be determined and at a price to be determined.
As of March 31, 1998, no invoices have been factored under the arrangement.
F-15
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
13. PREFERRED STOCK:
The authorized capital stock of the Company includes 16,500,000 shares of
Preferred Stock. Of the Preferred Stock, 650,000, 9,000,000 and 4,500,000 shares
have been designated as Series A, Series B and Series C Convertible Preferred
Stock. The remaining 2,350,000 shares of Preferred Stock have not been
designated.
Series A Convertible Preferred Stock ('Series A')
During 1995, the Company issued 410,000 shares of Series A (546,668 shares
of Common Stock 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 (213,333 shares of Common Stock on an as-converted
basis) were issued in connection with the acquisition of ExperNet as described
in Note 3.
Series B Convertible Preferred Stock ('Series B')
During 1995, the Company issued 4,026,772 shares of Series B 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 at the first closing of the Series B
Stock financing in November 1995. During 1996 the Company issued an additional
3,327,728 shares of Series B, in two separate financings, for cash consideration
of $11,550,000, net of issuance costs of $97,000. In addition, a warrant issued
to the lender in connection with the Series B bridge financing in August 1995
was exercised on a cashless basis for 218,714 shares in September 1996 (see Note
15).
Series C Convertible Preferred Stock ('Series C')
During 1997, the Company issued 2,609,491 shares of Series C, in two
separate financings, for cash consideration of $10,537,000, net of issuance
costs of $188,000.
In connection with this issuance the Company issued warrants to purchase-up
to 1,409,129 shares of Series C at an exercise price of $4.50 per share (see
Note 15).
Conversion
Each share of Series A, Series B and Series C 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, Series B and Series C is subject to adjustment upon the occurrence of certain
events. At March 31, 1998 each share of Series A, Series B and Series C is
convertible into four-thirds (4/3), one-third (1/3) and 0.39143 shares of Common
Stock, respectively.
The Series A, Series B and Series C Shares will automatically convert into
Common Stock at the then effective conversion price upon the closing of a firmly
underwritten public offering of Common Stock at a price of at least $15.75 per
share (as adjusted for splits, combinations and share dividends), and generating
gross proceeds of at least $15,000,000. In addition, the Series A, Series B and
Series C Shares 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, Series B and Series C Shares.
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
F-16
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
the Convertible Preferred Stock, voting together as a single class, and in which
the 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,
Series B and Series C Shares are entitled to receive out of the assets of the
Company available for distribution to its stockholders, an amount equal to
$5.00, $3.50 and $4.11 per share, respectively, 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,
Series B and Series C Shares 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, Series B and Series C
Shares 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 at least
1,000,000 shares of Series A, Series B and Series C Shares are outstanding, the
Company may not, without the approval of at least a majority of the outstanding
shares of the Series A, Series B and Series C Shares, take certain actions as
described in the Certificate of Incorporation.
14. 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 December 1996, the Company amended its Certificate of
Incorporation to increase the authorized number of Common Stock from 28,000,000
to 50,000,000.
During March 1995, the Company sold to Mr. Gartner 1,400,000 shares of
Common Stock at a purchase price of $0.07125 per share. During the remainder of
1995, the Company sold 636,000 shares of Common Stock to employees, consultants
and directors at a purchase price of $1.50 per share.
15. 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'). On August 28, 1996 the Board
of Directors adopted the 1996 Stock Option Plan (the '1996 Stock Plan') to
effectively supersede the 1995 Stock Plan. The 1995 Stock Plan provided for the
granting of options to purchase and for direct purchases of up to 1,033,333
shares of Common Stock. The 1996 Stock Plan provides for the granting of options
to purchase up to 1,000,000 shares of Common Stock.
Both the 1995 Stock Plan and the 1996 Stock Plan provide for 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 generally at the fair market value
determined by the Board on the date of the grant. The 1995 Stock Plan also
provided for direct purchases of Common Stock. 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 or direct purchases under the 1995 Stock
Plan 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.
Options granted under the 1995 and 1996 stock plans have variable vesting
periods. No options granted under these plans have a term in excess of 10 years
after the date of grant.
In March, 1998 the Board voted to grant 319,008 options to certain
employees at exercise prices ranging from $3.00 to $3.30 per share. The
estimated fair market value of the Company's Common Stock at the date of
F-17
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
grant was determined to be $6.75 per share. Accordingly, such grants were deemed
to be compensatory options in accordance with Accounting Principles Board
Opinion No. 25, 'Accounting for Stock Issued to Employees' ('APB No. 25'). Total
option-related compensation expense for the three months ended March 31, 1998
was immaterial.
In June 1997, the Company adopted the 1997 Director Stock Option Plan (the
'Director Plan') which provides for the granting of non-qualifying stock options
to purchase-up to 50,000 shares of common stock. Under the Director Plan,
non-employee directors are entitled to receive options to purchase 2,000 shares
of common stock on July 1 of each year commencing in 1997. In addition, each
eligible non-employee director would receive an option to purchase 2,000 shares
of common stock upon the initial election to the Board of Directors. The
exercise price of the options, which vest in four equal installments starting
from the date of the grant, will equal the fair market value on the date of the
grant. Each option shall expire 10 years after the date of the grant.
A summary of stock option activity through March 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding at March 17, 1995
Granted........................................................ 1,023,718 $ 1.50
Exercised...................................................... (53,332) 1.50
Forfeited/canceled............................................. (20,000) 1.50
---------- ------
Outstanding at December 31, 1995................................. 950,386 1.50
Granted........................................................ 444,554 2.07
Exercised...................................................... (24,792) 1.50
Forfeited/canceled............................................. (450,028) 1.61
---------- ------
Outstanding at December 31, 1996................................. 920,120 1.72
Granted........................................................ 517,597 3.00
Exercised...................................................... (38,035) 1.64
Forfeited/canceled............................................. (349,475) 2.30
---------- ------
Outstanding at December 31, 1997................................. 1,050,207 2.16
Granted........................................................ 385,543 3.08
Exercised...................................................... (37,702) 1.71
Forfeited/canceled............................................. (102,267) 2.48
---------- ------
Outstanding at March 31, 1998.................................... 1,295,781 2.42
---------- ------
---------- ------
</TABLE>
Options vested and exercisable at December 31, 1996 and 1997 and March 31,
1998 were 384,005, 488,763, and 487,372, respectively.
In July and October 1995 the Company granted options to purchase a total of
260,000 shares of Common Stock other than pursuant to the 1995 Stock Plan at an
exercise price of $1.50 per share.
The Company has adopted the disclosure-only provisions of SFAS No. 123, but
applies APB No. 25 and related Interpretations in accounting for options.
Accordingly, no compensation expense has been recognized for the issuance of
options. Pursuant to the required pro forma disclosure under the fair value
method of estimating compensation cost, the Company has estimated the fair value
of its stock options by applying a present value approach which does not
consider expected volatility of the underlying stock ('minimum value method')
using risk free interest rates based on zero coupon Treasury instruments with
maturities similar to the estimated option term and assuming no dividends.
F-18
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in 1995, 1996 and 1997
consistent with the provisions of SFAS No. 123, the Company's net loss to common
stockholders and net loss per share to common stockholders would have been
increased to the SFAS No. 123 pro forma amounts indicated below in thousands
except per share amounts:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
1996 1997 31, 1998
-------- -------- ------------
<S> <C> <C> <C>
Net loss to common stockholders--as reported..................... $(25,390) $(21,817) $ (3,807)
Net loss to common stockholders--SFAS No. 123
pro forma...................................................... (25,427) (21,941) (3,852)
Net loss per share to common stockholders--as reported........... $ (10.53) $ (1.80)
Net loss per share to common stockholders--SFAS No. 123 pro
forma.......................................................... (10.59) (1.82)
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of the effects on reported net income for future years. SFAS No. 123
does not apply to awards prior to 1996 and additional awards in future years are
anticipated.
The weighted average fair value per share at date of grant for stock
options granted during the years December 31, 1996 and 1997 and the three months
ended March 31, 1998 was $0.22, $0.38 and $0.36, respectively. The fair value of
each option granted during the years ended December 31, 1996 and 1997 is
estimated on the date of grant using the Black-Scholes option pricing model with
a zero expected volatility, a dividend yield of 0%, weighted average expected
lives of 6.3 and 8.0 years, respectively, and weighted average risk free
interest rates of 6.0% and 6.2%, respectively.
The following table summarizes the status of the Company's stock options
outstanding and exercisable at March 31, 1998:
<TABLE>
<CAPTION>
STOCK OPTIONS
STOCK OPTIONS OUTSTANDING EXERCISABLE
------------------------------------------- ----------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE AVERAGE
RANGE OF REMAINING EXERCISE EXERCISE
EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES PRICE
- --------------- --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$1.50 to $1.80 528,788 5.4 years $ 1.54 422,420 $ 1.53
$2.70 to $3.30 766,993 9.6 years $ 3.03 64,952 $ 2.94
--------- ---------
Total 1,295,781 487,372
--------- ---------
--------- ---------
</TABLE>
Warrants
In connection with its engagement of a private placement agent for the sale
by the Company of the Series B Preferred Stock, the Company agreed in June 1995
to issue the placement agent a warrant to purchase 107,876 shares of Series B at
an exercise price of $4.625 per share. In connection with the Series B bridge
financing, the Company agreed in August 1995 to issue the lender a warrant to
purchase 285,714 shares of Series B at an exercise price of $2.345 per share,
which warrant was exercised on a cashless basis in September 1996 for 218,714
shares. Both of these warrants are for a term of five years, subject to earlier
expiration upon the occurrence of certain events. The Company believes the fair
market value of each warrant was nominal.
In connection with the issuance of Series C, the Company issued warrants to
purchase up to 1,409,127 shares of Series C at an exercise price of $4.50 per
share. These warrants are for a term of five years, subject to earlier
expiration upon the occurrence of certain events.
F-19
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
16. STOCK PURCHASE PLANS/AGREEMENTS:
In the period from inception to December 31, 1995, the Company sold 139,999
shares of Common Stock to certain employees of the Company at $1.50 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
pro rata thereafter 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 determined
on the date of repurchase.
In October 1995, the Company sold 40,000 shares of Common Stock to a
director who also serves as a consultant to the Company for $1.50 per share of
which $10,000 was paid in cash and $50,000 was paid in the form of a nonrecourse
interest bearing note due March 31, 1996. In June 1996, the Company canceled the
promissory note plus interest accrued thereunder (totaling approximately
$52,000), in lieu of payment to the director for services rendered to the
Company in 1995 (for which the director was entitled to receive $25,000) and the
first six months of 1996 (for which the director was entitled to receive
$30,000) plus interest. These shares are also subject to certain repurchase
rights by the Company in the event that the director ceases to be either a
director of, or consultant to, the Company.
Pursuant to an agreement entered into in February 1997, the Company issued
to a director of the Company for services rendered 16,667 shares of Common Stock
which vest over six quarterly periods contingent upon services being provided
during the period. The Company recorded as compensation expense $50,000
representing the fair value of the Common Stock over the period during which the
services are rendered. Under the agreement, the Company also granted to the
director 8,333 non-qualified stock options with an exercise price at the fair
market value on the date of grant which vest over four years. In addition, the
Company reimbursed him $18,000 for operational expenses.
17. EMPLOYEE BENEFIT 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. In 1997,
the Company amended its 401(k) Plan specifying that employees can enter the plan
on the date of hire or the first day of the month. Employees must have attained
the age of 21. In prior years, employees were eligible to participate in the
401(k) Plan who worked a minimum of one year and had attained the age of 21. The
Company matched by 25% that portion 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. Effective in 1997, the employer contributions are discretionary
after considering business results at the conclusion of each plan year. The
Company has made mandatory contributions to the 401(k) Plan of $47,000 and
$63,000 during the period March 17 to December 31, 1995 and the year ended
December 31, 1996, respectively, and made no discretionary contributions during
the year ended December 31, 1997 and the three months ended March 31, 1997 and
1998.
In the United Kingdom, the Company maintains a defined contribution plan.
All permanent employees who have attained the age of 20, and are not
contributing to a personal pension plan, are eligible to participate. The
Company matches a percentage of employee contributions which are invested at
each participant's discretion in a choice of three funds. The employer matching
percentage is determined within defined age ranges. During the period March 17
to December 31, 1995, the years ended December 31, 1996 and 1997, and the three
months ended March 31, 1997 and 1998, the Company's match totaled $2,000,
$2,000, $2,000, $500 and $500, respectively.
F-20
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
18. 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 data-intensive BIS 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
expired by June 1997. The contracts with the service providers required that
Giga pay a percentage of the remaining contract value in exchange for their
fulfillment of Giga's obligations. In 1996, a total of approximately $623,000
was paid to the service providers to fulfill the obligations remaining under the
discontinued operations. A provision of approximately $1,187,000 was established
for probable refunds in connection with dissatisfied clients. At December 31,
1996 a total of approximately $720,000 remained in the provision for refunds.
The contracts with the providers also require the service providers to pay
royalties to Giga upon the renewal of contracts by them. Through December 31,
1997, no royalties had been earned or received. 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 $2,315,000 (net of taxes of approximately $158,000) was
recorded in 1996 for the loss on disposition of the operations consisting
primarily of rent and compensation. Included within the charge was a provision
related to the operations at two facilities in England which, based on the
market for subleased properties at the time, approximates the present value of
the expected expenses of these facilities for two and one-half years plus fifty
percent of the expected expenses over the remaining life of the leases and a
provision for the severance benefits payable to the terminated employees.
A gain of approximately $1,101,000 was recorded in 1997, mainly comprised
of a reversal of the provision for future lease commitments and related expenses
for two facilities in England and the provision which was established for
refunds to dissatisfied customers.
The net liabilities of the discontinued operations of the BIS business have
been segregated in the consolidated balance sheets and as of December 31, 1996
consist primarily of accounts receivable ($404,000), amounts payable related to
rent and facilities expenses ($2,245,000), customer refunds ($720,000),
liability to providers ($206,000) and salaries and related severance costs
($56,000). The operating results of the BIS business are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 17, TO
DECEMBER 31, YEAR ENDED
1995 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
Revenues.................................................... $ 11,329 $ 3,557
Pre-tax income.............................................. 2,987 35
Provision for income taxes.................................. 1,497 114
Net income (loss)........................................... 1,490 (79)
</TABLE>
On December 20, 1996 the Company elected to discontinue its Australian
econometric forecasting business, BIS Shrapnel, and commenced discussions with
the management team for the purchase of the entire business. A charge of
approximately $160,000 was recorded at the time for the loss on disposition of
the operations consisting primarily of estimated losses to be incurred in the
operation of the business through the anticipated disposal date. The entire
business was sold in July 1997 to the management team for AU$407,500, or
approximately $293,000 at the time of sale. A gain of approximately $212,000 was
recognized on the disposition after giving effect to transaction costs.
The net assets of the discontinued BIS Shrapnel business have been
segregated in the consolidated balance sheets and as of December 31, 1996
consist primarily of accounts receivable ($438,000), prepaid expenses
F-21
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
($394,000), property, plant and equipment, net ($404,000), deferred revenue
($496,000), reserve for loss on disposal ($162,000) and provision for long-term
service ($258,000).
The results of BIS Shrapnel operations prior to December 20, 1996 have been
classified as discontinued operations and prior year financial statements have
been restated to reflect the discontinuance. The operating results of BIS
Shrapnel operations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 17, TO
DECEMBER 31, YEAR ENDED
1995 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
Revenues.................................................... $ 3,747 $ 4,437
Pre-tax income.............................................. 154 (134)
Provision for income taxes.................................. -- --
Net income (loss)........................................... 154 (134)
</TABLE>
F-22
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
19. GEOGRAPHICAL MARKET INFORMATION:
The Company operates in one continuing 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>
UNITED UNITED OTHER
STATES KINGDOM INTERNATIONAL TOTAL
-------- ------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
March 17, 1995 to December 31, 1995:
Revenues:
Total revenues.............................................. $ 3,755 $2,051 $ 1,270 $ 7,076
Transfers between areas..................................... -- (55 ) (62) (117)
-------- ------- ------------- --------
Unaffiliated revenues....................................... $ 3,755 $1,996 $ 1,208 $ 6,959
-------- ------- ------------- --------
-------- ------- ------------- --------
Loss from operations........................................... $ (5,183) $ (857 ) $ (565) $ (6,605)
Total assets................................................... 21,534 2,077 1,222 24,833
January 1, 1996 to December 31, 1996:
Revenues:
Total revenues.............................................. $ 6,961 $2,314 $ 948 $ 10,223
Transfers between areas..................................... -- (35 ) (50) (85)
-------- ------- ------------- --------
Unaffiliated revenues....................................... $ 6,961 $2,279 $ 898 $ 10,138
-------- ------- ------------- --------
-------- ------- ------------- --------
Loss from operations........................................... $(21,073) $(1,386) $(1,154) $(23,613)
Total assets................................................... 17,928 1,019 732 19,679
January 1, 1997 to December 31, 1997:
Revenues:
Total revenues.............................................. $ 17,249 $2,014 $ 396 $ 19,659
Transfers between areas..................................... -- -- -- --
-------- ------- ------------- --------
Unaffiliated revenues....................................... $ 17,249 $2,014 $ 396 $ 19,659
-------- ------- ------------- --------
-------- ------- ------------- --------
Loss from operations........................................... $(21,031) $(1,064) $(1,718) $(23,813)
Total assets................................................... 20,114 1,690 1,219 23,023
January 1, 1997 to March 31, 1997:
Revenues:
Total revenues.............................................. $ 3,432 $ 506 $ 88 $ 4,026
Transfers between areas..................................... -- -- -- --
-------- ------- ------------- --------
Unaffiliated revenues....................................... $ 3,432 $ 506 $ 88 $ 4,026
-------- ------- ------------- --------
-------- ------- ------------- --------
Loss from operations........................................... $ (5,193) $ (168 ) $ (401) $ (5,762)
Total assets................................................... 13,485 1,189 964 15,638
January 1, 1998 to March 31, 1998:
Revenues:
Total revenues.............................................. $ 7,852 $ 514 $ 186 $ 8,552
Transfers between areas..................................... -- -- -- --
-------- ------- ------------- --------
Unaffiliated revenues....................................... $ 7,852 $ 514 $ 186 $ 8,552
-------- ------- ------------- --------
-------- ------- ------------- --------
Loss from operations........................................... $ (2,948) $ (404 ) $ (402) $ (3,754)
Total assets................................................... 12,353 1,875 1,445 15,673
</TABLE>
F-23
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
Export Sales
The information below summarizes export sales by geographic area for the
United States operations of Giga (in thousands):
<TABLE>
<CAPTION>
TOTAL
EXPORT
EUROPE FAR EAST OTHER SALES
------ -------- ----- ------
<S> <C> <C> <C> <C>
March 17 to December 31, 1995............................ $191 $251 $105 $ 547
1996..................................................... 124 101 11 236
1997..................................................... 924 87 8 1,019
January 1 to March 31, 1997.............................. 153 41 2 196
January 1 to March 31, 1998.............................. 443 11 1 455
</TABLE>
20. SUBSEQUENT EVENTS:
In April 1998, the Company designated 2,000,000 shares of Preferred Stock
as Series D Convertible Preferred Stock ('Series D') and, for cash proceeds of
$1,500,000, issued 214,286 shares of Series D and warrants to purchase 115,714
shares of Series D at $9.00 per share. The warrants expire on April 5, 2003.
Each share of Series D is convertible, at the holder's option, into that
number of shares of Common Stock as determined by dividing the original purchase
price by the conversion price in effect at the time of conversion. Each share of
Series D is currently convertible into two-thirds of a share of Common Stock.
The Series D will automatically convert into Common Stock at the then
effective conversion price upon the earlier of (a) the approval by the holders
of at least two-thirds (2/3) of the then outstanding Series D shares, (b)
immediately prior to the closing of a firmly underwritten public offering of
Common Stock at a price of at least $15.75 per share (as adjusted for splits,
combinations and share dividends), and having aggregate cash proceeds of at
least $15,000,000 and (c) immediately prior to the closing of a firmly
underwritten public offering of Common Stock at a price of at least $12.00 per
share and having aggregate cash proceeds of at least $30,000,000 and which
closes on or prior to January 31, 1999.
In the event of liquidation, dissolution or winding up of the Company
(either voluntary or involuntary) or the merger or consolidation of the Company
with another corporation or the sale or 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 the stockholders of the Company immediately prior to the such transaction
do not own more than 50% interest in the surviving entity, holders of Series D
will be entitled to receive out of the assets of the Company, prior and in
preference to any distribution of any of the assets of the Company to the
holders of Common Stock, but after payment of any liquidation preference which
may be provided for any other series of Preferred Stock, the original purchase
price for each outstanding share of Series D held (as adjusted for splits and
combinations), plus all declared and unpaid dividends prior to any distribution
to the holders of the Company's Common Stock. Following distribution of such
preferential amounts, holders of Series D shall not participate in any further
distribution.
Except as provided by law or in the Company's Amended and Restated
Certificate of Incorporation, the holders of Series D vote with the holders of
the Company's Common Stock on an as converted basis. In addition, as described
in the Certificate of Incorporation, the company may not take certain actions as
long as at least 1,000,000 shares of Series A, Series B, Series C and Series D
are outstanding, and without the approval of the holders of at least a majority
of the outstanding shares of Series A, Series B, Series C and Series D generally
voting together as a class.
Also in April 1998, the Company entered into a Loan and Warrant Purchase
Agreement whereby the Company issued convertible promissory notes with a face
value of $10,000,000 and warrants to purchase up to
F-24
<PAGE>
GIGA INFORMATION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1998 IS UNAUDITED)
166,666 shares of Common Stock in exchange for cash proceeds of $10,000,000. The
notes bear interest at an annual interest rate of 12% payable in quarterly
installments. The warrants are exercisable at $3.00 per share for a period of
ten years from the date of the grant. The fair market value of the warrants was
recorded as a discount of $1,046,907 to the Notes and such Notes will be
recorded at $8,953,093. Accordingly, approximately $1,046,907 of accretion will
be charged to interest expense, in addition to the stated interest rates, over
the term of the notes.
The outstanding principal amount of the notes and warrants will be
automatically converted on February 1, 1999 into 1,428,571 shares of Series D
with warrants to purchase up to a maximum of 514,286 shares of Common Stock at
an exercise price of $13.50 per share unless the Company completes prior to that
date a public offering of Common Stock generating proceeds of at least
$30,000,000 at an offering price of at least $12.00 per share.
In May 1998, the Company issued an additional 71,429 shares of Series D and
warrants to purchase 38,571 shares of Series D for consideration of $500,000.
In May 1998, pursuant to a vote of the board of directors, the board
approved, subject to shareholder approval, a 1 for 3 reverse stock split of the
Common Stock effective as of the closing of an initial public offering. All
share and per share data presented herein have been restated to reflect the
Common Stock split.
F-25
<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 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 audit.
We conducted our audit 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 audit provides 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
April 17, 1998
F-26
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1 TO APRIL 5, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Information service revenues............................................................................. $ 2,116
Cost and expenses:
Cost of services and product development............................................................... 1,422
Sales and marketing.................................................................................... 167
General and administrative............................................................................. 1,047
Depreciation and amortization.......................................................................... 215
---------
Total costs and expenses....................................................................... 2,851
---------
Operating loss........................................................................................... (735)
Interest income, net..................................................................................... 19
---------
Loss from continuing operations before income taxes............................................ (716)
---------
Income tax benefit....................................................................................... (213)
---------
Loss from continuing operations................................................................ (503)
---------
Discontinued operations:
Income from the discontinued BIS market research business, net of tax effect........................... 597
Income from the discontinued Shrapnel business, net of tax effect...................................... 54
---------
Income from discontinued operations............................................................ 651
---------
Net income..................................................................................... $ 148
---------
---------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-27
<PAGE>
BIS STRATEGIC DECISIONS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1 TO APRIL 5, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income............................................................................................. $ 148
Adjustments to reconcile net income to net cash used in continuing operating activities:
Net income from discontinued operations........................................................... (651)
Depreciation...................................................................................... 191
Amortization and write-down of goodwill........................................................... 24
Provision for deferred income taxes............................................................... 58
Allowance for doubtful accounts................................................................... 7
Changes in certain operating assets and liabilities:
Increase in accounts receivable................................................................... (383)
Decrease in unbilled services..................................................................... 183
Increase in prepaid expenses and other current assets............................................. (310)
Decrease in accounts payable and accrued expenses................................................. (531)
Increase in deferred revenue...................................................................... 370
---------
Net cash provided by (used in) operating activities of:
Continuing operations.................................................................................. (894)
Discontinued operations................................................................................ 681
---------
Net cash used in operating activities.................................................................... (213)
Cash flows from investing activities:
Purchase of fixed assets............................................................................... (83)
Proceeds from sale of equipment........................................................................ 32
---------
Net cash used in investing activities.................................................................... (51)
Cash flows from financing activities:
Proceeds from borrowings............................................................................... 22
Principal payments on borrowings....................................................................... (157)
Principal payments on capital lease obligations........................................................ (19)
---------
Net cash used in financing activities.................................................................... (154)
Effect of exchange rate changes on cash.................................................................. 219
---------
Net decrease in cash and cash equivalents................................................................ (199)
Cash and cash equivalents at beginning of period......................................................... 1,809
---------
Cash and cash equivalents at end of period............................................................... $ 1,610
---------
---------
Supplemental cash flow information:
Income taxes paid...................................................................................... $ 7
Interest paid.......................................................................................... $ 2
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-28
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BACKGROUND:
BIS Strategic Decision, Inc. and its five foreign affiliates (collectively
'BIS Strategic Decisions' or 'BIS') were wholly-owned subsidiaries of Friday
Holdings, L.P. ('FHLP'). On April 5, 1995, Giga Information Group, Inc. ('Giga')
acquired 100% of the common stock outstanding of each of the BIS companies from
FHLP for $200,000 in cash and a $1,000,000 convertible promissory note. The
acquisition of BIS 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 BIS.
On June 25, 1996, Giga elected to discontinue the BIS market research
business. In connection with the discontinuance of such operations, Giga
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 Giga's obligations to customers of BIS under certain existing
subscription agreements, all of which expired on or before June 1997.
On December 20, 1996, Giga elected to discontinue its economic forecasting
business in Australia, BIS Shrapnel PTY Ltd. ('BIS Shrapnel'). In connection
with the discontinuance of such business, in July 1997 Giga sold the stock of
BIS Shrapnel to the management team in exchange for AU$407,500, or approximately
$293,000 at the time of sale.
The continuing operations reflected in the financial statements represent
revenues and expenses associated with BIS Information Service revenues which
include events, publications and consulting. The results of the BIS market
research business and BIS Shrapnel have been shown as discontinued operations.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The combined financial statements of BIS Strategic Decision include the
accounts of BIS Strategic Decisions, Inc., BIS Strategic Decisions, Ltd., BIS
Shrapnel, BIS Strategic Decisions, GmbH, BIS Strategic Decisions, Srl and BIS
Strategic Decisions, Sarl. All intercompany accounts and transactions have been
eliminated in combination.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
For international operations, the local currency is used as the functional
currency. Income statement items are translated at the average rates of exchange
for the year. Realized and unrealized exchange gains or losses arising from
transaction adjustments are reflected in operations and are not material.
F-29
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of
three months or less at date of purchase.
Revenue Recognition
Revenues from events, publications and consulting 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.
Income Taxes
The Predecessor Companies recognize deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
Predecessor Companies' consolidated financial statements. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
currently enacted tax rates for the year in which the differences are expected
to reverse. The Predecessor Companies record a valuation allowance against net
deferred tax assets if, based upon the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized.
The BIS companies filed separate tax returns.
Property and Equipment
Property and equipment are depreciated over the estimated useful lives of
the related assets using the straight-line method. Computers and related
equipment are depreciated over three years, furniture and fixtures are
depreciated over five years and motor vehicles are depreciated over four years.
Leasehold improvements are amortized over the lesser of the noncancelable term
of the related lease or their estimated economic lives. Maintenance and repairs
are charged to expense as incurred.
3. PROPERTY AND EQUIPMENT:
Depreciation expense and amortization of leasehold improvements was
$191,000 for the period from January 1, 1995 to April 5, 1995.
4. 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 up 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 April 5, 1995, no amounts were outstanding under the line.
The weighted average interest rate of outstanding borrowings was 7.5% for
the period January 1, 1995 to April 5, 1995.
F-30
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES:
For financial reporting purposes, the income tax benefit from continuing
operations was based on the following components:
<TABLE>
<S> <C>
Pretax loss from continuing operations:
United States................................................... $(497)
Foreign......................................................... (219)
-----
Total pretax loss from continuing operations............ $(716)
-----
-----
</TABLE>
The results of continuing operations include a foreign tax benefit of
$3,000.
6. PENSION PLANS:
BIS has established the 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. BIS matches
the first 3% of an employee's contribution by 25% and the next 3% of an
employee's contribution by 50%. BIS may also make additional contributions to
the plan at the discretion of the Board of Directors. BIS has not made any
discretionary contributions to the profit sharing plan. For the period January 1
to April 5, 1995, BIS contributed $23,000 to the plan.
7. LEASE COMMITMENTS:
BIS leases certain office space and equipment under operating lease
agreements. Rent expense was $232,000 for the period January 1 to April 5, 1995.
8. JOINT VENTURE AGREEMENT:
On October 18, 1991, BIS 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.
9. GEOGRAPHIC MARKETS:
BIS operates 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.
JANUARY 1, 1995 TO APRIL 5, 1995 (IN THOUSANDS):
<TABLE>
<CAPTION>
NORTH UNITED OTHER
AMERICA KINGDOM INTERNATIONAL TOTAL
------- ------- ------------- ------
<S> <C> <C> <C> <C>
Revenues:
Total revenues........................................... $1,113 $ 499 $ 586 $2,198
Transfers between areas.................................. -- (19) (63) (82)
------- ------- ------ ------
Unaffiliated revenues.................................... $1,113 $ 480 $ 523 $2,116
------- ------- ------ ------
------- ------- ------ ------
Loss from continuing operations............................ $ (537 ) $ (22) $(176) $ (735)
</TABLE>
F-31
<PAGE>
BIS STRATEGIC DECISIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Export sales by geographic area for the U.S. operations of BIS totaled
$163,000 for the period January 1 to April 5, 1995 and were comprised of $57,000
to Europe, $75,000 to the Far East and $31,000 to other areas.
10. 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 operating results of the business for the period from
January 1 to April 5, 1995 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Revenues......................................................... $3,994
Pre-tax income................................................... 876
Provision for income taxes....................................... 279
Net income....................................................... 597
</TABLE>
On December 20, 1996, Giga decided to discontinue its Australian
econometric forecasting business. The results of these operations have been
classified as discontinued operations and the financial statements have been
restated to reflect the discontinuance. The operating results of the business
for the period from January 1 to April 5, 1995 are summarized as follows (in
thousands):
<TABLE>
<S> <C>
Revenues......................................................... $1,121
Pre-tax income................................................... 54
Provision for income taxes....................................... --
Net income....................................................... 54
</TABLE>
F-32
<PAGE>
[LOGO]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION 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 PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY, TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. 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................................... 7
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Consolidated Financial Data........... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 20
Business....................................... 27
Management..................................... 34
Certain Transactions........................... 41
Principal Stockholders......................... 45
Description of Capital Stock................... 48
Shares Eligible for Future Sale................ 51
Underwriting................................... 53
Legal Matters.................................. 55
Experts........................................ 55
Additional Information......................... 55
Index to Consolidated Financial
Statements................................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,000,000 SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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........................................................................ $ 13,570
NASD Filing Fee............................................................................. 5,100
Nasdaq Listing Fee.......................................................................... *
Blue Sky Fees and Expenses.................................................................. *
Transfer Agent and Registrar Fees........................................................... *
Accounting Fees and Expenses................................................................ *
Legal Fees and Expenses..................................................................... *
Printing, Engraving and Mailing Expenses.................................................... *
Premium for directors and officers insurance................................................ *
Miscellaneous............................................................................... *
--------
Total.................................................................................. $ *
--------
</TABLE>
- ------------------
* To be completed by Amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seven of the Registrant's Amended and Restated Certificate of
Incorporation (the 'Restated Certificate') 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 (the 'DGCL') prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article Eight of the Restated Certificate 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 DGCL 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 the DGCL, 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 8 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 2,464,957 shares of Common Stock at a weighted average exercise
price of $2.51 per share. During this same time period, the Registrant has
issued a total of 207,601 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 1,400,000 shares of Common Stock at a
purchase price of $0.07125 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.
4. In June 1995, the Registrant issued a warrant to purchase 107,876
shares of Series B Preferred Stock, $.001 par value ('Series B Preferred
Stock'), to Montgomery Securities in consideration for certain placement agent
services at an exercise price of $4.625 per share.
II-2
<PAGE>
5. In July 1995 and October 1995, the Registrant issued and sold an
aggregate of 570,000 shares of Series A Preferred Stock, $.001 par value
('Series A Preferred Stock') to a group of investors, including certain
employees and directors, at a purchase price of $5.00 per share.
6. In July 1995, the Registrant issued 160,000 shares of Series A
Preferred Stock 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.
7. In August 1995, the Company issued to Mr. Crandall 40,000 shares of
Common Stock at a purchase price of $1.50 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. In September 1996, the investor made a cashless exercise of the
warrant and received 218,714 shares of the Company's Series B Preferred Stock.
9. Throughout 1995, the Registrant issued 528,620 shares of Common Stock
to a group of employees, consultants and directors at a purchase price of $1.50
per share.
10. In November 1995, bridge financing in the principal amount of
$2,000,000 was automatically converted into 571,428 shares of Series B Preferred
Stock.
11. In November 1995, February 1996 and December 1996, the Registrant
issued and sold an aggregate of 7,354,500 shares of Series B Preferred Stock, to
a group of investors at a purchase price of $3.50 per share.
12. In August 1996, the Registrant issued 8,333 shares of Common Stock to
an employee in connection with the acquisition of his business.
13. In May and December 1997, the Company issued and sold an aggregate of
2,609,491 shares of Series C Preferred Stock, $.001 par value ('Series C
Preferred Stock'), at a purchase price of $4.11 per share to a limited number of
investors (the 'Series C Investors').
14. In January 1998, the Company issued warrants to purchase an aggregate
of 1,409,127 shares of Series C Preferred Stock at an exercise price of $5.28
per share to the Series C Investors.
15. In April 1998, the Company issued convertible promissory notes in the
aggregate principal amount of $10.0 million and warrants to purchase an
aggregate of 166,666 shares of Common Stock at an exercise price of $3.00 per
share to certain affiliates of Friedman, Billings, Ramsey & Co., Inc. ('FBR').
16. In April and May 1998, the Company issued and sold an aggregate of
285,715 shares of Series D Preferred Stock, par value $.001 per share ('Series D
Preferred Stock'), at a purchase price of $7.00 per share and warrants to
purchase an additional 154,286 shares of Series D Preferred Stock at an exercise
price of $9.00 per share.
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 or as not constituting sales under Section 2(3) of
the Securities Act.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 *** -- Form of Underwriting Agreement.
3.1** -- Fourth Amended and Restated Certificate of Incorporation of the Registrant.
3.2** -- Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
Registrant (to be filed with the State of Delaware prior to the closing of the Offering to which this
Registration Statement relates).
3.3* -- Certificate of Designations of Series D Preferred Stock of the Registrant.
3.4** -- Form of Fifth Amended and Restated Certificate of Incorporation of the Registrant (to be filed with
the State of Delaware simultaneous with the closing of the Offering to which this Registration
Statement relates).
3.5** -- By-Laws of the Registrant.
3.6** -- Form of Amended and 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 Weil, Gotshal & Manges LLP with respect to the validity of the securities being offered.
10.1* -- Series B Preferred Stock Purchase Agreement dated November 13, 1995, as amended, between the
Registrant and the Investors named on Exhibit A thereto.
10.2** -- Form of Series B Preferred Stock Purchase Warrant dated February 28, 1996 registered in the name of
Montgomery Securities.
10.3 -- *(a) Series C Preferred Stock and Warrant Purchase Agreement dated May 9, 1997, between the
Registrant and the Investors named in Exhibit A thereto.
-- **(b) Amendment No. 1 to Series C Preferred Stock and Warrant Purchase Agreement.
-- **(c) Letter Agreement re: Purchase of Series C Stock, between the Company and the Investors named on
the signature page thereto.
10.4* -- Form of Series C Preferred Stock Purchase Warrant dated January 2, 1998 and issued to the Investors
in the Series C Financing.
10.5* -- Series D Preferred Stock and Warrant Purchase Agreement dated April 6, 1998 between the Registrant
and the Investors named in Exhibit A thereto.
10.6 -- *(a) Registration Rights Agreement dated November 13, 1995, among the Registrant, the Investors named
on Exhibit A thereto, Gideon I. Gartner and David L. Gilmour.
-- **(b) Amendment No. 1 to Registration Rights Agreement.
-- **(c) Amendment No. 2 to Registration Rights Agreement.
-- **(d) Amendment No. 3 to Registration Rights Agreement.
-- **(e) Amendment No. 4 to Registration Rights Agreement.
10.7 -- *(a) 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.
-- **(b) Amendment No. 1 to Co-Sale Agreement.
-- **(c) Amendment No. 2 to Co-Sale Agreement.
10.8* -- Form of Series D Preferred Stock Purchase Warrant dated April 7, 1998 and issued to the Investors in
the Series D Financing.
10.9* -- Loan and Warrant Purchase Agreement dated April 7, 1998 between the Registrant and the Lenders named
in Schedule A thereto.
10.10* -- Form of Convertible Promissory Note dated April 7, 1998 issued to certain affiliates of Friedman,
Billings, Ramsey & Co., Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.11** -- Form of Common Stock Purchase Warrant dated April 7, 1998 issued to certain affiliates of Friedman,
Billings, Ramsey & Co., Inc.
10.12* -- Security Agreement dated as of April 7, 1998 between the Registrant and an affiliate of Friedman,
Billings, Ramsey & Co., Inc. as agent for the Lenders.
10.13** -- Consulting Agreement dated February 1, 1998 between the Registrant and David Gilmour.
10.14** -- Separation Agreement dated January 7, 1998 between the Registrant and Henry S. Givray.
10.15** -- Separation Agreement dated October 2, 1997 between the Registrant and Jacques Bouvard.
10.16* -- Non-competition Agreement dated November 13, 1995 between the Registrant and Gideon I. Gartner.
10.17 -- *(a) Letter Agreement dated July 12, 1996 between the Registrant and Richard L. Crandall.
-- **(b) Letter Agreement dated February 11, 1997 between the Registrant and Richard L. Crandall.
10.18* -- Lease dated October 31, 1995 between the Registrant and Cambridge 1400 Limited Partnership.
10.19 -- *(a) Lease dated October 6, 1987, as amended, between BIS Strategic Decisions, Inc. and Charles A.
Pesko, Jr., as Trustee of Longwater Circle Trust.
-- ***(b) Lease dated May 29, 1998 between the Registrant and Trinet Property Partners, L.P.
10.20** -- 1995 Stock Option/Stock Issuance Plan.
10.21** -- 1996 Stock Option Plan.
10.22* -- 1997 Director Option Plan.
21* -- Subsidiaries of the Registrant.
23.1*** -- Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5).
23.2** -- Consent of PricewaterhouseCoopers LLP.
24* -- Powers of Attorney (included on page II-7).
27* -- Financial Data Schedule.
99.1*** -- Consent of Josh S. Weston.
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
*** To be filed by Amendment.
(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.
II-5
<PAGE>
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)(l) 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-6
<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 6 DAY OF JULY, 1998.
GIGA INFORMATION GROUP, INC.
By: /s/ GIDEON I. GARTNER
----------------------------------
Gideon I. Gartner
Chairman of the Board,
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
HEREBY CONSTITUTES GIDEON I. GARTNER AND DANIEL M. CLARKE, AND EACH OF THEM
SINGLY, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, EACH WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION (UNTIL REVOKED IN WRITING) TO SIGN FOR SUCH
PERSON AND IN SUCH PERSON'S NAME AND CAPACITY INDICTAED BELOW, ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT AND ANY OTHER REGISTRATION STATEMENT
FILED IN CONNECTION WITH THE SAME OFFERING PURSUANT TO RULE 462(B) UNDER THE
SECURITIES ACT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION,
HEREBY RATIFYING AND CONFIRMING SUCH PERSON'S SIGNATURE AS IT MAY BE SIGNED BY
SUCH ATTORNEYS TO ANY AND ALL SUCH AMENDMENTS AND ADDITIONAL REGISTRATION
STATEMENTS.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------------------------- ------------
<S> <C> <C>
/s/ GIDEON I. GARTNER Chairman of the Board of Directors, President July 6, 1998
- --------------------------------------------- and Chief Executive Officer (Principal
Gideon I. Gartner Executive Officer)
* Senior Vice President and Chief Financial July 6, 1998
- --------------------------------------------- Officer, Treasurer and Secretary (Principal
Daniel M. Clarke Financial and Accounting Officer)
* Director July 6, 1998
- ---------------------------------------------
David L. Gilmour
* Director July 6, 1998
- ---------------------------------------------
Neill H. Brownstein
* Director July 6, 1998
- ---------------------------------------------
Richard L. Crandall
* Director July 6, 1998
- ---------------------------------------------
Irwin Lieber
* Director July 6, 1998
- ---------------------------------------------
Bernard Goldstein
By: /s/ GIDEON I. GARTNER
------------------------------------------
Gideon I. Gartner
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ---------- --------------------------------------------------------------------------------------------- --------
<S> <C> <C> <C>
1 *** -- Form of Underwriting Agreement
3.1** -- Fourth Amended and Restated Certificate of Incorporation of the Registrant
3.2** -- Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation
of the Registrant (to be filed with the State of Delaware prior to the closing of the
Offering to which this Registration Statement relates)
3.3* -- Certificate of Designations of Series D Preferred Stock of the Registrant
3.4** -- Form of Fifth Amended and Restated Certificate of Incorporation of the Registrant (to
be filed with the State of Delaware simultaneous with the closing of the Offering to
which this Registration Statement relates)
3.5** -- By-Laws of the Registrant
3.6** -- Form of Amended and 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 Weil, Gotshal & Manges LLP with respect to the validity of the securities
being offered.
10.1* -- Series B Preferred Stock Purchase Agreement dated November 13, 1995, as amended,
between the Registrant and the Investors named on Exhibit A thereto
10.2** -- Form of Series B Preferred Stock Purchase Warrant dated February 28, 1996 registered in
the name of Montgomery Securities
10.3 -- *(a) Series C Preferred Stock and Warrant Purchase Agreement dated May 9, 1997, between
the Registrant and the Investors named in Exhibit A thereto
-- **(b) Amendment No. 1 to Series C Preferred Stock and Warrant Purchase Agreement
-- **(c) Letter Agreement re: Purchase of Series C Stock, between the Company and the
Investors named on the signature page thereto
10.4* -- Form of Series C Preferred Stock Purchase Warrant dated January 2, 1998 and issued to
the Investors in the Series C Financing
10.5* -- Series D Preferred Stock and Warrant Purchase Agreement dated April 6, 1998 between the
Registrant and the Investors named in Exhibit A thereto
10.6 -- *(a) Registration Rights Agreement dated November 13, 1995, among the Registrant, the
Investors named on Exhibit A thereto, Gideon I. Gartner and David L. Gilmour
-- **(b) Amendment No. 1 to Registration Rights Agreement
-- **(c) Amendment No. 2 to Registration Rights Agreement
-- **(d) Amendment No. 3 to Registration Rights Agreement
-- **(e) Amendment No. 4 to Registration Rights Agreement
10.7 -- *(a) 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
-- **(b) Amendment No. 1 to Co-Sale Agreement
-- **(c) Amendment No. 2 to Co-Sale Agreement
10.8* -- Form of Series D Preferred Stock Purchase Warrant dated April 7, 1998 and issued to the
Investors in the Series D Financing
10.9* -- Loan and Warrant Purchase Agreement dated April 7, 1998 between the Registrant and the
Lenders named in Schedule A thereto
10.10* -- Form of Convertible Promissory Note dated April 7, 1998 issued to certain affiliates of
Friedman, Billings, Ramsey & Co., Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ---------- --------------------------------------------------------------------------------------------- --------
<S> <C> <C> <C>
10.11** -- Form of Common Stock Purchase Warrant dated April 7, 1998 issued to certain affiliates
of Friedman, Billings, Ramsey & Co., Inc.
10.12* -- Security Agreement dated as of April 7, 1998 between the Registrant and an affiliate of
Friedman, Billings, Ramsey & Co., Inc. as agent for the Lenders
10.13** -- Consulting Agreement dated February 1, 1998 between the Registrant and David Gilmour
10.14** -- Separation Agreement dated January 7, 1998 between the Registrant and Henry S. Givray
10.15** -- Separation Agreement dated October 2, 1997 between the Registrant and Jacques Bouvard
10.16* -- Non-competition Agreement dated November 13, 1995 between the Registrant and Gideon I.
Gartner
10.17 -- *(a) Letter Agreement dated July 12, 1996 between the Registrant and Richard L.
Crandall
-- **(b) Letter Agreement dated February 11, 1997 between the Registrant and Richard L.
Crandall
10.18* -- Lease dated October 31, 1995 between the Registrant and Cambridge 1400 Limited
Partnership
10.19 -- *(a) Lease dated October 6, 1987, as amended, between BIS Strategic Decisions, Inc. and
Charles A. Pesko, Jr., as Trustee of Longwater Circle Trust
-- ***(b) Lease dated May 29, 1998 between the Registrant and Trinet Property Partners,
L.P.
10.20** -- 1995 Stock Option/Stock Issuance Plan
10.21** -- 1996 Stock Option Plan
10.22* -- 1997 Director Option Plan
21* -- Subsidiaries of the Registrant
23.1*** -- Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5)
23.2** -- Consent of PricewaterhouseCoopers LLP
24* -- Powers of Attorney (included on page II-7)
27* -- Financial Data Schedule
99.1*** -- Consent of Josh S. Weston
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
<PAGE>
FOURTH 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 State 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 Fourth 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 Fourth 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 Law of the
State of Delaware.
ARTICLE III
This corporation is authorized to issue two classes of shares
designated "Common Stock" and "Preferred Stock", respectively. The total number
of shares which this corporation shall have authority to issue is Sixty-Six
Million Five Hundred Thousand (66,500,000), with a par value
<PAGE>
of $.001 per share. The number of shares of Common Stock authorized to be issued
is Fifty Million (50,000,000) and the number of shares of Preferred Stock
authorized to be issued is Sixteen Million Five Hundred Thousand (16,500,000),
of which Six Hundred and Fifty Thousand (650,000) shares shall be designated as
"Series A Preferred Stock", Nine Million (9,000,000) shares shall be designated
as "Series B Preferred Stock", and Four Million Five Hundred Thousand
(4,500,000) shares shall be designated as "Series C Preferred Stock", having the
rights, preferences, privileges and restrictions set forth 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, Series B Preferred Stock and Series C 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. Series Preferred Stock.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Series A Preferred Stock, Series B Preferred Stock and Series C
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.
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(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) "Original Series C Purchase Price" shall mean $4.11 per
share.
(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) "Series C Preferred Stock" shall mean the Series C
Preferred Stock $.001 par value of the Company.
(k) "Series A Original Issue Date" shall mean July 6, 1995.
(l) "Series B Original Issue Date" shall mean November 11,
1995.
(m) "Series C Original Issue Date" shall mean May 9, 1997.
(n) "Series Preferred Stock" shall mean, unless otherwise
specified in this Fourth Amended and Restated Certificate of Incorporation,
collectively, the Series A Preferred Stock, Series B Preferred Stock and the
Series C Preferred Stock.
(o) "Subsidiary" shall mean any corporation of which more then
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 Fourth Amended and Restated Certificate of Incorporation, the holders of
Series 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
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the basis that each holder of shares of Series Preferred Stock will have the
right to the number of votes equal to the number of shares of Common Stock into
which such shares could be converted on the record date fixed for the vote or
consent of stockholders (with any fractional share 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 Series 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 persons, assets or options or rights to purchase
any such securities or evidences of indebtedness, then, in each such case the
holders of the Series Preferred Stock shall be entitled to a proportionate share
of any such distribution as though the holders of the Series Preferred Stock
were the holders of the number of shares of Common Stock of the corporation into
which their respective shares of Series 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 Series
Preferred Stock shall have no right to share in any preferential distributions
made to any other series of Preferred Stock which may hereafter 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 Preferred Stock will be entitled to receive out of the assets of the
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 (i) the Original
Series A Purchase Price for each outstanding shares of Series A Preferred Stock,
the Original Series B Purchase Price for each outstanding shares of Series B
Preferred Stock and the Original Series C Purchase Price for each outstanding
share of Series C 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
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Stock pursuant to paragraph 5 immediately prior to such liquidation,
dissolution and winding up, and the holders of Series 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 Series 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 Series Preferred Stock
(so that each holder receives the same percentage of the applicable
preferential amount). After payment has been made to the holders of the Series
Preferred Stock of the full preferential amounts referred to above, the holders
of Series 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 Series 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 (or its parent) subsequent
to the transaction (provided, however, that shares 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
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 corporation has given the
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first notice provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of the Series 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 Preferred Stock 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 Preferred
Stock shall have conversion rights as follows:
(i) Optional Conversion. Each share of Series
Preferred Stock will be convertible, at the option of the holder thereof, at
the office of the corporation or any transfer agent for the Series Preferred
Stock, into Common Stock. The number of shares of Common Stock into which each \
share of Series Preferred Stock will be converted will equal (i) the Original
Series A Purchase Price in the case of the Series A Preferred Stock, (ii) the
Original Series B Purchase Price, in the case of the Series B Preferred Stock,
and (iii) the Original Series C Purchase Price, in the case of the Series C
Preferred Stock, divided by the applicable Conversion Price (as hereafter
defined), such conversion ratio being referred to hereafter as the
"Conversion Rate" for each such series. The initial Conversion Price for shares
of Series A Preferred Stock shall be $5.00 per share, the initial Conversion
Price for shares of Series B Preferred Stock shall be $3.50 per share and the
initial Conversion Price for shares of Series C Preferred Stock shall be $4.11
per share; provided, however, that the initial Conversion Price for the Series C
Preferred Stock shall be subject to adjustment as set forth on Appendix A
hereto, and further, provided, that each such Conversion Prices shall be subject
to adjustment as set forth in subsection 5(c), (d) and (e). 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, Series B Preferred Stock and Series C 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
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least two-thirds (2/3) of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock or Series C 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) to the
corporation 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).
(b) Mechanics of Conversion. Before any holder of Series
Preferred Stock will be entitled to convert 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
Series 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
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subdivision or combination of its outstanding Common Stock into a greater or
lesser number of shares without aproportionate 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 C Preferred Stock is convertible will be decreased or increased
proportionately.
In the event the corporation at any time from time to time
after the Series C 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 C Preferred Stock, then the Conversion Price of the Series
C Preferred Stock shall be decreased or increased, as applicable, so that the
number of shares into which each share of the Series C 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 Series Preferred Stock makes or
issues, or fixes a record date for the determination of holders of Common Stock
(but not holders of the Series Preferred Stock) entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights (hereinafter referred 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 Series 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 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 Series
Preferred Stock by a fraction;
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(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 Series 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 Series 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 decrease in the number of shares
of Common Stock issuable upon conversion or exercise thereof, the Conversion
Rate for such series shall, upon any such decrease 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 Issue Date for the Series A Preferred Stock, the Series B Preferred
Stock or the Series C Preferred Stock, the corporation issues or sells any
Additional Stock (as defined below) for a consideration per share less than the
Conversion Price for such series of Series Preferred Stock, then and in each
such case, the Conversion Price for such series of Series 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
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fraction will in no event be greater than one (1). Notwithstanding the
foregoing, if after the Original Issue Date for the Series C Preferred Stock
and prior to the earlier of (a) May 9, 1999 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 $4.61 and
for aggregate proceeds to 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 C Preferred Stock, then and in each such case the Conversion Price for
the Series C 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, Series B Preferred
Stock or Series C Preferred Stock and upon exercise or conversion of all
outstanding 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 series of Series 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
applicable Original Issue Date other than:
(i) the issuance (or deemed issuance) of up to
Seven Million Five Hundred Thousand (7,500,000) shares of Common Stock issuable
or issued to officers, directors, employees, advisors and consultants of the
corporation, at not less than fair market value (as determined by the
corporations' Board of Directors) pursuant to stock option or stock issuance
plans approved 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, 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;
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(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 at least a majority of the then outstanding Series Preferred Stock
of all series of Series Preferred Stock 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 this Fourth Amended and Restated
Certificate of Incorporation);
(iv) shares of Common Stock issued or issuable
upon conversion of shares of Series Preferred Stock (including shares issued or
issuable upon conversion of Series B Preferred Stock or Series C Preferred Stock
issued upon exercise of warrants issued by the Company);
(v) shares of Common stock issued or issuable
in a public offering before or in connection with which all outstanding shares
of Series Preferred Stock are converted to Common Stock;
(vi) except for shares described in clause e(i)
above, 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
Series 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);
(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; and
(ix) 2,676,399 shares of Series C Preferred
Stock (the "Series C Shares") and warrants to purchase up to 1,445,255 shares of
Series C Preferred Stock (the "Series C Stock Warrants") issued or issuable
pursuant to that certain Series C Preferred Stock and Warrant Purchase
Agreement dated May 9, 1997 by and among the Corporation and the entities named
on Schedule I thereto and the shares of Common Stock issued or issuable upon
conversion of the Series C Preferred Shares and the shares of Series C
Preferred Stock underlying the Series C Stock Warrants (the "Warrant Shares")
and the
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shares of Common Stock underlying the Series C Shares and the Warrant
Shares.
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 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 of
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 exercise
or conversion at the price per share determined under this subsection, and the
Conversion Price for each series of Series 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
Series 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.
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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
Series 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 Series Preferred Stock for which it has been
adjusted upon the issuance of such securities then in effect will be
readjusted (giving effect to all provisions hereof and all issuance 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 therefore 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, issue 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 time 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 Series Preferred Stock
against impairment.
(g) Certificate to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for the Series 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 Series 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 Series Preferred Stock, will furnish or
cause to be
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furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Rate for such Series
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 Series Preferred Stock held by such holder.
(h) Notice 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, and 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 Series Preferred
Stock at least ten (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.
(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 Series Preferred Stock such number of
its shares of Common Stock as from time to time will be sufficient to effect
the conversion of all then outstanding shares of Series 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 Series
Preferred Stock, in addition to such other remedies as may be available to the
holders of Series 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 purposes.
(j) Notices. Any notices required by the provisions of this
Section 5 to be given to the holders of shares of any series of Series 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 Stated 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 the United States, such notice shall
be sent by telex or
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facsimile in cases where the corporation has notice of a telex or facsimile
number for such person.
(k) Recapitalizations. If at any time or from time to time
there shall be a 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 Series Preferred Stock shall thereafter be entitled to receive upon
conversion of such shares of such Series 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 Series 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 Series Preferred
Stock after the recapitalization 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 Series 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 1,000,000 shares of Series A Preferred Stock,
Series B Preferred Stock and Series C 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, Series B Preferred Stock and Series C Preferred Stock, voting
together as a single class, will not:
(a) amend or repeal any provision of, or add any provision to,
this corporations' 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, Series B
Preferred Stock and Series C Preferred Stock;
(b) increase the number of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C 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, Series B Preferred Stock and Series C Preferred
Stock;
(d) create any new series of preferred stock having a
preference as to dividends or in liquidation over
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the Series A Preferred Stock, Series B Preferred Stock and Series C
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, Series B Preferred Stock and Series C 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, Series B Preferred Stock and Series C 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, Series B Preferred
Stock or Series C 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 each of the individual adversely affected
series of Series Preferred Stock, voting separately as a class, and shall not
require the approval of holders of any such series not adversely affected by
such action.
In addition to the foregoing and any other rights provided by
law, so long as an aggregate of 1,000,000 shares of Series B Preferred Stock and
Series C 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 and
Series C Preferred Stock, voting together as a separate class:
(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) of
effect any transaction or series of related transactions 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
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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 Series 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
borrowing 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
(including the Series Preferred Stock), 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 Series
Preferred Stock and any other series 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
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
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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 provide.
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 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 or was a director, officer or employee of the
corporation, or serves or serviced at any
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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 Fourth
Amended and Restated 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 Fourth Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, except as
otherwise provided in this Fourth Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
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<PAGE>
The undersigned, being the President and Chief Operating Officer, does
make, file and record this Fourth Amended and Restated Certificate of
Incorporation, hereby declaring, certifying and acknowledging that the foregoing
Fourth Amended and Restated Certificate of Incorporation is his act and deed and
that the facts stated therein are true, and has accordingly hereunto set his
hand this day of May, 1997.
_____________________
Henry Givray
President and Chief
Operating
Officer
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<PAGE>
APPENDIX A
SERIES C PREFERRED STOCK
CONVERSION PRICE ADJUSTMENT
The original Conversion Price for the Series C Preferred Stock is
subject to adjustment based on the Company's NAVI (as defined) attainment for
the fiscal year ended December 31, 1997 ("FY 1997") as follows:
Adjusted Original
NAVI(1) Conversion Price
(in millions) (in dollars)
$2,50 or less $3.50
40.0 or more $4.72
- --------
(1) NAVI means the annualized dollar value for FY 1997 of new customer contracts
and upgrades to existing contracts entered into by the Company in FY 1997 minus
the dollar value of downgrades and cancellations to existing customer contracts
in FY 1997. For purposes of the calculations of NAVI, "new contracts" mens both
(a) contracts with an initial term of at least six (6) months and (b) contracts
whose terms and conditions are as set forth in a written agreement.
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Exhibit 3.2
FORM OF
CERTIFICATE OF AMENDMENT TO AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF
GIGA INFORMATION GROUP, INC.
Pursuant to Sections 228 and 224
of the General Corporation Law
of the State of Delaware
GIGA INFORMATION GROUP, INC. (hereinafter called 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:
The Board of Directors of the Corporation duly adopted a
resolution, pursuant to Section 242 of the General Corporation Law, setting
forth an amendment to the Amended and Restated Certificate of Incorporation of
the Corporation and declaring said amendment to be advisable. The resolution
setting forth the amendment is as follows:
RESOLVED: That the Board of Directors hereby deems it advisable and in
the best interests of the Corporation to amend the
Corporation's Amended and Restated Certificate of
Incorporation by including the following provision:
Upon the filing of this Certificate of Amendment to Amended
and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware (the "Effective Time"), each
share of the Common Stock, par value $0.001 per share, of the
Corporation issued and outstanding immediately prior to the
Effective Time (the "Old Common Stock") shall, automatically
by operation of law and without any further action on the part
of the Corporation or any holders of shares of capital stock
of the Corporation, be converted into and reclassified as 1/3
of a validly issued, fully paid and non-assessable share of
the Common Stock of the Corporation, par value $0.001 per
share, (the "New Common Stock"), with the number of shares of
New Common Stock to be issued to a Stockholder rounded to
the nearest whole number of shares, authorized for issuance
pursuant to this Certificate of Amendment to the Amended and
Restated Certificate of Incorporation.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be affixed hereto and this Certificate of Amendment to be signed by its
President and Chief Operating Officer this ____ day of July, 1998.
GIGA INFORMATION GROUP, INC.
By:
-------------------------------
Gideon I. Gartner
President and Chief Operating
Officer
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<PAGE>
Exhibit 3.4
FORM OF
AMENDED AND 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.
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:
<PAGE>
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
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 55,000,000 shares,
consisting of (i) 50,000,000 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.
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<PAGE>
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 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.
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<PAGE>
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.
4
<PAGE>
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 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 Corp- oration, 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,
5
<PAGE>
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 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
6
<PAGE>
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
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<PAGE>
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.
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
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<PAGE>
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, (d)
independent legal counsel (who may be regular legal counsel to the Corporation),
or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as
granted by this Article shall be enforceable by
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<PAGE>
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 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
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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.
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.
11
<PAGE>
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
12
<PAGE>
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.
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 Bylaws 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 1999 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 2000 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 2001 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
13
<PAGE>
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 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.
14
<PAGE>
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.
15
<PAGE>
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 affixed hereto and this Restated Certificate of Incorporation to be
signed by its President and Chief Operating Officer this ____ day July, 1998.
GIGA INFORMATION GROUP, INC.
By:
--------------------------------
Gideon I. Gartner
President and Chief Operating
Officer
16
<PAGE>
Exhibit 3.5
BYLAWS OF
GIGA INFORMATION GROUP, INC.
(a Delaware corporation)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - CORPORATE OFFICES......................................................................... 1
1.1 REGISTERED OFFICE......................................................................... 1
1.2 OTHER OFFICES............................................................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................................................. 1
2.1 PLACE OF MEETINGS......................................................................... 1
2.2 ANNUAL MEETING............................................................................ 1
2.3 SPECIAL MEETING........................................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.......................................................... 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.................................................... 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.............................................. 3
2.7 QUORUM.................................................................................... 3
2.8 ADJOURNED MEETING; NOTICE................................................................. 4
2.9 CONDUCT OF BUSINESS....................................................................... 4
2.10 VOTING.................................................................................... 4
2.11 WAIVER OF NOTICE.......................................................................... 5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING............................................................................... 5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS......................................................................... 6
2.14 PROXIES................................................................................... 6
ARTICLE III - DIRECTORS................................................................................. 7
3.1 POWERS.................................................................................... 7
3.2 NUMBER OF DIRECTORS....................................................................... 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTOR................................................................................ 7
3.4 RESIGNATION AND VACANCIES................................................................. 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................................................. 8
3.6 REGULAR MEETINGS.......................................................................... 9
3.7 SPECIAL MEETINGS; NOTICE.................................................................. 9
3.8 QUORUM.................................................................................... 9
3.9 WAIVER OF NOTICE.......................................................................... 10
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING......................................... 10
3.11 FEES AND COMPENSATION OF DIRECTORS........................................................ 10
3.12 APPROVAL OF LOANS TO OFFICERS............................................................. 10
3.13 REMOVAL OF DIRECTORS...................................................................... 11
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS........................................................ 11
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(Cont.)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV - COMMITTEES................................................................................ 11
4.1 COMMITTEES OF DIRECTORS................................................................... 11
4.2 COMMITTEE MINUTES......................................................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES......................................................... 12
ARTICLE V - OFFICERS.................................................................................. 13
5.1 OFFICERS.................................................................................. 13
5.2 APPOINTMENT OF OFFICERS................................................................... 13
5.3 SUBORDINATE OFFICERS...................................................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS....................................................... 13
5.5 VACANCIES IN OFFICES...................................................................... 14
5.6 CHIEF EXECUTIVE OFFICER................................................................... 14
5.7 PRESIDENT................................................................................. 14
5.8 VICE PRESIDENTS........................................................................... 14
5.9 SECRETARY................................................................................. 14
5.10 CHIEF FINANCIAL OFFICER................................................................... 15
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............................................ 15
5.12 AUTHORITY AND DUTIES OF OFFICERS.......................................................... 16
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS................................................................ 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................................................. 16
6.2 INDEMNIFICATION OF OTHERS................................................................. 16
6.3 INSURANCE................................................................................. 17
ARTICLE VII - RECORDS AND REPORTS....................................................................... 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS..................................................... 17
7.2 INSPECTION BY DIRECTORS................................................................... 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.......................................................... 18
ARTICLE VIII - GENERAL MATTERS........................................................................... 18
8.1 CHECKS.................................................................................... 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND
INSTRUMENTS............................................................................. 18
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.................................................... 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES....................................................... 19
8.5 LOST CERTIFICATES......................................................................... 19
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(Cont.)
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
8.6 CONSTRUCTION; DEFINITIONS............................................................... 20
8.7 DIVIDENDS............................................................................... 20
8.8 FISCAL YEAR............................................................................. 20
8.9 SEAL.................................................................................... 20
8.10 TRANSFER OF STOCK....................................................................... 21
8.11 STOCK TRANSFER AGREEMENTS............................................................... 21
8.12 REGISTERED STOCKHOLDERS................................................................. 21
ARTICLE IX - AMENDMENTS.............................................................................. 21
ARTICLE X - DISSOLUTION............................................................................. 22
ARTICLE XI - CUSTODIAN............................................................................... 23
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES............................................. 23
11.2 DUTIES OF CUSTODIAN..................................................................... 23
</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.
1
<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 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
2
<PAGE>
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 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.
3
<PAGE>
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 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,
4
<PAGE>
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.
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:
5
<PAGE>
(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. 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.
6
<PAGE>
3.2 NUMBER OF DIRECTORS*
--------------------
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 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
7
*AMENDED - See Certificate of Amendment attached
<PAGE>
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.
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
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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.
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.
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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 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
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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 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.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
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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 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.
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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 other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
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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 predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
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,
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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 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.
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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 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.
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<PAGE>
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 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.
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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, 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.
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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 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.
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ARTICLE XI
CUSTODIAN
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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
(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.
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Exhibit 3.6
FORM OF
AMENDED AND RESTATED BYLAWS
OF
GIGA INFORMATION GROUP, INC.
ARTICLE - 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
<PAGE>
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 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
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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 adjournnent 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 sepa-
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arate 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.
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 fourty-five (45) days prior to the first anniversary date of the initial
notice of meeting given to stockholders of the previous year's annual meeting;
provided, however, that such notice shall not be required to be given more than
seventy-five (75) days prior to the annual meeting of stockholders. 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
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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 fourty-five (45) days prior to the first
anniversary date of the initial notice of meeting given to stockholders of the
previous year's annual meeting; provided, however, that such notice shall not
be required to be given more than seventy-five (75) days prior to the annual
meeting of stockholders.
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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
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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 - 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 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.
7
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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 1999; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2000; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2001; 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
8
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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 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
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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.
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 writ-
10
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ing, 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 Delaware, 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 reim-
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bursement 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 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 Secre-
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tary. 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 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.
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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
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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 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 deter-
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mined 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 con-
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spicuously 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.
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
17
<PAGE>
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 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 be approved 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
18
<PAGE>
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:
19
<PAGE>
(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, 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
20
<PAGE>
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.
21
<PAGE>
AMENDED AND RESTATED BYLAWS
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - Stockholders....................................................................... 1
1.1 Place of Meetings............................................................... 1
1.2 Annual Meeting.................................................................. 1
1.3 Special Meetings................................................................ 1
1.4 Notice of Meetings.............................................................. 1
1.5 Voting List..................................................................... 2
1.6 Quorum.......................................................................... 2
1.7 Adjournments.................................................................... 2
1.8 Voting and Proxies.............................................................. 2
1.9 Action at Meeting............................................................... 3
1.10 Nomination of Directors......................................................... 3
1.11 Notice of Business at Annual Meetings........................................... 4
1.12 Action without Meeting.......................................................... 5
1.13 Organization.................................................................... 5
ARTICLE 2 - Directors.......................................................................... 6
2.1 General Powers.................................................................. 6
2.2 Number; Election and Qualification.............................................. 6
2.3 Classes of Directors............................................................ 6
2.4 Terms of Office................................................................. 6
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors.......................................... 6
2.6 Vacancies....................................................................... 7
2.7 Resignation..................................................................... 7
2.8 Regular Meetings................................................................ 7
2.9 Special Meetings................................................................ 7
2.10 Notice of Special Meetings...................................................... 8
2.11 Meetings by Telephone Conference Calls.......................................... 8
2.12 Quorum.......................................................................... 8
2.13 Action at Meeting............................................................... 8
2.14 Action by Consent............................................................... 8
2.15 Removal......................................................................... 9
2.16 Committees...................................................................... 9
2.17 Compensation of Directors....................................................... 9
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
ARTICLE 3 - Officers.......................................................................... 10
3.1 Enumeration.................................................................... 10
3.2 Election....................................................................... 10
3.3 Qualification.................................................................. 10
3.4 Tenure......................................................................... 10
3.5 Resignation and Removal........................................................ 10
3.6 Vacancies...................................................................... 11
3.7 Chairman of the Board and Vice Chairman of the Board........................... 11
3.8 President...................................................................... 11
3.9 Vice Presidents................................................................ 11
3.10 Secretary and Assistant Secretaries............................................ 12
3.11 Treasurer and Assistant Treasurers............................................. 12
3.12 Salaries....................................................................... 13
ARTICLE 4 - Capital Stock..................................................................... 13
4.1 Issuance of Stock.............................................................. 13
4.2 Certificates of Stock.......................................................... 13
4.3 Transfers...................................................................... 13
4.4 Lost, Stolen or Destroyed Certificates......................................... 14
4.5 Record Date.................................................................... 14
ARTICLE 5 - General Provisions................................................................ 15
5.1 Fiscal Year.................................................................... 15
5.2 Corporate Seal................................................................. 15
5.3 Waiver of Notice............................................................... 15
5.4 Voting of Securities........................................................... 15
5.5 Evidence of Authority.......................................................... 15
5.6 Certificate of Incorporation................................................... 15
5.7 Transactions with Interested Parties........................................... 16
5.8 Severability................................................................... 16
5.9 Pronouns....................................................................... 16
ARTICLE 6 - Amendments........................................................................ 17
6.1 By the Board of Directors...................................................... 17
6.2 By the Stockholders............................................................ 17
6.3 Certain Provisions............................................................. 17
</TABLE>
23
<PAGE>
Exhibit 4.1
- ---------- ----------
NUMBER [LOGO] SHARES
G GIGA INFORMATION GROUP, INC.
- ---------- ----------
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINIATIONS
COMMON STOCK CUSIP 37517M 10 9
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 OF
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
Amended and 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:
[SEAL OF GIGA INFORMATION GRUOP, INC.]
/s/ Daniel M. Clarke /s/ Gideon I.Gartner
SECRETARY CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
GIGA INFORMATION GROUP, INC.
The Corporaiton 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 or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- ____________ Custodian ______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________________
(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 ASSIGNEE
_______________________________________
| |
| |
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRTIE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do 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) MUST 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>
- ---------- ----------
NUMBER [LOGO] SHARES
G GIGA INFORMATION GROUP, INC.
- ---------- ----------
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINIATIONS
COMMON STOCK CUSIP 37517M 10 9
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 OF
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
Amended and 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:
[SEAL OF GIGA INFORMATION GRUOP, INC.]
/s/ David M. [illegible] /s/ [illegible]
SECRETARY CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
GIGA INFORMATION GROUP, INC.
The Corporaiton 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 or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- ____________ Custodian ______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________________
(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 ASSIGNEE
_______________________________________
| |
| |
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRTIE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do 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) MUST 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 10.2
The Warrant represented by this certificate has not been registered
under the Securities Act of 1933, and such Warrant may not be sold or
transferred unless such sale or transfer is in accordance with the
registration requirements of the Securities Act of 1933, as at the time
amended, or in conformity with thelimitations of Rule 144 or similar rule as
then in effect under such Act, or unless some other exemption from the
registration requirements of such Act is available with respect thereto.
No. 1
Warrant to Purchase
________ Shares of
Series B Preferred Stock
(Subject to Adjustment)
Giga Information Group, Inc.
SERIES B PREFERRED STOCK PURCHASE WARRANT
Void after February 28, 2001
Giga Information Group, Inc. a Delaware corporation (together with any
corporation which shall succeed to or assume the obligations of the Company
hereunder, the "Company"), hereby certifies that, for value received,
MONTGOMERYSECURITIES, or registered assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company at any time or from
time to time before 5:00 p.m. Pacific time, on February 28, 2001 (the
"Expiration Date"), ________________________________________________________
(_______) fully paid and nonassessable shares of Series B Stock of the Company,
as constituted on the date hereof at the purchase price per share of $4.5625 and
otherwise in accordance with the terms hereof. The number and character of such
shares of Series B Stock are subject to adjustment as provided below.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The terms "Common Stock" shall mean the Common Stock, $.001 par
value per share, of the Company.
(b) The term "Series B Stock" shall mean the Series B Convertible
Preferred Stock, $.001 par value per share, of the Company and any other
securities or property of the Company or of any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled
-1-
<PAGE>
to receive on the exercise hereof, in lieu of or in addition to Series B
Stock, or which at any time shall be issuable in exchange for or in replacement
of Series B Stock.
1. Exercise Period. This Warrant may be exercised at any time or from time
to time and shall expire at 5:00 p.m., Pacific time, on February 28, 2001;
provided, however, that this Warrant shall terminate if not otherwise exercised
or exchanged pursuant to Section 2 below immediately prior to 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, combination or other
transaction as a result of which shareholders of the Company immediately prior
to such acquisition possess in the aggregate less than 50% of the voting power
of the acquiring entity immediately following such acquisition (an
"Acquisition"). In the event of an Acquisition, the Company shall give notice to
the Holder at least fifteen (15) days prior to the closing of such transaction.
2. Exercise of Warrant; Partial Exercise and Exchange of Warrant.
2.1 Exercise of Warrant and Partial Exercise.
This Warrant may be exercised in full or in part by the Holder
hereof by surrender of this Warrant, with the form of subscription attached
hereto duly executed by such Holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, of the purchase price of the shares of Series B
Stock to be purchased hereunder, the cancellation by the holder of
indebtedness of the Company to the Holder in an amount equal to such purchase
price, or any combination thereof. For any partial exercise hereof, the Holder
shall designate in the subscription the number of shares of Series B Stock
that it wishes to purchase. On any such partial exercise, the Company at its
expense shall forthwith issue and deliver to the Holder hereof a new warrant
of like tenor, in the name of the Holder hereof, which shall be exercisable
for such number of shares of Series B Stock represented by this Warrant which
have not been purchased upon such exercise.
2.2 Right to Exchange Warrant for Series B Stock.
(a) Right to Exchange. In addition to and without limiting
the rights of the Holder under the terms of this Warrant, the Holder shall
have the right to exchange this Warrant or any portion hereof (the
"Exchange Right") into shares of Series B Stock as provided in this
Section 2.2 at any time or from time to time during the term of this Warrant;
provided that
-2-
<PAGE>
the Exchange Right shall expire on an Acquisition of the Company. Upon exercise
of the Exchange Right with respect to a particular number of shares subject to
this Warrant (the "Exchange Warrant Shares"), the Company shall deliver to the
Holder (without payment by the Holder of any cash or other consideration) that
number of shares of Series B Stock equal to the quotient obtained by dividing
(x) the value of this Warrant (or the specified portion hereof) on the Exchange
Date (as defined in section 2.2(c), which value shall be determined by
subtracting (A) the aggregate exercise purchase price of the Exchanged Warrant
Shares immediately prior to the exercise of the Exchange Right from (B) the
aggregate fair market value of the Exchanged Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Exchange Date
by (y) the fair market value of one share of Series B Stock on the Exchange
Date. No fractional shares shall be issuable upon exercise of the Exchange
Right, and if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the fair market value of the resulting
fractional share on the Exchange Date.
(b) Method of Exercise. The Exchange Right may be exercised by
the Holder by the surrender of this Warrant prior to its expiration, at the
principal office of the Company together with a written statement specifying
that the Holder thereby intends to exercise the Exchange Right and indicating
the number of shares subject to this Warrant which are being surrendered
(referred to in subsection (a) hereof as the Exchanged Warrant Shares) in
exercise of the Exchange Right. Such exchange shall be effective upon receipt by
the Company of this Warrant together with the aforesaid written statement, or on
such later date as is specified therein (the "Exchange Date") and, at the
election of the Holder, may be made contingent upon the closing of an
Acquisition. Certificates for the shares of Series B Stock issuable upon
exercise of the Exchange Right (or any other securities deliverable in lieu
thereof under Section 5) and, if applicable, a new warrant evidencing the
balance of the shares remaining subject to this Warrant, shall be issued as of
the Exchange Date and shall be delivered to the holder immediately following the
Exchange Date.
(c) Determination of Fair Market Value. For purposes of this
Section 2.2, fair market value of a share of Exchanged Warrant Shares as of a
particular date (the "Determination Date") shall mean:
(i) If the Exchange Right is exercised in connection with an
Acquisition, the effective per share consideration to be received in
an Acquisition by holders of the Series B Stock, which price shall
be as specified in the agreement entered into with respect to such
-3-
<PAGE>
Acquisition and determined assuming receipt of the aggregate
exercise price of all outstanding warrants to purchase equity
securities of the Company (the "Outstanding Warrants"), or
if no such price is set forth in the agreement concerning the
Acquisition, than as determined in good faith by the Company's Board
of Directors upon a review of relevant factors, including the
aggregate exercise price of all Outstanding Warrants.
(ii) If the Exchange Right is not exercised in connection with
or contingent upon an Acquisition, then as follows:
(A) If such type of security is traded on a securities
exchange, the fair market value shall be deemed to be the
average of the closing prices of such type of security on such
exchange over the 30-day period ending five business days prior
to the Determination Date;
(B) If such type of security is traded over-the- counter,
the fair market value shall be deemed to be the average of the
closing bid prices of such type of security over the 30-day
period ending five business days prior to the Determination
Date; and
(C) If there is no public market for such type of
security, then fair market value shall be determined by mutual
agreement of the Holder and the Company, and if the Holder and
the Company are unable to so agree, by an investment banker of
national reputation selected by the Company and reasonably
acceptable to the Holder.
3. When Exercise Effective. The exercise of this Warrant shall be deemed to
have been effected immediately prior to the close of business on the business
day on which this Warrant is surrendered to the Company as provided in Section
2, and at such time the person in whose name any certificate for shares of
Series B Stock shall be issuable upon such exercise, as provided in Section 4,
shall be deemed to be the record holder of such Series B Stock for all purposes.
4. Delivery on Exercise. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within five business days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder hereof, or as such Holder may direct, a certificate or certificates
for the number of fully paid and nonassessable full shares of
-4-
<PAGE>
Series B Stock to which such Holder shall be entitled on such exercise, together
with cash, in lieu of any fraction of a share, equal to such fraction of the
current market value of one full share as determined in good faith by the Board
of Directors.
5. Adjustment of Purchase Price and Number of Shares. The character of the
shares of Series B Stock issuable upon exercise of this Warrant (or any shares
of stock or other securities at the time issuable upon exercise of this Warrant)
and the purchase price therefor, are subject to adjustment upon the occurrence
of the following events:
5.1 Adjustment for Stock Splits Stock Dividends, Recapitalizations, etc.
The exercise price of this Warrant and the number of shares of Series B Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
of shares, reclassification, recapitalization or other similar event affecting
the number of outstanding shares of Series B Stock (or such other stock or
securities). For example if there should be a 2-for-1 stock split, the exercise
price would be divided by two and such number of shares would be doubled.
5.2 Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the Series B Stock (or any shares of stock or other securities at the
time issuable upon exercise of the Warrant) payable in (i) securities of the
Company (other than shares of Series B Stock) or (ii) assets (excluding cash
dividends paid or payable solely out of retained earnings), then in each case,
the Holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Common Stock (or such other stock or securities) issuable on
such exercise prior to such date, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant immediately prior thereto (all subject to
further adjustment as provided in this Warrant).
5.3 Adjustment for Reorganization, Consolidation, Merger, etc. In case
of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization, or any transaction in which in excess
of 50% of the Company's voting power is transferred, or any sale of
-5-
<PAGE>
all or substantially all of the assets of the Company (any such transaction
being hereinafter referred to as a "Reorganization"), then, in each case, the
Holder of this Warrant, on exercise hereof at any time after the consummation or
effective date of such Reorganization (the "Effective Date"), shall receive, in
lieu of the Series B Stock issuable on such exercise prior to the Effective
Date, the stock and other securities and property (including cash) to which such
Holder would have been entitled upon the Effective Date if such Holder had
exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).
5.4 Certificate as to Adjustments. In case of any adjustment or
readjustment in the price or kind of securities issuable on the exercise of this
Warrant, the Company will promptly give written notice thereof to the Holder of
this Warrant in the form of a certificate, certified and confirmed by the Board
of Directors of the Company, setting forth such adjustment or readjustment and
showing in reasonable detail the facts upon which such adjustment or
readjustment is based.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Warrant against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise, (b) will at all times reserve and keep available a
number of its authorized shares of Series B Stock, free from all preemptive
rights therein, which will be sufficient to permit the exercise of this Warrant,
and (c) shall take all such action as may be necessary or appropriate in order
that all shares of Series B Stock as may be issued pursuant to the exercise of
this Warrant will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
-6-
<PAGE>
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock of
any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities, then and in each such event the Company will mail to the Holder
hereof a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Series
B Stock (or any shares of stock or other securities at the time issuable upon
the exercise of this Warrant) shall be entitled to exchange their shares for
securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least 20 days prior to the date
therein specified.
8. Exchange of Warrants. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the Holder thereof a new Warrant of like tenor, in
the name of such Holder or as such Holder may direct, calling in the aggregate
on the face thereof for the number of shares of Series B Stock called for on the
face of the Warrant so surrendered.
9. Replacement of Warrants. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or in the case of any such
mutilation, on surrender and cancellation of such Warrant, the
-7-
<PAGE>
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
10. Investment Intent. Unless a current registration statement under the
Securities Act of 1933, as amended, shall be in effect with respect to the
securities to be issued upon exercise of this Warrant, the Holder thereof, by
accepting this Warrant, covenants and agrees that, at the time of exercise
hereof, and at the time of any proposed transfer of securities acquired upon
exercise hereof, such Holder will deliver to the Company a written statement
that the securities acquired by the Holder upon exercise hereof are for the
account of the Holder for investment and are not acquired with a view to, or for
sale in connection with, any distribution thereof (or any portion thereof) and
with no present intention (at any such time) of offering and distributing such
securities (or any portion thereof).
11. Transfer. Subject to the transfer conditions referred to in the legend
endorsed hereon, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the Holder hereof upon surrender of this
Warrant with a properly executed assignment (in the form annexed hereto) at the
principal office of the Company. Upon any partial transfer, the Company will at
its expense issue and deliver to the Holder hereof a new Warrant of like tenor,
in the name of the Holder hereof, which shall be exercisable for such number of
shares of Series B Stock which were not so transferred.
12. No Rights or Liability as a Stockholder. This Warrant does not entitle
the Holder hereof to any voting rights or other rights as a stockholder of the
Company. No provisions hereof, in the absence of affirmative action by the
Holder hereof to purchase Series B Stock, and no enumeration herein of the
rights or privileges of the Holder hereof shall give rise to any liability of
such Holder as a stockholder of the Company. Notwithstanding the foregoing, the
Company will transmit to the Holder such information, documents and reports as
are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
13. Damages. The Company recognizes and agrees that the Holder hereof will
not have an adequate remedy if the Company fails to comply with the terms of
this Warrant and that damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not oppose an
application by the Holder of this Warrant or any other person entitled to the
benefits of this Warrant requiring specific performance of any and all
provisions hereof or enjoining the Company from continuing to commit any such
breach of the terms hereof.
-8-
<PAGE>
14. Representations and Warranties. The Company represents and warrants to
the Holder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms;
(b) The shares of Series B Stock issuable hereunder have been duly
authorized and reserved for issuance by the Company and, when issued in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable;
(c) The execution and delivery of this Warrant are not, and the issuance
of the shares of Series B Stock upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and, except for
consents that have already been obtained by the Company, do not and will not
conflict with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any Federal, state or local governmental authority or agency or other
person.
15. Registration Rights. The Company covenants and agrees as follows:
15.1 Definitions. For purposes of this Section 15: The term "Registrable
Securities" means (i) the Common Stock issuable upon conversion of the Series B
Stock issued pursuant to this Warrant and (ii) any 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, such Common Stock.
15.2 Grant of Rights. The Company hereby grants to the initial Holder of
this Warrant (and the permitted transferee of the Registration Rights, as
hereinafter defined) the "piggy-back" registration rights set forth in Section
2.3 of the Registration Rights Agreement dated as of November 13, 1995, by and
among the Company and the investors who are signatories thereto (the
"Registration Rights Agreement")(such rights are referred to herein as the
"Registration Rights"). Each of the Company and the Holder severally covenants
and agrees that it shall comply with each of the
-9-
<PAGE>
covenants and agreements contained in the Registration Rights Agreement, which
covenants and agreements are expressly incorporated herein by reference as
though stated herein in full.
15.3 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to the Registration Rights may be
assigned by a Holder to a transferee or assignee of such securities to the same
extent as permitted by Section 2.13 of the Registration Rights Agreement.
15.4 No Conflicting Agreements. The Company represents and warrants to
the Holder that the Company is not a party to any agreement that conflicts in
any manner with the Holder's rights to cause the Company to register Registrable
Securities pursuant to the Registration Rights. The Company covenants and agrees
that it shall comply with the provisions set forth in Section 1.1 of the
Registration Rights Agreement with respect to amendments or modifications of the
Registration Rights.
15.5 Rights and Obligations Survive Exercise and Expiration of Warrant.
The rights and obligations of the Company and the Holder set forth in this
Section 15 and in the Registration Rights shall survive the exercise and
expiration of this Warrant.
16. Initial Public Offering. If the Company shall effect an initial public
offering of its Common Stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended (an "Initial Public Offering"),
which results in the conversion of the Series B Stock into Common Stock pursuant
to the Company's Certificate of Incorporation in effect immediately prior to
such Initial Public Offering, then, effective upon such conversion, this Warrant
shall change from the right to purchase shares of Series B Stock to the right to
purchase shares of Common Stock, and the Holder shall thereupon have the right
to purchase, at a total price equal to that payable upon the exercise of this
Warrant in full, the number of shares of Common Stock which would have been
receivable by the Holder upon the exercise of this Warrant for shares of Series
B Stock immediately prior to such conversion of such shares of Series B Stock
into shares of Common Stock, and in such event appropriate provisions shall be
made with respect to the rights and interest of the Holder to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the purchase price and the number of shares purchasable upon exercise of this
Warrant) shall thereafter be applicable to any shares of Common Stock
deliverable upon the exercise hereof.
-10-
<PAGE>
17. Notices. All notices referred to in this Warrant shall be in writing and
shall be delivered personally or by certified or registered mail, return
receipt requested, postage prepaid and will be deemed to have been given when
so delivered or mailed (i) to the Company, at its principal executive offices
and (ii) to the Holder of this Warrant, at such Holder's address as it appears
in the records of the Company (unless otherwise indicated by such Holder).
18. Payment of Taxes. All shares of Series B Stock issued upon the exercise
of this Warrant shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect to the issue or delivery thereof.
19. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant is being delivered in the State of California and shall
be governed by and construed and enforced in accordance with the internal laws
of the State of California (without reference to any principles of the
conflicts of laws). The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
[Rest of Page Left Blank Intentionally]
-11-
<PAGE>
Effective as of February 28, 1996
(Corporate Seal)
GIGA INFORMATION GROUP, INC.
By:
-------------------------------
Kenneth Marshall
President
Attest:
By:
-------------------------------
Richard B. Goldman
Senior Vice President
-12-
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO
---------------------------
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ________________/*/ shares of Common Stock of __________,
and herewith makes payment of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
_________________, whose address is_________________________________________.
- ---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
- ---------------------------------------
- ---------------------------------------
(Address)
Dated:
- --------------------
/*/Insert here the number of shares as to which the Warrant
is being exercised.
-13-
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________ the right represented by the within Warrant
to purchase shares of Common Stock of _________________ to which the within
Warrant relates, and appoints ____________________ Attorney to transfer such
right on the books of ____________________ with full power of substitution in
the premises.
- ---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
- ------------------------------------
- ------------------------------------
(Address)
Dated:
- ----------------
-14-
<PAGE>
Exhibit 10.3(b)
AMENDMENT NO. 1 TO
SERIES C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO SERIES C PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT dated September 15, 1997, ("Amendment") to the Series C
Preferred Stock and Warrant Purchase Agreement dated May 9, 1997 (the
"Agreement") by and among Giga Information Group, Inc., a Delaware corporation
(the "Company") and the purchasers listed on Schedule A thereto (the
"Investors") is entered into by the Company and the Investors. Except as set
forth below, the Agreement shall remain in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Agreement.
WHEREAS, on May 9, 1997, the Company sold to the Investors
1,824,818 shares (the "Initial Shares") of its Series C Convertible Preferred
Stock, $.001 par value per share ("Series C Stock") pursuant to the Agreement.
WHEREAS, pursuant to the terms of the Agreement, the Company
was permitted to offer and sell, at a price of not less than $4.11 per share, up
to an additional 851,581 shares (the "Additional Shares") of its Series C Stock,
provided that, such Additional Shares were to be sold, if at all, on or before
August 6, 1997.
WHEREAS, the Company and the Investors desire to amend the
Agreement to extend the time in which the Company may sell the Additional
Shares, from August 6, 1997 to December 31, 1997.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
1. Acting in accordance with Section 8.9 of the Agreement, the
Company and the undersigned holders of Initial Shares representing at least a
majority of the outstanding number of Initial Shares hereby consent to the
following amendment to the Agreement:
a. Section 2.2(a) of the Agreement is deleted in its entirety
and a new Section 2.2(a) is inserted in lieu thereof which reads as
follows:
"(a) Conditions of Additional Closings. At any time or
times on or before December 31, 1997, 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 $4.11 per share, up
to that number of shares of Series C Stock that is equal to
2,676,399 shares of Series C Stock less the number of shares
of Series C Stock actually issued and sold by the Company
prior to such Additional Closing pursuant to this Agreement
and such New Investors shall be entitled to receive Warrants,
if any, on the same terms and conditions as are set forth in
this Agreement. New Investors may include persons or entities
who are already Investors under this Agreement."
2. The Agreement, as supplemented and modified by this
Amendment, together with the other writings referred to in the Agreement or
delivered pursuant thereto which form a part thereof, contain the entire
agreement among the parties with respect to the subject matter thereof and
amend, restate and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
3. Upon the effectiveness of this Amendment, on and after the
date hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like
2
<PAGE>
import, and each reference in the other documents entered into in connection
with the Agreement, shall mean and be a reference to the Agreement, as amended
hereby. Except as specifically amended above, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed.
4. This Amendment shall be governed by and construed and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
5. The Amendment may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment No. 1 to Series C Preferred Stock and Warrant Purchase Agreement as of
the date first written above.
GIGA INFORMATION GROUP, INC.
By:
--------------------------------------
Name:
Title:
PEQUOT PRIVATE EQUITY FUND, L.P.
By:
--------------------------------------
Name:
Title:
PEQUOT OFFSHORE PRIVATE EQUITY
FUND, INC.
By:
--------------------------------------
Name:
Title:
4
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment No. 1 to Series C Preferred Stock and Warrant Purchase Agreement as of
the date first written above.
GIGA INFORMATION GROUP, INC.
By:
--------------------------------------
Name:
Title:
PEQUOT PRIVATE EQUITY FUND, L.P.
By:
--------------------------------------
Name:
Title:
PEQUOT OFFSHORE PRIVATE EQUITY
FUND, INC.
By:
--------------------------------------
Name:
Title:
5
<PAGE>
Exhibit 10.3(c)
May 11, 1998
To the Series C Preferred Stockholders
Of Giga Information Group, Inc.
Ladies and Gentlemen:
This letter, when countersigned, will confirm our understanding and
agreement, as set forth below, with respect to certain terms of the Series C
Preferred Stock, par value $0.01 per share (the "Series C Stock") and the
warrants to purchase Series C Stock (the "Warrants") that were issued (the
"Series C Financing") pursuant to the Series C Preferred Stock and Warrant
Purchase Agreement, dated May 9, 1997, as amended (the "Series C Purchase
Agreement"), among Giga Information Group, Inc. (the "Company") and the
Investors listed on the schedule of investors attached as Exhibit A thereto.
Notwithstanding the express language of the Series C Purchase Agreement
and the agreements and documents executed and effected in connection therewith,
including, without limitation, the Fourth Amended and Restated Certificate of
Incorporation (the "Restated Certificate") and the Warrants, the parties hereby
confirm the following:
1. The "full-market" anti-dilution protection of the Series C
Stock, as set forth in Section 5(e) of Article 1V.A of the Restated Certificate,
was intended to terminate upon the sale by the Company of Preferred Stock or
Common Stock at a price per common equivalent share (not per share) of at least
$4.61 and for aggregate proceeds to the Company of at least $6,500,000.
Consequently, such full-market anti-dilution protection should not terminate
upon the consummation of the Series D Preferred Stock financing currently
contemplated by the Company. The Company will seek to obtain the necessary
consents of stockholders in order to amend said Article IV.A to reflect the
foregoing intention.
2. The exercise price of the Warrants was intended to be $4.50
per common equivalent share (not per share of Series C Stock). Consequently, as
a result of the adjustment to the Conversation Rate (as defined in the Restated
Certificate) of the Series C Stock from 1 to 1.17429 as of December 31, 1997,
the exercise price of the Warrants should be adjusted to $5.28 per share of
Series C Stock (or $4.50 multiplied by 1.17429).
Please sign a copy of this letter agreement where indicated below and
return the same to us to evidence your agreement to the foregoing. By executing
and returning this letter agreement to us you will be deemed to have (1)
consented to an amendment to the Restated Certificate to reflect the
understanding in Paragraph 1 above in accordance with Section 228 of the General
Corporation Law of the State of Delaware, and (2) subject to such amendment
becoming effective, consented to the change in the exercise price of the
Warrants to reflect the understanding in Paragraph 2 above.
Please return the Warrant(s) previously issued to you together with
this letter agreement. Upon receipt of such Warrant(s), the Company will issue
an amended warrant in accordance with the foregoing.
Very truly yours,
<PAGE>
GIGA INFORMATION GROUP, INC.
By:
----------------------------------------
Name: Daniel M. Clarke
Title: Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
Agreed and Accepted as of the date
first written above:
ALLEN & COMPANY INCORPORATED
By:
-------------------------------
Name:
Title:
- ----------------------------------
Neill H. Brownstein
- ----------------------------------
Richard L. Crandall
- ----------------------------------
Gideon I. Gartner
- ----------------------------------
Bernard Goldstein
2
<PAGE>
PEQUOT PRIVATE EQUITY FUND L.P.
By:
-------------------------------
Name:
Title:
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-------------------------------
Name:
Title:
WHEATLEY PARTNERS, L.P.
By:
-------------------------------
Name:
Title:
3
<PAGE>
Exhibit 10.6(b)
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1 dated December 12, 1996 (the "Amendment") to the
Registration Rights Agreement dated November 9, 1995 among Giga Information
Group, Inc., a Delaware corporation (the "Corporation"), the investors listed on
Exhibit A thereto (the "Investors") and those key members of the Company's
management listed on Exhibit B thereto (the "Management Persons") is entered
into by the Corporation, the Investors and the Management Persons. Except as set
forth below, the Agreement shall remain in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to the Agreement. Acting in accordance with Section 1.1
of the Agreement, the undersigned hereby consent to the following amendments to
the Agreement:
(a) Clause (ii) of Subsection 2.1(b) is deleted in its
entirety and the following is inserted in lieu thereof:
"(ii) the shares of Common Stock issuable or issued
upon conversion of the Company's Series A Convertible Preferred Stock,
$.001 par value, and Series B Convertible Preferred Stock, $.001 par
value (such shares of Common Stock referred to in clauses (i) and (ii)
hereof collectively referred to hereinafter as the "Stock"); and"
(b) Subsection 2.2(a) is amended by changing (i) the date
"November 1, 1999" in the second line to "June 30, 1998" and (ii) the term
"forty percent (40%)" in the fourth line to "thirty percent (30%)."
(c) Exhibit A of the Agreement is hereby amended, as set forth
on Exhibit A attached hereto, pursuant to which Ponoma Capital II, L.P., Baupost
Limited Partnership 1983 C-1, Wheatley Partners, L.P., Wheatley Foreign
Partners, L.P., Charles O. Rossotti Charitable Remainder Trust, Alfred
University, Foundation
<PAGE>
Partners, Tampsco II Partnership, Rochester Institute of Technology and the
Series A Preferred Stockholders are added to Exhibit A of the Agreement and
thereby become parties thereto and entitled to the rights and benefits thereof.
2. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
3. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in the other
documents entered into in connection with the Agreement, shall mean and be a
reference to the Agreement, as amended hereby. Except as specifically amended
above, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
4. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
5. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF the parties hereto have executed this Amendment on
the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-------------------------------------
Title: Chief Executive Officer
----------------------------------
2
<PAGE>
MANAGEMENT PERSONS:
- --------------------------------------
Gideon I. Gartner
- --------------------------------------
David L. Gilmour
3
<PAGE>
Exhibit 10.6(c)
AMENDMENT NO. 2
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 2 dated May 9, 1997 (the "Amendment") to the
Registration Rights Agreement dated November 9, 1995 among Giga Information
Group, Inc., a Delaware corporation (the "Corporation"), the investors listed on
Exhibit A thereto (the "Investors") and those key members of the Company's
management listed on Exhibit B thereto (the "Management Persons"), as amended
(the "Agreement"), is entered into by the Corporation, the Investors and the
Management Persons. Except as set forth below, the Agreement shall remain in
full force and effect. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Agreement.
WHEREAS, the Corporation proposes to enter into a Series C Preferred
Stock and Warrant Purchase Agreement dated as of the date hereof (the "Series C
Stock and Warrant Purchase Agreement") with the purchasers named on Schedule I
thereto (the "Purchasers"), and
WHEREAS, it is a condition to the performance of the obligations by the
Purchasers under the Series C Stock and Warrant Purchase Agreement that the
Corporation, the Investors and the Management Persons enter into this Amendment
for the purposes of making the Purchasers parties to the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to the Agreement. Acting in accordance with Section 1.1
of the Agreement, the undersigned hereby consent to the following amendments to
the Agreement.
(a) Clause (ii) of Subsection 2.1(b) is deleted in its entirety and the
following is inserted in lieu thereof:
"(ii) the shares of Common Stock issuable or issued upon conversion
of the Company's Series A Convertible Preferred Stock, $.001 par
value, Series B Convertible Preferred Stock, $.001 par value, and
Series C Convertible Preferred Stock, $.001 par
<PAGE>
value (such shares of Common Stock referred to in clauses (i) and
(ii) hereof collectively referred to hereinafter as the "Stock");
and"
(b) Exhibit A of the Agreement is hereby amended, as set forth on
Exhibit A attached hereto, pursuant to which each of the purchasers of shares of
the Corporation's Series C Preferred Stock, $.001 par value, pursuant to the
Series C Stock and Warrant Purchase Agreement of even date herewith, is added to
Exhibit A of the Agreement and thereby becomes a party thereto and entitled to
the rights and benefits thereof;
(c) Exhibit B of the Agreement is hereby amended, as set forth on
Exhibit B attached hereto, to specifically enumerate the number of shares of the
classes and series of the Company's capital stock owned by each of the
Management Persons which, in accordance with the terms of the Agreement,
collectively with any additional shares of the Company's securities acquired by
the Management Persons after the date of this Amendment, shall be deemed to be
"Management Shares" under the Agreement.
2. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
3. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in the other
documents entered into in connection with the Agreement, shall mean and be a
reference to the Agreement, as amended hereby. Except as specifically amended
above, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
4. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
5. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
2
<PAGE>
[Remainder of Page Left Blank Intentionally]
3
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Amendment No.
2 to Registration Rights Agreement on the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-------------------------------
Title:
-----------------------------
Management Persons:
- -----------------------------------
Gideon I. Gartner
- -----------------------------------
David L. Gilmour
4
<PAGE>
Exhibit 10.6(d)
AMENDMENT NO. 3
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 3, dated April ___, 1998 (the "Amendment"), to the
Registration Rights Agreement, dated November 9, 1995, among Giga Information
Group, Inc., a Delaware corporation (the "Company"), the investors listed on
Exhibit A thereto (the "Investors") and those key members of the Company's
management listed on Exhibit B thereto (the "Management Persons"), as amended
(the "Agreement"), is entered into by the Company, the Management Persons, the
undersigned Investors, the undersigned Purchasers (as defined herein) and
Friedman, Billings, Ramsey Group, Inc. and Friedman, Billings, Ramsey Investment
Management, Inc. (collectively, "FBR").
WHEREAS, the Company proposes to enter into a Series D Preferred Stock
and Warrant Purchase Agreement dated as of the date hereof (the "Series D
Agreement") with the purchasers named on Exhibit A thereto (the "Purchasers");
WHEREAS, the Company proposes to enter into a Bridge Loan Agreement
(the "Bridge Agreement") with FBR pursuant to which, among other things, the
Company (i) will issue senior convertible notes and warrants to purchase shares
of the Company's Common Stock, $0.001 par value per share and (ii) may (under
certain circumstances described therein) issue shares of its Series D Preferred
Stock, $0.001 par value per share (the "Series D Stock"), and warrants to
purchase additional shares of Series D Stock to FBR; and
WHEREAS, it is a condition to the performance of the obligations by the
Purchasers under the Series D Agreement and FBR under the Bridge Loan Agreement
that the Company, the Investors and Management Persons enter into this Amendment
for the purposes, among other things, of making the Purchasers and FBR parties
to the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to the Agreement. Acting in accordance with Section 1.1
of the Agreement, the undersigned hereby consent to the following amendments to
the Agreement:
<PAGE>
(a) Clause (ii) of Subsection 2.1(b) is deleted in its
entirety and the following clause (ii) is inserted in lieu thereof:
"(ii) the shares of Common Stock issuable or issued upon (A)
conversion of the Company's Series A Preferred Stock, par
value $0.001 per share, Series B Preferred Stock, par value
$0.001 per share, Series C Preferred Stock, par value $0.001
per share, and Series D Preferred Stock, par value $0.001 per
share, including shares of such series of preferred stock
issuable upon exercise of warrants to purchase such shares
(collectively, the "Series Preferred Stock") and (B) exercise
of warrants issued to Friedman, Billings, Ramsey Group, Inc.
and Friedman, Billings, Ramsey Investment Management, Inc. to
purchase shares of Common Stock (such shares of Common Stock
referred to in clauses (i) and (ii) hereof collectively
referred to hereinafter as the "Stock"); and"
(b) Subsection 2.2(a) is hereby amended by inserting the
phrase "file such registration statement" prior to the phrase "within ninety
(90) days" on the fourteenth line therein.
(c) Exhibit A of the Agreement is hereby amended, as set forth
on Exhibit A attached hereto, pursuant to which each of the Purchasers and FBR
is added to Exhibit A of the Agreement and thereby becomes a party thereto and
entitled to the rights and benefits thereof;
2. Notwithstanding any provisions contained herein to the contrary, the
effectiveness of this Amendment is conditional upon the effectiveness of the
Bridge Agreement and the execution of this Amendment by FBR.
3. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
4. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import, and each reference in the other
documents entered into in connection with the Agreement, shall mean and be a
reference to the Agreement, as amended hereby. Except as specifically amended
above, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
5. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
2
<PAGE>
6. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
[SIGNATURES BEGIN ON THE NEXT PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
3 to the Registration Rights Agreement on the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-------------------------------
Name: Daniel M. Clarke
Title: Senior Vice President, Chief
Financial Officer, Treasurer
and Secretary
Management Persons:
- --------------------------------------
Gideon I. Gartner
- --------------------------------------
David L. Gilmour
4
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
Series A Preferred Stockholders:
- --------------------------------------
Jonathan Art
- --------------------------------------
Adrian Bowles
- --------------------------------------
Neill H. Brownstein
RICHARD L. CRANDALL TRUST
U/A/D 6/13/86
By:
-------------------------
Name: Richard L. Crandall
Title: Trustee
- --------------------------------------
Esther Dyson
- --------------------------------------
Harry Edelson
FAHERTY PROPERTIES CO., LTD.
By:
-----------------------------------
Name:
Title:
- --------------------------------------
Bert Fingerhut
5
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
- --------------------------------------
Gideon I. Gartner
- --------------------------------------
David L. Gilmour
- --------------------------------------
Bernard Goldstein
- --------------------------------------
George J.W. Goodman
- --------------------------------------
Stewart H. Greenfield
- --------------------------------------
Michael J. Kolesar
- --------------------------------------
Stephen R. Levy
- --------------------------------------
Thomas W. Malone
- --------------------------------------
James D. Robinson III
6
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
RUTHERFORD GROUP
By:
------------------------------------
Name:
Title:
- --------------------------------------
Cornelius T. Ryan
- --------------------------------------
Arno D. Schefler
- --------------------------------------
Scott M. Smith
- --------------------------------------
Frederick G. Smith
- --------------------------------------
Peter A. Wright
YALE UNIVERSITY
By:
-----------------------------------
Name:
Title:
7
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
Series B Preferred Stockholders:
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
21ST CENTURY COMMUNICATIONS T-E PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
ACORN INVESTMENT TRUST, SERIES DESIGNATED ACORN FUND
By:
--------------------------------------
Name:
Title:
8
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
AKKAD
By:
--------------------------------------
Name:
Title:
ALFRED UNIVERSITY
By:
--------------------------------------
Name:
Title:
BAUPOST LIMITED PARTNERSHIP 1983 C-1
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Adam J. Brownstein
- --------------------------------------
Neill and Linda Brownstein
- --------------------------------------
Todd D. Brownstein
- --------------------------------------
Robert E. Cook
9
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
CORE TECHNOLOGY FUND, INC.
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Christopher J. DiVecchio
- --------------------------------------
Martin P. DuRoss
- --------------------------------------
Harry Edelson
EDELSON TECHNOLOGY PARTNERS III
By:
--------------------------------------
Name:
Title:
EXECUTIVE TECHNOLOGY, L.P.
By:
--------------------------------------
Name:
Title:
FOUNDATION PARTNERS
By:
--------------------------------------
Name:
Title:
10
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
GILO FAMILY PARTNERSHIP
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Will P. Gordon
- --------------------------------------
Jon D. Gruber
GRUBER & MCBAINE INTERNATIONAL
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Emily G. Hamilton
HARE & CO.
By:
--------------------------------------
Name:
Title:
11
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
HAUSSMAN HOLDINGS
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Michael J. Kolesar
LAGUNITAS PARNTERS, L.P.
By:
--------------------------------------
Name:
Title:
- --------------------------------------
John B. Landry
- --------------------------------------
Derek Lemke-von Ammon
THE MATRIX TECHNOLOGY GROUP N.V.
By:
--------------------------------------
Name:
Title:
12
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
MERRILL LYNCH, CUSTODIAN FOR THE
BENEFIT OF RICHARD FOUDY, S.C.P.
By:
--------------------------------------
Name:
Title:
- --------------------------------------
J. Patterson McBaine
MONTGOMERY SMALL CAP PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
MONTGOMERY SMALL CAP PARTNERS II, L.P.
By:
--------------------------------------
Name:
Title:
MONTGOMERY SMALL CAP PARTNERS III, L.P.
By:
--------------------------------------
Name:
Title:
13
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
MONTSOL INVESTMENTS N.V.
By:
--------------------------------------
Name:
Title:
NOSROB INVESTMENTS LTD.
By:
--------------------------------------
Name:
Title:
POMONA CAPITAL II, L.P.
By:
--------------------------------------
Name:
Title:
QUOTA FUND N.V.
By:
--------------------------------------
Name:
Title:
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
--------------------------------------
Name:
Title:
14
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
RRE GIGA INVESTORS, L.P.
By:
--------------------------------------
Name:
Title:
RRE GIGA INVESTORS II, L.P.
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Cornelius T. Ryan
- --------------------------------------
Frederick G. Smith
SCI-TECH INVESTMENT PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
S.G. PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
15
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
TAMPSCO II PARTNERSHIP
By:
--------------------------------------
Name:
Title:
WHEATLEY FOREIGN PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
WHEATLEY PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Susan Tracy Wheeler
YALE UNIVERSITY
By:
--------------------------------------
Name:
Title:
YALE UNIVERSITY RETIREMENT PLAN
FOR STAFF EMPLOYEES
By:
--------------------------------------
Name:
Title:
16
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
Series C Preferred Stockholders:
ALLEN & COMPANY INCORPORATED
By:
--------------------------------------
Name:
Title:
- --------------------------------------
Neill H. Brownstein
- --------------------------------------
Richard L. Crandall
- --------------------------------------
Gideon I. Gartner
- --------------------------------------
Bernard Goldstein
PEQUOT PRIVATE EQUITY FUND L.P.
By:
--------------------------------------
Name:
Title:
PEQUOT OFFSHORE PRIVATE EQUITY FUND, L.P.
By:
--------------------------------------
Name:
Title:
17
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
WHEATLEY FOREIGN PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
WHEATLEY PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
18
<PAGE>
Amendment No. 3 to
Registration Rights Agreement
The undersigned Purchasers of Series D Preferred Stock of the Company
and Friedman, Billings, Ramsey Group, Inc. and Friedman, Billings, Ramsey
Investment Management, Inc. hereby agree that upon their execution of this
Amendment the undersigned shall become parties to the Agreement such that the
undersigned shall be deemed "Investors," subject to all the terms and conditions
applicable to Investors set forth therein, and the shares of Series D Preferred
Stock and warrants, and Common Stock issuable upon conversion or exercise
thereof, held by the undersigned shall constitute "Registrable Securities,"
subject to all of the terms and conditions applicable to Registrable Securities
set forth therein.
Friedman, Billings, Ramsey Group, Inc.
By:
--------------------------------------
Title:
-----------------------------------
Friedman, Billings, Ramsey Investment Management, Inc.
By:
--------------------------------------
Title:
-----------------------------------
Novak Biddle Venture Partners, L.P.
By:
--------------------------------------
Title:
-----------------------------------
19
<PAGE>
REGISTRATION RIGHTS AGREEMENT
EXHIBIT A
INVESTORS
Series A Preferred Stockholders:
David Gilmour Michael J. Kolesar
c/o Expernet/Giga 35 Park Avenue
3945 Freedom Circle Ardsley, NY 10502
Santa Clara, CA 95054
Neill H. Brownstein Stephen R. Levy
536 West Crescent Drive c/o Bolt Beranek & Newman Inc.
Palo Alto, CA 94301 150 Cambridge Park Drive
Cambridge, MA 02140
Richard L. Crandall Trust Thomas W. Malone
U/A/D 6/13/86, Richard L. 50 Memorial Drive
Crandall, Trustee E53-333
2129 Devonshire Road Cambridge, MA 02141
Ann Arbor, MI 48104
Faherty Properties Co., Ltd. James D. Robinson III
c/o Michael D. Faherty RRE Investors, L.L.C.
6133 Higate Lane 126 E. 56th Street
Dallas, TX 75214 New York, NY 10022
Bert Fingerhut Rutherford Group
1520 Silver King Drive 5514 Calullmet
Aspen, CO 81611 La Jolla, CA 92037
Yale University Cornelius T. Ryan
c/o S(squared) Technology Corp. 315 Post Road West
515 Madison Avenue Westport, CT 06880
New York, NY 10022
Attn: Sy Goldblatt
George J.W. Goodman Arno D. Schefler
45 West 45th Street 2049 McLain Flats Road
15th Floor P.O. Box 1005
New York, NY 10036 Aspen, CO 81611
20
<PAGE>
Stewart H. Greenfield Esther Dyson
279 Sturges Highway c/o Daphne Kis
Westport, CT 06880 104 5th Avenue, 20th Floor
New York, NY 10011
Scott M. Smith Frederick Smith
Camelot Capital 435 East 57th Street
10 Glenville Street Apt. 5C
Greenwich, CT 06831 New York, NY 10022
Peter A. Wright Adrian Bowles
P.A.W. Partners, L.P. 57 Grozier Road
10 Glenville Street Cambridge, MA 02138
Greenwich, CT 06831
Jonathan Art Gideon I. Gartner
80 East End Avenue 0126 Magnifico Drive
New York, NY 10028 Aspen, CO 81611
Harry Edelson Bernard Goldstein
c/o Edelson Technology Partners c/o Broadview Associates
Whitecliff Lake, NJ 07675 1 Bridge Plaza
Fort Lee, NJ 07024
21
<PAGE>
Series B Preferred Stockholders:
21st Century Communications Sci-Tech Investment Partners, L.P.
Partners L.P. c/o S(squared) Technology Corp.
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 Foreign The Matrix Technology Group N.V.
Partners, L.P. c/o S(squared) Technology Corp.
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 T-E Yale University
Partners, L.P. c/o S(squared) Technology Corp.
767 5th Avenue 515 Madison Avenue, Suite 4200
New York, NY 10153 New York, NY 10022
Attention: Irwin Lieber Attention: Sy Goldblatt
Wheatley Partners, L.P. Wheatley Foreign Partners, L.P.
767 5th Avenue 767 5th Avenue
New York, NY 10153 New York, NY 10153
Attention: Irwin Lieber Attention: Irwin Lieber
Montsol Investments N.V. Yale University Retirement Plan for
c/o S(squared) Technology Corp. Staff Employees
515 Madison Avenue, Suite 4200 c/o S(squared) Technology Corp.
New York, NY 10022 515 Madison Avenue, Suite 4200
Attention: Sy Goldblatt New York, NY 10022
Attention: Sy Goldblatt
Executive Technology, L.P. S.G. Partners, L.P.
c/o S(squared) Technology Corp. c/o S(squared) Technology Corp.
515 Madison Avenue, Suite 4200 515 Madison Avenue, Suite 4200
New York, NY 10022 New York, NY 10022
Attention: Sy Goldblatt Attention: Sy Goldblatt
22
<PAGE>
Core Technology Fund, Inc. Acorn Investment Trust, Series
c/o S(squared) Technology Corp. Designated Acorn Fund
515 Madison Avenue, Suite 4200 c/o Asset Mgmt.
New York, NY 10022 227 West Monroe Street
Attention: Sy Goldblatt Suite 3000
Chicago, IL 60606
Attention: Ralph Wanger
Charles O. Rossotti Charitable Alfred University
Remainder Unitrust c/o S(squared) Technology Corp.
c/o S(squared) Technology Corp. 515 Madison Avenue, Suite 4200
515 Madison Avenue, Suite 4200 New York, NY 10022
New York, NY 10022 Attention: Sy Goldblatt
Attention: Sy Goldblatt
Foundation Partners Tampsco II Partnership
c/o S(squared) Technology Corp. c/o S(squared) Technology Corp.
515 Madison Avenue, Suite 4200 515 Madison Avenue, Suite 4200
New York, NY 10022 New York, NY 10022
Attention: Sy Goldblatt Attention: Sy Goldblatt
Hare & Co. Derek Lemke-von Ammon
c/o The Bank of New York c/o Montgomery Securities
P.O. Box 11203 600 Montgomery Street
New York, NY 10249 San Francisco, CA 94111
Attention: Betty Gorecki
Montgomery Small Cap Partners III, L.P. Kensington Partners L.P.
c/o Montgomery Asset Management 237 Park Avenue
3200 Cherry Creek Drive New York, NY 10017
Suite 370 Attention: Dick Keim
Denver, CO 80209
Quota Fund N.V. Lagunitas Partners, L.P.
c/o Montgomery Asset Management c/o Gruber & McBaine Capital
600 Montgomery Street Management
San Francisco, CA 94111 50 Osgood Place
Attention: Dana Schmidt San Francisco, CA 94133
Haussmann Holdings Jon D. Gruber
c/o Montgomery Asset Management c/o Gruber & McBaine Capital
600 Montgomery Street Management
San Francisco, CA 94111 50 Osgood Place
Attention: Dana Schmidt San Francisco, CA 94133
23
<PAGE>
Nosrob Investments Ltd. Martin P. DuRoss
c/o Montgomery Asset Management 15120 Eclipse Drive
600 Montgomery Street Manassas, VA 22111
San Francisco, CA 94111
Attention: Dana Schmidt
Neill and Linda Brownstein Susan Tracy Wheeler
536 West Crescent Drive 2 Bonnie Brook Road
Palo Alto, CA 94301 Westport, Connecticut 06880
Adam J. Brownstein John B. Landry
536 West Crescent Drive 62 Old Connecticut Path
Palo Alto, CA 94301 Wayland, MA 01778
Todd D. Brownstein 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
Will P. Gordon Harry Edelson
536 West Crescent Drive c/o Edelson Technology Partners
Palo Alto, CA 94301 Whiteweld Centre
300 Tice Boulevard
Woodcliff Lake, NJ 07675
Emily G. Hamilton Edelson Technology Partners III
536 West Crescent Drive Whiteweld Centre
Palo Alto, CA 94301 300 Tice Boulevard
Woodcliff Lake, NJ 07675
Attention: Mr. Harry Edelson
Merrill Lynch Gilo Family Partnership
Custodian for the benefit of 100 Why Worry Lane
Richard Foudy, S.C.P. Woodside, CA 94062
101 Hudson Street Attention: David Gilo
8th Floor
Jersey City, NJ 07302-3997
Cornelius T. Ryan Robert E. Cook
315 Post Road West 572 Park Avenue, 2nd Floor
Westport, CT 06880 Park City, UT 84060
24
<PAGE>
Frederick G. Smith RRE Giga Investors, L.P.
435 East 57th Street, Apt. 5C 126 East 56th Street, 22nd Floor
New York, NY 10022 New York, NY 10022
Attention: Mr. Stuart Ellman
Michael J. Kolesar Montgomery Small Cap Partners II, L.P.
Giga Information Group, Inc. c/o Montgomery Securities
1 Longwater Circle 101 California Street
Norwell, MA 02061 San Francisco, CA 94111
Attn: Ms. Dana Schmidt
Christopher J. DiVecchio Pomona Capital II, L.P.
254 Main Street, #1C c/o Pomona Capital
Southport, CT 06490 780 Third Avenue, 28th Floor
New York, NY 10017
AKKAD Baupost Limited Partnership 1983 C-1
Acorn Fund c/o Pomona Capital
c/o Wanger Asset Management 780 Third Avenue, 28th Floor
227 West Monroe Street New York, NY 10017
Suite 3000
Chicago, Illinois 60606
Attn: Emily Bredahl
Montgomery Small Cap Partners, L.P.
c/o Montgomery Securities
101 California Street
San Francisco, CA 94111
Attn: Ms. Dana Schmidt
25
<PAGE>
Series C Preferred Stockholders:
Pequot Private Equity Fund, L.P. Pequot Offshore Private Equity Fund, Inc.
354 Pequot Avenue c/o Hemisphere Management Limited
Southport, CT 06490-0760 Hemisphere House
Attn: Lawrence D. Lenihan, Jr. 9 Church Street
P.O. Box HM951
Hamilton HM OX Bermuda
Attn: Thomas L. Healy
Neill H. Brownstein Gideon I. Gartner
536 West Crescent Drive 0126 Magnifico Drive
Palo Alto, CA 94301 Aspen, CO 81611
Richard L. Crandall Bernard Goldstein
c/o Arbor Partners LLC Broadview Associates
505 East Huron, Suite 201 1 Bridge Plaza
Ann Arbor, MI 48104 Fort Lee, NJ 07024
Allen & Company Incorporated Wheatley Partners, L.P.
711 Fifth Avenue c/o Wheatley Partners, L.L.C.
New York, NY 10022 80 Cutter Mill Road, Suite 311
Great Neck, NY 11021
Wheatley Foreign Partners, L.P.
c/o Wheatley Partners, L.L.C.
80 Cutter Mill Road, Suite 311
Great Neck, NY 11021
26
<PAGE>
New Series D Preferred Stockholder:
Novak Biddle Venture Partners, L.P.
1897 Preston White Drive
Reston, VA 20191
FBR:
Friedman, Billings, Ramsey Group, Inc.
1001 19th Street North
Arlington, VA 22209-1710
Friedman, Billings, Ramsey Investment Management, Inc.
1001 19th Street North
Arlington, VA 22209-1710
27
<PAGE>
Exhibit 10.6(e)
AMENDMENT NO. 4
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 4, dated May ___, 1998 (the "Amendment"), to the
Registration Rights Agreement, dated November 9, 1995, among Giga Information
Group, Inc., a Delaware corporation (the "Company"), the investors listed on
Exhibit A thereto (the "Investors") and those key members of the Company's
management listed on Exhibit B thereto (the "Management Persons"), as amended
(the "Agreement"), is entered into by the Company and the undersigned Investors
and Management Persons.
WHEREAS, the Company proposes to register shares of its Common Stock
under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the public offering solely for cash of at least $30 million of
Common Stock at a minimum price to the public of $3.75 per share (as
appropriately adjusted for stock splits, combinations, reclassifications and the
like) (the "Offering");
WHEREAS, Section 2.3 of the Agreement provides that if the Company
proposes to register any of its Common Stock under the Securities Act in
connection with the public offering of such securities solely for cash, the
Company (i) shall promptly give each holder of Registrable Securities (as
defined therein) written notice of such registration and (ii) upon timely
written request by each such holder, shall cause to be registered (a "Piggyback
Registration") under the Securities Act all of the Registrable Securities that
each such holder has requested to be registered, subject to certain exceptions,
including underwriters' holdbacks;
WHEREAS, to facilitate a successful Offering, the Company is seeking
(i) a waiver of the Piggyback Registration rights of the holders of Registrable
Securities in connection with the Offering and (ii) an amendment of the
definition of Qualified Public Offering in the Agreement to include the
Offering; and
WHEREAS, Section 1.1 of the Agreement provides that any provision of
the Agreement may be amended or waived 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.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
1. Waiver. Acting in accordance with Section 1.1 of the Agreement, the
undersigned hereby waive their Piggyback Registration rights pursuant to Section
2.3 of the Agreement, which rights arise in connection with the Offering.
2. Amendment. Acting in accordance with Section 1.1 of the Agreement,
Section 2.1(f) is hereby amended and restated in its entirety as follows:
"(f) The term "Qualified Public Offering" means (i) 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 (an "IPO"), 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 (ii) an
IPO which results in aggregate cash proceeds (prior to underwriters'
commissions and expenses) to the Company and any selling stockholder of
at least $30,000,000, which has a public offering price of not less
than $3.75 per share (as appropriately adjusted for stock splits,
combinations, reclassifications and the like) and which closes on or
before January 31, 1999."
3. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
4. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import, and each reference in the other
documents entered into in connection with the Agreement, shall mean and be a
reference to the Agreement, as amended hereby. Except as specifically amended
above, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
5. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
6. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
2
<PAGE>
[SIGNATURES BEGIN ON THE NEXT PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 4 to the Registration Rights Agreement on the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-----------------------------------
Name: Daniel M. Clarke
Title: Senior Vice President, Chief
Financial Officer, Treasurer
and Secretary
Management Persons:
- ---------------------------------------
Gideon I. Gartner
- ---------------------------------------
David L. Gilmour
Holders of Registrable Securities:
Name of Stockholder (print):
- ---------------------------------------
By:
-----------------------------------
Name:
Title:
4
<PAGE>
AMENDMENT NO. 1
TO
CO-SALE AND STOCK RESTRICTION AGREEMENT
This Amendment No. 1 dated December 12, 1996 (the "Amendment") to the
Co-Sale and Stock Restriction Agreement dated November 13, 1995 among Giga
Information Group, Inc., a Delaware corporation (the "Corporation"), Gideon
Gartner and the holders of Series B Preferred Stock, $.001 par value, signatory
thereto (the "Stockholders"), is entered into by the Corporation, Gideon Gartner
and the Stockholders. Except as set forth below, the Agreement shall remain in
full force and effect. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to the Agreement. Acting in accordance with Section 7.2
of the Agreement, the undersigned hereby consent to an amendment to the
Agreement whereby Pomona Capital II, L.P., Baupost Limited Partnership 1983 C-1,
Wheatley Partners, L.P., Wheatley Foreign Partners, L.P., Charles O. Rossotti
Charitable Remainder Trust, Alfred University, Foundation Partners, Tampsco II
Partnership and Rochester Institute of Technology (collectively, the Additional
Series B Investors") will be made parties to the agreement such that (i) the
Additional Series B Investors will be deemed "Stockholders," as such term is
defined in the Agreement, subject to all the terms and conditions applicable to
Stockholders set forth therein and (ii) all of the shares of Series B Preferred
Stock held of record by the Additional Series B Investors will constitute
"Preferred Stock," as such term is defined in the Agreement, subject to all the
terms and conditions applicable to Preferred Stock set forth herein.
2. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
3. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in the other
documents entered
<PAGE>
into in connection with the Agreement, shall mean and be a reference to the
Agreement, as amended hereby. Except as specifically amended above, the
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
4. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
5. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF the parties hereto have executed this Amendment on
the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
ACORN INVESTMENT TRUST,
Series Designated Acorn Fund
By:
-----------------------------------
Title:
-----------------------------------
2
<PAGE>
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
amended hereby. Except as specifically amended above, the Agreement shall remain
in full force and effect and is hereby ratified and confirmed.
4. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
5. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF the parties hereto have executed this Amendment on
the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-----------------------------------
Title:
-----------------------------------
ACORN INVESTMENT TRUST,
Series Designated Acorn Fund
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
2
<PAGE>
amended hereby. Except as specifically amended above, the Agreement shall remain
in full force and effect and is hereby ratified and confirmed.
4. This Amendment shall be governed by the laws of the State of New
York, notwithstanding the conflict-of-law doctrines of New York or any other
jurisdiction to the contrary.
5. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF the parties hereto have executed this Amendment on
the date first above written.
GIGA INFORMATION GROUP, INC.
By:
-----------------------------------
Title:
-----------------------------------
ACORN INVESTMENT TRUST,
Series Designated Acorn Fund
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
2
<PAGE>
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS T.E. PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
SG PARTNERS, L.P.
by S(squared) Technology Corporation, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS T.E. PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
SG PARTNERS, L.P.
by S(squared) Technology Corporation, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS T.E. PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
SG PARTNERS, L.P.
by S(squared) Technology Corporation, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS T.E. PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
SG PARTNERS, L.P.
by S(squared) Technology Corporation, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
21ST CENTURY COMMUNICATION FOREIGN PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
21ST CENTURY COMMUNICATIONS T.E. PARTNERS, L.P.
by Infomedia Associates, Ltd., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
WHEATLEY FOREIGN PARTNERS, L.P.
By:
-----------------------------------
Title:
-----------------------------------
SG PARTNERS, L.P.
by S(squared) Technology Corporation, its General Partner
10
By:
-----------------------------------
Title:
-----------------------------------
3
<PAGE>
CORE TECHNOLOGY FUND, INC.
By:
-----------------------------------
Title:
-----------------------------------
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
-----------------------------------
Title:
-----------------------------------
ALFRED UNIVERSITY
By:
-----------------------------------
Title:
-----------------------------------
FOUNDATION PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
TAMPSCO II PARTNERSHIP
By:
-----------------------------------
Title:
-----------------------------------
4
<PAGE>
CORE TECHNOLOGY FUND, INC.
By:
-----------------------------------
Title:
-----------------------------------
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
-----------------------------------
Title:
-----------------------------------
ALFRED UNIVERSITY
By:
-----------------------------------
Title:
-----------------------------------
FOUNDATION PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
TAMPSCO II PARTNERSHIP
By:
-----------------------------------
Title:
-----------------------------------
4
<PAGE>
CORE TECHNOLOGY FUND, INC.
By:
-----------------------------------
Title:
-----------------------------------
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
-----------------------------------
Title:
-----------------------------------
ALFRED UNIVERSITY
By:
-----------------------------------
Title:
-----------------------------------
FOUNDATION PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
TAMPSCO II PARTNERSHIP
By:
-----------------------------------
Title:
-----------------------------------
4
<PAGE>
CORE TECHNOLOGY FUND, INC.
By:
-----------------------------------
Title:
-----------------------------------
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
-----------------------------------
Title:
-----------------------------------
ALFRED UNIVERSITY
By:
-----------------------------------
Title:
-----------------------------------
FOUNDATION PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
TAMPSCO II PARTNERSHIP
By:
-----------------------------------
Title:
-----------------------------------
4
<PAGE>
CORE TECHNOLOGY FUND, INC.
By:
Title:
CHARLES O. ROSSOTTI CHARITABLE
REMAINDER UNITRUST
By:
-----------------------------------
Title:
-----------------------------------
ALFRED UNIVERSITY
By:
-----------------------------------
Title:
-----------------------------------
FOUNDATION PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
TAMPSCO II PARTNERSHIP
By:
-----------------------------------
Title:
-----------------------------------
4
<PAGE>
ROCHESTER INSTITUTE OF TECHNOLOGY
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS, L.P.
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS II, L.P.
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
HAUSSMAN HOLDINGS
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
QUOTA FUND N.V.
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
5
<PAGE>
MONTGOMERY SMALL CAP PARTNERS, L.P.
by Montgomery Asset Management, L.P., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS II, L.P.
by Keith High, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
HAUSSMAN HOLDINGS
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
QUOTA FUND N.V.
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
NOSROB INVESTMENTS LTD.
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
5
<PAGE>
MONTGOMERY SMALL CAP PARTNERS, L.P.
by Montgomery Asset Management L.P., its General Partner
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS II, L.P.
by Keith High, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
HAUSSMANN HOLDINGS
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
QUOTA FUND N.V.
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
NOSROB INVESTMENTS LTD.
by Montgomery Asset Management, L.P., its attorney-in-fact
By:
-----------------------------------
Title:
-----------------------------------
5
<PAGE>
MONTGOMERY SMALL CAP PARTNERS III, L.P.
by Keith High, its General Partner
By:
-----------------------------------
Title:
-----------------------------------
POMONA CAPITAL II, L.P.
By:
-----------------------------------
Title:
-----------------------------------
BAUPOST LIMITED PARTNERSHIP 1983 C-1
By:
-----------------------------------
Title:
-----------------------------------
6
<PAGE>
NOSROB INVESTMENTS LTD.
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS III, L.P.
by Montgomery Asset Management L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
POMONA CAPITAL II, L.P.
By:
-----------------------------------
Title:
-----------------------------------
BAUPOST LIMITED PARTNERSHIP 1983 C-1
By:
-----------------------------------
Title:
-----------------------------------
6
<PAGE>
NOSROB INVESTMENTS LTD.
by Montgomery Asset Management, L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
MONTGOMERY SMALL CAP PARTNERS III, L.P.
by Montgomery Asset Management L.P., its investment advisor
By:
-----------------------------------
Title:
-----------------------------------
POMONA CAPITAL II, L.P.
By:
-----------------------------------
Title:
-----------------------------------
BAUPOST LIMITED PARTNERSHIP 1983 C-1
By:
-----------------------------------
Title:
-----------------------------------
6
<PAGE>
KENSINGTON PARTNERS
By:
-----------------------------------
Title:
-----------------------------------
7
<PAGE>
Exhibit 10.7(c)
AMENDMENT NO. 2
TO
CO-SALE AND STOCK RESTRICTION AGREEMENT
This Amendment No. 2 dated May 9, 1997 (the "Amendment") to the Co-Sale
and Stock Restriction Agreement dated November 13, 1995 among Giga Information
Group, Inc., a Delaware corporation (the "Corporation"), Gideon I. Gartner and
the holders of Series B Preferred Stock, $.001 par value (the "Stockholders"),
as amended (the "Agreement"), is entered into by the Corporation, Gideon I.
Gartner and the Stockholders. Except as set forth below, the Agreement shall
remain in full force and effect. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Agreement.
WHEREAS, the Corporation proposes to enter into a Series C Preferred
Stock and Warrant Purchase Agreement dated as of the date hereof (the "Series C
Stock and Warrant Purchase Agreement") with the purchasers named on Schedule I
thereto (the "Purchasers"), and
WHEREAS, it is a condition to the performance of the obligations by the
Purchasers under the Series C Stock and Warrant Purchase Agreement that the
Corporation, and the Stockholders enter into this Amendment for the purposes of
making the Purchasers parties to the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to the Agreement. Acting in accordance with Section
7.2 of the Agreement, the undersigned hereby consent to the following amendments
to the Agreement whereby the purchasers of shares of the Company's Series C
Preferred
<PAGE>
Stock, $.001 par value, pursuant to the Series C Preferred Stock and Warrant
Purchase Agreement of even date herewith (the "Series C Investors") will be made
parties to the Agreement such that (i) the Series C Investors will be deemed
"Stockholders," subject to all the terms and conditions applicable to
Stockholders set forth therein and (ii) all of the shares of Series C Preferred
Stock issued or issuable to the Series C Investors will constitute "Preferred
Stock," subject to all the terms and conditions applicable to Preferred Stock
set forth therein.
(a) The last two lines of the preamble paragraph of the
Agreement are hereby deleted and new lines inserted
in lieu thereto which read as follows:
"Delaware corporation (the "Company"), and
the undersigned holders of Series B
Preferred Stock and Series C Preferred Stock
(the "Stockholders")"; and
(b) The definition of "Preferred Stock" set forth in
Section 1(b) of the Agreement is hereby deleted and a
new definition is inserted in lieu thereof which
reads as follows:
"Preferred Stock" shall mean the Company's
outstanding Series B Preferred Stock, $.001
par value, and Series C Preferred Stock,
$.001 par value."
(c) Section 7.6 is hereby deleted in its entirety and a
new Section 7.6 is added in lieu thereof which reads
as follows:
"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
2
<PAGE>
or five days after deposit in the United States mail,
by registered or certified mail, postage prepaid and
properly addressed to the party to be notified (a) in
the case of Stockholders, at such Stockholder's
respective address furnished to the Company and set
forth in the stock record books of the Company, (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."
2. The Agreement, as supplemented and modified by this Amendment,
together with the other writings referred to in the Agreement or delivered
pursuant thereto which form a part thereof, contain the entire agreement among
the parties with respect to the subject matter thereof and amend, restate and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
3. Upon the effectiveness of this Amendment, on and after the
date hereof, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in the other
documents entered into in connection with the Agreement, shall mean and be a
reference to the Agreement, as amended hereby. Except as specifically amended
above, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
4. This Amendment shall be governed by the laws of the State of
New York, notwithstanding the conflict-of-law
3
<PAGE>
doctrines of New York or any other jurisdiction to the
contrary.
5. This Amendment may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
[Remainder of Page Left Blank Intentionally]
4
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
IN WITNESS WHEREOF the parties hereto have executed this Amendment No.
2 to Co-Sale and Stock Restriction Agreement on the date first above written.
GIGA INFORMATION GROUP, INC.
By:
---------------------------------------------
Title:
-------------------------------------------
Series B Preferred Stockholders:
21st Century Communications Partners, L.P.
By:
---------------------------------------------
Name:
Title:
21st Century Communications T-E Partners, L.P.
By:
---------------------------------------------
Name:
Title:
21st Century Communications Foreign Partners, L.P.
By:
---------------------------------------------
Name:
Title:
5
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Acorn Investment Trust, Series Designated Acom Fund
By:
---------------------------------------------
Name:
Title:
AKKAD
By:
---------------------------------------------
Name:
Title:
Alfred University
By:
---------------------------------------------
Name:
Title:
Baupost Limited Partnership 1983 C-1
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Adam J. Brownstein
- -------------------------------------------------
6
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Neill and Linda Brownstein
- -------------------------------------------------
Todd D. Brownstein
- -------------------------------------------------
Robert E. Cook
Core Technology Fund, Inc.
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Christopher J. Di Vecchio
- -------------------------------------------------
Martin P. DuRoss
- -------------------------------------------------
Harry Edelson
Edelson Technology Partners III
By:
---------------------------------------------
Name:
Title:
7
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
- -------------------------------------------------
Todd D. Brownsein
- -------------------------------------------------
Robert E. Cook
Core Technology Fund, Inc.
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Christopher J. Di Vecchio
- -------------------------------------------------
Martin P. DuRoss
- -------------------------------------------------
Harry Edelson
Edelson Technology Partners III
By:
---------------------------------------------
Name:
Title:
Executive Technology, L.P.
8
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
By:
---------------------------------------------
Name:
Title:
Foundation Partners
By:
---------------------------------------------
Name:
Title:
Gilo Family Partnership
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Will P. Gordon
- -------------------------------------------------
Jon D. Gruber
Gruber & McBaine International
By:
---------------------------------------------
Name:
Title:
-------------------------------------------------
9
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Emily G. Hamilton
Hare & Co.
By:
---------------------------------------------
Name:
Title:
Haussman Holdings
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Michael J. Kolesal
Lagunitas Partners, L.P.
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
John B. Landry
- -------------------------------------------------
Derek Lemke-von Ammon
10
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
The Matrix Technology Group N.V.
By:
---------------------------------------------
Name:
Title:
Merrill Lynch, Custodian for the
benefit of Richard Foudy, S.C.P.
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
J. Patterson McBaine
Montgomery Small Cap Partners, L.P.
By:
---------------------------------------------
Name:
Title:
Montgomery Small Cap Partners II, L.P.
By:
---------------------------------------------
Name:
Title:
Montgomery Small Cap Partners III, L.P.
11
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
By:
---------------------------------------------
Name:
Title:
Montsol Investments N.V.
By:
---------------------------------------------
Name:
Title:
Nosrob Investments Ltd.
By:
---------------------------------------------
Name:
Title:
Pomona Capital II, L.P.
By:
---------------------------------------------
Name:
Title:
Quota Fund N.V.
By:
---------------------------------------------
Name:
Title:
12
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Charles O. Rossotti Charitable
Remainder Unitrust
By:
---------------------------------------------
Name:
Title:
RRE Giga Investors, L.P.
By:
---------------------------------------------
Name:
Title:
RRE Giga Investors II, L.P.
By:
---------------------------------------------
Name:
Title:
- -------------------------------------------------
Cornelius T. Ryan
- -------------------------------------------------
Frederick G. Smith
Sci-Tech Investment Partners, L.P.
By:
---------------------------------------------
Name:
13
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Title:
S.G. Partners, L.P.
By:
---------------------------------------------
Name:
Title:
Tampsco II Partnership
By:
---------------------------------------------
Name:
Title:
Wheatley Foreign Partners, L.P.
By: Wheatley Partners LLC, General Partner
By:
---------------------------------------------
Name:
Title:
Wheatley Partners, L.P.
By: Wheatley Partners LLC, General Partner
By:
---------------------------------------------
Name:
Title:
-------------------------------------------------
14
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
Susan Tracy Wheeler
Yale University
By:
---------------------------------------------
Name:
Title:
Yale University Retirement Plan
for Staff Employees
By:
---------------------------------------------
Name:
Title:
15
<PAGE>
Amendment No. 2 to
Co-Sale and Stock
Restriction Agreement
The undersigned holders of Series C Preferred Stock of the Company
hereby agree that upon their execution of this Amendment the undersigned shall
become parties to the Agreement such that the undersigned shall be deemed
Stockholders subject to all the terms and conditions applicable to Stockholders
set forth therein and all of the shares of Series C Preferred Stock issued or
issuable to the undersigned shall constitute Preferred Stock, subject to all the
terms and conditions applicable to Preferred Stock set forth therein.
Pequot Private Equity Fund, L.P.
By:
---------------------------------------------
Name:
Title:
Pequot Offshore Private Equity Fund, Inc.
By:
---------------------------------------------
Name:
Title:
16
<PAGE>
Exhibit 10.11
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE BLUE SKY LAWS AND ARE SUBJECT TO CERTAIN INVESTMENT
REPRESENTATIONS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND SUCH APPLICABLE BLUE SKY LAWS OR AN EXEMPTION THEREFROM.
Warrant No. April 7, 1998
GIGA INFORMATION GROUP, INC.
(a Delaware Corporation)
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ____________________________
and permitted assigns ("Warrantholder"), is entitled to purchase
from Giga Information Group, Inc., a Delaware corporation (the "Company"), on
the terms and conditions contained herein, _______________________ (_______)
shares of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), at a price of One Dollar ($1.00) per share (the "Warrant Price").
This Common Stock Purchase Warrant (the "Warrant") is issued pursuant to a
Bridge Loan and Warrant Purchase Agreement (the "Loan and Warrant Purchase
Agreement"), dated April 7, 1998, among the Company and the Lender and is
subject to the terms and conditions of the Loan and Warrant Purchase
Agreement. This Warrant is being issued simultaneously with the Note issued
pursuant to the Loan and Warrant Purchase Agreement. Capitalized terms used
herein but not defined herein shall have the meaning assigned to them in the
Loan and Warrant Purchase Agreement.
1. Exercisability of Warrant/Conversion. This Warrant shall be exercisable
on the date of the IPO. The Note and this Warrant shall be automatically
converted on February 1, 1999 (unless the IPO has closed prior to such time)
into shares of Series D Preferred Stock of the Company ("Series D Preferred
Stock") and the number of Warrants as provided in the Note. If this Warrant is
converted on the Conversion Date as set forth in the Note this Warrant shall
be null and void.
2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange. This Warrant may be exercised by Warrantholder, in whole or in part,
by the surrender of this Warrant at the principal office of the Company at One
Longwater Circle, Norwell, MA 02061, and by (a) the payment to the Company of
the then applicable Warrant Price of the Common Stock being purchased, which
Warrant Price may be paid, in whole or in part, by the delivery of
<PAGE>
cash or check payable to the order of the Company or cancellation of
indebtedness (including accrued but unpaid interest) of the Company to the
Warrantholder evidenced by a promissory note issued pursuant to the Loan and
Warrant Purchase Agreement in an amount equal to such Warrant Price, and (b)
delivery to the Company of a notice of exercise executed by Warrantholder in
the form attached hereto as Attachments 1. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of Common
Stock so purchased shall be delivered to Warrantholder within a reasonable
time after the rights represented by this Warrant shall have been so
exercised, and unless this Warrant has expired, a new Warrant representing the
number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised or that may become exercisable after such
date, shall also be issued to Warrantholder within such time. In lieu of
exercising this Warrant for a specified number of shares of Common Stock (the
"Exercised Shares") and paying the aggregate Warrant Price therefor (the
"Exercise Price"), Warrantholder may elect, at any time prior to the
expiration of this Warrant, to receive a number of shares of Common Stock
equal to the number of Exercised Shares minus that number of shares of Common
Stock having an aggregate Fair Market Value equal to the Exercise Price.
Following such election, the number of shares of Common Stock covered by this
Warrant shall be deemed automatically reduced by the number of Exercised
Shares. For purposes of this Warrant, the "Fair Market Value" shall mean the
closing sales prices of Common Stock quoted on the Nasdaq National Market or,
if then traded on a national securities exchange, the average closing prices
of Common Stock on the principal national securities exchange on which listed
or, if quoted on the Nasdaq over-the-counter system, the average of the mean
of the closing bid and asked prices of Common Stock quoted on such system, in
any such case on each of the ten (10) trading days immediately preceding the
date of such conversion, or if not publicly traded, the fair market value per
share determined by the Board of Directors of the Company in good faith.
3. Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be fully paid and
nonassessable and free from all liens and encumbrances. The Company covenants
and agrees that, during the period within which the rights represented by this
Warrant may be exercised, it shall reserve for the purpose of the issuance
upon exercise of the purchase rights evidenced by this Warrant at least the
maximum number of shares of Common Stock as are issuable upon the exercise of
the rights represented by this Warrant.
4. Restrictions on Transferability of Securities; Compliance with
Securities Act.
(a) Restrictions on Transferability. This Warrant and the shares of
Common Stock issuable hereunder shall not be transferable except upon the
conditions specified in this Section 4, which conditions are intended to
insure compliance with the provisions of the Securities Act of 1933, as
amended (the "Securities Act"). Each holder of this Warrant or the Common
Stock issuable hereunder will cause any proposed transferee of the Warrant or
such Common Stock to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 4. Prior to the
Maturity Date of the Note issued
2.
<PAGE>
simultaneously herewith, this Warrant is subject to the transfer restrictions
set forth in the Note and may not be transferred except to the transferee of
such Note.
(b) Restrictive Legend. Each certificate representing (i) this
Warrant, (ii) the shares of Common Stock issued upon exercise of the Warrant
and (iii) any other securities issued in respect of such shares of Common
Stock upon any stock split, stock dividend or similar event (collectively, the
"Restricted Securities"), shall (unless otherwise permitted by the provisions
of Section 4(c) below or unless such securities have been registered under the
Securities Act) be imprinted with the following legend, in addition to any
legend required under applicable state securities laws:
THESE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
Upon request of a holder of a certificate with such legend imprinted
thereon, the Company shall remove the foregoing legend therefrom or, if
appropriate, issue to such holder a new certificate therefor free of any
transfer legend, if, with such request, the Company shall have received the
opinion referred to in Section 4(c) to the effect that any transfer by such
holder of the securities evidenced by such certificate will be exempt from the
registration and/or qualification requirements of, and that such legend is not
required in order to establish compliance with the Securities Act, and if
applicable, any state securities laws under which transfer restrictions on
such securities had been previously imposed.
(c) Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 4(c). Prior to any proposed
transfer of any Restricted Securities, the holder thereof shall give ten (10)
days prior written notice to the Company of such holder's intention to effect
such transfer. Each such notice shall describe the transferee and the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied by an opinion of counsel satisfactory to the Company to the effect
that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act and any applicable state
securities laws, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms
of the notice delivered by the holder to the Company. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 4(b) above.
5. Adjustment of Purchase Price and Number of Shares of Common Stock.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time as
follows:
3.
<PAGE>
(a) Consolidation, Merger, Reorganization, Etc. If the Company at
any time while this Warrant remains outstanding and unexpired shall
consolidate with or merge into any other corporation, reorganize or
reclassify, or in any manner change the securities then purchasable upon the
exercise of this Warrant, then upon consummation thereof this Warrant shall
thereafter represent the right of Warrantholder to receive, to the extent this
Warrant is exercisable as provided above in Section 1, in lieu of shares of
Common Stock, the cash or such number of securities to which Warrantholder
would have been entitled upon consummation thereof if Warrantholder had
exercised this Warrant immediately prior thereto. Upon any such event, an
appropriate adjustment shall also be made to the Warrant Price, if necessary
in the good faith judgment of the Board of Directors of the Company, to
preserve the economic benefit intended to be conferred upon Warrantholder in
accordance with its terms.
(b) Subdivision or Combination of Shares; Dividends and
Distribution of Common Stock. If the Company at any time while this Warrant
remains outstanding and unexpired shall subdivide or combine its Common Stock,
or take a record of the holders of its Common Stock for the purpose of
entitling them to receive without payment a dividend payable in, or other
distribution of, Common Stock or other securities, then the number of shares
of Common Stock purchasable hereunder shall be adjusted to that number
determined by multiplying the number of shares purchasable upon the exercise
of this Warrant immediately prior to such adjustment by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately after such subdivision, combination, dividend or
distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately prior to such subdivision,
combination, dividend or distribution. In addition, the Warrant Price shall be
adjusted to that price determined by multiplying the Warrant Price in effect
immediately prior to such subdivision, combination, dividend or distribution
by a fraction (x) the numerator of which shall be the total number of shares
of Common Stock outstanding immediately prior to such subdivision,
combination, dividend or distribution, and (y) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after
such subdivision, combination, dividend or distribution.
(c) Certificate as to Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 5, the Company at its expense shall
promptly compute such adjustment in accordance with the terms hereof and shall
(i) prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the number of shares of Common Stock and the
amount, if any, of other property that at the time would be received upon the
exercise of this Warrant and the Warrant Price in effect and (ii) cause a copy
of such statement to be mailed to Warrantholder promptly after the date when
the circumstances giving rise to the adjustment occurred.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder but in lieu of such fractional
shares, the Company shall make a cash payment therefor upon the basis of the
Fair Market Value of the Common Stock on the date of such exercise.
4.
<PAGE>
7. No Shareholder Rights. This Warrant, by itself and distinguished from
any securities purchased hereunder, shall not entitle Warrantholder to any of
the rights of a shareholder of the Company.
8. Registration Rights. Upon exercise of this Warrant, the Warrantholder
shall have and be entitled to exercise, together with all other holders of
registrable securities possessing registration rights under that certain
Registration Rights Agreement dated November 13, 1995, as amended, (the
"Registration Rights Agreement"), the rights of registration granted under the
Registration Rights Agreement (with respect to the Shares issued upon exercise
of this Warrant).
9. Notices. All notices and other communications from the Company to the
holder of this Warrant shall be delivered personally or mailed by first class
mail, postage prepaid, to the address furnished to the Company in writing by
the last holder of this Warrant who shall have furnished an address to the
Company in writing, and if mailed shall be deemed given three days after
deposit in the United States mail.
10. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York as applied to agreements
among New York residents entered into and to be performed entirely within New
York.
11. Expiration of Warrant. This Warrant shall terminate and expire and
shall no longer be exercisable on and after 5:00 P.M. on April 7, 2008.
5.
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed and issued by a
duly authorized officer of the Company as of this day of April, 1998.
GIGA INFORMATION GROUP, INC.
a Delaware corporation
By:
--------------------------
Name:
Title:
6.
<PAGE>
Attachment 1
NOTICE OF EXERCISE
TO: GIGA INFORMATION GROUP, INC.
1. The undersigned hereby elects to purchase shares of the
Common Stock of Giga Information Group, Inc. pursuant to the terms of the
attached Warrant, and [tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any][directs the Company to
issue shares, and to withhold shares in lieu of payment of the
Warrant Price, as described in Section 2 of the Warrant].
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------
(Name)
-----------------
(Address)
- ----------------------------------- ------------------------------------
(Date) (Name of Warrantholder)
By:
---------------------------------
Title:
------------------------------
1-I.
<PAGE>
Exhibit 10.13
AGREEMENT
This Agreement (the "Agreement"), is made as of February 1, 1998 (the
"Effective Date") between Giga Information Group, Inc. a Delaware corporation
having its principal place of business at One Longwater Circle, Norwell, MA
02061 ("Giga"), and David Gilmour, an individual having a place of residence at
26010 Torello Lane, Los Altos Hills, CA 94022 ("Gilmour").
Gilmour has conceived of ideas for the development and
commercialization of various forms of software related to the automatic capture
of knowledge through messaging systems (the "Software"), and has disclosed to
Giga and its directors his desire to pursue development and commercialization of
the Software. The parties to this Agreement believe that it is in the best
interests of each to permit Gilmour to pursue the development,
commercialization, distribution and other exploitation of the Software
("Activities") to:
1. Enable Giga to continue benefiting from Gilmour's efforts, experience and
knowledge of Giga;
2. Enable Gilmour to devote up to 75% of his time to the startup of a software
venture, Tacit Knowledge Systems ("Tacit"), that anticipates developing and
selling software products initially in the email and groupware segments of
the knowledge management software market;
3. Enable Giga to benefit from any commercial products developed by Tacit and
overall success of Tacit; and
4. Resolve all areas where this arrangement may cause a lack of clarity
regarding intellectual property right ownership, time allocation and equity
ownership.
In consideration of the mutual obligations, covenants and promises contained
herein, Giga and Gilmour agree as follows:
1. Financial Considerations
1.1 Gilmour holds a $400,000 note from Giga arising from Giga's acquisition
of ExperNet. Giga hereby agrees to redeem this note in cash as follows: (i) 1/2
upon the signing of this Agreement and (ii) 1/2 by April 15, 1998.
<PAGE>
1.2 Gilmour owns 80,000 shares of Giga Series A Preferred Stock convertible
into 320,000 shares of Giga common stock. Giga has the right to re-purchase a
portion of these shares if Gilmour leaves Giga voluntarily prior to July 6,
1998. Giga hereby forfeits its right to repurchase these shares.
1.3 Gilmour has been granted a Giga incentive Stock Option to purchase
120,000 shares of Giga common stock at $0.50 per share. As of January 31, 1998,
75,000 shares were vested and available for exercise. As of the Effective Date,
this option will change to a Non-qualified Stock Option and the remaining
unvested shares will vest at a revised rate of an additional 1/96 of the total
number of shares under the option each month thereafter. This option will
continue to vest as long as Gilmour is a consultant, as further defined below,
to the Company. No shares vested under the option will be subject to repurchase
by Giga. Except as modified by this Agreement, all other terms and conditions of
the option will remain in full force and effect.
1.4 Gilmour will be a consultant to the Company for at least six months
from the Effective Date, or such longer period as mutually agreed in writing. He
will devote approximately 25% of his time advising the Company as its Acting
Chief Research Officer or in any other appropriate capacity as Giga may
reasonably determine. For this consulting, Giga will pay Gilmour monthly at the
annualized rate of $50,000. Gilmour will at all times be an independent
contractor and Giga shall have no liability whatsoever for withholding,
collection or payment of income taxes or for taxes of any other nature on behalf
of Gilmour. It is specifically understood that Giga shall not, with respect to
Gilmour services, exercise or have the power to exercise such control over
Gilmour as would indicate or establish that a relationship of employer and
employee exists between Gilmour and Giga. Gilmour shall have full and complete
control over the manner and method of rendering his services hereunder.
1.5 Gilmour will continue to be a Director of Giga, at the pleasure of the
Board of Directors. However, as of the Effective Date, he will become a
non-employee Director.
1.6 Giga will receive a 7.5% equity ownership of Tacit Knowledge Systems
("Tacit"). The 7.5% ownership will be based on the fully diluted shares
outstanding after the formation of Tacit. Giga's ownership position will be
protected from dilution arising from shares purchased by Gilmour and/or his
family either (i) within the first 18 months from the initial formation of Tacit
or (ii) the date of Tacit's closing its first $1 million of financing from
investors other than Gilmour and/or his family, whichever comes first, without
additional consideration payable by Giga.
2
<PAGE>
Giga will have the right to participate in any future financings of Tacit, under
the same terms and conditions as the other participants, so that Giga's
percentage ownership of Tacit, on a fully diluted basis, does not drop below 7
1/2%. This right will terminate on the earlier of (i) the date Giga elects not
to participate in a Tacit financing to maintain it's ownership percentage, (ii)
the acquisition of a controlling interest in Tacit by another entity, or (iii)
an initial public offering by Tacit.
1.7 Giga will pay for Gilmour's medical benefits as long as they are
available to Gilmour under COBRA.
2. Software and Technology License for Giga
2.1 Tacit hereby grants Giga a royalty-free, irrevocable, worldwide license
to use, internally and as a value added component of its commercial information
services, any and all software, products and technologies, in object code form
only ("Licensed Software") Tacit develops during the three year period
commencing with the Effective Date. However, Tacit shall not be under any
obligation to provide Giga with any software or technology which has not yet
been released as a Tacit product while such software or technology is under
development by Tacit. This License may be extended, at Giga's option, for two
additional one-year periods for a fee of $50,000 per year. Except as provided in
this Agreement, Giga's rights in and use of the Licensed Software shall be bound
by the most favorable terms and conditions applicable to licensee under Tacit's
commercial software licenses.
2.2 Except for any dynamically downloaded software objects necessary for
end user access to the Giga services incorporating the Licensed Software, Giga
shall not have the right to sublicense, install, or distribute, any of the
Licensed Software to any third party or customer.
2.3 Any cost of modifying, supporting and integrating the Licensed Software
with Giga services, that may be incurred by Tacit at Giga's request, shall be
billed to Giga at Tacit's most favorable rates for such services. Tacit shall
not be under
any obligation to provide support for those portions of Licensed Software which
were never licensed commercially by Tacit to third parties.
2.4 Giga will provide reasonable support with respect to Tacit's alpha and
beta testing by being a test bed.
3
<PAGE>
2.5 During the term of the aforementioned license, Tacit will indemnify
Giga, and its officers, directors and employees against any claim that the use
of the Licensed Software infringes: (i) a patent, (ii) a copyright, (iii) a
trade secret or (iv) other property right. Tacit will pay resulting costs,
damages and attorney's fees finally awarded against Giga on the condition that:
(a) Giga notifies Tacit in writing promptly following Giga's receipt of any
such claim;
(b) Tacit has sole control of the defense, and all related
settlement negotiations for, any such claim; and
(c) Giga cooperates fully in the defense of, in the implementation of
remedies for, and furnishes all related evidence in its control
relating to, any such claim
Tacit is not liable for infringement claims based on (i) the combination,
operation or use of the Licensed Software with data or software not supplied or
authorized by Tacit; or (ii) modifications to the Licensed Software not
authorized by Tacit.
3. Intellectual Property
3.1 Exclusion. The parties agree that the Software shall not to constitute
a "Development" or "Proprietary Information" as such terms are defined in the
Invention and Non-Disclosure Agreement dated July 6, 1995 between Gilmour and
Giga (the "Invention Agreement"). To the extent any entity were to deem the
Software as Developments or Proprietary Information, Giga hereby waives and
disclaims any and all rights, title, and interest it may have in such
Developments or Proprietary Information, and furthermore agrees to assign to
Gilmour any and all rights, title and interest in such Software and Activities.
Giga acknowledges and agrees that all rights, title and interest in and to the
Software and Activities are the sole and exclusive property of Gilmour.
3.2 Use of Proprietary Information. Gilmour represents that it has no
intention to use any Proprietary Information in connection with the Activities,
with the exception of a de minimus amount of (i) facilities and equipment and
(ii) archival data used solely for the purpose of testing the Software. Giga
acknowledges that such de minimus use shall not in any way encumber Gilmour's
ownership of the Software. Gilmour acknowledges that such use will not impair
Giga's ownership of Proprietary Information.
4. Non-compete
4.1 Gilmour agrees that he shall not, directly or indirectly, either as a
consultant, employee, partner, officer, director or majority stockholder or in
any other capacity,
4
<PAGE>
accept employment with or render consulting services to the
following direct competitors of Giga or their affiliates: The Gartner Group,
Inc., META Group, Inc. or Forrester Research, Inc.
4.2 Gilmour agrees not to divert the business or patronage of any of the
current or Prospective Customers, clients, or accounts of Giga which were
contacted or serviced by Gilmour during the period of Gilmour's employment or
consulting. Giga agrees to support marketing by Tacit of Tacit's products to
Giga customers and Prospective Customers provided such marketing does not
adversely affect Giga's relationships with those customers. The term
"Prospective Customer" herein shall mean any organization which Giga has
actively solicited within twelve (12) months prior to the date of termination of
Gilmour's consulting arrangement with Giga.
4.3 Gilmour agrees not to recruit or assist others in recruiting any person
who is, or was within the preceding twelve (12) months, an employee of Giga,
without prior written consent of Giga.
4.4 This section 4 shall remain in effect for a period of one (1) year from
the date Gilmour voluntarily ends his consulting arrangement with Giga.
5. Representations
5.1 Giga agrees that Gilmour has made reasonable disclosure to Giga of his
plans regarding the Software. Gilmour agrees that statements made to Giga
concerning his plans regarding the Software have been made in good faith and are
complete and accurate to the best of his knowledge.
5.2 Giga represents that this Agreement has been approved by a majority of
the disinterested members of the Giga Board of Directors. Giga shall indemnify
Gilmour against any and all losses, claims, liabilities, or actions resulting
from a willful breech of the preceding representation.
6. General
6.1 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts.
6.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
and replaces all prior or
5
<PAGE>
contemporaneous understandings or agreements, written
or oral, regarding such subject matter. This Agreement may not be modified,
amended, rescinded, or waived, in whole or in part except by a written
instrument signed by the duly authorized representatives of both parties.
6.3 Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties' permitted successors and assigns
By signing below, each party agrees to the terms of this Agreement as of the
Effective Date. Once signed, any reproduction of this Agreement or an Order
under it made by reliable means (for example photocopy or facsimile) is
considered an original.
Giga Information Group, Inc.: David L. Gilmour:
By:
--------------------------- ------------------------------------------
(on his own behalf and on behalf of Tacit)
- -------------------------------
Print Name
- -------------------------------
Title
- ------------------------------- ------------------------------------------
Signing Date Signing Date
6
<PAGE>
Exhibit 10.14
AGREEMENT AND RELEASE
This Agreement and Release is made by and between Henry S. Givray
("You") and Giga Information Group, Inc. ("Giga") or the ("Company"). In
consideration of the mutual obligations and promises contained herein, You and
Giga agree as follows:
1. Consideration: The terms regarding your separation from the Company,
include: continuation of salary (excluding bonus except as set forth
below) at an annualized rate of $160,000 with welfare benefits,
electronic mail, Giga Web access, and voice mail (but excluding other
benefits not specified in this Agreement) through April 30, 1998.
Should you not gain new employment at an equivalent compensation and
benefit level before that time, the aforementioned salary and benefits
will be continued for an additional two (2) months. You agree to inform
us within one week of accepting such a position. You agreed to be
available for transition tasks that were mutually identified through
the end of 1997. Your active employment status ceases on November 5,
1997. Your 1997 bonus of $30,000 will be paid on or before February 15,
1998. Your unused vacation through October 30, 1997 will be paid on
January 15, 1998. An additional bonus of $5,000 will be paid on signing
this agreement. The current housing allowance was continued through the
end of 1997 and you may keep possession of one company laptop PC and
printer. Terms presented here are offered to you in consideration of
your execution of this Agreement and Release.
2. Stock Options: Your rights to exercise any vested options under
the Company's 1996 Stock Option Plan (the "Plan") will be determined
by the applicable provisions of the Plan. Vesting will continue
through your last
<PAGE>
day of employment considered to be November 5, 1997. As an exception to
policy, we will allow you to retain all option shares vested on or
before November 5, 1997.
3. Release of Claims: In consideration of Giga's payments and undertakings
contained in this Agreement and Release and except for any vested
interest in the Company's 401(k) Savings and Retirement Plan, and Stock
Option Plans, You hereby release and forever discharge, and covenant
not to sue or commence proceedings against, Giga, its subsidiaries or
affiliates and their respective officers, directors, employees, agents,
successors and assigns ("Releases"), from and with respect to any and
all claims, debts, demands, damages, actions and causes of action of
any kind whatsoever, based on facts or circumstances of which you have
present knowledge, which you now have, ever had, or may in the future
have, against such Releases, arising to the date of this Agreement and
Release, including, without limitation, those arising out of or in any
manner relating to your employment by Giga or the termination of such
employment, including, without limitation, any claim for reinstatement,
back or future pay, bonuses, commission, fringe benefits, medical
expenses, attorneys' fees and expenses, damages or consequential
damages, including but not limited to any claim, complaint, charge or
lawsuit under Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Age Discrimination in Employment Act of 1967,
the Equal Pay Act of 1963, the Employee Retirement Income Security Act
of 1974, the Rehabilitation Act of 1973, Executive Order 11246, the
Massachusetts Fair Employment Act, the Massachusetts Civil Rights Act,
the Massachusetts Equal Rights Act and any other state, federal or
municipal law statute, public policy, order or regulation affecting or
relating to the claims or rights of employees, including any and all
claims and suits in tort or contract. You hereby represent and warrant
to Giga that you have no present knowledge of
2
<PAGE>
any facts and circumstances that may give rise to a claim against Giga
or other Releases.
(b) With respect to any rights you may have under the Age
Discrimination in Employment Act of 1967, which rights are being
released under this Agreement and Release, you understand that you have
21 days to consider this Agreement and Release, which, if you choose to
sign this document before the 21-day period expires, you hereby waive;
that for a period of seven days following your execution of this
Agreement and Release you may revoke it and your release as to such
rights; that this Agreement and Release shall not become effective or
enforceable as to the release of such rights until this seven-day
revocation period has expired; and the Giga has no obligation to pay
any sums or provide any benefits referred to in this Agreement and
release, except those to which you are entitled under existing Giga
policy, until it becomes effective or enforceable.
4. Confidentiality and Non-Disparagement: You agree to keep as
confidential that the terms of this Agreement and Release and all facts
and circumstances associated therewith. In addition, you agree that you
will not act or assist any action to diminish or interfere with the
Company's relationship with its employees, clients, or prospective
clients, or the Company's goodwill.
5. Arrangement not to Compete: You agree that you shall not, through the
period ending october 31, 1998, directly or indirectly, either as an
employee, partner, officer, director or majority stockholder or in any
other capacity: accept similar employment with or render similar
services to any direct competitor of Giga in providing continuous
information services to information technology professionals (which
include the Gartner Group, Inc., META Group, Inc. and Forrester
Research, Inc.).
3
<PAGE>
6. Complete Agreement: You acknowledge that you have read and understood
this Agreement and Release and have had the opportunity to seek the
advice of your attorney upon request. This Agreement and Release sets
forth the entire agreement and understanding between you and Giga
concerning the matters specified above (but in no way limits your
obligations under any other agreement between you and the Company). It
may only be amended in writing signed by You and the Company.
7. This Agreement and Release is delivered to You by hand on January 7,
1998.
AGREED:
- ----------------------------------------
Henry S. Givray
Date:
-----------------------------------
Giga Information Group:
By:
-------------------------------------
Daniel M. Clarke
Senior Vice President and CFO
4
<PAGE>
Exhibit 10.15
AGREEMENT AND RELEASE
This Agreement and Release is made by and between Jacques Bouvard
("You") and Giga Information Group, Inc. ("Giga") or the ("Company"). In
consideration of the mutual obligations and promises contained herein, you and
Giga agree as follows:
1. Consideration: The terms regarding your mutually agreeable separation
from the Company, including: (1) continuation as an employee and of
salary at an annualized rate of $125,000 (excluding bonus except as set
forth below), welfare benefits, electronic mail, Giga Web access, and
voice mail (but excluding other benefits not specified in this
Agreement) through March 15, 1998, in connection with which you agree
to report on a daily basis to the Company's offices as requested by the
Company through October 15, 1997, but excluding approved vacation for
the period October 3, 1997 through October 9, 1997; (2) an annualized
bonus of up to $45,000 as determined by the Company, which shall in no
event be less than $30,000 and shall be payable on or before February
15, 1998; and (3) use of a MCI phone card on which you may incur total
charges of up to a maximum amount of $1,000 (you agree to pay any
charges in excess of that amount ) through March 15, 1998 or until the
maximum amount is reached, are offered to you in consideration of your
execution of this Agreement and Release. In addition, the Company shall
not exercise its right to repurchase any Shares of the Company's stock
acquired under the Company's 1996 Stock Option Plan (the "Plan") as set
forth in Section 7(a) of the Plan.
2. Stock Options: Your rights to exercise any vested options under the
Company's 1996 Stock Option Plan (the "Plan") will be determined by the
applicable provisions of that Plan. The Company acknowledges that as of
your last day of employment, March 15, 1998, you shall be vested with
the option to purchase 20,000 shares of stock pursuant to the Plan.
3. Release of Claims: In consideration of Giga's payments and undertakings
contained in this Agreement and Release and except for any vested
interest in the Company's 401(k) Savings and Retirement Plan, and 1995
Stock Option Plan, you hereby release and forever discharge, and
covenant not to sue or commence proceedings against, Giga, its
subsidiaries or affiliates and their respective officers, directors,
employees, agents, successors and assigns ("Releasees"), from and with
respect to any and all claims, debts, demands, damages, actions and
causes of action of any kind whatsoever, based on facts or
circumstances of which you have present knowledge, which you now have,
ever had, or
<PAGE>
may in the future have, against such Releasees, arising to the date of
this Agreement and Release, including, without limitation, those
arising out of or in any manner relating to your employment by Giga or
the termination of such employment, including, without limitation, any
claim for reinstatement, back or future pay, bonuses, commissions,
fringe benefits, medical expenses, attorneys' fees and expenses,
damages or consequential damages, including but not limited to any
claim, complaint, charge or lawsuit under Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, the Equal Pay Act of 1963, the Employee
Retirement Income Security Act of 1974, the Rehabilitation Act of 1973,
Executive Order 11246, the Massachusetts Fair Employment Act, the
Massachusetts Civil Rights Act, the Massachusetts Equal Rights Act and
any other state, federal or municipal law statute, public policy, order
or regulation affecting or relating to the claims or rights of
employees, including any and all claims and suits in tort or contract.
You hereby represent and warrant to Giga that you have no present
knowledge of any facts and circumstances that may give rise to a claim
against Giga or other Releasees.
(b) With respect to any rights you may have under the Age
Discrimination in Employment Act of 1967, which rights are being
released under this Agreement and Release, you understand that you have
21 days to consider this Agreement and Release, which, if you choose to
sign this document before the 21-day period expires, you hereby waive;
that for a period of seven days following your execution of this
Agreement and Release you may revoke it and your release as to such
rights; that this Agreement and Release shall not become effective or
enforceable as to the release of such rights until this seven-day
revocation period has expired; and that Giga has no obligation to pay
any sums or provide any benefits referred to in this Agreement and
release, except those to which you are entitled under existing Giga
policy, until it becomes effective or enforceable.
4. Confidentiality and Non-Disparagement: You agree to keep as
confidential that the terms of this Agreement and Release and all facts
and circumstances associated therewith. In addition, you agree that you
will not act or assist any action to diminish or interfere with the
Company's relationship with its employees, clients, or prospective
clients, or the Company's goodwill. Notwithstanding the foregoing, you
are permitted to share the details of this Agreement in confidence with
your attorney.
5. Arrangement Not to Compete: You agree that you shall not, during your
term of employment with Giga and throughout the period ending February
15, 1999, directly or indirectly, either as an employee, partner,
officer, director or majority stockholder or in any other capacity:
accept similar employment with or render similar services to any direct
competitor of Giga in providing continuous information services to
information
2
<PAGE>
technology professionals (which include the Gartner Group, Inc.,
META Group, Inc. and Forrester Research, Inc.).
6. Complete Agreement: You acknowledge that you have read and understood
this Agreement and Release and have had the opportunity to seek the
advice of your attorney upon request. This Agreement and Release sets
forth the entire agreement and understanding between you and Giga
concerning the matters specified above (but in no way limits your
obligations under any other agreement between you and the Company). It
may only be amended in writing signed by you and the Company.
7. This Agreement and Release is executed by both parties and delivered to
you by hand on October 2, 1997.
AGREED: By Giga Information Group:
_________________________________ ____________________________________
Jacques Bouvard Henry Givray
_________________________________ ____________________________________
Printed Name Date President
_________________________________ ____________________________________
Witness Date Date
3
<PAGE>
Exhibit 10.17(b)
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
<PAGE>
President & COO
Giga Information Group, Inc.
<PAGE>
Exhibit 10.20
GIGA INFORMATION GROUP, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to
promote the interests of Giga Information Group, Inc., a Delaware corporation,
by providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
This Plan serves as the successor to the Corporation's 1995
Stock Option Plan (the "Predecessor Plan"), and no further option grants will be
made under the Predecessor Plan from and after the date this Plan is adopted by
the Board (the "Effective Date"). All options outstanding under the Predecessor
Plan on the Effective Date are hereby incorporated into this Plan and will, be
treated as outstanding options under this Plan. However, each outstanding option
so incorporated will continue to be governed solely by the express terms and
conditions of the instrument evidencing such grant, and no provision of this
Plan will be deemed to affect or otherwise modify the rights or obligations of
the holders of the incorporated options with respect to their acquisition of
shares of Common Stock under those incorporated options.
Capitalized terms in this document have the meanings assigned
to those terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan is divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of
1.
<PAGE>
Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any
Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any option or stock issuance
thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-
employee members of the board of directors of any Parent or
Subsidiary, and
(iii) consultants who provide services to the Corporation
(or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants under the Option Grant Program, which eligible
persons are to receive option grants, the time or times when such option grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times at which each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding, and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuances, the time or times
2.
<PAGE>
when such issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued shares and
the consideration to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 5,000,000
shares after giving effect to a four-for-one split of the Company's Common
Stock. After giving effect to a four-for- one split of the Company's Common
Stock, this authorized share reserve is comprised of (i) the number of shares
that remained available for issuance, as of the Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders prior to the
Effective Date, including the shares subject to the outstanding options
incorporated into this Plan and any other share that would have been available
for future option grant under the Predecessor Plan as last approved by the
stockholders (750,000 shares in the aggregate), plus (ii) an increase of 500,000
shares, subject to stockholder approval subsequent to the Effective Date. To the
extent that one or more outstanding options under the Predecessor Plan that have
been incorporated into this Plan are subsequently exercised, the number of
shares issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan.
C. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan and (ii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive. In no event shall any such
adjustments be made in connection
3.
<PAGE>
with the conversion of one or more outstanding shares of the Corporation's
preferred stock into shares of Common Stock.
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section 1 of Article Four and
the documents evidencing the option, be payable in cash or check made payable to
the Corporation. Should the Common Stock be registered under Section 12(g) of
the 1934 Act at the time the option is exercised, then the exercise price may
also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the
4.
<PAGE>
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance
procedure is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Effect of Termination of Service. The following provisions shall
govern the exercise of any options held by the Optionee at the time of
cessation of Service or death:
(i) Should the Optionee cease to remain in Service for
any reason other than Disability or death, then the Optionee shall have
a period of three (3) months following the date of such cessation of
Service during which to exercise each outstanding option held by such
Optionee.
(ii) Should such Service terminate by reason of
Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee.
(iii) Should the Optionee die while holding one or more
outstanding options, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution shall have a period of twelve (12) months
following the date of the Optionee's death during which to exercise
each such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option
term.
(v) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if
5.
<PAGE>
earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which
the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding to the extent it is not exercisable for vested
shares on the date of such cessation of Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Unvested Shares. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, all or (at the discretion of the Corporation and with the consent of the
Optionee) any of those unvested shares. The terms upon which such repurchase
rights shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. [The Plan Administrator may not impose a vesting schedule upon
any option grant or any shares of Common Stock subject to the option which is
more restrictive than twenty percent (20%) per year vesting, with the initial
vesting to occur one (1) year after the option grant date. However, this minimum
vesting requirement shall not be applicable with respect to any option granted
to a Highly-Compensated Person.]
F. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
provide that it may be assigned in whole or in part during Optionee's lifetime
in accordance with the terms of a Qualified Domestic Relations Order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to such Qualified Domestic Relations
Order. The terms applicable to the assigned portion shall be the same as those
in effect for the option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non- Statutory Options
shall not be subject to the terms of this Section II.
6.
<PAGE>
A. Eligibility. Incentive Options may only be granted to Employees.
B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporation Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights shall
terminate automatically in the event of any Corporate Transaction, except to the
extent the repurchase rights are assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the aggregrate exercise price payable for such
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
in capital or business structure to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7.
<PAGE>
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Option Grant
Program and to grant in substitution therefor new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new option grant
date.
V. ADDITIONAL AUTHORITY
The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service or death
but also with respect to one or more additional installments in which
the Optionee would have vested under the option had the Optionee
continued in Service.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
8.
<PAGE>
1. The purchase price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The purchase price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the stock issuance date.
(ii) If the person to whom the stock issuance is made is
a 10% Stockholder, then the purchase price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share
of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I or Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for one or
both of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation,
or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Disability or other event
designated by the Plan Administrator is to have upon the vesting
schedule,
9.
<PAGE>
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement. The Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, beginning one (1) year
after the stock issuance date. However, this minimum vesting requirement shall
not be applicable with respect to any stock issued to a Highly-Compensated
Person.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
10.
<PAGE>
II. CORPORATE TRANSACTION
All of the outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically in the event of any Corporate
Transaction, except to the extent the repurchase rights are assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price or the purchase price for shares
issued to such person under the Plan by delivering a promissory note payable in
one or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee or Participant may not exceed the sum of (i) the aggregate option
exercise price or purchase price payable for the purchased shares (less the par
value of such shares) plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. This Plan is hereby adopted to serve as the successor to the
Predecessor Plan, but no option granted under the Plan may be exercised, and no
shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan. Subject to such limitation, the Plan Administrator may
grant options and issue shares under the Plan at any time after the effective
date of the Plan and before the date fixed herein for termination of the Plan.
11.
<PAGE>
B. The Plan shall terminate upon the earliest of (i) the expiration
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding under the
Plan shall continue to have full force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, the Board shall not, without the approval of the
Corporation's stockholders, (i) increase the maximum number of shares issuable
under the Plan, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted under the
Plan and shares of Common Stock may be issued under the Plan that are in each
instance in excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under the Plan are held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short-Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
12.
<PAGE>
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any options or upon the issuance or vesting of any shares
issued under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or (ii) under the Stock Issuance Program shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options granted
under it and the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under and each Participant in the Plan, unless such individual is a key Employee
whose duties in connection with the Corporation (or any Parent or Subsidiary)
assure such individual access to equivalent information.
13.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Code shall mean the Internal Revenue Code of 1986, as amended.
C. Committee shall mean a committee of two (2) or more Board
members appointed by the Board to exercise one or more administrative functions
under the Plan.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Transaction shall mean either of the following
stockholder- approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. Corporation shall mean Giga Information Group, Inc., a Delaware
corporation.
G. Disability shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances. Disability shall be
deemed to constitute Permanent Disability in the event that such Disability is
expected to result in death or has lasted or can be expected to last for a
continuous period of twelve (12) months or more.
H. Domestic Relations Order shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the Corporation
shall have received written notice of the option exercise.
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K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither
listed on any Stock Exchange nor traded on the Nasdaq National Market,
then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
L. Highly-Compensated Person shall mean an Optionee or Participant
(i) whose compensation per calendar year from the Corporation (or any
Parent or Subsidiary) equals or exceeds Sixty Thousand Dollars ($60,000) in
the aggregate and (ii) who has previously received one or more option grants or
stock issuances under the Plan.
M. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
N. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
O. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
P. Option Grant Program shall mean the option grant program in effect
under the Plan.
Q. Optionee shall mean any person to whom an option is granted
under the Option Grant Program.
R. Parent shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty
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percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
S. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
T. Plan shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.
U. Plan Administrator shall mean either the Board or the Committee,
to the extent the Committee is at the time responsible for the administration
of the Plan.
V. Qualified Domestic Relations Order shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
W. Service shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee,
a non-employee member of the board of directors or a consultant, except to
the extent otherwise specifically provided in the documents evidencing
the option grant or stock issuance.
X. Stock Exchange shall mean either the American Stock Exchange
or the New York Stock Exchange.
Y. Stock Issuance Agreement shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
Z. Stock Issuance Program shall mean the stock issuance program
in effect under the Plan.
AA. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
BB. 10% Stockholder shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
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Exhibit 10.21
GIGA INFORMATION GROUP, INC.
1996 STOCK OPTION PLAN
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Giga Information
Group, Inc. (the "Company") and its shareholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 shall apply only to Incentive Stock Options (as that
term is defined in the Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or Non-Statutory Options which are not
intended to meet the requirements of Section 422 of the Code ("Non-Statutory
Options").
(b) Administration.
(i) The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock ("Common Stock") and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements,
which need not be identical, and to make all other determinations which are, in
the judgment of the Board of Directors, necessary or desirable for the
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administration of the Plan. The Board of Directors may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan made in
good faith.
(ii) The Board of Directors may, to the full extent
permitted by or consistent with applicable laws or regulations and Section 3(b)
of this Plan delegate any or all of its powers under the Plan to a committee
(the "Committee") appointed by the Board of Directors, and if the Committee is
so appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan
which make express reference to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3"),
or which are required in order for certain option transactions to qualify for
exemption under Rule 16b-3, shall apply only to such persons as are required to
file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the
time of grant, employees, officers or directors of, or consultants or advisors
to, the Company; provided, that the class of employees to whom Incentive Stock
Options may be granted shall be limited to all employees of the Company. A
person who has been granted an option may, if he or she is otherwise eligible,
be granted additional options if the Board of Directors shall so determine.
Subject to adjustment as provided in Section 15 below, the maximum number of
shares with respect to which options may be granted to any employee under the
Plan shall not exceed 100,000 shares of common stock during any one year of the
Plan. For the purpose of calculating such maximum number, (a) an option shall
continue to be treated as outstanding notwithstanding its repricing,
cancellation or expiration and (b) the repricing of an outstanding option or the
issuance of a new option in substitution for a cancelled option shall be deemed
to constitute the grant of a new additional option separate from the original
grant of the option that is repriced or cancelled.
(b) Grant of Options to Directors and Officers. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors
or (ii) by a
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Committee of two or more directors having full authority to act in the matter,
each of whom shall be a "Non-Employee Director" within the meaning of Rule
16b-3, as such term is interpreted from time to time.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock which may be issued and sold under the Plan is
3,000,000 shares. If an option granted under the Plan shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; provided, that in no event shall such shares be
made available for issuance pursuant to exercise of Incentive Stock Options.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not inconsistent
with the Plan as may be approved by the Board of Directors.
Such option agreements may differ among recipients.
6. Purchase Price.
(a) General. Subject to Section 3(b), the purchase price per share
of stock deliverable upon the exercise of an option shall be determined by the
Board of Directors, provided, however, that in the case of an Incentive Stock
Option, the exercise price shall not be less than 100% of the fair market value
of such stock, as determined by the Board of Directors, at the time of grant of
such option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan
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<PAGE>
and with applicable laws and regulations (including, without limitation, the
provisions of Regulation T promulgated by the Federal Reserve Board). The fair
market value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an option shall be
determined by the Board of Directors.
7. Option Period.
Each option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an Incentive Stock Option, such date shall not be later than ten years after
the date on which the option is granted and, in all cases, options shall be
subject to earlier termination as provided in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Incentive Stock Options.
Incentive Stock Options shall not be assignable or transferable by the
person to whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution, and, during the life of
the optionee, shall be exercisable only by the optionee. Non-Statutory Options
may be transferred, subject to any conditions and restrictions determined by the
Board of Directors and set forth in the applicable option agreement.
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
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(a) Express Designation. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10%, of the total combined
voting power of all classes of stock of the Company (after taking into account
the attribution of stock ownership rules of Section 424(d) of the Code), then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of
the fair market value of one share of Common Stock at the time of
grant; and
(ii) the option exercise period shall not exceed five
years from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her option,
employed by the Company except that:
(i) an Incentive Stock Option may be exercised within
the period of three months after the date the optionee ceases to be
an employee of the Company (or within such lesser period as may be
specified in the applicable option agreement), provided, that the
agreement with respect to such option may designate a longer exercise
period and that the exercise after such three- month period shall be
treated as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to be such
an employee, the Incentive Stock Option may be exercised by the
person to whom it is transferred by will or the laws of descent and
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distribution within the period of one year after the date of death (or
within such lesser period as may be specified in the applicable option
agreement); and
(iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of the Company, the Incentive Stock
Option may be exercised within the period of one year after the date
the optionee ceases to be such an employee because of such disability
(or within such lesser period as may be specified in the applicable
option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in
its sole discretion, include additional provisions in option agreements covering
options granted under the Plan, including without limitation restrictions on
transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange
for or guaranty loans or to transfer other property to optionees upon exercise
of options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in
its sole discretion, (i) accelerate the date or dates on which all or any
particular option or options granted under the Plan may be exercised or (ii)
extend the dates during which all, or any particular, option or options granted
under the Plan may be exercised.
13. General Restrictions.
(a) Investment Representations. The Company may require any person
to whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state
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<PAGE>
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other condition
is necessary as a condition of, or in connection with, the issuance or purchase
of shares thereunder, such option may not be exercised, in whole or in part,
unless such listing, registration, qualification, consent or approval, or
satisfaction of such condition shall have been effected or obtained on
conditions acceptable to the Board of Directors. Nothing herein shall be deemed
to require the Company to apply for or to obtain such listing, registration or
qualification, or to satisfy such condition.
14. Rights as a Shareholder.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
Adjustment Provisions for Recapitalization and Related Transactions.
(a) General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (x) the
maximum number and kind of shares reserved for issuance under the Plan, (y)
the number and kind of shares or other securities subject to any then
outstanding options under the Plan, and (z) the price for each share subject to
any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code.
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<PAGE>
(b) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Board of Directors, whose determination as
to what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale of
all or substantially all of the assets of the Company in which outstanding
shares of Common Stock are exchanged for securities, cash or other property of
any other corporation or business entity or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the
Plan in substitution for options held by employees of another corporation who
become employees of the Company, or a subsidiary of the Company, as the result
of a merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way
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with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the shareholders of the Company is required under Section 422 of the Code or
any successor provision with respect to Incentive Stock Options, or under Rule
16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify (i) the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code and (ii) the terms and
provisions of the Plan and of any outstanding option to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
20. Withholding.
(a) The Company shall have the right to deduct from payments of
any kind otherwise due to the optionee any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon
exercise of options under the Plan. Subject to the prior approval of the
Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii)
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by delivering to the Company shares of Common Stock already owned by the
optionee. The shares so delivered or withheld shall have a fair market value
equal to such withholding obligation. The fair market value of the shares used
to satisfy such withholding obligation shall be determined by the Company as of
the date that the amount of tax to be withheld is to be determined. An optionee
who has made an election pursuant to this Section 20(a) may only satisfy his or
her withholding obligation with shares of Common Stock which are not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting
Person, no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3 (unless it is intended that the transaction not qualify for exemption
under Rule 16b-3).
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted
by the Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option to
a particular person) unless and until such amendment shall have been approved by
the Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall
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terminate to the extent that such amendment was required to enable the Company
to grant such option to a particular optionee. Subject to this limitation,
options may be granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with
Section 16, the Plan shall terminate upon the close of business on the day next
preceding the tenth anniversary of the date of its adoption by the Board of
Directors. Options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on
August 28, 1996.
Adopted by the Stockholders in
September 17, 1996.
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