-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BlVBojwlQXeFtDYW4BQNIzzvA3v9RBNrA0W+d8KwxaZwPilrqkh1u5k7dSdLNyJ9 QUGtA50/NmNc+7oY10PvYw== /in/edgar/work/20000814/0000950135-00-003984/0000950135-00-003984.txt : 20000921 0000950135-00-003984.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950135-00-003984 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLAIRE CORP CENTRAL INDEX KEY: 0001016139 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 411812820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25265 FILM NUMBER: 696610 BUSINESS ADDRESS: STREET 1: ONE ALEWIFE CENTER 3RD FLOOR STREET 2: SUITE 552 CITY: CAMBRIDGE STATE: MA ZIP: 02140 BUSINESS PHONE: 6177612000 MAIL ADDRESS: STREET 1: FOLEY HOAG & ELIOT LLP STREET 2: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 e10-q.txt ALLAIRE CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 0-25265 --------------- ALLAIRE CORPORATION (Exact Name of Registrant as Specified in its Charter) DELAWARE 41-1830792 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 275 GROVE STREET, NEWTON, MASSACHUSETTS 02466 (Address of Principal Executive Offices) (Zip Code) (617) 219-2000 (Registrant's Telephone Number, Including Area Code) ONE ALEWIFE CENTER CAMBRIDGE, MA 02140 (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: TITLE OF CLASS SHARES OUTSTANDING AT JULY 31, 2000 -------------- ----------------------------------- Common Stock, $.01 par value............... 27,247,402 2 ALLAIRE CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet as of June 30, 2000 and December 31, 1999............................ 3 Consolidated Statement of Operations for the Three and Six Months Ended June 30, 2000 and 1999.. 4 Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2000 and 1999........... 5 Notes to Unaudited Consolidated Financial Statements............................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................... 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders............................................. 14 Item 6. Exhibits and Reports on Form 8-K................................................................ 14 Signatures................................................................................................ 15 Exhibit Index............................................................................................. 15
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLAIRE CORPORATION CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) ASSETS
JUNE 30, DECEMBER 31, 2000 1999 ---------- --------- Current assets: Cash and cash equivalents............................................................................ $ 44,583 $106,624 Short-term investments............................................................................... 83,221 12,405 Investment in marketable securities.................................................................. 6,730 -- Accounts receivable, net of allowance for doubtful accounts and returns of $998 and $701 at June 30, 2000 and December 31, 1999, respectively.................................................. 15,803 7,926 Prepaid expenses and other current assets............................................................ 1,579 1,028 --------- --------- Total current assets............................................................................ 151,916 127,983 Property and equipment, net.......................................................................... 8,713 4,948 Goodwill and other intangibles, net.................................................................. 4,914 584 Other assets......................................................................................... 2,402 25 --------- --------- TOTAL ASSETS....................................................................................... $ 167,945 $ 133,540 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of capital lease obligations......................................................... $ 21 $ 159 Current portion of notes payable..................................................................... 526 488 Accounts payable..................................................................................... 4,502 3,358 Accrued expenses..................................................................................... 14,251 8,536 Accrued employee compensation and benefits........................................................... 7,466 6,591 Deferred revenue..................................................................................... 25,544 11,937 --------- --------- Total current liabilities....................................................................... 52,310 31,069 Notes payable........................................................................................... 273 547 --------- --------- TOTAL LIABILITIES............................................................................... 52,583 31,616 --------- --------- Stockholders' equity Preferred stock, $.01 par value; Authorized: 5,000,000 shares at June 30, 2000 and December 31, 1999 -- -- Common stock, $.01 par value; Authorized: 100,000,000 shares at June 30, 2000 and 35,000,000 shares at December 31, 1999 Issued and outstanding: 27,267,727 shares issued and 27,234,507 shares outstanding at June 30, 2000 and 26,849,532 issued and 26,816,312 outstanding at December 31, 1999.................. 273 268 Additional paid-in capital......................................................................... 142,449 139,050 Accumulated deficit................................................................................ (33,970) (36,746) Unrealized gain on marketable securities........................................................... 7,125 -- Deferred compensation.............................................................................. (505) (638) Stock subscriptions receivable..................................................................... (10) (10) --------- --------- Total stockholders' equity.................................................................... 115,362 101,924 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................................... $ 167,945 $ 133,540 ========= =========
3 The accompanying notes are an integral part of these consolidated financial statements. 4 ALLAIRE CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 2000 1999 2000 1999 ------- ------- ------- ------- REVENUE: Software license fees...................................................... $28,326 $10,761 $50,806 $17,724 Services................................................................... 4,980 2,314 9,119 4,048 ------- ------- ------- ------- Total revenue......................................................... 33,306 13,075 59,925 21,772 ------- ------- ------- ------- COST OF REVENUE: Software license fees...................................................... 1,295 647 2,520 1,103 Services................................................................... 5,803 1,794 9,357 3,300 ------- ------- ------- ------- Total cost of revenue................................................. 7,098 2,441 11,877 4,403 ------- ------- ------- ------- GROSS PROFIT.................................................................... 26,208 10,634 48,048 17,369 ------- ------- ------- ------- OPERATING EXPENSES: Research and development................................................... 5,372 2,897 9,884 5,364 Sales and marketing........................................................ 15,936 6,795 29,985 12,461 General and administrative................................................. 3,862 1,606 7,261 3,043 Stock-based compensation................................................... 61 66 123 133 Amortization of goodwill and other intangibles............................. 319 -- 425 -- Merger costs............................................................... -- 2,700 -- 2,700 ------- ------- ------- ------- Total operating expenses.............................................. 25,550 14,064 47,678 23,701 ------- ------- ------- ------- INCOME (LOSS) FROM OPERATIONS................................................. 658 (3,430) 370 (6,332) Interest income, net....................................................... 1,722 517 3,331 803 ------- --- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES............................................. 2,380 (2,913) 3,701 (5,529) Income tax provision....................................................... 595 -- 925 -- ------- ------- ------- ------- NET INCOME (LOSS)............................................................. $ 1,785 $(2,913) $ 2,776 $(5,529) ------- -------- ------- -------- NET INCOME (LOSS) PER SHARE: Basic net income (loss) per share.......................................... $ 0.07 $ (0.13) $ 0.10 $ (0.26) Diluted net income (loss) per share........................................ 0.06 (0.13) 0.09 (0.26) Pro forma basic net loss per share......................................... (0.25) Pro forma diluted net loss per share....................................... (0.25) WEIGHTED AVERAGE SHARES: Shares used in computing basic net income (loss) per share................. 27,105 22,744 26,997 20,899 Shares used in computing diluted net income (loss) per share............... 30,953 22,744 31,132 20,899 Shares used in computing pro forma basic net loss per share................ 21,831 Shares used in computing pro forma diluted net loss per share.............. 21,831
The accompanying notes are an integral part of these consolidated financial statements. 4 5 ALLAIRE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------- 2000 1999 --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Net income (loss) ................................................................................. $ 2,776 $ (5,529) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization .................................................................. 2,911 1,122 Compensation expense relating to the issuance of equity instruments ............................ 123 133 Tax benefit from stock options exercised ....................................................... 888 -- Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable .......................................................................... (7,877) (1,859) Prepaid expenses and other current assets .................................................... (551) 347 Other assets ................................................................................. 43 (1) Accounts payable ............................................................................. 1,144 (1,220) Accrued expenses ............................................................................. 6,590 3,351 Deferred revenue ............................................................................. 13,607 3,428 --------- --------- Total adjustments ............................................................................ 16,878 5,301 --------- --------- Net cash provided by (used for) operating activities ......................................... 19,654 (228) --------- --------- Cash flows from investing activities: Purchases of short-term investments ............................................................... (209,348) (33,971) Sales of short-term investments ................................................................... 138,532 496 Purchase of Open Sesame ........................................................................... (5,125) -- Purchases of property and equipment ............................................................... (5,906) (1,441) Investment in partners ............................................................................ (2,000) -- --------- --------- Net cash used for investing activities ....................................................... (83,847) (34,916) Cash flows from financing activities: Principal payments on capital lease obligations ................................................... (138) (167) Principal payments on promissory notes ............................................................ -- (1,500) Principal payments on notes payable ............................................................... (236) (1,346) Proceeds from sale of common stock, net of issuance costs ......................................... 2,526 54,426 Payment received on stock subscription receivable ................................................. -- 16 --------- --------- Net cash provided by financing activities .................................................... 2,152 51,429 --------- --------- Net increase (decrease) in cash and cash equivalents ................................................ (62,041) 16,285 Cash and cash equivalents, beginning of period ...................................................... 106,624 3,247 --------- --------- Cash and cash equivalents, end of period ............................................................ $ 44,583 $ 19,532 --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid for income taxes ........................................................................ $ 56 -- Cash paid for interest ............................................................................ 76 $ 206 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Unrealized gain on marketable securities .......................................................... $ 7,125 $ -- Conversion of Series A convertible preferred stock to common stock ................................ -- 751 Conversion of redeemable convertible preferred stock to common stock .............................. -- 12,673
5 The accompanying notes are an integral part of these consolidated financial statements. 6 ALLAIRE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Allaire Corporation and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Allaire Corporation and its subsidiaries are collectively referred to as the "Company" or "Allaire." Certain 1999 amounts have been reclassified to conform to the 2000 method of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the financial condition of the Company as of the date of the interim balance sheet. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and the Company's Registration Statement on Form S-1 filed on September 29, 1999, (Registration No. 333-86563). Net Income (Loss) Per Share Net income (loss) per share is computed under SFAS No. 128, "Earnings Per Share." Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, excluding shares of common stock subject to repurchase. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, including potential common shares from conversion of stock options and warrants. Pro forma basic and diluted net income (loss) per share have been calculated assuming the conversion of all outstanding shares of preferred stock into common stock, as if the shares had converted immediately upon their issuance. Options to purchase 641,540 and 216,519 shares for the second quarter and first six months of 2000 were outstanding but were not included in the computations of diluted EPS because the price of the options was greater than the average market price of the common stock for the period reported. 2. COMPREHENSIVE INCOME The components of comprehensive income are as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Net income (loss)....................................... $ 1,785 $(2,913) $ 2,776 $(5,529) Unrealized gain (loss) on marketable securities......... (7,125) -- 7,125 -- -------- ------- ------- ------- COMPREHENSIVE NET INCOME (LOSS)......................... $ (5,340) $(2,913) $ 9,901 $(5,529) ======== ======= ======= =======
3. ACQUISITION In March 2000, Allaire acquired Open Sesame from Bowne Internet Solutions for a total purchase price of $5.1 million. Open Sesame is profiling and personalization technology that delivers personalized customer interaction capabilities. Allaire accounted for this acquisition as a purchase. The excess of the purchase price over identified tangible and intangible assets was considered goodwill. Goodwill and other intangibles are amortized over four years. Pro forma financial statements have not been disclosed due to immateriality. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. The forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors set forth below in "Certain Factors that may Affect Future Results," that may cause the actual results, performance and achievements of Allaire to differ materially from those indicated by the forward-looking statements. ColdFusion is a U.S. registered trademark, and Allaire, Allaire Spectra, HomeSite and JRun are trademarks of Allaire Corporation. All other company names, brand names and product names are the property of their respective holder(s). OVERVIEW Allaire develops, markets and supports Web application servers, packaged applications and visual tools that enable the development and deployment of sophisticated e-business Web sites and applications. Allaire derives a majority of its revenue from its four primary products, Allaire Spectra, ColdFusion, JRun and HomeSite. Allaire's revenue is derived principally from license fees for software products and, to a lesser extent, fees for a range of services complementing these products, primarily training, consulting and technical support. Software license fees include sales of licenses for the then-current version of Allaire's products, product upgrades and subscriptions. Subscriptions entitle the customer to all new releases for a specific product during the subscription period, generally 12 to 24 months. Revenue from sales of licenses to use Allaire's software products and product upgrades is recognized upon delivery to customers, provided no significant post-delivery obligations or uncertainties remain and collection of the related receivable is probable. Revenue under arrangements where multiple products or services are sold together under one contract is allocated to each element based on their relative fair values, with these fair values being determined using the price charged when that element is sold separately. For agreements with specified upgrade rights, the revenue related to such upgrade rights is deferred until such time as the specified upgrade is delivered. Allaire provides most of its distributors with rights of return. An allowance for estimated future returns is recorded at the time revenue is recognized based on Allaire's historical experience. Revenue from subscription sales is recognized ratably over the term of the subscription period. Services revenue is recognized as services are rendered or ratably over the term of the service agreement. Allaire generates its software license revenue through direct sales of licenses to end users and through its indirect distribution channel. Direct revenue is generated by Allaire's direct sales force and via its Web site. The indirect distribution channel includes distributors, direct and original equipment manufacturer resellers, system integrators and Allaire Alliance members. Revenue generated by the indirect distribution channel accounted for 62% and 49% of total revenue for the three months ended June 30, 2000 and June 30, 1999, respectively. Revenue generated by the indirect distribution channel accounted for 62% and 49% of total revenue for the six months ended June 30, 2000 and June 30, 1999, respectively. Allaire anticipates that revenue derived from the indirect distribution channel will continue to represent a significant percentage of total revenue. Allaire primarily derives its international revenue through its indirect distribution channel. International revenue outside of North America accounted for 19% and 11% of total revenue for the three months ended June 30, 2000 and June 30, 1999, respectively, and 19% and 13% of total revenue for the six months ended June 30, 2000 and June 30, 1999, respectively. RESULTS OF OPERATIONS REVENUE Total revenue increased 155% from $13.1 million for the three months ended June 30, 1999 to $33.3 million for three months ended June 30, 2000. Total revenue increased 175% from $21.8 million for the six months ended June 30, 1999 to $59.9 million for the six months ended June 30, 2000. 7 8 Software License Fees. Revenue from software license fees increased 163% from $10.8 million for the three months ended June 30, 1999 to $28.3 million for the three months ended June 30, 2000. Revenue from software license fees increased 187% from $17.7 million for the six months ended June 30, 1999 to $50.8 million for the six months ended June 30, 2000. The increase was primarily due to an increase in the number of licenses sold to use the Company's Allaire Spectra, ColdFusion and JRun products. Allaire's first shipment of Allaire Spectra occurred in the fourth quarter of 1999. Increases in product prices associated with the release of new versions of Allaire's products in March 2000 also contributed to the growth in revenue. Services. Revenue from services increased 115% from $2.3 million for the three months ended June 30, 1999 to $5.0 million for the three months ended June 30, 2000. Revenue from services increased 125% from $4.0 million for the six months ended June 30, 1999 to $9.1 million for the six months ended June 30, 2000. The increase was primarily attributable to growth in training revenue resulting from an increase in Allaire's installed customer base. COST OF REVENUE Cost of Software License Fees. Cost of software license fees includes costs of product media duplication, manuals, packaging materials, licensed technology and fees paid to third party vendors and agents for order fulfillment. Cost of software license fees increased 100% from $647,000 for the three months ended June 30, 1999 to $1.3 million for the three months ended June 30, 2000. Cost of software license fees increased 128% from $1.1 million for the six months ended June 30, 1999 to $2.5 million for the six months ended June 30, 2000. The increase in absolute dollars was due to higher unit sales volume. The improvement in software license fees gross margins from 94% for the three months ended June 30, 1999 to 95% for the three months ended June 30, 2000 and 94% for the six months ended June 30, 1999 to 95% for the six months ended June 30, 2000, was primarily attributable to economies of scale achieved with higher sales volume in 2000. Cost of Services. Cost of services consists primarily of personnel costs. Cost of services increased 223% from $1.8 million for the three months ended June 30, 1999 to $5.8 million for the three months ended June 30, 2000. The increase in absolute dollars resulted primarily from the hiring of additional employees and the use of contract trainers to support increased customer demand for training classes, consulting and technical support. The decline in services gross margins from 22% for the three months ended June 30, 1999 to (17)% for the three months ended June 30, 2000 and from 18% for the six months ended June 30, 1999 to (3)% for the six months ended June 30, 2000 was primarily attributable to the investment in additional consulting and technical support resources to support Allaire Spectra, the Company's newly released packaged e-business application product. Overall gross margins are primarily affected by the mix of products licensed, sales through direct versus indirect distribution channels, software license fees revenue versus services revenue, and international revenue versus domestic revenue. Allaire typically realizes higher gross margins on direct sales relative to indirect distribution channel sales and higher gross margins on software license fees relative to services revenue. As services revenue or revenue derived through indirect distribution channels increase as a percentage of total revenue, Allaire's gross margins may be adversely affected. OPERATING EXPENSES Research and Development. Research and development expenses consist primarily of employee salaries, fees for outside consultants and related costs associated with the development of new products, the enhancement and localization of existing products, quality assurance and testing. Research and development expenses increased 85% from $2.9 million for the three months ended June 30, 1999 to $5.4 million for the three months ended June 30, 2000. Research and development expenses increased 84% from $5.4 million for the six months ended June 30, 1999 to $9.9 million for the six months ended June 30, 2000. The increase primarily resulted from salaries associated with newly hired development personnel and costs related to the localization of Allaire's products. Allaire anticipates that research and development expenses will continue to increase in absolute dollars. Sales and Marketing. Sales and marketing expenses consist primarily of employee salaries, commissions, and costs associated with marketing programs such as advertising, seminars, trade shows and new product launch activities. Sales and marketing expenses increased 135% from $6.8 million for the three months ended June 30, 1999 to $15.9 million for the three months ended June 30, 2000. Sales and marketing expenses increased 141% from $12.5 million for the six months ended June 30, 1999 to $30.0 million for the six months ended June 30, 2000. The increase was primarily attributable to costs associated with additional direct sales, pre-sales support and marketing personnel, and an increase in marketing programs, including advertising, and seminars. Allaire anticipates that 8 9 sales and marketing expenses will continue to increase in absolute dollars as it continues to expand its marketing programs and sales force to support its brand awareness, product launches, international expansion and increased focus on major account sales. General and Administrative. General and administrative expenses consist primarily of employee salaries and other personnel related costs for executive and financial personnel, as well as legal, accounting, recruiting and insurance costs. General and administrative expenses increased 140% from $1.6 million for the three months ended June 30, 1999 to $3.9 million for the three months ended June 30, 2000. General and administrative expenses increased 139% from $3.0 million for the six months ended June 30, 1999 to $7.3 million for the six months ended June 30, 2000. The increase was primarily attributable to salaries associated with newly hired personnel and related costs required to manage Allaire's growth and facilities expansion. Allaire expects that its general and administrative expenses will increase in absolute dollars as it continues to expand its staffing to support expanding facilities and operations. Stock-based Compensation. The amount that the estimated fair market value of Allaire's common stock exceeds the exercise price of stock options on the date of grant is recorded as deferred compensation and amortized to stock-based compensation expense as the options vest. Allaire recognized $66,000 of stock-based compensation for the three months ended June 30, 1999 compared to $61,000 of stock based compensation for the three months ended June 30, 2000. Allaire recognized $133,000 of stock-based compensation for the six months ended June 30, 1999 compared to $123,000 of stock based compensation for the six months ended June 30, 2000. Amortization of Goodwill and Other Intangibles. The amortization of goodwill and other intangibles of $319,000 for the three months ended June 30, 2000 and $425,000 for the six months ended June 30, 2000 related to the amortization of costs associated with the purchase of the Open Sesame technology from Bowne Internet Solutions in March 2000. Merger Costs. The merger costs of $2.7 million in the six months ended June 30, 1999 relate to the mergers with Bright Tiger and Live Software. The costs include professional fees, facility closings, severance packages and related costs associated with these acquisitions. INTEREST INCOME, NET Interest income, net of interest expense, increased 233% from $517,000 for the three months ended June 30, 1999 to $1.7 million for the three months ended June 30, 2000. Interest income, net of interest expense, increased 315% from $803,000 for the six months ended June 30, 1999 to $3.3 million for the six months ended June 30, 2000.The increase was due to interest income earned from the investment of the net cash proceeds from Allaire's initial public offering in January 1999 and follow-on public offering in September 1999. PROVISION FOR INCOME TAXES Allaire's effective tax rate for the second quarter and six months ended June 30, 2000 was 25% compared to a zero rate for the same periods in 1999. For the second quarter of 1999, Allaire incurred a net operating loss for which no tax benefit was recognized as a full valuation allowance was recorded for the related deferred tax asset since realization of the tax benefit was not sufficiently assured. The effective tax rate of 25% for 2000 is different from the Federal statutory rate of 35% due to the realization of the benefit of operating loss carryforwards from prior years that were not recognized as a deferred tax asset. Due to Allaire's continuing trend in positive earnings, Allaire reversed a portion of its valuation allowance related to the previously established deferred tax asset for which realization is considered more likely than not. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2000, Allaire had cash, cash equivalents and short-term investments of $127.8 million, up from $119.0 million at December 31, 1999. Cash provided by operating activities for the six months ended June 30, 2000 was $19.7 million, primarily related to increases in accrued expenses and deferred revenue and net income of $2.8 million, offset by an increase in accounts receivable. Cash used for 9 10 operating activities for the six months ended June 30, 1999 was $228,000 primarily related to a net loss of $5.5 million, partially offset by increases in deferred revenue and accrued expenses. Cash used for investing activities for the six months ended June 30, 2000 was $83.8 million, primarily related to net purchases of short-term investments. Cash used by investing activities for the six months ended June 30, 2000 was $34.9 million primarily related to the purchase of short term investments. Cash provided by financing activities for the six months ended June 30, 2000 was $2.2 million, primarily due to common stock issuances. Cash provided by financing activities for the six months ended June 30, 1999 was $51.4 million, primarily related to net proceeds from Allaire's initial public offering. As of June 30, 2000, Allaire's primary commitments consisted of obligations related to operating leases, $799,000 of notes payable under equipment lines and $21,000 of capital lease obligations. In March 2000, Allaire acquired Open Sesame from Bowne Internet Solutions for a total purchase price of $5.1 million. Allaire expects to experience significant growth in its operating expenses for the foreseeable future in order to execute its business plan, particularly research and development and sales and marketing expenses. As a result, Allaire anticipates that such operating expenses, as well as planned capital expenditures, will constitute a material use of its cash resources. In addition, Allaire may utilize cash resources to fund acquisitions or investments in complementary businesses, technologies or product lines. Allaire believes that its current cash and cash equivalents and short-term investments will be sufficient to meet its anticipated cash requirements for working capital and capital expenditures for the foreseeable future. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Allaire does not expect SFAS No. 133 to have a material affect on its financial position or results of operations. In March 2000, the Financial Accounting-Standard Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 to certain issues including: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for the exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 are applicable retroactively to specific events occurring after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's financial position or results of operations. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Allaire has substantial net losses and may not be profitable in the future. Allaire's limited operating history and the undeveloped nature of the market for Web development products make predicting future revenue and operating results difficult. Allaire has experienced substantial net losses in each fiscal year since its inception and, as of June 30, 2000, had an accumulated deficit of $34 million. These net losses and accumulated deficit resulted primarily from the significant costs incurred in the development of Allaire's products and in the preliminary establishment of its infrastructure. Although Allaire recorded a small profit for the quarters ended December 31, 1999, March 31, 2000 and June 30, 2000, it cannot be certain that Allaire will continue to be profitable. Disappointing quarterly revenue and operating results could cause the price of Allaire's common stock to fall. Allaire's quarterly revenue may fluctuate for several reasons, including: 10 11 - - The market for web application server and packaged e-business applications is in an early stage of development and it is therefore difficult to accurately predict customer demand; and - - The sales cycle for Allaire's products and services varies substantially from customer to customer and, if Allaire's average sales price continues to increase as expected, it expects the sales cycle to lengthen. As a result, Allaire may have difficulty determining whether and when it will receive license revenue from a particular customer. In addition, most of Allaire's expenses, such as employee compensation and rent, are relatively fixed. Allaire's expense levels are based, in part, on its expectations regarding future revenue increases. As a result, any shortfall in revenue in relation to Allaire's expectations could cause significant changes in its operating results from quarter to quarter and could result in quarterly losses. If Allaire's quarterly operating results fall below the expectations of investors or public market analysts, the price of Allaire's common stock could fall substantially. Allaire operates in highly competitive markets and may not be able to compete effectively. The web application server and packaged e-business applications market is intensely competitive and rapidly changing. Many of Allaire's current and potential competitors have longer operating histories and substantially greater financial, technical, marketing, distribution and other resources than Allaire does and therefore may be able to respond more quickly than Allaire can to new or changing opportunities, technologies, standards or customer requirements. In the portion of the market with the highest product prices, Allaire competes with large web and database platform companies that offer a variety of software products. Allaire also competes with a number of medium-sized and start-up companies that have introduced or that are developing web application servers and packaged e-business applications. In the middle range of the market where product prices are significantly lower, Allaire competes primarily against Microsoft. Allaire expects that additional competitors will enter the market with competing products as the size and visibility of the market opportunity increases. Increased competition could result in pricing pressures, reduced margins or the failure of Allaire's products to achieve or maintain market acceptance. If, in the future, a competitor chooses to bundle a competing web application server or packaged e-business application with other products, the demand for Allaire's products might be substantially reduced. In addition, new technologies will likely increase the competitive pressures that Allaire faces. The development of competing technologies by market participants or the emergence of new industry standards may adversely affect Allaire's competitive position. As a result of these and other factors, Allaire may not be able to compete effectively with current or future competitors, which would have a material adverse effect on its business, operating results and financial condition. Future success will depend on Allaire's ability to market and sell Allaire Spectra successfully. Allaire expects that its future financial performance will depend in part on sales of Allaire Spectra. Allaire began commercial shipments of Allaire Spectra in December 1999. Market acceptance of Allaire Spectra will depend on the market for packaged e-business applications and customer demand for the specific functionality of Allaire Spectra. If Allaire Spectra does not meet customer needs or expectations, for whatever reason, Allaire's reputation could be damaged, or it could be required to upgrade or enhance the product, which could be costly and time consuming. Allaire's failure to expand its sales force and distribution channels would adversely affect its revenue growth and financial condition. To increase its revenue, Allaire must increase the size of its sales force and the number of its indirect channel partners, including original equipment manufacturers, value-added resellers and systems integrators. A failure to do so could have a material adverse effect on Allaire's business, operating results and financial condition. There is intense competition for sales personnel in Allaire's business, and there can be no assurance that Allaire will be successful in attracting, integrating, motivating and retaining new sales personnel. Allaire's existing or future channel partners may choose to devote greater resources to marketing and supporting the products of other companies. In addition, Allaire will need to resolve potential conflicts among its sales force and channel partners. Allaire depends on a small number of distributors for a significant portion of its revenue. Allaire derives a substantial portion of its revenue from a small number of distributors. For the six months ended June 30, 2000, revenue from Allaire's indirect distribution channel accounted for 62% of total revenue and one distributor, Ingram Micro, accounted for 33% of total revenue. For the six months ended June 30, 1999, revenue from the indirect distribution channel accounted for 49% of Allaire's total revenue, and Ingram Micro accounted for 37% of total revenue. The loss of, or a reduction in orders from, Ingram Micro or any other significant distributor could have a material adverse effect on Allaire's business, operating results and financial condition. 11 12 Allaire may experience lost or delayed sales as its sales cycle lengthens. A longer sales cycle reduces Allaire's ability to forecast revenue levels and may result in lost sales. Any delay or loss in sales of Allaire's products could have a material adverse effect on its business, operating results and financial condition, and could cause operating results to vary significantly from quarter to quarter. As Allaire increases its sales and marketing focus on larger sales to businesses and other large organizations, it expects that increased executive-level involvement of information technology officers and other senior managers of its customers will be required. Potential large sales may be delayed, or lost altogether, because Allaire will have to provide a more comprehensive education to prospective customers regarding the use and benefits of its products. Allaire's customers' purchase decisions may be subject to delays over which Allaire may have little or no control. If Allaire is unable to continue licensing technology for its products from third parties, its product development efforts could be delayed. Allaire licenses technology that is incorporated into its products from third parties. The loss of access to this technology could result in delays in Allaire's development and introduction of new products or enhancements until equivalent or replacement technology could be accessed, if available, or developed internally, if feasible. These delays could have a material adverse effect on its business, operating results and financial condition. In light of the rapidly evolving nature of web technology and Allaire's strategy to pursue industry partnerships, Allaire believes that it will increasingly need to rely on technology from third party vendors, such as Microsoft, which may also be competitors. There can be no assurance that technology from others will continue to be available to Allaire on commercially reasonable terms, if at all. Allaire's failure to properly manage its growth could strain its resources and adversely affect its business. Allaire's failure to manage its rapid growth could have a material adverse effect on the quality of its products, its ability to retain key personnel and its business, operating results and financial condition. Allaire's revenue increased 175% for the six months ended June 30, 2000 from the same period in 1999. The number of Allaire's employees increased from 93 at January 1, 1998 to 509 at June 30, 2000. To manage future growth effectively Allaire must maintain and enhance its financial and accounting systems and controls, integrate new personnel and manage expanded operations. Allaire's business could be adversely affected if its products fail to perform properly. Software products as complex as Allaire's may contain undetected errors or "bugs," which result in product failures or security breaches or otherwise fail to perform in accordance with customer expectations. Errors in certain Allaire products have been detected after the release of the product. The occurrence of errors could result in loss of or delay in revenue, loss of market share, failure to achieve market acceptance, diversion of development resources, injury to Allaire's reputation, or damage to its efforts to build brand awareness, any of which could have a material adverse effect on its business, operating results and financial condition. In addition, any failure in a customer's web application developed and deployed with Allaire's products could result in a claim for substantial damages against Allaire, regardless of Allaire's responsibility for the failure. Although Allaire maintains general liability insurance, including coverage for errors and omissions, there can be no assurance that its existing coverage will continue to be available on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. Claims by Other Companies That Allaire Infringes Their Copyrights or Patents Could Adversely Affect Allaire's Financial Condition. If any of Allaire's products violate third party proprietary rights, Allaire may be required to reengineer these products or seek to obtain licenses from third parties to continue to offer them. Any efforts to reengineer Allaire's products or obtain licenses on commercially reasonable terms may not be successful, and, in any case, would substantially increase costs and have a material adverse effect on Allaire's business, operating results and financial condition. Allaire does not conduct comprehensive patent searches to determine whether the technology used in its products infringes patents held by third parties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. Although Allaire is generally indemnified against claims that third party technology that it licenses infringes the proprietary rights of others, this indemnification is not always available for all types of intellectual property rights (for example, patents may be excluded) and in some cases the scope of such indemnification is limited. Even if Allaire receives broad indemnification, third party indemnitors are not always well-capitalized and may not be able to indemnify Allaire in the event of infringement, resulting in substantial exposure to Allaire. There can be no assurance that infringement or invalidity claims arising from the incorporation of third party technology in Allaire's products, and claims for indemnification from customers resulting from these claims, will not be asserted or prosecuted against Allaire. These claims, even if not meritorious, could result in the expenditure of significant financial 12 13 and managerial resources in addition to potential product redevelopment costs and delays, all of which could materially adversely affect Allaire's business, operating results and financial condition. In addition, any claim of infringement could cause Allaire to incur substantial costs defending against the claim, even if the claim is invalid, and could distract Allaire's management from their business. A party making a claim also could secure a judgment that requires Allaire to pay substantial damages. A judgment could also include an injunction or other court order that could prevent Allaire from selling its products. Any of these events could have a material adverse effect on Allaire's business, operating results and financial condition. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of June 30, 2000, Allaire was exposed to market risks which primarily include changes in U.S. interest rates. Allaire maintains a significant portion of its cash and cash equivalents and short-term investments in financial instruments with purchased maturities of 12 months or less. Allaire does not hold derivative financial instruments in its investment portfolio. Allaire's cash equivalents and short-term investments consist of high-quality corporate and government debt. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. Due to the short duration of these financial instruments, an immediate increase in interest rates would not have a material effect on Allaire's financial condition or results of operations. 13 14 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Stockholders of Allaire was held on May 17, 2000. At that meeting, the stockholders elected Joseph J. Allaire, David J. Orfao, Jonathan A. Flint, John J. Gannon, Thomas A. Herring, Ronald G. Ward and W. Frank King III to serve as directors of Allaire, for a term expiring at the Annual Meeting of Stockholders of Allaire in 2001 or a special meeting in lieu thereof. The results of the votes to elect each of the directors were as follows: Number of Shares ------------------------ For Withheld ---------- -------- Joseph J. Allaire 20,453,497 127,719 Jonathan A. Flint 20,453,541 127,675 John J. Gannon 20,453,541 127,675 Thomas A. Herring 20,453,441 127,775 W. Frank King III 20,462,861 118,355 David J. Orfao 20,453,141 128,075 Ronald G. Ward 20,463,261 117,955 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 10.1 Sublease termination agreement between Allaire and New Boston Alewife Limited Partnership dated April 4, 2000 Exhibit 10.2 Sublease termination agreement between Allaire and The Center for Quality Management dated April 19, 2000 Exhibit 10.3 First lease amendment between Allaire and EOP - Riverside Project, L.L.C. dated May 31, 2000 Exhibit 10.4 Sublease agreement between Allaire and Nervewire Inc., dated February 14, 2000 Exhibit 10.5 1998 Incentive Stock Option Agreement for David J. Orfao Exhibit 10.6 1998 Non Statutory Employee Stock Option Agreement for David J. Orfao Exhibit 11 Statement re: Computation of Unaudited Net Income (Loss) Per Share and Pro Forma Net Income (Loss) Per Share Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: Allaire filed no reports on Form 8-K during the quarter ended June 30, 2000. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 11, 2000 ALLAIRE CORPORATION By: /s/ DAVID A. GERTH --------------------------------------------- DAVID A. GERTH VICE PRESIDENT, FINANCE AND OPERATIONS, TREASURER AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) EXHIBIT INDEX Exhibit 10.1 Sublease termination agreement between Allaire and New Boston Alewife Limited Partnership dated April 4, 2000 Exhibit 10.2 Sublease termination between Allaire and The Center for Quality Management dated April 19, 2000 Exhibit 10.3 First lease amendment between Allaire and EOP - Riverside Project, L.L.C. dated May 31, 2000 Exhibit 10.4 Sublease agreement between Allaire and Nervewire Inc., dated February 14, 2000 Exhibit 10.5 1998 Incentive Stock Option Agreement for David J. Orfao Exhibit 10.6 1998 Non Statutory Employee Stock Option Agreement for David J. Orfao Exhibit 11 Statement re: Computation of Unaudited Net Income (Loss) Per Share and Pro Forma Net Income (Loss) Per Share Exhibit 27 Financial Data Schedule 15 EX-10.1 2 ex10-1.txt SUBLEASE TERMINATION AGREEMENT 1 Exhibit 10.1 SUBLEASE TERMINATION AGREEMENT THIS LEASE TERMINATION AGREEMENT (the "AGREEMENT") made this 4th day of April, 2000 between NEW BOSTON ALEWIFE LIMITED PARTNERSHIP, with a principal place of business at One Longfellow Place, Suite 3612, Boston, Massachusetts 02114 ("LANDLORD") and ALLAIRE CORPORATION, with a principal mailing address of One Alewife Center, Cambridge, Massachusetts 02138 ("TENANT"). WHEREAS, pursuant to a lease dated October 1, 1997, as amended by a First Amendment of Lease dated September 28, 1998, (the lease as amended hereinafter referred to as the "LEASE") between Tenant and Landlord's predecessor-in-interest Robert Sorrentino and David R. Vickery, as Trustees of One Alewife Center Realty Trust, Tenant leases approximately 53,928 square feet of space (the "PREMISES") in a building known as One Alewife Center, Cambridge, (hereinafter called the "BUILDING"); WHEREAS, the interest of Robert Sorrentino and David R. Vickery, as Trustees of One Alewife Center Realty Trust under the Lease has been assigned to Landlord; WHEREAS, Landlord and Tenant now desire to terminate the Lease prior to the normal expiration date of the term thereof, but only in accordance with the terms and conditions of this Lease Termination Agreement; WHEREAS, Landlord is currently under negotiations with NetGenesis Corp. ("NETGENESIS") to enter a new lease for the Premises; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by both parties hereto, it is agreed as follows: 1. The Lease shall terminate on the date which is thirty (30) days from receipt of written notice from Tenant to Landlord of its intention to vacate the Premises, such termination date to be no earlier than July 1, 2000 or later than August 15, 2000 (hereinafter referred to as the "EFFECTIVE TERMINATION DATE"), and Tenant shall vacate the Premises and remove its goods and effects therefrom, and shall otherwise quit and surrender the Premises in a neat and clean condition and in good order, condition and repair, in the same condition as of the commencement date of the Lease or as put into during the term of the Lease, reasonable wear and tear and damage due to casualty excepted, all as required by the Lease and in addition, shall surrender to Landlord eight (8) two-ton supplemental air conditioning wall units, as more fully described in Exhibit A, in good order, condition and repair. Tenant hereby covenants that it will make no additions or alterations in the Premises after the execution hereof, without the prior written consent of Landlord. In the event that Tenant fails to deliver notice of termination as provided herein, the Effective Date of termination shall be August 15, 2000. 2. Tenant shall remain liable for the payment of all Basic Rent and Additional Rent and any and all sums due under the Lease through the Effective Termination Date and shall continue to perform all other terms, conditions and covenants 1 2 required to be performed by Tenant under or on account of the Lease, through and including the Effective Termination Date. Subsequent to the Effective Termination Date, Tenant's sole and exclusive liability under or on account of the Lease shall be only as expressly set forth hereinafter. 3. Upon the Effective Termination Date Tenant shall pay Landlord the sum of $253,248.63 (the "TERMINATION FEE"). 4. Except as to such rights, claims and obligations as may be created or otherwise preserved by this Agreement (including, without limitation, the obligation of Tenant to pay Rent and Additional Rent through the Effective Termination Date as provided in Paragraph 2 and the payment of the Termination Fee as provided in Paragraph 3), and except for indemnifications by Tenant and Landlord set forth in the Lease which expressly survive the expiration or termination of the Lease, on the Effective Termination Date, Landlord and Tenant each hereby releases, remises and forever discharges the other from (A) all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, and all claims and liabilities arising out of, connected with or incidental to the Lease or the Premises to the extent same relate to events or occurrences through the Effective Termination Date; and (B) the performance of the terms, covenants and conditions of the Lease accruing from and after the Effective Termination Date. Notwithstanding the foregoing, Landlord agrees to surrender the Letter of Credit and any cash security deposit being held by Landlord pursuant to the Lease to Tenant within fifteen (15) days after the Effective Termination Date, provided Tenant performs all of its obligations under the Lease and this Agreement. 5. This Lease Termination Agreement is expressly subject to the occurrence of, and/or strict compliance by Tenant and Landlord, the following conditions precedent: (a) approval by Fleet Bank N.A. mortgagee of Landlord for the transaction contemplated hereby; (b) the full and final execution and delivery of a lease for the Premises by and between Landlord and NetGenesis as tenant; and (c) the execution by Tenant and delivery to Landlord of this Agreement. In the event that all the conditions precedent as herein stated have not been satisfied by April 4, 2000, Landlord or Tenant shall have the right by written notice to the other party to terminate this Agreement prior to the date of satisfaction of all conditions precedent, in which case this Agreement shall be null and void and of no force and effect and the Lease shall continue in full force and effect and Tenant shall not be released from any of its obligations thereunder. 6. This Agreement is binding upon and shall inure to the benefit of the Landlord and Tenant, their respective agents, employees, representatives, officers, directors, divisions, subsidiaries, affiliates, assigns, heirs, successors-in-interest and shareholders. 7. All notices given hereunder shall be in writing and shall be sent by a national overnight delivery service with priority mailing, such as Federal Express, which provides proof of delivery, as follows: 2 3 (a) TO TENANT If prior to the Effective Termination Date: Allaire Corporation One Alewife Center Cambridge, Massachusetts 02140 Attn: Chief Financial Officer If on or after the Effective Termination Date: Allaire Corporation One Riverside Center Newton, Massachusetts 02464 Attn: Chief Financial Officer (b) TO LANDLORD: New Boston Alewife Limited Partnership One Longfellow Place, Suite 3612 Boston, Massachusetts 02114 8. The obligations contained herein on the part of Landlord are solely those of New Boston Alewife Limited Partnership and no partner, general or limited shall have any liability on account thereof. 9. This Lease Termination Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. [THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW] 3 4 IN WITNESS WHEREOF, the parties have set their hands and seals as of the date first written above. ALLAIRE CORPORATION By: /s/ David A. Gerth ------------------------------------------- David A. Gerth, its Chief Financial Officer and Vice President for Operations and Finance, duly authorized NEW BOSTON ALEWIFE LIMITED PARTNERSHIP By: New Boston Fund IV, Inc. Its General Partner By: /s/ Jerome L. Rappaport, Jr. ------------------------------------------- Jerome L. Rappaport, Jr. Its President 4 EX-10.2 3 ex10-2.txt SUBLEASE TERMINATION DATED APRIL 19,2000 1 Exhibit 10.2 SUBLEASE TERMINATION AGREEMENT THIS SUBLEASE TERMINATION AGREEMENT (the "AGREEMENT") made this 19th day of April, 2000, with THE CENTER FOR QUALITY MANAGEMENT with a principal place of business at One Alewife Center, Cambridge, Massachusetts ("SUBLESSOR") and ALLAIRE CORPORATION, with a principal mailing address of ("SUBLESSEE"). WHEREAS, pursuant to a lease dated January 24, 1996, (the "MASTER LEASE") between Sublessor as tenant and Robert Sorrentino and David R. Vickery, as Trustees of One Alewife Center, Sublessor leases approximately 8,854 square feet of space (the "MAIN PREMISES") in a building known as One Alewife Center, Cambridge (hereinafter called the "BUILDING"); WHEREAS, the interest of Robert Sorrentino and David R. Vickery, as Trustees of One Alewife Center under the Lease has been assigned to New Boston Alewife Limited Partnership ("LANDLORD"); WHEREAS, pursuant to a sublease dated January 28, 1999, (the "SUBLEASE") Sublessee subleases a portion of the Main Premises from Sublessor totaling approximately 4,020 square feet of space (the "SUBLEASED PREMISES") in the Building; WHEREAS, Sublessor and Sublessee now desire to terminate the Sublease prior to the normal expiration date of the term thereof, but only in accordance with the terms and conditions of this Sublease Termination Agreement. NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by both parties hereto, it is agreed as follows: 1. The Sublease shall terminate on the date which is thirty (30) days from receipt of written notice from Sublessee to Sublessor and Landlord of its intention to vacate the Subleased Premises, such date to be no earlier than July 1, 2000 or later than August 15, 2000 (hereinafter referred to as the "EFFECTIVE TERMINATION DATE"), and Sublessee shall vacate the Subleased Premises and remove its goods and effects therefrom, and shall otherwise quit and surrender the Subleased Premises in a neat and clean condition and in good order, condition and repair, in the same condition as of the commencement date of the Sublease, reasonable wear and tear and damage due to casualty excepted, all as required by the Sublease. 2. Sublessee shall remain liable for the payment of all Fixed Rent and Additional Rent and any and all sums due under the Sublease through the Effective Termination Date and shall continue to perform all other terms, conditions and covenants required to be performed by Sublessee under or on account of the Lease as amended, through and including the Effective Termination Date. Subsequent to the Effective Termination Date, Sublessee's sole and exclusive liability under or on account of the Lease as amended shall be only as expressly set forth hereinafter. 1 2 3. Except as to such rights or claims as may be created or otherwise preserved by this Agreement, and except for indemnifications by Sublessee and Sublessor set forth in the Sublease including the obligation of Sublessee to pay Fixed Rent and Additional Rent through the Effective Termination Date as provided in Paragraph 2, Sublessor and Sublessee each hereby releases, remises and forever discharges the other from all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, and all claims and liabilities arising out of, connected with or incidental to the Lease or the Premises to the extent same relate to events or occurrences prior to the Effective Termination Date. 4. This Sublease Termination Agreement is expressly subject to the occurrence of, and/or strict compliance by Sublessee and Sublessor, the following conditions precedent: (a)( approval by Fleet Bank N.A., mortgagee of Landlord for the transactions contemplated hereby; (b) the full and final execution and delivery of a lease for the Subleased Premises by and between Landlord and NetGenesis Corporation as tenant; (c) the execution by Sublessee and Sublessor of this Sublease Termination Agreement; and (d) the execution by Landlord and Sublessor of an Amendment to Lease whereby Sublessor partially terminates the Master Lease as pertains to the Subleased Premises. In the event that all of the conditions precedent as herein stated have not occurred by April 21, 2000, this Agreement shall be null and void and of no force and effect and the Sublease shall continue in full force and effect and Sublessee shall not be released from any of its obligations under the Sublease thereunder. After the Effective Termination Date, provided all conditions precedent have been met, Sublessor shall return to Sublessee any security deposit being held pursuant to the terms of the Sublease. 5. This Agreement is binding upon and shall inure to the benefit of the Sublessor and Sublessee, their respective agents, employees, representatives, officers, directors, divisions, subsidiaries, affiliates, assigns, heirs, successors-in-interest and shareholders. 6. All notices given hereunder shall be in writing and shall be sent by a national overnight delivery service with priority mailing, such as Federal Express, which provides proof of delivery, as follows: (A) TO SUBLESSOR: The Center for Quality Management One Alewife Center Cambridge, Massachusetts 02140 2 3 (B) TO SUBLESSEE: Allaire Corporation One Alewife Center Cambridge, Massachusetts 02140 (B) New Boston Alewife Road Limited Partnership One Longfellow Place, Suite 3612 Boston, Massachusetts 02114 8. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the Sublease. 9. This Sublease Termination Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have set their hands and seals as of the date first written above. SUBLESSOR THE CENTER FOR QUALITY MANAGEMENT BY /s/ Illegible ------------------------------- SUBLESSEE ALLAIRE CORPORATION BY /s/ David A. Gerth ------------------------------- 3 EX-10.3 4 ex10-3.txt FIRST LEASE AMENDMENT DATED MAY 31, 2000 1 Exhibit 10.3 FIRST AMENDMENT THIS FIRST AMENDMENT (the "Amendment") is made and entered into as of the 31st day of May, 2000, by and between EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE ("Tenant"). WITNESSETH A. WHEREAS, Landlord and Tenant are parties to that certain lease dated the 23rd day of November, 1999 (the "Lease") for space currently containing approximately 270,446 square feet, consisting of 223,300 square feet in One Riverside Center (sometimes referred to as the "One Riverside Center Premises") and 47,146 square feet in Two Riverside Center (sometimes referred to as the "Two Riverside Center Premises"), all as further described in the Lease; and B. WHEREAS, Tenant has requested that additional space containing approximately 78,014 rentable square feet consisting of the 1st and 4th floors of Three Riverside Center (as defined in the Lease) as shown on EXHIBITS A-5 AND A-6 hereto (the "Three Riverside Center Premises") be added to the original Premises and that the Lease be appropriately amended and Landlord is willing to do the same on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: I. PREMISES. Section 1.A.(ii) is amended to provide that the Premises are located entirely in One Riverside Center, Two Riverside Center and Three Riverside Center. In addition, Section I.C. of the Lease is hereby deleted in its entirety and replaced by the following Section I.C.: I.C. "Premises" shall mean (i) the area shown on EXHIBITS A, A-1, A-2, A-3 AND A-4 to the Lease and identified as Suites #1-100, #1-200, #1-300, #2-100, and #2-200 and (ii) the area shown on EXHIBITS A-5 AND A-6 hereto and identified as Suites #3-100 and #3-400. The Premises are located on floors one (1), two (2) and three (3) of One Riverside Center, floors one (1) and two (2) of Two Riverside Center and floors one (1) and four (4) of Three Riverside Center. The "Rentable Square Footage of the Premises" is deemed to be approximately 348,460 square feet, consisting of 223,300 square feet in One Riverside Center (sometimes referred to as the "One Riverside Center Premises") and 47,146 square feet in Two Riverside Center (sometimes referred to as the "Two Riverside Center Premises") and 78,014 square feet in Three Riverside Center (sometimes referred to as the Three Riverside Center Premises"). Landlord and Tenant acknowledge that Landlord has determined the location of the building management office on the first floor of Two Riverside Center as shown on EXHIBIT A-3 to the Lease. All corridors and restroom facilities located on floors one, two and three of One Riverside Center, floor two of Two Riverside Center, floor four of Three Riverside Center and any other floors leased by Tenant in their entirety (other than the first floor of Three Riverside Center) shall be considered part of the Premises. The total Rentable Square Footage of the Premises and of the Building has been determined from the approved permit set of construction drawings, without field measurement, based upon the 1996 BOMA standard of measurement. Notwithstanding the foregoing, Landlord, at its sole cost and expense within six (6) months following the Substantial Completion (hereinafter defined) of the Base Building Work (hereinafter defined), shall cause the Rentable Square Footage of the Premises, the Rentable Square Footage of the Building and the Rentable Square Footage of the First Expansion Space (defined in Section IV of Exhibit E) to be field measured by an architect retained by Landlord. If, as a result of such field measurement, it is determined that the Rentable Square Footage of the Premises, First Expansion Space or the Rentable Square Footage of the Building has been misstated by more than 1%, Landlord and Tenant shall promptly enter into an amendment to this Lease to restate the Rentable Square Footage of the Building, First Expansion Space, and/or the Rentable Square Footage of the Premises, as the case may be, to reflect the actual 1 2 square footage pursuant to the field measurement. If such field measurement does not disclose a variance of 1% or more, any variance that is disclosed shall be considered by Landlord and Tenant to be immaterial and shall not result in an amendment of the Rentable Square Footage of the Building, First Expansion Space, and/or the Rentable Square Footage of the Premises, as the case may be. Landlord and Tenant acknowledge that the amendment of the Rentable Square Footage of the Premises will affect the Base Rent, Allowance (hereinafter defined), the Architectural and Engineering Allowance (hereinafter defined), Three Riverside Center Premises Allowance (hereinafter defined), the Three Riverside Center Premises Architectural and Engineering Allowance (hereinafter defined) as such amounts are determined on a "per square foot" basis. Landlord and Tenant further acknowledge that the amendment of either the Rentable Square Footage of the Premises or the Rentable Square Footage of the Building will affect Tenant's Pro Rata Share (as hereinafter defined)." II. BASE RENT. Section I.D. is hereby amended to add the following Base Rent schedule with respect to the Three Riverside Center Premises. "BASE RENT SCHEDULE FOR THE THREE RIVERSIDE CENTER PREMISES
ANNUAL RATE ANNUAL MONTHLY PERIOD PER SQUARE FOOT BASE RENT BASE RENT ------ --------------- --------- ---------
III. TENANT'S PRO RATA SHARE: Section I.E s hereby amended by deleting "54.6676%" and inserting "70.4372%" in lieu thereof. IV. BASE TAX YEAR AND BASE EXPENSE YEAR - The Tax Base Year and Expense Base Year for the Three Riverside Center Premises shall be the same as that for the remainder of the Premises. As such, the "Tax Base Year" shall be Fiscal Year 2001 and the "Expense Base Year" for the shall be the period beginning on the Commencement Date and ending on the day prior to the first anniversary of the Commencement Date. V. TERM. Section I.G. of the Lease is hereby deleted in its entirety and replaced by the following Section I.G: "I.G. "Term" shall mean the following with respect to the One Riverside Center Premises, Two Riverside Center Premises and Three Riverside Center Premises: TERM FOR THE ONE RIVERSIDE CENTER PREMISES A period of 120 months, as the same may be extended in accordance with the terms hereof. The "Term" for the One Riverside Center Premises shall commence on the later to occur of (1) July 1, 2000 (the "Target Commencement Date"); or (2) the date upon which Landlord Work in the One Riverside Premises is "Substantially Complete", as such date is determined pursuant to Section III.A. hereof (such date being referred to as the date of "Substantial Completion"); or (3) the date on which Landlord delivers full possession of the One Riverside Center Premises to Tenant (the later to occur of such dates being defined as the "Commencement Date"). The "Termination Date" shall, 2 3 unless sooner terminated as provided herein, mean the last day of the Term as the same may be extended as provided herein. TERM FOR THE TWO RIVERSIDE CENTER PREMISES A period of months, days and years, as the same may be extended in accordance with the terms hereof, commencing on the Two Riverside Center Premises Commencement Date (hereinafter defined) and ending on the Termination Date as determined above with respect to the One Riverside Center Premises, it being agreed that the entire Premises (i.e. the One Riverside Center Premises, Two Riverside Center Premises and Three Riverside Center Premises) shall always expire on the same date. The "Two Riverside Center Premises Commencement Date" shall occur on the later to occur of (1) August 1, 2000 (the "Two Riverside Center Target Commencement Date"); or (2) the date upon which Landlord Work in the Two Riverside Premises is "Substantially Complete", as such date is determined pursuant to Section III.A. hereof (such date being referred to as the date of "Substantial Completion"); (3) the date on which Landlord delivers full possession of the Two Riverside Center Premises to Tenant; or (4) the Commencement Date with respect to the One Riverside Center Premises. Landlord and Tenant acknowledge that the defined terms of "Substantially Complete" and "Substantial Completion" shall have the same meaning, but shall be applied separately, with respect to the One Riverside Center Premises and the Two Riverside Center Premises. Except as provided elsewhere in this Lease to the contrary, the adjustment of the Commencement Date and, accordingly, the postponement of Tenant's obligation to pay Rent shall be Tenant's sole remedy and shall constitute full settlement of all claims that Tenant might otherwise have against Landlord by reason of the Landlord Work in the One Riverside Center Premises not being Substantially Complete on the Target Commencement Date or the Two Riverside Center Premises not be Substantially Complete on the Two Riverside Premises Target Commencement Date. Landlord, in accordance with Section III.A. below, shall provide Tenant with notice of the date on which Landlord reasonably estimates that the Landlord Work will be Substantially Complete (as defined in Section III.A herein) in the One Riverside Center Premises and the Two Riverside Center Premises. Promptly after the determination of the Commencement Date and the Two Riverside Center Premises Commencement Date, Landlord and Tenant shall enter into a commencement letter agreement in the form attached as EXHIBIT C. TERM FOR THE THREE RIVERSIDE CENTER PREMISES A period of months, days and years, as the same may be extended in accordance with the terms hereof, commencing on the later to occur of (i) September 1, 2000, (ii) the Commencement Date with respect to the One Riverside Center Premises, or (iii) the date on which Landlord has Substantially Completed the Base Building Work in the Three Riverside Center Premises (the later of such dates being referred to as the "Three Riverside Center Commencement Date") and ending on the Termination Date as determined above with respect to the One Riverside Center Premises. It is understood that Tenant shall have the right to select the general contractor for the performance of Initial Alterations (hereinafter defined) in the Three Riverside Center Premises and that the substantial completion of the Initial Alterations shall not be a condition precedent to the occurrence of the Three Riverside Center Commencement Date." VI. THREE RIVERSIDE CENTER PREMISES - ADJUSTMENT OF COMMENCEMENT DATE; POSSESSION. Landlord and Tenant acknowledge and agree that Landlord is only obligated to perform Base Building Work in the Three Riverside Center Premises (and not Landlord Work as described in the Lease) and, as a result thereof, the terms and conditions of sections III.A through III.E of the Lease, including Tenant Delays and Late Completion Penalties, shall not apply to the Three Riverside Center Premises, and the following provisions are hereby added to Article III and shall govern with respect to the Three Riverside Center Premises: "F. The Base Building Work with respect to the Three Riverside Center Premises shall be deemed to be "Substantially Complete" on the date that all of the following conditions have been satisfied: (i) All of the Base Building Work with respect to the Three Riverside Center Premises has been performed (as evidenced by Landlord's 3 4 architect's certificate of substantial completion), other than any minor details of construction, mechanical adjustment or any other matter, the noncompletion of which does not materially interfere with Tenant's use and occupancy of the Three Riverside Center Premises as more particularly set forth below and in Section III.C. below ("Punchlist Items"), (ii) subject to the completion of Punchlist Items, the Base Building Work in the Common Areas of Three Riverside Center has been completed, including the installation of all elevators and stairways and the installation of all heating, ventilating, air-conditioning, fire/life safety, sanitary, water and power facilities; provided that Tenant shall be responsible for distributing any necessary systems to the Three Riverside Center Premises as part of the Initial Alterations; (iii) the ground floor lobby in the Building has been substantially completed, subject to Punchlist Items, and lobby furniture shall have been installed, (iv) there is adequate parking available to provide Tenant parking spaces at the Property based on a ratio of 3 spaces for each 1000 rentable square feet of Premises, (v) a cafeteria or other food service provider is open for business in the Building, (vi) workout facilities are open for use in the Building, and (vii) parking lot and outdoor lighting is installed and operational. From time to time upon request by Tenant or Tenant's designated representative, Landlord shall advise Tenant of the progress of the Base Building Work in the Three Riverside Center Premises and the approximate date on which Base Building Work in the Three Riverside Center Premises will be Substantially Complete. G. Within a reasonable time after the later to occur of the execution of this First Amendment and, with respect to the Terminable Space (hereinafter defined), the satisfaction of the Contingency (hereinafter defined), Landlord and Tenant shall conduct a walk through of the Three Riverside Center Premises for the purpose of preparing a list of Punchlist Items with respect to the Base Building Work in the Three Riverside Center Premises. Subject to the completion of any Punchlist Item, latent defects, and necessary corrections and adjustments to seasonal items such as heating and air conditioning that are not readily discoverable by Tenant on or about the date of Substantial Completion, by taking possession of the Three Riverside Center Premises for the purpose of performing the Initial Alterations, Tenant is deemed to have accepted the Three Riverside Center Premises and agreed that the Three Riverside Center Premises is in good order and satisfactory condition, with no representation or warranty by Landlord as to the condition of the Three Riverside Center Premises or the Building or suitability thereof for Tenant's use. However, nothing contained in this section shall be deemed to relieve Landlord from its obligation to complete, and Landlord shall complete, with reasonable speed and diligence, all Punchlist Items with respect to the Base Building Work. H. If Tenant takes possession of the Three Riverside Center Premises before the Three Riverside Center Premises Commencement Date, such possession shall be subject to the terms and conditions of this Lease and Tenant shall pay Rent (defined in Section IV.A.) to Landlord for each day of possession before the Three Riverside Center Commencement Date; provided, however, Tenant shall not be required to pay Rent for any days of possession before the Three Riverside Center Commencement Date unless Tenant shall be actively using the Three Riverside Center Premises for the conduct of Tenant's business. Notwithstanding anything herein to the contrary, Landlord agrees that Tenant shall have access to each portion of the Three Riverside Center Premises for the purpose of performing Initial Alterations following the later to occur of the execution of this First Amendment and, with respect to the Terminable Space, the satisfaction of the Contingency. I. In the event that Tenant terminates this Lease pursuant to subsections III.E.1 or III.E.3 above, such termination shall also apply with respect to the Three Riverside Center Premises." VII. SECURITY DEPOSIT. A. The initial amount of the Security Deposit is hereby increased from $8,477,000.00 to $10,992,311.00. Within 15 days after the date on which Landlord notifies Tenant that the Contingency has been satisfied or the date on which this Amendment is terminated with respect to the Terminable Space, as the case may be, Tenant shall provide Landlord with cash or a letter of credit for the additional $2,445,311.00 (i.e. $10,922,311.00 - $8,477,000.00). Any portion of the initial $8,477,000.00 security deposit that has not, as of the date hereof, been delivered to Landlord shall remain 4 5 payable to Landlord in accordance with the terms and conditions of Section VI.A. of the Lease. Notwithstanding the foregoing, Landlord and Tenant acknowledge that the increased amount of the Security Deposit set forth above, as well as the Security Deposit and reduction amounts set forth below in the substitute Sections VI.C. and VI.D. are calculated based on the assumption that the Contingency will be satisfied and this Amendment shall remain in full force and effect with respect to the entire Three Riverside Center Premises. If the Contingency is not satisfied and this Amendment is terminated with respect to the Terminable Space, the applicable Security Deposit, reduction amounts and such other amounts as set forth in Section XI (Contingency) below will be adjusted as set forth in Section XI below. B. Sections VI.C and VI.D of the Lease are hereby deleted in their entirety and replaced with the following sections VI.C. and VI.D.: "C. Notwithstanding anything herein to the contrary, provided Tenant is not in default under this Lease as of the third (3rd) anniversary of the Commencement Date (i.e. the expiration of the 3rd lease year), the amount of the Security Deposit shall reduce from $10,992,311.00 to $8,582,758.00 effective as of the 3rd anniversary of the Commencement Date. If the Security Deposit is provided by Tenant in the form of cash, Landlord shall return the reduced portion of the Security Deposit to Tenant within thirty (30) days following the 3rd anniversary of the Commencement Date. If the Security Deposit is provided in the form of a letter of credit, such reduction shall be accomplished by having Tenant provide Landlord with a substitute letter of credit in the reduced amount. If the Security Deposit is provided through a combination of cash and letter of credit, Tenant, by written notice to Landlord, shall advise Landlord as to the method that will be used to effectuate the reduction of the letter of credit. D. In addition to the reduction of the Security Deposit described in Section VI.C. above, the amount of the Security Deposit shall be subject to further reduction effective as of the 4th, 5th, 6th and 7th anniversaries of the Commencement Date (each referred to as an "Anniversary Date") as follows: 1) If Tenant reported a profit for the 4 consecutive quarters immediately preceding the applicable Anniversary Date, the amount of the Security Deposit shall reduce by $1,560,502.00 effective as of such Anniversary Date. Such reduction shall be accomplished in the manner referred to in Section VI.C. above, provided that Landlord shall not be required to refund any portion of the Security Deposit or to accept a substitute letter of credit unless and until Tenant has provided Landlord with audited financial statements evidencing that Tenant is entitled to a reduction of the Security Deposit in accordance with the terms hereof. 2) If Tenant did not report a profit for the 4 consecutive quarters immediately preceding the applicable Anniversary Date but did report a profit for 3 quarters within such period, the amount of the Security Deposit shall reduce by $780,251.00 effective as such Anniversary Date. Such reduction shall be accomplished in the manner referred to in Section VI.C. above, provided that Landlord shall not be required to refund any portion of the Security Deposit or to accept a substitute letter of credit unless and until Tenant has provided Landlord with audited financial statements evidencing that Tenant is entitled to a reduction of the Security Deposit in accordance with the terms hereof. 3) If Tenant is not entitled to a reduction of the Security Deposit under D.1. or D.2. above, Tenant shall not be entitled to a reduction of the Security Deposit with respect to the applicable Anniversary Date. Tenant shall, however, be entitled to a reduction of the Security Deposit with respect to any future Anniversary Dates where the conditions for a reduction have been satisfied. Notwithstanding anything herein to the contrary, in no event shall the Security Deposit be reduced below the sum of: (i) $2,340,750.00, plus (ii) the amount of any increase in the Security Deposit pursuant to Section VI.E. below." IX. INITIAL ALTERATIONS. A. From and after the later to occur of the execution of this First Amendment and, with respect to the Terminable Space, the satisfaction of the Contingency, Tenant shall have access to the Three Riverside Center Premises for the purpose of performing 5 6 alterations and improvements in preparation for Tenant's occupancy thereof (the "Initial Alterations"). Notwithstanding the fact that Tenant has been provided with possession of the Three Riverside Center Premises, Tenant and its contractors shall not have the right to perform Initial Alterations in the Three Riverside Center Premises unless and until Tenant has complied with all of the terms and conditions of Article IX.C. of this Lease, including, without limitation, reasonable approval by Landlord of the final plans for the Initial Alterations and the contractors to be retained by Tenant to perform such Initial Alterations. Tenant shall be responsible for all elements of the design of Tenant's plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Three Riverside Center Premises and the placement of Tenant's furniture, appliances and equipment), and Landlord's approval of Tenant's plans shall in no event relieve Tenant of the responsibility for such design. Landlord agrees that Landlord shall not have any approval rights over the aesthetic aspects of the Initial Alterations unless the same are visible from the exterior of the Building or the interior of the Building atrium. Landlord's approval of the contractors to perform the Initial Alterations shall not be unreasonably withheld. B. Provided Tenant is not in default after the delivery of notice and the expiration of any applicable cure periods, Landlord agrees to contribute the sum of Two Million Three Hundred Forty Thousand Four Hundred Twenty and 00/100 Dollars ($2,340,420.00) (i.e. $30 per rentable square foot of the Three Riverside Center Premises) (the "Three Riverside Center Premises Allowance") toward the cost of performing the Initial Alterations in preparation of Tenant's occupancy of the Three Riverside Center Premises. The Three Riverside Center Premises Allowance may only be used for the cost of labor, materials, permits and contractors fees in connection with the Initial Alterations. The Three Riverside Center Premises Allowance, less the amount of retainage provided for in Tenant's construction contract (which shall not be less than 5% nor more than 10%)(which retainage shall be payable as part of the final draw), shall be paid to Tenant or, at Landlord's option, to the order of the general contractor that performs the Initial Alterations, in periodic disbursements within thirty (30) days after receipt of the following documentation: (i) an application for payment and sworn statement of contractor substantially in the form of AIA Document G-702 covering all work for which disbursement is to be made to a date specified therein; (ii) a certification from an AIA architect substantially in the form of the Architect's Certificate for Payment which is located on AIA Document G702, Application and Certificate of Payment; (iii) Contractor's, subcontractor's and material supplier's waivers of liens which shall cover all Initial Alterations for the previous disbursement and all other statements and forms required for compliance with the mechanics' lien laws of the State of Massachusetts, together with all such invoices, contracts, or other supporting data as Landlord may reasonably require; and (iv) a request to disburse from Tenant containing an approval by Tenant of the work done and a good faith estimate of the cost to complete the Initial Alterations. In addition, prior to the first such disbursement, Tenant shall deliver to Landlord (x) a cost breakdown for each trade or subcontractor performing the Initial Alterations; (y) final plans and specifications for the Initial Alterations, together with a certificate from an AIA architect that such plans and specifications comply in all material respects with all laws affecting the Building, Property and Three Riverside Center Premises; and (z) copies of all construction contracts for the Initial Alterations, together with copies of all change orders, if any. Upon completion of the Initial Alterations, and prior to final disbursement of the Allowance, Tenant shall furnish Landlord with: (1) general contractor and architect's completion affidavits, (2) full and final waivers of lien, (3) receipted bills covering all labor and materials expended and used, (4) as-built plans of the Initial Alterations, and (5) the certification of Tenant and its architect that the Initial Alterations have been installed in a good and workmanlike manner in accordance with the approved plans, and in accordance with applicable laws, codes and ordinances. In no event shall Landlord be required to disburse the Three Riverside Center Premises Allowance more than one time per month. If the cost of the Initial Alterations exceeds the Three Riverside Center Premises Allowance, Tenant shall be entitled to the Three Riverside Center Premises Allowance in accordance with the terms hereof, but each individual disbursement of the Allowance shall be disbursed in the proportion that the Three Riverside Center Premises Allowance bears to the total cost for the Initial Alterations, less the retainage referenced above. Notwithstanding anything herein to the contrary, Landlord shall not be obligated to disburse any portion of the Three Riverside Center Premises Allowance during the continuance of an uncured default under the Lease, and Landlord's obligation to disburse shall only resume when and if such default is cured. 6 7 In addition to Landlord's obligation to provide Tenant with an Three Riverside Center Premises Allowance, Landlord, provided Tenant is not in default after the delivery of notice and the expiration of any applicable cure periods, shall provide Tenant with an allowance (the "Three Riverside Center Premises Architectural and Engineering Allowance") in the amount of One Hundred Fifty Six Thousand Twenty Eight and 00/100 Dollars ($156,028.00) (i.e., $2 per rentable square foot of the Three Riverside Center Premises) to be applied toward the cost of architectural and engineering services for the Three Riverside Center Premises contracted by Tenant. Landlord shall disburse the Three Riverside Center Premises Architectural and Engineering Allowance, or applicable portion thereof, to Tenant within forty-five (45) days after Landlord's receipt of invoices and lien waivers from Tenant with respect to Tenant's actual engineering and architectural fees as described above. Any unused portion of the Three Riverside Center Premises Architectural and Engineering Allowance may be applied toward the cost of the Initial Alterations. Any unused portion that is not applied toward the cost of the Initial Alterations shall accrue to the sole benefit of Landlord, it being agreed that Tenant shall not be entitled to any credit, offset, abatement or payment with respect thereto. C. In no event shall the Three Riverside Center Premises Allowance be used for the purchase of moveable office equipment, furniture or other items of personal property of Tenant. In the event Tenant does not use the entire Three Riverside Center Premises Allowance in connection with the performance of the Initial Alterations, any unused amount shall accrue to the sole benefit of Landlord, it being understood that Tenant shall not be entitled to any credit, abatement or other concession in connection therewith. Tenant shall be responsible for all applicable state sales or use taxes, if any, payable in connection with the Initial Alterations and/or Three Riverside Center Premises Allowance. D. Landlord agrees to respond to any requests by Tenant for approval of its initial drafts of plans within ten (10) Business Days. Landlord agrees to respond to any requests by Tenant for approval of its contractors or any revisions to previously submitted plans within seven (7) Business Days. Notwithstanding the foregoing, the response times set forth above for the approval of any plans or revisions thereto shall be extended by five (5) additional Business Days in the event that the matters for which approval is being requested will, in Landlord's reasonable judgment, require review by an outside consultant. If Landlord shall disapprove any requests by Tenant, Landlord shall commit to writing its specific basis for such disapproval. Time is of the essence with respect to the response periods set forth herein. E. Landlord shall be responsible for performing the Base Building Work in the Three Riverside Center Premises as described in the Base Building Scope attached to the Lease as EXHIBIT M. All Base Building Work shall be performed at Landlord's sole cost and expense. In no event shall the cost of the Base Building Work be applied against or deducted from the Three Riverside Center Premises Allowance or Three Riverside Center Premises Architectural and Engineering Allowance. Notwithstanding the foregoing, Landlord shall have the right to change the plans and specifications for the Base Building Work from time to time, provided that Landlord shall not materially reduce the overall quality of the Base Building Work; provided, further, that Tenant shall have the right to approve any such changes that materially affect Tenant's occupancy, operation or design of the Three Riverside Center Premises, which approval shall not be unreasonably withheld or delayed. F. Tenant acknowledges that Landlord and its contractors, including ADP Marshall ("ADP") will be performing Base Building Work in the Building and Three Riverside Center Premises and improvement work in the premises of other tenants of the Building prior to and during the performance of the Initial Alterations by Tenant. Each portion of the Initial Alterations, including, without limitation, the delivery of any materials, the placement of dumpsters and sanitary facilities and the use of any loading docks must be coordinated with Landlord and ADP in advance in accordance with the rules and regulations enacted by Landlord and attached hereto as EXHIBITS B-1 and B-2. It is understood that Landlord is constructing the Base Building Work on a merit shop basis that is not restricted by the terms of a collective bargaining agreement. Notwithstanding the foregoing, Landlord hereby represents to Tenant and Tenant acknowledges that Landlord and ADP have reached an understanding with the New England Regional Council of Carpenters and the Laborers' International Union of North 7 8 America, Local 560 with respect to the employment of union labor at the Building and that Tenant and Tenant's Contractor shall work diligently and in good faith with Landlord and ADP to comply with the understanding that was reached with such unions. Tenant and Tenant's Contractor shall be obligated to take all actions necessary to assure that the Initial Alterations are performed to completion without disruption to Landlord's performance of the Base Building Work from labor disputes arising from any cause, including, without limitation, disputes concerning union jurisdiction and the affiliation of workers employed by Tenant's Contractor or the subcontractors of Tenant's Contractor. Should a jurisdictional dispute arise, Tenant and Tenant's Contractor shall take the necessary legal steps required to allow Landlord's and ADP's construction of the Base Building Work to continue without interruption from any strikes, work stoppages or other actions in connection with the jurisdictional dispute. G. Once completed, the Initial Improvements shall be deemed "Leasehold Improvements" and the provisions of Section VIII.B. shall be applicable with respect to the Initial Alterations. H. Notwithstanding anything in Section X.A. to the contrary, Tenant, as part of the Initial Alterations, shall install any necessary sub-meters (as well as any electrical panels, transformers, bus duct plug and related equipment) in the Three Riverside Center Premises at Tenant's sole cost and expense (subject to the Three Riverside Center Premises Allowance). X. ASSIGNMENT AND SUBLETTING. All references in Article XII to One Riverside Center or Two Riverside Center shall be deemed to refer to One Riverside Center, Two Riverside Center or Three Riverside Center, or to One Riverside Center Premises or Two Riverside Center Premises shall be deemed to refer to One Riverside Center Premises, Two Riverside Center Premises or Three Riverside Center Premises. In addition, Landlord's rights under Section XII.B to recapture space that Tenant desires to Transfer shall not apply to any subleases or occupancy agreements for all or any portion of the Three Riverside Center Premises entered into by Tenant during the first 15 months of the Term and having a term not exceeding four (4) years ("Initial Three Riverside Subleases"). XI. CONTINGENCY. Landlord and Tenant acknowledge that, with the exception of the 25,117 rentable square feet shown on EXHIBIT A-7 hereto (the "Unencumbered Space"), the Three Riverside Center Premises is currently leased to Harvard Vanguard Medical Associates, Inc. ("Harvard") pursuant to the terms and conditions of a lease dated December 15, 1999 (the "Harvard Lease"). The 52,897 rentable square foot portion of the Three Riverside Center Space that is leased to Harvard is referred to herein as the "Terminable Space". Landlord is currently engaged in good faith negotiations with Harvard with respect to a termination of the Terminable Space (the "Harvard Termination"). Tenant acknowledges and agrees that (i) there is no guaranty that Landlord and Harvard will enter into the Harvard Termination, (ii) Landlord shall be under no obligation to enter into the Harvard Termination, and (iii) this First Amendment, with respect to the Terminable Space only, is contingent upon Landlord and Harvard entering into the Harvard Termination (the "Contingency"). In the event that Landlord and Harvard do not enter into the Harvard Termination by May 12, 2000, either party shall have the right to terminate this First Amendment with respect to the Terminable Space only by written notice to the other on or before the date on which the Contingency is satisfied. If either party elects to terminate this Amendment with respect to the Terminable Space, this Amendment shall continue in full force and effect subject to the following: 1) The Three Riverside Center Premises shall refer only to the 25,117 rentable square feet shown on Exhibit A-7 and the Rentable Square Footage of the Premises shall be 295,563 square feet; 2) The Annual Base Rent and Monthly Base Rent for the Three Riverside Premises shall be appropriately adjusted based on the new Three Riverside Premises square footage (i.e. 25,117); 3) Tenant's Pro Rata Share shall be 59.7447%; 4) The Security Deposit shall be increased from $8,477,000.00 to $9,264,000.00. As such, the additional amount to be provided by Tenant shall be $787,280.00. In 8 9 addition, Sections VI.C. and VI.D. of the Lease shall be deleted in their entirety and replaced with the following sections VI.C. and VI.D: "C. Notwithstanding anything herein to the contrary, provided Tenant is not in default under this Lease as of the third (3rd) anniversary of the Commencement Date (i.e. the expiration of the 3rd lease year), the amount of the Security Deposit shall reduce from $9,264,280.00 to $7,279,876.00 effective as of the 3rd anniversary of the Commencement Date. If the Security Deposit is provided by Tenant in the form of cash, Landlord shall return the reduced portion of the Security Deposit to Tenant within thirty (30) days following the 3rd anniversary of the Commencement Date. If the Security Deposit is provided in the form of a letter of credit, such reduction shall be accomplished by having Tenant provide Landlord with a substitute letter of credit in the reduced amount. If the Security Deposit is provided through a combination of cash and letter of credit, Tenant, by written notice to Landlord, shall advise Landlord as to the method that will be used to effectuate the reduction of the letter of credit. D. In addition to the reduction of the Security Deposit described in Section VI.C. above, the amount of the Security Deposit shall be subject to further reduction effective as of the 4th, 5th, 6th and 7th anniversaries of the Commencement Date (each referred to as an "Anniversary Date") as follows: 1) If Tenant reported a profit for the 4 consecutive quarters immediately preceding the applicable Anniversary Date, the amount of the Security Deposit shall reduce by $1,323,614.00 effective as of such Anniversary Date. Such reduction shall be accomplished in the manner referred to in Section VI.C. above, provided that Landlord shall not be required to refund any portion of the Security Deposit or to accept a substitute letter of credit unless and until Tenant has provided Landlord with audited financial statements evidencing that Tenant is entitled to a reduction of the Security Deposit in accordance with the terms hereof. 2) If Tenant did not report a profit for the 4 consecutive quarters immediately preceding the applicable Anniversary Date but did report a profit for 3 quarters within such period, the amount of the Security Deposit shall reduce by $661,807.00 effective as such Anniversary Date. Such reduction shall be accomplished in the manner referred to in Section VI.C. above, provided that Landlord shall not be required to refund any portion of the Security Deposit or to accept a substitute letter of credit unless and until Tenant has provided Landlord with audited financial statements evidencing that Tenant is entitled to a reduction of the Security Deposit in accordance with the terms hereof. 3) If Tenant is not entitled to a reduction of the Security Deposit under D.1. or D.2. above, Tenant shall not be entitled to a reduction of the Security Deposit with respect to the applicable Anniversary Date. Tenant shall, however, be entitled to a reduction of the Security Deposit with respect to any future Anniversary Dates where the conditions for a reduction have been satisfied. Notwithstanding anything herein to the contrary, in no event shall the Security Deposit be reduced below the sum of: (i) $1,985,420.00, plus (ii) the amount of any increase in the Security Deposit pursuant to Section VI.E. below." 5) The amount of the Three Riverside Premises Allowance shall be $753,510.00 and the amount of the Three Riverside Premises Architectural and Engineering Allowance shall be $50,234.00; and 6) Tenant's parking spaces shall be allocated as follows: 626 spaces in the parking structure, 185 spaces in the surface parking areas and 76 spaces in the executive parking garage XII. PARKING. Section VI.A of Exhibit E to the Lease is hereby deleted and replaced with the following Section VI.A: "A. During the initial Term, Landlord shall make parking spaces available to Tenant at the Property based on a ratio of 3 parking spaces per 1,000 rentable square feet of Premises leased by Tenant from time to time (the "Parking Ratio"). Tenant acknowledges that handicapped parking spaces and visitor parking spaces are included within the Parking Ratio of 3 spaces per 1,000 rentable square feet. In other 9 10 words, Tenant's Pro Rata Share of the total amount of visitor and handicapped parking spaces for the entire Property shall be deducted from the number of parking spaces that Tenant is entitled to use based on the Parking Ratio. Landlord, in its sole discretion, shall have the right to allocate Tenant's parking rights between the surface parking areas, the parking structure and the executive parking garage beneath One Riverside Center (collectively referred to at the "Parking Areas"), provided that not less than 89 of Tenant's parking spaces (exclusive of handicapped parking spaces) shall be located in the executive parking garage beneath the Building. As of the date hereof, it is contemplated that Tenant's parking spaces will be allocated as follows: 738 spaces in the parking structure, 218 spaces in the surface parking areas and 89 spaces in the executive parking garage. Tenant shall not have the right to lease or otherwise use more than its share of parking spaces. Landlord shall have the right to establish such rules and regulations as Landlord reasonably elects to monitor the use of parking spaces by Tenant and other tenants, visitors and invitees and to assure, to the extent reasonably possible, that such parties are parking in the specific areas (e.g. surface areas, parking structure or garage) designated by Landlord and Tenant is not exceeding the Parking Ratio. Without limitation, Landlord shall have the right to implement a system of parking passes, parking stickers, card key access or any other system reasonably designated by Landlord. Tenant shall be responsible for assuring that its visitors, employees, subtenants and invitees comply with the rules and regulations designated by Landlord. Landlord shall have the right to require Tenant to institute and operate a subsidized MBTA pass program at the Premises to encourage Tenant's employees to use public transportation." XIII. MONUMENT SIGN. Section VIII of Exhibit E to the Lease is hereby amended by adding the following sentence: "Notwithstanding anything herein to the contrary, Initial Three Riverside Subleases (as defined in Section XII of the Lease) shall not be taken into account for purposes of determining whether the Monument Signage Conditions have been satisfied." XIV. DIRECTORY AND ENTRY SIGNAGE. Section IX.A of Exhibit E to the Lease is hereby amended by adding the following sentence: "Notwithstanding anything herein to the contrary, Landlord shall not have any right to remove, nor require the removal of, the Atrium Sign because the existence of Initial Three Riverside Subleases (as defined in Section XII of the Lease) shall cause Tenant to be in violation of the sublease restrictions and/or occupancy requirements of this Section." XV. PARKING STRUCTURE SIGNAGE. Section X of Exhibit E to the Lease is hereby amended by adding the following subsection: "D. Notwithstanding anything herein to the contrary, Landlord shall not have any right to remove, nor require the removal of, the Parking Structure Sign because the existence of Initial Three Riverside Subleases (as defined in Section XII of the Lease) shall cause Tenant to be in violation of the sublease restrictions and/or occupancy requirements of this Section. In addition, Initial Three Riverside Subleases shall not be taken into account for purposes of determining whether the Parking Signage Conditions have been satisfied." XVI. ONE RIVERSIDE SIGNAGE. Section XI of Exhibit E to the Lease is hereby amended by adding the following subsection: "D. Notwithstanding anything herein to the contrary, Landlord shall not have any right to remove, nor require the removal of, the One Riverside Center Sign because the existence of Initial Three Riverside Subleases (as defined in Section XII of the Lease) shall cause Tenant to be in violation of the sublease restrictions and/or occupancy requirements of this Section. In addition, Initial Three Riverside Subleases shall not be taken into account for purposes of determining whether the Riverside Center Signage Conditions have been satisfied." XVII. THREE RIVERSIDE SIGNAGE. Section XII of Exhibit E to the Lease is hereby amended as follows: a. The following subsection is hereby added: "C. Notwithstanding anything herein to the contrary, Landlord shall not have any right to remove, nor require the removal of, the Three Riverside Center Sign because the existence of Initial Three Riverside Subleases (as defined in Section XII of the Lease) shall cause Tenant to be in violation of the sublease restrictions and/or occupancy requirements of this Section. In addition, Initial Three Riverside Subleases shall not be taken into account for purposes of determining whether the Riverside Center Signage Conditions have been satisfied." 10 11 b. Section XII.A and XII.B are hereby amended as follows: (i) the words "fifty percent (50%) of the total rentable square footage of Three Riverside Center" are hereby deleted and replaced with "75,000 rentable square feet in Three Riverside Center"; and (ii) the words "50% of the total rentable square footage of Three Riverside Center" in subsection XII.A(4) and XII.B(6) are hereby deleted and replaced with "75,000 rentable square feet in Three Riverside Center". Landlord acknowledges that, provided this Amendment is not terminated with respect to the Terminable Space, Tenant has satisfied the Three Riverside Center Signage Condition with respect to the amount of space leased by Tenant in Three Riverside Center. Such condition will be deemed to have been satisfied regardless of whether a remeasurement pursuant to Section I.C. of the Lease causes the square footage of the Three Riverside Center Premises to drop below 75,000 rentable square feet. XVIII. SUPPLEMENTAL HVAC UNITS AND ANTENNA/DISHES. Section XIII of Exhibit E to the Lease is hereby amended by increasing the number of Roof Top Units from ten (10) to thirteen (13). XIX. BUILDING RISERS. Section XVII of Exhibit E to the Lease is hereby deleted and replaced with the following Section XVII: "XVII. BUILDING RISERS. Tenant shall have the right to use the vertical sleeves in One Riverside Center, Two Riverside Center and Three Riverside Center for Tenant's data and telecommunication cabling and in connection with the rights granted to Tenant with respect to the Roof Space. Tenant, acknowledges, however, that the existing vertical sleeves run to the top floor of the Building, but not through to the roof of the Building. As such, if Tenant desires to have the sleeves run to the roof, Tenant will be responsible for any costs required to extend the sleeves through to the roof or to install separate sleeves connecting the top floor of the Building to the roof. All such usage shall be in common with Landlord and shall not adversely affect Landlord's right to use the vertical sleeves for the operation of the Building (including the leasing, licensing and granting of roof rights to third parties); provided that Landlord shall not lease, license or grant any roof rights to third parties to the extent that the same would have an adverse affect on Tenant's ability to use the vertical sleeves in connection with the normal operation of Tenant's business in the Premises. Landlord, at Landlord's expense, has installed for Tenant's use, conduits within the Building to facilitate Tenant's ability to interconnect Tenant's systems within One Riverside Center, Two Riverside Center and Three Riverside Center. XX. MISCELLANEOUS. A. This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Three Riverside Center Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment. B. Tenant shall not record this Amendment. Landlord, however, agrees to execute and to deliver to Tenant for recordation or registration, at Tenant's cost and expense, a memorandum or notice of this Amendment in the form attached hereto as Exhibit F-1. If the Lease is terminated before the Term expires, upon Landlord's request the parties shall execute, deliver and record an instrument acknowledging the above and the date of the termination of this Lease, and Tenant appoints Landlord its attorney-in-fact in its name and behalf to execute the instrument if Tenant shall fail to execute and deliver the instrument after Landlord's request therefor within 10 days. C. Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. D. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control. 11 12 E. Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant; provided, that, if Landlord shall not have executed and delivered the same to Tenant within seven (7) business days after the same has been executed by Tenant and submitted to Landlord, Tenant shall have the right by written notice to Landlord at any time prior to the date on which a fully executed copy of this Amendment is delivered to Tenant, to declare this Amendment null and void. F. The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment. G. Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment. Tenant agrees to indemnify and hold Landlord, its members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the "Landlord Related Parties") harmless from all claims of any brokers, including without limitation Roy Hirshland, Spaulding & Slye or any successor thereto, claiming to have represented Tenant in connection with this Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Amendment. Landlord agrees to indemnify and hold Tenant, its members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents (collectively, the "Tenant Related Parties") harmless from all claims of any brokers claiming to have represented Landlord in connection with this Amendment. IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day and year first above written. WITNESS/ATTEST: LANDLORD: EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY By: Beacon Property Management Corporation, a Delaware corporation, its managing member /s/ Hannah Song By: /s/ Gregory R. Clancy - ---------------------------------- ------------------------------------- Name (print): Hannah Song Name: Gregory R. Clancy -------------------- ----------------------------------- /s/ Harcie Sacehson Title: VICE PRESIDENT - Leasing - ---------------------------------- ---------------------------------- Name (print): Harcie Sacehson -------------------- WITNESS/ATTEST: TENANT: ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE /s/ Eric J. Smith By: /s/ David A. Gerth - ----------------------------------- ------------------------------------- Name (print): Eric J. Smith Name: David A. Gerth --------------------- ----------------------------------- Title: Chief Financial Officer and Vice - ----------------------------------- President of Operations and Finance Name (print): --------------------- 12 13 EXHIBIT A-5 OUTLINE AND LOCATION OF THE FIRST FLOOR PREMISES IN THREE RIVERSIDE CENTER This Exhibit is attached to and made a part of the Lease dated as of , , 2000, by and between EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE ("Tenant") for space in the Building located at 275 Grove Street, Newton, MA. [1ST FLOOR LAYOUT] 1 14 EXHIBIT A-6 OUTLINE AND LOCATION OF THE FOURTH FLOOR PREMISES IN THREE RIVERSIDE CENTER This Exhibit is attached to and made a part of the Lease dated as of , , 2000, by and between EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE ("Tenant") for space in the Building located at 275 Grove Street, Newton, MA. [4TH FLOOR LAYOUT] 2 15 EXHIBIT A-7 OUTLINE AND LOCATION OF THE FIRST FLOOR PREMISES IN THREE RIVERSIDE CENTER (I.E. THE UNENCUMBERED SPACE) This Exhibit is attached to and made a part of the Lease dated as of , , 2000, by and between EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE ("Tenant") for space in the Building located at 275 Grove Street, Newton, MA. [FLOOR LAYOUT] 3 16 EXHIBIT B-1 RULES & REGULATIONS FOR CONSTRUCTION WORK The following Rules and Regulations should be incorporated into all agreements between a tenant and contractors or vendors performing construction services on the premises. 1. DEFINITIONS 1.1 Building: Riverside Center 275 Grove Street Newton, Massachusetts 1.2 Property Manager: Robert Baker 1.3 Chief Engineer: Michael O'Shaughnessy 1.4 TIW Project Manager: As assigned 1.5 Regular Business Hours: Monday - Friday, 8:00 a.m. - 6:00 p.m. Saturday, 8:00 a.m. - 1:00 p.m. excluding holidays 1.6 Tenant: The capitalize term "Tenant" shall refer to Allaire Corporation and its permitted subtenants and assignees. The non-capitalized term "tenant" shall refer to any occupant of the Building. 1.7 Special Work: Any part of the Work which involves the operations: following a. All utility disruptions, shut-offs, and turnovers b. Activities involving high levels of noise, including, but not limited to, demolition, coring, drilling, and ramsetting. c. Activities resulting in excessive dust or odors, including, but not limited to, demolition and spray painting. 1.8 Contractor or Vendor: Any service provider contracting directly with Tenant to install furniture or equipment, or perform physical improvements to the premises. 1.9 Tradesperson: Any employee (including, without limitation, any mechanic or laborer) employed by a Contractor or Vendor performing work. 2. INSURANCE 2.1 The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located insurance for protection from claims under worker's or workmen's compensation acts and other employee benefits acts which are applicable, claims for damages because of bodily injury, including death, and from claims for damages, other than to the Work itself, to property which may arise out of or result from the Contractor's operations under the Contract, whether such operations be by the Contractor or by a Subcontractor or anyone directly or indirectly employed by any of them. This insurance shall be written for not less than limits of liability set forth herein or required by law, whichever 4 17 coverage is greater, and shall include contractual liability insurance applicable to the Contractor's obligations hereunder. Certificates of such insurance shall be filed with the Landlord prior to the commencement of the Work. 2.2 The insurance required by Subparagraph 2.1 shall be written for not less than the following, or greater if required by law: 1. Workers Compensation: (a) State.................................................. Statutory (b) Applicable Federal:.................................... Statutory (c) Employer's Liability...................................$1,000,000 2. Comprehensive General Liability (including but not limited to comprehensive form, premises operations, explosion and collapse hazard and underground hazard, products and completed operations hazard, contractual liability, broad form property damage (including completed operations), independent contractors' protective, personal injury, automobile liability comprehensive form for owned, hired and non-owned vehicles): (a) Combined single limits for bodily and property damages: $5,000,000 .................................. Each Occurrence $5,000,000 .................................. Annual Aggregate (b) Products and Completed Operations to be maintained for 3 years after final payment. (b) Property Damage Liability Insurance shall provide X, C and U coverage if Contractor's operations involve any exposure to explosion, collapse or underground damage. 5 18 2.3 The certificates of insurance shall contain the following provisions: 1. Name the Landlord, Landlord's agents, beneficiaries and mortgagee, and Architect as additional insured (excluding workers' compensation), including EOP-RIVERSIDE PROJECT, L.L.C., BEACON PROPERTY MANAGEMENT CORPORATION, AND EQUITY OFFICE PROPERTIES TRUST; 2. In the event of any change in the limits of liability, decrease in coverage or other material change in coverage, or the cancellation of insurance in its entirety, the insurer must give Landlord, Landlord's agents, beneficiaries mortgagee, and Architect written notice at least thirty (30) days prior to the effective date of such change or cancellations, and insurance coverage shall remain in force during said thirty (30) day period; and 3. Waiver of any right of subrogation of the insurers against Landlord, Landlord's agents, beneficiaries an mortgagee, and the Architect. 2.4 At Landlord's request, Contractor shall cause any bank and/or financial institution and/or any trustee designated by Landlord to be added as additional insureds under the insurance policies required by Subparagraph 2.1. 2.5 If Contractor fails to carry or provide evidence of insurance provided for herein, Landlord may, but shall not be obligated to, procure the same and charge the cost thereof to Contractor. 2.6 Contractor shall carry sufficient comprehensive insurance on its equipment at the site an on route to or from the site as may be necessary to fully protect itself, and Contractor acknowledge that Landlord shall have no responsibility or liability therefor. 2.7 Contractor shall certify to the Landlord that it has obtained or will obtain similar certificates of insurance form each of its Subcontractor before their work commences. Each subcontractor must be covered by insurance of the same character and in the same amounts as the Contractor unless the Contractor and the Landlord agree that a reduced coverage is adequate. Each Subcontractor's insurance shall cover the Landlord's agents and beneficiaries and the Architect. 3. SCHEDULING 3.1 COORDINATION a. All Work to be carried out expeditiously and with minimum disturbance and disruption to the operation of the Building and without causing discomfort, inconvenience, or annoyance to any of the other tenants or occupants of the Building or the public at large. b. All schedules for the performance of construction, including delivery of materials, shall be coordinated through the TIW Project Manager and the Property Manager. The TIW Project Manager reserves the right, without incurring any liability to Tenant, Contractor, or Vendor, to stop activities and/or require rescheduling of Tenant Work based upon adverse impact on tenants or occupants of the Building, Landlord's or another party's performance of work in the Building, including any base building work or tenant work, or on the maintenance or operation of the Building. c. If any Work requires the shutdown of risers and mains for electrical, mechanical, life-safety, or plumbing systems, such work to be approved by and coordinated with the Chief Engineer, and at the discretion of the Chief Engineer, to be supervised by the Chief Engineer or designated representative. The Contractor or Vendor is responsible for protecting all existing systems and equipment as required. d. Contractor to notify all local regulatory authorities of all shutdowns of electrical, mechanical, life safety, or plumbing systems, as required. 6 19 3.2 TIME RESTRICTIONS a. Subject to Paragraph 2.1 of these Rules and Regulations, prior to the date on which any portion of the Building is occupied by tenants or other occupants, general construction work will be permitted at all times, including during Regular Business Hours. From and after the date on which any portion of the Building is occupied by tenants or other occupants, Property Manager shall have the right to restrict the hours in which construction work may be performed in order to minimize any disruption to the business activities of such tenants or occupants. Without limitation, Property Manager shall have the right to require construction work to be performed only at times outside Regular Business Hours. b. Contractor or Vendor to provide Property Manager with at least twenty-four (24) hours notice to schedule Special Work. From and after the date on which any portion of the Building is occupied by tenants or other occupants, such Special Work will be permitted only during periods outside of Regular Business Hours as agreed to by the Property Manager. c. The delivery of construction materials to the Building, distribution within the Building, and the removal of waste materials will, from and after the date on which any portion of the Building is occupied by tenants or other occupants, be confined to periods outside Regular Business Hours, unless otherwise specifically permitted in writing by the TIW Project Manager. d. If coordination, labor disputes, or other circumstances require, the Property Manager may change the hours during which regular construction work can be performed and/or restrict or refuse entry to the Building by any Contractor or Vendor. 4. CONTRACTOR OR VENDOR PERSONNEL 4.1 CONDUCT a. While in or about the Building, all Contractors and Vendors must perform in a dignified, quiet, courteous, and professional manner at all times. Tradespersons must wear clothing suitable for their work and shall remain fully attired at all times. Each Contractor and Vendor will be responsible for his/her Tradesperson's behavior and conduct. b. The TIW Project Manager reserves the right to prohibit any Contractor, Vendor, or Tradesperson from working on the premises for disturbing any tenant, occupant, contractor, vendor, or tradesperson, interfering with the work of others, or in any way displaying conduct or performance not compatible with the Owner's standards. 4.2 ACCESS a. Contractors and Vendors must contact the TIW Project Manager to coordinate Building access. Elevators will not be available for any purpose in connection with the performance of work by Contractor in the Building, including, without limitation, for the purpose of transporting any persons to or from the premises in which work will be performed. Access to the Building before and after Regular Business Hours, all day on weekends and holidays, or any other hours designated from time to time by the TIW Project Manager, will only be provided following receipt of twenty-four (24) hours advanced notice by the TIW Project Manager and Chief Engineer. b. Contractors and Vendors must obtain permission from the TIW Project Manager prior to undertaking work in any space outside the Contractor's Work limits. This requirement specifically includes ceiling spaces below the premises where any work required must be undertaken at the convenience of the affected tenant and outside of Regular Business Hours. Contractor or Vendor undertaking such work shall ensure that all work, including work required to reinstate removed items and cleaning, be completed prior to opening of the next business day. 7 20 c. No Contractor or Vendor will be permitted to enter any private or public space in the Building, other than the common areas of the Building necessary for direct access to the area of Work for which he/she has been employed, without the prior approval of the TIW Project Manager. d. Contractor or Vendor will ensure that all furniture, equipment, and accessories in areas potentially affected by the Work are adequately protected by means of drop cloths or other appropriate measures. In addition, Contractor and Vendor shall be responsible for maintaining security to the extent required by the Property Manager. e. Temporary access doors for tenant construction areas connecting with a public corridor will consist of building standard door, frame, hardware, and lockset. A copy of the key will be furnished to the Property Manager. f. Unless otherwise agreed to by Property Manager, bulk loading of material to be made via lift or crane through a removed window. Contractor or Vendor to protect all existing construction as required. 4.3 SAFETY a. Contractor or Vendor to police ongoing construction operations and activities at all times, keeping the premises orderly, maintaining cleanliness in and about the premises, and ensuring safety and protection of all areas, including truck docks, elevators, lobbies, and all other public areas which are used for access to the premises. b. Contractor or Vendor to appoint a supervisor who will be responsible for all safety measures, as well as for compliance with all applicable governmental laws, ordinances, rules and regulations such as, for example, "OSHA" and "Right-to-Know" legislation. c. Contractor or Vendor to take all reasonable precautions to prevent damage to property, both visible and concealed, and will restore the Building to substantially the same condition existing prior to the Contractor's or vendor's entry, to the satisfaction of the TIW Project Manager. While performing services hereunder, the Contractor or Vendor will immediately notify the TIW Project Manager of any defective condition in the Building of which he/she becomes aware. Any damage caused by Tradespersons will be the responsibility of the Contractor or Vendor. Costs for Owner's repair of such damage will be charged directly to the Tenant. d. Contractor or Vendor to maintain proper emergency egress for the area of Work and adjacent areas of the Building during all phases of the Work. e. Contractor or Vendor to notify the TIW Project Manager if any of its employees, equipment, or motor vehicles or that of any subcontractors are involved in an accident or injury while on the Property within twenty four (24) hours. Contractor of Vendor to provide a detailed accident report within three (3) business days. 4.4 PARKING a. Parking is not allowed in or near truck docks, in accessible parking spaces or loading zones, fire access lanes, or private ways in or surrounding the property. Vehicles so parked will be towed at the expense of the Contractor or Vendor for whom the owner of such vehicle is employed. b. The availability of parking in any parking areas of the Building is limited. Use of such parking for Contractor or Vendor and his/her personnel is restricted and must be arranged with and approved by the TIW Project Manager. c. In no event may any office and/or storage trailers be parked at the Building or at the property on which the Building is located. 5. BUILDING MATERIALS 5.1 DELIVERY 8 21 All deliveries of construction materials to be made at the predetermined times coordinated with and approved by the TIW Project Manager, and to be carried out safely and expeditiously only at the location determined by the TIW Project Manager. Contractor shall work together in good faith with any other contractors performing work at the Building to assure that materials can be delivered to the Building and respective premises with minimal disruption. In addition to being entitled to designate and coordinate the times for material deliveries, the TIW Project Manager and/or Property Manager may act as the sole arbitrator for the purpose of resolving any disputes in connection with any such activities. 5.2 TRANSPORTATION IN BUILDING a. Distribution of materials from delivery point to the work area in the Building to be accomplished with the least disruption to the operation of the Building possible. Subject to the terms of Section 4.2.f., the Property Manager may designate elevators for material delivery. b. Contractor or Vendor will provide adequate protection for all carpets, wall surfaces, doors and trim in all public areas through which materials are transported. Contractor or Vendor must continuously clean all such areas. Protective measures shall include runners over carpet, padding in elevators, and any other measures determined by the TIW Project Manager and Property Manager. c. Any damage caused to the building through the movement of construction materials or otherwise will be the responsibility of the Contractor or Vendor. Costs for Owner's repair of such damage will be charged directly to the Tenant. 5.3 STORAGE AND PLACEMENT a. All construction materials to be stored only in the premises where they are to be installed. No storage or staging of materials will be permitted in public areas, loading docks, corridors leading to the premises or any other portion of the Building or Property other than the premises in which such materials will be installed. b. No flammable, toxic, or otherwise hazardous materials may be brought in or about the Building unless: (I) authorized by the Chief Engineer, (ii) all applicable laws, ordinances, rules, and regulations are complied with, and (iii) all necessary permits have been obtained. All necessary precautions will be taken by the Contractor or Vendor when handling such materials so to avoid damage or injury. 5.4 SALVAGE AND WASTE REMOVAL a. All rubbish, waste, and debris will be neatly and cleanly removed from the Building daily by the Contractor or Vendor unless otherwise approved by TIW Project Manager. The Building's trash compactor will not be used for construction or debris. For any demolition and debris, Contractor, at its sole cost and expense, must make arrangements with the Property Manager for scheduling and location of an additional dumpster to be supplied by Contractor. Where, in the opinion of the TIW Project Manager, such arrangements are not practical, Contractor will make alternative arrangements for rubbish removal. Contractor shall not be entitled to install more than one trash chute to dispose of rubbish, waste and debris in connection with the Work. b. Toxic or flammable waste is to be properly removed daily and disposed of in full accordance with all applicable laws, ordinances, rules, and regulations. c. Contractor or Vendor will, prior to removing any item (including, without limitation, building standard doors, frames and hardware, light fixtures, ceiling diffusers, ceiling exhaust fans, sprinkler heads, fire horns, ceiling speakers, and smoke detectors) from the Building, notify the TIW Project Manager that he/she intends to remove such item. At the election of TIW Project Manager, Contractor or Vendor to deliver any such items, at no cost, to an area designated by the TIW Project Manager to an area within the Building or complex in which the Building is located. 9 22 d. Contractor shall be responsible for obtaining its own Port-a-John or other sanitary facilities for use by Tradespersons, the location of which shall be subject to approval of the Property Manager. Contractor shall be responsible for having the sanitary facilities cleared at regular intervals and for removing such sanitary facilities from the Building and property upon the completion of the work. In no event shall Contractor or Tradespersons be entitled to use the Building restrooms or the sanitary facilities or any other contractor. 6. MISCELLANEOUS. a. All transformers, chillers, air conditioners, mechanical/ventilation systems, HVAC equipment, and similar devices shall be designed, located and baffled using appropriate. Acoustical screening to minimize the noise produced. The noise produced by this equipment shall comply with the City of Newton Noise Ordinance and shall not exceed 51 dBa during the day and 46 dBa during the night as measured at the property line or any location on immediately abutting residential properties. Emergency generators will be designed to meet City of Newton noise regulations. Any such equipment must be retested from time to time to confirm that it will continue to comply with such standards. b. No Contractors or Tradesmen shall park on neighborhood streets. c. Noise levels shall comply with the City's Noise Control Ordinance, Section 20-13. d. Trucks shall only access the site to and from Route 128, except when the MBTA bridge is too low to allow passage of large equipment, in which case, the routes and times shall be reviewed and approved by the Police Department. d. Noise from heaters used during construction in winter conditions shall comply with the City's Noise Control Ordinance. 10 23 EXHIBIT B-2 INDOOR AIR QUALITY (IAQ) GUIDELINES FOR CONSTRUCTION WORK The following Indoor Air Quality Guidelines are herewith incorporated into all agreements with Contractors and Vendors performing construction services on the premises. 1. MATERIALS The Contractor shall use only application-approved materials with the lowest content by volume of toxic or irritating chemicals. New carpet must have a green label certified by the Carpet and Rug Institute (CRI) and be installed according to CRI installation guidelines. Contractor shall avoid materials containing chemicals listed as potentially carcinogenic, mutagenic, teratogenic, neurotoxic, or "sensitizing." The following materials are banned from new installations: a. Materials containing greater than trace (0.1%) amounts of asbestos. b. Materials containing any halogenated hydrocarbon solvents (e.g. methylene chloride, tetrachloroethylene, trichloroethylene, trichloroethane). c. HVAC components internally lined with permeable man-made mineral fiber products unless coated with "Tuffcoat" or other tough, resilient coating or mat surface that provides a smooth, non-shedding surface in contact with the air stream. 2. SUBMITTALS & INFORMATION 2.1 Prior to starting work, the Contractor shall furnish information copies of MSDS forms to the TIW Project Manager for all materials to be installed and utilized during installation. 2.2 The Contractor will assist the TIW Project Manager in providing pre-construction information and/or information sessions to the Tenant during project planning stages and/or at least twenty-four (24) hours prior to project initiation. The information and/or information sessions shall address the following: a. Project scope and duration. b. Anticipated construction impacts on indoor air quality (IAQ) and workplace conditions. c. Methods to minimize impact (e.g. engineering controls, material selection). d. Methods to record, investigate, and resolve occupant complaints related to construction impacts on IAQ or workplace conditions. 3. METHODS 3.1 General a. The Contractor shall maintain work area clean and free of open containers of paint, cleaners, chemicals, loose trash and garbage. All flammable and hazardous substances shall be stored to prevent spillage and in accordance with National Fire Protection Association (NFPA) codes and OSHA regulations. When possible, flammable and hazardous materials shall be removed from the Building on a daily basis. Otherwise, appropriate storage arrangements shall be made with the Chief Engineer. b. No methods to isolate the Work area, contain odors and contaminants, or ventilate odors and contaminants shall impede emergency egress from the area of work or any area of the Building. 11 24 c. No equipment powered by a combustion engine will be permitted in the premises. d. When possible, the Contractor shall use application methods that generate the least amount of airborne contaminants (e.g. brush vs. spray application of paint). e. Unless approved by product specifications, the Contractor shall not install wet or water-damaged building materials. The Contractor shall protect stored materials from water and moisture prior to installation. The Contractor shall protect new building assemblies from water damage following installation and inspect for signs of ineffective water and moisture control (e.g. condensation on pipes and ducts and roof and drain leaks) following installation. 3.2 Isolation of Work Area a. Where feasible, construction site passageways abutting tenant occupied locations shall incorporate single chamber "air locks" (two sets of doors or plastic strip doors at opposite ends of an enclosed chamber or small room) into each construction site entrance. Plastic strip doors shall be of minimum 0.120" thick material with full overlap. Once installed, the air lock shall remain in place for the duration of the project or until such a time as its presence blocks final completion of the renovations. The Contractor's passage routes should avoid or minimal intersect tenant occupied areas of the building. The Contractor shall submit plan indicating construction site passageways for approval to the TIW Project Manager and shall construct and use only these passageways for access to the area of work b. All persons and materials passing to the construction site should be fully in the air lock and the door to the tenant occupied area closed before opening the construction site door (or flaps). At least one (set of) air lock door(s) (or flaps) must remain closed throughout the renovation process. All persons leaving the site shall clean their feet on a floor mat in the air lock prior to entering the tenant occupied part of the building. The Contractor shall clean the floor mat regularly. 3.2 Containment & Ventilation of Odors & Contaminants a. Upon mobilization, the Contractor and the HVAC subcontractor shall meet with the Chief Engineer to review the building HVAC system. b. The Contractor shall submit for approval to the Building Engineer proposed plan to contain and ventilate odors and contaminants. c. The Contractor is responsible for ensuring that odors and contaminants are contained. Activities that have potential to emit airborne contaminants must be coordinated with the TIW Project Manager. The Contractor shall: i. Isolate all return air pathways from the construction area. ii. Cut and cap all supply air ducts serving the construction area except for temporary ducts supplying air to the construction area for temporary heat and air conditioning. iii. Monitor and maintain construction site at negative pressure at least (-0.02" w.c.) relative to tenant occupied spaces by installing and operating temporary exhaust to outdoors through existing building exhaust systems or through temporary louvers installed in place of windows or exterior doors. Preparation should be made to replace designated windows or doors with appropriate weatherproof exhaust equipment manifolds. Upon completion of construction, the Contractor shall restore all repositioned windows and doors to original condition and location. iv. Where renovation site lacks access to perimeter windows, doorways, or existing building exhaust systems, "negative air machines" with HEPA 12 25 and/or activated-carbon filters may be utilized to re-circulate air to the building, preferably to unoccupied building locations. v. Install and maintain air-tight seals at all openings between tenant occupied areas of the building and the construction site (e.g. doorways, corridors, air plenums, chases, open conduits and duct work) throughout the course of construction activities. Upon completion of construction, the Contractor shall remove all installed barriers and seals. vi. The Contractor shall ensure that the rest of the building outside the project area remains unaffected by the project. In particular, all HVAC systems altered for the purposes of controlling site contaminants must continue to provide at least the minimum outside air ventilation rate required by all applicable codes at the time the facility was constructed, to all occupied spaces. 4. COMPLETION OF WORK 4.1 Upon completion of Work, the Contractor shall clean all air plenums and mechanical system components determined to have deteriorated as a result of the the Contractor's work. All air filters shall be changed. 4.2 The area of work should be ventilated and exhausted for a period of a minimum of 48-72 hours prior to occupancy by Tenant to allow newly installed building materials, finishes, and office equipment to off-gas volatile organic compounds, if any. 4.3 Contractor shall verify that all mechanical systems are balanced and working properly and shall provide balancing reports to the Chief Engineer. 13 26 EXHIBIT F-1 AMENDMENT TO NOTICE OF LEASE This Amendment to Notice of Lease between EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY, as Landlord, and ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE, as Tenant, is hereby given pursuant to the provisions of Chapter 183, Section 4 of the Massachusetts General Laws. WHEREAS, Landlord and Tenant are parties to that certain Lease dated November 23, 1999 with respect to the 270,446 square feet of space located in the buildings known as One Riverside Center and Two Riverside Center, 275 Grove Street, Newton, Middlesex County, Massachusetts, a notice of which is recorded with the Middlesex (South) Registry of Deeds in BOOK ____, PAGE ____ (the "Notice of Lease"). WHEREAS, Landlord and Tenant have entered into a First Amendment of even date herewith whereby Tenant has leased from Landlord and Landlord has leased to Tenant upon the terms and conditions set forth therein and in the Lease, an additional 78,014 square feet of space located in the building known as Three Riverside Center, 275 Grove Street, Newton, Middlesex County, Massachusetts. NOW, THEREFORE, Landlord and Tenant hereby agree to amend the Notice of Lease as follows: 1. The "Description of the Premises" appearing in the Notice of Lease is hereby deleted in its entirety and replaced with the following: "Description of Premises: Approximately 348,460 square feet of space on the 1st, 2nd and 3rd floors of the building commonly known as One Riverside Center, the 1st and 2nd floors of the building commonly known as Two Riverside Center and the 1st and 4th floors of the building commonly known as Three Riverside Center ("Premises") shown on the sketch plan attached hereto as Exhibit "A" and located at 275 Grove Street, Newton, MA (the "Property") more particularly described on Exhibit "B" attached hereto and made a part hereof." 2. Except as modified herein, the Notice of Lease remains unchanged and is in full force and effect. 14 27 WITNESS the execution hereof as a sealed instrument as of the 31st day of May, 2000. WITNESS/ATTEST: LANDLORD: EOP-RIVERSIDE PROJECT, L.L.C, A DELAWARE LIMITED LIABILITY COMPANY By: Beacon Property Management Corporation, a Delaware corporation, its managing member /s/ Hannah Song By: /s/ Gregory R. Clancy - -------------------------------- -------------------------------- Name (print): Hannah Song Name: Gregory R. Clancy ------------------ ------------------------------ /s/ Marcie T. Jacobson Title: VICE PRESIDENT - Leasing - -------------------------------- ------------------------------ Name (print): Marcie T. Jacobson ------------------- WITNESS/ATTEST: TENANT: ALLAIRE CORPORATION, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE By: /s/ David A. Gerth - --------------------------------- ------------------------------------ Name (print): Name: David A. Gerth --------------------- - ---------------------------------- Title: Chief Financial Officer and Vice President of Operations and Finance Name (print): --------------------- 15 28 STATE OF MASSACHUSETTS , ss May 31, 2000 [County] Then personally appeared the above-named Gregory Clancy, the VP of Beacon Property Management Corporation, a Delaware corporation, the managing member of EOP-Riverside Project, L.L.C., a Delaware limited liability company, known to me to be the person described in and who executed the foregoing instrument and acknowledged the same to be his free act and deed and that of said Beacon Property Management Corporation as the managing member of EOP-Riverside Project, L.L.C., before me, /s/ Kimberly C. Ruby ---------------------------------------- Notary Public My Commission Expires: September 8, 2006 COMMONWEALTH OF MASSACHUSETTS Middlesex , ss 5/11/00 [County] Then personally appeared the above-named David A. Gerth, the Chief Financial Officer and Vice President for Operations and Finance of Allaire Corporation, a Delaware corporation, known to me to be the person described in and who executed the foregoing instrument and acknowledged the same to be his free act and deed and that of said Allaire Corporation, before me, /s/ Victoria Sullivan Reiff ---------------------------------------- Notary Public My Commission Expires: 2005 16 EX-10.4 5 ex10-4.txt SUBLEASE AGREEMENT DATED FEBRUARY 14, 2000 1 Exhibit 10.4 SUBLEASE AGREEMENT SUBLEASE AGREEMENT (this "Sublease") made this 14th day of February, 2000, by and between ALLAIRE CORPORATION, a Delaware corporation ("Sublessor") and NERVEWIRE, INC., a Delaware corporation ("Sublessee"). WITNESSETH THAT WHEREAS, Sublessor, as tenant, and EOP-Riverside Project, L.L.C., a Delaware limited liability company, as landlord (the "Landlord"), are parties to that certain Office Lease Agreement dated November 23, 1999, a redacted copy of which is attached hereto as EXHIBIT A (as so redacted, the "Main Lease") pursuant to which Landlord has leased to Sublessor certain premises containing approximately 270,446 rentable square feet of space (the "Main Premises") known as Suites 1-100, 1-200, 1-300, 2-100 and 2-200 located within the project located at 275 Grove Street, Newton, Massachusetts and known as Riverside Center (the "Building") (the Main Premises consist of approximately 223,300 rentable square feet of space located on the first, second and third floors of the portion of the Building known as One Riverside Center and approximately 47,146 rentable square feet of space located on the first and second floors of the portion of the Building known as Two Riverside Center); and WHEREAS, Sublessor has agreed to sublease approximately 47,146 rentable square feet of the Main Premises located on the first and second floor(s) of the portion of the Building known as Two Riverside Center known as Suites 2-100 and 2-200 which space is shown cross-hatched on EXHIBITS B-1 AND B-2 attached hereto (the "Sublease Premises"), to Sublessee on the terms stated herein; NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublessor, and Sublessee hereby agree as follows: 1. SUBLEASE PREMISES. Sublessor hereby leases to Sublessee, and Sublessee hereby leases from Sublessor, the Sublease Premises, upon and subject to the terms and conditions hereinafter stated or incorporated herein by reference. Capitalized terms not otherwise defined herein shall have the meanings specified in the Main Lease. Sublessee shall have, as appurtenant to the Sublease Premises, the right to use in common with others entitled thereto on a non-exclusive basis, the rights and reservations described in Article II of the Main Lease appurtenant to the Sublease Premises. Sublessee acknowledges that, pursuant to Article I.C of the Main Lease, Landlord has the right to field measure the rentable square footage of the Main Premises and the Building. If as a result of such field measurement Landlord and Sublessor shall enter into an amendment of the Main Lease restating the rentable square footage of the Main Premises and/or the Building, Sublessee and Sublessor shall enter into a similar amendment of this Sublease which, in addition to restating the rentable square footage of the Main Premises and/or Building, shall restate (to the extent the same has changed) the rentable square footage of the Sublease Premises. Sublessor and Sublessee acknowledge that the amendment of the rentable square footage of the Sublease Premises will affect the Base Rent (as defined in paragraph 4, below), the Allowance (as defined in paragraph 8, below) and any other right or obligation hereunder which is determined on a "per square foot" basis. Sublessor and Sublessee further acknowledge that the amendment of the rentable square footage of the Sublease Premises or the Main Premises will affect Sublessee's Pro Rata Share (as defined in paragraph 5(g) below). 2. TERM. To have and to hold for a term (the "Term") commencing (the "Commencement Date") on the "Two Riverside Center Commencement Date" (as defined in Article I.G of the Main Lease, and terminating at 11:59 p.m. on the day that is forty-eight (48) months after the Commencement Date, unless sooner terminated or extended, as herein provided. Once the Commencement Date has been established, Sublessee and Sublessor shall confirm the same in writing. Sublessor shall deliver possession of the Sublease Premises on the Commencement Date free of tenants and occupants and all personal property (except for such property moved into the Sublease Premises by Sublessee prior to the Commencement Date). If the Commencement Date does not occur by December 1, 2000 (the "Outside Completion Date"), Sublessee may terminate this Sublease by giving 1 2 Sublessor written notice of termination on or before the earlier to occur of: (i) five business days after the Outside Completion Date, and (ii) the Commencement Date. In the event that Sublessee terminates this Sublease, this Sublease shall be deemed null and void and of no further force and effect and Sublessor shall promptly refund any Security Deposit previously advanced by Sublessee under this Sublease, and so long as Sublessee shall not previously defaulted under any of its obligations hereunder, the parties hereto shall have no further responsibilities or obligations to each other with respect to this Sublease. Sublessor and Sublessee acknowledge and agree that the determination of the Commencement Date shall take into consideration the effect of any Tenant Delays (as defined in Article III.B of the Main Lease) attributable to Sublessee, and that the Outside Completion Date shall be postponed by the number of days the Commencement Date is delayed due to events of Force Majeure (as defined in Article XXXI.D of the Main Lease). Sublessor shall have the right, but not the obligation, to offer Sublessee up to three (3) consecutive one year options to extend the Term of this Sublease, each such extension to be effective upon the expiration of the then current Term. If Sublessor elects to offer Sublessee any of the extension options, it shall, with respect to each such option, give Sublessee written notice of the same no later than twelve (12) months prior to the expiration date of the then current Term. If Sublessee wishes to exercise the extension option then being offered by Sublessor, it shall do so in writing within ninety (90) days after receipt of Sublessor's notice, in which event, the Term shall automatically extend for one year upon the same terms and conditions contained herein (exclusive of the extension option contained in this paragraph), except that Base Rent (as defined in paragraph 4, below) shall be increased to One Million Six Hundred Ninety-Seven Thousand Two Hundred Fifty-Six and 00/100 Dollars ($1,697,256.00) per year (i.e. $141,438.00 per month; $36.00 per rentable square foot per year). If Sublessor shall not offer Sublessee any of the extension options, or if Sublessor shall offer Sublessee an extension option, but Sublessee shall not make the election within the required ninety-day period (time being of the essence), Sublessee shall have no further right to extend the Term. Sublessee agrees that if Sublessor offers Sublessee a one year extension of the Term, Sublessor shall be under no obligation to offer any of the remaining extension options, such right being within Sublessor's sole discretion. 3. PARKING. Sublessee shall have the right, as appurtenant to the Sublease Premises, and without additional charge, to use Sublessee's Pro Rata Share (as defined in paragraph 5(g) herein) of Sublessor's parking spaces in the Parking Area (as defined in Paragraph VI of Exhibit E to the Main Lease). As of the date hereof, it is contemplated that Sublessee shall have the right to use one hundred forty-one (141) parking spaces in the Parking Area which spaces shall be allocated as follows: twelve (12) spaces in the executive parking garage, ninety-eight (98) spaces in the parking structure and thirty-one (31) spaces in the surface parking areas. Sublessee's use of all such spaces shall be subject to the terms and conditions of the Main Lease. 4. RENT. Sublessee covenants and agrees to pay to Sublessor as rent hereunder One Million Six Hundred Two Thousand Nine Hundred Sixty-Four and 00/100 Dollars ($1,602,964.00) per year (i.e. $34.00 per rentable square foot per year) commencing on the Commencement Date in equal monthly installments of One Hundred Thirty-Three Thousand Five Hundred Eight and 33/100 Dollars ($133,580.33) (the "Base Rent") and shall be payable in advance on the first day of each month of the Term at One Riverside Center, 275 Grove Street, Newton, Massachusetts, or such other place as Sublessor shall from time to time designate in writing. It is the intention of the parties that the Base Rent shall be completely "net" to Sublessor such that all utilities furnished to or used by Sublessee at the Sublease Premises shall be paid or reimbursed by Sublessee as provided in paragraph 5, below. Notwithstanding the foregoing, Sublessee shall have no obligation to pay Base Rent until the Sublease Premises are Substantially Complete (as defined in Article III of the Main Lease) or deemed by Landlord to be Substantially Complete absent any Tenant Delays (as defined in Article III.B of the Main Lease) attributable to Sublessee. 5. ADDITIONAL RENT. Sublessee covenants and agrees to pay the Sublessor, as additional rent, the following amounts (hereinafter, "Additional Rent"): 2 3 a. Sublessee's Pro Rata Share of the Tax Excess pursuant to Article IV of the Main Lease; b. Sublessee's Pro Rata Share of the Expense Excess pursuant to Article IV of the Main Lease; c. All electricity used by Sublessee in the Sublease Premises as determined by Landlord pursuant to Article X of the Main Lease; d. Sublessee shall be fully responsible for items of Additional Rent (as defined in the Main Lease) charged by Landlord and attributable to the Sublease Premises, including supplementary services requested by Sublessee or provided by Landlord to the Sublease Premises pursuant to Articles VII and X of the Main Lease; e. Sublessee shall pay in a timely manner all charges for telephone, internet service, cable and other utilities contracted by Sublessee which are now or hereafter separately billed to Sublessee by the utility provider or by Landlord; f. With respect to any item of Additional Rent payable on a monthly basis, Sublessee shall pay the same at the same time as Base Rent shall be due hereunder; otherwise, Additional Rent shall be within twenty-one (21) days after Sublessor notifies Sublessee of the amount thereof. Sublessee shall be liable for such Additional Rent only as it relates to the period covered by this Sublease. Sublessee shall have no liability for additional rent attributable to periods prior to the Commencement Date or subsequent to the expiration of the Term hereunder. g. As used herein, "Sublessee's Pro Rata Share" shall be the fraction comprised of 47,146 (representing the rentable square footage of the Sublease Premises) as the numerator and 270,446 (representing the total rentable square footage of the Main Premises) as the denominator, as the same may be adjusted pursuant to the terms herein and/or in Main Lease. h. Base Rent and Additional Rent are collectively referred to as "Rent". 6. LATE COMPLETION PENALTIES. In the event that the Sublease Premises are not Substantially Complete by October 1, 2000 (the "Outside Completion Date") through no fault of Sublessee (including, without limitation, Tenant Delays attributable to Sublessee), which Outside Completion Date shall be extended by reasons of Force Majeure (as defined in Article XXXI.D of the Main Lease), subject to the last sentence of this Paragraph, Sublessee shall be entitled to a rent abatement in the amount of $ 4,392.00 (the "Rent Abatement") for every day after the Outside Completion Date until either the Sublease Premises are Substantially Complete or the Main Lease is terminated pursuant to Article III.E of the Main Lease. Any such Rent Abatement shall be applied against Base Rent next due hereunder until the same shall be exhausted. Sublessee's right to the Rent Abatement described herein shall be conditioned upon Sublessor receiving from the Landlord pursuant to the Main Lease an equivalent abatement of Rent with respect to the Sublease Premises. 7. SECURITY DEPOSIT. Sublessee will deposit with the Sublessor, in accordance with the following schedule, a security deposit (the "Security Deposit") in the amount of One Million Four Hundred Seventy-Seven Thousand and 00/100 Dollars ($1,477,000.00) to be held by Sublessor for the duration of this Sublease as security for the full performance by Sublessee of all the obligations on the part of Sublessee hereunder. One half of the Security Deposit ($738,500.00) shall be paid upon the execution of this Sublease. The remaining one half of the Security Deposit shall be paid as follows: (i) $246,000.00 shall be delivered on or before April 1, 2000; (ii) $246,000 shall be delivered on or before June 1, 2000; and (iii) $246,500.00 shall be delivered on or before the Commencement Date. The Security Deposit shall, at the option of Sublessee, be in the form of either cash or an irrevocable demand letter of credit (the "Letter of Credit"), in form and substance reasonably acceptable to Sublessor, issued by Fleet Bank, N.A. or other FDIC-insured banking institution reasonably acceptable to Sublessor (the "Issuing Bank"). 3 4 a. If the Security Deposit, or any portion thereof, is in the form of cash, Sublessor shall hold the same without liability for interest or to segregate such cash from Sublessor's other funds; provided, however, if the cash portion of the Security Deposit is, at any time, more than $50,000.00, then such cash portion shall be held by Sublessor in a segregated interest-bearing account designated for such purpose, provided that Sublessee shall have provided Sublessor with Sublessee's federal taxpayer identification number. Sublessor assumes no responsibility for the sufficiency of interest being offered by such bank. If Sublessor shall be required to keep the Security Deposit in a segregated interest-bearing account, Sublessor shall give Sublessee notice of the bank holding the Security Deposit and the identification of such account and, provided Sublessee shall not be in default hereunder, shall pay to Sublessee on the anniversary of the Commencement Date, all accrued interest, if any, on such account. Sublessee shall not mortgage, pledge, grant a security interest in, or otherwise encumber the Security Deposit. Sublessor shall have the right from time to time, without prejudice to any other remedy Sublessor may have on account thereof, to apply such Security Deposit, or any part thereof, to Sublessor's damages arising from any default (beyond applicable notice and cure periods) on the part of Sublessee. Upon such application, Sublessee shall promptly restore the Security Deposit to its original amount. Upon the full performance by Sublessee of its obligations hereunder, the Security Deposit, or such amount that shall be remaining after application of the same hereunder, together with any accrued interest thereon not previously delivered to Sublessee, shall be returned by Sublessor to Sublessee upon the expiration or earlier termination of this Sublease and surrender of possession of the Sublease Premises by Sublessee to Sublessor at such time. b. If the Security Deposit is in the form of a Letter of Credit, such Letter of Credit shall, throughout the Term, be in full force and in compliance with the terms of this Sublease. Sublessee shall not mortgage, pledge, grant a security interest in, or otherwise encumber the Letter of Credit or the proceeds of the same. Sublessor shall have the right from time to time, without prejudice to any other remedy Sublessor may have on account thereof, to draw on the Letter of Credit and apply the proceeds, or any part thereof, to Sublessor's damages arising from any default (beyond applicable notice and cure periods) on the part of Sublessee. Upon such application, Sublessee shall promptly restore the Security Deposit to its original amount by either delivering cash or a new Letter of Credit complying with the provisions hereof to Sublessor. In addition, in the event that (i) Sublessor shall transfer its interest under the Main Lease to a third party and the Issuing Bank does not consent to the transfer of Sublessor's beneficial interest to such third party or issue a replacement Letter of Credit in identical form to such third party, or (ii) such Letter of Credit will expire by its terms prior to the end of the Term, and Sublessee fails to provide a substitute Letter of Credit at least thirty (30) days prior to such expiration, then Sublessor may draw on the Letter of Credit. Any portion of the proceeds of the Letter of Credit not applied to cure a default by Sublessee hereunder, shall be held by Sublessor as a cash Security Deposit pursuant to the provisions of subparagraph A above, unless Sublessee shall deliver to Sublessor a new Letter of Credit complying with the provisions hereof, in which event the unapplied cash proceeds shall be promptly returned to Sublessee. Upon the full performance by Sublessee of its obligations hereunder, the Letter of Credit (or the remaining proceeds thereof if previously drawn and not applied to cure a default by Sublessee hereunder), shall be surrendered by Sublessor to Sublessee upon the expiration or earlier termination of this Sublease and surrender of possession of the Sublease Premises by Sublessee to Sublessor at such time. c. Notwithstanding anything herein to the contrary, provided Sublessee is not in default under this Sublease as of the third (3rd) anniversary of the Commencement Date (i.e. the expiration of the 3rd lease year), the amount of the Security Deposit shall reduce to $1,000,000.00 effective as of the 3rd anniversary of the Commencement Date. Furthermore, in the event that that the Term of this Sublease has been extended pursuant to paragraph 2 herein, and provided that 4 5 Sublessee is not in default under this Sublease as of the forth (4th) anniversary of the Commencement Date (i.e. the expiration of the 4th lease year), the amount of the Security Deposit shall reduce to $600,000.00 effective as of the 4th anniversary of the Commencement Date. If the Security Deposit is provided by Sublessee in the form of cash, Sublessor shall return the reduced portion of the Security Deposit to Sublessee within thirty (30) days following the applicable anniversary date. If the Security Deposit is provided in the form of a letter of credit, such reduction shall be accomplished by having Sublessee provide Sublessor with a substitute letter of credit in the reduced amount. If the Security Deposit is provided through a combination of cash and letter of credit, Sublessee, by written notice to Sublessor, shall advise Sublessor as to the method that will be used to effectuate the reduction of the Security Deposit. 8. LANDLORD WORK. Pursuant to the provisions of Exhibit D to the Main Lease (the "Work Letter"), Landlord is responsible for the construction of Landlord Work to prepare the Main Premises (including the Sublease Premises) for Sublessor's use and occupancy. Except as expressly provided in this Sublease, Sublessee agrees (a) to be bound by the terms and conditions of the Work Letter as if Sublessee were the "Tenant" thereunder, to the extent that the same shall be applicable to the Sublease Premises; and (b) to be responsible for any liability, losses, costs and expenses incurred by Sublessor due to Sublessee's failure to timely, fully and faithfully perform the obligations of Sublessor under the Work Letter to the extent that the same shall be applicable to the Sublease Premises (including, without limitation, Tenant Delays attributable to Sublessee). Subject to Landlord's obligation to contribute $25.00 per rentable square foot of the Sublease Premises (i.e. $1,178,650.00) (the "Allowance") to the Cost of Landlord Work, the Cost of Landlord Work with respect to the Sublease Premises shall be at Sublessee's sole cost and expense. Sublessee shall pay the Cost of Landlord Work with respect to the Sublease Premises in excess of the Allowance at such time(s), and in such manner, as required pursuant to the Work Letter, but in no event more than five (5) Business Days after billing thereof from Sublessor. In addition, Sublessee shall pay to Sublessor a fee equal to fifty cents ($.50) per rentable square foot of the Sublease Premises (i.e. $23,573.00) toward the cost of Sublessor's construction manager. The fee shall be paid in five (5) equal monthly installments of $4,714.60 beginning on March 1, 2000, with the last such installment due on July 1, 2000. 9. ARCHITECTURAL ALLOWANCE. Sublessee shall be entitled to Sublessee's Pro Rata Share of the Architectural and Engineering Allowance being provided by Landlord to Sublessor pursuant to the Work Letter (i.e. $94,292.00) toward the cost of architectural and engineering services for the Main Premises contracted by Sublessor. Such share shall be payable to Sublessee at such time and in the manner prescribed in the Work Letter. Sublessee shall contract with Margulies & Associates for Core Architectural Services. The term "Core Architecture Services" means architectural services required for the basic configuration of the Sublease Premises, such as placement of walls, doors and cabling. Sublessee may contract with Bergmeyer Associates, Inc. (or other architect selected by Sublessee and acceptable to Sublessor in its reasonable discretion) for all other architectural services to the Sublease Premises. The design of the Sublease Premises, whether by Margulies & Associates, Bergmeyer Associates, Inc, or other architect, shall be subject to Landlord's prior approval in accordance with the provisions of the Main Lease, and to Sublessor's prior approval, which approval Sublessor agrees shall not be unreasonably withheld. 10. EARLY ACCESS PERIOD. Sublessee shall have access to the Sublease Premises during the period beginning twenty-one (21) days prior to the Commencement Date (the "Early Access Period") for the purpose of installing Sublessee's voice/data cabling and systems, furniture and equipment; provided, that such access does not contribute to Tenant Delays (as defined in Article III.B of the Main) so as to cause a delay in the date of Substantial Completion (as defined in Article III.A of the Main Lease). Sublessor and Sublessee agree to work together in good faith to schedule Sublessee's work in the Sublease Premises during the Early Access Period so as to minimize interference with the timely completion of Landlord Work. Sublessee shall not conduct any business in the Sublease Premises during the Early Access Period. During the Early Access Period, Sublessee 5 6 shall be subject to all of the terms and conditions of this Sublease, except that no Base Rent or Additional Rent shall be due or payable. 11. SIGNAGE. Subject to Section IX.B of Exhibit E to the Main Lease, Sublessor shall cause Sublessee's name to be listed any tenant directory in the lobby of the Building, and on any standard tenant identification signage on or adjacent to the main entry door to the Sublease Premises on each floor of the Building on which the Sublease Premises are located. 12. INCORPORATION OF MAIN LEASE. a. Except as otherwise expressly provided herein, all of the terms, covenants and conditions of the Main Lease are incorporated herein by reference and made a part hereof with the same force and effect as if set forth herein in their entirety, provided that the terms and conditions hereof shall be controlling whenever the terms and conditions of the Main Lease are contradictory to or inconsistent with terms and conditions hereof, and provided further that those incorporated provisions of the Main Lease which are protective and for the benefit of Landlord shall, in this Sublease, be deemed to be protective and for the benefit of both Landlord and Sublessor, that references therein to "Landlord" and "Tenant" shall be deemed to refer to "Sublessor" and "Sublessee", respectively, that references therein to "this Lease" shall be deemed to refer to "this Sublease," and that references therein to the "Premises" shall be deemed to refer to the "Sublease Premises," as defined herein. b. Notwithstanding Subparagraph a, above, the terms, covenants and conditions contained in the following provisions of the Main Lease (including any redacted portions of the Main Lease) are expressly excluded from this Sublease: Article I (but only the following paragraphs: C (first two sentences only), D, E, G (definitions of the "Term" and "Termination Date" only), H, I, J and K); Section III.E.2; Article VI; Article XXXI.M (except for the first three sentences); Exhibit C; Exhibit E (except Sections VI (Parking), VII (Hazardous Materials), IX.B (Directory and Entry Signage), XV (Vacation or Abandonment) and XVII (Building Risers)); Exhibit F; Exhibit K; Exhibit L; Exhibit O; and Exhibit P. 13. ADDITIONAL SUBLESSEE COVENANTS. Sublessee hereby covenants and agrees: a. To observe, comply and perform all of the terms, covenants, conditions and provisions of the Main Lease on the part of the Sublessor as tenant thereunder to be performed pursuant to the provisions thereof, to the extent the same are applicable to the Sublease Premises and not inconsistent with the terms and provision of this Sublease, and neither to do nor cause to be done, nor suffer, nor permit any act or thing to be done which would or might cause the Main Lease or the rights of Sublessor as tenant thereunder to be canceled, terminated, forfeited or surrendered, or might make Sublessor liable for any damages, claims or penalties. b. Sublessee shall maintain throughout the Term such insurance (with such coverages and in such amounts) as Sublessor is required to maintain pursuant to Article XV of the Main Lease. All liability insurance shall name Sublessor, Landlord, and any other parties that Landlord may designate pursuant to the Main Lease as additional insureds. Sublessee agrees to deliver evidence of insurance to Sublessor as of the date hereof and thereafter not less than thirty (30) days prior to the expiration of any such policy. Such insurance shall not be cancellable without thirty (30) days' prior written notice to Sublessor and Landlord. Sublessor will not carry insurance of any kind on Sublessee's furniture, equipment or personal property, and, except as provided by law, shall not be obligated to repair any damage thereto or to replace the same. 14. ASSIGNMENT/SUB-SUBLEASE. 6 7 a. Except in connection with a Permitted Transfer (defined below), Sublessee shall not assign, sublease, transfer or encumber any interest in this Sublease or allow any third party to use any portion of the Sublease Premises (collectively or individually, a "Transfer") without the prior written consent of (a) Sublessor, which consent shall not be unreasonably withheld, conditioned or delayed if Sublessor does not elect to exercise its recapture rights below, and (b) Landlord pursuant to Article XII of the Main Lease. Without limitation, it is agreed that Sublessor's consent shall not be considered unreasonably withheld if: (1) the proposed transferee's net worth is less than that of Sublessee either on the execution date of this Sublease or at the time immediately prior to such Transfer, which ever is greater, provided that such criteria shall only be applicable to an assignee of this Sublease, and shall not be applicable to a subtenant or other occupant of the Sublease Premises; (2) the proposed transferee's financial capability is insufficient in Sublessor's reasonable judgment, to meet the obligations imposed by the Transfer or under this Sublease; (3) the proposed transferee is a business competitor of Sublessor; (4) Sublessee is in default (beyond the expiration of any notice and cure periods) under this Sublease; or (5) Landlord does not grant its consent or conditions its consent in such a manner as to increase Sublessor's obligations or decrease Sublessor's rights under the Main Lease. Sublessee shall not be entitled to receive monetary damages based upon a claim that Sublessor unreasonably withheld its consent to a proposed Transfer and Sublessee's sole remedy shall be an action to enforce any such provision through specific performance or declaratory judgment. Any attempted Transfer in violation of this Paragraph shall, at Sublessor's option, be void. Consent by Sublessor to one or more Transfer(s) shall not operate as a waiver of Sublessor's rights to approve any subsequent Transfers. In no event shall any Transfer or Permitted Transfer (as defined below) release or relieve Sublessee from any obligation under this Sublease. b. As part of its request for Sublessor's consent to a Transfer, Sublessee shall provide Sublessor with financial statements for the proposed transferee, a complete copy of the proposed assignment, sublease and other contractual documents and such other information as Sublessor may reasonably request. Sublessor shall, by written notice to Sublessee within 10 Business Days of its receipt of the required information and documentation, either: (1) consent to the Transfer by the execution of a consent agreement in a form reasonably designated by Sublessor and/or Landlord, or reasonably refuse to consent to the Transfer in writing; or (2) recapture the space that Sublessee desires to Transfer. Notwithstanding the foregoing, Sublessor shall not have the right to recapture any portion of the Sublease Premises that is being transferred pursuant to a Permitted Transfer. Sublessee shall pay any review fee which Sublessor is required to pay Landlord pursuant to the Main Lease. c. Sublessee and Sublessor shall equally share the net amount of all rent and other consideration which Sublessee receives as a result of a Transfer that is in excess of the Rent payable to Sublessor for the portion of the Sublease Premises and Term covered by the Transfer, and after deducting any portion of such excess to which Landlord shall be entitled pursuant to the terms and conditions of the Main Lease. Sublessee shall pay Sublessor any such excess within 30 days after Sublessee's receipt of such excess consideration. Sublessee may deduct from the excess all reasonable and customary expenses directly incurred by Sublessee attributable to the Transfer including Landlord's review fee, brokerage fees, legal fees and construction costs. If Sublessee is in Monetary Default (defined in Section XIX.A. of the Main Lease), Sublessor may require that all sub-sublease payments be made directly to Sublessor, in which case Sublessee shall receive a credit against Rent in the amount of any payments received (less: any excess). d. Except as provided below with respect to a Permitted Transfer, if Sublessee is a corporation, limited liability company, partnership, or similar entity, and if the entity which owns or controls a majority of the voting shares/rights at any time changes for any reason (including but not limited to a merger, consolidation or reorganization), such change of ownership or control shall constitute a Transfer. 7 8 The foregoing shall not apply so long as Sublessee is an entity whose outstanding stock is listed on a recognized security exchange, or if at least 80% of its voting stock is owned by another entity, the voting stock of which is so listed. e. Sublessee may assign its entire interest under this Sublease or sublet the Sublease Premises or any portion thereof to a wholly owned corporation, partnership or other legal entity or affiliate, subsidiary or parent of Sublessee or to any successor to Sublessee by purchase, merger, consolidation or reorganization (hereinafter, collectively, referred to as "Permitted Transfer") without the consent of Sublessor (but subject, however, to the consent of Landlord pursuant to the Main Lease), provided: (i) Sublessee is not in default under this Sublease beyond notice and applicable cure periods; (ii) if such proposed transferee is a successor to Sublessee by purchase, merger, consolidation or reorganization, the continuing or surviving entity shall own all or substantially all of the assets of Sublessee; (iii) such proposed transferee operates the business in the Sublease Premises for the Permitted Use and no other purpose; and (iv) in no event shall any Permitted Transfer release or relieve Sublessee from any of its obligations under this Sublease. In addition, if the proposed transferee is a successor to Sublessee by purchase, merger, consolidation or reorganization and the continuing or surviving entity does not have a net worth which is at least equal to the greater of Sublessee's net worth on the execution date of this Sublease or the net worth of Sublessee immediately prior to such purchase, merger, consolidation or reorganization. Sublessee shall give Sublessor written notice at least thirty (30) days prior to the effective date of such Permitted Transfer; provided that if the Permitted Transfer is being treated as confidential by Sublessee, Sublessee shall provide Sublessor with written notice within thirty (30) days after the first to occur of the closing date of the Permitted Transfer and the date that the occurrence or proposed occurrence of the Permitted Transfer becomes public knowledge. As used herein: (a) "parent" shall mean a company which owns a majority of Sublessee's voting equity; (b) "subsidiary" shall mean an entity wholly owned by Sublessee or at least fifty-one percent (51%) of whose voting equity is owned by Sublessee; (c) "affiliate" shall mean an entity controlled, controlling or under common control with Sublessee; and (d) "net worth" shall mean Sublessee's total assets minus Sublessee's total liabilities calculated at the period of time in question. 15. SUBLESSOR'S COVENANT. Except for the obligations of Sublessee hereunder, Sublessor covenants to observe, comply and perform all of the terms, covenants, conditions and provisions of the Main Lease to be observed and/or performed by Sublessor, and neither to do nor cause to be done any act or thing (other than the exercise of Sublessor's rights hereunder) which would or might cause the Main Lease or this Sublease or the rights of Sublessee hereunder to be canceled, terminated, forfeited or surrendered or might make Sublessee liable for any damages, claims or penalties. 16. NO SUBLESSOR MAINTENANCE, ETC. OBLIGATION. Sublessor shall not have any obligation to construct, maintain, alter, repair or restore the Sublease Premises, the Building, or any parking area or other facility or improvement thereon or appurtenant thereto or to provide Sublessee with any service of any kind or description whatsoever, nor shall Sublessor be responsible for the performance of Landlord's obligations under the Main Lease or be liable in damages or otherwise for any negligence of Landlord or for any damage or injury suffered by Sublessee as a result of any act or failure to act by Landlord or any default by Landlord in fulfilling its obligations under the Main Lease. Without limiting the generality of the foregoing, Sublessor shall not be required to perform any of the obligations, or to provide any of the services, to be performed or provided by Landlord under Article VII or Section IX.B of the Main Lease. If Landlord shall default in any of its obligations to Sublessor, Sublessor shall cooperate with Sublessee, upon request by Sublessee and at Sublessee's sole cost and expense, in enforcing Sublessor's rights against Landlord under the Main Lease. 17. NO LIABILITY FOR LANDLORD DEFAULT. Sublessor will not incur any liability whatsoever to Sublessee for any injury, inconvenience, or damages incurred or suffered by Sublessee as a result of the exercise by Landlord of any of the rights reserved to Landlord under the 8 9 Main Lease, nor shall such exercise constitute a constructive eviction or a default by Sublessor hereunder, unless such exercise by Landlord arises out of a default under the Main Lease by Sublessor but only to the extent such default is not attributable to the default of Sublessee hereunder. 18. CONDITION OF THE PREMISES. By taking possession of the Sublease Premises on the Commencement Date, Sublessee is deemed to have accepted the Sublease Premises with no representation or warranty by Sublessor as to the condition of the Sublease Premises or suitability thereof for Sublessee's use, and further agrees that it shall have no claim that Sublessor has failed to perform its obligation to deliver the Sublease Premises with Landlord Work complete; PROVIDED, HOWEVER, the foregoing shall not apply to "punch list" work to be performed by Landlord after the Commencement Date, or to "latent defects" to be corrected by Landlord pursuant to Article III.C of the Main Lease. Sublessee acknowledges that pursuant to the Main Lease, Landlord is responsible for the completion of Landlord Work in the Sublease Premises and shall contribute the Allowance toward to Cost of Landlord Work in the Sublease Premises; accordingly, Sublessee acknowledges Sublessor shall have no obligation to do any work in or to the Sublease Premises, or to incur any expense in connection with said work, in order to make them suitable and ready for occupancy and use by Sublessee. 19. FIRE, CASUALTY AND EMINENT DOMAIN. In the event the Sublease Premises, or a portion thereof, are rendered substantially unsuitable for their intended use by fire or other casualty or are taken by eminent domain, a just and proportionate abatement of rent shall be made to the extent Sublessor is entitled to an abatement of rent under the Main Lease. Sublessee hereby releases and assigns to Sublessor all of Sublessee's right, title and interest in and to any and all damages to the Sublease Premises, except for moving and/or relocation awards payable to Sublessee, for any taking by eminent domain or by reason of anything lawfully done in pursuance of public authority. Sublessee further covenants to deliver such further assignments and assurance thereof as Sublessor any from time to time reasonably request. In the event of a fire or other casualty or a taking by eminent domain, Sublessee shall have the right to terminate this Sublease in the manner and under the circumstances set forth in Articles XVII and XVIII of the Main Lease as if fully set forth herein. 20. DEFAULT AND ENFORCEMENT. It is agreed that the relationship between, and the rights of, Sublessor and Sublessee shall, with respect to enforcement of the provisions of this Sublease Agreement and termination hereof, be governed by Articles XIX and XX of the Main Lease as if they were Landlord and Tenant respectively. In any action or proceeding involving a dispute between Sublessor and Sublessee arising out of the enforcement of the terms and conditions of this Sublease, the prevailing party shall be entitled to receive from the other party its costs (including reasonable attorneys' fees) incurred in connection with such action or proceeding. 21. CONSENTS. Sublessor shall not unreasonably withhold, condition or delay any consent or approval requested by Sublessee under the terms of this Sublease, provided, however, that it shall not be unreasonable for Sublessor to withhold or delay any such consent or approval until it has first obtained the written consent of Landlord with respect to such matter. 22. SUBORDINATION; TERMINATION. This Sublease is and shall be subject and subordinate to the Main Lease and all amendments and modifications thereto; provided, however, Sublessee shall not be subject to any future amendment or modification of the Main Lease which reduces Sublessee's rights or increases Sublessee's obligations hereunder. Upon termination of the Main Lease, (i) this Sublease shall terminate simultaneously therewith, without giving rise to any claim or action against Sublessor as a result of such termination, unless such termination was the result of a breach by Sublessor under the Main Lease and in no way attributable to a breach by Sublessee of any term, covenant or condition of this Sublease, and (ii) any unearned rent paid in advance shall be refunded to Sublessee unless such termination was the result of a breach by Sublessee of any term, covenant or condition of this Sublease. Notwithstanding any provision in this Sublease or the Main Lease to the contrary, and except for termination rights of Sublessor under 9 10 the Article III.E, XVII and XVIII of the Main Lease, Sublessor shall not voluntarily terminate the Main Lease. 23. RELATIONSHIP BETWEEN SUBLESSOR AND SUBLESSEE. The parties hereto agree that the relationship between Sublessor and Sublessee hereunder shall, except as otherwise provided herein, be governed by the provisions of the Main Lease as if they were landlord and tenant under the Main Lease. 24. NOTICES. All notices required or permitted hereunder shall be in writing and given in the manner described in Article XXVIII of the Main Lease, at the following addresses: If to Sublessor: as provided in Article I.M of the Main Lease: If to Sublessee: If prior to the Commencement Date: 200 Needham Street, Needham, MA 02494 If on or after the Commencement Date: At the Sublease Premises with a copy to: Gadsby & Hannah LLP, 225 Franklin Street, Boston, MA 02110, Attn: Cynthia B. Kelliher, Esq. If to Landlord: as provided in Article I.M of the Main Lease. Any of the persons named in this Section may change the address for notices by written notice sent to each of the other persons at the addresses as set forth herein. 25. SEVERABILITY. If any provision of this Sublease shall to any extent be determined by any court of competent jurisdiction to be invalid or unenforceable for any reason, the parties agree to amend this Sublease so as to effectuate the original intent of the Sublessor and Sublessee. There are no oral or written agreements between Sublessor and Sublessee affecting this Sublease. 26. CONSENT OF LANDLORD. The obligations of the parties hereto are conditional upon Landlord's execution and delivery of the Consent to Sublease in the form attached hereto as EXHIBIT C. 27. AMENDMENT. This Sublease Agreement may not be amended, altered, or modified except by instrument in writing and executed by Sublessor and Sublessee. 28. GOVERNING LAW. This Sublease shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 29. BIND AND INURE. This Sublease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 30. BROKER. Sublessor and Sublessee each represent and warrants to the other that it has not dealt with any broker in connection with this Sublease except for Insignia/ESG Inc. to whom Sublessor shall be responsible for a commission. Sublessor and Sublessee shall indemnify the other against, and hold the other harmless from the breach of its representation and warranty hereunder. 31. SUBLESSOR. The term "Sublessor" whenever used in this Sublease shall be limited to mean and include only the tenant or tenants at the time in question under the Main Lease, so that in the event that the original Sublessor hereunder, or any successor Sublessor, shall assign or otherwise dispose of its entire interest under the Main Lease, and the new tenant or tenants under the Main Lease shall assume the obligations of such original Sublessor or successor Sublessor, as the case may be, under the Main Lease, and recognize Sublessee's rights under this Sublease, such original Sublessor or successor Sublessor, as the case may be, shall thereupon be released from all liabilities and obligations of the Sublessor under this Sublease accruing after the time of such assignment or disposition (provided, that, any cash Security Deposit and accrued interest thereon shall have been 10 11 transferred to the new tenant or tenants under the Main Lease) and all such liabilities and obligations shall thereupon become binding on the new tenant or tenants under the Main Lease. Sublessor agrees to give Sublessee prompt written notice of the assignment or disposition of its entire interest under the Main Lease, together with a copy of the instrument evidencing the assumption of Sublessor's obligations under the Main Lease and the recognition of Sublessee's rights under this Sublease. Notwithstanding anything herein to the contrary, no partner, general or limited, of Sublessor shall be personally liable for the observance or performance of Sublessor's obligations hereunder, all such liability being limited to the assets of Sublessor. 32. CONSEQUENTIAL DAMAGES. Notwithstanding anything to the contrary contained in this Sublease, neither party hereto shall be liable to the other for any indirect, special, consequential or incidental damages (including without limitation loss of profits, loss of use or loss of goodwill) regardless of (i) the negligence (either sole or concurrent) of either party, or (ii) whether either party has been informed of the possibility of such damages. It is expressly understood and agreed that damages payable by either party to Landlord shall be deemed to constitute direct damages of such party. 33. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple counterparts, and as so executed shall constitute one original agreement. This Agreement shall be of no force or effect until fully executed by all parties. EXECUTED under seal as of the date first above written. Witness: Sublessor: ALLAIRE CORPORATION /s/ ??????????? By: /s/ David A. Gerth - --------------------------- ------------------------------------------ Name: David A. Gerth, its Chief Financial Officer and Vice President for Operations and Finance, duly authorized Witness: Sublessee: NERVEWIRE, INC. /s/ Michael F. Newbold By: /s/ Ryan R. Srenneman - --------------------------- ----------------------------------------- Name: Michael F. Newbold Name: Ryan R. Srenneman Title: VP Finance, duly authorized 11 EX-10.5 6 ex10-5.txt 1998 INCENTIVE STOCK OPTION AGREEMENT 1 Exhibit 10.5 ALLAIRE CORPORATION 1998 STOCK INCENTIVE PLAN INCENTIVE STOCK OPTION AGREEMENT This is an INCENTIVE STOCK OPTION AGREEMENT between Allaire Corporation, a Delaware corporation (the "Company"), and the optionee (the "Optionee") identified on the Notice of Grant of Stock Options to which this Agreement is attached and which is incorporated into this Agreement by reference (the "Notice"). WHEREAS, the Company desires to carry out the purposes of the Allaire Corporation 1998 Stock Incentive Plan (the "Plan") by affording the Optionee an opportunity to purchase shares of Common Stock of the Company, par value $.01 per share ("Common Stock"), according to the terms set forth herein. NOW THEREFORE, the parties hereto hereby agree as follows: 1. GRANT OF OPTION. Subject to the terms of the Plan, the Company hereby grants to the Optionee the right and option (the "Option") to purchase the number of shares of the Company's Common Stock specified in the Notice (the "Shares") on the terms and conditions hereinafter set forth. Such Option is intended by the Company and the Optionee to be an Incentive Stock Option as defined in the Plan. 2. PURCHASE PRICE. The purchase price of each of the Shares subject to the Option shall be the exercise price per share specified in the Notice, which price has been specified in accordance with Section 5(a) of the Plan. 3. OPTION PERIOD. (a) Subject to the provisions of Sections 5 and 6 of this Agreement, the Option shall become exercisable as to the number of Shares and on the dates specified in the exercise schedule in the Notice. The exercise schedule shall be cumulative; thus, to the extent the Option has not already been exercised and has not expired, terminated or been canceled, the Optionee may at any time, and from time to time, purchase all or any portion of the Shares then purchasable under the exercise schedule. (b) The Option and all rights to purchase Shares thereunder shall cease on the earliest of: (i) the expiration date specified in the Notice (which date shall not be more than ten years after the date of this Agreement); (ii) termination of the Optionee's employment for Cause (as defined in the Plan); (iii) the expiration of the period after the termination of the Optionee's employment, other than a termination for Cause, within which the Option is exercisable as specified in Section 5(a) or 5(b) of this Agreement, whichever is applicable; or (iv) the date, if any, fixed for cancellation pursuant to Section 6(b)(iii) of this Agreement. Notwithstanding any other provision in this Agreement, in no event may anyone exercise the Option, in whole or in part, after its original expiration date. 4. MANNER OF EXERCISING OPTION. (a) The Option may be exercised in whole or in part, by delivering written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods: 2 (i) in cash, by certified or bank check or other instrument acceptable to the committee under the Plan (the "Committee"); or (ii) in the form of shares of the Company's Common Stock that are not then subject to restrictions, if permitted by the Committee, in its discretion. Such surrendered shares shall be valued at Fair Market Value (as defined in the Plan) on the exercise date; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the Optionee chooses to pay the purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. The Company need not act upon such exercise notice until the Company receives full payment of the exercise price; or (iv) by any other means, (including, without limitation, by delivery of a promissory note of the Optionee, payable on such terms as specified by the Committee) which the Committee determines are consistent with the purpose of the Plan and with applicable laws and regulations. (b) The delivery of certificates representing shares of the Company's Common Stock to be purchased pursuant to the exercise of the Option will be contingent upon receipt by the Company of the full purchase price for such shares from the Optionee or the Optionee's legal representative, heirs or legatees and the fulfillment of any other requirements contained in the Plan or imposed by applicable law. 5. EXERCISABILITY OF OPTION AFTER TERMINATION OF EMPLOYMENT. (a) During the lifetime of the Optionee, the Option may be exercised only while the Optionee is employed by the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date of this Agreement, except that: (i) the Option shall continue to be exercisable for three months after termination of the Optionee's employment, unless the Optionee's employment was terminated for Cause, but only to the extent that the Option was exercisable immediately prior to the Optionee's termination of employment; (ii) in the event the Optionee's employment terminates due to Disability, the Optionee or his or her legal representative may exercise the Option within one year after the termination of the Optionee's employment; (iii) in the event the Optionee's employment terminates due to Normal Retirement, the Option shall continue to be exercisable for three months after the date of such Normal Retirement; and (iv) if the Optionee's employment terminates after the Committee notifies the Optionee pursuant to Section 6(b)(iii) of this Agreement that the Option shall be canceled, the Optionee may exercise the Option at any time permitted by Section 6(b)(iii). (b) In the event of the Optionee's death prior to expiration of the Option, the legal representative, heirs or legatees of the Optionee's estate or the personal who acquired the right to exercise the Option by bequest or inheritance may exercise the Option within five years after the death of the Optionee. 2 3 (c) Neither the transfer of the Optionee between any combination of the Company, its parent and any subsidiary of the Company, nor a leave of absence granted to the Optionee and approved by the Committee, shall be deemed a termination of employment. The terms "parent" and "subsidiary" as used herein shall have the meaning ascribed to "parent corporation" and "subsidiary corporation," respectively in Sections 424(e) and (f) (or successor provisions) of the Internal Revenue Code of 1986, as amended. 6. ACCELERATION OF OPTION. (a) DEATH, DISABILITY OR RETIREMENT. If any of Sections (5)(a)(ii), 5(a)(iii) or 5(b) of this Agreement is applicable, the Option, whether or not previously exercisable, shall become immediately exercisable in full if the Optionee shall have been employed continuously by the Company or a parent or subsidiary thereof between the date the Option was granted and the date of such Disability or Normal Retirement or, in the event of death, a date not more than three months prior to such death. (b) CHANGE OF CONTROL. In the event of a Change of Control (as defined in the Plan): (i) SUBSTITUTE OPTIONS. Subject to the provisions of clause (iii) below, after the effective date of such Change of Control, the Optionee shall be entitled, upon exercise of the Option, to receive, in lieu of shares of the Company's Common Stock (or consideration based upon the Fair Market Value of the Company's Common Stock), shares of such stock or other securities, cash or property (or consideration based upon shares of such stock or other securities, cash or property) as the holders of shares of the Company's Common Stock received in connection with the Change of Control. (ii) PARTIAL ACCELERATION. Notwithstanding any other provision of this Section 6, one hundred-percent (100%) of the Shares which are not then exercisable shall become exercisable upon the occurrence of a Change of Control if the Optionee is an employee of the Company immediately before the occurrence of the Change of Control and (1) the Optionee's employment with the Company is terminated by the Company (including any successor or parent resulting from the Change in Control) without Cause within six (6) months after the Change in Control, or (2) the Company (or successor) does not offer the Optionee a Comparable Position upon the Change in Control, or (3), if the Optionee is offered and accepts a Comparable Position, the Optionee is involuntarily removed from such position within six (6) months after the Change in Control. For the purpose of this Section 6(b), the term "Comparable Position" shall mean a position of employment with the Company or its successor following a Change of Control (or if the Company or its successor has a Parent following a Change of Control, its Parent) (X) with substantially the same or superior title, responsibilities, base salary, opportunity for incentive compensation, and eligibility for stock options or other equity incentives as the Optionee had prior to the Change of Control, and (Y) at a location within 50 miles of the Optionee's location prior to the Change of Control, without the Optionee's express prior written consent. For the purpose of this Section 6(b) the term "Cause" shall mean (A) substantial failure by or refusal of the Optionee to perform the Optionee's duties to the Company, gross neglect of such duties, or other material breach of the Optionee's written or oral employment agreement with the Company, as the case may be; (B) material misappropriation by the Optionee of the Company's property or trade secrets, commission of a felony by the Optionee or other public misconduct by the Optionee detrimental to the reputation of the Company or (C) material dishonesty or material violation of any fiduciary duty or duty of loyalty owed by the Optionee to the Company. 3 4 (iii) ACCELERATION OF VESTING AND NOTICE OF CANCELLATION. The Committee may cancel the Option as of the effective date of any such Change of Control provided that (x) all Shares that have not yet become exercisable shall become exercisable in full immediately prior to such Change of Control, (y) notice of such cancellation shall be given to the Optionee and (z) the Optionee shall have the right to exercise the Option, including exercising Shares that became exercisable pursuant to the acceleration provisions of clause (x) above. (c) EARLY EXERCISE FOR RESTRICTED SHARES. The Optionee may exercise the Option in accordance with this Section 6(c) for shares of the Company's Common Stock prior to the date or dates upon which such shares become exercisable under Section 3(a), and the exercise schedule in the Notice shall be deemed to have been accelerated for such purpose, provided, however, that in no event shall the Optionee be permitted pursuant to this Section 6(c) to exercise in any calendar year more than the $100,000 Limitation Amount. For these purposes, the "$100,000 Limitation Amount" shall mean the number of shares of the Company's Common Stock equal to (i) $100,000 less the Prior Grant Amount divided by (ii) the exercise price per share specified in the Notice; and the "Prior Grant Amount" shall mean the number of shares of the Company's Common Stock becoming exercisable in such calendar year pursuant to incentive stock options granted to the Holder by the Company (or a company acquired by the Company) prior to the date this Option was granted multiplied by the exercise price of such options. The shares issued upon such early exercise shall be subject to the restrictions set forth in this subsection, and are referred to in this subsection as the "Restricted Shares." (i) REVERSE VESTING. Restricted Shares purchased under this Section 6(c) prior to the Option becoming exercisable shall "vest" according to the same schedule (i.e., on the same dates and in the same amounts) as such shares would have become purchasable upon exercise of the Option had the exercise schedule not been accelerated in accordance with this Section 6(c). In addition, Restricted Shares shall be subject to accelerated "vesting" as set forth in Section 6(a), Section 6(b)(ii) and Section 6(b)(iii) if applicable, to the same extent as the exercisability of such shares would have been accelerated had the exercise schedule not been previously accelerated in accordance with this Section 6(c). Restricted Shares that are not vested shall be subject to repurchase by the Company under Sections 6(c)(ii) and 6(c)(iii) below. As Restricted Shares become vested they shall no longer be subject to repurchase by the Company. (ii) COMPANY REPURCHASE RIGHTS. In the event of termination of the Optionee's employment by the Company for any reason (including death, Disability, Normal Retirement and for Cause), the Company shall have the option to purchase all or any part of the Restricted Shares that were not vested prior to termination of the Optionee's employment (after taking into effect any accelerated vesting pursuant to Section 6(a), Section 6(b)(ii) and Section 6(b)(iii)) at a per share price equal to the purchase paid by the Optionee upon exercise of the Option (subject to equitable adjustment for any stock split, stock dividend or combination of the Restricted Shares). (iii) TERMS OF COMPANY PURCHASE. If the Company intends to repurchase the Restricted Shares subject to repurchase, then it shall, within sixty (60) days after termination of the Optionee's employment, mail written notice of its intent to repurchase the Restricted Shares and the number of Restricted Shares to be repurchased to the Optionee's last known address appearing in the personnel records of the Company. If the Company has not mailed notice within that period, the Restricted Shares will no longer be subject to repurchase by the Company. Upon receipt from the Optionee of the certificate for the Restricted Shares, duly endorsed in blank or accompanied by a duly endorsed blank stock power suitable for transferring the Shares to the Company, the Company shall send to the Optionee (or his or her heir legatee, representative or guardian) the purchase price for the Restricted Shares and a certificate for the shares which are not subject to repurchase or are not being repurchased by the Company. The purchase price for the Restricted Shares being repurchased may be payable by check, by cancellation of all or a portion of any outstanding 4 5 indebtedness of the Optionee to the Company, or both. If the Company has not received the certificate for the Restricted Shares by the time the Company is prepared to pay the purchased price for such shares, then the Company, at its option, may coincident with the payment of the purchase price and/or cancellation of debt, make appropriate entries in the records of the Company to effect the transfer of the Restricted Shares to the Company free and clear of any liens or encumbrances. (iv) OPTIONEE REPRESENTATIONS. By exercising the shares under this subsection 6(c), the Optionee represents that (i) he or she is acquiring the Restricted Shares for investment and not with a view to, or for resale in connection with, any distribution thereof; (ii) the Restricted Shares are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that there is no assurance that such Rule will apply to future resales of the Restricted Shares; (iii) he or she will make no sale or other distribution that would cause the Optionee to be deemed an "underwriter" within the meaning of Section 2(11) of the Securities Act; and (iv) he or she will make no sale, pledge, transfer or other disposition of the Restricted Shares received except in accordance with this Agreement unless a registration statement with respect to the Restricted Shares is then in effect under applicable federal and state securities laws or unless he or she obtains an opinion of counsel satisfactory to the Company that such disposition may be effected without violation of applicable federal or state securities laws. (v) CERTIFICATES; LEGENDS. The certificates representing the Restricted Shares will bear restrictive legends noting the restrictions identified in the preceding clause, the Company's repurchase rights and the restrictions on transfer set forth in Section 7 of this Agreement. 7. LIMITATION ON TRANSFER. During the lifetime of the Optionee, only the Optionee or his or her guardian or legal representative or transferee of a transfer permitted by this Section may exercise the Option. The Optionee shall not assign or transfer the Option or Restricted Shares issued upon early exercise of the Option, except that the Optionee may transfer the Option by will or the laws of descent and distribution. Any attempt to assign, transfer, pledge, hypothecate or otherwise dispose of the Option or any Restricted Shares contrary to the provisions hereof, and the levy of any attachment or similar process upon the Option or any Restricted Shares, shall be null and void. 8. SHAREHOLDER RIGHTS BEFORE EXERCISE. The Optionee shall have none of the rights of a shareholder of the Company with respect to any Share subject to the Option until the Share is actually issued to him or her upon exercise of the Option. 9. ADJUSTMENTS. The Committee may in its sole discretion make appropriate adjustments in the number of Shares subject to the Option and in the purchase price per Share to give effect to any adjustments made in the number of outstanding Shares of the Company through a merger or consolidation (that is not a Change in Control) or a recapitalization, stock dividend, stock split or other relevant change, provided that fractional Shares shall be rounded to the nearest whole share. 10. DISQUALIFYING DISPOSITIONS. The Optionee agrees to notify the Company in writing immediately after making a Disqualifying Disposition of any shares of Common Stock received pursuant to the exercise of this Option. A "Disqualifying Disposition" shall have the meaning specified in Section 421(b) of the Internal Revenue Code of 1986, as amended, or any successor provision. The Optionee also agrees to provide the Company with any information that the Company shall request concerning any such Disqualifying Disposition. The Optionee acknowledges that he or she will forfeit the favorable income tax treatment otherwise available with respect to the exercise of this Option if he or she makes a Disqualifying Disposition of shares received upon exercise of this Option. 11. TAX WITHHOLDING. The Optionee agrees that if the Company in its discretion determines that it is obligated to withhold tax with respect to a Disqualifying Disposition of shares of Common Stock received upon exercise of this Option, then the Company may withhold from the Optionee's wages the appropriate amount of federal, state or local withholding taxes 5 6 attributable to such Disqualifying Disposition. If any portion of this Option is treated as a Nonqualified Option (as defined in the Plan), the Optionee hereby agrees that the Company may withhold from the Optionee's wages the appropriate amount of federal, state and local withholding taxes attributable to the Optionee's exercise of such Nonqualified Option. The Optionee further agrees that, at the time he or she exercises the Option, if the Company or a parent or subsidiary thereof is required to withhold such taxes, he or she will promptly pay in cash upon demand to the Company, or the parent or subsidiary having such obligation, such amounts as shall be necessary to satisfy such obligation; provided, however, that in lieu of all or any part of such a cash payment, the Board may, but shall not be required to, permit the Optionee to elect to cover all or any part of the required withholdings, and to cover any additional withholdings up to the amount needed to cover the Optionee's full FICA and federal, state and local income taxes with respect to income arising from the exercise of the Option, through a reduction of the number of Shares delivered to the Optionee. 12. LOCK UP AGREEMENT. Optionee agrees that, upon the request of the Company or the managing underwriter(s) in connection with a registration of shares of the Company's Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") for a period of time (not to exceed 180 days) from the effective date of the Company's registration under Section 12 of the Exchange Act, Optionee (or any transferee permitted under this Agreement) shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of the Company's Common Stock owned or controlled by it; provided, however, that, at the time of the request, the Optionee is an officer or a member of the board of directors of the Company or the Optionee holds (assuming exercise of all options and warrants, and the conversion of all convertible securities held by the Optionee, to the extent then exercisable or convertible) an aggregate number of shares of the Company's Common Stock (or equivalent) equal to at least one percent (1%) of the total number of shares of the Company's Common Stock then issued and outstanding. 13. INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. In the event that there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. 14. DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary thereof, and the Company or any such parent or subsidiary thereof employing the Optionee may terminate his or her employment and otherwise deal with the Optionee without regard to the effect it may have upon him or her under this Agreement. 15. GENERAL. The Company shall at all times during the term of this Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement. This Agreement shall be binding in all respects on the Optionee's heirs, representatives, successors and assigns. This Agreement is entered into under the laws of the State of Delaware, without regard to its principles of conflict of laws, and shall be construed and interpreted thereunder. 6 EX-10.6 7 ex10-6.txt 1998 NON STATUTORY EMPLOYEE STOCK OPTION AGREEMENT 1 Exhibit 10.6 ALLAIRE CORPORATION 1998 STOCK INCENTIVE PLAN NONSTATUTORY EMPLOYEE STOCK OPTION AGREEMENT This is a NONSTATUTORY EMPLOYEE STOCK OPTION AGREEMENT between Allaire Corporation, a Delaware corporation (the "Company"), and the optionee (the "Optionee") identified on the Notice of Grant of Stock Options to which this Agreement is attached and which is incorporated into this Agreement by reference (the "Notice"). WHEREAS, the Company desires to carry out the purposes of the Allaire Corporation 1998 Stock Incentive Plan (the "Plan") by affording the Optionee an opportunity to purchase shares of Common Stock of the Company, par value $.01 per share ("Common Stock"), according to the terms set forth herein. NOW THEREFORE, the parties hereto hereby agree as follows: 1. GRANT OF OPTION. Subject to the terms of the Plan, the Company hereby grants to the Optionee the right and option (the "Option") to purchase the number of shares of the Company's Common Stock specified in the Notice (the "Shares") on the terms and conditions hereinafter set forth. 2. PURCHASE PRICE. The purchase price of each of the Shares subject to the Option shall be the exercise price per share specified in the Notice, which price has been specified in accordance with Section 5(a) of the Plan. 3. OPTION PERIOD. (a) Subject to the provisions of Sections 5 and 6 of this Agreement, the Option shall become exercisable as to the number of Shares and on the dates specified in the exercise schedule in the Notice. The exercise schedule shall be cumulative; thus, to the extent the Option has not already been exercised and has not expired, terminated or been canceled, the Optionee may at any time, and from time to time, purchase all or any portion of the Shares then purchasable under the exercise schedule. (b) The Option and all rights to purchase Shares thereunder shall cease on the earliest of: (i) the expiration date specified in the Notice (which date shall not be more than ten years after the date of this Agreement); (ii) termination of the Optionee's employment for Cause (as defined in the Plan); (iii) the expiration of the period after the termination of the Optionee's employment, other than a termination for Cause, within which the Option is exercisable as specified in Section 5(a) or 5(b) of this Agreement, whichever is applicable; or (iv) the date, if any, fixed for cancellation pursuant to Section 6(b)(iii) of this Agreement. Notwithstanding any other provision in this Agreement, in no event may anyone exercise the Option, in whole or in part, after its original expiration date. 4. MANNER OF EXERCISING OPTION. (a) The Option may be exercised in whole or in part, by delivering written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods: 2 (i) in cash, by certified or bank check or other instrument acceptable to the committee under the Plan (the "Committee"); or (ii) in the form of shares of the Company's Common Stock that are not then subject to restrictions, if permitted by the Committee, in its discretion. Such surrendered shares shall be valued at Fair Market Value (as defined in the Plan) on the exercise date; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the Optionee chooses to pay the purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. The Company need not act upon such exercise notice until the Company receives full payment of the exercise price; or (iv) by any other means, (including, without limitation, by delivery of a promissory note of the Optionee, payable on such terms as specified by the Committee) which the Committee determines are consistent with the purpose of the Plan and with applicable laws and regulations. (b) The delivery of certificates representing shares of the Company's Common Stock to be purchased pursuant to the exercise of the Option will be contingent upon receipt by the Company of the full purchase price for such shares from the Optionee or the Optionee's legal representative, heirs or legatees and the fulfillment of any other requirements contained in the Plan or imposed by applicable law. 5. EXERCISABILITY OF OPTION AFTER TERMINATION OF EMPLOYMENT. (a) During the lifetime of the Optionee, the Option may be exercised only while the Optionee is employed by the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date of this Agreement, except that: (i) the Option shall continue to be exercisable for three months after termination of the Optionee's employment, unless the Optionee's employment was terminated for Cause, but only to the extent that the Option was exercisable immediately prior to the Optionee's termination of employment; (ii) in the event the Optionee's employment terminates due to Disability, the Optionee or his or her legal representative may exercise the Option within one year after the termination of the Optionee's employment; (iii) in the event the Optionee's employment terminates due to Normal Retirement, the Option shall continue to be exercisable for three months after the date of such Normal Retirement; and (iv) if the Optionee's employment terminates after the Committee notifies the Optionee pursuant to Section 6(b)(iii) of this Agreement that the Option shall be canceled, the Optionee may exercise the Option at any time permitted by Section 6(b)(iii). (b) In the event of the Optionee's death prior to expiration of the Option, the legal representative, heirs or legatees of the Optionee's estate or the personal who acquired the right to exercise the Option by bequest or inheritance may exercise the Option within five years after the death of the Optionee. 2 3 (c) Neither the transfer of the Optionee between any combination of the Company, its parent and any subsidiary of the Company, nor a leave of absence granted to the Optionee and approved by the Committee, shall be deemed a termination of employment. The terms "parent" and "subsidiary" as used herein shall have the meaning ascribed to "parent corporation" and "subsidiary corporation," respectively in Sections 424(e) and (f) (or successor provisions) of the Internal Revenue Code of 1986, as amended. 6. ACCELERATION OF OPTION. (a) DEATH, DISABILITY OR RETIREMENT. If any of Sections (5)(a)(ii), 5(a)(iii) or 5(b) of this Agreement is applicable, the Option, whether or not previously exercisable, shall become immediately exercisable in full if the Optionee shall have been employed continuously by the Company or a parent or subsidiary thereof between the date the Option was granted and the date of such Disability or Normal Retirement or, in the event of death, a date not more than three months prior to such death. (b) CHANGE OF CONTROL. In the event of a Change of Control (as defined in the Plan): (i) SUBSTITUTE OPTIONS. Subject to the provisions of clause (iii) below, after the effective date of such Change of Control, the Optionee shall be entitled, upon exercise of the Option, to receive, in lieu of shares of the Company's Common Stock (or consideration based upon the Fair Market Value of the Company's Common Stock), shares of such stock or other securities, cash or property (or consideration based upon shares of such stock or other securities, cash or property) as the holders of shares of the Company's Common Stock received in connection with the Change of Control. (ii) PARTIAL ACCELERATION. Notwithstanding any other provision of this Section 6, one hundred-percent (100%) of the Shares which are not then exercisable shall become exercisable upon the occurrence of a Change of Control if the Optionee is an employee of the Company immediately before the occurrence of the Change of Control and (1) the Optionee's employment with the Company is terminated by the Company (including any successor or parent resulting from the Change in Control) without Cause within six (6) months after the Change in Control, or (2) the Company (or successor) does not offer the Optionee a Comparable Position upon the Change in Control, or (3), if the Optionee is offered and accepts a Comparable Position, the Optionee is involuntarily removed from such position within six (6) months after the Change in Control. For the purpose of this Section 6(b), the term "Comparable Position" shall mean a position of employment with the Company or its successor following a Change of Control (or if the Company or its successor has a Parent following a Change of Control, its Parent) (X) with substantially the same or superior title, responsibilities, base salary, opportunity for incentive compensation, and eligibility for stock options or other equity incentives as the Optionee had prior to the Change of Control, and (Y) at a location within 50 miles of the Optionee's location prior to the Change of Control, without the Optionee's express prior written consent. For the purpose of this Section 6(b) the term "Cause" shall mean (A) substantial failure by or refusal of the Optionee to perform the Optionee's duties to the Company, gross neglect of such duties, or other material breach of the Optionee's written or oral employment agreement with the Company, as the case may be; (B) material misappropriation by the Optionee of the Company's property or trade secrets, commission of a felony by the Optionee or other public misconduct by the Optionee detrimental to the reputation of the Company or (C) material dishonesty or material violation of any fiduciary duty or duty of loyalty owed by the Optionee to the Company 3 4 (iii) ACCELERATION OF VESTING AND NOTICE OF CANCELLATION. The Committee may cancel the Option as of the effective date of any such Change of Control provided that (x) all Shares that have not yet become exercisable shall become exercisable in full immediately prior to such Change of Control, (y) notice of such cancellation shall be given to the Optionee and (z) the Optionee shall have the right to exercise the Option, including exercising Shares that became exercisable pursuant to the acceleration provisions o f clause (x) above. (c) EARLY EXERCISE FOR RESTRICTED SHARES. The Optionee may exercise the Option in accordance with this Section 6(c) for shares of the Company's Common Stock prior to the date or dates upon which such shares become exercisable under Section 3(a), and the exercise schedule in the Notice shall be deemed to have been accelerated for such purpose. The shares issued upon such early exercise shall be subject to the restrictions set forth in this subsection, and are referred to in this subsection as the "Restricted Shares." (i) REVERSE VESTING. Restricted Shares purchased under this Section 6(c) prior to the Option becoming exercisable shall "vest" according to the same schedule (i.e., on the same dates and in the same amounts) as such shares would have become purchasable upon exercise of the Option had the exercise schedule not been accelerated in accordance with this Section 6(c). In addition, Restricted Shares shall be subject to accelerated "vesting" as set forth in Section 6(a), Section 6(b)(ii), and Section 6(b)(iii) if applicable, to the same extent as the exercisability of such shares would have been accelerated had the exercise schedule not been previously accelerated in accordance with this Section 6(c). Restricted Shares that are not vested shall be subject to repurchase by the Company under Sections 6(c)(ii) and 6(c)(iii) below. As Restricted Shares become vested they shall no longer be subject to repurchase by the Company. (ii) COMPANY REPURCHASE RIGHTS. In the event of termination of the Optionee's employment by the Company for any reason (including death, Disability, Normal Retirement and for Cause), the Company shall have the option to purchase all or any part of the Restricted Shares that were not vested prior to termination of the Optionee's employment (after taking into effect any accelerated vesting pursuant to Section 6(a), Section 6(b)(ii) and Section 6(b)(iii)) at a per share price equal to the purchase paid by the Optionee upon exercise of the Option (subject to equitable adjustment for any stock split, stock dividend or combination of the Restricted Shares). (iii) TERMS OF COMPANY PURCHASE. If the Company intends to repurchase the Restricted Shares subject to repurchase, then it shall, within sixty (60) days after termination of the Optionee's employment, mail written notice of its intent to repurchase the Restricted Shares and the number of Restricted Shares to be repurchased to the Optionee's last known address appearing in the personnel records of the Company. If the Company has not mailed notice within that period, the Restricted Shares will no longer be subject to repurchase by the Company. Upon receipt from the Optionee of the certificate for the Restricted Shares, duly endorsed in blank or accompanied by a duly endorsed blank stock power suitable for transferring the Shares to the Company, the Company shall send to the Optionee (or his or her heir legatee, representative or guardian) the purchase price for the Restricted Shares and a certificate for the shares which are not subject to repurchase or are not being repurchased by the Company. The purchase price for the Restricted Shares being repurchased may be payable by check, by cancellation of all or a portion of any outstanding indebtedness of the Optionee to the Company, or both. If the Company has not received the certificate for the Restricted Shares by the time the Company is prepared to pay the purchased price for such shares, then the Company, at its option, may coincident with the payment of the purchase price and/or cancellation of debt, make appropriate entries in the 4 5 records of the Company to effect the transfer of the Restricted Shares to the Company free and clear of any liens or encumbrances. (iv) OPTIONEE REPRESENTATIONS. By exercising the shares under this subsection 6(c), the Optionee represents that (i) he or she is acquiring the Restricted Shares for investment and not with a view to, or for resale in connection with, any distribution thereof; (ii) the Restricted Shares are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that there is no assurance that such Rule will apply to future resales of the Restricted Shares; (iii) he or she will make no sale or other distribution that would cause the Optionee to be deemed an "underwriter" within the meaning of Section 2(11) of the Securities Act; and (iv) he or she will make no sale, pledge, transfer or other disposition of the Restricted Shares received except in accordance with this Agreement unless a registration statement with respect to the Restricted Shares is then in effect under applicable federal and state securities laws or unless he or she obtains an opinion of counsel satisfactory to the Company that such disposition may be effected without violation of applicable federal or state securities laws. (v) CERTIFICATES; LEGENDS. The certificates representing the Restricted Shares will bear restrictive legends noting the restrictions identified in the preceding clause, the Company's repurchase rights and the restrictions on transfer set forth in Section 7 of this Agreement. 7. LIMITATION ON TRANSFER. During the lifetime of the Optionee, only the Optionee or his or her guardian or legal representative or transferee of a transfer permitted by this Section may exercise the Option. The Optionee shall not assign or transfer the Option or Restricted Shares issued upon early exercise of the Option, except that the Optionee may transfer the Option by will or the laws of descent and distribution. Any attempt to assign, transfer, pledge, hypothecate or otherwise dispose of the Option or any Restricted Shares contrary to the provisions hereof, and the levy of any attachment or similar process upon the Option or any Restricted Shares, shall be null and void. 8. SHAREHOLDER RIGHTS BEFORE EXERCISE. The Optionee shall have none of the rights of a shareholder of the Company with respect to any Share subject to the Option until the Share is actually issued to him or her upon exercise of the Option. 9. ADJUSTMENTS. The Committee may in its sole discretion make appropriate adjustments in the number of Shares subject to the Option and in the purchase price per Share to give effect to any adjustments made in the number of outstanding Shares of the Company through a merger or consolidation (that is not a Change in Control) or a recapitalization, stock dividend, stock split or other relevant change, provided that fractional Shares shall be rounded to the nearest whole share. 10. Tax Withholding. The parties hereto recognize that the Company or a parent or subsidiary thereof may be obligated to withhold federal and state income taxes and social security or other taxes upon the Optionee's exercise of the Option. The Optionee agrees that, at the time he or she exercises the Option, if the Company or a parent or subsidiary thereof is required to withhold such taxes, he or she will promptly pay in cash upon demand to the Company, or the parent or subsidiary having such obligation, such amounts as shall be necessary to satisfy such obligation; provided, however, that in lieu of all or any part of such a cash payment, the Board may, but shall not be required to, permit the Optionee to elect to cover all or any part of the required withholdings, and to cover any additional withholdings up to the amount needed to cover the Optionee's full FICA and federal, state and local income taxes with respect to income arising from the exercise of the Option, through a reduction of the number of Shares delivered to the Optionee. 11. LOCK UP AGREEMENT. Optionee agrees that, upon the request of the Company or the managing underwriter(s) in connection with a registration of shares of the Company's Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") for a period of time (not to exceed 180 days) from the effective date of the Company's registration under Section 12 of the Exchange Act, Optionee (or any transferee permitted under this Agreement) shall not sell, make 5 6 any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of the Company's Common Stock owned or controlled by it; provided, however, that, at the time of the request, the Optionee is an officer or a member of the board of directors of the Company or the Optionee holds (assuming exercise of all options and warrants, and the conversion of all convertible securities held by the Optionee, to the extent then exercisable or convertible) an aggregate number of shares of the Company's Common Stock (or equivalent) equal to at least one percent (1%) of the total number of shares of the Company's Common Stock then issued and outstanding. 12. INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. In the event that there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. 13. DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary thereof, and the Company or any such parent or subsidiary thereof employing the Optionee may terminate his or her employment and otherwise deal with the Optionee without regard to the effect it may have upon him or her under this Agreement. 14. GENERAL. The Company shall at all times during the term of this Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement. This Agreement shall be binding in all respects on the Optionee's heirs, representatives, successors and assigns. This Agreement is entered into under the laws of the State of Delaware, without regard to its principles of conflict of laws, and shall be construed and interpreted thereunder. 6 EX-11 8 ex11.txt STATEMENT RE: COMPUTATION OF UNAUDITED NET INCOME 1 ALLAIRE CORPORATION EXHIBIT 11 STATEMENT RE: COMPUTATION OF UNAUDITED NET INCOME (LOSS) PER SHARE AND PRO FORMA NET INCOME (LOSS) PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ----------------- 2000 1999 2000 1999 ------- ------- ------- ------- BASIC: Net income (loss) 1,785 (2,913) 2,776 (5,529) ------- ------- ------- ------- Weighted average common shares outstanding 27,105 22,744 26,997 20,899 ------- ------- ------- ------- Basic net income (loss) per share $ 0.07 $ (0.13) $ 0.10 $ (0.26) ======= ======= ======= ======= DILUTED: Net income (loss) 1,785 (2,913) 2,776 (5,529) ------- ------- ------- ------- Weighted average common shares outstanding 27,105 22,744 26,997 20,899 Weighted common stock equivalents 3,848 - 4,135 - ------- ------- ------- ------- Total weighted average shares 30,953 22,744 31,132 20,899 Diluted net income (loss) per share $ 0.06 $ (0.13) $ 0.09 $ (0.26) ======= ======= ======= =======
SIX MONTHS ENDED JUNE 30, 1999 ----------------- PRO FORMA BASIC: Net income (loss) (5,529) ------- Pro forma weighted average common shares outstanding (1) 20,933 Shares attributable to the assumed conversion of convertible preferred stock upon closing of the initial public offering 898 ------- Total pro forma weighted average shares outstanding 21,831 Pro forma basic net income (loss) per share $ (0.25) ======= PRO FORMA DILUTED: Net income (loss) (5,529) ------- Pro forma weighted average common shares outstanding (1) 20,933 Shares attributable to the assumed conversion of convertible preferred stock upon closing of the initial public offering 898 ------- Total pro forma weighted average shares 21,831 Pro forma diluted net income (loss) per share $ (0.25) =======
(1) Includes outstanding common stock subject to repurchase under a stock restriction agreement which lapsed upon the consummation of the initial public offering in January 1999. EX-27 9 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLAIRE CORPORATION FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 44,583 89,951 16,801 (998) 435 151,916 15,688 (6,975) 167,945 52,310 0 0 0 273 115,089 167,945 50,806 59,925 2,520 11,877 47,678 0 76 3,701 925 2,776 0 0 0 2,776 0.10 0.09
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