-----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, LnOq2i7ck5mYO0uVSMxP4DyapIoiiBX5kL6O8Cew4PNKipOB5bw27/XXAjpOb0H7 XnW5y7HhdUURZy8BjobpiQ== 0000950135-99-001196.txt : 19990304 0000950135-99-001196.hdr.sgml : 19990304 ACCESSION NUMBER: 0000950135-99-001196 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19990303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONESOURCE INFORMATION SERVICES INC CENTRAL INDEX KEY: 0001079880 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043204522 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-73263 FILM NUMBER: 99555865 BUSINESS ADDRESS: STREET 1: 150 CAMBRIDGE PARK DRIVE CITY: CAMBRIDGE STATE: MA ZIP: 02140 BUSINESS PHONE: 6174417000 MAIL ADDRESS: STREET 1: 150 CAMBRIDGE PARK DRIVE CITY: CAMBRIDGE STATE: MA ZIP: 02140 S-1 1 ONSOURCE INFORMATION SERVICES 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ONESOURCE INFORMATION SERVICES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 7375 04-3204522 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 150 CAMBRIDGEPARK DRIVE CAMBRIDGE, MA 02140 617-441-7000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ DANIEL J. SCHIMMEL, PRESIDENT AND CHIEF EXECUTIVE OFFICER ONESOURCE INFORMATION SERVICES, INC. 150 CAMBRIDGEPARK DRIVE CAMBRIDGE, MA 02140 617-441-7000 (NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: LAWRENCE S. WITTENBERG KEVIN F. BLATCHFORD TESTA, HURWITZ & THIBEAULT, LLP SIDLEY & AUSTIN 125 HIGH STREET ONE FIRST NATIONAL PLAZA BOSTON, MASSACHUSETTS 02110 CHICAGO, ILLINOIS 60603 TEL: (617) 248-7000 TEL: (312) 853-7000 FAX: (617) 248-7100 FAX: (312) 853-7036
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date hereof. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _____________. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]____________. If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ____________. If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [X] ------------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF PROPOSED MAXIMUM SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE(1) - ------------------------------------------------------------------------------------------------------------- Common stock....................... $40,500,000.00 $11,259.00 - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
(1) Estimated solely to calculate the registration fee. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED , 1999 PROSPECTUS SHARES [ONE SOURCE LOGO] COMMON STOCK OneSource Information Services, Inc. is offering shares of its common stock and the selling stockholders are offering shares of OneSource's common stock owned by them. We will not receive any of the proceeds from the selling stockholders' sale of their shares. This is our initial public offering and no public market currently exists for our shares. We expect the initial public offering price to be between $ and $ per share. We intend to apply for quotation of the common stock on the Nasdaq National Market under the symbol "ONES." INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. FOR MORE INFORMATION, SEE "RISK FACTORS" ON PAGE 7. --------------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- PER SHARE TOTAL - ----------------------------------------------------------------------------------------------- Public Offering Price................................ $ $ Underwriting Discount................................ $ $ Proceeds to OneSource Information Services, Inc...... $ $ Proceeds to Selling Stockholders..................... $ $ - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
The Underwriters may also purchase at the public offering price, less the underwriting discount, up to additional shares from the selling stockholders within 30 days from the date of this prospectus to cover any over-allotments. We expect that the shares of the common stock will be ready for delivery on or about , 1999. WILLIAM BLAIR & COMPANY U.S. BANCORP PIPER JAFFRAY INC. ADAMS, HARKNESS & HILL, INC. The date of this prospectus is , 1999 3 [The inside front cover depicts four computer screen shots of the OneSource Business Browser. The heading on the page is "Ready-To-Use Business Information." The top three computer screen shots depict the Global Business Browser, the European Business Browser, and the UK Business Browser. The fourth computer screen shot depicts Market Forecasts and contains a chart graphic. There are four ellipses on the page that briefly describe the potential uses of the business information contained in the Business Browser products, including: "Profile a Company"; "Prospect for New Customers"; "Track Competitors"; and "Research an Industry". The OneSource logo is in the lower right hand corner of the page.] --------------------------- OneSource(TM), Business Browser(TM), OneSource Business Browser(TM), Business Browser AppLink(TM), AppLink(TM), and the OneSource logo are our trademarks. Other trademarks and tradenames in this prospectus are the property of their respective owners. --------------------------- Unless the context otherwise requires, any reference to "OneSource" in this prospectus means OneSource Information Services, Inc. and its subsidiary. Unless otherwise indicated, all information contained in this prospectus: - reflects the merger on February 26, 1999 of OneSource Information Services, Inc. into its parent, OneSource Holding Corporation, and the name change of OneSource Holding Corporation to OneSource Information Services, Inc. - assumes no exercise of the Underwriters' over-allotment option - reflects the reclassification (prior to the completion of the offering) of each share of Class P common stock into one share of common stock plus additional shares of common stock (determined by dividing the preference amount for each share of Class P common stock by the assumed initial public offering price) --------------------------- This prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this prospectus, the words "anticipate," "believe," "estimate," "intend" and "expect" and similar expressions are intended to identify such forward-looking statements. Our actual results, performance or achievements could differ materially from the results expressed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in "Risk Factors." 2 4 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. It is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully. THE COMPANY OneSource provides Web-based business and financial information to professionals who need quick access to reliable corporate, industry and market intelligence. Our Business Browser product line integrates comprehensive and up-to-date business and financial information on over one million public and private companies from more than 25 information providers drawing upon over 2,500 sources of content. These sources include both textual information, such as news, trade press, SEC filings, executive biographies and analyst reports, and numeric information, such as company financial results, stock quotes and industry statistics. Our customers access this information over the Internet using standard Web browsers at a fixed annual subscription price. According to an industry source, the market for all Web-based and on-line business information services was $24.8 billion in 1997 and is projected to grow to $39.8 billion in 2002, reflecting a compound annual growth rate of 9.9%. According to this industry source, the primary market segment in which OneSource participates--Web-based and on-line financial news, current awareness and research services--was $5.4 billion in 1997 and is projected to grow to $9.8 billion in 2002, reflecting a compound annual growth rate of 12.6%. Recent industry growth has been driven by corporations and other enterprises recognizing that productivity and competitiveness depend on extensive knowledge of external information, including information about industries, customers, competitors, prospects, business trends, breaking news and market data. OneSource focuses on the functional uses of the business and financial information it delivers. The Business Browser product line has been designed for use not only by traditional users of business information, but also throughout an organization, including sales, marketing, finance and management professionals. We apply our knowledge of how business professionals use information to transform raw, disparate data into meaningful, actionable information. We focus on integrating and presenting information so that interpretation, manipulation and analysis can be performed more easily by the end user. Because our products are based on standard Web technology, our customers require minimal installation and systems support, and users, after minimal training, have full access to the products at any time from anywhere via the Internet. Our products are designed to address information needs of leading professional and financial services firms, technology companies and other large organizations. Representative customers include American Express, Bain & Company, BankAmerica, Boeing, British Telecom, Deloitte & Touche, Ernst & Young, Harvard Business School, KPMG Peat Marwick, MCI/WorldCom, Merrill Lynch, Oracle and SAP. OneSource's fixed annual pricing strategy is designed to be particularly attractive to large organizations. The annual subscription price for the Business Browser product line declines on a per-user basis as the total number of users increases. The fixed-price model encourages professionals to use the products as needed without concern with additional, usage-based charges, 3 5 and a declining marginal price per user encourages customers to distribute the products widely throughout their organizations. At December 31, 1998, 445 organizations subscribed to our Web-based Business Browser product line, up from 233 at December 31, 1997. On average, our customers for Web-based products at December 31, 1998 had an annualized contract value of $58,248 per customer, compared to $38,512 per customer at December 31, 1997. The annualized value of Business Browser customer contracts was $25.9 million at December 31, 1998, having grown from $9.0 million at the end of 1997. Of this $25.9 million, $14.2 million was attributable to those customers that were under contract at both December 31, 1997 and 1998. The renewal rate of the Business Browser product line for 1998 was 90% calculated on a dollar basis. For more information regarding annualized contract value, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our goal is to become a leading Web-based provider of business and financial information to professionals worldwide. Our strategy to accomplish this objective includes: - focusing on the information needs of professionals in large organizations - expanding our customer base through our sales and marketing efforts - leveraging our existing customer base by expanding the number of users per customer and upgrading those customers to new or enhanced products - continually expanding the content and functionality of our products and designing additional products - selectively seeking possible strategic acquisitions and alliances THE OFFERING Shares offered by OneSource.............. Shares offered by the selling stockholders........................... Shares outstanding immediately after the offering............................... (1) Use of proceeds.......................... Repayment of outstanding debt, repurchase of certain common stock in connection with the reclassification, payments to terminate management fee arrangements and general corporate purposes, including working capital and possibly to acquire or invest in complementary businesses, products or technologies Proposed Nasdaq National Market symbol... ONES
- ------------ (1) Based on shares of common stock outstanding as of , 1999. Excludes shares of common stock issuable upon the exercise of stock options and warrants outstanding on , 1999 with a weighted average exercise price of $ and an aggregate of shares reserved for future stock option grants and purchases under our equity compensation plans. For more information, see "Description of Capital Stock," "Management--Equity Plans" and Notes 6, 7 and 8 to the Consolidated Financial Statements. 4 6 SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE, SHARE AND NUMBER OF CUSTOMERS DATA)
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1997 1998 ------- ------- ------- STATEMENT OF OPERATIONS DATA: Web-based product revenues............................ $ 15 $ 3,312 $16,058 CD Rom product revenues(1)............................ 30,419 27,072 14,370 ------- ------- ------- Total revenues...................................... 30,434 30,384 30,428 ======= ======= ======= Gross profit.......................................... 17,895 17,539 16,773 Operating expenses.................................... 19,488 18,943 21,737 ------- ------- ------- Loss from operations.................................. (1,593) (1,404) (4,964) Interest income (expense), net........................ (733) (930) (595) Gain on sale of product line.......................... -- 501 12,797 ------- ------- ------- Income (loss) before income taxes and extraordinary gain................................................ (2,326) (1,833) 7,238 ======= ======= ======= Net income (loss)..................................... $(1,933) $(1,833) $ 6,988 ======= ======= ======= Unaudited pro forma earnings per share:(2) Basic............................................... $ Diluted............................................. $ Weighted average common shares outstanding: Basic............................................ Diluted..........................................
DECEMBER 31, 1998 ------------------------------ UNAUDITED PRO FORMA ACTUAL AS ADJUSTED(3) ------------ -------------- BALANCE SHEET DATA: Cash and cash equivalents................................... $ 8,665 $ Working capital (deficit)................................... (2,118) Total assets................................................ 27,646 Total debt (including capital lease obligations)............ 6,936 704 Deferred revenues........................................... 18,022 18,022 Total stockholders' equity (deficit)........................ (6,311)
DECEMBER 31, ----------------------------- 1996 1997 1998 ------- ------- ------- OTHER DATA FOR WEB-BASED PRODUCTS (UNAUDITED): Annualized contract value(4).......................... $ 412 $ 8,973 $25,920 Number of customers................................... 11 233 445 Average annualized contract value per customer........ $ 37.4 $ 38.5 $ 58.2
- ------------ (1) In 1997 and 1998, OneSource divested certain CD Rom product lines. Revenues attributable to these divested product lines, which are included in the statement of operations data through the divestiture date, were $6,415,000, $6,630,000 and $2,612,000 in the years ended December 31, 1996, 1997 and 1998, respectively. (2) Unaudited pro forma basic and diluted earnings per share of common stock for the year ended December 31, 1998 have been calculated based on net income attributable to all classes of common stock and assuming the reclassification of OneSource's 5 7 Class P common stock prior to completion of this offering as if it had occurred at January 1, 1998. In the reclassification, each share of Class P common stock will be reclassified into one share of common stock plus an additional number of shares of common stock (determined by dividing the preference amount for such share by the assumed initial public offering price of $ per share). As described in "Use of Proceeds", OneSource intends to use a portion of its net proceeds to repay a $6.2 million note due to Lotus Development Corporation and to pay $1.0 million to terminate certain management fee arrangements. Accordingly, had the note repayment and the management fee termination occurred at January 1, 1998, unaudited supplemental pro forma basic and diluted earnings per share for the year ended December 31, 1998 would be $ and $ , respectively. Such amounts reflect the elimination of annual interest expense on the note of $0.5 million and the elimination of annual management fees of $0.2 million, and the issuance of shares of common stock at the assumed initial public offering price of $ per share necessary to fund the note repayment and management fee termination. (3) This column shows the numbers in the "Actual" column as adjusted to give effect to: - the reclassification of each share of OneSource's Class P common stock prior to the completion of this offering into one share of common stock plus an additional number of shares of common stock (determined by dividing the preference amount as of December 31, 1998 for such share by the assumed initial public offering price of $ per share); - the sale of shares of common stock by OneSource in this offering at the assumed initial public offering price of $ per share, as if the sale had been completed on December 31, 1998; - the use of a portion of the estimated net proceeds to OneSource from this offering to pay off the note due to Lotus Development Corporation for $6.2 million plus accrued interest as of December 31, 1998 of $0.5 million; - the use of a portion of the estimated net proceeds to OneSource from this offering to repurchase for $ million shares of common stock which were issued to holders of Class P common stock in satisfaction of their preference amount; and - the use of a portion of the estimated net proceeds to OneSource from this offering to pay $1.0 million to terminate certain management fee arrangements. For more information, see "Reclassification," "Use of Proceeds" and "Capitalization." (4) Annualized contract value represents the invoiced fees for one month for all customer contracts for Web-based products in effect at the measurement date, multiplied by 12, without regard to the actual remaining duration of such contracts. At December 31, 1996, 1997 and 1998, annualized contract value was calculated by multiplying the total amount of fees invoiced for one month and included in deferred revenues for all customer contracts for Web-based products at December 31, 1996, 1997 and 1998 of $34,300, $747,750 and $2,160,000, respectively, by 12. For more information regarding annualized contract value, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." ------------------------ OneSource was incorporated in Delaware on July 21, 1993 under the name Datext Holding Corporation. On February 26, 1999, OneSource Information Services, Inc. merged into its parent, OneSource Holding Corporation, and the name of the combined company was changed to OneSource Information Services, Inc. Our principal executive offices are located at 150 CambridgePark Drive, Cambridge, MA 02140, and our telephone number is (617) 441-7000. 6 8 RISK FACTORS You should consider carefully the risks described below before you decide to buy our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we do not presently know about or that we currently believe are immaterial may also adversely impact our business operations. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could fall, and you may lose all or part of the money you paid to buy our common stock. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face, as more fully described below in this section and elsewhere in this prospectus. OUR BUSINESS BROWSER PRODUCTS HAVE NOT BEEN PROFITABLE We began operations as an independent company in 1993. We began to migrate our business to the Web from CD Rom-based products in early 1996, and launched the Web-based Business Browser product line in December 1996. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies transitioning to a new product line, particularly companies in the new and rapidly evolving market for Internet and Web-based business information products. We incurred losses from operations of approximately $1.6 million in 1996, $1.4 million in 1997 and $5.0 million in 1998. In addition, we have not reached the critical mass of users of Web-based products which we believe is necessary to leverage effectively our infrastructure expenses and become profitable. As of December 31, 1998, we had an accumulated deficit of $10.4 million. WE RELY PRIMARILY ON OUR BUSINESS BROWSER PRODUCT LINE Subscription revenues from our Business Browser product line accounted for 83% of our total annualized contract value at the end of 1998 and 29% at the end of 1997. We are currently phasing out CD Rom products that are not part of the Business Browser product line. As a result, our future financial condition will depend heavily on the success or failure of our Business Browser product line. Business Browser products were introduced in December 1996 and it is difficult to predict demand and market acceptance for these products in the new and rapidly evolving Web-based business information services market. If the demand for Business Browser products does not grow, whether due to competition, lack of market acceptance, failure of Internet or Web use to grow in general, technological change or other factors, our business would suffer significantly. WE FACE INTENSE COMPETITION The business information services industry is intensely competitive. We face direct or indirect competition from the following types of companies: - large, well-established business and financial information providers such as Dow Jones, Dialog, Lexis-Nexis, Pearson, Reuters, Thomson, Primark and McGraw-Hill 7 9 - on-line information services or Websites targeted to specific markets or applications, such as NewsEdge, Factset and Bloomberg - providers of sales, marketing and credit information such as Dun & Bradstreet - Web retrieval, Web "portal" companies and other free or low-cost mass market on-line services such as Excite, Infoseek, Lycos, Yahoo! and AOL/Netscape Many of our existing competitors, as well as a number of prospective competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in user requirements, or to devote greater resources to the development, promotion and sale of their products than we can. Such competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential employees, customers and information providers. Our competitors also may develop products that are equal or superior to our products or that achieve greater market acceptance than our products. Certain of our competitors offer financial and business information free of charge with the goal of achieving high enough usage to facilitate the sale of substantial amounts of advertising. To the extent these types of competitors offer products free of charge that are similar to ours, it would have a material adverse impact on our business, financial condition and results of operations. In addition, there are relatively low barriers to entry to the Web-based information market and we may face additional competition from new entrants. We also expect that competition may increase as a result of industry consolidation. It is possible that new competitors may emerge and rapidly acquire significant market share. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share. Any of these would have a material adverse effect on our business, financial condition and results of operations. WE DEPEND ENTIRELY ON OUR INFORMATION PROVIDERS FOR CONTENT We do not own or create the original content distributed through our products. We depend on information providers to supply information and data feeds to us on a timely basis. Our products could experience interruptions due to any failure or delay in the transmission or receipt of this information. Many of our information providers compete with one another and, in some cases, with us, for users. Business decisions made by our information providers could adversely affect the availability or pricing of their information to us. Any increase in the fees we negotiate with our information providers could have an adverse effect on our results of operations. Our arrangements with our information providers generally extend for one-year periods, which automatically renew unless terminated by notice given at least three months prior to the end of the term. In the event of a breach by us, the contracts can be terminated on relatively short notice. An information provider may be difficult to replace and the loss of one or more significant information providers could decrease the quality, quantity or mix of the information distributed through our products. This could make our products less competitive. If information providers terminate their relationships with us, our business and delivery of our products may be disrupted. This could result in a loss of customers or requests for refunds. 8 10 IF OUR WEBSITE SERVICE IS DISRUPTED, OUR BUSINESS WOULD BE ADVERSELY AFFECTED Our on-line site is located at a dedicated hosting facility and we do not currently have a shadow site fully equivalent to the live on-line site. Any damage to the hosting facility or the equipment there, such as damage by fire or power loss, or loss of telecommunications could disrupt the delivery of our products. In addition, our users depend on Internet service providers, on-line service providers and other Website operators for access to our products. Each of them has experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our on-line architecture. These types of occurrences could cause users to perceive our products as not functioning properly and therefore cause them to use other methods to obtain their business and financial information. The number of Business Browser users has increased since its introduction in December 1996 and we are seeking to further increase our user base. This has led to increased usage and increased demands on our on-line architecture. Any downtime or slow response times may damage our reputation and make it more difficult to attract new users. OUR MARKET IS NEW AND RAPIDLY EVOLVING The market for Web-based distribution of electronic business and financial information has only recently begun to develop and it is rapidly evolving. This makes it difficult to predict demand and market acceptance for our products. We cannot guarantee that the market for our products will grow or that our products will become widely accepted. If the market for our products does not develop as quickly as we expect or if our products are not accepted by customers, our future financial results will be adversely affected. A significant increase in the number of customers and development of new product offerings could also require the expenditure of significant amounts of money, time and other resources. This could strain our personnel and financial resources. WE DEPEND ON CONTINUED GROWTH IN INTERNET USE Our business would be adversely affected if the number of professionals using the Web does not continue to grow. This growth may be inhibited by a number of factors, such as: - inadequate network infrastructure - inconsistent quality of service - lack of cost-effective, high-speed service - security concerns Even if Web use grows, the Internet infrastructure may not be able to support adequately future growth and its reliability and quality of service may suffer. In addition, numerous Websites have experienced service interruptions due to outages and other delays occurring internally and throughout the Internet network infrastructure. If these outages or delays occur frequently in the future, Web usage, as well as usage of our products, could grow more slowly or decline. GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE WEB COULD HURT OUR BUSINESS Currently, there are few laws or regulations that specifically regulate communications or commerce on the Web. However, laws and regulations may be adopted that address issues such 9 11 as user privacy, pricing and the characteristics and quality of products and services. For example, the Telecommunications Act sought to prohibit the transmission of certain types of information and content over the Web. In addition, several telecommunications companies have petitioned the Federal Communications Commission to regulate Internet and on-line service providers in a manner similar to long distance telephone carriers and to impose access fees on such providers. This could increase the cost of transmitting data over the Internet. Moreover, it may take years to determine the extent to which existing laws relating to issues such as property ownership, libel and personal privacy apply to the Web. Finally, state tax laws and regulations relating to the provision of products and services over the Internet are still developing. If individual states impose taxes on products and services provided over the Web, the cost of our products may increase and we may not be able to increase the price we charge for our products to cover these costs. Any new laws or regulations or new interpretations of existing laws and regulations relating to the Web could adversely affect our business. WE RELY ON OUR INTELLECTUAL PROPERTY We believe that our success depends, in large part, on protecting our intellectual property in the United States and in foreign countries. Other than certain trademarks, most of our intellectual property consists of proprietary or confidential information that is not subject to patent or similar protection. Competitors may independently develop similar or superior products, software or business models. We cannot guarantee that we will be able to protect our intellectual property. There is no way to assure that unauthorized third parties will not try to copy our products or business model or use our confidential information to develop competing products. Legal standards relating to the validity, enforceability and scope of protection of certain proprietary rights in Internet-related businesses are uncertain and still evolving. As a result, we cannot predict the future viability or value of our proprietary rights and those of other companies within the industry. We also cannot guarantee that our business activities and products will not infringe upon the proprietary rights of others, or that other parties will not assert infringement claims against us. Any such claims and any resulting litigation, should it occur, could subject us to significant liability for damages and could result in invalidation of our proprietary rights. Even if we eventually won any such litigation, it could be time-consuming and expensive to defend, and could result in the diversion of our management's time and attention. WE COULD BE SUBJECT TO LEGAL LIABILITY FOR DISTRIBUTING INFORMATION ON OUR WEBSITE We may be subjected to claims based on negligence or other theories relating to the information we distribute. Similarly, we may be subjected to claims for defamation or copyright or trademark infringement relating to the information we provide in our products. These types of claims have been brought, sometimes successfully, against on-line services as well as print publications in the past. We also could be subjected to claims based upon the content that is accessible from our products through links to other Websites. These types of claims could be time-consuming and expensive to defend, and could result in the diversion of our management's time and attention. In addition, if our products provide faulty or inaccurate information, or fail to provide all the information a user expects, we could be subject to legal liability. Our insurance and contractual provisions with users and information providers may not protect us against these types of claims. 10 12 OUR PRODUCTS COULD CONTAIN SOFTWARE DEFECTS Complex software like the software we develop for our products may contain errors or defects, especially when first implemented, that may be very costly to correct. Defects or errors also could result in downtime and our business could suffer significantly from potential adverse customer reaction, negative publicity and harm to our reputation. WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS Our quarterly revenues, gross profits and results of operations have fluctuated significantly in the past and we expect them to continue to fluctuate significantly in the future. In addition, we believe that an important measure of our business is the annualized contract value at the end of each period, which also may fluctuate. Causes of such fluctuations have included and may include, among other factors: - changes in demand for our products - the dollar value and timing of both new and renewal subscriptions - competition (particularly price competition) - changes in operating expenses - technical difficulties or system downtime affecting our products on the Web generally - economic conditions specific to the Web, as well as general economic conditions - consolidation of our customers In addition, a substantial portion of our expenses, including certain product development and selling and marketing expenses, must be incurred in advance of revenue generation. If our projected revenue does not meet our expectations, then we may have an operating loss in a particular quarter. Any one or more of these factors could affect our business, financial condition and results of operations, and this makes the prediction of results of operations on a quarterly basis unreliable. As a result, we believe that period-to-period comparisons of our historical results of operations and annualized contract values are not necessarily meaningful and that you should not rely on them as an indication for future performance. Also, due to these and other factors, it is possible that our quarterly results of operations (including the annualized contract value) may be below the expectations of public market analysts and investors. If this happens, the price of our common stock would likely decrease. WE DEPEND ON KEY PERSONNEL Our future success depends on the continued services of a number of key employees, including Daniel J. Schimmel, our President and Chief Executive Officer, James A. Becker, our Vice President, Global Strategic Web Applications Team, Philip J. Garlick, our Vice President, Global Enterprise Sales and Marketing, Mark C. VanDine, our Vice President, Engineering and Roy D. Landon, our Vice President, Finance and Administration. We also depend on a limited number of engineers to monitor the performance and availability of our complex network and to perform the necessary updates and repairs. We do not have employment contracts with our key personnel. If any of our key employees leave, the loss of their technological knowledge and industry expertise would seriously impede the development of new products and services and our 11 13 ability to manage our business. The loss of one or a group of our key employees could adversely affect our future financial results. THERE IS INTENSE COMPETITION FOR QUALIFIED PERSONNEL Our future performance also depends upon our ability to attract and retain highly-qualified technical, sales and managerial personnel. Qualified personnel are in great demand throughout the software and Internet industries and there is intense competition for such personnel. In addition, competition for qualified personnel may lead to increased costs for such personnel. If we do not succeed in retaining our personnel or in attracting new employees, our business could suffer significantly. WE ARE SUBJECT TO RISKS OF OPERATING INTERNATIONALLY Revenue from customers located outside North America accounted for 23% in 1998, 20% in 1997 and 17% in 1996 of our total revenue for such years. Over time, we expect revenue from international operations, principally in Europe, to increase as a percentage of our total revenue. As a result, we may be exposed to a number of risks customary for international operations, including: - difficulties relating to managing an international sales force - the burdens of complying with a wide variety of foreign laws - the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property - multiple and possibly overlapping tax structures - economic or political changes in international markets - currency and exchange rate fluctuations - adverse tax consequences of returning any earnings of our foreign operations back to the United States To date, we have not used risk management techniques or "hedged" the risks associated with fluctuations in foreign exchange rates. WE ARE SUBJECT TO RISKS ASSOCIATED WITH YEAR 2000 PROBLEMS Many existing computer systems and software products do not properly recognize dates after December 31, 1999. This "Year 2000" problem could result in miscalculations, data corruption, system failures or disruptions of operations. We are subject to potential Year 2000 problems affecting telecommunication services, customers, our products, our internal systems and the systems of our hosting facility and our information providers, any of which could have a material adverse effect on our business, financial condition and results of operations. We also have identified certain third-party software as non-compliant and certain internal systems need to be addressed as part of our relocation in June 1999. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Year 2000 Readiness Disclosure Statement." Furthermore, as we approach the Year 2000, customers may be forced to devote greater resources to comply with Year 2000 requirements and as a result purchase fewer products from us, which would have an adverse effect on our net revenues. 12 14 OUR EXISTING OFFICERS AND DIRECTORS WILL CONTINUE TO CONTROL ONESOURCE Following this offering, our officers and directors, together with entities affiliated with them, will beneficially own approximately % of our outstanding shares of common stock ( % if the over-allotment option is exercised in full). As a result, these stockholders acting together will be able to take any of the following actions without the approval of our public stockholders: - elect our directors - amend our charter or approve a merger, sale of assets or other major corporate transaction - defeat any non-negotiated takeover attempt that may be beneficial to our public stockholders - otherwise control the outcome of all matters submitted for a stockholder vote THE OFFERING WILL BENEFIT SELLING STOCKHOLDERS The selling stockholders will receive substantial proceeds and certain other benefits in connection with this offering. In addition, a selling stockholder and an affiliate of another selling stockholder will each receive a payment of $0.5 million out of OneSource's net proceeds to terminate a management fee arrangement. For more information, see "Certain Transactions." The offering will also establish a public market for the common stock and provide significantly increased liquidity to our existing stockholders and optionholders. THERE IS NO PRIOR TRADING MARKET FOR OUR COMMON STOCK Before this offering, there was no public market for our common stock. We and the underwriters have determined the initial public offering price of our common stock based on negotiations between us concerning the proper valuation of our common stock. Nevertheless, after this offering, you may not be able to resell your shares at or above the initial public offering price due to a number of factors, including: - actual or anticipated fluctuations in our operating results or annualized contract values - changes in expectations as to our future financial performance - changes in securities analysts' financial estimates - the operating and stock price performance of our competitors and other comparable companies In addition, the stock market in general, and the stocks of Web-based businesses in particular, have experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance. You should read the "Underwriting" section for a more complete discussion of the factors that the underwriters and we considered in determining the initial public offering price. OTHER SHARES MAY BE SOLD IN THE FUTURE After this offering, we will have shares of common stock outstanding and will have reserved an additional shares of common stock for issuance pursuant to our stock option and purchase plans and outstanding warrants. We intend to register for resale the shares of common stock reserved for issuance under our stock option and stock purchase plans approximately 180 days after the date of this prospectus. The federal securities laws impose 13 15 certain restrictions on the ability of certain stockholders to resell their shares. In addition, our officers and directors have agreed not to sell their shares for a period of 180 days after the date of this prospectus. If a large number of our shares of common stock are sold following this offering, the price of our common stock would likely decrease. PURCHASERS WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION The initial public offering price of our common stock is substantially higher than the resulting net tangible book value per share of the outstanding common stock after the offering. Accordingly, if you purchase any shares of common stock in this offering you will incur immediate dilution of approximately $ in the net tangible book value per share of the common stock from the price you pay for our common stock. OUR ANTI-TAKEOVER PROVISIONS MAY HAVE ADVERSE EFFECTS Our Restated Certificate of Incorporation and Amended and Restated By-laws contain anti-takeover provisions that could have the effect of delaying or preventing changes in our management, even if such changes would benefit our public stockholders. For example, following the closing of this offering, the Board of Directors may issue up to one million shares of preferred stock without any further vote or action by the stockholders. The preferred stock could have voting, liquidation, dividend and other rights superior to those of the common stock, and, therefore, any issuance of preferred stock could adversely affect your rights as a common stockholder. These factors could cause the market price of the common stock to decrease. WE DO NOT EXPECT TO PAY DIVIDENDS We do not expect to pay cash dividends on our common stock in the foreseeable future. RECLASSIFICATION Prior to the consummation of this offering, OneSource will reclassify all of its outstanding shares of capital stock into a single class of common stock and will authorize a single class of undesignated preferred stock. Each share of Class P common stock will be reclassified into shares of common stock. Each share of Class P common stock is entitled to a payment upon any distribution by OneSource to holders of its capital stock in an amount equal to the original cost of such share plus a preferential amount which accrues on a daily basis at a rate of 12% per annum on such cost, compounded quarterly. As of , 1999, the preference amount of the outstanding Class P common stock will be $ per share, based on an original cost per share of $ for an aggregate preference of $ million. In connection with the reclassification, each outstanding share of Class P common stock will be reclassified into one share of common stock plus an additional number of shares of common stock determined by dividing the applicable preference amount for such share by the value of a share of common stock based on the initial public offering price in the offering. Based on an assumed initial public offering price of $ per share, an aggregate of shares of common stock will be issued upon the reclassification of all shares of Class P common stock. Fractional shares otherwise issuable will be rounded down to the nearest whole number. OneSource intends to repurchase the shares of common stock issued with respect to the preference amount at the initial public offering price upon completion of this offering. For more information, see "Use of Proceeds." 14 16 USE OF PROCEEDS We estimate our net proceeds from the issuance and sale of the shares of common stock being offered by OneSource hereby to be approximately $ million, at an assumed initial public offering price of $ per share, after deducting the estimated underwriting discount and offering expenses. We will not receive any proceeds from the sale of the common stock by the selling stockholders. The principal purposes of this offering are to repay debt, repurchase certain shares of common stock in connection with the reclassification, terminate certain management fee arrangements, obtain working capital, establish a public market for our common stock, increase our visibility in the marketplace, facilitate future access to public capital markets and provide liquidity to existing stockholders and optionholders. We intend to use approximately $6.7 million of the net proceeds to us to repay principal and interest on a note issued by OneSource to Lotus Development Corporation in connection with the purchase of OneSource's business from Lotus in 1993. The note bears interest at the rate of 8% per year and is due September 8, 2000, unless accelerated upon certain events. The completion of this offering would require OneSource to repay a significant portion of the note if we do not repay it in full. We also intend to use approximately $ million to repurchase shares of common stock issued to holders of Class P common stock in the reclassification in satisfaction of their preference amount. For more information, see "Reclassification." In addition, we intend to pay $0.5 million to each of William Blair Venture Partners III Limited Partnership and an affiliate of Information Partners Capital Fund, L.P. to terminate certain management fee arrangements. For more information, see "Certain Transactions." We intend to use the remaining net proceeds for general corporate purposes, including working capital, and we may also use a portion of the net proceeds to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. We have no specific understandings, commitments or agreements with respect to any such acquisition or investment. Pending such uses, our remaining net proceeds of the offering will be invested in short-term, interest-bearing, investment-grade securities, certificates of deposit or direct or guaranteed obligations of the United States. DIVIDEND POLICY We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. 15 17 CAPITALIZATION The left-hand column in the following table sets forth OneSource's capitalization as of December 31, 1998. The middle column gives pro forma effect to the reclassification of each outstanding share of OneSource's Class P common stock into one share of common stock plus an additional number of shares of common stock (determined by dividing the applicable preference amount as of December 31, 1998 for such share by the value of a share of common stock based on the assumed initial public offering price of $ per share) and the filing of our Restated Certificate of Incorporation, each prior to the completion of this offering. The right-hand column sets forth OneSource's pro forma capitalization as of December 31, 1998, as further adjusted to reflect the sale of shares of common stock by OneSource in this offering (based on an assumed initial public offering price of $ per share), the use of a portion of the estimated net proceeds to repay the $6.2 million note plus accrued interest of $0.5 million as of December 31, 1998 payable to Lotus, to repurchase for $ million shares of common stock issued to holders of Class P common stock in satisfaction of their preference amount, to pay $1.0 million to terminate certain management fee arrangements, all as if they occurred on December 31, 1998. You should read the data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this prospectus.
DECEMBER 31, 1998 -------------------------------------- PRO FORMA PRO FORMA AS ADJUSTED ACTUAL (UNAUDITED) (UNAUDITED) -------- ----------- ----------- Current portion of capital lease obligations(1)........... $ 471 $ 471 $ 471 ======== ======== ======== Long-term debt and capital lease obligations(1)........... 6,465 6,465 233 -------- -------- -------- Stockholders' equity (deficit): Preferred stock, $0.01 par value; no shares authorized, issued or outstanding, actual; 1,000,000 shares authorized, no shares issued or outstanding, pro forma; 1,000,000 shares authorized, no shares issued or outstanding, pro forma as adjusted................ -- -- -- Class P common stock, $0.01 par value; 500,000 shares authorized, 352,400 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma; no shares authorized, issued or outstanding, pro forma as adjusted................... 3,524 -- -- Common stock, $0.01 par value; 6,500,000 shares authorized, 3,329,392 shares issued and 3,275,392 shares outstanding, actual; 20,000,000 shares authorized, shares issued and shares outstanding, pro forma; 20,000,000 shares authorized, issued and shares outstanding, pro forma as adjusted(2).......................................... 33 Additional paid-in capital.............................. 759 Unearned compensation................................... (39) (39) (39) Accumulated deficit..................................... (10,444) (10,444) (11,444) Accumulated other comprehensive loss.................... (138) (138) (138) Common stock held in treasury........................... (6) (6) -------- -------- -------- Total stockholders' equity (deficit)................. (6,311) -------- -------- -------- Total capitalization............................ $ 154 $ $ ======== ======== ========
- ------------ (1) For information regarding OneSource's long-term debt and capital lease obligations, see Notes 4 and 13 to the Consolidated Financial Statements. (2) The number of shares of common stock issued and outstanding, pro forma as adjusted, excludes as of December 31, 1998, 1,983,852 shares of common stock issuable upon the exercise of stock options and warrants outstanding at a weighted average exercise price of $2.57, and an aggregate of 252,760 shares reserved for future stock option grants and purchases under OneSource's equity compensation plans. For more information, see "Management--Equity Plans" and Notes 7 and 8 to the Consolidated Financial Statements. 16 18 DILUTION The net tangible book value per share of our common stock immediately after this offering will be substantially less than the initial public offering price because the assumed initial public offering price is substantially higher than the current net tangible book value per share. The pro forma net tangible book value deficit of OneSource as of December 31, 1998 was $(6.3) million, or $( ) per share. Pro forma net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding after giving effect to the reclassification of all shares of Class P common stock into common stock and the issuance of shares of common stock to the holders of Class P common stock in satisfaction of their preference amount. After giving effect to the sale by OneSource of the shares of common stock offered hereby (at an assumed initial public offering price of $ per share) and the application of the estimated net proceeds, the pro forma net tangible book value of OneSource as of December 31, 1998, would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate "dilution" of $ per share to investors purchasing common stock in this offering. The following table illustrates this per share dilution: Assumed initial public offering price....................... $ Pro forma net tangible book value deficit per share as of December 31, 1998...................................... $ Increase per share attributable to new investors.......... ------ Pro forma net tangible book value per share after this offering.................................................. ----- Dilution per share to new investors......................... $ =====
The following table summarizes, as of December 31, 1998, the difference between the number of shares of common stock purchased from OneSource, the total consideration paid to OneSource, and the average price per share paid by existing stockholders and by new investors (at an assumed initial public offering price of $ per share before deduction of the estimated underwriting discount and offering expenses payable by OneSource):
SHARES PURCHASED TOTAL CONSIDERATION --------------------- ---------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- ----------- ------- ------------- Existing stockholders............... % $ % $ New investors....................... $ ---------- ----- ----------- ----- Total.......................... 100.0% $ 100.0% ========== ===== =========== =====
The foregoing tables (a) assume the repurchase of of the shares of common stock issued in the reclassification and (b) assume no exercise of the options or the warrants outstanding as of December 31, 1998 to purchase an additional shares of common stock at a weighted average exercise price of $ per share. To the extent these options or warrants are exercised, there will be further dilution to new shareholders in the net tangible book value of their shares. For more information, see "Management--Equity Plans." In addition, the second table does not reflect the sale of shares by the selling stockholders in this offering. Such sales will reduce the number of shares held by existing shareholders as of December 31, 1998 to , or approximately % of the total shares of common stock to be outstanding after this offering ( % if the over-allotment option is exercised in full), and will increase the number of shares to be purchased by the new shareholders to or % ( % if the over-allotment option is exercised in full) of the total shares of common stock to be outstanding after this offering. For more information, see "Principal and Selling Stockholders." 17 19 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data set forth below should be read in conjunction with OneSource's Consolidated Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations," appearing elsewhere in this prospectus. The consolidated statement of operations data for the years ended December 31, 1996, 1997 and 1998, and the consolidated balance sheet data as of December 31, 1997 and 1998, have been derived from, and are qualified by reference to, OneSource's audited Consolidated Financial Statements appearing elsewhere in this prospectus. The consolidated statement of operations data for the years ended December 31, 1994 and 1995, and the consolidated balance sheet data as of December 31, 1994, 1995 and 1996, have been derived from audited Consolidated Financial Statements of OneSource that do not appear in this prospectus. The historical results are not necessarily indicative of the operating results to be expected in the future.
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues:(1) Web-based product........................... $ -- $ -- $ 15 $ 3,312 $ 16,058 CD Rom product.............................. 30,300 28,957 30,419 27,072 14,370 -------- -------- -------- -------- -------- Total revenues.............................. 30,300 28,957 30,434 30,384 30,428 -------- -------- -------- -------- -------- Cost of revenues: Web-based product........................... -- -- 295 2,401 7,863 CD Rom product.............................. 12,380 11,520 12,244 10,444 5,792 -------- -------- -------- -------- -------- Total cost of revenues...................... 12,380 11,520 12,539 12,845 13,655 -------- -------- -------- -------- -------- Gross profit.................................. 17,920 17,437 17,895 17,539 16,773 -------- -------- -------- -------- -------- Operating expenses: Selling and marketing....................... 11,231 8,705 8,572 9,167 11,577 Platform and product development............ 5,512 6,585 7,252 6,375 6,313 General and administrative.................. 6,516 5,163 3,664 3,401 3,847 -------- -------- -------- -------- -------- Total operating expenses.................... 23,259 20,453 19,488 18,943 21,737 -------- -------- -------- -------- -------- Loss from operations.......................... (5,339) (3,016) (1,593) (1,404) (4,964) Interest income (expense), net................ (515) (633) (733) (930) (595) Gain on sale of product line.................. -- -- -- 501 12,797 -------- -------- -------- -------- -------- Income (loss) before income taxes and extaordinary gain........................... (5,854) (3,649) (2,326) (1,833) 7,238 Provision (benefit) for income taxes.......... (473) -- -- -- 250 Extraordinary gain on early extinguishment of debt........................................ -- -- 393 -- -- -------- -------- -------- -------- -------- Net income (loss)............................. (5,381) (3,649) (1,933) (1,833) 6,988 Less: income (loss) attributable to Class P common stock................................ (122) 104 335 414 1,367 -------- -------- -------- -------- -------- Income (loss) attributable to common stock.... $ (5,259) $ (3,753) $ (2,268) $ (2,247) $ 5,621 ======== ======== ======== ======== ======== Earnings (loss) per share:(2) Class P common stock: Basic and diluted earnings (loss) per share......................................... $ (0.34) $ 0.29 $ 0.95 $ 1.17 $ 3.88 Weighted average Class P common shares outstanding............................ 355,900 355,400 353,300 352,800 352,600
18 20
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- Common stock: Basic earnings (loss) per share........... $ (1.64) $ (1.17) $ (0.71) $ (0.70) $ 1.72 Diluted earnings (loss) per share......... $ (1.64) $ (1.17) $ (0.71) $ (0.70) $ 1.20 Weighted average common shares outstanding: Basic.................................. 3,206,431 3,205,223 3,187,695 3,216,385 3,263,309 Diluted................................ 3,206,431 3,205,223 3,187,695 3,216,385 4,699,337 Unaudited pro forma earnings per share:(3) Basic..................................... $ Diluted................................... $ Weighted average common shares outstanding Basic.................................. Diluted................................
DECEMBER 31, ---------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT NUMBER OF CUSTOMER DATA) BALANCE SHEET DATA: Cash and cash equivalents..................... $ 1,378 $ 966 $ 535 $ 341 $ 8,665 Working capital (deficit)..................... (7,431) (7,499) (8,803) (9,792) (2,118) Total assets.................................. 19,396 16,567 16,934 16,644 27,646 Total debt (including capital lease obligations)................................ 4,755 6,223 6,661 8,171 6,936 Deferred revenues............................. 13,818 14,160 15,419 15,748 18,022 Total stockholders' deficit................... (6,116) (9,757) (11,827) (13,613) (6,311) OTHER DATA FOR WEB-BASED PRODUCTS (UNAUDITED): Annualized contract value(4).................. $ -- $ -- $ 412 $ 8,973 $ 25,920 Number of customers........................... -- -- 11 233 445 Average annualized contract value per customer.................................... $ -- $ -- $ 37.4 $ 38.5 $ 58.2
- ------------ (1) In 1997 and 1998, OneSource divested certain CD Rom product lines. Revenues attributable to these divested product lines, which are included in the statement of operations data through the divestiture date, were $5,713,000, $6,002,000, $6,415,000, $6,630,000 and $2,612,000 in the years ended December 31, 1994, 1995, 1996, 1997 and 1998, respectively. (2) You should read Notes 2 and 5 to the Consolidated Financial Statements for further description of the calculation of these items. (3) Unaudited pro forma basic and diluted earnings per share of common stock for the year ended December 31, 1998 have been calculated based on net income attributable to all classes of common stock and assuming the reclassification of OneSource's Class P common stock prior to the completion of this offering as if it had occurred at January 1, 1998. In the reclassification, each share of Class P common stock will be reclassified into one share of common stock plus an additional number of shares of common stock (determined by dividing the preference amount for such share by the assumed initial public offering price of $ per share). As described in "Use of Proceeds", OneSource intends to use a portion of its net proceeds to repay a $6.2 million note due to Lotus Development Corporation and to pay $1.0 million to terminate certain management fee arrangements. Accordingly, had the note repayment and the management fee termination occurred at January 1, 1998, unaudited supplemental pro forma basic and diluted earnings per share for the year ended December 31, 1998 would be $ and $ , respectively. Such amounts reflect the elimination of annual interest expense on the note of $0.5 million and the elimination of annual management fees of $0.2 million, and the issuance of shares of common stock at the assumed initial public offering price of $ per share necessary to fund the note repayment and management fee termination. (4) Annualized contract value represents the invoiced fees for one month for all customer contracts for Web-based products in effect at the measurement date, multiplied by 12, without regard to the actual remaining duration of such contracts. At December 31, 1996, 1997 and 1998, annualized contract value was calculated by multiplying the total amount of fees invoiced for one month and included in deferred revenues for all customer contracts for Web-based products at December 31, 1996, 1997 and 1998 of $34,300, $747,750 and $2,160,000, respectively, by 12. For more information regarding annualized contract value, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." 19 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW OneSource provides Web-based business and financial information to professionals who need quick access to reliable corporate, industry and market intelligence. OneSource was formed as a division of Lotus in 1987 and became an independent company when it was purchased in a management buy-out in 1993. Until December 1996, our business was to provide business information to the financial community using CD Rom technology as the primary method of distribution. The introduction of Business Browser in December 1996 marked a fundamental shift in our business as we began a transition away from our legacy CD Rom business and toward Web-based products. Revenues from Web-based products accounted for $16.1 million, or 53% of total revenues, for the year ended December 31, 1998 up from $3.3 million, or 11% of total revenues, for the year ended December 31, 1997. In the same period, CD Rom product revenues decreased to $14.4 million, or 47% of total revenues for the year ended December 31, 1998 from $27.1 million, or 89% of total revenues, for the year ended December 31, 1997. As of December 31, 1998, 445 organizations subscribed to our Business Browser product line, and the annualized contract value for these organizations was $25.9 million. During this transition period, we utilized the cash flow from our CD Rom business to fund a portion of the significant expenses incurred to build our Web-based business. These expenses included (a) platform and product development expenses to develop and enhance our Web-based products, (b) selling and marketing expenses to hire and train a Web-based sales force and to retrain a portion of our CD Rom-based sales force and (c) general and administrative expenses to build the necessary infrastructure to support our growing Web-based business. The gross margins on our Web-based business have also been adversely impacted by certain royalty expenses and other costs of revenues which were disproportionately high compared to Web-based revenues which were growing from low initial levels. We believe that our operating margins will improve as we more effectively leverage our Web-based royalty and infrastructure expenses and eliminate costs incurred to support our legacy CD Rom products. In May 1998, we sold our CD-Insurance division to allow us to focus more completely on our new Web-based product line. We recognized a gain of $12.8 million on this sale during 1998. In addition, in connection with the disposition, we licensed certain of our CD Rom technology to the acquiror in exchange for $4.0 million of license fees. These license fees will be paid in eight equal quarterly installments beginning January 1, 1999 and running through December 31, 2000 and recognized ratably. One measure of the performance of our business is "annualized contract value," a term we use as an indicator of business volume and growth, both in terms of new customers and upgrades and expansions at existing customers. It is not an absolute indicator and we cannot guarantee that any annualized contract value will be ultimately realized as revenues. Annualized contract value represents the total annualized revenue under all customer contracts for Web-based products in effect at the measurement date, without regard for the actual remaining duration of such contracts. We have increased annualized contract value attributable to Web-based products 189% to $25.9 million as of December 31, 1998 from $9.0 million as of December 31, 1997. The 20 22 number of on-line customers has increased 91%, to 445 at December 31, 1998 from 233 at December 31, 1997. At the same time, the average annualized contract value of all Web-based product customers has increased 51%, to $58,248 per customer at December 31, 1998 from $38,512 per customer at December 31, 1997. The average annualized contract value for the customers that were under contract at both December 31, 1997 and 1998 grew to $76,143 per customer at December 31, 1998 from $38,512 per customer at December 31, 1997. This growth was attributable to an increase in the number of user seats purchased by customers and the addition of new products. The renewal rate of the Business Browser product line for 1998 was 90% calculated on a dollar basis. The renewal rate is measured by comparing a customer's annualized contract value at December 31, 1998 to its annualized contract value at December 31, 1997. The set of customers measured are those who had subscriptions in effect at December 31, 1997. Our revenues (for both CD Rom and Web-based products) consist of monthly subscription fees from customer contracts. Customer contracts span varying periods of time but are generally for one year, are renewable for like periods, and are payable in advance. Subscription fees generally are quoted to clients on an annual basis but are earned as revenues on a monthly basis over the subscription period. Invoices are recorded as accounts receivable until paid and as deferred revenues until earned. Deferred revenues attributable to Web-based products increased 231% to $15.9 million as of December 31, 1998 from $4.8 million as of December 31, 1997. Cost of revenues consists primarily of royalties to information providers and, to a lesser extent, employee salaries and related expenses (including benefits and facilities allocation), depreciation associated with computers for data processing and on-line requirements and Web hosting expenses. We enter into contracts with our information providers which are generally for a term of at least one year and are automatically renewable if not canceled with advance notice. These contracts may be terminated under certain circumstances. For more information, see "Risk Factors--We depend entirely on our information providers for content." Under these arrangements, royalties are generally paid on a quarterly basis to information providers. Royalties generally are calculated either as a flat percentage of our revenues or as a per-user fee that declines as the number of authorized users of the product increases. In limited cases, we pay a fixed fee per period. Selling and marketing expense consists primarily of employee salaries and sales commissions paid to our sales force, customer support organization and marketing personnel, as well as related expenses (including benefits and facilities allocation), direct marketing promotional materials, trade show exhibitions and advertising. Sales commissions are paid when customers are invoiced and are recorded as deferred subscription costs, which are amortized ratably over the term of the contract, typically 12 months, as the associated revenues are recognized. All other selling and marketing costs are expensed as incurred. Platform and product development expense consists primarily of employee salaries and related expenses (including benefits and facilities allocation) as well as outside contractor expenses, relating to the development of our "platform" of core software supporting our products and the development of new products based upon that platform. Platform and product development expense includes expenses relating to the editorial staff that implements our KeyID technology to integrate disparate information sources into our Web-based products. 21 23 General and administrative expense consists primarily of employee salaries and related expenses (including benefits and facilities allocation) associated with OneSource's management, finance, human resources, management information systems and administrative groups. In addition, we will incur non-recurring charges of (a) approximately $0.2 million in moving and related costs in June 1999 due to the relocation of our headquarters from Cambridge to Concord, Massachusetts and (b) approximately $0.2 million of financial advisory fees. The quarterly management fees of $25,000 paid to each of William Blair Venture Partners and an affiliate of Information Partners Capital will cease in exchange for the payment of a $0.5 million termination fee to each of these parties upon completion of this offering. For more information, see "Certain Transactions." RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of total revenues represented by each line item in OneSource's consolidated statement of operations. We can give no assurance that the indicated trends in revenues or operating results will continue in the future.
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ----- ----- ----- (PERCENTAGE OF TOTAL REVENUES) Revenues: Web-based product..................................... --% 11% 53% CD Rom product........................................ 100 89 47 --- --- ---- Total revenues..................................... 100 100 100 --- --- ---- Cost of revenues: Web-based product..................................... 1 8 26 CD Rom product........................................ 40 34 19 --- --- ---- Total cost of revenues............................. 41 42 45 --- --- ---- Gross profit............................................ 59 58 55 Operating expenses: Selling and marketing................................. 28 30 38 Platform and product development...................... 24 21 21 General and administrative............................ 12 11 12 --- --- ---- Loss from operations.................................... (5) (4) (16) Interest income (expense), net.......................... (2) (3) (2) Gain on sale of product line............................ -- 1 42 --- --- ---- Income (loss) before income taxes and extraordinary gain.................................................. (7) (6) 24 Provision for income taxes.............................. -- -- 1 Extraordinary gain on early extinguishment of debt...... 1 -- -- --- --- ---- Net income (loss)....................................... (6)% (6)% 23% === === ====
22 24 COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 Revenues. Total revenues remained at approximately the same level of $30.4 million for each of the years ended December 31, 1998 and 1997. Web-based product revenues increased by 385% to $16.1 million for the year ended December 31, 1998 from $3.3 million for the year ended December 31, 1997. The increase was attributable to new customers, an increase in the number of user seats purchased by existing customers and the sale of new products to existing customers. At the same time, CD Rom product revenues decreased by 47% to $14.4 million in 1998 from $27.1 million in 1997 as OneSource continued its transition away from its legacy CD Rom business. During this period, CD Rom product revenues included revenues attributable to our CD-Insurance division which was sold in May 1998. Revenues from this product line were $2.6 million for the year ended December 31, 1998 compared to $6.6 million for the year ended December 31, 1997. Cost of Revenues. Total cost of revenues increased 6% to $13.7 million for the year ended December 31, 1998 from $12.8 million for the year ended December 31, 1997. As a percentage of total revenues, total cost of revenues increased to 45% in 1998 from 42% in 1997. The increase in total cost of revenues was principally due to increased royalty expense for our Web-based products. It was offset partially by a decrease in our costs of revenues relating to the CD Rom product line. Cost of Web-based product revenues increased 227% to $7.9 million for the year ended December 31, 1998 from $2.4 million for the year ended December 31, 1997. As a percentage of Web-based product revenues, cost of Web-based product revenues decreased to 49% in 1998 from 72% in 1997, due to an increase in our customer base. Royalty expense increased as a result of growth in Business Browser product line revenues and number of user seats sold. Cost of CD Rom product revenues decreased 45% to $5.8 million for the year ended December 31, 1998 from $10.4 million for the year ended December 31, 1997. This decrease was due to decreased revenues reflecting our shift away from the CD Rom product line. As a percentage of CD Rom product revenues, cost of CD Rom product revenues increased to 40% in 1998 from 39% in 1997. Selling and Marketing Expense. Selling and marketing expense increased 26% to $11.6 million for the year ended December 31, 1998 from $9.2 million for the year ended December 31, 1997 principally due to increased expenses incurred to hire new sales personnel and to train new and existing personnel in connection with our transition to our new Business Browser product line. Selling and marketing expense increased as a percentage of total revenues to 38% in 1998 from 30% in 1997. Platform and Product Development Expense. Platform and product development expense decreased 1% to $6.3 million for the year ended December 31, 1998 from $6.4 million for the year ended December 31, 1997, although as a percentage of total revenues it remained constant at 21%. The decrease was due principally to the decrease in salary expense resulting from the elimination of CD-Insurance product development staff in May 1998 upon the sale of that division and the elimination of several CD Rom product management positions. This decrease in salary expense was offset by increased headcount in the Global Strategic Web Applications Team to meet new product demands. 23 25 General and Administrative Expense. General and administrative expense increased 13% to $3.8 million for the year ended December 31, 1998 from $3.4 million for the year ended December 31, 1997 principally due to increased headcount in management information systems and human resources for infrastructure required to accommodate the growth in our business. General and administrative expense increased as a percentage of total revenues to 12% in 1998 from 11% in 1997. Interest Expense, Net. Interest expense, net of interest income, decreased 36% to $0.6 million for the year ended December 31, 1998 from $0.9 million for the year ended December 31, 1997 due to an increase in interest income related to invested cash balances from the sale of the CD-Insurance product line in May 1998. Gain on Sale of Product Line. As a result of the sale of the CD-Insurance division, we recorded a gain of $12.8 million. This gain reflects cash proceeds received of $11.0 million together with recognition of deferred revenues of $3.1 million and $0.6 million of deferred subscription costs due to the transfer of related service obligations, net of transaction related expenses. Income Taxes. The income tax provision for the year ended December 31, 1998 was $0.3 million and is directly related to the gain on the sale of the CD-Insurance division. Although the gain on the sale created significant taxable income for 1998, such gain was largely offset by utilizing our net operating loss carryforwards. COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 Revenues. Revenues remained at approximately the same level of $30.4 million for each of the years ended December 31, 1997 and 1996. Web-based product revenues increased to $3.3 million for the year ended December 31, 1997 from $15,000 for the year ended December 31, 1996 due to the addition of new customers. At the same time, CD Rom product revenues decreased by 11% to $27.1 million in 1997 from $30.4 million in 1996 as we began our transition to Web-based products. Cost of Revenues. Total cost of revenues increased 2% to $12.8 million for the year ended December 31, 1997 from $12.5 million for the year ended December 31, 1996. As a percentage of total revenues, total cost of revenues increased marginally to 42% in 1997 from 41% in 1996. This increase in total cost of revenues was due principally to increased royalty expense for our Web-based products. It was partially offset by a decrease in our costs of revenues relating to the CD Rom product line. Cost of Web-based product revenues increased to $2.4 million for the year ended December 31, 1997 from $0.3 million for the year ended December 31, 1996 due to a substantial increase in Web-based customers and related royalty expenses. Cost of CD Rom product revenues decreased 15% to $10.4 million for the year ended December 31, 1997 from $12.2 million for the year ended December 31, 1996. This decrease reflected our shift away from the CD Rom product line. As a percentage of CD Rom product revenues, cost of CD Rom product revenues decreased to 39% in 1997 from 40% in 1996. Selling and Marketing Expense. Selling and marketing expense increased 7% to $9.2 million for the year ended December 31, 1997 from $8.6 million for the year ended December 31, 1996 principally due to increased headcount and related expenses. Total selling 24 26 and marketing expense increased as a percentage of total revenues to 30% in 1997 from 28% in 1996. Platform and Product Development Expense. Platform and product development expense decreased 12% to $6.4 million for the year ended December 31, 1997 from $7.3 million for the year ended December 31, 1996 principally due to the decrease in headcount and related expenses, as well as lower contractor expense. The reduction in headcount was exclusively in the platform development organization as we ceased all development efforts related to the CD Rom platform in 1997 and shifted all resources to Web-based platform and product development. Platform and product development expense decreased as a percentage of total revenues to 21% in 1997 from 24% in 1996. General and Administrative Expense. General and administrative expense decreased 7% to $3.4 million for the year ended December 31, 1997 from $3.7 million for the year ended December 31, 1996 principally due to the decrease in amortization expense of intangibles. The amortization of $9.9 million of intangibles, originally recorded in 1993 at the time of the management buy-out of OneSource from Lotus, ended in 1997 with expense of $25,000 compared to $0.7 million in 1996. Increased salary and related expense, resulting from increased headcount for infrastructure required to meet demands in management information systems, contracting and UK finance management, partially offset the decrease in amortization. General and administrative expense decreased as a percentage of total revenues to 11% in 1997 from 12% in 1996. Interest Expense, Net. Interest expense, net of interest income, increased 27% to $0.9 million for the year ended December 31, 1997 from $0.7 million for the year ended December 31, 1996 due to increased borrowings for working capital requirements in 1997. Gain on Sale of Product Line. In June 1997, we sold our CD-Banking product line for $0.7 million. As a result of the sale, we recorded a gain of $0.5 million which is net of transaction related expenses. 25 27 QUARTERLY RESULTS OF OPERATIONS AND OTHER DATA The following tables set forth a summary of OneSource's unaudited quarterly operating results for each of the eight quarters in the two-year period ended December 31, 1998. This information has been derived from unaudited interim consolidated financial statements that, in the opinion of management, have been prepared on a basis consistent with the Consolidated Financial Statements appearing elsewhere in this prospectus and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of such information when read in conjunction with OneSource's Consolidated Financial Statements and Notes thereto. Our operating results and other data for any quarter are not necessarily indicative of results for any future period.
QUARTER ENDED --------------------------------------------------------------------------------------- 1997 1998 ------------------------------------------ ------------------------------------------ MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, -------- -------- --------- -------- -------- -------- --------- -------- (IN THOUSANDS) STATEMENT OF OPERATIONS DATA (UNAUDITED): Revenues: Web-based product................ $ 172 $ 369 $ 979 $1,792 $ 2,628 $ 3,419 $ 4,479 $ 5,532 CD Rom product................... 7,348 7,383 6,309 6,032 5,322 4,273 2,725 2,050 ------ ------ ------ ------ ------- ------- ------- ------- Total revenues..................... 7,520 7,752 7,288 7,824 7,950 7,692 7,204 7,582 ------ ------ ------ ------ ------- ------- ------- ------- Cost of revenues: Web-based product................ 340 451 718 892 1,287 1,872 2,070 2,634 CD Rom product................... 2,769 2,747 2,523 2,405 1,979 1,643 1,159 1,011 ------ ------ ------ ------ ------- ------- ------- ------- Total cost of revenues............. 3,109 3,198 3,241 3,297 3,266 3,515 3,229 3,645 ------ ------ ------ ------ ------- ------- ------- ------- Gross profit....................... 4,411 4,554 4,047 4,527 4,684 4,177 3,975 3,937 ------ ------ ------ ------ ------- ------- ------- ------- Operating expenses: Selling and marketing............ 2,168 2,195 2,346 2,458 2,797 2,904 2,861 3,015 Platform and product development.................... 1,544 1,745 1,608 1,478 1,561 1,528 1,638 1,586 General and administrative....... 929 749 686 1,037 957 1,051 897 942 ------ ------ ------ ------ ------- ------- ------- ------- Total operating expenses....... 4,641 4,689 4,640 4,973 5,315 5,483 5,396 5,543 ------ ------ ------ ------ ------- ------- ------- ------- Loss from operations............... $ (230) $ (135) $ (593) $ (446) $ (631) $(1,306) $(1,421) $(1,606) ====== ====== ====== ====== ======= ======= ======= ======= (PERCENTAGE OF TOTAL REVENUES) Revenues: Web-based product................ 2% 5% 13% 23% 33% 44% 62% 73% CD Rom product................... 98 95 87 77 67 56 38 27 ------ ------ ------ ------ ------- ------- ------- ------- Total revenues..................... 100 100 100 100 100 100 100 100 ------ ------ ------ ------ ------- ------- ------- ------- Cost of revenues: Web-based product................ 4 6 10 11 16 24 29 35 CD Rom product................... 37 35 35 31 25 22 16 13 ------ ------ ------ ------ ------- ------- ------- ------- Total cost of revenues............. 41 41 45 42 41 46 45 48 ------ ------ ------ ------ ------- ------- ------- ------- Gross profit....................... 59 59 55 58 59 54 55 52 ------ ------ ------ ------ ------- ------- ------- ------- Operating expenses: Selling and marketing............ 29 28 32 32 35 38 40 40 Platform and product development.................... 21 23 22 19 20 20 23 21 General and administrative....... 12 10 9 13 12 13 12 12 ------ ------ ------ ------ ------- ------- ------- ------- Total operating expenses....... 62 61 63 64 67 71 75 73 ------ ------ ------ ------ ------- ------- ------- ------- Loss from operations............... (3)% (2)% (8)% (6)% (8)% (17)% (20)% (21)% ====== ====== ====== ====== ======= ======= ======= ======= OTHER DATA FOR WEB-BASED PRODUCTS (AS OF THE QUARTER END) (UNAUDITED): (IN THOUSANDS, EXCEPT NUMBER OF CUSTOMERS DATA) Annualized contract value.......... $ 981 $2,430 $4,815 $8,973 $11,854 $14,619 $19,754 $25,920 Number of customers................ 37 92 149 233 279 322 386 445 Average annualized contract value per customer..................... $ 26.5 $ 26.4 $ 32.3 $ 38.5 $ 42.5 $ 45.4 $ 51.2 $ 58.2
26 28 Annualized contract value represents the invoiced fees for one month for all customer contracts for Web-based products in effect at the measurement date, multiplied by 12, without regard to the actual duration of such contracts. At March 31, June 30, September 30 and December 31, 1997 and March 31, June 30, September 30 and December 31, 1998, annualized contract value was calculated by multiplying the total amount of fees invoiced for one month and included in deferred revenues for all customer contracts for Web-based products at March 31, June 30, September 30 and December 31, 1997 and March 31, June 30, September 30 and December 31, 1998 of $81,750, $202,500, $401,250 and $747,750 and $987,850, $1,218,250, $1,646,200 and $2,160,000, respectively, by 12. Our quarterly revenues, gross profits and results of operations have fluctuated significantly in the past and we expect them to continue to fluctuate significantly in the future. In addition, we believe that an important measure of our business is the annualized contract value at the end of each period, which also may fluctuate. Causes of such fluctuations have included and may include, among other factors: - changes in demand for our products - the dollar value and timing of both new and renewal subscriptions - competition (particularly price competition) - changes in operating expenses - technical difficulties or system downtime affecting our products on the Web generally - economic conditions specific to the Web, as well as general economic conditions - consolidation of our customers In addition, a substantial portion of our expenses, including certain product development and selling and marketing expenses, must be incurred in advance of revenue generation. If our projected revenue does not meet our expectations, then we may have an operating loss in a particular quarter. Annualized contract value depends upon the timely renewal, upgrade and sale to new customers of subscription agreements within a quarter and can be difficult to forecast accurately. In addition, we have experienced some quarterly seasonality in contract bookings with a significant amount of activity occurring in the fourth quarter of a given year. Accordingly, these timing variations can create shortfalls in revenues in relation to our expectations and have an adverse effect on our operating results. LIQUIDITY AND CAPITAL RESOURCES Since acquiring our business from Lotus in 1993, we have funded our operations through a combination of seller financing, proceeds received from the sale of Class P common stock and common stock in connection with the purchase of the business from Lotus, bank debt, proceeds received from the sale of non-strategic lines of business, capitalized equipment leases and cash flows from operations. Our cash and cash equivalents totaled $8.7 million at December 31, 1998, as compared to $0.3 million at December 31, 1997, an increase of $8.3 million. Net cash of $1.2 million was provided by operations for the year ended December 31, 1998, primarily resulting from growth in contracts invoiced for the period. Net cash provided by investing activities for 1998 was $9.0 27 29 million, primarily reflecting net cash proceeds from the sale of the CD-Insurance division, offset partially by expenditures of $1.3 million for property and equipment. Net cash used in financing activities for the year ended December 31, 1998 was $2.0 million reflecting primarily repayments on our line of credit, term loan and capital lease obligations. We do not currently have a line of credit but intend to enter into a revolving line of credit for letters of credit and general working capital. We have a note outstanding to Lotus and the principal amount outstanding at December 31, 1998 was $6.2 million. This note plus accrued interest is due September 8, 2000 and a repayment of a portion of the note would be required upon completion of this offering. We intend to repay the note upon the completion of this offering. Upon repayment of the note, the company will recognize a one-time expense of $ relating to the unamortized portion of the original issue discount. We currently anticipate capital expenditures of approximately $2.8 million for 1999, including approximately $0.9 million in connection with the relocation of our corporate headquarters, which is scheduled to occur in June 1999. We expect to investigate the possibility of investing in or acquiring complementary businesses, products or technologies, although we have not entered into any commitments or negotiations with respect to any such transactions. We believe that our net proceeds from this offering, together with our current cash and cash equivalents and funds anticipated to be generated from operations, will be sufficient to satisfy working capital and capital expenditure requirements for at least the next twelve months. YEAR 2000 READINESS DISCLOSURE STATEMENT We have established a Year 2000 compliance program and we anticipate that our products and internal systems should operate correctly at the turn of the century. We have been performing Year 2000 tests for the past three years. Initial Year 2000 work was organized in late 1996 to certify readiness of the proprietary client software associated with our CD Rom product line. A more formal organizational effort involving senior management, product managers, developers and quality assurance personnel was established in early 1998. Compliance Program. The scope of OneSource's compliance program focuses on four key areas: products, third-party information providers, third-party software applications and internal systems. Our compliance program involves a three-step process to evaluate each of the key areas, which includes (a) inventory review, (b) assessment/testing and (c) resolution and contingency planning. Products. We have assessed existing products to review OneSource's overall compliance status. We have decided not to test those products that will be discontinued prior to December 31, 1999. This includes, for example, all products associated with our CD Rom product line with the exception of the "UK Companies" product, which we expect to produce beyond 1999. We have established clear migration paths for those customers who have products installed that will be discontinued. As of February 1999, we had completed almost all work associated with creating internal company awareness of Year 2000 issues, organizing and executing high-level plans to address the concern, and inventorying existing systems, data, and software dependency for Year 2000 exposure. We estimate that as of February 1999 we had 28 30 completed about two-thirds of the process of analyzing the impact of Year 2000 issues company-wide and developing detailed plans for resolving problem situations. We are in the midst of implementing those plans. Resolution of outstanding Year 2000 issues for non-Information Services applications are being incorporated with plans to move our corporate offices in June 1999. Projects that involve IS-related issues (particularly those processes that prepare and deliver data in our products) are expected to be completed in April 1999, with follow-up testing, if required, extending through July 1999. In terms of verifying and planning for Year 2000 compliance for our products, we use the British Standards Institute's definition of Year 2000 compliance as stated in DISC PD2000-1:1998: A Definition of Year 2000 Conformity Requirements. According to this definition, Year 2000 conformity means that neither performance nor functionality is affected by dates prior to, during and after the year 2000, and according to the following rules: - No value for current date will cause any interruption in operation - Date-based functionality must behave consistently for dates prior to, during and after the year 2000 - In all interfaces and data storage, the century in any date must be specified either explicitly or by unambiguous algorithms or inferencing rules - Year 2000 must be recognized as a leap year New products under development for this year and next have Year 2000 qualification as part of their standard test plans. Products that fail their standard test plans are not released to customers. Third-Party Information Providers. OneSource relies on content provided by third-party information providers. Communication with our information providers with respect to their Year 2000 compliance status was largely complete as of February 1999. OneSource's goal is to have all information providers' compliance responses complete by March 31, 1999. We are also trying to minimize our dependence on third-party information providers' external date formats by accommodating changes in date format within our existing production processes. Third-Party Application and System Software. OneSource invests in third-party software as components of the data storage and delivery requirements of our products. We have identified an exhaustive list of such systems along with research of the current status of their Year 2000 compliance efforts. We completed this research in February 1999. Our goal is to have confirmation of compliance or a specific plan to replace any non-compliant resource by March 31, 1999. Only a short list of these resources remains non-compliant as of February 1999. While OneSource is committed to taking every reasonable action to obtain assurances from such business partners that their software is Year 2000 compliant, we cannot guarantee the performance of such business partners or predict whether any of the assurances provided by them may be accurate or realistic. Internal Systems. OneSource has completed its inventory of its internal systems and its assessment of such systems' compliance status is approximately 50% complete, with an anticipated completion date of March 31, 1999. The scope of these systems ranges from accounting, payroll, communications, network hardware and applications, Internet access, internal information systems and data production systems. The majority of our internal systems and equipment are currently Year 2000 compliant. Some existing Year 2000 issues (e.g., 29 31 OneSource's phone switch and some components of the Corporate Local Area Network) will be addressed as part of the relocation of our offices in June 1999. Costs. To date we have not relied on outside consulting expertise for assessing our products or testing for Year 2000 related issues. We are utilizing internal personnel to identify Year 2000 readiness in our supported products, network hardware/applications, internal business and information systems. A large number of our personnel are necessarily involved in this work. We estimate that the aggregation of all such efforts represents an equivalent of six full-time employees (efforts at this level dating back approximately one year). Not included in this estimate are those indirect costs associated with time spent by management or staff discussing Year 2000 issues internally or with third parties. Such discussions are handled by existing employees in the ordinary course of business. We have not identified the need to hire additional staff specifically to address third-party questions or concerns. Risks. With regard to third-party information suppliers, OneSource is addressing, through normal operating procedures any concerns that third-party information providers may have delivery problems associated with Year 2000 issues. OneSource is identifying issues by internal quality assurance or editorial reviewers. When identified, issues are being handled by contacting the information provider who may correct the problem at the source or by developing a workaround in the software. The risks associated with delivery problems present more serious issues for us as our products could be deprived of certain data content. While OneSource does not anticipate a failure in its ability to deliver data, and has established contingency plans as discussed below, such a failure may (a) have a material adverse effect upon our business, financial condition and results of operations, (b) require us to incur unanticipated material expenses to remedy any problem and (c) result in litigation due to our inability to fulfill our contractual obligations. In such cases, we would likely suffer a disruption in our revenue stream and operations could be materially impacted. Contingency Plans. At this time, our contingency plans relating to the above discussed Year 2000 issues include having additional support staff and programmers on call for rapid response dealing with any disruption of our business during a critical date transition (e.g., January 1, 2000, February 29, 2000). Our assessment of our products and internal systems for Year 2000 compliance will be an ongoing effort throughout the remainder of this year. The information contained herein is the product of conclusions made from the information and test results available to OneSource at this time. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 1998, the Accounting Standards Executive Committee ("AcSEC") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 establishes the accounting for costs of software products developed or purchased for internal use, including when such costs should be capitalized. We do not expect SOP 98-1, which is effective for OneSource beginning January 1, 1999, to have a material effect on our financial condition or results of operations. In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." Start-up activities are defined broadly as those one-time activities relating to opening a new facility, introducing a new product or service, conducting business in a new territory, 30 32 conducting business with a new class of customer, commencing some new operation or organizing a new entity. Under SOP 98-5, the cost of start-up activities should be expensed as incurred. SOP 98-5 is effective for OneSource's calendar year 1999 financial statements and we do not expect its adoption to have a material effect on our financial condition or results of operations. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("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, and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. We do not expect SFAS No. 133 to have a material effect on our financial condition or results of operations. 31 33 BUSINESS This prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. Our actual results, performance or achievements could differ materially from the results expressed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in "Risk Factors." OVERVIEW OneSource provides Web-based business and financial information to professionals who need quick access to reliable corporate, industry and market intelligence. Our Business Browser product line integrates comprehensive and up-to-date business and financial information on over one million public and private companies from more than 25 information providers drawing upon over 2,500 sources of content. These sources include both textual information, such as news, trade press, SEC filings, executive biographies and analyst reports, and numeric information, such as company financial results, stock quotes and industry statistics. Our customers access this information over the Internet using standard Web browsers at a fixed annual subscription price. Our products are designed to address information needs of leading professional and financial services firms, technology companies and other large organizations. Representative customers include American Express, Bain & Company, BankAmerica, Boeing, British Telecom, Deloitte & Touche, Ernst & Young, Harvard Business School, KPMG Peat Marwick, MCI/Worldcom, Merrill Lynch, Oracle and SAP. At December 31, 1998, 445 organizations subscribed to our Web-based Business Browser product line, up from 233 at December 31, 1997. On average, our customers for Web-based products at December 31, 1998 had an annualized contract value of $58,248 per customer, compared to $38,512 per customer at December 31, 1997. The annualized value of Business Browser customer contracts was $25.9 million at December 31, 1998, having grown from $9.0 million at the end of 1997. Of this $25.9 million, $14.2 million was attributable to those customers that were under contract at both December 31, 1997 and 1998. The renewal rate of the Business Browser product line for 1998 was 90% calculated on a dollar basis. INDUSTRY BACKGROUND According to an industry source, the market for all Web-based and on-line business information services was $24.8 billion in 1997 and is projected to grow to $39.8 billion in 2002, reflecting a compound annual growth rate of 9.9%. According to this industry source, the primary market segment in which OneSource participates--Web-based and on-line financial news, current awareness and research services--was $5.4 billion in 1997 and is projected to grow to $9.8 billion in 2002, reflecting a compound annual growth rate of 12.6%. Recent industry growth has been driven by corporations and other enterprises recognizing that productivity and competitiveness depend on extensive knowledge of external information, including information about industries, customers, competitors, prospects, business trends, breaking news and market data. These organizations have already invested heavily in Internet connectivity and networked computing infrastructures to manage internal information and are seeking to leverage these infrastructures to access and manage external information. 32 34 The task of finding and using external information is often difficult and cumbersome. Traditional, textual sources such as newspapers and directories require hours to search. A centralized library can be costly to establish and maintain and can be an inefficient and incomplete information source. While the emergence of the Web has greatly increased access to information, finding comprehensive, precise, up-to-date, relevant and reliable information on the Web can still be time-consuming and difficult. While other on-line services can be useful research tools in certain circumstances, most of these services currently focus on specific areas of content, such as financial data or news. They do not provide the full range of data required by professionals. In addition, most on-line services charge a fee for each search performed. Traditional sources, the Web and existing on-line services do not adequately meet the information needs of many professionals who want to compete effectively in today's fast-paced, global, customer-focused marketplace. These professionals and their organizations demand external information that is: - easily accessible in a user-friendly format - comprehensive and includes both textual and numeric information - derived from multiple, high quality sources - integrated at a single site - delivered on a platform that allows interpretation, manipulation and analysis - available throughout the enterprise at a fixed cost - delivered in a product easily implemented and supported on a corporate network THE ONESOURCE SOLUTION OneSource's Business Browser product line is designed to be a comprehensive and easy to use business and financial information resource for professionals who need quick access to reliable corporate, industry and market intelligence. Business Browser products integrate over 2,500 sources of business information from more than 25 category-leading business and financial information providers. These sources include both textual information, such as news, trade press, SEC filings, executive biographies and analyst reports, and numeric information, such as company financial results, stock quotes and industry statistics. OneSource uses its proprietary KeyID technology to sort, prioritize, integrate and link information on over one million public and private companies worldwide. Our Business Browser product line is accessed through a standard Web browser that is already available and familiar to end-users. Because our products are based on standard Web technology, our customers require minimal installation and systems support and users have full access to the products at any time from anywhere via the Internet. OneSource focuses on the functional uses of the business and financial information it delivers. The Business Browser product line has been designed for use not only by traditional users of business information, but also throughout an organization, including sales, marketing, finance and management professionals. We apply our knowledge of how business professionals use information to transform raw, disparate data into meaningful, actionable information. We focus on integrating and presenting information so that interpretation, manipulation and analysis 33 35 can be performed more easily by the end user. Because the interface is built around the inquiries of professionals, users require minimal training to become productive quickly. OneSource's pricing strategy is designed to be particularly attractive to large organizations. The Business Browser product line is available at a fixed annual subscription price which declines on a per-user basis as the total number of users increases for that customer. The fixed-price model encourages professionals to use the products as needed without concern with additional charges, and a declining marginal price per user encourages customers to distribute our products widely throughout their organizations. STRATEGY Our goal is to become a leading Web-based provider of business and financial information to professionals worldwide. To accomplish that goal, we have adopted the following strategies: --Focus on Information Needs of Professionals in Large Organizations. We believe that professional and financial services firms, technology companies and other large organizations have the widely distributed Web access necessary to take advantage of the Business Browser product line and are most likely to be willing to purchase external information services to gain the competitive advantages available through our products. While many alternative products are focused on small organizations and individual consumers, our product and pricing strategies and sales and marketing efforts have been designed to address the needs of large enterprises. --Expand Customer Base. At December 31, 1998, 445 organizations subscribed to our Web-based Business Browser product line, up from 233 at December 31, 1997. One group of our direct sales force, our account executives, concentrates primarily on selling the Business Browser product line to new customers. We intend to continue to invest in training our sales force and in recruiting technically qualified sales personnel to sell Business Browser products. In addition, while the traditional users of on-line business information services have been primarily financial analysts and professional service providers, we have expanded our target customer base to include corporations which are purchasing our products for use by their sales, marketing, finance and management professionals. We also intend to explore selective third-party distribution of our products primarily to expand geographic coverage. For example, we recently entered into an agreement with Dun & Bradstreet under which they will serve as a distributor of our European Business Browser product. --Leverage Existing Customer Base. We will continue to seek to increase sales to existing customers by expanding the number of authorized user seats at each customer and by upgrading customers to new products, more extensive content and increased functionality. Each customer is assigned an account manager who is responsible for that customer's retention, monitoring that customer's needs and assisting that customer with rollouts and upgrades. The average annualized contract value at December 31, 1998 of Business Browser customers who were also customers at December 31, 1997 was $76,143 per customer, compared to $38,512 per customer at December 31, 1997, an increase of 98% during the course of the year. --Expand Content and Product Offerings. Since introducing Business Browser in December 1996, we have followed a strategy of enhancing the Business Browser product line by adding content from new sources, increasing functionality and designing products tailored to particular markets. For example, in January 1999 we introduced European Business Browser, which includes content focused on the European market, and in December 1998 we introduced 34 36 AppLink, which permits customers to integrate content from Business Browser products within the customer's own intranet applications, such as sales force automation applications. --Strategic Alliances and Possible Acquisitions. We will seek to expand our distribution channels in part by seeking strategic alliances with partners, such as vendors of sales automation software, who may use AppLink to integrate content from the Business Browser products into their software offerings. In addition, OneSource may seek additional content sources, distribution channels or technology through selective acquisitions or strategic alliances, although we are not currently in discussions regarding any potential acquisitions or alliances. PRODUCTS Business Browser Product Line The Business Browser product line includes: US BUSINESS BROWSER. Released in December 1996, US Business Browser is focused specifically on the US and Canada. It contains a subset of business and financial information from the Global Business Browser product. It covers over 250,000 public and private companies in the US and Canada. UK BUSINESS BROWSER. Released in September 1997, UK Business Browser is a comprehensive source of information on over 350,000 public and private companies in the UK. GLOBAL BUSINESS BROWSER. Released in December 1997, Global Business Browser is a single, integrated resource that provides information on over 350,000 public and private companies from around the world. EUROPEAN BUSINESS BROWSER. Released in January 1999, European Business Browser provides users with a comprehensive database on 300,000 public and private companies across Europe, including 50,000 UK companies. An important source of data for the European Business Browser is Dun & Bradstreet, a leading business information source. Business Browser delivers information in an integrated format. This allows customers to obtain different types of information from multiple sources in a single report. Business Browser products organize data around business applications and transform raw, disparate data into meaningful, actionable information, delivered according to the characteristics users have defined and in the custom formats, tables and reports that users require. Users who need to perform detailed analysis can also easily transfer quantitative data into spreadsheets or other desktop tools, such as contact management software. Specific applications available through the Business Browser product line include: - "Company Profiler" delivers integrated reports on a company's history, products, competition, industry, executives, current news articles and financials. Both summary and detailed company reports are available, depending on the user's need. In addition, "Corporate Family Reports" allow users to quickly map relationships among subsidiaries and divisions of corporations. - "WatchList Update" automatically keeps track of new articles, news stories, financial filings and research reports on the companies the user monitors. - "Industry Profiler" delivers reports on market size, segmentation, financial norms, ratios and forecasts for a specified industry, as well as participants, industry news and 35 37 analysis, and creates research reports with graphs and statistics that help track industry trends. - "Company Finder" screens companies by defining key search characteristics to deliver a targeted list by industry, geography, size, revenues, employment or other key characteristics. - "Topic Search" screens news stories, research reports, business descriptions and trade articles for information by topic. - "Executive Search" provides users with reports on business leaders by name, company, location, schools and affiliated organizations. Additional Software Applications Two additional software applications are available with Business Browser products. BUSINESS BROWSER AP. Business Browser AP, which became commercially available in August 1997, is an advanced Web-based quantitative analysis tool available as an option with all of the Business Browser products other than European Business Browser. Business Browser AP lets users screen across a wide range of public company financial statement items, ratios, growth rates and other criteria. It also allows users to produce detailed quantitative reports of their own design. Business Browser AP also makes EDGAR documents more user friendly by removing confusing computer codes, formatting tables for easy viewing and printing, and allowing users to export tables to a spreadsheet. BUSINESS BROWSER APPLINK. Business Browser AppLink, which became commercially available in December 1998, is a software toolkit that allows customers to easily incorporate Business Browser content (e.g., company profiles, news, business and trade articles, analyst reports, executive biographies, industry intelligence and financial data) directly into corporate intranet applications. Users have the ability to integrate in-depth, objective external business information into their existing internal applications such as prospect and customer databases, sales force automation tools, enterprise reporting software and corporate Web applications. No special client software or dedicated servers are necessary. AppLink-enabled applications are currently under development at a number of client sites. Legacy CD Rom Products Prior to our introduction of Business Browser in 1996, we distributed business information on CD Rom. Having made the strategic decision to transition to a completely Web-based business, we began in 1998 to phase out our CD Rom products. We expect that all but two of these products will be completely phased out by the end of 1999, with the remaining two products being phased out shortly thereafter. PLATFORM AND PRODUCT DEVELOPMENT The product development function is currently carried out by 38 employees in our Global Strategic Web Applications Team. This team includes product managers who define functional software components, end user interfaces, report formats and content requirements; product development engineers who take content feeds from information partners and write database loader code; and the KeyID team whose role, through both programming and editorial expertise, 36 38 is to ensure consistent integration and presentation of information from multiple underlying sources of content. Our product development strategy is to deliver a broad range of information on a software platform which allows end users to efficiently research their business questions. Since the inception of the Business Browser product line, we have consistently added sources of content and improved the software functionality for users. In the future, we expect to continue to make these types of improvements to our product line. The product development team uses our proprietary KeyID technology to integrate and link public and private companies worldwide from multiple databases, each with its own set of incompatible identifiers. Through a combination of proprietary programmatic and editorial means, this technology enables us to provide a single and unified presentation from multiple underlying company databases. It also manages multiple SIC codes and industry mappings assigned to companies by disparate databases and reclassifies the companies to comparable categories. The system also keeps track of company name synonyms to allow searching by commonly used alternative company names. The synonyms feature allows the user to input one company name or term and to access all information for that company although it may be categorized under different names or terms depending on the database. In total, the KeyID database contains 1.1 million companies, 1.7 million synonyms and 40,000 URLS. 37 39 INFORMATION PROVIDERS Each Business Browser product combines an array of carefully chosen financial, company, industry, executive and news-related content obtained from leading business and financial information providers identified by our Global Strategic Web Applications Team. The following table lists the type of content provided by our current information providers and which Business Browser products include that content.
BUSINESS BROWSER PRODUCT ------------------------- TYPE OF INFORMATION INFORMATION PROVIDER GLOBAL US UK EURO ------------------- -------------------- ------ --- --- ---- Company Information............ CorpTech X X Dun & Bradstreet X Extel (Primark) X Graham & Whiteside Limited X Hemmington Scott X Hoover's Inc. X X ICC X InfoUSA X X Market Guide X X Reed Elsevier X X Worldscope (Disclosure Inc.) X Industry Reports and Data...... McGraw-Hill X X Integra X X The Gale Group X X Snapshots Intl X X X X News and Newsletters........... Asia Pulse X X X X Comtex News X X X X Phillips Newsletters X X X X Reuters News X X X X Business and Trade Press....... Responsive Database Services X X X X Information Access Company X X X X Executive Biographies.......... Marquis Who's Who X X Standard & Poor's Register X X Stock Quotes................... Datastream X Quote.com X X Investment Reports............. Investext X X X Published Statistical Tables... Responsive Database Services X X SEC Filings.................... EDGAR X X
We enter into contracts with our information providers which are generally for a term of at least one year, and which renew for the same period if not canceled with advance notice. These contracts may be terminated under certain circumstances. For more information, see "Risk Factors--We depend entirely on our information providers for content." Under these arrangements, royalties are generally paid on a quarterly basis to information providers. Royalties are typically calculated either as a flat percentage of our revenues or as a per-user fee that declines as the number of authorized users of the product increases. In limited cases, we pay a fixed fee per period for unlimited use of the information. 38 40 CUSTOMERS At December 31, 1998, 445 organizations had subscribed to our Web-based Business Browser product line, up from 233 at December 31, 1997. On average, our customers at December 31, 1998 had an annualized contract value of $58,248 per customer, compared to $38,512 per customer at December 31, 1997. The annualized contract value of customer contracts for Business Browser products was $25.9 million at December 31, 1998, having grown from $9.0 million at December 31, 1997. The following is a representative list of significant customers in each of our primary industry sectors: PROFESSIONAL SERVICES Arthur Andersen Arthur D. Little Bain & Company Cambridge Technology Partners Deloitte & Touche EDS Ernst & Young KPMG Watson Wyatt OTHER CORPORATIONS Avery Dennison Bayer Boeing Cargill Coca Cola General Electric Johnson & Johnson Pitney Bowes Sears FINANCIAL SERVICES American Express BankAmerica Bank of Tokyo Bear Stearns Credit Lyonnais First Union Bank Merrill Lynch Oppenheimer Royal Bank of Canada BUSINESS SCHOOLS Dartmouth Duke Harvard Stanford University of Florida University of Southern California University of Texas Yale TECHNOLOGY AT&T British Telecom Compaq GTE JD Edwards Lockheed Martin MCI/Worldcom Nortel Oracle PeopleSoft SAP Sun Microsystems At December 31, 1998, approximately 60% of our annualized contract value for Web-based products came from customers in the professional services and financial services sectors, which have been the traditional customers for business information products. The remaining 40% of our annualized contract value at December 31, 1998 for Web-based products represented customers in sectors that have not historically been heavy consumers of business information products. At these customers, Business Browser products are used by professionals throughout the organization, including sales, marketing, finance and management personnel, as a result of the products' ease of use and availability over the Web. SALES AND MARKETING We market our products through a direct sales force and marketing staff, which as of December 31, 1998 consisted of 67 full-time employees based at five locations throughout the US and one location in the UK. The sales function breaks down into two major parts: - the initial sale, which is conducted by account executives - customer retention and growth through the sale of additional seats and upgrades, which are primarily handled by account managers 39 41 As of December 31, 1998, we had 20 account executives and 12 account managers. Compensation for account executives and account managers is comprised of base salary plus commission. The commission component typically constitutes 50% and 40% of the compensation of account executives and account managers, respectively. We also employ a telemarketing group which assists in generating leads for the account executives. As of December 31, 1998, there were ten members of the telemarketing group. Business Browser products are sold on a subscription basis, generally for a one-year period. Customers typically prepay for annual subscriptions. Typically, contracts automatically renew for the same period prior to expiration unless canceled by the client. The Business Browser product line is available at a fixed annual subscription price which declines on a per-user basis as the total number of users increases. The fixed-price model encourages business professionals to use the products as needed without concern with additional charges, and a declining marginal price per user encourages customers to distribute the products widely throughout their organizations. List prices as of January 1, 1999 ranged from $20,000 per year for a single user seat to $290,000 per year for 1,000 user seats. CUSTOMER SUPPORT We provide both on-site and telephone support for clients. As of December 31, 1998, we had eight field support consultants who provide assistance before and after sales are completed. For example, they assist in managing a product trial for a prospective customer and expanding the availability of our products to additional users through training and rollout initiatives within an organization. They also provide technical consulting which may be requested, such as the customization of Web pages for large clients or the building of prototype applications using AppLink. As of December 31, 1998, we had six telephone-based customer support representatives in the U.S. and one in the UK. These representatives operate the telephone help desk which is open from 8:00 a.m. to 8:00 p.m. Monday through Friday. WEBSITE TECHNOLOGY AND OPERATIONS OneSource has designed its Website architecture to be open, flexible, scaleable and reliable. The architecture is designed to accommodate an evolving collection of third-party technologies that together provide the functionality required by our products' applications. These technologies are adapted and integrated with software developed in-house. As a result, we believe our systems are flexible enough to upgrade or change software as new, improved third-party software products are developed or as we develop our own new software. Our on-line architecture was also designed to be able to expand easily and efficiently as usage grows. By treating the core backoffice technologies as system "objects," we have constructed a natural environment for simply adding additional copies of specific servers, as needed, to share the load. Besides load sharing and usage expansion, this setup also provides natural failover capabilities for the system. Any given server can suffer a problem and one or several backups share the load while the problem is corrected. The OneSource on-line site is located at a dedicated hosting facility managed by GTE/BBN Internetworking. It is a node on the GTE/BBN Internet backbone. The system is available 24 40 42 hours a day, seven days a week. For more information, see "Risk Factors--If our Website service is disrupted, our business would be adversely affected." The engineering team closely monitors the usage, delivery performance and availability of the system. Particular attention is paid to individual product usage, relative levels of customer activity, speed of data retrieval and delivery, peak usage figures, uptime statistics and power requirements. This engineering team is key to maintaining continuous service for our customers. COMPETITION The business information services industry is intensely competitive. We face direct or indirect competition from the following types of companies: - large, well-established business and financial information providers such as Dow Jones, Dialog, Lexis-Nexis, Pearson, Reuters, Thomson, Primark and McGraw-Hill - on-line information services or Websites targeted to specific markets or applications, such as NewsEdge, Factset and Bloomberg - providers of sales, marketing and credit information such as Dun & Bradstreet - Web retrieval, other Web "portal" companies and other free or low-cost mass market on-line services such as Excite, Infoseek, Lycos, Yahoo! and AOL/Netscape Many of our existing competitors, as well as a number of prospective competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. Certain of our competitors offer financial and business information free of charge with the goal of achieving high enough usage to facilitate the sale of substantial amounts of advertising. To the extent these types of competitors offer products free of charge that are similar to ours, it would have a material adverse impact on our business, financial condition and results of operations. In addition, there are relatively low barriers to entry to the Web-based information market and we may face additional competition from new entrants. For more information, see "Risk Factors--We face intense competition from other companies." The principal competitive factors in our industry are availability of comprehensive and integrated business and financial information, ease of use, support and training required and price/performance characteristics. We believe that Business Browser products are differentiated from the products offered by other providers because of our ability to deliver information from many different, competing providers on an enterprise-wide basis. We also believe that our focus on integrating and presenting information so that interpretation, manipulation and analysis can be performed more easily also differentiates our products. EMPLOYEES We had 166 full-time employees as of December 31, 1998, including 67 in sales and marketing, 22 in engineering, 14 in production/on-line support, 25 in finance and administration and 38 on our Global Strategic Web Applications Team. Our employees are not represented by any collective bargaining organization. We have never experienced a work stoppage and we believe our relationships with our employees are good. 41 43 FACILITIES Our corporate headquarters are located in a 28,766 square foot rented facility in Cambridge, Massachusetts, under a lease expiring in July 1999. We have entered into a new lease for a new, 35,766 square foot headquarters facility in Concord, Massachusetts. We intend to move to that facility in June 1999. Our lease to the new facility expires in May 2004. We lease additional sales offices in Chicago, New York, Los Angeles, San Francisco and London, England. We believe that these facilities and additional or alternative space available to us will be adequate to meet our needs for the foreseeable future. LITIGATION OneSource is not a party to any material legal proceedings. 42 44 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information with respect to the executive officers and directors of OneSource as of March 1, 1999.
AGE POSITION NAME --- -------- Martin Kahn(1)(2)........... 48 Chairman of the Board of Directors Daniel J. Schimmel.......... 39 President, Chief Executive Officer and Director James A. Becker............. 41 Vice President, Global Strategic Web Applications Team Philip J. Garlick........... 37 Vice President, Global Enterprise Sales and Marketing Mark C. VanDine............. 42 Vice President, Engineering Roy D. Landon............... 43 Vice President, Finance and Administration David Dominik(1)............ 42 Director Gregg S. Newmark(2)......... 40 Director
- ------------ (1) Member of Compensation Committee. (2) Member of Audit Committee. Martin Kahn joined OneSource as Chairman of the Board of Directors in September 1993. Mr. Kahn has served as managing director of Cadence Information Associates LLC since 1996. Mr. Kahn was the chairman of Ovid Technologies, Inc., a producer of medical, scientific and technical CD Rom and network products, from 1990 to 1998, was chairman of VISTA Information Solutions, Inc., a supplier of information about geographically-based risk, from 1992 to 1996 and was chairman of Shoppers Express, Inc., an Internet-based grocery shopping service, from 1995 to 1998. Mr. Kahn holds an MBA from the Harvard Business School and a B.A. from Yale University. Daniel J. Schimmel joined OneSource as President, Chief Executive Officer and a Director in 1993. Prior to joining OneSource, Mr. Schimmel served as general manager of the OneSource Division and held other operating positions at Lotus. Mr. Schimmel holds an MBA from the Harvard Business School and a B.A. from Harvard University. James A. Becker joined OneSource as the Director of Product Management in 1993 and became Vice President, Global Strategic Web Applications Team in 1995. Prior to joining OneSource, Mr. Becker served as group product manager at Lotus. Mr. Becker holds an MBA from the Yale School of Management and a B.A. from Brown University. Philip J. Garlick joined OneSource as Director of Marketing and Product Development in 1993, served as Vice President and General Manager Europe from 1995 to October 1997, and in October 1997 became Vice President, Global Enterprise Sales and Marketing. Prior to joining OneSource, Mr. Garlick was a marketing executive at Lotus UK. Mr. Garlick holds an MA in Economics and a B.A. from Manchester University. Mark C. VanDine joined OneSource as Senior Product Manager in 1993, served as Director, Platform Product Management in 1995 and in 1996 became Vice President, Engineering. Prior to joining OneSource, Mr. VanDine was a senior consultant at Lotus. Mr. VanDine holds a B.A. and an MBA from Penn State University. 43 45 Roy D. Landon joined OneSource as Director, Finance and Administration in 1993 and became Vice President, Finance and Administration in 1997. Prior to joining OneSource, Mr. Landon was director of plans and controls for the Consulting and Information Services Group at Lotus. Mr. Landon holds a B.S. from Babson College. David Dominik joined OneSource as a Director in 1993. Mr. Dominik has been a managing director at Bain Capital Inc. since January 1990. He is also a director of Oacis Healthcare Holdings Corp., a clinical information systems software company. Gregg S. Newmark joined OneSource as a Director in 1993. Since 1993 Mr. Newmark has served as general partner of William Blair Venture Partners, as a principal of William Blair & Company, L.L.C. and as a managing director of William Blair Capital Partners. ELECTION OF OFFICERS AND DIRECTORS The executive officers of OneSource are elected by the Board of Directors on an annual basis and serve until their successors are duly elected and qualified. Messrs. Dominik and Newmark were selected as directors of OneSource pursuant to a Stockholders Agreement dated September 8, 1993 between OneSource and certain of its stockholders, which agreement will terminate as of the effective date of this offering. For more information, see "Certain Transactions." There are no family relationships among any of the executive officers or directors of OneSource. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has appointed a Compensation Committee consisting of Messrs. Kahn and Dominik. The Compensation Committee reviews and evaluates the compensation and benefits of all officers of OneSource, reviews general policy matters relating to compensation and benefits of OneSource employees and make recommendations concerning these matters to the Board of Directors. The Compensation Committee also administers OneSource's stock option and stock purchase plans. For more information, see "--Equity Plans." The Board of Directors has also appointed an Audit Committee consisting of Messrs. Kahn and Newmark. The Audit Committee reviews, with OneSource's independent auditors, the scope and timing of their audit services and any other services they are asked to perform, the auditors' report on OneSource's consolidated financial statements following completion of their audit, and OneSource's policies and procedures with respect to internal accounting and financial controls. In addition, the Audit Committee will make annual recommendations to the Board of Directors for the appointment of independent auditors for the ensuing year. DIRECTOR COMPENSATION Directors who are not employees of OneSource and who are not affiliated with principal stockholders (also referred to as "outside directors"), will receive an annual retainer fee and a fee for attending regular (or special) meetings of the Board of Directors and for meetings of any committees of the Board of Directors on which they serve, if such meetings are held separately. Currently, Mr. Kahn is the only outside director. Outside directors also are eligible to participate in OneSource's 1999 Stock Option and Incentive Plan. Directors also are reimbursed for reasonable out-of-pocket expenses incurred in attending such meetings. For more information, see "--Equity Plans," and "Certain Transactions." 44 46 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is comprised of Messrs. Kahn and Dominik. Neither member of the Compensation Committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of OneSource's Board of Directors or Compensation Committee. EXECUTIVE COMPENSATION Summary Compensation The following table sets forth the compensation earned by (a) the Chief Executive Officer and (b) OneSource's four other most highly compensated executive officers (together with the Chief Executive Officer, the "Named Executive Officers") for services rendered in all capacities to OneSource during the year ended December 31, 1998. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) ----------------------- ALL OTHER NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) --------------------------- ---------- --------- --------------- Daniel J. Schimmel.............................. $164,997 $57,749 -- President and Chief Executive Officer James A. Becker................................. 123,748 24,750 -- Vice President, Global Strategic Web Applications Team Philip J. Garlick............................... 144,000 47,520 $145,725 Vice President, Global Enterprise Sales and Marketing Mark C. VanDine................................. 115,498 23,100 -- Vice President, Engineering Roy D. Landon................................... 105,186 21,037 -- Vice President, Finance and Administration
- ------------ (1) OneSource did not make any restricted stock awards, grant any stock appreciation rights or make any long-term incentive payments during 1998 to its executive officers. Options granted to the Named Executive Officers were granted at fair market value as determined by the Board of Directors based on all factors available to them on the grant date. (2) Mr. Garlick received additional compensation in connection with his relocation from the UK to Massachusetts, including car and housing allowances, moving expenses and payment of certain taxes. Option Grants in Last Fiscal Year None of the Named Executive Officers were granted options in the year ended December 31, 1998. 45 47 Option Exercises and Year-End Holdings The following table sets forth information concerning stock option exercises during 1998 by each of the Named Executive Officers and the number and value of unexercised options held by them as of December 31, 1998. AGGREGATE OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Daniel J. Schimmel............... 0 -- 506,732 0 $0 President and Chief Executive Officer James A. Becker.................. 22,000 122,000 100,000 Vice President, Global Strategic Web Applications Team Philip J. Garlick................ 0 -- 67,600 110,000 Vice President, Global Enterprise Sales and Marketing Mark C. VanDine.................. 0 -- 78,000 60,000 Vice President, Engineering Roy D. Landon.................... 0 -- 52,000 20,000 Vice President, Finance and Administration
- ------------ (1) There was no public trading market for the common stock as of December 31, 1998. Accordingly, these values have been calculated by determining the difference between the assumed initial public offering price of $ per share and the exercise price of the Named Executive Officer's options. EQUITY PLANS 1999 Stock Option and Incentive Plan. OneSource's 1999 Stock Option and Incentive Plan (the "1999 Stock Option Plan") was adopted by the Board of Directors in February 1999 and approved by OneSource's stockholders in , 1999, to be effective upon the completion of this offering. The 1999 Stock Option Plan provides for the grant of stock-based awards to employees, officers and directors of, and consultants or advisors to, OneSource. Under the 1999 Stock Option Plan, OneSource may grant options that are intended to qualify as incentive stock options ("incentive stock options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), options not intended to qualify as incentive stock options ("non-qualified stock options"), restricted stock and other stock-based awards. Incentive stock options may be granted only to employees of OneSource. A total of 800,000 shares of common stock may be issued upon the exercise of options or other awards granted under the 1999 Stock Option Plan after the completion of this offering. The maximum number of shares with respect to which awards may be granted to any employee under the 1999 Stock Option Plan shall not exceed 100,000 shares of common stock during any calendar year. The 1999 Stock Option Plan is administered by the Board of Directors and the Compensation Committee. Subject to the provisions of the 1999 Stock Option Plan, each of the Board of Directors and the Compensation Committee has the authority to select the persons to 46 48 whom awards are granted and determine the terms of each award, including the number of shares of common stock subject to the award. Payment of the exercise price of an award may be made in cash, shares of common stock, a combination of cash and stock, a promissory note or by any other method approved by the Board or Compensation Committee, consistent with Section 422 of the Code and Rule 16b-3 under the Exchange Act. Unless otherwise permitted by the Board of Directors, awards are not assignable or transferable except by will or the laws of descent and distribution, and, during the participant's lifetime, may be exercised only by the participant. The Board of Directors or Compensation Committee may, in its sole discretion, amend, modify or terminate any award granted or made under the 1999 Stock Option Plan, so long as such amendment, modification or termination would not materially and adversely affect the participant. The Board of Directors or Compensation Committee may also, in its sole discretion, accelerate or extend the date or dates on which all or any particular option or options granted under the 1999 Stock Option Plan may be exercised. 1993 Stock Purchase and Option Plan. OneSource's 1993 Stock Purchase and Option Plan (the "1993 Plan") was adopted by the Board of Directors and approved by OneSource's stockholders in September 1993. Under the 1993 Plan, OneSource is authorized to grant incentive stock options and non-qualified stock options to employees, consultants, directors and advisors of OneSource. The aggregate number of shares of common stock which may be issued under the 1993 Plan is 2,100,000 shares and the aggregate number of shares of Class P common stock that may be issued under the 1993 Plan is 20,000 shares. In February 1999, the Board of Directors, voted to terminate the 1993 Plan effective immediately prior to the closing of this offering. To date, OneSource has granted stock options to purchase an aggregate of 1,940,548 shares of common stock pursuant to the 1993 Plan. 1999 Employee Stock Purchase Plan. The 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan") was adopted by the Board of Directors in February 1999 and approved by OneSource's stockholders in 1999, to be effective upon the completion of this offering. The 1999 Purchase Plan provides for the issuance of a maximum of 100,000 shares of common stock after the completion of this offering. The 1999 Purchase Plan is administered by the Compensation Committee of the Board of Directors. All employees of OneSource whose customary employment is for more than 20 hours per week and for more than three months in any calendar year and who have completed more than 180 days of employment with OneSource on or before the first day of any Payment Period (as defined below) are eligible to participate in the 1999 Purchase Plan. Employees who would own 5% or more of the total combined voting power or value of OneSource's stock immediately after the grant may not participate in the 1999 Purchase Plan. To participate in the 1999 Purchase Plan, an employee must authorize OneSource to deduct an amount (not less than one percent nor more than 10 percent of a participant's total cash compensation) from his or her pay during six-month payment periods (each, a "Payment Period"). The first Payment Period will commence upon the registration of OneSource's common stock under the Exchange Act and will end on the earlier of the following or . Thereafter, the Payment Periods will commence on the six-month periods commencing on 1 and 1, respectively, and ending on the following and , 47 49 respectively, of each year, but in no case shall an employee be entitled to purchase more than shares in any one Payment Period. The exercise price for the option granted in each Payment Period is 85% of the lesser of the average market price of the common stock on the first or last business day of the Payment Period, in either event rounded up to the nearest cent to avoid fractions of a dollar other than 1/4, 1/2 and 3/4. If an employee is not a participant on the last day of the Payment Period, such employee is not entitled to exercise his or her option, and the amount of his or her accumulated payroll deductions will be refunded. Options granted under the 1999 Purchase Plan may not be transferred or assigned. An employee's rights under the 1999 Purchase Plan terminate upon his or her voluntary withdrawal from the plan at any time or upon termination of employment. No options have been granted to date under the 1999 Purchase Plan. 401(K) PLAN OneSource has established a tax-qualified employee savings and retirement plan. Employees must complete three months of service at OneSource before they are eligible to participate on the first day of the month following the completion. Employees may contribute a percentage of their pre-tax compensation and OneSource may, in its discretion from year-to-year, make matching contributions to the employees. Amounts matched by OneSource vest over three years. LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OneSource's Restated Certificate of Incorporation and Amended and Restated By-Laws provide that the directors and officers of OneSource shall be indemnified by OneSource to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with their service for or on behalf of OneSource. In addition, the Restated Certificate of Incorporation provides that the directors of OneSource will not be personally liable for monetary damages to OneSource for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to OneSource or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper personal benefit from their action as directors. OneSource intends to obtain insurance which insures the directors and officers of OneSource against certain losses and which insures OneSource against certain of its obligations to indemnify such directors and officers. 48 50 CERTAIN TRANSACTIONS In connection with the management buy-out from Lotus in 1993, each of William Blair Venture Partners III Limited Partnership and Information Partners Capital Fund, L.P. and its affiliated entities purchased 162,000 shares of Class P common stock for $1.62 million, or $10.00 per share, and 1,458,000 shares of common stock for $180,000, or $0.12 per share. The shares of common stock held by William Blair Venture Partners and Information Partners Capital are subject to registration rights entitling the holder to demand that OneSource register the shares under the Securities Act in certain circumstances to enable the holder to resell its shares. For more information, see "Shares Eligible For Future Sale." A Stockholders Agreement among OneSource, William Blair Venture Partners, Information Partners Capital and certain other stockholders provides that, for so long as William Blair Venture Partners or Information Partners Capital continues to own at least 25% of the common stock which each such entity originally purchased in the buy-out, OneSource shall cause a representative of each of William Blair Venture Partners and Information Partners Capital to be nominated to the Board of Directors. Mr. Newmark, a general partner of William Blair Venture Management Company (the general partner of William Blair Venture Partners), currently serves as the William Blair Venture Partners representative and Mr. Dominik, a general partner of Information Partners, Inc. (the general partner of Information Partners Capital), currently serves as the Information Partners Capital representative. The Stockholders Agreement will be terminated upon consummation of this offering. Since 1993, OneSource has paid each of William Blair Venture Partners and an affiliate of Information Partners Capital an annual management fee of $0.1 million, pursuant to an oral arrangement. OneSource has agreed to pay each of these entities a one-time fee of $0.5 million to terminate the management fee arrangement. OneSource intends to use approximately $6.7 million of its net proceeds from this offering to repay a note issued by OneSource to Lotus in connection with the purchase of OneSource's business from Lotus in 1993. The note bears interest at the rate of 8% per year and is due September 8, 2000, unless accelerated upon certain events. The completion of this offering would require OneSource to repay a significant portion of the note if it is not repaid in full. 49 51 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information known to OneSource regarding beneficial ownership of OneSource's common stock as of March 1, 1999 and as adjusted to reflect the sale of the shares of common stock in this offering by (a) each person known by OneSource to be the beneficial owner of more than 5% of OneSource's common stock; (b) each of OneSource's directors; (c) each Named Executive Officer (for more information, see "Management--Executive Compensation"); (d) all executive officers and directors as a group; and (e) each selling stockholder. Unless otherwise indicated, to the knowledge of OneSource, each stockholder possesses sole voting and investment power with respect to the shares listed, except to the extent an individual stockholder's shares are owned jointly with that person's spouse.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR TO THE OWNED AFTER THE OFFERING(1) OFFERING(1)(2) ------------------- ------------------- NUMBER OF SHARES NUMBER OF NAME AND ADDRESS OF BENEFICIAL OWNER(3) SHARES PERCENT OFFERED(2) SHARES PERCENT --------------------------------------- --------- ------- ----------- --------- ------- Information Partners Capital Fund, L.P.(4)................................. 1,619,999 44.0% William Blair Venture Partners III Limited Partnership(5).......................... 1,620,000 44.0 Martin Kahn(6)............................ 329,364 8.4 Daniel J. Schimmel(7)..................... 586,732 14.0 James A. Becker(8)........................ 166,000 4.5 Philip J. Garlick(9)...................... 71,600 1.9 Mark C. Van Dine(10)...................... 86,000 2.3 Roy D. Landon(11)......................... 60,000 1.6 David Dominik(4).......................... 1,619,999 44.0 Gregg Newmark(5).......................... 1,620,000 44.0 Lotus Development Corporation(12)......... 200,000 5.2 All executive officers and directors as a group (8 persons)(13)................... 4,539,695 95.4
- ------------ (1) Based on shares of common stock outstanding prior to the offering and outstanding upon completion of the offering. The number of shares of common stock deemed outstanding includes (a) one share of common stock for each share of outstanding Class P common stock and (b) shares issuable pursuant to options held by the respective person or group which may be exercised within 60 days after March 1, 1999 ("presently exercisable stock options"), as set forth in the other footnotes to this table, including options to purchase shares that are being exercised by certain of the selling stockholders in connection with this offering. For purposes of calculating each person's or group's percentage ownership, presently exercisable stock options are included for that person or group but not the presently exercisable stock options of any other person or group. (2) Assumes that the Underwriters' over-allotment option to purchase up to an additional shares from the selling stockholders is not exercised. If the Underwriters exercise their over-allotment option to purchase up to an additional shares, then the following stockholders will sell up to the following number of additional shares: (3) For more information, see "Management--Executive Officers and Directors." Unless otherwise indicated, the address for each beneficial owner is c/o OneSource Information Services, Inc., 150 CambridgePark Drive, Cambridge, MA 02140. (4) Includes 55,933 shares owned by BCIP Associates and 60,613 shares owned by BCIP Trust Associates, L.P. The respective general partners of these entities, including Mr. Dominik, exercise sole voting and investment power with respect to the shares owned by such entities. Each of these persons disclaims beneficial ownership of such shares except to the extent of his respective proportionate pecuniary interest therein. 50 52 (5) The general partners of this entity, including Mr. Newmark, exercise sole voting and investment power with respect to the shares owned by such entity. Each of these persons disclaims beneficial ownership of such shares except to the extent of his respective proportionate pecuniary interest therein. (6) Includes 249,364 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (7) Includes 506,732 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (8) Includes 122,000 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (9) Includes 67,600 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (10) Includes 78,000 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (11) Includes 52,000 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. (12) Lotus Development Corporation's address is 55 Cambridge Parkway, Cambridge, MA 02142. All of such shares are issuable pursuant to a currently exercisable warrant. (13) Please reference notes 5 through 11 inclusive. Includes 1,075,696 shares of common stock issuable pursuant to stock options that are exercisable within 60 days of March 1, 1999. DESCRIPTION OF CAPITAL STOCK Effective upon the closing of this offering and the filing of OneSource's Restated Certificate of Incorporation, the authorized capital stock of OneSource will consist of 20,000,000 shares of common stock, par value $.01 per share, and 1,000,000 shares of preferred stock, par value $.01 per share. Prior to the closing of this offering and in accordance with OneSource's Certificate of Incorporation as currently in effect, OneSource is authorized to issue up to 6,500,000 shares of common stock, par value $.01 per share, of which 3,329,392 shares are issued and outstanding and 500,000 shares of Class P common stock, par value $.01 per share, of which 352,400 shares are issued and outstanding. Prior to the closing of this offering, all shares of Class P common stock and preference amount thereon will be reclassified into shares of common stock. The following summary description of OneSource's capital stock is not intended to be complete and is qualified by reference to the provisions of applicable law and to OneSource's Restated Certificate of Incorporation and Amended and Restated By-laws filed as exhibits to the registration statement of which this prospectus is a part. COMMON STOCK As of March 1, 1999, there were 3,329,392 shares of common stock outstanding held by 42 stockholders of record. Based upon the number of shares outstanding as of that date and giving effect to the issuance of the shares of common stock offered by OneSource in this offering and the reclassification of each outstanding share of Class P common stock into one share of common stock plus an additional number of shares of common stock determined by dividing the preference amount for such shares by the assumed initial public offering price of $ per share and the repurchase of such additional shares of common stock by OneSource, there will be shares of common stock outstanding upon the closing of this offering. In addition, as of , 1999, there were outstanding stock options for the purchase of a total of shares of common stock and outstanding warrants for the purchase of shares of common stock. 51 53 Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Directors are elected by a plurality of the votes of the shares present in person or by proxy at the meeting and entitled to vote in such election. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor, subject to any preferential dividend rights of outstanding preferred stock. Upon the liquidation, dissolution or winding up of OneSource, the holders of common stock are entitled to receive ratably the net assets of OneSource available after the payment of all debts and other liabilities of OneSource, subject to the prior rights of any outstanding preferred stock. Holders of the common stock have no preemptive, subscription, redemption or conversion rights, nor are they entitled to the benefit of any sinking fund. The outstanding shares of common stock are, and the shares offered by OneSource in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable. The rights, powers, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which OneSource may designate and issue in the future. PREFERRED STOCK The Board of Directors will be authorized, subject to any limitations prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 1,000,000 shares of preferred stock, in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the Board of Directors, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights. The stockholders of OneSource have granted the Board of Directors authority to issue the preferred stock and to determine its rights and preferences in order to eliminate delays associated with a stockholder vote on specific issuances. The rights of the holders of common stock will be subject to the rights of holders of any preferred stock issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the voting power or other rights of the holders of common stock, and could make it more difficult for a third-party to acquire, or discourage a third-party from attempting to acquire, a majority of the outstanding voting stock of OneSource. OneSource has not, to date, issued any shares of preferred stock and has no present plans to issue any shares of preferred stock. DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER EFFECTS Upon completion of this offering, OneSource will be subject to the provisions of Section 203 of the General Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of the corporation's outstanding voting stock. 52 54 The Restated Certificate of Incorporation provides that directors may be removed only for cause by the affirmative vote of the holders of 75% of the shares of capital stock of OneSource entitled to vote. In addition, under the Restated Certificate of Incorporation any vacancy on the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may only be filled by vote of a majority of the directors then in office. The likely effect of the limitations on the removal of directors and filling of vacancies is an increase in the time required for the stockholders to change the composition of the Board of Directors. The Restated By-Laws to be adopted upon the closing of this offering provide that any action required or permitted to be taken by the stockholders of OneSource at an annual meeting or special meeting of stockholders may only be taken if OneSource is given proper advance notice of the action. The Restated By-Laws further provide that special meetings of stockholders may only be called by a majority of the Board of Directors, the Chairman of the Board of Directors or the President of OneSource. The foregoing provisions could have the effect of delaying until the next stockholders meeting stockholder actions which are favored by the holders of a majority of the outstanding voting securities of OneSource. However, the Restated By-Laws provide that stockholders may take action by written consent. The General Corporation Law of Delaware provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation's certificate of incorporation or by-laws, unless a corporation's certificate of incorporation or by-laws, as the case may be, requires a greater percentage. The Restated By-Laws require the affirmative vote of the holders of at least 75% of the issued and outstanding shares of capital stock of OneSource entitled to vote to amend or repeal any of the foregoing provisions of the Restated By-Laws. The 75% stockholder vote would be in addition to any separate class vote that might be required pursuant to the terms of any series of preferred stock that might be outstanding at the time any such amendments are submitted to stockholders. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the common stock will be . 53 55 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, OneSource will have shares of common stock outstanding (assuming no exercise of the outstanding options or warrants). Of these shares, the shares ( shares if the over-allotment option is exercised in full) to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares purchased by affiliates of OneSource, as that term is defined in Rule 144 under the Securities Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 described below. SALES OF RESTRICTED SHARES The remaining shares of common stock outstanding upon completion of this offering are deemed "Restricted Shares" under Rule 144 or Rule 701 under the Securities Act. Approximately of such Restricted Shares will be eligible for sale in the public market pursuant to Rule 144(k) on the date of this prospectus. Upon expiration of certain lock-up agreements, 180 days after the date of this prospectus, an additional shares of common stock will be eligible for sale in the public market pursuant to Rule 144 under the Securities Act. In general, under Rule 144, a person (or persons whose shares are aggregated), including an Affiliate, who has beneficially owned Restricted Shares for at least one year is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of (a) one percent of the then outstanding shares of common stock (approximately shares immediately after this offering) or (b) the average weekly trading volume in the common stock in the over-the-counter market during the four calendar weeks preceding the date on which notice of such sale is filed, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, Affiliates must comply with the restrictions and requirements of Rule 144, other than the one-year holding period requirement, in order to sell shares of common stock which are not Restricted Shares. Under Rule 144(k), a person who is not an Affiliate and has not been an Affiliate for at least three months prior to the sale and who has beneficially owned Restricted Shares for at least two years may resell such shares without compliance with the foregoing requirements. In meeting the one- and two-year holding periods described above, a holder of Restricted Shares can include the holding periods of a prior owner who was not an Affiliate. The one- and two-year holding periods described above do not begin to run until the full purchase price or other consideration is paid by the person acquiring the Restricted Shares from the issuer or an Affiliate. Rule 701 provides that currently outstanding shares of common stock acquired under OneSource's employee compensation plans may be resold by persons, other than Affiliates, beginning 90 days after the date of this prospectus, subject only to the manner of sale provisions of Rule 144, and by Affiliates under Rule 144, without compliance with its one-year minimum holding period, subject to certain limitations. OPTIONS Rule 701 also provides that the shares of common stock acquired upon the exercise of currently outstanding options or pursuant to other rights granted under OneSource's stock plans may be resold by persons, other than Affiliates, beginning 90 days after the date of this prospectus, subject only to the manner of sale provisions of Rule 144, and by Affiliates under 54 56 Rule 144, without compliance with its one-year minimum holding period, subject to certain limitations. As of the date of this prospectus, the Board of Directors has authorized an aggregate of up to shares of common stock for issuance pursuant to OneSource's stock option and stock purchase plans. At the date of this prospectus, shares of common stock are issuable pursuant to outstanding vested options or pursuant to other rights granted under OneSource's stock plan(s), of which approximately shares are not subject to lock-up agreements with the Underwriters and will be eligible for sale in the public market in accordance with Rule 701 under the Securities Act beginning 90 days after the date of this prospectus; shares of common stock are issuable pursuant to outstanding options that are not yet exercisable; and shares of common stock are available for future grants under OneSource's stock option and stock purchase plans. OneSource intends to file one or more registration statements on Form S-8 under the Securities Act 180 days after the date of this prospectus to register all shares of common stock which are issuable pursuant to OneSource's stock option and stock purchase plans. Such registration statements are expected to become effective upon filing. Shares covered by such registration statements will thereupon be eligible for sale in the public markets. LOCK-UP AGREEMENTS With certain exceptions, OneSource, its executive officers and directors, the selling stockholders and certain other security-holders have agreed not to sell or transfer any shares of common stock (or any security convertible into or exchangeable or exercisable for common stock), or to engage in certain hedging transactions with respect to the common stock without the prior written consent of William Blair & Company, L.L.C. ("William Blair") for a period of 180 days from the date of this prospectus. In addition, for a period of 180 days from the date of this prospectus, except as required by law, OneSource has agreed that its Board of Directors will not consent to any offer for sale, sale or other disposition, or any transaction which is designed or could be expected to result in the disposition by any person, directly or indirectly, of any shares of common stock without the prior written consent of William Blair. For more information, see "Underwriting." William Blair in its sole discretion at any time or from time to time and without notice may release for sale in the public market all or any portion of the shares subject to the lock-up agreements. REGISTRATION RIGHTS Upon the expiration of the contractual lock-up period, certain security holders of OneSource (the "Rights Holders") will be entitled to require OneSource to register under the Securities Act up to a total of shares of outstanding common stock (the "Registrable Shares") under the terms of an agreement between OneSource and the Rights Holders (the "Registration Rights Agreement"). The Registration Rights Agreement provides that if OneSource proposes to register in a firm commitment underwritten offering any of its securities under the Securities Act at any time or times, the Rights Holders, subject to certain exceptions, shall be entitled to include Registrable Shares in such registration. However, the managing underwriter of any such offering may exclude for marketing reasons some or all of such Registrable Shares from such registration. The Rights Holders also have, subject to certain conditions and limitations, the right to require OneSource, no more than once in any six-month period, to prepare and file a registration statement under the Securities Act with respect to their 55 57 Registrable Shares. OneSource is generally required to bear the expenses of all such registrations, except underwriting discounts and commissions. Prior to this offering, there has been no public market for the common stock of OneSource, and no predictions can be made as to the effect, if any, that market sales of shares of common stock prevailing from time to time, or the availability of shares for future sale, may have on the market price for our common stock. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock and could impair OneSource's future ability to obtain capital through an offering of equity securities. 56 58 UNDERWRITING Each Underwriter named below has agreed to purchase from OneSource and the selling stockholders the number of shares of common stock set forth opposite its name.
NUMBER OF UNDERWRITER SHARES ----------- --------- William Blair & Company, L.L.C. ............................ U.S. Bancorp Piper Jaffray Inc. ............................ Adams, Harkness & Hill, Inc. ............................... -------- Total..................................................
This offering will be underwritten on a firm commitment basis. In the Underwriting Agreement among OneSource, the selling stockholders and the Underwriters, the Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase the shares of common stock being sold pursuant thereto at a price per share equal to the public offering price less the underwriting discount specified on the cover page of this prospectus. According to the terms of the Underwriting Agreement, the Underwriters will either purchase all of the shares or none of them. In the event of default by any Underwriter, in certain circumstances the purchase commitments of the non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated. William Blair, U.S. Bancorp Piper Jaffray Inc. and Adams, Harkness & Hill, Inc. are acting as the representatives of the Underwriters. The representatives of the Underwriters have advised OneSource and the selling stockholders that the Underwriters will offer the shares of common stock to the public at the public offering price specified on the cover page of this prospectus. The Underwriters may also offer the shares to certain dealers at the public offering price less a concession of up to $ per share. The Underwriters may allow, and these dealers may re-allow, a concession of up to $ per share to certain other dealers. The Underwriters will offer the shares subject to prior sale and subject to receipt and acceptance of the shares by the Underwriters. The Underwriters may reject any order to purchase shares in whole or in part. The Underwriters expect that OneSource and the selling stockholders will deliver the shares to the Underwriters through the facilities of the Depository Trust Company in New York, New York on or about , 1999. At that time, the Underwriters will pay OneSource and the selling stockholders for the shares in immediately available funds. After the commencement of the initial public offering, the representatives may change the offering price and the other selling terms. The Underwriters have the option to purchase up to an aggregate of additional shares of common stock from the selling stockholders at the same price they are paying for the shares offered hereby. The Underwriters may purchase additional shares only to cover over-allotments made in connection with this offering and only within 30 days after the date of this prospectus. If the Underwriters decide to exercise this over-allotment option, each Underwriter will be required to purchase additional shares in approximately the same proportion as set forth in the table above. The Underwriters will offer any additional shares that they purchase on the terms described in the preceding paragraph. 57 59 The following table summarizes the compensation to be paid by OneSource and the selling stockholders to the Underwriters:
TOTAL --------------------------------------------- PER SHARE WITHOUT OVER-ALLOTMENT WITH OVER-ALLOTMENT --------- ---------------------- ------------------- Public Offering Price................. Underwriting Discount paid by OneSource........................... Underwriting Discount paid by the selling stockholders................
OneSource estimates the expenses of this offering payable by OneSource (excluding the underwriting discount) to be $ . OneSource and the selling stockholders have agreed to indemnify the Underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act. OneSource and certain stockholders of OneSource have agreed not to sell or transfer any shares of common stock, or to engage in certain hedging transactions with respect to the common stock, for a period of 180 days from the date of this prospectus without the consent of William Blair, except in certain limited circumstances. Stockholders who have agreed to this lock-up arrangement hold an aggregate of shares of common stock and options to purchase shares of common stock. For more information, see "Shares Eligible for Future Sale." In connection with this offering, the Underwriters and other persons participating in this offering may engage in transactions which affect the market price of the common stock. These may include stabilizing and over-allotment transactions and purchases to cover syndicate short positions. Stabilizing transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock. Over-allotment involves selling more shares of common stock in this offering than are specified on the cover page of this prospectus, which results in a syndicate short position. The Underwriters may cover this short position by purchasing common stock in the open market or by exercising all or part of their over-allotment option. In addition, the representatives of the Underwriters may impose a penalty bid. This allows the representatives to reclaim the selling concession allowed to an Underwriter or selling group member if common stock sold by such Underwriter or selling group member in this offering is repurchased by the representatives in stabilizing or syndicate short covering transactions. These transactions, which may be effected on the Nasdaq National Market, may stabilize, maintain or otherwise affect the market price of the common stock and could cause the price to be higher than it would be without these transactions. The Underwriters and other participants in this offering are not required to engage in any of these activities and may discontinue any of these activities at any time without notice. Neither OneSource nor any of the Underwriters makes any representation or prediction as to whether the Underwriters will engage in such transactions or choose to discontinue any transactions engaged in or as to the direction or magnitude of any effect that these transactions may have on the price of the common stock. The representatives of the Underwriters have advised OneSource and the selling stockholders that the Underwriters do not intend to confirm, without client authorization, sales to any account over which they exercise discretionary authority. 58 60 Prior to this offering, there has been no public market for OneSource's common stock. Consequently, OneSource, representatives of the selling stockholders and the representatives of the Underwriters negotiated to determine the initial public offering price. They considered current market conditions, OneSource's operating results in recent periods, the market capitalization of other companies in its industry, estimates of OneSource's potential and other factors they deemed relevant. The estimated price range specified on the cover page of this prospectus may change because of market conditions and other factors. The Underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares of common stock in this offering for OneSource employees and certain other individuals with a relationship with OneSource. Purchases of the reserved shares would reduce the number of shares available for sale to the general public. The Underwriters will offer any reserved shares which are not so purchased to the general public on the same terms as the other shares. OneSource intends to apply for quotation of the common stock on the Nasdaq National Market under the symbol "ONES." Certain of the Underwriters and their affiliates engage in transactions with, and perform services for, OneSource in the ordinary course of business and have engaged, and may in the future engage, in commercial banking and investment banking transactions with OneSource. In connection with rendering such services in the past, the Underwriters and their affiliates have received customary compensation. William Blair is an affiliate of William Blair Venture Partners. As such, William Blair may be deemed to be an affiliate of OneSource under Schedule E of the By-Laws of the National Association of Securities Dealers, Inc. ("NASD"). Mr. Newmark, a principal of William Blair, currently serves on OneSource's Board of Directors as the representative of William Blair Venture Partners. In addition, since 1993, OneSource has paid William Blair Venture Partners an annual management fee of $100,000 pursuant to an oral arrangement and OneSource will pay William Blair Venture Partners $500,000 upon the closing of this offering in termination of this arrangement. For more information, see "Principal and Selling Stockholders" and "Certain Transactions." When an NASD member participates in an offering of an affiliated company's equity securities, Rule 2720 of the NASD requires that a "qualified independent underwriter" within the meaning of the Rule participate in the preparation of the registration statement and prospectus for the offering and conduct due diligence as part of such preparation. In addition, if a bona fide independent market does not exist for the offered securities, the public offering price can be no higher than that recommended by the qualified independent underwriter. U.S. Bancorp Piper Jaffray Inc. has accepted the responsibility of acting as the "qualified independent underwriter" with respect to this offering and, accordingly, the initial public offering price specified on the cover page of this prospectus does not exceed that recommended by U.S. Bancorp Piper Jaffray in its capacity as such. LEGAL MATTERS The validity of the shares of common stock to be issued in this offering will be passed upon for OneSource by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain legal matters in connection with this offering will be passed upon for the Underwriters by Sidley & Austin, Chicago, Illinois. 59 61 EXPERTS The consolidated financial statements as of December 31, 1997 and 1998 and for each of the three years in the period ended December 31, 1998 included in this prospectus have been so included in reliance upon the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. ADDITIONAL INFORMATION OneSource has filed with the Commission a registration statement on Form S-1 (including all amendments and exhibits thereto, the "Registration Statement") under the Securities Act with respect to the common stock in this offering. As permitted by the rules and regulations of the Commission, this prospectus omits certain information contained in the Registration Statement. For further information with respect to OneSource and the common stock offered in this offering, you should refer to the Registration Statement and to the exhibits and schedules filed as part thereof. Statements contained in this prospectus regarding the contents of any agreement or other document filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance reference is made to the copy of such agreement or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. You may obtain copies of all or any portion of the Registration Statement at prescribed rates from the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at its regional offices located at Seven World Trade Center, New York, New York 10007 and 500 West Madison Street, Chicago, Illinois 60661, or by calling the Commission at 1-800-SEC-0330. In addition, the Commission maintains a Website that contains reports, proxy and information statements and other information regarding registrants (including OneSource) that file electronically with the Commission which can be accessed at http://www.sec.gov. OneSource intends to furnish to its stockholders annual reports containing consolidated financial statements audited by an independent public accounting firm and with quarterly reports for each of the first quarters of each fiscal year containing unaudited consolidated financial statements. 60 62 ONESOURCE INFORMATION SERVICES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants........................... F-2 Consolidated Balance Sheet as of December 31, 1997 and 1998 and Pro Forma December 31, 1998 (unaudited)............... F-3 Consolidated Statement of Operations for the Years Ended December 31, 1996, 1997 and 1998.......................... F-4 Consolidated Statement of Changes in Stockholders' Deficit for the Years Ended December 31, 1996, 1997 and 1998...... F-5 Consolidated Statement of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998.......................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 63 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of OneSource Information Services, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in stockholders' deficit and of cash flows present fairly, in all material respects, the financial position of OneSource Information Services, Inc. and its subsidiary at December 31, 1997 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Boston, Massachusetts February 26, 1999 F-2 64 ONESOURCE INFORMATION SERVICES, INC. CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, PRO FORMA ------------------- DECEMBER 31, 1997 1998 1998 -------- -------- ------------ (NOTE 2) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 341 $ 8,665 $ 8,665 Accounts receivable, net of allowance for doubtful accounts of $210 and $300 at December 31, 1997 and 1998, respectively..................................... 8,703 9,621 9,621 Deferred subscription costs............................... 5,037 6,662 6,662 Prepaid expenses and other current assets................. 323 426 426 -------- -------- -------- Total current assets................................... 14,404 25,374 25,374 Property and equipment, net................................. 1,826 1,770 1,770 Restricted time deposit..................................... -- 100 100 Other assets................................................ 414 402 402 -------- -------- -------- Total assets......................................... $ 16,644 $ 27,646 $ 27,646 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current portion of capital lease obligations.............. $ 580 $ 471 $ 471 Notes payable............................................. 1,530 -- -- Accounts payable.......................................... 1,204 995 995 Accrued expenses.......................................... 2,450 3,378 3,378 Accrued royalties......................................... 2,684 4,626 4,626 Deferred revenues......................................... 15,748 18,022 18,022 -------- -------- -------- Total current liabilities.............................. 24,196 27,492 27,492 Capital lease obligations................................... 439 233 233 Long-term debt.............................................. 5,622 6,232 6,232 -------- -------- -------- Total liabilities.................................... 30,257 33,957 33,957 -------- -------- -------- Commitments (Note 13)....................................... -- -- -- Stockholders' deficit: Preferred stock, $0.01 par value: No shares authorized, issued or outstanding at December 31, 1997 and 1998; 1,000,000 shares authorized, no shares issued and outstanding at December 31, 1998 on a pro forma basis (unaudited)............................ -- -- -- Class P common stock, $0.01 par value: 500,000 shares authorized, 352,800 and 352,400 shares issued and outstanding at December 31, 1997 and 1998, respectively, at issuance cost (liquidation preference $6,656); no shares authorized, issued and outstanding at December 31, 1998 on a pro forma basis (unaudited)............................................ 3,528 3,524 -- Common stock, $0.01 par value: 6,500,000, 6,500,000 and 20,000,000 shares authorized; 3,284,992, 3,329,392, shares issued; and 3,234,592, 3,275,392, and shares outstanding, at December 31, 1997, December 31, 1998 and December 31, 1998 on a pro forma basis (unaudited), respectively........................ 32 33 Additional paid-in capital................................ 397 759 Unearned compensation..................................... -- (39) (39) Accumulated deficit....................................... (17,432) (10,444) (10,444) Accumulated other comprehensive loss...................... (132) (138) (138) Common stock held in treasury, at cost.................... (6) (6) (6) -------- -------- -------- Total stockholders' deficit.......................... (13,613) (6,311) (6,311) -------- -------- -------- Total liabilities and stockholders' deficit.......... $ 16,644 $ 27,646 $ 27,646 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-3 65 ONESOURCE INFORMATION SERVICES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31, ---------------------------------------- 1996 1997 1998 ---------- ---------- ------------ Revenues: Web-based product................................... $ 15 $ 3,312 $ 16,058 CD Rom product...................................... 30,419 27,072 14,370 ---------- ---------- ---------- 30,434 30,384 30,428 ---------- ---------- ---------- Cost of revenues: Web-based product................................... 295 2,401 7,863 CD Rom product...................................... 12,244 10,444 5,792 ---------- ---------- ---------- 12,539 12,845 13,655 ---------- ---------- ---------- Gross profit........................................ 17,895 17,539 16,773 ---------- ---------- ---------- Operating expenses: Selling and marketing............................... 8,572 9,167 11,577 Platform and product development.................... 7,252 6,375 6,313 General and administrative.......................... 3,664 3,401 3,847 ---------- ---------- ---------- Total operating expenses......................... 19,488 18,943 21,737 ---------- ---------- ---------- Loss from operations............................. (1,593) (1,404) (4,964) Interest expense...................................... (752) (943) (878) Interest income....................................... 19 13 283 Gain on sale of product line.......................... -- 501 12,797 ---------- ---------- ---------- Income (loss) before income taxes and extraordinary gain............................. (2,326) (1,833) 7,238 Provision for income taxes............................ -- -- 250 ---------- ---------- ---------- Income (loss) before extraordinary gain.......... (2,326) (1,833) 6,988 Extraordinary gain on early extinguishment of debt.... 393 -- -- ---------- ---------- ---------- Net income (loss)................................ $ (1,933) $ (1,833) $ 6,988 Less: income attributable to Class P common stock..... 335 414 1,367 ---------- ---------- ---------- Net income (loss) attributable to common stock... $ (2,268) $ (2,247) $ 5,621 ========== ========== ========== Class P common stock: Basic and diluted earnings per share................ $ 0.95 $ 1.17 $ 3.88 Weighted average Class P common shares outstanding...................................... 353,300 352,800 352,600 Common stock: Basic earnings (loss) per share..................... $ (0.71) $ (0.70) $ 1.72 Diluted earnings (loss) per share................... $ (0.71) $ (0.70) $ 1.20 Weighted average common shares outstanding: Basic............................................ 3,187,695 3,216,385 3,263,309 Diluted.......................................... 3,187,695 3,216,385 4,699,337 Unaudited pro forma earnings per share: Basic............................................... $ Diluted............................................. $ Weighted average common shares outstanding: Basic............................................ Diluted..........................................
The accompanying notes are an integral part of these consolidated financial statements. F-4 66 ONESOURCE INFORMATION SERVICES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (IN THOUSANDS, EXCEPT SHARE DATA)
CLASS P COMMON STOCK COMMON STOCK ADDITIONAL ---------------- ------------------ PAID-IN UNEARNED COMPREHENSIVE ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION INCOME (LOSS) DEFICIT ------- ------ --------- ------ ---------- ------------ ------------- ----------- Balance, December 31, 1995..... 353,800 $3,538 3,225,600 $32 $376 $ -- $(13,666) Comprehensive loss: Net loss...................... $(1,933) (1,933) Other comprehensive income (loss): Foreign currency translation adjustment................ (130) ------- Comprehensive loss........ (2,063) ======= Issuance of common stock pursuant to exercise of options....................... 14,976 -- 4 Reacquisition and retirement of Class P common stock.......... (1,000) (10) Reacquisition of common stock for treasury.................. ------- ------ --------- --- ---- ---- -------- Balance, December 31, 1996..... 352,800 3,528 3,240,576 32 380 -- (15,599) Comprehensive loss: Net loss...................... (1,833) (1,833) Other comprehensive income (loss): Foreign currency translation adjustment................ 30 ------- Comprehensive loss........ (1,803) ======= Issuance of common stock pursuant to exercise of options....................... 44,416 -- 17 ------- ------ --------- --- ---- ---- -------- Balance, December 31, 1997..... 352,800 3,528 3,284,992 32 397 -- (17,432) Comprehensive income: Net income.................... 6,988 6,988 Other comprehensive income (loss): Foreign currency translation adjustment................ (6) ------- Comprehensive income...... $ 6,982 ======= Issuance of common stock pursuant to exercise of options....................... 44,400 1 22 Unearned compensation relating to grants of stock options.... 45 (45) Compensation relating to grants of stock options.............. 6 Compensation relating to modification of stock options on sale of product line....... 295 Reacquisition and retirement of Class P common stock.......... (400) (4) Reacquisition of common stock for treasury.................. ------- ------ --------- --- ---- ---- -------- Balance, December 31, 1998..... 352,400 $3,524 3,329,392 $33 $759 $(39) $(10,444) ======= ====== ========= === ==== ==== ======== ACCUMULATED OTHER TREASURY STOCK TOTAL COMPREHENSIVE --------------- STOCKHOLDERS' LOSS SHARES AMOUNT DEFICIT ------------- ------ ------ ------------- Balance, December 31, 1995..... $ (32) 41,400 $(5) $ (9,757) Comprehensive loss: Net loss...................... (1,933) Other comprehensive income (loss): Foreign currency translation adjustment................ (130) (130) Comprehensive loss........ Issuance of common stock pursuant to exercise of options....................... 4 Reacquisition and retirement of Class P common stock.......... (10) Reacquisition of common stock for treasury.................. 9,000 (1) (1) ----- ------ --- -------- Balance, December 31, 1996..... (162) 50,400 (6) (11,827) Comprehensive loss: Net loss...................... (1,833) Other comprehensive income (loss): Foreign currency translation adjustment................ 30 30 Comprehensive loss........ Issuance of common stock pursuant to exercise of options....................... 17 ----- ------ --- -------- Balance, December 31, 1997..... (132) 50,400 (6) (13,613) Comprehensive income: Net income.................... 6,988 Other comprehensive income (loss): Foreign currency translation adjustment................ (6) (6) Comprehensive income...... Issuance of common stock pursuant to exercise of options....................... 23 Unearned compensation relating to grants of stock options.... -- Compensation relating to grants of stock options.............. 6 Compensation relating to modification of stock options on sale of product line....... 295 Reacquisition and retirement of Class P common stock.......... (4) Reacquisition of common stock for treasury.................. 3,600 -- -- ----- ------ --- -------- Balance, December 31, 1998..... $(138) 54,000 $(6) $ (6,311) ===== ====== === ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 67 ONESOURCE INFORMATION SERVICES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1997 1998 ------- ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows relating to operating activities Net income (loss)......................................... $(1,933) $(1,833) $ 6,988 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization........................... 2,670 1,776 1,518 Compensation expense relating to grants of stock options.............................................. -- -- 6 Amortization of debt discount........................... 108 142 121 Loss on sale leaseback transaction...................... -- -- 45 Gain on sale of product line............................ -- (501) (12,797) Gain on early extinguishment of debt.................... (393) -- -- Changes in assets and liabilities: Accounts receivable.................................. (781) 17 (946) Deferred subscription costs.......................... (178) (748) (2,217) Prepaid expenses and other assets.................... (255) 14 (43) Accounts payable..................................... 509 (459) (213) Accrued expenses..................................... 507 758 1,075 Accrued royalties.................................... 76 (128) 2,283 Deferred revenues.................................... 943 453 5,373 ------- ------- -------- Net cash provided (used) by operating activities........ 1,273 (509) 1,193 ------- ------- -------- Cash flows relating to investing activities Investment in certificate of deposit...................... -- -- (100) Purchases of property and equipment....................... (1,332) (878) (1,252) Capitalization of software development costs.............. (300) (75) (200) Net proceeds from sale of product line.................... -- 501 10,563 ------- ------- -------- Net cash provided (used) by investing activities........ (1,632) (452) 9,011 ------- ------- -------- Cash flows relating to financing activities Proceeds from issuance of common stock.................... 4 17 23 Repurchase of Class P common stock and common stock....... (11) -- (4) Net borrowings (repayments) under line of credit.......... (400) 883 (1,183) Borrowings under term loan................................ 575 -- -- Repayments of term loan................................... (208) (228) (347) Proceeds from sale and leaseback of fixed assets.......... 289 753 228 Repayments of capital lease obligations................... (402) (607) (684) ------- ------- -------- Net cash provided (used) by financing activities........ (153) 818 (1,967) ------- ------- -------- Effect of exchange rate changes on cash and cash equivalents............................................... 81 (51) 87 ------- ------- -------- Increase (decrease) in cash and cash equivalents............ (431) (194) 8,324 Cash and cash equivalents, beginning of year................ 966 535 341 ------- ------- -------- Cash and cash equivalents, end of year...................... $ 535 $ 341 $ 8,665 ======= ======= ======== Supplemental disclosure of cash flow information: Cash paid for interest.................................... $ 218 $ 301 $ 209 Cash paid for taxes....................................... -- -- 175 Supplemental disclosure of noncash investing and financing activities: Additions to capital lease obligations for purchases of fixed assets............................................ $ 430 $ 87 $ 183 Additions to capital lease obligations for sale and leaseback of fixed assets............................... 289 753 228 Additions to long-term debt for accrued interest.......... 440 480 489 Exchange of property and equipment for the retirement of capital lease obligations............................... -- -- 41
The accompanying notes are an integral part of these consolidated financial statements. F-6 68 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS OneSource Information Services, Inc. and its wholly-owned subsidiary provide Web-based business and financial information to professionals in corporations and other enterprises. OneSource primarily sells its products through a direct sales force located throughout the United States and United Kingdom. OneSource manages its business as a single segment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of OneSource Information Services, Inc. and OneSource Information Services Limited, its wholly-owned subsidiary (collectively, "OneSource"). All significant intercompany transactions and balances have been eliminated. REVENUE RECOGNITION OneSource's products are sold on a subscription basis pursuant to customer contracts that span varying periods of time but are generally for a period of one year. In accordance with its customer agreements, OneSource initially records receivables and defers the related revenue at the time amounts are billed to customers. Revenues are recognized ratably over the related subscription period. SUBSCRIPTION COSTS Subscription costs represent sales commission and royalty costs that are directly associated with securing a subscription and procuring information to be delivered over the subscription period, respectively. These costs are deferred and amortized ratably over the associated subscription period as a component of selling and marketing expense and cost of revenues, respectively. At December 31, 1997 and 1998, deferred subscription costs consisted of $1,365,000 and $1,250,000, respectively, related to sales commissions and $3,672,000 and $5,412,000, respectively, related to royalties. CASH AND CASH EQUIVALENTS Cash equivalents consist of money market funds with original maturities of three months or less and are stated at cost which approximates fair market value. These funds are managed by a financial institution with a strong credit rating. Accordingly, the investments are subject to minimal credit and market risks. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three to five years, using the straight-line method. Equipment held under capital leases is stated at the fair value of the equipment at inception of the leases and is amortized on a straight-line basis over the term of the leases. F-7 69 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) PLATFORM AND PRODUCT DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS Platform and product development costs, other than certain software development costs, are charged to expense as incurred. Software development costs incurred subsequent to the establishment of technological feasibility, and prior to general release of the product, are capitalized and amortized on a straight-line basis over the estimated useful lives of the related products, generally twenty-four to thirty-six months. For the years ended December 31, 1996, 1997 and 1998, amortization of capitalized software development costs amounted to $340,000, $413,000 and $198,000, respectively. FINANCIAL INSTRUMENTS Fair values of OneSource's financial instruments, which include cash and cash equivalents, restricted time deposits, accounts receivable, long-term debt and capital lease obligations are based on quoted market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. The carrying value of these financial instruments approximated their fair value at December 31, 1997 and 1998. CONCENTRATION OF CREDIT RISK Concentration of credit risk with respect to accounts receivable is limited due to the large number of companies comprising OneSource's client base. Ongoing credit evaluations of customers' financial condition are performed and collateral is generally not required. OneSource maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations. ACCOUNTING FOR STOCK-BASED COMPENSATION OneSource accounts for stock-based compensation to employees in accordance with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and related interpretation. Accordingly, compensation expense is recorded for options issued to employees in fixed amounts to the extent that the fixed exercise prices are less than the fair market value of OneSource's common stock at the date of grant. OneSource follows the disclosure requirements of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" (Note 8). All stock-based awards to non-employees are accounted for at their fair value in accordance with SFAS No. 123. UNAUDITED PRO FORMA BALANCE SHEET Prior to the closing of OneSource's initial public offering, each outstanding share of Class P common stock (the "Class P stock") will be reclassified into one share of common stock plus an additional number of shares of common stock (determined by dividing the preference amount for such share by the assumed initial public offering price of $ per share). In addition, upon the closing of OneSource's initial public offering, OneSource will file a Restated Certificate of Incorporation which will authorize 1,000,000 shares of a single class of undesignated preferred F-8 70 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) stock, $0.01 par value per share, will cancel authorization of the Class P common stock and will have authorized 20,000,000 shares of common stock. This reclassification and other changes have been reflected in the unaudited pro forma balance sheet as of December 31, 1998. EARNINGS PER SHARE AND UNAUDITED PRO FORMA EARNINGS PER SHARE Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires the presentation of two amounts, basic earnings per share and diluted earnings per share. The two-class method of computing earnings per share has been used since the Class P stock and the common stock share ratably in earnings remaining subsequent to the 12% yield on the Class P stock. Earnings per share of Class P stock is calculated by dividing the yield earned and income (loss) attributable to Class P stock by the weighted average number of shares of Class P stock outstanding during the period. Diluted earnings per share is the same for all periods presented as there are no securities outstanding that would result in dilution for Class P stock. Earnings per share of common stock is calculated by dividing income (loss) attributable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by considering the impact of potential common stock as if they were converted into common stock at the beginning of the period. Potential common stock equivalents are not included in loss periods as they are anti-dilutive. Unaudited pro forma basic and diluted earnings per share of common stock for the year ended December 31, 1998 have been calculated based on net income applicable to all classes of common stock and assuming the reclassification of OneSource's Class P common stock prior to the completion of this offering, as if such reclassification had occurred at January 1, 1998. Each share of Class P common stock will be reclassified into one share of common stock plus an additional number of shares of common stock (determined by dividing the preference amount for such share by the assumed initial public offering price of $ per share). FOREIGN CURRENCY TRANSLATION Assets and liabilities of OneSource's United Kingdom operations, where the local currency is the functional currency, are translated into US dollars at the exchange rate in effect as of the balance sheet date, while revenues and expenses are translated at average exchange rates during the period. The resultant translation adjustment is reflected as a separate component of stockholders' deficit. Transaction gains and losses, which are not material in amount, are reflected in the consolidated statement of operations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires OneSource management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-9 71 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 1998, the Accounting Standards Executive Committee ("AcSEC") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 establishes the accounting for costs of software products developed or purchased for internal use, including when such costs should be capitalized. OneSource does not expect SOP 98-1, which is effective for OneSource beginning January 1, 1999, to have a material effect on OneSource's financial condition or results of operations. In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." Start-up activities are defined broadly as those one-time activities relating to opening a new facility, introducing a new product or service, conducting business in a new territory, conducting business with a new class of customer, commencing some new operation or organizing a new entity. Under SOP 98-5, the cost of start-up activities should be expensed as incurred. SOP 98-5 is effective for OneSource's calendar year 1999 financial statements and OneSource does not expect its adoption to have a material effect on OneSource's financial condition or results of operations. In June 1998, the Financial Accounting Standards Board 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, and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. OneSource does not expect SFAS No. 133 to have a material effect on its financial condition or results of operations. 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
DECEMBER 31, ------------------ 1997 1998 ------- ------- (IN THOUSANDS) Office and computer equipment................... $ 5,222 $ 5,478 Furniture and fixtures.......................... 293 326 ------- ------- 5,515 5,804 Less: accumulated depreciation and amortization.................................. (3,689) (4,034) ------- ------- $ 1,826 $ 1,770 ======= =======
At December 31, 1997 and 1998, office and computer equipment under capital leases totaled $2,112,000 and $1,304,000, respectively. Related accumulated amortization of assets under capital leases totaled $1,158,000 and $702,000 at December 31, 1997 and 1998, respectively. During the years ended December 31, 1996, 1997 and 1998, OneSource sold and leased back certain computer equipment with net book values of $308,000, $788,000, and F-10 72 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) $237,000, respectively for cash proceeds of $289,000, $753,000 and $228,000. During 1998, OneSource retired $525,000 of fully depreciated property and equipment. 4. BORROWINGS NOTES PAYABLE OneSource entered into a credit agreement (the "Agreement") with a bank, as amended, which provides for a line of credit (the "Line") of up to $2,500,000 through April 1, 1998 and a term loan (the "Term Loan") of $750,000 to be used for financing equipment purchases. At December 31, 1997, borrowings under the Line were $1,183,000 and borrowings under the Term Loan were $347,000. During 1998, the Line and the Term Loan expired and were repaid in full. LONG-TERM DEBT In connection with the acquisition of the business in 1993, OneSource entered into a subordinated note agreement with the seller with a face amount of $5,000,000 (the "Note"). The Note bears interest at 8% per annum, payable annually commencing March 31, 1995 and has been discounted to reflect the market rate of 12% at the time of issuance. The initial discount totaling $938,000 is being amortized to interest expense over the life of the Note using the effective interest method. As of December 31, 1998, the unamortized discount was $291,000. Interest payments may be added to the unpaid principal of the Note if OneSource's cash flow, as defined in the Note agreement, is less than a specified amount. The Note, and any accrued but unpaid interest thereon, is due on the earlier of i) September 8, 2000, ii) the date OneSource's stockholders, in connection with an acquisition, cease to own a majority of the capital stock of OneSource, or iii) the date OneSource sells substantially all of its assets. In the event OneSource issues equity securities with net proceeds to OneSource in excess of $10,000,000, OneSource is required to make a prepayment of the principal amount as defined in the Note agreement. The Note agreement requires OneSource to comply with certain restrictive covenants, including the maintenance of specified financial ratios, and restricts OneSource from paying dividends. In December 1996, OneSource reached a settlement agreement for an alleged breach by the seller of a provision of the Note agreement regarding the initial acquisition of the business. Under the terms of the settlement, the seller forgave $393,000, or $0.11 per common share, of the principal on the Note, which amount has been recognized as an extraordinary gain on early extinguishment of debt. As of December 31, 1998, the carrying value of the Note was $6,232,000. In accordance with the terms of the Note agreement, OneSource has added $1,523,000 to the principal of the Note for interest which had accrued through the end of December 31, 1997. Accrued interest related to the Note was $504,000 for the year ended December 31, 1998 and, since OneSource met the cash flow requirements set forth in the Note agreement, such amount is due by March 31, 1999. F-11 73 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. EARNINGS PER SHARE The following tables set forth the computation of earnings per share of common stock and Class P stock from net income (loss):
YEAR ENDED DECEMBER 31, ----------------------------------- 1996 1997 1998 --------- --------- --------- Numerator for common stock (in thousands): Net income (loss)...................... $ (1,933) $ (1,833) $ 6,988 Less: income attributable to Class P stock............................... 335 414 1,367 --------- --------- --------- $ (2,268) $ (2,247) $ 5,621 ========= ========= ========= Denominator for common stock: Weighted average shares outstanding used for basic earnings per share... 3,187,695 3,216,385 3,263,309 Effect of dilutive securities: Stock options.......................... -- -- 1,195,624 Common stock warrants.................. -- -- 240,404 --------- --------- --------- Weighted average shares outstanding used for diluted earnings per share............................... 3,187,695 3,216,385 4,699,337 ========= ========= =========
Total potential common equivalent shares consist of 1,743,448 stock options outstanding with a weighted average exercise price of $2.91 per share and 240,404 common stock warrants exercisable at $0.12 per share as of December 31, 1998.
YEAR ENDED DECEMBER 31, ----------------------------------- 1996 1997 1998 --------- --------- --------- (IN THOUSANDS) Numerator for Class P stock: Yield earned by Class P stock.......... $ 586 $ 660 $ 742 Income (loss) attributable to Class P stock............................... (251) (246) 625 --------- --------- --------- $ 335 $ 414 $ 1,367 ========= ========= =========
Basic and diluted earnings per share of Class P stock are the same for all periods presented since there are no potentially dilutive securities. 6. CLASS P COMMON STOCK AND COMMON STOCK In connection with its initial capitalization, OneSource issued 356,400 shares of Class P stock and 3,207,600 shares of common stock at $10.00 per share and $0.12 per share, respectively. The holders of the Class P stock, as a separate class, are entitled to receive first all or a portion of any distribution, as defined, until the "preference amount" and the original F-12 74 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) issuance cost has been paid in full. The preference amount is 12% compounded quarterly. After all such payments have been made, the holders of the Class P stock and of the common stock shall share pro rata in the remaining portion of the distribution, as a single class. As of December 31, 1998, no dividends on either the Class P stock or the common stock have been declared or paid, and no payments of the aggregate yield have been made to the Class P stockholders. As a result, the Class P stock is stated at its original issuance cost of $10.00 per share. As of December 31, 1998, the liquidation preference of these shares was $6,656,000. All holders of Class P stock and all holders of common stock are entitled to one vote per share on all matters to be voted upon by OneSource's stockholders. The Class P stock is not convertible into common stock without the prior agreement of the Class P stockholders and OneSource. 7. WARRANTS In connection with the Note agreement (Note 4), OneSource issued a warrant exercisable at $0.12 per share for 200,000 shares of OneSource's common stock. The warrant is currently exercisable and expires on September 8, 2002. In connection with the credit agreement (Note 4), OneSource also issued a warrant to the Term Loan holder which entitles the holder to purchase 40,404 shares of OneSource's common stock at $0.12 per share. The warrant is currently exercisable and expires on the later of September 8, 2003 or five years from the effective date of an initial public offering of OneSource's common stock. The fair value of these warrants at the date of issuance was determined to be $10,000 in the aggregate. OneSource has reserved 240,404 shares of common stock for issuance upon exercise of the above warrants. 8. STOCK PLANS The 1993 Stock Purchase and Option Plan (the "1993 Plan") provides for the grant of incentive stock options and non-qualified stock options for the purchase of up to an aggregate of 2,100,000 shares of OneSource's common stock by employees, directors, consultants and advisors of OneSource. The Board of Directors determines the term of each option, option price, number of shares for which each option is granted, whether restrictions will be imposed on the shares subject to options, and the vesting schedule of each option. The exercise price for incentive stock options granted may not be less than the fair value per share of the underlying common stock on the date granted as determined by the Board of Directors (not less than 110% of the fair value for options granted to holders of more than 10% of the voting stock of OneSource). Additionally, the term of the options cannot exceed ten years (five years for options granted to holders of more than 10% of the voting stock of OneSource). The options generally vest over a four-year period. In February 1999, the Board of Directors of OneSource approved the 1999 Stock Option and Incentive Plan (the "1999 Stock Option Plan") to be effective upon the closing of OneSource's initial public offering. The 1999 Stock Option Plan provides for the grant of stock-based awards to employees, officers and directors of, and consultants or advisors to, F-13 75 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) OneSource. A total of 800,000 shares of common stock are authorized for issuance upon the exercise of options or other awards granted under the 1999 Stock Option Plan. In February 1999, the Board of Directors of OneSource approved the 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"), to be effective upon the closing of OneSource's initial public offering. The 1999 Purchase Plan provides for the issuance of a maximum of 100,000 shares of common stock. Transactions under the 1993 Plan during the years ended December 31, 1996, 1997 and 1998 are summarized as follows:
WEIGHTED- NUMBER OF AVERAGE SHARES EXERCISE PRICE --------- -------------- Outstanding--December 31, 1995............... 1,382,756 $2.17 Granted (weighted average fair value of $0.25).................................. 620,700 3.53 Exercised.................................. (14,976) 0.25 Forfeited.................................. (85,876) 1.39 --------- Outstanding--December 31, 1996............... 1,902,604 2.67 Granted (weighted average fair value of $0.25).................................. 144,600 3.52 Exercised.................................. (44,416) 0.39 Forfeited.................................. (230,540) 2.99 --------- Outstanding--December 31, 1997............... 1,772,248 2.75 Granted (weighted average fair value of $1.66).................................. 100,700 4.44 Exercised.................................. (44,400) 0.55 Forfeited.................................. (85,100) 2.73 --------- Outstanding--December 31, 1998............... 1,743,448 2.91 =========
The following table summarizes information about stock options outstanding at December 31, 1998:
WEIGHTED- AVERAGE REMAINING NUMBER OF NUMBER CONTRACTUAL OPTIONS EXERCISE PRICE OF OPTIONS LIFE IN YEARS EXERCISABLE - -------------- ---------- ------------- ----------- $0.25............................. 370,548 4.9 365,973 2.78............................. 675,900 6.4 496,950 4.45............................. 697,000 6.7 478,825 --------- --------- 1,743,448 6.2 1,341,748 ========= =========
F-14 76 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of December 31, 1996 and 1997, 925,853 and 1,214,860 options were exercisable, respectively, under the 1993 Plan. As of December 31, 1998, there were 252,760 shares of common stock available for grant to employees under the 1993 Plan. The fair value of each option grant is estimated on the date of grant using the minimum value method with the following assumptions for grants in 1996, 1997 and 1998: dividend yield of 0.0% for all years; risk-free interest rates of 6.4%, 6.2% and 5.2% for 1996, 1997 and 1998, respectively; and a weighted-average expected option term of 5 years for all years. Compensation expense has been recognized for OneSource's stock option plan under APB No. 25. Had compensation cost been determined based on the fair value of the options at the grant date consistent with the provisions of SFAS No. 123, OneSource's net income (loss) and earnings (loss) per share would have been increased to the pro forma amounts indicated below:
YEAR ENDED DECEMBER 31, ---------------------------- 1996 1997 1998 ------- ------- ------ Net income (loss) (in thousands): As reported.................................. $(1,933) $(1,833) $6,988 Pro-forma.................................... (2,006) (1,890) 6,909 Basic and diluted earnings per Class P common share: As reported.................................. 0.95 1.17 3.88 Pro-forma.................................... 0.92 1.15 3.85 Basic earnings per common share: As reported.................................. (0.71) (0.70) 1.72 Pro-forma.................................... (0.73) (0.71) 1.70 Diluted earnings per common share: As reported.................................. (0.71) (0.70) 1.20 Pro-forma.................................... (0.73) (0.71) 1.18
Because options vest over several years and additional option grants are expected to be made in future years, results of operations for future years may be materially different if the provisions of SFAS No. 123 are applied. In conjunction with the sale of the CD-Insurance division, OneSource modified the terms of 111,352 stock options held by terminated employees. In accordance with APB No. 25, compensation expense of $295,000 was recorded as a reduction of the gain on the sale of the insurance division in the year ended December 31, 1998. During 1998, 99,800 stock options were granted with an exercise price of $4.45 per share and 900 stock options were granted with an exercise price of $2.78 per share; these exercise prices were below the estimated fair market value of the common stock at the date of grant. Unearned compensation of $45,000 was recorded, in accordance with APB No. 25, and will be amortized over the related vesting period. Compensation expense of $6,000 was recorded in the F-15 77 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) year ended December 31, 1998. Options issued during 1996 and 1997 were granted with exercise prices above the estimated fair market value of the common stock at the date of grant. 9. INCOME TAXES Components of the income (loss) before income taxes and extraordinary gain and of the current provision for income taxes are as follows:
YEAR ENDED DECEMBER 31, ---------------------------- 1996 1997 1998 ------- ------- ------ (IN THOUSANDS) Income (loss) before income taxes and extraordinary gain: Domestic..................................... $(1,976) $(2,124) $7,204 Foreign...................................... (350) 291 34 ------- ------- ------ $(2,326) $(1,833) $7,238 ======= ======= ====== Current provision for income taxes: Federal...................................... $ -- $ -- $ 200 State........................................ -- -- 45 Foreign...................................... -- -- 5 ------- ------- ------ $ -- $ -- $ 250 ======= ======= ======
OneSource had no deferred provision for income taxes in each of the years ended December 31, 1996, 1997 and 1998 due to the offsetting effects of the valuation allowance on its net deferred tax assets. There was no income tax effect related to the extraordinary gain on early extinguishment of debt in 1996. Provision has not been made for US or additional foreign taxes on undistributed earnings of foreign subsidiaries as those earnings have been permanently reinvested. Such taxes, if any, are not expected to be significant. F-16 78 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Income taxes computed using the federal statutory income tax rate differ from OneSource's effective tax rate primarily due to the following:
YEAR ENDED DECEMBER 31, ------------------------- 1996 1997 1998 ----- ----- ------- (IN THOUSANDS) Income tax expense (benefit) at US federal statutory tax rate............................. $(657) $(623) $ 2,461 State income taxes, net of federal tax effect.... (115) (125) 508 Permanent items.................................. 79 20 21 Other............................................ 20 (4) 36 Change in deferred tax asset valuation allowance...................................... 673 732 (2,776) ----- ----- ------- Provision for income taxes....................... $ -- $ -- $ 250 ===== ===== =======
Components of OneSource's deferred tax assets and liabilities are as follows:
DECEMBER 31, ------------------ 1997 1998 ------- ------- (IN THOUSANDS) Deferred tax assets: Net operating loss carryforwards.............. $ 3,394 $ 238 Depreciation.................................. 378 537 Accrued expenses.............................. 222 623 Deferred revenues............................. 2,159 1,342 Equity compensation........................... -- 123 Miscellaneous................................. 120 133 ------- ------- Gross deferred tax asset................... 6,273 2,996 Less: valuation allowance..................... (4,544) (1,768) ------- ------- Total deferred tax assets.................. 1,729 1,228 ------- ------- Deferred tax liabilities: Prepaid expenses.............................. 1,068 513 Deferred royalties............................ 253 252 Amortization of debt discount................. 163 217 Capitalized software development costs........ 126 127 Tax operating leases.......................... 119 119 ------- ------- Total deferred tax liabilities............. 1,729 1,228 ------- ------- Net deferred tax assets......................... $ -- $ -- ======= =======
F-17 79 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Realization of OneSource's net deferred tax assets is contingent upon the generation of future taxable income. Due to the uncertainty of realization of these tax benefits, OneSource has provided a valuation allowance for the full amount of its net deferred tax assets. During 1998, OneSource utilized $8,000,000 of net operating loss carryforwards. At December 31, 1998, OneSource had net operating loss carryforwards of $575,000 for foreign tax purposes which do not expire. Under the provisions of the Internal Revenue Code, if certain substantial changes in OneSource's ownership should occur, the amount of net operating loss carryforwards which could be utilized annually to offset future taxable income and income tax liability may be limited. The amount of any annual limitation is determined based upon OneSource's value prior to an ownership change. 10. SALE OF PRODUCT LINES In June 1997, OneSource sold its CD Rom banking product line for $650,000 in cash. In connection with the sale, OneSource entered a non-compete agreement for five years. As a result of the sale, OneSource recorded a gain of $501,000 which is net of expenses of $149,000 incurred in conjunction with the sale. No assets or liabilities with recorded net book values were transferred in connection with this product line sale. In May 1998, OneSource sold its CD-Insurance division for $11,000,000 in cash and entered a software license agreement for $4,000,000 to be received in equal quarterly installments for two years commencing January 1, 1999. In connection with the sale, OneSource also entered a non-compete agreement for five years. As a result of the sale, OneSource recorded a gain of $12,797,000 which includes: (i) the recognition of $3,124,000 of deferred revenues and $595,000 of deferred subscription costs based upon the assumption by the buyer of all obligations to service the existing subscriber base of the insurance division, (ii) $530,000 of employee severance costs and (iii) $202,000 of expenses associated with the sale. Payments pertaining to the software license agreement will be recognized in other income as support services are performed and payments become due in accordance with the agreement. 11. EMPLOYEE BENEFIT PLANS After three months of service, OneSource employees are eligible to participate in a tax deferred savings plan (the "Savings Plan") under Section 401(k) of the Internal Revenue Code. OneSource matches 25% of the first 6% contributed by the employee, and the employee becomes fully vested in OneSource's matching contribution after three years of service. OneSource's contributions to the Savings Plan totaled $122,000, $116,000 and $120,000 for the years ended December 31, 1996, 1997 and 1998, respectively. 12. RELATED PARTY TRANSACTIONS At December 31, 1997 and 1998, OneSource had accounts receivable of $117,000 and $335,000, respectively, due from two stockholders. OneSource recognized revenue of $200,000, $292,000 and $318,000 in the years ended December 31, 1996, 1997, and 1998 respectively, from these parties. F-18 80 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Management fees paid to a stockholder and an affiliate of another stockholder totaling $200,000 for each of the years ended December 31, 1996, 1997 and 1998 are included in general and administrative expenses. 13. COMMITMENTS Leases OneSource leases facilities and certain equipment under various noncancellable operating lease agreements. Total rent expense under such leases was $1,271,000, $1,191,000 and $1,146,000 for the years ended December 31, 1996, 1997, and 1998, respectively. Future minimum lease commitments under all noncancellable capital and operating leases at December 31, 1998 are as follows:
CAPITAL OPERATING LEASES LEASES ------- --------- (IN THOUSANDS) 1999............................................... $490 $ 920 2000............................................... 207 231 2001............................................... 80 223 2002............................................... -- 221 2003............................................... -- 68 ---- ------ Total minimum lease payments....................... 777 $1,663 ====== Less: amount representing interest................. 73 ---- Present value of net minimum lease payments, including current maturities of $471............. $704 ====
In January 1999, OneSource entered into a five-year noncancellable operating lease for a new operating facility. Minimum yearly rental payments will be $655,000, commencing in June 1999. Pursuant to the lease, OneSource entered into a $415,000 irrevocable letter of credit collateralized by a certificate of deposit. Restricted Time Deposit In connection with a facility lease, OneSource is required to maintain, on behalf of the landlord, an irrevocable letter of credit with a bank in the amount of $100,000 over the term of the lease. In addition, OneSource was required to maintain a certificate of deposit in an equal amount as security for the letter of credit. F-19 81 ONESOURCE INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 14. GEOGRAPHIC INFORMATION Revenue was distributed geographically as follows:
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1997 1998 ------- ------- ------- (IN THOUSANDS) United States......................... $25,294 $24,193 $23,428 United Kingdom........................ 5,140 6,191 7,000 ------- ------- ------- $30,434 $30,384 $30,428 ======= ======= =======
Substantially all of OneSource's identifiable assets are located in the United States. F-20 82 [The graphic contains the OneSource logo in the center of the page. Reading from the top right diagonally to the bottom left of the page is the following text: Turning World Class Information into Integrated Solutions For Demanding Business Professionals Worldwide. The top left of the page depicts the names and logos of the following OneSource information providers: The Investext Group; Market Guide; Standard & Poor's; Comtex; Financial Times; Corp Tech; WorldScope Disclosure; Hoover's Inc.; Reuters; and Dun & Bradstreet. The bottom half of the page depicts the following OneSource customers by name and logo displayed according to the following industry sectors noted in the text: Financial Institutions: Credit Suisse; Merrill Lynch; American Express: Bank of America. Professional Services: Bain & Company; KMPG; Deloitte Touche Tohmatsu; Ernst & Young. High Tech: Oracle; SAP; Platinum; IBM. Leading Corporations: Boeing; MCI Worldcom; BT; Nortel Networks.] 83 - ------------------------------------------------------ - ------------------------------------------------------ YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT WHICH IS SET FORTH IN THIS PROSPECTUS. WE ARE OFFERING TO SELL SHARES OF COMMON STOCK AND SEEKING OFFERS TO BUY SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THE PROSPECTUS OR OF ANY SALE OF COMMON STOCK. --------------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary................. 3 Risk Factors....................... 7 Reclassification................... 14 Use of Proceeds.................... 15 Dividend Policy.................... 15 Capitalization..................... 16 Dilution........................... 17 Selected Consolidated Financial Data............................. 18 Management's Discussion and Analysis of Financial Condition and Results of Operations........ 20 Business........................... 32 Management......................... 43 Certain Transactions............... 49 Principal and Selling Stockholders..................... 50 Description of Capital Stock....... 51 Shares Eligible for Future Sale.... 54 Underwriting....................... 57 Legal Matters...................... 59 Experts............................ 60 Additional Information............. 60 Index to Consolidated Financial Statements....................... F-1
--------------------------- Until , 1999 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ SHARES [ONE SOURCE LOGO] COMMON STOCK ------------------------ PROSPECTUS , 1999 ------------------------ WILLIAM BLAIR & COMPANY U.S. BANCORP PIPER JAFFRAY INC. ADAMS, HARKNESS & HILL, INC. - ------------------------------------------------------ - ------------------------------------------------------ 84 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses payable in connection with the sale of the common stock in this offering are as follows: SEC registration fee........................................ $ 11,259 NASD filing fee............................................. 4,550 Nasdaq National Market listing fee.......................... 49,000 Printing and engraving expenses............................. 125,000 Legal fees and expenses..................................... 250,000 Accounting fees and expenses................................ * Transfer agent and registrar fees and expenses.............. * Miscellaneous............................................... * -------- Total.................................................. $ * ========
- ------------ * To be completed by amendment OneSource will bear all of the expenses shown above. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Delaware General Corporation Law, the Company's charter and by-laws provide for indemnification of the Company's directors and officers for liabilities and expenses that they may incur in such capacities. In general, directors and officers are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. Reference is made to the Company's corporate charter and by-laws filed as Exhibits 3.01 and 3.02 hereto, respectively. The Underwriting Agreement provides that the Underwriters are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of the Company against certain liabilities, including liabilities under the Securities Act. Reference is made to the form of Underwriting Agreement filed as Exhibit 1.01 hereto. The Company intends to apply for a directors' and officers' insurance policy. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. In the three years preceding the filing of this registration statement, the Company has issued the following securities that were not registered under the Securities Act: Since January 1, 1996, the Company has issued options to purchase an aggregate of 1,063,100 shares of common stock under the 1993 Plan, exercisable at a weighted average price of $6.29 per share. From January 1, 1996 through December 31, 1998, options to purchase 103,792 shares had been exercised. The following table lists options granted between January 1, 1996 and March 1, 1999.
DATE SHARES PRICE - ---- ------ ----- November 12, 1996........................................... 340,700 $2.78 November 12, 1996........................................... 280,000 4.45 April 17, 1997.............................................. 600 2.78 July 17, 1997............................................... 1,000 2.78
II-1 85
DATE SHARES PRICE - ---- ------ ----- October 16, 1997............................................ 1,000 2.78 November 12, 1997........................................... 8,000 2.78 November 17, 1997........................................... 70,000 2.78 November 17, 1997........................................... 64,000 4.45 May 6, 1998................................................. 900 2.78 May 6, 1998................................................. 99,800 4.45 February 26, 1999........................................... 20,000 4.45 February 26, 1999........................................... 15,000 12.00 February 26, 1999........................................... 162,100 20.20
No underwriters were involved in the foregoing sales of securities. Such sales were made in reliance upon the exemption provided by Section 4(2) of the Securities Act for transactions not involving a public offering and/or Rule 701 under the Securities Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) EXHIBITS:
EXHIBIT NO. EXHIBIT ------- ------- +1.01 Form of Underwriting Agreement +3.01 Form of Restated Certificate of Incorporation of the Company 3.02 Amended and Restated Certificate of Incorporation of the Company 3.03 By-laws, as amended and restated, of the Company +3.04 Second Amended and Restated By-Laws of the Company +4.01 Specimen certificate representing the common stock +5.01 Opinion of Testa, Hurwitz & Thibeault, LLP 10.01 1993 Stock Purchase and Option Plan +10.02 1999 Stock Option and Incentive Plan +10.03 1999 Employee Stock Purchase Plan 10.04 Registration Agreement dated September 8, 1993 10.05 Stock Purchase Warrant issued to Lotus Development Corporation dated September 8, 1993 10.06 Warrant Agreement with Silicon Valley Bank dated September 8, 1993 10.07 Subordinated Promissory Note issued to Lotus Development Corporation dated September 8, 1993 10.08 Stock Purchase Agreement dated September 8, 1993 10.09 Form of Management Stock Purchase Agreement 10.10 Stock Purchase Agreement dated August 3, 1993, by and among Lotus Development Corporation, Datext, Inc. and Datext Holding Corporation 10.11 Lease dated July 1, 1998 by and between OneSource and CambridgePark Two Limited Partnership 10.12 Lease dated January 20, 1999 by and between OneSource and 300 Baker Avenue Associates, Limited Partnership 10.13 Agreement and Plan of Merger dated February 26, 1999 by and between OneSource Information Services, Inc. and OneSource Holding Corporation +10.14 Stockholders Agreement dated September 8, 1993 21.01 Subsidiaries of the Company 23.01 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.01) 23.02 Consent of PricewaterhouseCoopers LLP
II-2 86
EXHIBIT NO. EXHIBIT ------- ------- 24.01 Power of Attorney (included in signature page) 27.01 Financial Data Schedule
- ------------ + to be filed by amendment (b) FINANCIAL STATEMENT SCHEDULES: Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are either not applicable or the required information is included in the Consolidated Financial Statements and Notes thereto, and therefore have been omitted. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to provisions described in Item 14 above, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The Company hereby undertakes: (1) to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser; (2) that for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and (3) that for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 87 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Cambridge, Massachusetts on March 1, 1999. OneSource Information Services, Inc. By: /s/ DANIEL J. SCHIMMEL ----------------------------------- Daniel J. Schimmel President and Chief Executive Officer POWER OF ATTORNEY AND SIGNATURES The undersigned officers and directors of OneSource Information Services, Inc. hereby constitute and appoint Daniel J. Schimmel and Roy D. Landon, and each of them singly, with full power of substitution, our true and lawful attorneys-in-fact and agents to take any actions to enable OneSource Information Services, Inc. to comply with the Securities Act, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including the power and authority to sign for us in our names in the capacities indicated below any and all amendments to this registration statement and any other registration statement filed pursuant to the provisions of Rule 462 under the Securities Act. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE --------- -------- ---- President and Chief Executive March 1, 1999 Officer and Director (principal /s/ DANIEL J. SCHIMMEL executive officer) - ------------------------------------------ Daniel J. Schimmel Vice President, Finance and March 1, 1999 Administration (principal /s/ ROY D. LANDON financial officer) - ------------------------------------------ Roy D. Landon /s/ MARTIN KAHN Director March 1, 1999 - ------------------------------------------ Martin Kahn /s/ DAVID DOMINIK Director March 1, 1999 - ------------------------------------------ David Dominik /s/ GREGG NEWMARK Director March 1, 1999 - ------------------------------------------ Gregg Newmark
II-4 88 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS ONESOURCE INFORMATION SERVICES, INC.
BALANCE AT BEGINNING OF CHARGED TO BALANCE AT DESCRIPTION PERIOD OPERATIONS DEDUCTIONS(1) END OF PERIOD - ----------- ------------ ---------- -------------- ------------- Year ended December 31, 1996 Reserves and allowances deducted from asset accounts Allowance for doubtful accounts..................... $161,000 49,000 49,000 $161,000 Year ended December 31, 1997 Reserves and allowances deducted from asset accounts Allowance for doubtful accounts..................... $161,000 72,000 23,000 $210,000 Year ended December 31, 1998 Reserves and allowances deducted from asset accounts Allowance for doubtful accounts..................... $210,000 120,000 30,000 $300,000
- ------------ (1) Doubtful accounts written off, net of recoveries S-1 89 EXHIBIT INDEX
EXHIBIT NO. ------- +1.01 Form of Underwriting Agreement +3.01 Form of Restated Certificate of Incorporation of the Company 3.02 Amended and Restated Certificate of Incorporation of the Company 3.03 By-laws, as amended and restated, of the Company +3.04 Second Amended and Restated By-Laws of the Company +4.01 Specimen certificate representing the common stock +5.01 Opinion of Testa, Hurwitz & Thibeault, LLP 10.01 1993 Stock Purchase and Option Plan +10.02 1999 Stock Option and Incentive Plan +10.03 1999 Employee Stock Purchase Plan 10.04 Registration Agreement dated September 8, 1993 10.05 Stock Purchase Warrant issued to Lotus Development Corporation dated September 8, 1993 10.06 Warrant Agreement with Silicon Valley Bank dated September 8, 1993 10.07 Subordinated Promissory Note issued to Lotus Development Corporation dated September 8, 1993 10.08 Stock Purchase Agreement dated September 8, 1993 10.09 Form of Management Stock Purchase Agreement 10.10 Stock Purchase Agreement dated August 3, 1993, by and among Lotus Development Corporation, Datext, Inc. and Datext Holding Corporation 10.11 Lease dated July 1, 1998 by and between OneSource and CambridgePark Two Limited Partnership 10.12 Lease dated January 20, 1999 by and between OneSource and 300 Baker Avenue Associates, Limited Partnership 10.13 Agreement and Plan of Merger dated February 26, 1999 by and between OneSource Information Services, Inc. and OneSource Holding Corporation +10.14 Stockholders Agreement dated September 8, 1993 21.01 Subsidiaries of the Company 23.01 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.01) 23.02 Consent of PricewaterhouseCoopers LLP 24.01 Power of Attorney (included in signature page) 27.01 Financial Data Schedule
- ------------ + to be filed by amendment EX-3.02 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.02 CERTIFICATE OF RESTATED CERTIFICATE OF INCORPORATION BEFORE PAYMENT OF CAPITAL OF DATEXT HOLDING CORPORATION ------------------------------------------ Adopted in accordance with the provisions of Sections 241 and 245 of the General Corporation Law of the State of Delaware ------------------------------------------ David Dominik and Gregg Newmark, being the vice president and secretary, respectively, of Datext Holding Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: 1. That the Corporation filed its original Certificate of Incorporation with the Delaware Secretary of State on July 21, 1993. 2. That the board of directors of the Corporation pursuant to written consent and in accordance with Sections 141(f), 241 and 245 of the General Corporation Law of the State of Delaware, adopted the resolutions authorizing the Corporation to amend, integrate and restate the Corporation's Certificate of Incorporation in its entirety to read as set forth in Exhibit A attached hereto and made a part hereof. 3. The Corporation has not received any payment for any of its stock. IN WITNESS WHEREOF, the undersigned, being the vice president and secretary hereinabove named, for the purpose of restating the Certificate of Incorporation of the Corporation pursuant to the General Corporation Law of the State of Delaware, under penalties of perjury do hereby declare and certify that this is the act and deed of the Corporation and the 2 -2- facts stated herein are true, and accordingly have hereunto signed this Certificate of Amendment to Certificate of Incorporation this 3rd day of September, 1993. DATEXT HOLDING CORPORATION By: /s/ David Dominik ----------------------------- David Dominik, President ATTEST: By: /s/ Gregg Newmark ---------------------------- Gregg Newmark, Secretary 3 EXHIBIT A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ONESOURCE HOLDING CORPORATION ----------------------------- ARTICLE ONE The name of the corporation is OneSource Holding Corporation. ARTICLE TWO The address of the corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent 19901. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE THREE The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR Part A. Authorized Shares The total number of shares of capital stock which the Corporation has authority to issue is 1,600,000 shares, consisting of: (1) 100,000 shares of Class P common Stock, par value $.01 per share ("CLASS P COMMON"); and (2) 1,500,000 shares of Common Stock, par value $.01 per share ("COMMON STOCK"). The Class P Common and Common Stock and any other common stock issued hereafter are referred to collectively as the "COMMON SHARES." The Common Shares shall have the rights, preferences and limitations set forth below. Capitalized terms used but not otherwise defined in Part A or Part B of this Article Four are defined in Part C. 4 -2- Part B. COMMON SHARES Except as otherwise provided in this Part B or as otherwise required by applicable law, all shares of Class P Common and Common Stock shall be identical in all respects and shall entitled the holders thereof to the same rights and privileges, subject to the same qualifications, limitations and restrictions. Section 1. VOTING RIGHTS. Except as otherwise provided in this Part B or as otherwise required by applicable law, all holders of Class P Common and Common Stock shall be entitled to one vote per share on all matters to be voted on by the Corporation's stockholders, and the holders of Class P Common and Common Stock shall vote together as a single class. Section 2. DISTRIBUTIONS. At the time of each Distribution, such Distribution shall be made to the holders of Class P Common and Common Stock in the following priority. (i) The holders of Class P Common, as a separate class, shall be entitled to receive all or a portion of such Distribution (ratably among such holders based upon the number of shares of Class P Common held by each such holder as of the time of such Distribution) equal to the aggregate Unpaid Yield on the outstanding shares of Class P common as of the time of such Distribution, and no Distribution or any portion thereof shall be made under paragraphs 2(ii) or 2(iii) below until the entire amount of the Unpaid Yield on the outstanding shares of Class P Common as of the time of such Distribution has been paid in full. The Distributions made pursuant to this paragraph 2(i) to holders of Class P Common shall constitute a payment of Yield on Class P Common. (ii) After the required amount of a Distribution has been made in full pursuant to paragraph 2(i) above, the holders of Class P common, as a separate class, shall be entitled to receive all or a portion of such Distribution (ratably among such holders based upon the number of shares of Class P common held by each such holder as of the time of such Distribution) equal to the aggregate Unreturned Original Cost of the outstanding shares of class P common as of the time of such Distribution, and no Distribution or any portion thereof shall be made under paragraphs 2(iii) below until the entire amount of the Unreturned Original Cost of the outstanding shares of Class P Common as of the time of such Distribution has been paid in full. The Distributions made pursuant to this paragraph 2(ii) to holders of Class P Common shall constitute a return of Original Cost of Class P Common. (iii) After the required amount of a Distribution has been made pursuant to paragraphs 2(i) and 2(ii) above, holders of Class P common and Common Stock, as a group, shall be entitled to receive the remaining portion of such Distribution (ratably among such holders based upon the number of Common Shares held by each such holder as of the time of such Distribution). Section 3. STOCK SPLITS AND STOCK DIVIDENDS. The Corporation shall not in any manner subdivide (by stock split, stock dividend or otherwise) or combine (by stock split, stock 5 -3- dividend or otherwise) the outstanding common Shares of one class unless the outstanding Common Shares of all the other classes shall be proportionately subdivided or combined. All such subdivisions and combinations shall be payable only in Class P Common to the holders of Class P Common and in Common Stock to the holders of Common Stock. In no event shall a stock split or stock dividend constitute a payment of Yield or a return of Original Cost. Section 4. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Common Shares. Upon the surrender of any certificate representing shares of any class of Common Shares at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of such class as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate. The issuance of new certificates shall be made without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance. Section 5. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of any class of Common Shares, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. Section 6. NOTICES. All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal executive offices and to any stockholder of such holder's address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder). Section 7. AMENDMENT AND WAIVER. No amendment or waiver of any provision of this Article Four shall be effective without the prior written consent of the holders of a majority of the then outstanding Common Shares voting as a single class; provided that no amendment directly to any terms or provisions of any class of Common Shares that adversely affects such class of Common Shares shall be effective without the prior consent of the holders of a majority of the then outstanding shares of such class of Common Shares. 6 -4- Part C. DEFINITIONS "DISTRIBUTION" means each distribution made by the Corporation to holders of Common Shares, whether in cash, property, or securities of the Corporation and whether by dividend, liquidating distributions or otherwise; provided that neither of the following shall be a Distribution: (a) any redemption or repurchase by the Corporation of any Common Shares for any reason or (b) any recapitalization or exchange of any Common Shares, or any subdivision (by stock split, stock dividend or otherwise) or any combination (by stock split, stock dividend or otherwise) of any outstanding Common Shares. "ORIGINAL COST" of each share of Class P Common shall be equal to the amount originally paid for such share when it was issued by the Corporation (as proportionally adjusted for all stock splits, stock dividends and other recapitalizations affecting the Class P Common). "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "SUBSIDIARY" means with respect to any Person, any corporation of which the shares of stock having a majority of the general voting power in electing the board of directors are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through Subsidiaries. "UNPAID YIELD" of any share of Class P Common means an amount equal to the excess, if any, of (a) the aggregate Yield accrued on such share, over (b) the aggregate amount of Distributions made by the Corporation that constitute payment of Yield on such share. "UNRETURNED ORIGINAL COST" of any shares of Class P Common means an amount equal to the excess, if any, of (a) the Original cost of such share, over (b) the aggregate amount of Distributions made by the Corporation that constitute a return of Original Cost of such share. "YIELD" means, with respect to each share of Class P Common for each calendar quarter, the amount accruing on such share each day during such quarter at the rate of 12% per annum of the sum of (a) such share's Unreturned Original Cost, plus (b) Unpaid Yield thereon for all prior quarters. In calculating the amount of any Distribution to be made during a calendar quarter, the portion of a Class P Common share's Yield for such portion of such quarter elapsing before such Distribution is made shall be taken into account. ARTICLE FIVE The corporation is to have perpetual existence. 7 -5- ARTICLE SIX In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE SEVEN Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of directors need not be by written ballot unless the bylaws of the corporation so provide. ARTICLE EIGHT To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE EIGHT shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE NINE The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE TEN The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. 8 CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ONESOURCE HOLDING CORPORATION Adopted in accordance with the provisions of ss.242 of the General Corporation Law of the State of Delaware Daniel Schimmel and Roy Landon, being the President and Secretary, respectively, of OneSource Holding Corporations, a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DO HEREBY CERTIFY as follows: 1. That the Corporation filed its original Certificate of Incorporation with the office of the Delaware Secretary of State on July 21, 1993 under the name Datex Holding Corporation. The Amended and Restated Certificate of Incorporation was filed with the Office of the Secretary of State of the State of Delaware on September 23, 1993. 2. That the Board of Directors of the Corporation, pursuant to the written consent and in accordance with Sections 141(f), 241 and 245 of the General Corporation Law of the State of Delaware, adopted the resolutions set forth below proposing the amendment to the Amended and Restated Certificate of Incorporation (the "Amendment") and directed that the Amendment be submitted to the holders of the issued and outstanding shares of stock of the Corporation entitled to vote thereon for its consideration and approval: RESOLVED: That the Board of Directors of the Corporation deem it advisable and in the Corporation's best interest to amend the Corporation's Amended and Restated 9 -2- Certificate of Incorporation to delete Part A of Article Four in its entirety and substitute therefor Part A of Article Four as follows: "ARTICLE FOUR Part A. AUTHORIZED SHARES The total number of shares of capital stock which the Corporation has authority to issue is 7,000,000 shares, consisting of: (1) 500,000 shares of Class P Common Stock, par value $.01 per share ("CLASS P COMMON"); and (2) 6,500,000 shares of Common Stock, par value $.01 per share ("COMMON STOCK"). The Class P Common and Common Stock and any other common stock issued hereafter are referred to collectively as the "COMMON SHARES". The Common Shares shall have the rights, preferences and limitations set forth below. Capitalized terms used but not otherwise defined in Part A or Part B of this Article Four are defined in Part C." 3. That the Amendment was duly adopted in accordance with ss.242 of the General Corporation Law of the State of Delaware by written consent of the holders of the issued and outstanding shares of stock of the Corporation entitled to vote thereon. 10 -3- IN WITNESS WHEREOF, the undersigned do hereby certify under penalties of perjury that this Certificate of Amendment is the act and deed of the undersigned and the facts stated herein are true and accordingly have hereunto set their hands this 19th day of March, 1997. ONESOURCE HOLDING CORPORATION a Delaware Corporation By: /s/ Daniel Schimmel ----------------------- Name: Daniel Schimmel Title: President ATTEST By: /s/ Roy Landon ------------------------- Name: Roy Landon Title: Secretary 11 CERTIFICATE OF MERGER FOR THE MERGER OF ONESOURCE INFORMATION SERVICES, INC. (A DELAWARE CORPORATION) WITH AND INTO ONESOURCE HOLDING CORPORATION, INC. (A DELAWARE CORPORATION) ********** Pursuant to Section 251 of the General Corporation Law of the State of Delaware (the "Delaware Law"), OneSource Holding Corporation, a corporation organized and existing under and by virtue of the Delaware Law and the surviving corporation in the merger contemplated herein (sometimes referred to herein as "Holding" or the "Surviving Corporation"), DOES HEREBY CERTIFY: FIRST. That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION OneSource Holding Corporation ("Holding") Delaware OneSource Information Services, Inc. ("Services") Delaware SECOND. That an Agreement and Plan of Merger (referred to herein as the "Merger Agreement"), dated as of February 26, 1999, by and between Holding and Services setting forth the terms and conditions of the merger of Services with and into Holding has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the Delaware Law. THIRD. The name of the surviving corporation will be changed from "OneSource Holding Corporation" to "OneSource Information Services, Inc." (a Delaware corporation). 12 FOURTH. As part of the merger, the certificate of incorporation of Holding shall remain the certificate of incorporation of the surviving corporation. FIFTH. That the executed Merger Agreement is on file at the principal place of business of the Surviving Corporation. The address of the principal place of business of the Surviving Corporation, is 150 CambridgePark Drive, Cambridge, MA 02140. SIXTH. That a copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of any constituent corporation. [Remainder of Page Intentionally Left Blank] 13 IN WITNESS WHEREOF, Holding, the Surviving Corporation, has caused this Certificate of Merger to be signed by its authorized officer, this 26th day of February, 1999, and such authorized officer acknowledges that such signature is made on behalf of the Surviving Corporation and that the facts stated herein are true and correct as of the date hereof. OneSource Holding Corporation (A Delaware corporation) By: /s/ David Dominik ----------------------------- Name: Title: ATTEST By: /s/ Gregg Newmark --------------------------- Name: Title: Secretary EX-3.03 3 AMENDED AND RESTATED BY-LAWS 1 EXHIBIT 3.03 AMENDED AND RESTATED BY-LAWS OF ONESOURCE INFORMATION SERVICES, INC. A Delaware Corporation ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be located at 32 Loockerman Square, Suite L-100, Dover, Delaware, County of Kent. The name of the corporation's registered agent at such address shall be The Prentice-Hall Corporation System, Inc. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. SECTION 2. OTHER OFFICES. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE AND TIME OF MEETINGS. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. SECTION 3. PLACE OF MEETINGS. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. 2 SECTION 4. NOTICE. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting. SECTION 5. STOCKHOLDERS LIST. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of' the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 6. QUORUM. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. SECTION 7. ADJOURNED MEETINGS. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 8. VOTE REQUIRED. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. SECTION 9. VOTING RIGHTS. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. -2- 3 SECTION 10. PROXIES. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. SECTION 11. ACTION BY WRITTEN CONSENT. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. SECTION 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of directors shall be five (5). Thereafter, the number of directors shall be established from time to time by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. SECTION 3. REMOVAL AND RESIGNATION. Any director or the entire board of directors may be removed at any time, with or without cause, by the holders of a majority of the shares then -3- 4 entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation. SECTION 4. VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. SECTION 5. ANNUAL MEETINGS. The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. SECTION 6. OTHER MEETINGS AND NOTICE. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph. SECTION 7. QUORUM, REQUIRED VOTE AND ADJOURNMENT. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 8. COMMITTEES. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. SECTION 9. COMMITTEE RULES. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as -4- 5 provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. SECTION 10. COMMUNICATIONS EQUIPMENT. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. SECTION 11. WAIVER OF NOTICE AND PRESUMPTION OF ASSENT. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. SECTION 12. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be elected by the board of directors and shall consist of a chairman, president, vice presidents, a secretary, a treasurer and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. -5- 6 SECTION 3. REMOVAL. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. VACANCIES. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. SECTION 5. COMPENSATION. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. SECTION 6. CHAIRMAN. The chairman shall have the powers and perform the duties incident to that position. Subject to the powers of the board of directors, he or she shall be in the general and active charge of the entire business and affairs of the corporation, and shall be its chief policy making officer. He or she shall preside at all meetings of the board of directors and stockholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws. SECTION 7. PRESIDENT. The president, subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors, the chairman or as may be provided in these by-laws. SECTION 8. VICE-PRESIDENTS. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the chairman, the president or these by-laws may, from time to time, prescribe. SECTION 9. THE SECRETARY AND ASSISTANT SECRETARIES. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when -6- 7 so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chairman or the president may, from time to time, prescribe. SECTION 10. THE TREASURER AND ASSISTANT TREASURER. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such-surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chairman or the president may, from time to time, prescribe. SECTION 11. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. SECTION 12. ABSENCE OR DISABILITY OF OFFICERS. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. -7- 8 ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS SECTION 1. NATURE OF INDEMNITY. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, fiduciary or agent or in any other capacity while serving as a director, officer, employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. SECTION 2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any indemnification of a director, officer, employee, fiduciary or agent of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director, officer, employee, fiduciary or agent. If a determination (as defined in the General Corporation Law of the State of Delaware) by the corporation that the director, officer, employee, fiduciary or agent is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director, officer, employee, fiduciary or agent in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not-met the standards of conduct which make it permissible under the General Corporation Law of -8- 9 the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 3. ARTICLE NOT EXCLUSIVE. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 4. INSURANCE. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. SECTION 5. EXPENSES. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. SECTION 6. EMPLOYEES AND AGENTS. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. SECTION 7. CONTRACT RIGHTS. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. -9- 10 SECTION 8. MERGER OR CONSOLIDATION. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK SECTION 1. FORM. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. SECTION 2. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that -10- 11 fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 3. FIXING A RECORD DATE FOR STOCKHOLDER MEETINGS. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 4. FIXING A RECORD DATE FOR ACTION BY WRITTEN CONSENT. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. SECTION 5. FIXING A RECORD DATE FOR OTHER PURPOSES. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the -11- 12 resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. SECTION 6. REGISTERED STOCKHOLDERS. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. SECTION 7. SUBSCRIPTIONS FOR STOCK. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 2. CHECKS, DRAFTS OR ORDERS. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. SECTION 3. CONTRACTS. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. -12- 13 SECTION 4. LOANS. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. SECTION 5. FISCAL YEAR. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SECTION 6. CORPORATE SEAL. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. VOTING SECURITIES OWNED BY CORPORATION. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. SECTION 8. INSPECTION OF BOOKS AND RECORDS. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. SECTION 9. SECTION HEADINGS. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. SECTION 10. INCONSISTENT PROVISIONS. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. -13- 14 ARTICLE VIII AMENDMENTS These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers. -14- EX-10.01 4 1993 STOCK PURCHASE & OPTION PLAN 1 Exhibit 10.01 ONESOURCE HOLDING CORPORATION ----------------------------- 1993 STOCK PURCHASE AND OPTION PLAN ----------------------------------- 1. PURPOSE OF PLAN. THIS 1993 STOCK PURCHASE AND OPTION PLAN (THE "PLAN") OF OneSource Holding Corporation (the "Company") is designed to provide incentives to such present and future employees, directors, consultants or advisers of the Company or its subsidiaries ("Participants"), as may be selected in the sole discretion of the Company's board of directors, through the grant of Options by the Company to Participants or through the sale of Common Stock to Participants. 2. DEFINITIONS. Certain terms used in this Plan have the meanings set forth below: "Board" means the Company's board of directors. "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. "Class P Common" means the Company's Class P Common Stock, par value $.01 per share. "Common" means the Company's Common Stock, par value $.01 per share. "Common Stock" means the Class P Common and the Common. "Fair market value" of a share of Common Stock means (a) the mean between the highest and lowest reported sale prices of a share of Common Stock on the New York Stock Exchange--Composite Transactions Table (or, if not so reported, on any domestic stock exchanges on which the Common Stock is then listed); or (b) if the Common Stock is not listed on any domestic stock exchange, the mean between the closing high bid and low asked prices of a share of Common Stock as reported by the National Association of Securities Dealers Automated Quotation System (or, if not so reported, by the system then regarded as the most reliable source of such quotations); or (c) if the Common Stock is listed on a domestic stock exchange or quoted in the domestic over-the-counter market, but there are not reported sales or quotations, as the case may be, on the given date, the value determined pursuant to (a) or (b) above using the reported sale prices or quotations on the last previous date on which so reported; or (d) if none of the foregoing clauses apply, the fair value of the share of Common Stock as determined in good faith by the Board. "Option" means any option enabling the holder thereof to purchase any class of Common Stock from the Company granted by the Board pursuant to the provisions of this Plan. Options to be granted under this Plan may be incentive stock options within the meaning of Section 422 -1- 2 ONESOURCE HOLDING CORPORATION ----------------------------- of the Code.("Incentive Stock Options") or in such other form, consistent with this Plan, as the Board may determine. "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time the option is granted, each of the corporations other than the last corporation in the chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. GRANT OF OPTIONS. The Board shall have the right and power to grant to any Participant Options at any time prior to the termination of this Plan in such quantity, at such price, on such terms and subject to such conditions that are consistent with this Plan and established by the Board. Options granted under this Plan shall be subject to such terms and conditions and evidenced by agreements as shall be determined from time to time by the Board. 4. SALE OF COMMON STOCK. The Board shall have the power and authority to sell to any participant any class or classes of Common Stock at any time prior to the termination of this Plan in such quantity, at such price, on such terms and subject to such conditions that are consistent with this Plan and established by the Board. Common Stock sold under this Plan shall be subject to such terms and evidenced by agreements as shall be determined from time to time by the Board. 5. ADMINISTRATION BY THE PLAN. The Board shall have the power and authority to prescribe, amend and rescind rules and procedures governing the administration of this Plan, including but not limited to the full power an authority (i) to interpret the terms of this Plan, the terms of any Options granted under this Plan, and the rules and procedures established by the Board governing any such Options and (ii) to determine the rights of any person under this Plan, or the meaning, of requirements imposed by the terms of this Plan or any rule or procedure established by the Board. Each action of the Board which shall be binding, on all persons. 6. LIMITATION ON THE AGGREGATE NUMBER OF SHARE. The number of shares of Common Stock issued under this Plan (including the number of shares of Common Stock with respect to which Options may be granted under this Plan (and which may be issued upon the exercise payment thereof), shall not exceed, in the aggregate, 20,000 shares of Class P Common and 2,100,000 shares of Common (as such numbers are equitably adjusted pursuant to paragraph 10 hereof). If any Options expire unexercised or unpaid or are canceled, terminated or forfeited in any manner without the issuance of Common Stock or payment thereunder, the shares with respect to which such Options were granted shall again be a available under this Plan. Similarly, if any shares of Common Stock issued hereunder upon exercise of Options are repurchased hereunder, such shares shall again be available under this Plan for reissuance as Options. Shares of Common Stock to be issued upon exercise of the Options or shares of Common Stock to be sold directly hereunder may be either authorized and unissued shares, treasury shares, or a combination thereof, as the Board shall determine. 7. INCENTIVE STOCK OPTIONS. All Incentive Stock Options (i) shall have an exercise price per share of Common Stock of no less than 100% of the fair market value of such share on -2- 3 ONESOURCE HOLDING CORPORATION ----------------------------- the date of grant. (ii) shall not be exercisable more than ten years after the date of grant, (iii) shall not be transferable other than by will or under the law of descent and distribution and, during the lifetime of the Participant to whom such Incentive Stock Options were granted, may be exercised only by such Participant (or his guardian or legal representative), (iv) shall only be granted to employees of the Company or its Subsidiaries and (v) shall be exercisable only during the Participant's employment by the Company or a Subsidiary, PROVIDED, HOWEVER, that the Board may, in its discretion, provide at the time that an Incentive Stock Option is granted that such Incentive Stock may be exercised for a period ending upon either (x) the termination of this Plan in the event of a Participant's death while an employee of the Company or a subsidiary, or (y) the date which is three months after termination of the Participant's employment for any other reason; and PROVIDED, FURTHER, that if an Incentive Stock Option is granted to a person who owns or is treated under Section 424(d) of the Code as owning, on the date of grant, stock possessing more that ten percent of the total combined voting power of all classes of stock of the Company (or of any parent or Subsidiary of the Company in existence on such date of grant), (A) the price at which each share of Common Stock may be purchased upon exercise of such Incentive Stock Option may not be less than 110% of the fair market value of such share on the date of grant, and (B) the Incentive Stock Option, by its terms, may not be exercised more than five years after the date of grant. The Board's discretion to extend the period during which an Incentive Stock Option is exercisable shall only apply to the extent that (i) the Participant was entitled to exercise such option on the date of termination, and (ii) such option would not have expired had the Participant continued to be employed by the Company or a Subsidiary. 8. LISTING REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS. Each Option shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the grating of such Option or the issue or purchase of shares thereunder, no such Option may be exercised or paid in Common Stock in whole or in part unless such listing, registration, qualification, consent or approval (a "Required Listing,") shall have been effected or obtained, and the holder of the Option will supply the Company with such certificates, representations and information as the Company shall request which are reasonably necessary or desirable in order for the Company to obtain such Required Listing, and shall otherwise cooperate with the Company in obtaining such Required Listing. In the case of officers and other persons subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the Board may at any time impose any limitations upon the exercise of an Option which, in the Board's discretion, are necessary or desirable in order to comply with Section 16(b) and the rules and regulations thereunder. If the Company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any Options may be exercised, the Board may, in its discretion and without the consent of the holders of any such Options, so reduce such period on not less than 15 days' written notice to the holders thereof. 9. CASH PAYMENTS UPON EXERCISE. Options which are not Incentive Stock Options may, in the Board's discretion, provide that the holder thereof, as soon as practicable after the -3- 4 ONESOURCE HOLDING CORPORATION ----------------------------- exercise of the Options will receive, in lieu of any issuance of Common Stock, a cash payment in such amount as the Board may determine, but not more than the excess of the fair market value of a share of Common Stock (on the date the holder recognizes taxable income) or the Options exercise price multiplied by the number of shares as to which the Option is exercised. 10. ADJUSTMENT FOR CHANGE IN COMMON STOCK. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation or other change in the Common Stock, the Board shall make appropriate change in the number and type of shares authorized by this Plan, the number and type of shares covered by outstanding Options and the prices specified therein. 11. CONSOLIDATIONS OF MERGERS. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Board or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Option the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition; or shares of Common Stock in connection with the Acquisition; or (ii) upon written notice to the optionees, provide that all Options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options (to the extent then exercisable) over the exercise price, thereof. 12. TAXES. The Company shall be entitled, if necessary or desirable, to withhold (or secure payment from the Plan participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any amount payable and/or shares issuable under this Plan, and the Company may defer such payment or issuance unless indemnified to its satisfaction. 13. TERMINATION OF AMENDMENT. The Board at any time may suspend or terminate this Plan and make such additions or amendments as it deems advisable under this Plan, except that they may not, without further approval by the Company's stockholders, (a) increase the maximum number of shares as to which Options may be granted under this Plan, except pursuant to paragraph 10 above or (b) extend the term of this Plan; provided that, subject to paragraph 8 hereof, the Board may not change any of the terms of a written agreement with respect to an Option between the Company and the holder of such Option without the approval of the holder of such Option. No Options shall be granted or shares of Common Stock issued hereunder after September 30, 2003. -4- EX-10.04 5 REGISTRATION AGREEMENT 1 Exhibit 10.04 REGISTRATION AGREEMENT THIS AGREEMENT is made as of September 8, 1993, by and among OneSource Holding corporation, a Delaware corporation (the "Company"), Information Partners Capital Fund, L.P., a Delaware limited partnership ("Information Partners Capital Fund"), William Blair Venture Partners III Limited Partnership, an Illinois limited partnership ("Blair"), the Persons listed on Schedule A attached hereto (the "Information Partners Coinvestors"), Silicon Valley Bank, a California bank ("Silicon") , and the Persons listed on Schedule B attached hereto (the "Management Group") (Information Partners Capital Fund and Information Partners Coinvestors are collectively referred to herein as "Information Partners"; Information Partners, Blair, Silicon and the Management Group are collectively referred to herein as the "Stockholders," and each as a "Stockholder"). Information Partners, Blair and the Company are parties to a Stock Purchase Agreement of even date herewith (the "Purchase Agreement"). Silicon and OneSource Information Services, Inc., a wholly owned subsidiary of the Company, are parties to certain financing agreements (the "Financing Agreements") of even date herewith. Each of the Management Group will become a party with the Company to a Management Stock Purchase Agreement (collectively, the "Management Agreements") and will become a party to a Stock Option Agreement (collectively, the "Stock Option Agreements"). In order to induce Information Partners and Blair to enter into the Purchase Agreement, Silicon to enter into the Financing Agreements and the Management Group to enter into the Management Agreements, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 9 hereof. The parties hereto agree as follows: 1. DEMAND REGISTRATIONS. (a) REQUESTS FOR REGISTRATION. At any time the holders of a majority of both the Information Partners Registrable Securities and the Blair Registrable Securities may request registration under the Securities Act of all or part of their Registrable Securities on Form S-1 or any similar long-form registration ("Long-Form Registrations") or, if available, on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"). Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered and the anticipated per share price range for such offering. Within ten days after receipt of any such request, the Company will give written notice of such requested registration to all other holders of Registrable Securities and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. All registrations requested pursuant to this paragraph 1(a) are referred to herein as "Demand Registrations." 2 (b) LONG-FORM REGISTRATIONS. The holders of a majority of the Information Partners Registrable Securities and the holders of a majority of the Blair Registrable Securities will be entitled to request two Long-Form Registrations in which the Company will pay all Registration Expenses. A registration will not count as one of the permitted Long-Form Registrations until it has become effective (unless such Long-Form Registration has not become effective due solely to the fault of the holders requesting such registration), and the last of such Long-Form Registrations will not count as one of the permitted Long-Form Registrations unless the holders of Registrable Securities requesting such registration have been able to register and sell pursuant to a Demand Registration(s) at least 90% of the Registrable Securities requested to be registered by such holders; provided that in any event the Company will pay all Registration Expenses in connection with any registration initiated as a Long-Form Registration whether or not it has become effective. All Long-Form Registrations shall be underwritten registrations. (c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form Registrations provided pursuant to paragraph 1(b) , the holders of a majority of the Information Partners Registrable Securities and the holders of a majority of the Blair Registrable Securities will be entitled to request an unlimited number of Short-Form Registrations in which the Company will pay all Registration Expenses. Demand Registrations will be Short-Form Registrations whenever the Company is permitted to use any applicable short form. After the Company has become subject to the reporting requirements of the Securities Exchange Act, the Company will use its best efforts to make Short-Form Registrations available for the sale of Registrable Securities. (d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not include in any Demand Registration any securities which are not Registrable Securities without the prior written consent of the holders of a majority of the Registrable Securities included in such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company will include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, pro rata among the respective holders thereof on the basis of the amount of Registrable Securities owned by each such holder. (e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be obligated to effect any Demand Registration within six months after the effective date of a previous Demand Registration. -The Company may postpone for up to six months the filing or the effectiveness of a registration statement for a Demand Registration if the Company and the holders of at least a majority of the Registrable Securities agree that such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company or any of its Subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or similar transaction; provided that in 3 such event, the holders of Registrable Securities initially requesting such Demand Registration will be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration will not count as one of the permitted Demand Registrations hereunder and the Company will pay all Registration Expenses in connection with such registration. (f) SELECTION OF UNDERWRITERS. The holders of a majority of the Registrable Securities included in any Demand Registration will have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the Company's approval which will not be unreasonably withheld. (g) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement, the Company will not grant to any Persons the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the prior written consent of the holders of a majority of the Registrable Securities. 2. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration or a registration on Form S4 or S-8 or any successor or similar forms) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration") , whether or not for sale for its own account, the Company will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of -the Company's notice. (b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of Registrable Securities will be paid by the Company in all Piggyback Registrations. (c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an underwritten primary registration on behalf of the.- Company, and the managing underwriters advise the company in writing (with a copy to each party hereto requesting registration of Registrable Securities) that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range reasonably acceptable to the company, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in 4 such offering within a price range reasonably acceptable to the Company, the Company will include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration and the Registrable Securities requested to be included in such registration, pro rata among the holders requesting such registration and the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (ii) second, other securities requested to be included in such registration. (e) OTHER REGISTRATIONS. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and " if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form) , whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least six months has elapsed from the effective date of such previous registration. 3. HOLDBACK AGREEMENTS. (a) To the extent not inconsistent with applicable law, each holder of Registrable Securities (other than Silicon) agrees not to effect any public sale or, distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration) , unless the underwriters managing the registered public offering otherwise agree. Notwithstanding the foregoing, Silicon agrees to be bound by the terms of this paragraph 3 (a) in the event that the underwriters managing the registered public offering so request. (b) The company agrees (i) not to effect any public sale or distribution, of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form) , unless the. underwriters managing the registered public offering otherwise agree, and (ii) to cause each holder of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted) , unless the underwriters managing the registered public offering otherwise agree. 4. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof (including the registration of 5 Common and Class P Common held by a holder of Registrable securities requesting registration as to which the Company has received reasonable assurances that only Registrable Securities will be distributed to the public) , and pursuant thereto the Company will as expeditiously as possible: (a) prepare and (within 60 days after the end of the period, within which requests for registration may be given to the Company) file with the Securities and Exchange Commission a registration statement with respect to such Registrable Securities and thereafter use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the company will furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement (who shall be reasonably acceptable to the holders of a majority of the Information Partners Registrable Securities and a majority of the Blair Registrable Securities) copies of all such documents proposed to be filed, which documents will be subject to review of such counsel); (b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of either (i) not less than six months (subject to extension pursuant to paragraph 7(b)) or, if such registration statement relates to an underwritten offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer or (ii) such shorter period as will terminate when all of the securities covered by such registration statement have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement (but in any event not before the expiration of any longer period required under the Securities Act), and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to CONSUMMATE the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); 6 (e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the discovery of the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the request of any such seller, the Company will prepare and furnish to such seller a reasonable number of copies of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the NASD automated quotation system; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable securities (including, without limitation, effecting a stock split or a combination of shares); (i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Securities included in such registration 7 statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order; (1) obtain a cold comfort letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the Company's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the holders of a majority of the Registrable Securities being sold reasonably request (provided that such Registrable Securities constitute at least 10% of the securities covered by such registration statement) ; and (m) provide a legal opinion of the Company's outside counsel, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement) , with respect to the registration statement, each amendment and supplement thereto, the prospectus included herein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal opinions of such nature. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. 5. REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses") , will be borne as provided in this Agreement, except that the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system. (b) In connection with each Demand Registration and each Piggyback Registration, the Company will reimburse the holders of Registrable Securities covered by such registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Registrable Securities included in such registration (who shall be reasonably acceptable to the holders of a majority of the Information Partners Registrable Securities and a majority of the Blair Registrable Securities). 8 (c) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder will pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. 6. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against any losses, claims, damages, liabilities, joint or several, to which such holder or any such director or officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) .arise, out of or are based upon (i) any untrue or alleged untrue statement of material fact contained (A) in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or (B) in any application or other document or communication (in this paragraph 6 collectively called an "application") executed by or on behalf of the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify any securities covered by such registration statement under the "blue sky" or securities laws thereof, or (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder and each such director, officer and controlling person for any legal or any other expenses incurred by .them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission, made in such registration statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information prepared and furnished to the Company by such holder expressly for use therein. In connection with an underwritten offering, the company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify and hold harmless the Company, its directors and officers and each other Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities, joint or several, to which such holder or any such director or officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, 9 damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or in any application or (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is made in such registration statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information prepared and furnished to the Company by such Holder expressly for use therein, and such holder will reimburse the Company and each such directly, officer and controlling person for any legal or any other expenses incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that the obligation to indemnify will be individual to each holder and will be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided f or under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. (a) No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including, without limitation, pursuant to the terms of any overallotment or "green shoe" option requested by the managing underwriter(s)) and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting 10 agreements and other documents reasonably required under the terms of such underwriting arrangements. (b) Each Person that is participating in any registration hereunder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph 4 (e) above, such Person will forthwith discontinue the disposition of its Registrable Securities pursuant to the registration statement until such Person's receipt of the copies of a supplemented or amended prospectus as contemplated by such paragraph 4 (e). In the event the Company shall give any such notice, the applicable time period mentioned in paragraph 4(b) during which a Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to this paragraph to and including the date when each seller of a Registrable Security covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by paragraph 4(e). 8. CURRENT PUBLIC INFORMATION. At all times after the Company has filed a registration statement with the Securities and Exchange Commission pursuant to the requirements of either the Securities Act or the Securities Exchange Act, the Company will file all reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder, and will take such further action as any holder or holders of Registrable Securities may reasonably request, all to the extent required to enable such holders to sell Registrable Securities pursuant to Rule 144 adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission. 9. DEFINITIONS. "Blair Registrable Securities" means (i) any shares of Common Stock issued to Blair pursuant to the Purchase Agreement, (ii) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, including a recapitalization or exchange pursuant to paragraph 5 of the Stockholders Agreement; provided, however, that in the event that pursuant to such recapitalization or exchange equity securities are issued which do not participate in the residual equity of the Company ("Non-Participating Securities"), such Non-Participating Securities will not be Registrable Securities, and (iii) any other shares of Common Stock held by Persons holding securities described in clauses (i) and (ii) above. As to any particular shares constituting Blair Registrable Securities, such shares will cease to be Blair Registrable Securities when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or by similar provision then in force) under the Securities Act. 11 "Class P Common" means the Class P Common Stock, par value $.01 per share, of the Company. "Common" means the Common Stock, par value $.01 per share, of the Company. "Common Stock" means collectively Class P Common and Common. "Information Partners Registrable Securities" means (i) any shares of Common Stock issued to Information Partners pursuant to the Purchase Agreement, (ii) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, including a recapitalization or exchange pursuant to paragraph 5 of the Stockholders Agreement; provided, however, that in the event that pursuant to such recapitalization or exchange NonParticipating Securities are issued, such Non-Participating Securities will not be Registrable Securities, and (iii) any other shares of Common Stock held by Persons holding securities described in Clauses (i) and (ii) above. As to any particular shares constituting Information Partners Registrable Securities, such shares will cease to be Information Partners Registrable Securities when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or by similar provision then in force) under the Securities Act. "Management Registrable Securities" means (i) any shares of Common Stock issued to the Management Group pursuant to the Management Agreements, (ii) any shares of Common Stock issued or issuable upon exercise of the stock options issued to the Management Group pursuant to the Stock Option Agreements, (iii) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in clauses (i) and (ii) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, including a recapitalization or exchange pursuant to paragraph 5 of the Stockholders Agreement; provided, however, that in the event that pursuant to such recapitalization or exchange Non-Participating Securities are issued, such NonParticipating securities will not be Registrable Securities, and (iv) any other shares of Common Stock held by Persons holding securities described in clauses (i) , (ii) and (iii) above. As to any particular shares constituting Management Registrable Securities, such shares will cease to be Management Registrable Securities when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or by similar provision then in force) under the Securities Act. "Person" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "Registrable Securities" means collectively Blair Registrable Securities, Information Partners Registrable Securities, Silicon Registrable Securities and Management Registrable. Securities. 12 "Securities Act" means the Securities Act of 1933, as amended, or any similar federal law then in force. "Securities and Exchange Commission" includes any governmental body or agency succeeding to the functions thereof. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force. "Silicon Registrable Securities" means (i) any shares of Common Stock issued to Silicon upon the exercise of that certain warrant issued to Silicon pursuant to that certain Warrant Agreement dated as of the date hereof (the "Silicon Warrant"), (ii) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, including a recapitalization or exchange pursuant to paragraph 5 of the Stockholders Agreement; provided, however, that in the event that pursuant to such recapitalization or exchange Non-Participating Securities are issued, such NonParticipating Securities will not be Registrable Securities, and (iii) any other shares of Common Stock held by Persons holding securities described in clauses (i) and (ii) above. As to any particular shares constituting Silicon Registrable Securities, such shares will cease to be Silicon Registrable Securities when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or by similar provision then in force) under the Securities Act. Unless otherwise stated, other capitalized terms contained herein have the meanings set forth in the Purchase Agreement. 10. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable securities in this Agreement. (b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would adversely affect the marketability of such Registrable securities in any such registration (including, without limitation, effecting a stock split or a combination of shares). (c) REMEDIES. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any 13 party hereto shall have the right to injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Agreement. (d) ARBITRATION. (i) ARBITRATION. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) at Boston, Massachusetts. Such arbitration proceeding shall be conducted in as expedited a manner as is then permitted by the commercial arbitration rules (formal or informal) of the American Arbitration Association, and the arbitrator or arbitrators in any such arbitration shall be persons who are expert in the subject matter of the dispute. Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through such Arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. The parties agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may, in his or its sole discretion, ask for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (ii) PROCEDURE. Such arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The arbitration shall be conducted before a panel of arbitrators selected in accordance with the rules of the American Arbitration Association. The costs of said arbitrators and the arbitration shall be borne equally by the parties hereto. Each party shall bear separately the cost of their respective attorneys, witnesses and experts in connection with such arbitration. Time is of the essence of this arbitration procedure, and the arbitrators shall be instructed and required to render their decision within ten (10) days following completion of the arbitration. (iii) VENUE AND JURISDICTION. Any and all legal proceedings to enforce this Agreement, (including any action to compel arbitration hereunder or to enforce any award or judgment rendered thereby), shall be governed in accordance with this paragraph (d) hereunder. (e) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and holders of at least two-thirds of the Registrable Securities; provided, however, that in the event that such amendment or waiver would adversely affect a holder or group of holders of Registrable Securities in a manner different from any other holders of Registrable Securities, then such amendment or waiver will require the consent of such holder or the holders of a majority of the Registrable Securities of such group adversely affected. (f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of and be enforceable by third parties hereto and their respective successors and assigns. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the holders of Registrable Securities (or 14 any portion thereof) as such shall be for the benefit of an enforceable by any subsequent holder of any Registrable Securities (or of such portion thereof), subject to the provisions respecting the minimum numbers or percentages of shares of Registrable Securities (or of such portion thereof) required in order to be entitled to certain rights, or take certain actions, contained herein. (g) SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (h) COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (i) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (j) GOVERNING LAW. All issues concerning this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the state of Delaware or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Delaware. (k) NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when personally delivered or received by certified mail, return receipt requested, or sent by guaranteed overnight courier service. Such notices, demands and other communications will be sent to Blair and Information Partners at the addresses indicated on the Schedule of Purchasers attached to the Purchase Agreement, to the Management Group at the address indicated in the Management Agreements and to the Company at the address indicated below: OneSource Holding Corporation c/o Information Partners Capital Fund, L.P. Two Copley Place Boston, Massachusetts 02116 Attention: David Dominik or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 15 IN WITNESS WHEREOF, the parties hereto have executed this Agreement o the day and year first above written. ONESOURCE HOLDING CORPORATION By: /s/ David Dominik ------------------------------- Its: President ------------------------------- WILLIAM BLAIR VENTURE PARTNERS III LIMITED PARTNERSHIP By: William Blair Venture Management Company Its: General Partner By: /s/ Gregg Newmark ------------------------------- Its: A General Partner SILICON VALLEY BANK By: /s/ David B. Fischer ------------------------------- Its: Vice President ------------------------------- BCIP ASSOCIATES By: /s/ David Dominik ------------------------------- Its: General Partner ------------------------------- BCIP TRUST ASSOCIATES, L.P. By: /s/ David Dominik ------------------------------- Its: General Partner ------------------------------- 16 SCHEDULE A BCIP Associates BCIP Trust Associates, L.P. 17 SCHEDULE B THE MANAGEMENT GROUP None EX-10.05 6 STOCK PURCHASE WARRANT 1 EXHIBIT 10.05 The security represented by this certificate was originally issued on September 8, 1993, and has not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be sold or transferred in the absence of an effective registration statement under the Act or an exemption from registration thereunder. Prior to any sale or transfer of this certificate, except pursuant to an effective registration statement under the Act covering such sale or transfer, the holder hereof shall have delivered to the issuer hereof (the "Company") an opinion of counsel reasonably satisfactory to the Company to the effect that such sale or transfer is exempt from registration under the Act. The transfer of such security is subject to the conditions specified in the Stock Purchase Agreement, dated as of September 8, 1993 between the Company and Lotus Development Corporation (the "Stock Purchase Agreement"), and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge. STOCK PURCHASE WARRANT ---------------------- Date of Issuance: September 8, 1993 Certificate No. W-1 For value received, OneSource Holding Corporation, a Delaware corporation (the "Company"), hereby grants to Lotus Development Corporation, a Delaware corporation, or its registered assigns (the "Registered Holder"), the right to purchase from the Company 100,000 shares of the Company's common stock, par value $.0l per share (the "Underlying Common Stock"), at a price per share of $0.49 (as adjusted from time to time in accordance herewith, the "Exercise Price"). Certain capitalized terms used herein are defined in Section 6 hereof. The amount and kind of securities purchasable pursuant to the rights granted hereunder and the purchase price for such securities are subject to adjustment pursuant to the provisions contained in this Warrant. This Warrant is subject to the following provisions: Section 1. EXERCISE OF WARRANT. 1A. EXERCISE PERIOD. The Registered Holder may exercise, in whole or in part, the purchase rights represented by this Warrant at any time and from time to time after the Date of Issuance to and including the date which is two years after the date on which that certain Note (the "Note") issued by the Company on September 8, 1993 in the principal amount of $5,000,000 2 -2- has been paid in full (the "Exercise Period"). The Company shall give the Registered Holder written notice of the expiration of the Exercise Period at least 60 days but not more than 90 days prior to the expiration of the Exercise Period. 1B. EXERCISE PROCEDURE. (i) This Warrant shall be deemed to have been exercised when the Company has received all of the following items (the "Exercise Time"): (a) a completed Exercise Agreement, as described in paragraph 1C below, executed by the Person exercising all or part of the purchase rights represented by this Warrant (the "Purchaser"); (b) this Warrant; (c) if this Warrant is not registered in the name of the Purchaser, an Assignment or Assignments in the form set forth in EXHIBIT II hereto evidencing the assignment of this Warrant to the Purchaser, in which case the Registered Holder shall have complied with the provisions set forth in Section 8 hereof; and (d) a check payable to the Company in an amount equal to the product of the Exercise Price multiplied by the number of shares of Underlying Common Stock being purchased upon such exercise (the "Aggregate Exercise Price"). (ii) Certificates for shares of Underlying Common Stock purchased upon exercise of this Warrant shall be delivered by the Company to the Purchaser within five business days after the date of the Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company shall prepare a new Warrant, substantially identical hereto, representing the rights formerly represented by this Warrant which have not expired or been exercised and shall, within such five-day period, deliver such new Warrant to the Person designated for delivery in the Exercise Agreement. (iii) The Underlying Common Stock issuable upon the exercise of this Warrant shall be deemed to have been issued to the Purchaser at the Exercise Time, and the Purchaser shall be deemed for all purposes to have become the record holder of such Underlying Common Stock at the Exercise Time. (iv) The issuance of certificates for shares of Underlying Common Stock upon exercise of this Warrant shall be made without charge to the Registered Holder or the Purchaser for any issuance tax in respect thereof or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Underlying Common Stock. Each share of Underlying Common Stock issuable upon exercise of this Warrant shall, upon payment of the Exercise Price therefor, be fully paid and nonassessable and free from all liens and charges with respect to the issuance thereof. 3 -3- (v) The Company shall not close its books against the transfer of this Warrant or of any share of Underlying Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. The Company shall from time to time take all such action as may be necessary to assure that the par value per share of the unissued Underlying Common Stock acquirable upon exercise of this warrant is at all times equal to or less than the Exercise Price then in effect. (vi) The Company shall assist and cooperate with any Registered Holder or Purchaser required to make any governmental filings or obtain any governmental approvals prior to or in connection with any exercise of this Warrant (including, without limitation, making any filings required to be made by the Company). (vii) Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or sale of the Company, the exercise of any portion of this Warrant may, at the election of the holder hereof, be conditioned upon the consummation of the public offering or sale of the Company in which case such exercise shall not be deemed to be effective until the consummation of such transaction. (viii) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Underlying Common Stock solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Underlying Common Stock issuable upon the exercise of all outstanding Warrants. All shares of Underlying Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be necessary to assure that all such shares of Underlying Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). (ix) Upon any exercise of this Warrant, the Company may require customary representations from the Registered Holder and the Purchaser to assure that the issuance of the Underlying Common Stock hereunder shall not require registration or qualification under the Act or any state securities laws. 1C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the Exercise Agreement shall be substantially in the form set forth in Exhibit I hereto, except that if the shares of Underlying Common Stock are not to be issued in the name of the Person in whose name this Warrant is registered, the Exercise Agreement shall also state the name of the Person to whom the certificates for the shares of Underlying Common Stock are to be issued, and if the number of shares of Underlying Common Stock to be issued does not include all the shares of Underlying Common Stock purchasable hereunder, it shall also state the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is to be delivered. Such Exercise Agreement shall be dated the actual date of execution thereof. 4 -4- Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In order to prevent dilution of the rights granted under this Warrant, the Exercise Price shall be subject to adjustment from time to time as provided in this Section 2, and the number of shares of Underlying Common Stock obtainable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 2. 2A. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares of Underlying Common Stock obtainable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Underlying Common Stock obtainable upon exercise of this Warrant shall be proportionately decreased. 2B. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as "Organic Change". Prior to the consummation of any Organic Change, the Company shall make appropriate provision (in form and substance satisfactory to the Registered Holders of the Warrants representing a majority of the Underlying Common Stock obtainable upon exercise of all Warrants then outstanding) to insure that each of the Registered Holders of the Warrants shall thereafter have the right to acquire and receive in lieu of or addition to (as the case may be) the shares of Underlying Common Stock immediately theretofore acquirable and receivable upon the exercise of such holder's Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Underlying Common Stock immediately theretofore acquirable and receivable upon exercise of such holder's Warrant had such Organic Change not taken place. In any such case, the Company shall make appropriate provision (in form and substance satisfactory to the Registered Holders of the Warrants representing a majority of the Underlying Common Stock obtainable upon exercise of all Warrants then outstanding) with respect to such holders' rights and interests to insure that the provisions of this Section 2 shall thereafter be applicable to the Warrants. 2C. NOTICES. (i) Immediately upon any adjustment of the Exercise Price, the Company shall give written notice thereof to the Registered Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Company shall give written notice to the Registered Holder at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any 5 -5- dividend or distribution upon the Common Stock or (B) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Company shall also give written notice to the Registered Holders at least 20 days prior to the date on which any Organic Change, dissolution or liquidation shall take place. Section 3. DEFINITIONS. The following terms have meanings set forth below: "ACT" means the Securities Act of 1933, as amended from time to time. "COMMON STOCK" means, collectively, the Company's common stock, par value $.0l per share, the Company's Class P Common Stock and any capital stock of any class of the Company hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. "PERSON" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "PUBLIC SALE" means any sale pursuant to a registered public offering under the Act or any sale to the public pursuant to Rule 144 promulgated under the Act effected through a broker, dealer or market maker. "UNDERLYING COMMON STOCK" means shares of the Company's common stock, par value $.0l per share; provided that if there is a change such that the securities issuable upon exercise of the Warrants are issued by an entity other than the Company or there is a change in the class of securities so issuable, then the term "Underlying Common Stock" shall mean one share of the security issuable upon exercise of the Warrants if such security is issuable in shares, or shall mean the smallest unit in which such security is issuable if such security is not issuable in shares. Underlying Common Stock will continue to be Underlying Common Stock in the hands of any holder other than the Registered Holder (except for the Company and the Investors and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Underlying Common Stock will succeed to all rights and obligations attributable to the Registered Holder as a holder of Underlying Common Stock hereunder. Underlying Common Stock will also include shares of the Company's capital stock issued with respect to Underlying Common Stock by way of a stock split, stock dividend or other recapitalization. Section 4. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Registered Holder to purchase Underlying Common Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such holder for the Exercise Price of Underlying Common Stock acquirable by exercise hereof or as a stockholder of the Company. 6 -6- Section 5. WARRANT TRANSFERABLE. Subject to the transfer conditions referred to in the legend endorsed hereon and the transfer conditions set forth in the Stock Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the Registered Holder, upon surrender of this Warrant with a properly executed Assignment (in the form of Exhibit II hereto) at the principal office of the Company. Section 6. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the Company, for new Warrants of like tenor representing in the aggregate the purchase rights hereunder, and each of such new Warrants shall represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. The date the company initially issues this Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. All Warrants representing portions of the rights hereunder are referred to herein as the "Warrants." Section 7. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing this Warrant, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the same rights represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. Section 8. NOTICES. Except as otherwise expressly provided herein, all notices referred to in this Warrant shall be in writing and shall be delivered personally, sent by reputable express courier service (charges prepaid) or sent by registered or certified mail, return receipt requested, postage prepaid and shall be deemed to have been given when so delivered, sent or deposited in the U.S. Mail (i) to the Company, at its principal executive offices and (ii) to the Registered Holder of this Warrant, at such holder's address as it appears in the records of the Company (unless otherwise indicated by any such holder). Section 9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Registered Holders of Warrants representing a majority of the shares of Underlying Common Stock obtainable upon exercise of the Warrants. Section 10. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The construction, validity and interpretation of this Warrant shall be governed by the internal law, and not the conflicts law, of Delaware. 7 -7- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly authorized officers under its corporate seal and to be dated the Date of Issuance hereof. ONESOURCE HOLDING CORPORATION By: /S/ David Dominik --------------------------------- Its: President --------------------------------- [Corporate Seal] Attest: /s/ Gregg Newmark - --------------------------------------- Secretary 8 -8- EXHIBIT I EXERCISE AGREEMENT ------------------ To: Dated: The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. W- ), hereby agrees to subscribe for the purchase of shares of the Underlying Common Stock covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant. Signature -------------------------------- Address ---------------------------------- EXHIBIT II ASSIGNMENT FOR VALUE RECEIVED, hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (Certificate No. W- with respect to the number of shares of the Underlying Common Stock covered thereby set forth below, unto: Names of Assignee Address No. of Shares - ----------------- ------- ------------- Dated: Signature -------------------------------- -------------------------------- Witness -------------------------------- EX-10.06 7 WARRANT AGREEMENT 1 EXHIBIT 10.06 EXECUTION COPY -------------- THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933. WARRANT AGREEMENT To purchase Shares of the Common Stock of ONESOURCE HOLDING CORPORATION Dated as of September 8, 1993 (the "Effective Date") WHEREAS, OneSource Information Services, Inc. (the "Operating Company") is the wholly owned subsidiary of one Source Holding Corporation (the "Company") and the Operating Company has entered into a Loan Agreement dated as of September 8, 1993 with Silicon Valley Bank (the "Warrantholder"); and WHEREAS, the Company desires to grant to the Warrantholder, in consideration for the Revolving Credit Line and the Term Loan provided to the Operating Company under the Loan Agreement, the right to purchase shares of the Company's Common Stock; NOW, THEREFORE, in consideration of the Warrantholder executing and delivering the Loan Agreement and providing the Revolving Credit Line and Term Loan thereunder and in consideration of mutual covenants and agreements contained herein, the Company and the Warrantholder agree as follows: 1. GRANT OF THE RIGHT TO PURCHASE STOCK. The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, a Warrant to subscribe to and purchase, from the Company, an aggregate of 10,101 fully paid and non-assessable shares ("Warrant Shares") of the Company's Common Stock, par value $.01 per share ("Common Stock"), constituting 1% of the Company's capital stock on a fully diluted basis on the date hereof (after giving effect to the issuance of 81,000 shares of Common Stock and 9,000 shares of Class P Common Stock to be issued to management of the Company after the date hereof), at a 2 -2- purchase price of $.49 per share (the `Exercise Price"). The number and purchase price of such Warrant Shares are subject to adjustment as provided in Section 8 hereof. 2. TERM OF THE WARRANT AGREEMENT. Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Warrant Shares as granted herein shall commence on the Effective Date and shall be exercisable for a period of (i) ten (10) years or (ii) five (5) years from the effective date of the Company's initial public offering, whichever is longer. The Company shall give the Warrantholder written notice of the Warrantholder's right to exercise purchase rights under this Warrant Agreement in the form attached as APPENDIX I not more than 90 days and not less than 30 days before the expiration of the term established in this section. If such notice is not so given, the term shall automatically be extended until 30 days after the Company gives such notice to the Warrantholder. 3. EXERCISE OF THE PURCHASE RIGHTS. (a) The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as APPENDIX II (the `Notice of Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of Warrant Shares purchased and shall execute the Notice of Exercise indicating the number of Warrant Shares which remain subject to future purchases, if any. The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Warrant Shares in accordance with the following formula: X = (P)(A-B) -------- A Where: X = the number of Warrant Shares to be issued to the Warrantholder for the portion of the Warrant being exercised. P = the number of Warrant Shares requested to be exercised under this Warrant Agreement. A = the Fair Market Value (defined below) of one (1) share of the Company's Common Stock. B = the Exercise Price. 3 -3- As used herein, "Fair Market Value" of Common Stock shall mean with respect to each share of Common Stock: (i) if the exercise is in connection with an initial public offering, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the initial "Price to Public" specified in the final prospectus with respect to the offering; (ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and: (a) if traded on a securities exchange, the Fair Market Value shall be deemed to be the average of the closing prices over a twenty-one (21) day period ending three days before the day the Fair Market Value of the securities is being determined; or (b) if actively traded over-the-counter, the Fair Market Value shall be deemed to be the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the Fair Market Value of the securities is being determined; (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value of Common Stock shall be the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the Fair Market Value of Common Stock shall be deemed to be the value received by the holders of Common Stock pursuant to such merger or acquisition. The foregoing notwithstanding, if the Warrantholder advises the Board of Directors in writing that the Warrantholder disagrees with such determination, then the Company and the Warrantholder shall promptly agree upon a reputable investment banking firm to undertake such valuation. If the valuation of such investment banking firm is greater than that determined by the Board of Directors, then all fees and expenses of such investment banking firm shall be paid by the Company. In all other circumstances, such fees and expenses shall be paid by the Warrantholder. (b) Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of Warrant Shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof. 4 -4- 4. RESERVATION OF SHARES. (a) AUTHORIZATION AND RESERVATION OF SHARES. During the term of this Warrant Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Warrant Shares as provided for herein. (b) REGISTRATION OR LISTING. If any shares of Common Stock required to be reserved hereunder require registration with or approval of any governmental authority under any Federal or state law (other than any registration under the Securities Act of 1933, as then in effect ("1933 Act"), or any similar Federal statute then enforced, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon exercise of this Warrant, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered, listed or approved for listing on such domestic securities exchange, as the case may be. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect. 6. NO RIGHTS AS SHAREHOLDER. This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of this Warrant. 7. WARRANTHOLDER REGISTRY. The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement. 8. ADJUSTMENT RIGHTS. The Exercise Price per share and the number of Warrant Shares purchasable hereunder are subject to adjustment, as follows: (a) MERGER AND SALE OF ASSETS. If at any time there shall be a capital reorganization of the shares of the Company's stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation when the Company is not the surviving corporation, or the sale of all or substantially all of the Company's properties and assets to any other person (hereinafter referred to as a "Merger Event"), then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of Warrant Shares or other securities of the successor 5 -5- corporation resulting from such Merger Event, equivalent in rights and value to that which would have been issuable if the Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of Warrant Shares purchasable) shall be applicable to the greatest extent possible. (b) RECLASSIFICATION OF SHARES. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. (c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time shall combine or subdivide its Common Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination. (d) STOCK DIVIDENDS. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing subsections (a) or (b)) of the Company's stock, then the Exercise Price shall be adjusted, from and after the record date of such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of all shares of the Company's stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of all shares of the Company's stock outstanding immediately after such dividend or distribution. The Warrantholder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (e) ANTIDILUTION RIGHTS. Additional antidilution rights applicable to the Common Stock purchasable hereunder are as set forth in APPENDIX III hereto. The Company shall provide the Warrantholder with prior written notice of any issuance of its stock or other equity security to occur after the Effective Date of this Warrant, which notice shall include (i) the price at which such stock or security is to be sold, (ii) the number of shares to be issued, and (iii) such other information as necessary for Warrantholder to determine if a dilutive event has occurred. (f) NOTICE OF ADJUSTMENTS. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in cash, property, stock or other securities; (ii) the Company 6 -6- shall offer for subscription pro rata to the holders of Common Stock or other stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; or (iv) there shall be any voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; and (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up). In the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof. Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company. (g) TIMELY NOTICE. Failure to timely provide such notice required by subsection (f) above shall entitle the Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by the Warrantholder. The notice period shall begin on the date the Warrantholder actually receives a written notice containing all the information specified above. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) RESERVATION OF WARRANT SHARES. The Warrant Shares issuable upon exercise of the Warrant granted under this Warrant Agreement have been duly and validly reserved and, when issued in accordance with the provisions of this Warrant Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, however, that the Warrant Shares issuable pursuant to this Warrant Agreement will be subject to restrictions on transfer under that certain Stockholders Agreement of even date among the Company, the Warrantholder, William Blair Venture Partners III Limited Partnership ("William Blair'), Information Partners Limited Fund, L.P. ("Information Partners") and certain other persons listed on SCHEDULE A thereto (the "Stockholders Agreement"). The Company has made available to the Warrantholder true, correct and complete copies of its Certificate of Incorporation and Bylaws, as amended. The issuance of certificates for shares of Common Stock upon exercise of the Warrant Agreement shall be made without charge to the Warrantholder for any issuance tax or transfer-tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of Warrant Shares. 7 -7- (b) DUE AUTHORITY. The execution and delivery by the Company of this Warrant Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the Warrant Shares upon exercise of the Warrant granted hereby, have been duly authorized by all necessary corporate action on the part of the Company, and this Warrant Agreement is not inconsistent with the Company's Certificate of Incorporation or Bylaws, does not contravene any law or governmental rule, regulation or order applicable to it, does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound, and this Warrant Agreement and the Warrant evidenced hereby constitute legal, valid and binding agreements of the Company, enforceable in accordance with their terms. (c) CONSENTS AND APPROVALS. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, Federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant Agreement, except for the filing of a notice pursuant to Regulation D under the 1933 Act, which filing will be effective by the time required thereby. (d) ISSUED SECURITIES. All issued and outstanding shares of capital stock and other securities of the Company have been duly authorized and validly issued and are fully paid and non assessable. All outstanding shares of capital stock and other securities of the Company were issued in full compliance with all Federal and state securities laws. In addition: (i) The authorized capital stock of the Company consists of (A) 1,500,000 shares of Common Stock, of which 729,000 shares are issued and outstanding, and (B) 100,000 shares of Class P Common Stock, $.01 per share ("Class P Common Stock"), of which 81,000 shares are issued and outstanding. The names of the Company's officers, directors, shareholders and holders of options, warrants and other convertible securities (including percentage of ownership as to shareholders and holders of options, warrants and other convertible securities) are as set forth on EXHIBIT A hereto. (ii) The Company has reserved (A) 100,000 shares of Common Stock for issuance to Lotus Development Corporation upon the exercise of certain warrants, (B) 81,000 shares of Common Stock and 9,000 shares of Class P Common Stock for issuance to members of management of the Operating Company and (C) an additional 352,265 shares of Common Stock for issuance to members of management of the Operating Company upon the exercise of certain stock options. There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company. 8 -8- (iii) In accordance with the Company's Certificate of Incorporation, and except as otherwise set forth in the Stockholders Agreement, no shareholder of the Company has preemptive rights to purchase new issuances of the Company's capital stock. (e) INSURANCE. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement. (f) REGISTRATION RIGHTS. The Company hereby acknowledges that the Warrant Shares are subject to the registration rights set forth in that certain Registration Agreement of even date among the Company, the Warrantholder, Information Partners, William Blair and certain other persons listed on Schedule B thereto (the "Registration Agreement"). Except as set forth in the Registration Agreement, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the 1933 Act any of its presently outstanding securities or any of its securities which may hereafter be issued. (g) EXEMPT TRANSACTION. Subject to the accuracy of the Warrantholder's representations in Section 10 hereof, the issuance of the Warrant Shares upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the 1933 Act and (ii) the qualification requirements of applicable state securities laws. (h) COMPLIANCE WITH RULE 144. At the written request of the Warrantholder who proposes to sell Warrant Shares issuable upon the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company's compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time. 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER. This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder: (a) INVESTMENT PURPOSE. The right to acquire Warrant Shares or the Warrant Shares issuable upon exercise of the Warrant granted hereby will be acquired for investment and not with a view to the sale or distribution of any part thereof in violation of applicable securities laws, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption. (b) PRIVATE ISSUE. The Warrantholder understands (i) that the Warrant Shares issuable upon exercise of this Warrant are not registered under the 1933 Act or qualified under applicable 9 -9- state securities laws on the ground that the issuance contemplated by this Warrant Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on the representations set forth in this Section 10. (c) DISPOSITION OF WARRANTHOLDER'S RIGHTS. In no event will the Warrantholder make a disposition of any of its rights to acquire Warrant Shares or Warrant Shares issuable upon exercise of such rights unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) reasonably satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Warrant Shares or Warrant Shares issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular Warrant Share when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a Warrant Share then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such Warrant Shares not bearing any restrictive legend. (d) FINANCIAL RISK. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment. 11. TRANSFERS. Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached here to as APPENDIX IV (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. The Warrantholder hereby acknowledges that the Warrant Shares are subject to certain restrictions on transfer set forth in the Stockholders Agreement and that such restrictions may, in accordance with the Stockholders Agreement, be binding upon any transferee of the Warrant. 10 -10- 12. MISCELLANEOUS. (a) EFFECTIVE DATE. The provisions of this Warrant Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant Agreement and the Warrant granted hereunder and evidence hereby shall be binding upon any successors or assigns of the Company. (b) ATTORNEY'S FEES. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to reasonable attorneys' fees and expenses and all costs of proceedings incurred in enforcing this Warrant Agreement. (c) GOVERNING LAW. This Warrant Agreement shall be governed by and construed for all purposes under and in accordance with the internal laws of the Commonwealth of Massachusetts, without giving effect to the conflicts of law principles thereof. (d) COUNTERPARTS. This Warrant Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, facsimile transmission (provided that the original is sent by personal delivery or mail as hereinafter set forth) or five (5) days after deposit in the United States mail, by registered or certified mail, addressed (i) to the Warrantholder at 45 William Street, Suite 170, Wellesley, Massachusetts 02181, Attention: David B. Fischer, Vice President (and/or, if by facsimile, 617 431-9906) and (ii) to the Company at c/o Information Partners Capital Fund L.P., Two Copley Place, Boston, MA 02116, Attention: David Dominik (and/or if by facsimile, 617/572-3274) or at such other address as any such party may subsequently designate by written notice to the other party. (f) REMEDIES. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where the Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement. (g) NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its Certificate of Incorporation or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment. 11 -11- (h) SURVIVAL. The representations, warranties, covenants and conditions of the respective parties contained herein or made pursuant to this Warrant Agreement shall survive the execution and delivery of this Warrant Agreement. (i) SEVERABILITY. In the event any one or more of the provisions of this Warrant Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision. (j) AMENDMENTS. Any provision of this Warrant Agreement may be amended by a written instrument signed by the Company and by the Warrantholder. ********************** 12 -12- OneSource Holding Corporation Warrant Agreement SIGNATURE PAGE -------------- IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date. Company: ONESOURCE HOLDING CORPORATION By: /s/ David Dominik --------------------------- Title: President Warrantholder: Silicon Valley Bank By: /s/ David B. Fischer --------------------------- David B. Fischer, Vice President 13 -13- APPENDIX I NOTICE THAT WARRANT IS ABOUT TO EXPIRE -------------------------------------- Silicon Valley Bank Wellesley Office Park 45 William Street, Suite 170 Wellesley, MA 02181 Attn: Chief Financial Officer Dear: This is to advise you that the Warrant issued to you described below will expire on 19 . Issuer: OneSource Holding Corporation Issue Date: September , 1993 Class of Security Issuable: Common Stock Exercise Price per Share: Number of Shares Issuable: Procedure for Exercise: Please contact [name of contact person at (phone number)] with any questions you may have concerning exercise of the Warrant. This is your only notice of pending expiration. OneSource Holding Corporation By -------------------------------- Its: 14 -14- APPENDIX II NOTICE OF EXERCISE ------------------ 1. The undersigned hereby elects to purchase shares of the Common Stock of OneSource Holding Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 1. The undersigned hereby elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised with respect to of the Shares covered by the Warrant. [Strike paragraph that does not apply.] 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: ---------------------------- (Name) ---------------------------- ---------------------------- (Address) 3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws. ---------------------------- (Signature) - ---------------------------- (Date) 15 -15- APPENDIX II, CONTINUED ACKNOWLEDGMENT OF EXERCISE The undersigned hereby acknowledge receipt of the "Notice of Exercise" from Warrantholder, to purchase shares of the Common Stock of OneSource Holding Corporation, pursuant to the terms of the Warrant Agreement, and further acknowledges that shares remain subject to purchase under the terms of the Warrant Agreement. Company: OneSource Holding Corporation By: -------------------------------- Title: ----------------------------- Date: ----------------------------- 16 -16- APPENDIX III ANTI-DILUTION ADJUSTMENTS ------------------------- In addition to the adjustments specified in Section 8 of the Warrant Agreement, the Exercise Price in effect at any time and the number and kind of Warrant Shares issuable upon exercise of the Warrant shall be subject to adjustments from time to time upon the happening of the events hereinafter specified. No adjustment shall be made for (i) any cash dividends, (ii) any Warrant Shares issued or issuable upon exercise of the Warrants, (iii) shares of Common Stock issued or issuable to Lotus Development Corporation upon the exercise of that certain Stock Purchase Warrant of even date, (iv) up to 81,000 shares of Common Stock and 9,000 shares of Class P Common Stock issued to members of management of the Operating Company (who are not affiliates of William Blair or Information Partners), and (v) up to 352,265 additional shares of Common Stock issued or issuable to members of management of the Operating Company (who are not affiliates of William Blair or Information Partners) upon the exercise of certain stock options. Notwithstanding any other provision of this Agreement, the Exercise Price, as adjusted from time to time, shall not in any event be less than the par value (if any) of the Common Stock. (1) EXERCISE PRICE ADJUSTMENT. If, at any time after the date hereof, the Company issues or sells any shares of Common Stock (except for issuances subject to Section 8(d) of the Warrant Agreement) for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issue or sale, or the Company shall issue or sell any shares of Common Stock for a consideration per share less than the Fair Market Value immediately prior to the time of such issue or sale (as determined under Section 3(a) of the Warrant Agreement), then, forthwith upon such issue or sale, the Exercise Price in effect immediately prior to such issue or sale shall thereupon be reduced to the lower of the prices (calculated to the nearest cent) determined as follows: (a) by dividing an amount equal to the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale MULTIPLIED BY the then existing Exercise Price and (ii) the consideration, if any, received by the Company upon such issue or sale, by the total number of shares of Common Stock outstanding immediately after such issue or sale; and (b) by multiplying the Exercise Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale MULTIPLIED BY the then existing Fair Market value and (ii) the consideration, if any, received by the Company upon such issue or sale, and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such issue or sale MULTIPLIED BY the existing Exercise Price. (2) SPECIAL RULES FOR ADJUSTING THE EXERCISE PRICE. For the purposes of Section (1) above, the following subsections (a) to (d), inclusive, shall also be applicable: 17 -17- (a) TREATMENT OF OPTIONS, RIGHTS, ETC. At any time the Company grants, issues or sells (whether directly or by assumption in a merger or otherwise) any rights to subscribe for, or any rights or options to purchase, Common Stock or any securities convertible into or exchangeable for Common Stock (such convertible or exchangeable securities being herein called "CONVERTIBLE SECURITIES"), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options PLUS the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of such rights or options PLUS, in the case of any such rights or options that relate to such Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options) is less than the Exercise Price in effect immediately prior to the granting of such rights or options (or less than the Fair Market Value determined as of the date of the granting of such rights or options), then the maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the maximum number of such Convertible Securities issuable upon the exercise of such rights or options shall be deemed to be outstanding as of the date of granting of such rights or options and to have been issued for such price per share and the Exercise Price shall be adjusted as of the date of the granting of such rights or options as set forth in Section (1) above; PROVIDED, HOWEVER, that except as provided in Section (3) below, no further adjustments of the Exercise Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such rights or options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (b) TREATMENT OF CONVERTIBLE SECURITIES. At any time the Company issues or sells (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities PLUS the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) is less than the Exercise Price in effect immediately prior to the time of such issue or sale (or less than the Fair Market Value determined as of the date of such issue or sale), then the maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed 18 -18- to be outstanding as of the date of the issue or sale of such Convertible Securities and to have been issued for such price per share and the Exercise Price shall be adjusted as of the date of such issue or sale as set forth in Section (1) above; PROVIDED, HOWEVER, that (A) except as provided in Section (3) below, no further adjustments of the Exercise Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (B) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Exercise Price have been or are to be made pursuant to other provisions of this Section (2), no further adjustment of the Exercise Price shall be made by reason of such issue or sale. (c) COMPUTATION OF CONSIDERATION. For purposes of this APPENDIX III, in case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold: (i) for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith; (ii) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as reasonably determined in good faith by the board of directors of the Company, without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith; and (iii) in connection with any merger or consolidation of another corporation into the Company (other than any merger or consolidation in which the previously outstanding shares of Common Stock of the Company shall be changed into or exchanged for the stock or other securities of another corporation), the amount of consideration therefor shall be deemed to be the fair value of the portion of the assets and business of such merged or consolidated corporation attributable to such Common Stock, Convertible Securities, rights and/or options as reasonably determined in good faith by the board of directors of the Company after deducting therefrom all cash and other consideration, if any, paid by the Company in connection with such merger or consolidation. In the event of any consolidation or merger of the Company in which the Company is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Company shall be changed into or exchanged for the stock or other securities of another corporation or in the event of any sale of all or substantially all of the property and assets and/or the stock of the Company for stock or other securities of any corporation, the Warrantholder shall receive either the stock, securities or other property and assets of the other corporation computed on the basis of the actual exchange 19 -19- ratio on which the transaction was predicated and for a consideration equal to the fair value (as determined in accordance with clause (iii) above) on the date of such transaction of all such stock, securities or other property and assets of the other corporation. If any calculation required under the immediately preceding sentence results in adjustment of the Exercise Price, the determination of the number of Warrant Shares issuable upon exercise of the Warrants immediately prior to such merger, consolidation or sale shall be made after giving effect to such adjustment of the Exercise Price. (d) RECORD DATE. At any time the Company takes a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock or Convertible Securities or (ii) to subscribe for or purchase Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the actual issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the actual granting of such right of subscription or purchase, as the case may be. (e) TREASURY SHARES. The number of shares of Common Stock outstanding at any given time shall not include shares of Common Stock directly or indirectly owned or held by or for the account of the Company or any of its subsidiaries, and the disposition of any such shares of Common Stock shall be considered an issue or sale of shares of Common Stock for the purposes of this Section (2). (3) CERTAIN READJUSTMENTS. If the purchase price provided for in any right or option referred to in Section 2(a), or the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in Section 2(a) or 2(b), or the rate at which any Convertible Securities referred to in Section 2(a) or 2(b) are convertible into or exchangeable for Common Stock, shall change or a different purchase price or rate shall become effective at any time or from time to time (other than under or by reason of provisions designed to protect against dilution), then, upon such change becoming effective, the Exercise Price then in effect under the Warrant Agreement shall thereupon be readjusted to such Exercise Price as would have been in effect had the adjustments made upon the granting or issuance of such rights or options or convertible Securities been made upon the basis of (i) the issuance of the number of shares of Common Stock theretofore actually delivered upon the exercise of such options or rights or upon the conversion or exchange of such Convertible Securities, and the total consideration received therefor, and (ii) the granting or issuance at the time of such change of any such options, rights or Convertible Securities then still outstanding for the consideration, if any, received by the Company therefor and to be received on the basis of such changed price. On the expiration of any right or option referred to in Section 2(a), or on the termination of any right to convert or exchange any Convertible Securities referred to in Section 2(a) or 2(b), the Exercise Price then in effect under the Warrant Agreement shall thereupon be readjusted to the Exercise Price as would have been in effect had the adjustment made upon the granting or issuance of such rights or options or Convertible Securities been made upon the basis of the issuance or sale of only the number of shares of Common Stock actually issued upon the exercise of such options or rights or upon the conversion or exchange of such Convertible Securities. If the purchase price provided 20 -20- for in any such right or option, or the rate at which any such Convertible Securities are convertible into or exchangeable for Common Stock, shall change at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise of any such right or option or upon conversion or exchange of any such Convertible Security, the Exercise Price then in effect shall forthwith be decreased to such Exercise Price as would have been obtained had the adjustments made upon the issuance of such right or option or Convertible Security never been made as to such Common Stock and had adjustments instead been made upon the issuance of such right or option or Convertible Security upon the basis of the issuance of (and the total consideration received for) the shares of Common Stock delivered as aforesaid. (4) ADJUSTMENT IN WARRANT SHARES PURCHASABLE. Whenever the Exercise Price is adjusted pursuant to Section (1) above, each Warrant outstanding at the time of such adjustment shall become the right to purchase that number of Warrant Shares obtained by multiplying the number of Warrant Shares into which such Warrant is exercisable immediately prior to such adjustment by the Exercise Price in effect immediately prior to the adjustment, and dividing the product so obtained by the Exercise Price in effect immediately after such adjustment, so that upon exercise of such Warrant for all of the Warrant Shares purchasable thereby, the Company shall receive the same amount of consideration it would have received if the event occasioning the adjustment had not occurred and such Warrant were exercised with respect to all the Warrant Shares purchasable thereby. (5) REFLECTION OF ADJUSTMENT ON CERTIFICATES. Notwithstanding any adjustments in the Exercise Price or the number or kind of Warrant Shares issuable upon exercise of the Warrant, the Warrant Agreement may continue to express the same price and number and kind of Warrant Shares as are stated in the Warrant initially issued to the Warrantholder pursuant to the Warrant Agreement. (6) CERTAIN EVENTS. If (a) in the good faith opinion of the Warrantholder, any event occurs as to which the other provisions of this APPENDIX III are not strictly applicable but the lack of an adjustment would not in the opinion of the Warrantholder fairly protect the purchase rights of the Warrantholder in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the purchase rights of the Warrantholder in accordance with the basic intent and principles of such provisions and (b) following notice to the Company, the Warrantholder and the Company shall disagree as to the applicability or appropriateness of such adjustment, then the Company shall appoint a firm of independent certified public accountants of recognized national standing (which may be the independent accounting firm then regularly engaged by the Company to report on the financial statements of the Company), which shall give its opinion upon the adjustment, if any, on a basis strictly consistent with the basic intent and principles established in the other provisions of this APPENDIX III, necessary to preserve, without dilution as provided for herein, the exercise rights of the Warrantholder in accordance with this APPENDIX III. Upon receipt of such opinion, the Company shall forthwith make the adjustments described therein, absent manifest error. 21 -21- APPENDIX IV TRANSFER NOTICE (To transfer or assign the foregoing Warrant Agreement execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to (Please Print) whose address is Dated ------------------------------------------- Holder's Signature ------------------------------ Holder's Address -------------------------------- -------------------------------- Signature Guaranteed: ------------------------------------------------------ NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement. 22 -22- EXHIBIT A --------- Officers, Directors, Shareholders of the Company 1. Officers of Holding: President and Treasurer: David Dominik Vice President and Secretary: Gregg Newmark 2. Directors of Holding: David Dominik Gregg Newmark 3. Shareholders of Holding: (See attached Schedule) 4. Holders of Convertible Securities of Holding: (See attached Schedule) 23 ONE SOURCE CAPITALIZATION TABLE
Price/ Price/ %total before Common Share Amount Common P Share Amount Warrants options Total $ WBVP 364,500 $0.49 $180,000 40,500 $40,00 $1,620,000 40.10% $1,800,000 Information Partners 364,500 $0.49 $180,000 40,500 $40,00 $1,620,000 40.10% $1,800,000 Lotus Development 0 $ 0 $ 0 100,000 9.90% $ 0 Silicon Valley Bank 0 $ 0 $ 0 10,101 1.00% $ 0 Dan Schimmel* 18,000 $0.49 $ 8,889 2,000 $40,00 $ 80,000 1.98% $ 88,889 Marty Kahn* 18,000 $0.49 $ 8,889 2,000 $40,00 $ 80,000 1.98% $ 88,889 Other Senior Mgt* 18,000 $0.49 $ 8,889 2,000 $40,00 $ 80,000 1.98% $ 88,889 Other Employees 27,000 $0.49 $ 13,333 3,000 $40,00 $ 120,000 2.97% $ 133,333 Total 810,000 $0.49 $400,000 90,000 $40,00 $3,600,000 110,101 100.00$ $4,000,000 Total Equity $4,000,000 $4.44
*To be issued post-closing. 24 ONE SOURCE CAPITALIZATION TABLE
Warrants Initial Options Other Options WBVP III -0- -0- -0- Information Partners -0- -0- -0- Lotus Development 100,000 Silicon Valley Bank 10,101 Dan Schimmel* 34,483 92,200 Marty Kahn* 17,241 46,100 Other Senior Mgt* 45,977 36,880 Other Employees* 51,724 27,660 Total 110,101 149,425 202,840
Warrants are exercisable at per share price of: Initial Options are convertible at per share price of: $1.00 50% of Other Options are convertible at per share price of: $0.49 $8.89 through 1996, $11.11 through 1997 and $13.33 after 1997. The other 50% are convertible at $13.33, $17.78 and $22.22, for the same dates. *To be granted post-closing. EX-10.07 8 SUBORDINATED PROMISSORY NOTE 1 Exhibit 10.07 The security represented by this certificate was originally issued on September 8, 1993, and has not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be sold or transferred in the absence of an effective registration statement under the Act or an exemption from registration thereunder. Prior to any sale or transfer of this certificate, except pursuant to an effective registration statement under the Act covering such sale or transfer, the holder hereof shall have delivered to the issuer hereof (the "Company") an opinion of counsel reasonably satisfactory to the Company to the effect that such sale or transfer is exempt from registration under the Act. The transfer of such security is subject to the conditions specified in the Stock Purchase Agreement, dated as of September 8, 1993 between the company and Lotus Development Corporation, and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge. SUBORDINATED PROMISSORY NOTE --------------- September 8, 1993 $5,000,000 OneSource Holding Corporation, a Delaware corporation (the "Company"), hereby promises to pay to the order of Lotus Development corporation the principal amount of five million dollars ($5,000,000) together with interest thereon calculated from the date hereof in accordance with the provisions of this Note. This Note was issued in connection with a Stock Purchase Agreement, dated as of August 3, 1993 (the "Purchase Agreement"), between the Company and Lotus Development Corporation. The Purchase Agreement contains terms governing certain rights and obligations of the holder of this Note, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Unless otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement. All Notes representing portions of the rights hereunder are referred to herein as the "Notes". 1. PAYMENT OF INTEREST. Except as otherwise expressly provided in paragraph 6 hereof, interest shall accrue at the rate of eight percent (8%) per annum on the unpaid principal amount of this Note outstanding from time to time, or (if less) at the highest rate then permitted under applicable law. The Company shall pay to the holder of this Note all accrued interest accruing on each March 31, beginning March 31, 1995; provided that interest accruing in 1993 2 -2- and in any calendar year following December 31, 1993 may, at the Company's option, be added to the outstanding principal amount of this Note if the Company's Cash Flow is less than $2 million in the calendar year immediately preceding the year in which payment is due. Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the final principal payment on this Note is paid. Interest at the applicable rate stated herein shall accrue on any principal payment due under this Note until such time as payment therefor is actually delivered to the holder of this Note. 2. PAYMENT OF PRINCIPAL ON NOTE. (a) SCHEDULED PAYMENTS. The company shall pay the principal amount of $5,000,000 (or such lesser or greater principal amount then outstanding) to the holder of this Note, together with all interest accrued thereon on the earliest of (i) September 8, 2000, (ii) the date the Company's stockholders as of the date hereof cease to own a majority of the capital stock of the Company possessing the voting power (under ordinary circumstances) to elect a majority of the Company's board of directors, or (iii) the date the Company sells all or substantially all of its assets (determined on a consolidated basis). (b) OPTIONAL PREPAYMENTS. The Company may, at any time and from time to time without premium or penalty, prepay all or any portion (in whole number multiples of $100,000 only) of the outstanding principal amount of this Note; provided that (such prepayment is not prohibited by any Senior Indebtedness (as defined in paragraph 4 hereof) and (B) the Company has paid all interest on the Note accrued through the date of prepayment. (c) MANDATORY PREPAYMENTS. In the event that the Company issues equity securities (other than to management of the Company or its Subsidiaries) following September 8, 1993 with proceeds (net of related costs and expenses) to the Company in excess of $10 million (such net proceeds in excess of $10 million being referred to as "Excess Proceeds"), the Company will make a prepayment on this Note in an amount equal to (i) the amount of Excess Proceeds, multiplied by (ii) a fraction, the numerator of which is the then outstanding principal amount of this Note, and the denominator of which is an amount equal to the then outstanding principal amount of the Note plus the aggregate amount of the net proceeds received by the Company with respect to all equity issuances by the Company (including the original equity investment on September 8, 1993) prior to the current equity issuance. Such prepayment shall be applied first to pay accrued and unpaid interest and thereafter to pay unpaid principal. 3. SET OFF. The outstanding principal amount of this Note and any interest thereon is subject to set off pursuant to and in accordance with Section 9.02(h) of the Purchase Agreement and the sixth sentence of Section 2.4 of the License Agreement. In the event of any set off, the Company shall deliver to the holder of this Note a notice stating the amount of and the basis for such set off (such amount to be equal to 100% of the actual amount of any Agreement). Any reduction in the principal amount or interest outstanding hereunder in connection with any set off in accordance with Section 9.02(h) of the Purchase Agreement or pursuant to the sixth sentence of Section 2.4 of the License Agreement (i) will be applied at the election of the holders of the 3 -3- Notes to either principal or interest due, and (ii) will be permanent and such set off amounts will no longer be deemed outstanding. 4. SUBORDINATION. (a) SUBORDINATION TO SENIOR INDEBTEDNESS. Any other provisions of this Note to the contrary notwithstanding, all indebtedness with respect to this Note is hereby expressly subordinated, to the extent and in the manner set forth below, to all Senior Indebtedness. "Senior Indebtedness" shall mean principal of, and premium (if any) and interest on, and all other payment obligations from time to time due or payable under, the Credit Agreement or any renewal or refinancing thereof after the date hereof. (b) PRIORITY OF SENIOR INDEBTEDNESS ON DISTRIBUTION OF ASSETS. Upon (i) any payment being required to be made by the Company under this Note upon any declaration of acceleration of the principal amount hereof, or (ii) any payment or distribution of assets of the Company of any kind or character, whether in money, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings (collectively, a "Reorganization") , all principal of, and premium (if any) and interest due or to become due upon, all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for, before any payment is made on this Note (other than payment in securities or instruments junior to the Senior Indebtedness to at least the same extent as provided herein); and upon any such declaration of acceleration or Reorganization, any distribution of assets of the Company of any kind or character, whether in money, property or securities, to which the holder of this Note would be entitled except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holder of this Note if received by it, directly to the holders of Senior Indebtedness (according to the priorities of such Senior Indebtedness or, in respect of Senior Indebtedness of equal priority, pro rata to each such holder on the basis of the respective amounts of such Senior Indebtedness held by such holders), or their representatives, to the extent necessary to pay all such Senior Indebtedness in full as aforesaid, after giving effect to any prior or concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness, before any payment or distribution is made to the holder of this Note. Notwithstanding the foregoing, so long as the Senior Indebtedness shall not have been declared in default, the Company may make, and the holder of this Note may accept and receive, (i) payments of interest as provided in paragraph 1 hereof, (ii) scheduled payments of principal as provided in paragraph 2(a) hereof, (iii) optional prepayments in accordance with paragraph 2(b) hereof, and (iv) mandatory prepayments pursuant to paragraph 2(c) hereof. (c) SUBROGATION. When all Senior Indebtedness then outstanding has been paid in full, the holders of the Notes shall be subrogated to the rights of the holders of any Senior Indebtedness to receive payments or distributions of assets of the Company, any Subsidiary or any other obligor thereon (each an "Obligor," and collectively the "Obligors") until the Indebtedness evidenced by the Notes shall have been paid in full; and for the purposes of such subrogation, no payments or distributions to any holder of Senior Indebtedness of any cash, 4 -4- property or securities to which the holders of the Notes would be entitled except for the provisions of this paragraph 4, and no payment over pursuant to the provisions of this paragraph 4 to the holders of Senior Indebtedness by the holders of the Notes, shall, as between the obligors, creditors other than the holders of Senior Indebtedness and the holders of the Notes be deemed to be a payment by any such Obligor or creditor due or on account of Senior Indebtedness, it being understood that the provisions of this paragraph 4 are and are intended solely for the purpose of defining the relative rights of the holders of Senior Indebtedness on the one hand, and the holders of the Notes on the other hand. If any holder of Senior Indebtedness shall receive any distribution of the assets of any Obligor to which the holders of the Notes are entitled by virtue of the provisions of this paragraph 4(c) , it shall promptly pay over such distribution to the holders of the Notes. (d) TREATMENT OF MISTAKEN PAYMENTS AND DISTRIBUTIONS. If any payment or distribution of assets of the Company of any kind or character, whether in money, property or securities, prohibited by the foregoing shall be received by the holder of this Note before all Senior Indebtedness is paid in full, or provision is made for such payment, in accordance with its terms, such payment or distribution shall be held for the benefit of and shall be paid over or delivered to, the holders of such Senior Indebtedness, or their representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued or under which such instruments are pledged or secured, as their respective interest may appear for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all such Senior Indebtedness in full in accordance with its terms, after giving effect to any prior or concurrent payment or distribution to or for the holders of such Senior Indebtedness. (e) ACCELERATION OF NOTE. In the event that a default exists under the Senior Indebtedness or a default under the Senior Indebtedness would occur upon the acceleration of the maturity of this Note, no holder of this Note shall take any action to accelerate the maturity of this Note unless (i) all Senior Indebtedness shall have been paid in full, (ii) all Senior Indebtedness shall theretofore have become due and payable or (iii) 270 days shall have lapsed after the date on which an Event of Default has occurred and such Event of Default remains uncured. Notwithstanding the foregoing, if an event described in subparagraph 6(a)(iii) herein has occurred, acceleration of the maturity of this Note shall be automatic pursuant to subparagraph 6(b)(ii) herein. 5. RESTRICTIONS. So long as at least 29% of the principal amount of this Note remains outstanding, the Company shall not without the prior written consent of the holders of Notes representing a majority of the principal amount of the Note then outstanding: (a) directly or indirectly declare or pay any dividends or make any distributions upon any of its equity securities, except for dividends payable in shares of common stock of the Company issued upon the outstanding shares of common stock of the company; (b) directly or indirectly redeem, purchase or otherwise acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire, any of the Company's equity securities 5 -5- (including, without limitation, warrants, options and other rights to acquire equity securities), except for (i) repurchases of common stock (at a price not to exceed the fair market value thereof) from employees of the company and its Subsidiaries upon termination of employment pursuant to arrangements approved by the Company's board of directors and (ii) repurchases of that certain Stock Purchase Warrant issued on September 8, 1993 to Lotus Development Corporation to initially purchase 100,000 shares of the Company's common stock and repurchases of any common stock of the Company issued upon the exercise of such Warrant; (c) make any amendment to the Company's senior credit agreements which would materially adversely affect the holders of the Notes; (d) enter into, or permit any Subsidiary to enter into, any transaction with any of its or any Subsidiary's stockholders, officers, directors, employees or affiliates or any individual related by blood or marriage to any such Person or any entity in which any such Person or individual owns a beneficial interest, except (i) for normal employment arrangements and benefit programs on commercially reasonable terms, (ii) for certain fees to be paid to the Investors (as defined in the Purchase Agreement) for services rendered to the Company, (iii) for a closing fee paid to the Investors in an amount not to exceed $250,000 in connection with the transactions contemplated by the Purchase Agreement, (iv) for agreements and transactions entered into on an arms-length basis or otherwise on fair and reasonable terms to the Company and (v) except as otherwise expressly contemplated by the transactions consummated in connection with the Purchase Agreement; (e) create, incur, assume or suffer to exist, Indebtedness exceeding in the aggregate an amount such that the Company's Debt Ratio would exceed 3:1 immediately after the incurrence of such Indebtedness (for all purposes of this clause (e), it is expressly understood that Indebtedness shall include all Indebtedness incurred by OneSource Information Services, Inc.); (f) directly or indirectly enter into or permit any Subsidiary to enter into the ownership, active management or operation of any business other than the distribution or resale of financial or business databases unless the Company's Net Worth exceeds $10 million (in which event the restrictions set forth in this paragraph (f) shall not apply); or (g) create, suffer or permit to exist any lien, security interest in, or encumbrance on any assets of the company except for (i) liens granted to holders of Senior Indebtedness, (ii) liens and security interests on fixed assets acquired by the Company or a Subsidiary (including without limitation capitalized leases) which constitute purchase money security interests under applicable law and (iii) Permitted Encumbrances. 6. EVENTS OF DEFAULT. (a) DEFINITION. For purposes of this Note, an Event of Default shall be deemed to have occurred if 6 -6- (i) the Company fails to pay when due the full amount of interest then accrued on any Note or the full amount of any principal payment on any Note; (ii) the Company fails to perform or observe any other covenant or provision contained in the Note, provided that no Event of Default shall be deemed to have occurred under this subparagraph (ii) if the Company establishes (to the reasonable satisfaction of the holder of this Note) that (A) the particular Event of Default has not been caused by knowing or purposeful conduct by the Company or any Subsidiary, (B) the Company has exercised, and continues to exercise, best efforts to expeditiously cure the Event of Default (if cure is possible), (C) the Event of Default is not material to the Company's financial condition, operations, assets or business prospects, and (D) the Event of Default is not material to the holder's investment in the Note; or (iii) the company or any subsidiary makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Company or any Subsidiary bankrupt or insolvent; or any order for relief with respect to the Company or any Subsidiary is entered under the Federal Bankruptcy Code; or the Company or any Subsidiary petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or any Subsidiary, or of all or any substantial part of the assets of the Company or any Subsidiary, or any proceeding is commenced (other than a proceeding for the voluntary liquidation and dissolution of any subsidiary not relating to insolvency) relating to the Company or any Subsidiary under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Company or any Subsidiary and either (A) the Company or any such Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein or (B) such petition, application or proceeding is not dismissed within 60 days. (b) CONSEQUENCES OF EVENTS OF DEFAULT. (i) If an Event of Default of the type described in subparagraph 6(a)(i) or (ii) has occurred and continued for 30 days or any other Event of Default has occurred, the interest rate on this Note shall increase by an increment of two (2) percentage point(s) to the extent permitted by law. Any increase of the interest rate resulting from the operation of this subparagraph shall terminate as of the close of business on the date on which no Events of Default exist (subject to subsequent increases pursuant to this subparagraph). (ii) If an Event of Default of the type described in subparagraph 6(a)(iii) has occurred, the aggregate principal amount of this Note (together with all accrued interest thereon and all other amounts payable in connection therewith) shall become immediately due and payable without any action on the part of the holders of this Note, and the Company shall immediately pay to the holders of this Note all amounts due and payable with respect to this Note. 7 -7- (iii) If an Event of Default of the type described in subparagraphs 6(a)(i) or (ii) has occurred and continued for 90 days, the holder or holders of Notes representing a majority of the aggregate principal amount of Notes then outstanding may declare all or any portion of the outstanding principal amount of the Notes (together with all accrued interest thereon and all other amounts due in connection therewith) due and payable and demand immediate payment of all or any portion of the outstanding principal amount of the Notes owned by such holder or holders. The Company shall give prompt written notice of any such demand to the other holders of Notes, each of which may demand immediate payment of all or any portion of such holder's Note. If any holder or holders of the Notes demand immediate payment and all or any portion of such holder's Notes, the Company shall immediately pay to such holder or holders all amounts due and payable with respect to such Notes. (iv) The holders of the Notes shall also have any other rights which such holders may have been afforded under any contract or agreement at any time and any other rights which such holder may have pursuant to applicable law, including without limitation the right to file a petition with respect to the Company or any Subsidiary under the U.S. Bankruptcy Code. (v) The Company hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accent security for this Note or release security for this Note, all without in any way affecting the liability of the Company hereunder. 7. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the provisions of the Notes may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of a majority of the outstanding principal amount of the Notes. 8. DEFINITIONS. For purposes of the Notes, the following capitalized terms have the following meaning. "CASH FLOW" means the Company's consolidated net income for any fiscal year, PLUS depreciation and amortization expense for such fiscal year, PLUS the decrease in Working capital for such fiscal year, if any, MINUS the increase in working capital for such fiscal year, if any, MINUS the Company's capital expenditures incurred during such fiscal year, MINUS all principal payments of Senior Indebtedness made during such fiscal year, all as determined in accordance with GAAP consistently applied. "CREDIT AGREEMENT" means that certain Loan Agreement dated as of the date hereof in the initial principal amount of $4,250,000 between the Company, OneSource Information Services, Inc. and Silicon Valley Bank, as amended, modified or supplemented. "DEBT RATIO" means, at any date, the ratio of Indebtedness at such date to Net Worth at such date. 8 -8- "GAAP" means generally accepted accounting principles. "INDEBTEDNESS" means (i) indebtedness for borrowed money (including principal, premium if any, and interest thereon), whether short-term or long-term and whether secured or unsecured, (ii) leases which shall have been or should be, in accordance with GAAP, recorded as capitalized leases, and (iii) guarantees by the Company of items described in (i) and (ii) above. "NET WORTH" means, at any date, consolidated stockholders' equity (including retained earnings) at such date in accordance with GAAP. "PERMITTED ENCUMBRANCES" means the following types of liens: (a) liens for taxes, assessments or other governmental charges not yet due and payable or which are being contested in good faith and for which adequate reserves have been established in accordance with GAAP, consistently applied; (b) statutory liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than thirty (30) days delinquent or which are being contested in good faith; (c) statutory liens incurred for deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (d) deposits made in the ordinary course of business to secure liability to insurance carriers and utility companies; (e) liens for purchase money obligations incurred in the ordinary course of business; (f) any attachment or judgment liens not to exceed $250,000 in the aggregate at any time; (g) leases or subleases granted to others not interfering in any material respect with the business of the Company or its Subsidiaries; (h) easements, rights-of-way, restrictions, and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or its Subsidiaries; 9 -9- (i) any interest or title of a lessor or sublessor under any lease entered into in the ordinary course of business; (j) liens arising from filing UCC financing statements regarding leases described in paragraph 8(i) above; and (k) statutory customer rights of set-off and in respect of returned goods under the UCC. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "SUBSIDIARY" means any corporation of which the shares of stock having a majority of the general voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Company either directly or indirectly through Subsidiaries. "UCC" means the Uniform Commercial Code of the Commonwealth of Massachusetts, as amended from time to time, and any successor statute. "WORKING CAPITAL" means at any time the amount of the Company's consolidated current assets at such time minus the amount of the Company's consolidated current liabilities at such time. 9. CANCELLATION. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 10. PLACE OF PAYMENT. Payments of principal and interest are to be delivered to Lotus Development Corporation by wire transfer to: Bank Name: Bank of Boston Bank Address: Boston, MA ABA #: 011000390 Bank Account Name: Lotus Development corporation Bank Account #: 511-40113 or to such other address or to the attention of such other person as specified by prior written notice to the Company. 11. USURY LAWS. It is the intention of the Company and the holder of this Note to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts 10 -10- having proper jurisdiction over such matters. If the maturity of this Note is accelerated by reason of an election by the holder hereof resulting from an Event of Default, voluntary prepayment by the company or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of the holder hereof either be rebated to the Company or credited on the principal amount of this Note, or if this Note has been paid, then the excess shall be rebated to the Company. The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Company or credited an the principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated to the Company. 12. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Note (and any successor Notes) shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Massachusetts, without giving effect to any choice of law or conflict of law provision or rule (whether of the Commonwealth of Massachusetts, or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first above written. ONESOURCE HOLDING CORPORATION Attest By /s/ David Dominik _____________________________________ /s/ Gregg Newmark Its President ________________________________ ____________________________________ EX-10.08 9 STOCK PURCHASE AGREEMENT 1 EXHIBIT 10.08 STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT, dated as of September 8, 1993 (this "Agreement"), is made by and among OneSource Holding Corporation, a Delaware corporation (the "Company"), and the Persons set forth on the "Schedule of Purchasers" attached hereto (hereinafter referred to collectively as the "Purchasers" and individually as a "Purchaser"). The Purchasers will purchase, severally and not jointly, the number of shares listed on the "Schedule of Purchasers" attached hereto. Except as otherwise indicated, capitalized terms used herein are defined in Section 6 hereof. Pursuant to a Stock Purchase Agreement, dated as of August 3, 1993 (the "Acquisition Agreement"), between Lotus Development Corporation, a Delaware corporation ("Lotus"), Datext, Inc.., a Delaware corporation ("Datext"), and the Company, the Company will purchase all of the outstanding capital stock of Datext. The purchase and sale of common stock contemplated by this Agreement will be consummated contemporaneously with the consummation of the Acquisition pursuant to the terms of the Acquisition Agreement. The parties hereto agree as follows: Section 1. AUTHORIZATION OF COMMON STOCK. The Company will authorize the issuance and sale to the Purchasers of: (i) 81,000 shares of the Company's Class P Common Stock, par value $.01 per share (the "Class P Common"), for a purchase price of $40.00 per share; and (ii) 729,000 shares of the Company's Common Stock, par value $.01 per share (the "Common"), for a purchase price of $0.49 per share. The Class P Common and the Common are hereinafter sometimes referred to collectively, as the "Common Stock." Section 2. PURCHASE AND SALE OF COMMON STOCK. 2A. PURCHASE AND SALE. The Company will sell to each Purchaser, and, subject to the terms and conditions set forth herein, each Purchaser will purchase from the Company, the Common Stock set forth beside such Purchaser's name on the Schedule of Purchasers, at the purchase price per share as set forth in Section 1 above. The sale to and purchase by each Purchaser of the securities to be purchased by such Purchaser hereunder will constitute a separate sale and purchase. 2B. THE CLOSING. The Closing of the separate sales and purchases of the Common Stock (the "Closing") will take place at the offices of Kirkland & Ellis, 200 East Randolph 2 Drive, Chicago, Illinois 60601 at 10:00 a.m. on September - , 1993 (the "Closing Date") , or at such other place or on such other date as may be mutually agreeable to the Company and the Purchasers-. At the Closing, the Company will deliver to each Purchaser a certificate or certificates evidencing the number of shares of each class of Common Stock to be purchased by such Purchaser, registered in such name as such Purchaser shall designate, against payment of the purchase price therefor by delivery of a cashier's or certified check or checks of immediately available funds or by wire transfer to a bank account designated by the Company. 2C. CLOSING FEE. At the Closing, the Company or Datext will pay to each of Information Partners Capital Fund, L.P. and William Blair Venture Partners III Limited Partnership a fee in the amount of $150,000 and $100,000, respectively, relating principally to their services in arranging the acquisition of Datext pursuant to the Acquisition Agreement (the "Closing Fees") . Section 3. RESTRICTIONS ON TRANSFERS. 3A. RESTRICTIONS. Subject to the Stockholders Agreement, Restricted Securities are transferable pursuant to (:L) -,public-offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule then in force) if such rule is available, and (iii) subject to the conditions specified in paragraph 3B below, any other legally available means of transfer pursuant to the Securities Act. 3B. PROCEDURE FOR TRANSFER. In connection with the transfer of any Restricted Securities (other than a transfer referred to in clauses (i) or (ii) of paragraph 3A above) , the holder thereof will deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of Kirkland & Ellis or other counsel which (to- the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the holder of such Restricted Securities delivers to the Company an opinion of such counsel that no subsequent transfer of such Restricted Securities will require registration under the Securities Act, the Company will promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act Legend set forth in paragraph 5A below. If the Company is not required to deliver new certificates for such Restricted Securities not bearing such legend, the holder thereof will not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this paragraph and paragraph 5A. 3C. TRANSFEREES. Upon request of any Purchaser, the company shall promptly supply to such Purchaser or its prospective transferees all information regarding the Company required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission. Section 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Purchasers that as of the Closing: 3 4A. ORGANIZATION, ETC. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to carry on its businesses as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this- Agreement. 4B. CAPITAL STOCK AND RELATED MATTERS. (i) As of the Closing hereunder, (a) the authorized capital stock of the company will consist of 100, 000 shares of Class P Common and 1,500,000 shares of Common and (b) the Company will have issued, and there will be outstanding, 81,000 shares of Class P Common and 729,000 shares of Common. (ii) As of the Closing hereunder, the Company will not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, nor will it have outstanding any rights or options to subscribe for or to purchase any capital stock or any stock or securities convertible into or exchangeable for any capital stock, except pursuant to the Warrants and except pursuant to the Management Agreements. As of the Closing, all of the outstanding shares of the Company's capital stock will have been duly authorized, and upon payment therefor will be validly issued and will be fully paid and nonassessable. 4C. AUTHORIZATION; NO BREACH. The execution, delivery and-performance of this Agreement, the stockholders Agreement, the Registration Agreement and all other agreements and transactions contemplated hereby and thereby have been duly authorized by the Company. This Agreement, the Registration Agreement and the Stockholders Agreement each constitutes a valid and binding obligation of the Company enforceable in accordance with its terms,, subject to the availability of equitable remedies and to the laws of bankruptcy and other similar laws affecting creditors' rights generally. The execution and delivery by the company of this Agreement, the Stockholders Agreement, the Registration Agreement and all other agreements and instruments contemplated hereby to b( executed by the Company, and the offering, sale and issuance of the Common Stock hereunder, do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of , (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body (other than in connection with certain state and federal securities laws) pursuant to, the Company's certificate of incorporation or bylaws, or any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company is subject or any agreement or instrument to which the Company is a party. 4D. CONDUCT OF BUSINESS; LIABILITIES. The Company has not conducted any business, incurred any expenses, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Company and whether due or to become due) , entered into any contracts or agreements, except in connection with the consummation 4 of the transactions contemplated by this Agreement, the Acquisition Agreement and the transactions relating to the financing thereof, or violated any laws or governmental rules or regulations. Section 5. PURCHASERS' REPRESENTATIONS AND WARRANTIES 5A. PURCHASER'S INVESTMENT REPRESENTATIONS. Each Purchaser hereby represents that it is acquiring the Restricted Securities purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities for investment purposes and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein will prevent any Purchaser and the subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of Section 3 hereof and in compliance with the provisions of the Stockholders Agreement. Each certificate for Restricted Securities will be imprinted with a legend in substantially the following form (the "Securities Act Legend"): "The securities represented by this certificate were originally issued on September 1 1993, and have not been registered under the Securities Act of 1933, as amended (the "Act"). The transfer of such securities is subject to the conditions specified in the Stock Purchase Agreement, dated as of September -, 1993, between the issuer (the "Company") and certain investors, and the Company reserves the right to refuse to transfer such securities until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions will be furnished by the Company to the holder hereof without charge." Whenever any shares of Common Stock cease to be Restricted securities and are not otherwise restricted securities, the holder thereof will be entitled to receive from the Company, without expense, upon surrender to the Company of the certificate representing such shares of Common Stock, a new certificate representing such shares of Common Stock of like tenor but not bearing a legend of the character set forth above. 5B. OTHER REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby severally represents and warrants to and covenants and agrees with, the Company that: (i) such Purchaser has had an opportunity to ask questions and receive answers concerning the terms and conditions of the securities purchased hereunder and has had full access to such other information concerning the Company (including access to the Acquisition Agreement and the Financing Documents) as such Purchaser may have requested and that in making its decision to invest in the securities being purchased hereunder it is not in any way relying on the f act that any other person has decided to be a Purchaser hereunder or to invest in the securities; (ii) such Purchaser (a) is an "accredited investor" as defined in Rule 501 (a) under the Securities Act or (b) by reason of its business and financial experience, and the business and financial-experience of those retained by it to advise it with respect to its investment 5 in the securities being purchased hereunder, it, together with such advisors, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of its prospective investment in such securities, is able to bear the economic risk of such investment and, at the present time, is able to afford a complete loss of such investment; and (iii) (a) such Purchaser has the requisite power and authority to purchase the securities to be purchased by it hereunder and has authorized the purchase of such securities and (b) the purchase of the securities to be purchased by it hereunder DOES not violate its charter, by-laws or other organizational documents. Section 6. DEFINITIONS. "FINANCING DOCUMENTS" means those certain financing agreements dated as of the date hereof between Silicon Valley Bank and OneSource Information Services, Inc. "MANAGEMENT AGREEMENTS" means those certain Management Stock Purchase Agreements between the Company and certain management employees of the Company as may be entered into from time to time. "PERSON" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "REGISTRATION AGREEMENT" means that certain Registration Agreement dated as of the date hereof by and among the Company, the Purchasers and certain other Persons set forth therein. "RESTRICTED SECURITIES" means the Common Stock issued hereunder and any securities issued with respect to such securities by way of any stock dividend or stock split, or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Restricted Securities, such securities will cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144 of the Securities and Exchange Commission (or any similar rule then in force) or (c) been otherwise transferred and new securities for them not bearing the Securities Act Legend set forth in paragraph 5A have been delivered by the Company in accordance with paragraph 3B. Whenever any particular securities cease to be Restricted Securities, the holder thereof will be entitled to receive from the Company, without expense, new securities of like tenor not bearing a Securities Act Legend of the character set forth in paragraph 5A. "RULE 144" means Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force. 6 "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal law then in force. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force. "SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or agency succeeding to the functions thereof. "STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement dated as of the date hereof by and among the Company, the Purchasers and certain other Persons set forth therein. "WARRANTS" means those certain Stock Purchase Warrants issued by the Company as of the date hereof to Lotus Development Corporation and Silicon Valley Bank to acquire up to 100,000 shares of common and 10,101 shares of Common, respectively. Section 7. MISCELLANEOUS. 7A. REMEDIES. The holders of Common Stock acquired hereunder (directly or indirectly) will have all of the rights and remedies set forth in this Agreement and the Company's certificate of incorporation, and all of the rights and remedies which such holders have been granted at any time under any other agreement or contract, and all of the rights and remedies which such holders have under any law. Any Person having any rights -under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law. 7B. ARBITRATION. (i) ARBITRATION. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) at Boston, Massachusetts. Such arbitration proceeding shall be conducted in as expedited a manner as is then permitted by the commercial arbitration rules (formal or informal) of the American Arbitration Association, and the arbitrator or arbitrators in any such arbitration shall be persons who are expert in the subject matter of the dispute. Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through such arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. The parties agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may, in his or its sole discretion, ask for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 7 (ii) PROCEDURE. Such arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The arbitration shall be conducted before a panel of arbitrators selected in accordance with the rules of the American Arbitration Association. The costs of said arbitrators and the arbitration shall be borne equally by the parties thereto. Each party shall bear separately the cost of their respective attorneys, witnesses and experts in connection with such arbitration. Time is of the essence of this arbitration procedure, and the arbitrators shall be instructed and required to render their decision within ten (10) days following completion of the arbitration. (iii) VENUE AND JURISDICTION. Any and all legal proceedings to enforce this Agreement (including any action to compel arbitration hereunder or to enforce any award or judgment rendered thereby) shall be governed in accordance with this paragraph 7B. 7C. AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no modification, amendment or waiver of any provision hereof shall be effective against the Company or the Purchasers unless such modification, amendment or waiver is approved in writing by the Company and the holders of at least two-thirds of the outstanding shares of Common Stock issued hereunder; provided, however, that in the event that such amendment or waiver would adversely affect a holder or group of holders of Common Stock in a manner different from any other holders of Common Stock, then such amendment or waiver will require the consent of such holder or the holders of a majority of Common Stock of such group adversely affected. The failure of any party to enforce any provision of this Agreement or under any agreement contemplated hereby or under the Company's certificate of incorporation or bylaws shall in `no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement, any agreement referred to herein, the Company's certificate of incorporation, or bylaws in accordance with their terms. 7D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or made in writing by-.,any party in connection herewith will survive the execution and delivery of this Agreement, regardless of any investigation made by the Company or any Purchaser or on its behalf. 7E. SUCCESSORS AND ASSIGNS. (i) Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for any Purchaser's benefit as the purchaser or holder of Common Stock, as the case may be, are also for the benefit of and enforceable by any subsequent holder of such Purchaser's Common Stock. (ii) If a sale, transfer, assignment or other disposition of any Common Stock is made in accordance with the provisions of this Agreement to any Person and such securities 8 remain Restricted Securities immediately after such acquisition, such Person shall, at or prior to the time such securities are acquired, execute a counterpart of this Agreement with such modifications thereto as may be necessary to reflect such acquisition, and such other documents as are necessary to confirm such Person's agreement to become a party to, and to be bound by, all covenants, terms and conditions of this Agreement, the Stockholders Agreement and the Registration Agreement as theretofore amended. 7F. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction, without invalidating the remainder of this Agreement in such jurisdiction or any provision hereof in any other jurisdiction. 7G. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. 7H. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 7I. GOVERNING LAW. All issues concerning the enforceability, validity and binding effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Delaware. 7J. NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered or received by certified mail, return receipt requested, or sent by guaranteed overnight courier service. Notices, demands and communications will be sent to each Purchaser at such Purchaser's address as indicated in the Company's books and records of the Company's transfer agent and registrar and to the Company at the address indicated below: NOTICES TO THE COMPANY: OneSource Holding Corporation c/o Information Partners Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attention: David Dominik 9 With a copy to: Information Partners Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attention: David Dominik With a copy to: William Blair Venture Partners 135 South LaSalle Street Chicago, Illinois 60603 Attention: Gregg Newmark WITH A COPY TO: Kirkland and Ellis 200 E. Randolph Drive Chicago, Illinois 60601 Attention: Karl E. Lutz, P.C. James L. Learner or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. * * * * * 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ONESOURCE HOLDING CORPORATION By: /s/ David Dominik Its: President WILLIAM BLAIR VENTURE PARTNERS III LIMITED PARTNERSHIP By: William Blair Venture Management Company Its: General Partner By: /s/ Gregg Newmark Its: General Partner INFORMATION PARTNERS CAPITAL FUND, L.P. By: Information Partners Its: General Partner By: /s/ David Dominik Its: General Partner BCIP ASSOCIATES By: /s/ David Dominik Its: General Partner BCIP ASSOCIATES, L.P. By: /s/ David Dominik Its: General Partner 11 SCHEDULE OF PURCHASERS
# OF SHARES PURCHASE OF CLASS P PRICE FOR # OF PURCHASE TOTAL COMMON CLASS P SHARES OF PRICE FOR PURCHASE NAMES AND ADDRESSES STOCK COMMON COMMON COMMON PRICE - ------------------------ ----------- ----------- --------- --------- ----------- William Blair Venture 40,500.00 $ 1,620,000 364,500 $ 180,000 $ 1,800,000 Partners III Limited Partnership 135 South LaSalle Street Chicago, Illinois 60603 Information Partners 37,586.25 1,503,450 338,277 167,050 1,670,500 Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attn: David Dominik BCIP Associates 1,398.37 55,935 12,585 6,215 62,150 c/o Information Partners Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attn: David Dominik BCIP Associates, L.P. 1,515.38 60,615 13,638 6,735 67,350 c/o Information Partners Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attn: David Dominik
EX-10.09 10 MANAGEMENT STOCK PURCHASE AGREEMENT 1 Exhibit 10.09 MANAGEMENT STOCK PURCHASE AGREEMENT ----------------------------------- STOCK PURCHASE AGREEMENT dated as of December 3, 1993 between OneSource Holding Corporation, a Delaware corporation (the "Company"), and ___________ ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive will purchase and the Company will sell _____ shares of the Company's Class P Common Stock, par value $.01 per share (the "Class P Common"), and _____ shares of the Company's Common Stock, par value $.01 per share (the "Common"; the Class P Common and the Common are hereinafter sometimes referred to collectively as the "Common Stock"). All of such shares of Common Stock acquired by Executive are referred to herein as the "Executive Stock". The parties hereto agree as follows: 1. PURCHASE AND SALE OF STOCK. (a) Executive will purchase and the Company will sell ____ shares of Class P Common at a price per share of $40 and ____ shares of Common at a price per share of $.4938, for an aggregate purchase price of $________. The Company will deliver to Executive a certificate or certificates representing such shares of Executive Stock, and, upon the receipt of such certificate(s), Executive will deliver to the Company the purchase price therefor in the form of a cashier's or certified check or wire transfer of funds. (b) Executive represents and warrants that the Executive Stock to be acquired by him pursuant to this Agreement will be acquired for his own account and not with a view to, or present intention of, distribution thereof in violation of the Securities Act of 1933, as amended (the "1933 Act"), and will not be disposed of in contravention of the 1933 Act. (c) Executive acknowledges that the Executive Stock has not been registered under the 1933 Act and, therefore, cannot be sold unless subsequently registered under the 1933 Act or an exemption from such registration is available and, in light of these facts, he is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time. (d) Executive represents and warrants that he has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Executive Stock and has had full access to such other information concerning the Company as he has requested. 2 IN WITNESS WHEREOF, the parties has executed this Agreement on the day and year first above written. ONESOURCE HOLDING CORPORATION By: /s/ Gregg Newmark ------------------------------ Its: Vice President ---------------------------------- Executive -2- EX-10.10 11 STOCK PURCHASE AGREEMENT DATEXT 1 EXHIBIT 10.10 STOCK PURCHASE AGREEMENT AGREEMENT made as of August 3, 1993 by and among Lotus Development Corporation, a Delaware corporation ("SELLER"), Datext, Inc., a Delaware corporation (the "COMPANY"), and Datext Holding Corporation, a Delaware corporation ("BUYER"). The authorized capital stock of the Company consists of 100 shares of common stock, par value $.01 per share (the "COMPANY STOCK"), of which 100 shares are issued and outstanding. Seller owns beneficially and of record 100% of the outstanding Company Stock. Prior to the closing of the transactions contemplated herein, Seller will have transferred all of the assets (other than certain assets to be licensed to the Company) and all of the liabilities of its Lotus OneSource Division (the "DIVISION") to the Company. References herein to the "BUSINESS" shall mean the Division prior to the asset transfer and the Company after the asset transfer. Buyer desires to acquire from Seller the shares of Company Stock owned by Seller, and Seller desires to sell to the Buyer, all of the shares of Company Stock owned by Seller. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF STOCK 1.01 STOCK PURCHASE. On and subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined in Section 1.04 (a) below), Buyer will purchase from Seller, and Seller will sell and transfer to Buyer, all of the shares of Company Stock owned by Seller, free and clear of all liens, charges, security interests and other encumbrances, for the consideration specified in Section 1.02 below. 1.02 PURCHASE PRICE. (a) The total purchase price to be paid to Seller for the Company Stock (the "PURCHASE PRICE") will be an amount equal to (i) $8,439,000 plus (ii) the amount, if any, that the Closing Date Asset Value (as defined in (b) below) is greater than $15,921,000, minus (iii) the amount, if any, that the Closing Date Asset Value is less than $15,921,000. (b) "CLOSING DATE ASSET VALUE" shall be equal to the excess of the Company's assets (excluding cash) over its liabilities (excluding deferred revenues), determined as of the close of the Company's business on the day immediately preceding the Closing Date in accordance with generally accepted accounting principles ("GAAP") applied in a manner consistent with past practices of Seller. In computing Closing Date Asset Value, all accounting entries (including all liabilities and accruals) will be taken into account regardless of their amount and all known errors and omissions will be corrected and all known proper adjustments will be made. 2 (c) The purchase price to be paid to Seller at Closing will be an amount equal to $8,439,000 (the "ESTIMATED PURCHASE PRICE"). The Estimated Purchase Price shall be paid as follows: (i) $3,439,000 of which will be paid by Buyer to Seller in cash by wire transfer of immediately available funds; and (ii) $5,000,000 of which will be paid by Buyer to Seller by issuance of a subordinated promissory note of Buyer in the form of EXHIBIT A attached hereto (the "NOTE"). In addition, Buyer will issue to Seller a warrant to initially purchase 100,000 shares of Buyer's common stock in the form of EXHIBIT B attached hereto (the "WARRANT"). The Note, the Warrant and the common stock issued or issuable pursuant to the Warrant are referred to herein as the "BUYER Securities." (d) As soon as practicable (but in no event later than five days) after the Purchase Price is determined pursuant to Section 1.03 below, (i) in the event that the Purchase Price is less than the Estimated Purchase Price, Seller will pay to Buyer in immediately available funds an amount equal to (A) such difference, plus (B) simple interest computed on the amount determined pursuant to clause (i) (A) above at 8% per annum from (and including) the Closing Date to (but not including) the date on which such payment is made, or (ii) in the event that the Purchase Price is greater than the Estimated Purchase Price, Buyer will pay to Seller in immediately available funds an amount equal to (A) such difference plus (B) simple interest computed on the amount determined pursuant to clause (ii)(A) above at 8% per annum from (and including) the Closing Date to (but not including) the date on which such amount is paid; provided that in the event that Buyer's financing agreements do not permit the payment described above to Seller, Buyer may deliver to Seller its promissory note in the principal amount as set forth above bearing interest at 8% per annum which will mature twelve months from the date of issuance. 1.03 DETERMINATION OF PURCHASE PRICE. For the purpose of determining the Purchase Price, Buyer's accountants will prepare and deliver to Seller, within 60 days after the Closing Date, a detailed balance sheet for the Company as of the close of business on the day immediately preceding the Closing Date (the "CLOSING BALANCE SHEET"), which sets forth the determination of Closing Date Asset Value and the Purchase Price, all computed in accordance with Section 1.02(b) hereof. Within 15 days after the accountants' delivery of the Closing Balance Sheet and the determination of the Purchase Price, Seller will deliver a detailed statement describing its objections (if any) to the Closing Balance Sheet and determination of the Purchase Price. Buyer and Seller will use reasonable efforts to resolve any disputes regarding the determination of the Purchase Price, but if a final resolution is not obtained within 30 days after Seller has submitted its objections, any remaining disputes will be resolved by a nationally recognized accounting firm mutually agreeable to Buyer and Seller. If Buyer and Seller are unable to mutually agree on such an accounting firm within 30 days, a "big-six" accounting firm will be selected by lot after eliminating Price Waterhouse, Coopers & Lybrand and any other -2- 3 accounting firm which has a conflict with Buyer or Seller (any accounting firms selected or agreed upon shall be referred to herein as the "SELECTED ACCOUNTING FIRM"). The determination of the Purchase Price by the Selected Accounting Firm (which determination need not be in the form of an opinion of the Selected Accounting Firm) will be made within 45 days of the date such dispute is submitted to the Selected Accounting Firm and will be conclusive and binding upon the parties. The Company will allow Seller, its attorneys, accountants and representatives and the Selected Accounting Firm reasonable access to its books, records and personnel in order to determine the Purchase Price. The Selected Accounting Firm will determine the allocation of the costs and expenses of its determination of the Purchase Price based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if Seller claims the Purchase Price is $1,000 greater than the amount determined by Buyer's accountants, and the Buyer contests only $500 of the amount claimed by Seller, and if the Selected Accounting Firm ultimately resolves the dispute by awarding Seller $300 of the $500 contested, then the costs and expenses of arbitration will be allocated 60% (i.e. 300 / 500) to Buyer and 40% (i.e. 200 / 500) to Seller. 1.04 CLOSING TRANSACTIONS. (A) CLOSING. The closing of the transactions contemplated by this Agreement (the "CLOSING") will take place at the offices of Lotus Development Corporation or such other place as mutually agreed upon by Seller and Buyer, at 10:00 a.m. on the third business day following the satisfaction or waiver of all conditions to the obligations of Seller and Buyer to consummate the transactions contemplated hereby (other than conditions with respect to actions to be taken at the Closing itself), or on such other date as is mutually agreeable to Buyer and Seller. The date and time of the Closing are herein referred to as the "CLOSING DATE." (b) TRANSFERS. Subject to the conditions set forth in this Agreement, the parties agree to consummate the following "CLOSING TRANSACTIONS" on the Closing Date: (i) Seller will deliver to Buyer certificates representing the Company Stock owned by Seller, duly endorsed for transfer with all requisite state and federal transfer stamps affixed thereto to be accompanied by duly executed stock powers; (ii) Buyer will deliver to Seller $3,439,000 in cash, by wire transfer of immediately available funds, and the Note and Warrant duly executed; (iii) Buyer will deliver to Seller $3,000,000 in cash, by wire transfer of immediately available funds, as payment of the Non-Compete Price (as defined in Section 10.07(e) below); (iv) The Company will deliver to Seller $400,000 in cash, by wire transfer of immediately available funds, as payment for the License Agreement; and (v) There shall be delivered to Buyer, Seller and the Company the opinions, certificates and other documents and instruments provided to be delivered under Article II hereof. -3- 4 ARTICLE II CONDITIONS TO CLOSING 2.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or before the Closing Date: (a) The representations and warranties set forth in Article IV and Article V hereof will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties; provided, however, that any disclosures made by Seller and the Company to Buyer pursuant to Sections 4.29 and 5.06 hereof will not be taken into account in determining whether this condition is satisfied; (b) Seller will have performed and complied in all material respects with all of the covenants and agreements required to be performed under this Agreement prior to the Closing; (c) Since March 31, 1993, there will have been no material adverse change in the business, financial condition, operating results, earnings, customer, supplier or employee relations of the Business and there will have been no material casualty loss, destruction or damage to the assets or properties of the Company, whether or not covered by insurance; (d) All consents by third parties that are required for the transfer of the Company Stock to Buyer or that are set forth on Schedule 2.01(d) hereto (the "CONSENTS SCHEDULE") will have been obtained, and releases of any and all security interests held by third parties will have been obtained, all on terms reasonably satisfactory to Buyer; (e) All governmental filings, authorizations and approvals (including filings, authorizations and approvals of foreign governments) that are required for the consummation of the transactions contemplated hereby will have been duly made and obtained; (f) No action or proceeding before any court or government body will be pending or threatened wherein an unfavorable judgment, decree, injunction or order would prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause such transactions to be rescinded, or might adversely affect the right of Buyer to own, operate or control the Company; (g) Seller will have entered into the License Agreement (the "LICENSE AGREEMENT") with the Company relating to the license of certain of Seller's intellectual property to the Company, in the form set forth in EXHIBIT C attached hereto, and the License Agreement will be in full force and effect; (h) Seller will have entered into a Transition Services Agreement (the "TRANSITION AGREEMENT") with the Company, substantially in the form set forth in EXHIBIT D attached hereto, and the Transition Agreement will be in full force and effect; -4- 5 (i) Seller will have entered into an Assignment and Assumption Agreement with the Company substantially in the form set forth in EXHIBIT E attached hereto (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), and the Assignment and Assumption Agreement will be in full force and effect; (j) [INTENTIONALLY LEFT BLANK]; (k) Buyer will have obtained working capital financing and a term facility in an amount sufficient to consummate the transactions contemplated by this Agreement (which will be satisfied as to amount if Buyer receives at least $5.0 million based upon a commitment from the equity investors of Buyer to invest at least $4 million in Buyer) on terms satisfactory to Buyer (it being understood that in the event that Buyer cannot obtain such financing it will use its best efforts to deliver to Seller a letter from the potential financing source indicating that it does not wish to provide Buyer with such financing); (l) Buyer will be satisfied, in its sole discretion, with the results of the confirmatory business (meaning confirming that there are no material variances with prior diligence), legal and accounting due diligence investigations and review of the Company performed by its representatives; (m) Buyer will have received an opinion, dated the Closing Date, of (i) Thomas M. Lemberg, Esq., General Counsel to Seller, in the form of EXHIBIT F attached hereto; (n) On or prior to the Closing Date, Seller will have delivered to Buyer all of the following: (i) A certificate from Seller in the form set forth in EXHIBIT G attached hereto, dated the Closing Date, stating that the preconditions specified in Sections 2.01(a) through (f) above have been satisfied; (ii) Copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions contemplated herein; (iii) Certified copies of the resolutions of the Seller's board of directors approving the transactions contemplated by this Agreement; (iv) Resignations of all of the officers and directors of the Company, effective as of the Closing Date; (v) All books (including the Company's corporate minute books), records and other materials related to the Company's corporate administration and record keeping (which Seller may deliver by delivery of the foregoing to the Company's principal place of business); (vi) Long form good standing certificate of the Company for the State of Delaware; -5- 6 (vii) Certificate of Incorporation of the Company certified by the State of Delaware and By-Laws of the Company certified by its Secretary; and (viii) Such other documents or instruments as Buyer reasonably requests to effect the transactions contemplated hereby. (o) All actions to be taken by Seller in connection with the consummation of the Closing Transactions and the other transactions contemplated hereby and all certificates, opinions, instruments and other documents required to be delivered by Seller to effect the transactions contemplated hereby reasonably requested by Buyer will be reasonably satisfactory in form and substance to Buyer. Any condition specified in this Section 2.01 may be waived by Buyer, PROVIDED that no such waiver will be effective unless it is set forth in a writing executed by Buyer or unless Buyer agrees to consummate the transactions contemplated by this Agreement without satisfaction of such condition. 2.02 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or before the Closing Date: (a) the representations and warranties set forth in Article VI hereof will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties; provided, however, that any disclosures made by Buyer to Seller pursuant to Section 6.08 will not be taken into account in determining whether this condition is satisfied; (b) Buyer will have performed and complied with all of the covenants and agreements required to be performed by it under this Agreement prior to the Closing; (c) All governmental filings, authorizations and approvals that are required for the consummation of the transactions contemplated hereby will have been duly made and obtained; (d) The company will have entered into the License Agreement with the Seller, and the License Agreement will be in full force and effect; (e) The Company will have entered into the Transition Agreement with the Seller, and the Transition Agreement will be in full force and effect; (f) The Company will have entered into the Assignment and Assumption Agreement with the Seller, and the Assignment and Assumption Agreement will be in full force and effect; (g) [INTENTIONALLY LEFT BLANK]; (h) Seller will have received an opinion, dated the Closing Date, of Kirkland & Ellis, counsel to Buyer, in the form of EXHIBIT H attached hereto; -6- 7 (i) On or prior to the Closing Date, Buyer will have delivered to Seller all of the following: (i) a certificate from Buyer in the form set forth in EXHIBIT I attached hereto, dated the Closing Date, stating that the preconditions specified in Sections 2.02(a) through (c) above have been satisfied; (ii) copies, certified by the Secretary of Buyer, of the resolutions of Buyer's board of directors approving the execution and delivery of this Agreement, the Buyer Securities and the transactions contemplated by this Agreement; and (iii) such other documents or instruments as Seller reasonably requests to effect the transactions contemplated hereby. (j) All actions to be taken by Buyer in connection with the consummation of the Closing Transactions and the other transactions contemplated hereby and all certificates, opinions, instruments and other documents required to be delivered by Buyer to effect the transactions contemplated hereby reasonably requested by Seller will be satisfactory in form and substance to Seller. Any condition specified in this Section 2.02 may be waived by Seller, PROVIDED that no such waiver will be effective unless it is set forth in a writing executed by Seller or unless Seller agrees to consummate the transactions contemplated by this Agreement without the satisfaction of such condition. ARTICLE III COVENANTS PRIOR TO CLOSING 3.01 AFFIRMATIVE COVENANTS OF THE COMPANY AND SELLER. With respect to the period commencing on the date hereof through the Closing Date, unless Buyer otherwise agrees in writing, the Company and Seller covenant and agree as follows: (a) Except as set forth in the Assets Schedule (as defined in Section 4.10(a)), Seller will cause all of the assets (other than the assets to be licensed to the Company by Seller pursuant to the License Agreement) of the Division to be transferred to the Company; (b) The Company will, and Seller will cause the Business to, conduct its business and operations (including its cash management practices, the collection of receivables, inventory control and payment of payables) only in the usual and ordinary course of business in accordance with past custom and practice; (c) Seller will cause the Business to, and the Company will, keep in full force and effect its corporate existence and all material rights, franchises and intellectual property relating or pertaining to the Business; -7- 8 (d) Seller will cause the Business to, and the Company will, use its reasonable best efforts to carry on the Business in the same manner as presently conducted and to keep the Business' business organization and properties intact, including its present business operations and employees and its present relationships with lessors (through June 30, 1993 with respect to the Cambridge, MA real estate), licensors, suppliers and customers and others having business relations with each of them; (e) Seller will cause the Business to, and the Company will, maintain the assets of the Business in customary repair, order and condition consistent with past practice and current needs, replace in accordance with past practice their inoperable, worn out or obsolete assets with assets of comparable quality consistent with past practice and current need and, in the event of a casualty, loss or damage to any of such assets or properties prior to the Closing Date for which the Business is insured, either repair or replace such damaged property or use the proceeds of such insurance in such other manner as mutually agreed upon by Buyer and Seller; (f) Seller will cause the Business to, and the Company will, maintain the books, accounts and records of the Business in accordance with past custom and practice as used in the preparation of the Financial Statements (as such term is defined in Section 4.06 hereof); (g) Seller will, and will cause the Business to, and the Company will, not act to dissuade or discourage employees from continuing such employment; (h) Seller will, and will cause the Company and its officers, directors, employees and agents (including attorneys and accountants) to permit Buyer and its employees, agents, accounting and legal representatives and lenders (and such lenders' audit staff) and their representatives to have reasonable access at reasonable times during normal business hours and in a manner so as not to interfere with the normal business operations of the Business to the Business' books, records, invoices, contracts, leases, personnel, facilities, equipment and other things reasonably related to the business and assets of the Business, wherever located as Buyer may reasonably request; (i) Seller will promptly (once any officer or director of Seller or the Company has knowledge thereof) inform Buyer in writing of any material variances from the representations and warranties contained in Article IV or Article V hereof or any breach of any covenant hereunder by Seller or the Company; (j) Seller will cause the Business to, and the Company will, comply in all material respects with all legal requirements and contractual obligations applicable to the operations and business of the Business and pay all applicable taxes when due; (k) Seller will, and will cause the Business to, and the Company will, cooperate with Buyer and use their reasonable best efforts to make all registrations, filings and applications, to give all notices and to cause the conditions to Buyer's obligation to close to be satisfied (including, without limitation, the execution and delivery of all agreements contemplated hereunder to be so executed and delivered); and -8- 9 (l) Seller will confer on a regular and frequent reasonable basis with representatives of Buyer to report on operational matters and the general status of ongoing operations. 3.02 NEGATIVE COVENANTS OF THE COMPANY AND SELLER. Prior to the Closing, without Buyer's prior written consent, Seller will cause the Business to not, and the Company will not: (a) take any action of the type that would require disclosure under Section 4.09 of this Agreement; (b) make any loans, enter into any insider transactions or make or grant any increase in any employee's or officer's compensation in excess of 5% of his or her previous compensation level or make or grant any increase in any employee benefit plan, incentive arrangement or other benefit covering any of the employees of the Business except in accordance with past practices; (c) establish or, except in accordance with past practice, contribute to any pension, retirement, profit sharing or stock bonus plan, multiemployer, severance or health benefit plan covering the employees of the Business; (d) except as specifically contemplated by this Agreement, enter into any contract, agreement or transaction other than in the ordinary course of the Business' business, in accordance with past custom and practice and at arm's length with unaffiliated persons or entities; (e) fail to use reasonable efforts to take or omit to take any action which could reasonably be anticipated to have a material adverse effect upon the business, operations, financial condition, operating results, earnings, assets, customer, supplier, employee and sales representative relations, or business prospects of the Business; (f) terminate the employment of any senior level managers of the Business listed on Schedule 3.02(f) attached hereto (the "MANAGERS SCHEDULE") other than for cause; and (g) amend, modify, renew or alter any contract of the Business with its existing customers which would cause payments from customers to the Business to be made more frequently than is contemplated by the contracts in existence as of the date of this Agreement. 3.03 COVENANTS OF BUYER. Prior to the Closing, Buyer will: (a) promptly (once it has knowledge thereof) inform Seller in writing of any variances from the representations and warranties contained in Article VI hereof or any breach of any covenant hereunder by Buyer; and (b) cooperate with Seller and use its reasonable best efforts to make all registrations, filings and applications, to give all notices and to obtain all governmental, third party or other consents, transfers, approvals, orders, qualifications and waivers necessary for the consummation of the transactions contemplated hereby and to cause the other conditions to Seller's obligation to -9- 10 close to be satisfied (including, without limitation, the execution and delivery of all agreements contemplated hereunder to be so executed and delivered). ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE BUSINESS As a material inducement to Buyer to enter into this Agreement, Seller and the Company hereby represent and warrant that: 4.01 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in every jurisdiction in which the nature of its business or its ownership of property requires it to be qualified, other than where the failure to qualify would not have a material adverse effect on the Company or the Business. All such jurisdictions in which the Company is qualified are set forth on Schedule 4.01 attached hereto (the "QUALIFICATIONS SCHEDULE"). The Company has full corporate power and authority and all licenses, permits and authorizations necessary to own and operate its properties, to carry on its business as now conducted. The copies of the Company's certificate of incorporation and by-laws which have been furnished to Buyer reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. The minute books containing the records of meetings of the shareholders and board of directors, the stock certificate books and the stock record books of the Company are correct and complete. The Company is not in default under or in violation of any provision of its certificate of incorporation or by-laws. 4.02 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate power and authority to execute and deliver this Agreement and all other agreements contemplated hereby to which the Company is a party and to consummate the transactions contemplated hereby and thereby. The board of directors of Seller has duly approved this Agreement and all other agreements contemplated hereby to which the Company is a party and has duly authorized the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby. No other corporate proceedings on the part of the Company are necessary to approve and authorize the execution and delivery of this Agreement and all other agreements contemplated hereby to which the Company is a party and the consummation of the transactions contemplated hereby and thereby. This Agreement and all other agreements contemplated hereby to which the Company is a party have been duly executed and delivered by the Company and constitute the valid and binding agreements of the Company, enforceable against the Company in accordance with their terms, except as enforceability hereof or thereof may be limited by bankruptcy or other laws affecting creditor's rights generally and limitations on the availability of equitable remedies. 4.03 CAPITALIZATION. The authorized, issued and outstanding stock of the Company is as set forth in the second paragraph of the recitals of this Agreement. All of the issued and outstanding shares of the Company Stock have been duly authorized, are validly issued, fully paid and nonassessable, are not subject to, nor were they issued in violation of, any preemptive -10- 11 rights, and are owned of record and beneficially by Seller. There are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights or other agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance, disposition or acquisition of any of its capital stock (other than this Agreement). There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. There are no voting trusts, proxies or any other agreements or understandings with respect to the voting of the capital stock of the Company. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock. 4.04 SUBSIDIARIES; INVESTMENTS. Except as set forth in Schedule 4.04 attached hereto (the "SUBSIDIARIES SCHEDULE"), the Company does not own or hold any rights to acquire any shares of stock or any other security or interest in any other Person, and the Company has never had any Subsidiary. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof "SUBSIDIARY" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination as being made, owned by the Company either directly or through one or more Subsidiaries. 4.05 ABSENCE OF CONFLICTS. Except as set forth in Schedule 4.05 attached hereto (the "RESTRICTIONS SCHEDULE"), the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the transfer of the assets of the Division to the Company) do not and will not (a) conflict with or result in any breach of any of the provisions of, (b) constitute a default under, (c) result in a violation of, (d) give any third party the right to terminate or to accelerate any obligation under, (e) result in the creation of any lien, security interest, charge or encumbrance upon the assets of the Company or the Company Stock, or (f) require any authorization, consent, approval, exemption or other action by or notice to any court or other governmental body, under the provisions of the certificate of incorporation or by-laws of the Company or any indenture, mortgage, lease, loan agreement or other agreement or instrument to which the Company is bound or affected, or any law, statute, rule or regulation or any judgment, order or decree to which the Company is subject. 4.06 FINANCIAL STATEMENTS. The Company has furnished Buyer with copies of the Division's (a) unaudited balance sheet as of March 31, 1993 (the "Latest Balance Sheet") and the related statements of income and cash flow for the three month period then ended and (b) audited balance sheets and statements of income and cash flow for the fiscal years ended December 31, 1992 and 1991. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (the "FINANCIAL STATEMENTS") is accurate and complete in all material respects, is consistent with the Division's books and records (which, in turn, are accurate and complete in all material respects), present fairly the Division's financial condition and results of operations as of the times and for the periods referred to therein, and has been prepared in accordance with GAAP, consistently applied, subject in the case of unaudited financial statements to changes -11- 12 resulting from normal year-end adjustments (which will not be material individually or in the aggregate) and to the absence of footnote disclosure. 4.07 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing, including taxes with respect to or based upon transactions or events occurring on or before the Closing, except (i) obligations under contracts or commitments described in Schedule 4.13 or under contracts and commitments which are not required to be disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities reflected on the Latest Balance Sheet, (iii) liabilities which have arisen after the date of the Latest Balance Sheet in the ordinary course of business or otherwise in accordance with the terms and conditions of this Agreement (none of which is a liability for breach of contract, breach of warranty, tort or infringement, or a claim or lawsuit, or an environmental liability), and (iv) liabilities otherwise expressly disclosed in this Agreement or the Schedules attached hereto. 4.08 ABSENCE OF MATERIAL ADVERSE CHANGE. Since March 31, 1993, there has been no material adverse change in the business, financial condition, operating results, earnings, assets, customer, supplier or employee relations of the Business and there has been no material casualty loss or damage to the assets of the Business (whether or not covered by insurance). 4.09 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in Schedule 4.09 attached hereto (the "DEVELOPMENTS SCHEDULE") and except as expressly contemplated by this Agreement, since March 31, 1993, neither the Company nor Seller with respect to the Division has: (a) redeemed or repurchased, directly or indirectly, any shares of capital stock or declared, set aside or paid any dividends or made any other distributions with respect to any shares of its capital stock; (b) issued, sold or transferred any notes, bonds or other debt securities or any equity securities, securities convertible, exchangeable or exercisable into equity securities, or warrants, options or other rights to acquire equity securities, of the Company or its Subsidiaries; (c) borrowed any amount or incurred or become subject to any liabilities, except liabilities incurred in the ordinary course of business; (d) discharged or satisfied any lien or encumbrance or paid any obligation or liability, other than liabilities paid in the ordinary course of business, or prepaid any amount of indebtedness for borrowed money; (e) mortgaged, pledged or subjected to any lien, charge or any other encumbrance, any portion of its properties or assets, other than purchase money liens incurred in the ordinary course of business not to exceed $10,000 in the aggregate; -12- 13 (f) sold, leased, assigned or transferred (including without limitation transfers to Seller or any employees or affiliates of the Company) a portion of its tangible assets, except in the ordinary course of business, or cancelled without fair consideration any debts or claims owing to or held by it; (g) sold, assigned, licensed or transferred (including without limitation transfers to Seller or any employees or affiliates of the Company or the Division) any Proprietary Rights; (h) disclosed any confidential information other than pursuant to agreements which prohibit the receiving party from disclosing such confidential information or received any confidential information of any third party in violation of any obligation of confidentiality; (i) suffered any extraordinary losses or waived any rights of value, whether or not in the ordinary course of business or consistent with past custom and practice in excess of $10,000; (j) suffered any theft, damage, destruction or casualty loss in excess of $10,000, to its tangible assets, whether or not covered by insurance or suffered any substantial destruction of the Business' books and records; (k) entered into, amended or terminated any lease, contract, agreement or commitment, or taken any other action or entered into any other transaction, in each case other than in the ordinary course of business and in accordance with past custom and practice or entered into any transaction with any insider (as defined in Section 4.22); (l) made or granted any bonus or any wage, salary or compensation increase in excess of $10,000 per year to any director, officer, employee or sales representative, group of employees or consultant or made or granted any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement; (m) made any capital expenditures or commitments for capital expenditures that aggregate in excess of $25,000; (n) made any loans or advances to, or guarantees for the benefit of, any persons; (o) made any charitable contributions or pledges; (p) entered into any lease of capital equipment or real estate involving rental in excess of $10,000 per annum; or (q) changed or authorized any change in its certificate of incorporation or by-laws. 4.10 TITLE TO PROPERTIES. (a) Except as set forth on Schedule 4.10(a) attached hereto (the "ASSETS SCHEDULE"), Seller has transferred all of its right, title and interest in all of the assets (other than the assets to be licensed to the Company by Seller pursuant to the License Agreement) of the Division to the -13- 14 Company. Such transferred assets include, without limitation, the assets used principally by the employees of the Division at each of Seller's facilities (i.e., office furniture and computer equipment used by such employees and the equipment used at the smaller training room in the New York, New York field office and the training room in the Chicago, Illinois field office). (b) The Company (i) owns no real estate and (ii) has no real estate leases or subleases. As of the Closing, the Transition Agreement will provide Buyer with arrangements relating to all real estate used or occupied by the Business. (c) Except as set forth on Schedule 4.10(c) attached hereto (the "ENCUMBRANCES SCHEDULE"), the Business owns good and marketable title, free and clear of all liens, charges, security interests and encumbrances to all of the personal property and tangible assets which are shown on the Latest Balance Sheet or acquired thereafter or located on their premises or used primarily by the Business. (d) The machinery, equipment, vehicles and other tangible assets of the Business are in satisfactory operating condition and repair and are usable in the ordinary course of business except for assets that are not necessary for the operation of the business of the Business. The Business owns or leases under valid leases all machinery, equipment and other tangible assets necessary for the conduct of its business. 4.11 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 4.11 attached hereto (the "ACCOUNTS RECEIVABLE SCHEDULE"), all of the notes and accounts receivable of the Business reflected on the Closing Balance Sheet are, and all notes and accounts receivable of the Business as of the Closing Date will be, good and valid receivables (subject to no counterclaims or offset except for claims by debtors of nonperformance relating to accounts receivable which are contingent on the Company's performance after the Closing of its obligations pursuant to agreements) and will be collected if the Company exercises reasonable best efforts in collection of the same (net of the allowance for doubtful accounts) within 90 days after the Closing Date at the aggregate amount recorded therefor on the books and records of the Business as of the Closing Date. As of the Closing Date, there are no individual accounts receivable which are over $25,000 and 60 days past due, except as set forth on Schedule 4.11 attached hereto (the "ACCOUNTS RECEIVABLE SCHEDULE"). As of the Closing date, no person or entity will have any lien on such receivables or any part thereof, and no agreement for deduction, free goods, discount or other deferred price or quantity adjustment will have been made with respect to any such receivables other than in the ordinary course of business. 4.12 TAXES. (a) The Company has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes owed by the Company (as shown on any Tax Return) have been paid. No claim is currently outstanding and, to Seller's knowledge, for the period since Seller has owned the Company no claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no security interests on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. -14- 15 (b) The Affiliated Group has filed all income Tax Returns that it was required to file for each taxable period during which the Company was a member of the group. All such Tax Returns were correct and complete in all material respects in so far as they relate to the Company. All income Taxes owed by the Affiliated Group (as shown on any Tax Return) have been paid for each taxable period during which the Company was a member of the group. (c) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (d) No director or officer (or employee responsible for Tax matters) of the Company or Seller has knowledge of any specific issue that he expects any Tax authority to raise which, if sustained would lead to the assessment of additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any liability for Taxes of the Company either (i) claimed or raised by any authority in writing or (ii) as to which any of the Seller and the directors and officers (and employees responsible for Tax matters) of the Company has knowledge based upon personal contact with any agent of such authority, except liability for Taxes for which another Person is principally responsible but for which the Company may be liable on account of the provisions of Treasury Reg. Section 1.1504-6 (or any similar provision of state, local or foreign law). Schedule 4.12 lists all federal, state, local and foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 1991, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Seller has delivered to Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company for taxable periods ended on or after December 31, 1991. (e) The Company has not filed a consent under Code Section 341(f) concerning collapsible corporations. The Company has not made any payments, is not obligated to make any payments, and is not a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. The Company is not a party to any Tax allocation or sharing agreement. Since August 23, 1987, the Company has not been a member of an Affiliated Group other than the Affiliated Group of which it is currently a member. (f) The Company has no liability for the Taxes of any Person other than the Company (i) under Treasury Reg. Section 1. 1502-6 (or any similar provision of state, local, or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. (g) Schedule 4.12 sets forth the following information with respect to the Company as of April 3, 1993 (i) the basis of the Company in its assets; and (ii) the amount of any deferred gain or loss allocable to the Company arising out of any deferred intercompany transaction (as defined in Treasury Reg. Section 1.1502-13). Seller will further provide to Buyer at least 5 days -15- 16 prior to the Closing: (i) an update to the information set forth in Schedule 4.12 as of June 30, 1993 and (ii) an estimated pro forma basis of the Company's fixed assets as of the Closing. (h) The unpaid Taxes of the Company (i) did not, as of the date of the Latest Balance Sheet, exceed the reserve for tax liability (rather than any reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the face of the Latest Balance Sheet (rather than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing their Tax Returns. (i) For purposes of this Agreement: (i) "TAX" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. (ii) "TAX RETURN" means any return, declaration, report, claim of refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. (iii) "AFFILIATED GROUP" means the affiliated group within the meaning of Code Section 1504, or any similar group defined under a similar provision of state, local or foreign law, of which the Company was a member during the period from August 23, 1987 through the Closing Date. (iv) "CODE" means the Internal Revenue Code of 1986, as amended. 4.13 CONTRACTS AND COMMITMENTS. (a) Except as specifically contemplated by this Agreement and except as set forth in Schedule 4.13 attached hereto (the "CONTRACTS SCHEDULE"), neither the Company nor Seller with respect to the Division is a party to or bound by, whether written or oral, any: (i) collective bargaining agreement or contract with any law or union or any bonus, pension, profit sharing, retirement or any other form of deferred compensation plan or any stock purchase, stock option, hospitalization insurance or similar plan or practice, whether formal or informal; (ii) contract for the employment of any officer, individual employee or other person on a full time or consulting basis or any severance agreements; (iii) agreement or indenture relating to the borrowing of money or to mortgaging, pledging or otherwise placing a lien on any of its assets; (iv) agreements with respect to the lending or investing of funds; (v) license or royalty agreements (other than the licenses granted by the Company pursuant to its customer subscription agreements); (vi) guaranty of any obligation for borrowed money or otherwise, other than endorsements made for collection; (vii) lease or agreement under which it is lessee of, or holds or -16- 17 operates, any personal property owned by any other party calling for payments in excess of $25,000 annually; (viii) lease or agreement under which it is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by it; (ix) contract or group of related contracts with the same party for the purchase or sale of raw materials, commodities, supplies, products or other personal property or for the furnishing or receipt of services which either calls for performance over a period of more than one year (except if such contracts do not involve a sum in excess of $5,000 annually)or involves a sum in excess of $25,000; (x) contract or group of related contracts with the same party continuing over a period of more than six months from the date or dates thereof, not terminable by it on 30 days or less notice without penalties or involving more than $15,000; (xi) contract which prohibits it from freely engaging in business anywhere in the world; (xii) contract or agreement with any officer, director, shareholder or other insider of the Company or Seller or any of its affiliates (excluding customer contracts); (xiii) contract relating to the distribution, marketing or sales of its products; (xiv) warranty agreement with respect to products sold; (xv) franchise agreements; (xvi) agreements, contracts or understandings pursuant to which the Business subcontracts work to third parties which involves a sum in excess of $25,000; or (xvii) other agreement material to it whether or not entered into in the ordinary course of business. (b) Except as specifically contemplated by this Agreement or disclosed in the Contracts Schedule, (i) no contract or commitment required to be disclosed on the Contracts Schedule has been breached or cancelled by the other party since April 1, 1993, (ii) since April 1, 1993, no customer or supplier has indicated in writing or orally to an officer or director of the Company or Seller that it will stop or materially decrease the rate of business done with the Business, (iii) the Business has performed all the obligations required to be performed in connection with the contracts or commitments required to be disclosed on the Contracts Schedule and is not in receipt of any claim of default under any contract or commitment required to be disclosed on the Contracts Schedule, (iv) the Business has no present expectation or intention of not fully performing any obligation pursuant to any contract set forth on the Contracts Schedule, (v) no director, officer or division directors of the Company or officer or director of Seller has knowledge of any breach or anticipated breach by any other party to any contract set forth on the Contracts Schedule, and (vi) no unfilled customer order or commitment obligating the Business to process, manufacture or deliver products or perform services will result in a loss to the Business upon completion of performance. (c) Seller has provided Buyer with a true and correct copy of all written contracts which are referred to on the Contracts Schedule, together with all amendments, waivers or other changes thereto. The Contracts Schedule contains an accurate and complete description of all material terms of all oral contracts referred to therein. 4.14 PROPRIETARY RIGHTS. (a) "PROPRIETARY RIGHTS" shall mean all of the following items owned by, issued to or licensed to (other than the rights licensed to the Company pursuant to the License Agreement), the Company or Seller with respect solely to the Division, along with all income, royalties, damages and payments due or payable at the Closing or thereafter, including, without limitation, -17- 18 damages and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation in part, division, revision, extension or reexamination thereof; trademarks, service marks, trade dress, logos, trade names and corporate names together with all goodwill associated therewith, including, without limitation, the use of the name "Datext", "OneSource" and all translations, adaptations, derivations and combinations of the foregoing; copyrights registered or unregistered, statutory or common law, and copyrighted works; mask works; and all registrations, applications and renewals for any of the foregoing; trade secrets and confidential information (including, without limitation, ideas, formulae, compositions, know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial, business and marketing plans, and customer and supplier lists and related information); computer software (including, without limitation, data and related documentation); other proprietary rights; licenses or other agreements to or from third parties regarding the foregoing; and all copies and tangible embodiments of the foregoing (in whatever form or medium), in each case including, without limitation, the items set forth on Schedule 4.14 attached hereto (the "PROPRIETARY RIGHTS SCHEDULE"), but excluding items specifically noted as excluded on the Proprietary Rights Schedule. (b) The Proprietary Rights, the items excluded on the Proprietary Rights Schedule and the rights licensed to the Company pursuant to the License Agreement comprise all of the intellectual property necessary for the operation of the Company's and the Division's businesses as currently conducted. The Proprietary Rights Schedule sets forth a complete and correct list of: (i) all patented or registered Proprietary Rights and all pending patent applications or other applications for registration of Proprietary Rights owned or filed by the Company or Seller solely with respect to the Division which constitute Proprietary Rights; (ii) all trade names and unregistered trademarks used by the Company or Seller solely with respect to the Division; and (iii) all licenses or similar agreements or arrangements to which the Company or Seller with respect to the Division is a party either as licensee or licensor for the Proprietary Rights. (c) Except as set forth in the Proprietary Rights Schedule, (i) the Company or Seller with respect to the Division owns and possesses all right, title and interest in and to, or has a valid and enforceable right to use, each of the Proprietary Rights, and no claim by any third party contesting the validity, enforceability, use or ownership of any of the Proprietary Rights is currently outstanding or is, to the knowledge of Seller or the Company, threatened, and there are no grounds for same; (ii) the Company or Seller with respect to the Division owns or has the valid right to use each of the Proprietary Rights necessary for the operation of its business as currently conducted; (iii) neither the Company nor Seller has received any notices of, nor is any officer or director of Seller or the Company aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to the Proprietary Rights set forth in the Proprietary Rights Schedule including, without limitation, any demand that the Business license rights from a third party; and (iv) neither the Company nor Seller with respect to the Division has infringed, misappropriated or otherwise conflicted with -18- 19 any rights of any third parties and none of the officers, division directors or directors of the Company nor the officers or directors of Seller is aware of any infringement, misappropriation or conflict which will occur as a result of the continued operation of the Business' businesses as currently conducted. (d) All of the Proprietary Rights are or will be owned by, or properly assigned or licensed to, the Company at the time of the Closing. The transactions contemplated by this Agreement (including, without limitation, the asset transfer from the Division to the Company) will have no adverse effect on the Company's right, title and interest in and to the Proprietary Rights. The Company and Seller with respect to the Division have taken all necessary action to protect the Proprietary Rights and will continue to maintain those rights prior to the Closing so as to not adversely affect the validity or enforcement of such Proprietary Rights. 4.15 LITIGATION; PROCEEDINGS. Except as set forth in Schedule 4.15 attached hereto (the "LITIGATION SCHEDULE"), there are no actions, suits, proceedings, orders or, to the knowledge of the officers, directors or division directors of the Company or the officers or directors of Seller, governmental investigations pending or, to the knowledge of the directors, officers or division directors of the Company or the officers or directors of Seller, threatened against or affecting the Company or the Seller with respect to the Business at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and there is no basis known to the directors, division directors or the officers of the Company or the officers or directors of Seller for any of the foregoing. Except as set forth on the Litigation Schedule, neither the Company nor Seller has received any opinion or legal advice in writing from outside counsel to the effect that the Business is exposed from a legal standpoint to any liability which may be material to the Business, business as previously or presently conducted. 4.16 BROKERAGE. Except as set forth in Schedule 4.16 attached hereto (the "BROKERAGE SCHEDULE"), there are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Company or Seller with respect to the Division. 4.17 GOVERNMENTAL LICENSES AND PERMITS. Schedule 4.17 attached hereto (the "LICENSES SCHEDULE") contains a complete listing and summary description of all permits, licenses, franchises, certificates, approvals and other authorizations of foreign, federal, state and local governments or other similar rights (collectively, the "LICENSES") owned or possessed by the Company or Seller with respect to the Division or used by the Company or Seller with respect to the Division in the conduct of the Business other than real estate leased by the Business. Except as indicated on the License Schedule, the Business owns or possesses all right, title and interest in and to all of the Licenses which are necessary to conduct its business as presently conducted and will use their best efforts to maintain all such Licenses. No loss or expiration of any License is pending or, to the knowledge of Seller or any officer or director of the Company, threatened, other than expiration in accordance with the terms thereof. -19- 20 4.18 EMPLOYEES. The Company and Seller with respect to the Division have complied with all applicable laws relating to the employment of personnel and labor, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes, the Worker Adjustment and Retraining Act, Sections 71A-71H of Chapter 151A of the Massachusetts General Laws Annotated and similar laws regarding plant closings or mass layoffs in other jurisdictions, and the Immigration Reform and Control Act of 1986. Neither the Company nor Seller with respect to the Division is a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances or unfair labor practices claims. Neither the Company nor Seller with respect to the Division has engaged in any unfair labor practice. No officer or director of the Company or Seller has any knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Business relating to the Business' business. The Employees Schedule sets forth the names, present annual or, as the case may be, hourly rate of compensation (including salary, bonuses and commissions) of all persons employed by the Company and Seller with respect to the Division (including independent contractors) and their job titles and dates of hire, whether full-time or part-time, whether such employees (or independent contractors) are remunerated on an hourly, weekly or monthly basis, whether such employees (or independent contractors) are members of a bargaining unit, whether such employees (or independent contractors) are actively employed and to the extent any such employee (or independent contractor) is on a paid or unpaid leave of absence, the nature of such leave of absence and the anticipated date of such employee's (or independent contractor's) return to active employment. 4.19 EMPLOYEE BENEFIT PLANS. (a) Except as set forth on Schedule 4.19, with respect to current or former employees of the Company or the Division, neither the Company nor the Seller maintains or contributes to any (i) nonqualified deferred compensation, bonus or retirement plans or arrangements, (ii) qualified defined contribution or defined benefit plans or arrangements which are employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")), or (iii) employee welfare benefit plans, (as defined in Section 3(l) of ERISA), or material fringe benefit plans or programs. The Company does not and the Seller has not, within the last five years, contributed to any multiemployer pension plan (as defined in Section 3(37) of ERISA) with respect to employees of the Company or the Division. The Company does not maintain or contribute to or have any liability under any employee welfare benefit plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Internal Revenue Code of 1986 (the "Code") or applicable state insurance laws. All of the employee benefit plans scheduled, pursuant to paragraphs (i), (ii) or (iii) above (the "Benefit Plans") are maintained by Seller. (b) The Benefit Plans (and related trusts and insurance contracts) comply in form and in operation in all respects with the applicable requirements of ERISA and the Code; and each Benefit Plan intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service as to such qualification and neither Seller -20- 21 nor the Company is aware of any facts which could cause such determination letters to be invalid as of the Closing Date. (c) Except as set forth on Schedule 4.19, all required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-ls and Summary Plan Descriptions) with respect to the employee pension benefit plans and employee welfare benefit plans have been properly filed with the appropriate government agency or distributed to participants, and the Company or the Seller has complied with the requirements of Section 4980B of the Code with respect to current or former employees of the Division. (d) With respect to each Benefit Plan which is an employee pension benefit plan, all contributions which are due (including all employer contributions and employee salary reduction contributions) have been paid to such employee pension benefit plan, all contributions for prior plan years which are not yet due and with respect to the current plan year for the period ending on the Closing Date have been made or accrued, and, with respect to any Benefit Plan which is an employee welfare benefit plans, all premiums or other payments which are due have been paid. (e) With respect to any Benefit Plan currently or previously maintained by members of the controlled group of companies (as defined in sections 414 (b) and (c) of the Code) that includes the Company (the "Controlled Group"), the Company has no liability to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the Department of Labor, any multiemployer plan, or any current or former employee of the Company or the Division or otherwise that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any member of the Controlled Group of incurring such a liability. (f) With respect to each of the Benefit Plans and each employee welfare benefit plan, Seller has furnished to Buyer true and complete copies of (i) the plan documents and summary plan descriptions, (ii) the most recent determination letter received from the Internal Revenue Service, and (iii) the last Form 5500 Annual Report. 4.20 INSURANCE. Schedule 4.20 attached hereto (the "INSURANCE SCHEDULE") lists and briefly describes each insurance policy maintained by the Business with respect to its properties, assets and business. All of such insurance policies are in full force and effect, and the Business is not in default with respect to its obligations under any such insurance policies. 4.21 OFFICERS AND DIRECTORS; BANK ACCOUNTS. Schedule 4.21 attached hereto (the "OFFICERS AND DIRECTORS SCHEDULE") lists all officers and directors of the Company, and all of the Company's bank accounts (designating each authorized signatory and the level of each signatory's authorization). 4.22 AFFILIATE TRANSACTIONS. Except as disclosed on Schedule 4.22 attached hereto (the "AFFILIATE TRANSACTIONS SCHEDULE"), no officer or director of the Company or Seller or any person related by blood or marriage to any such person (collectively, the "INSIDERS"), is a party to any material agreement, contract, commitment or transaction with the Business or which is pertaining to the business of the Business. -21- 22 4.23 COMPLIANCE WITH LAWS. The Company and its officers, directors, agents and employees, and Seller with respect to the Business, have complied with all applicable laws, regulations (including, without limitation, applicable occupational health and safety laws and regulations) and zoning ordinances of foreign, federal, state and local governments and all agencies thereof which affect the business, business practices (including, but not limited to, the Business' marketing, sales and distribution of its products and services) or any owned or leased properties of the Business and to which the Business may be subject, and no claims have been filed against the Company or Seller with respect to the Business alleging a violation of any such laws or regulations. The Company and Seller with respect to the Business have complied with, and bears no liability or correction or remediation obligation under, any environmental or safety laws or related common law theories. Neither the Company nor Seller with respect to the Business have given or agreed to give any money, gift or similar benefit (other than business meals and/or entertainment or incidental gifts of articles of nominal value) to any actual or potential customer, supplier, governmental employee, insider or any other person in a position to assist or hinder the Business in connection with any actual or proposed transaction. 4.24 PRODUCT WARRANTY. Liability for replacement, repair or refunds of products sold or licensed by the Business in connection with the Business' informal return policy or applicable contractual commitments or express or implied warranties does not exceed, in the aggregate, 1% of the Business, receipts from sales and licenses on a monthly basis. Except as set forth on Schedule 4.24 attached hereto (the "PRODUCT WARRANTY SCHEDULE"), no product manufactured, sold, licensed, leased or delivered by the Business is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale or lease, other than statutory warranties where the breach thereof would not have a material adverse effect on the Business. The Product Warranty Schedule includes copies of such standard terms and conditions for sale or lease for the Business (containing applicable guaranty, warranty and indemnity provisions). 4.25 PRODUCT LIABILITY. There is no existing liability, claim or obligation arising from or alleged to arise from any actual or alleged injury to persons or property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the Company or the Division. 4.26 POWERS OF ATTORNEY. There are no outstanding powers of attorney executed on behalf of the Company. 4.27 GUARANTEES. The Company is not a guarantor or otherwise liable for any indebtedness of any other person, firm or corporation other than endorsements for collection in the ordinary course of business. 4.28 DISCLOSURE. Neither this Agreement, nor any of the schedules, attachments or exhibits hereto, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact which has not been disclosed to Buyer of which any of the officers or directors of Seller or the Company is aware and which materially adversely -22- 23 affects or could reasonably be anticipated to materially adversely affect the business, financial condition, operating results, earnings, assets, customer, supplier, employee relations or business prospects of the Business. 4.29 CLOSING DATE. All of the representations and warranties contained in this Article IV and elsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any writing delivered to Buyer at the Closing are true and correct on the date of this Agreement and will be true and correct on the Closing Date, except to the extent that Seller has advised Buyer otherwise in writing prior to the Closing. ARTICLE V REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER As a material inducement to Buyer to enter into this Agreement, Seller represents and warrants to Buyer that: 5.01 CORPORATE ORGANIZATION AND POWER. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to enter into this Agreement and the other agreements contemplated hereby to which Seller is a party and perform its obligations hereunder and thereunder. 5.02 AUTHORIZATION. The execution, delivery and performance of this Agreement and the other agreements contemplated hereby to which Seller is a party by Seller and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of Seller, and no other corporate proceedings on its part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement constitutes, and each of the other agreements contemplated hereby to which Seller is a party will when executed constitute, a valid and binding obligation of Seller, enforceable in accordance with their terms, except as enforceability hereof may be limited by bankruptcy or other laws affecting creditor's rights generally and limitations on the availability of equitable remedies. 5.03 ABSENCE OF CONFLICTS. Neither the execution and the delivery of this Agreement and the other documents contemplated hereby to which Seller is a party, nor the consummation of the transactions contemplated hereby and thereby, will (a) conflict with, result in a breach of any of the provisions of, (b) constitute a default under, (c) result in the violation of, (d) give any third party the right to terminate or to accelerate any obligation under, (e) result in the creation of any lien, security interest or charge or encumbrance upon the assets of the Company or the Company Stock, or (f) require any authorization, consent, approval, execution or other action by or notice to any court or other governmental body, under the provisions of the certificate of incorporation or by-laws of the Seller or any indenture, mortgage, lease, loan agreement or other agreement or instrument to which Seller is bound or affected, or any statute, regulation, rule, judgment, order, decree or other restriction of any government, governmental agency or court to which Seller is subject. No notice to, filing with or authorization, consent or approval of any government or governmental agency by Seller is necessary for the consummation of the -23- 24 transactions contemplated by this Agreement and the other documents contemplated hereby to which Seller is a party. 5.04 BROKERAGE. Except as set forth on the Brokerage Schedule, there are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Seller. 5.05 SHARES. Seller holds of record and owns beneficially 100 shares of Company Stock, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act of 1933, as amended, and the state securities laws), claims, taxes, liens, charges, encumbrances, pledges, security interests, options, warrants, rights, contracts, calls, commitments, equities and demands. Seller is not a party to any option, warrant, right, contract, call, put or other agreement or commitment providing for the disposition or acquisition of any capital stock of the Company (other than this Agreement). Seller is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of the Company. 5.06 CLOSING DATE. All of the representations and warranties concerning Seller contained in this Article V and elsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any writing delivered to Buyer are true and correct on the date of this Agreement and will be true and correct on the Closing Date, except to the extent that Seller has advised Buyer otherwise in writing prior to the closing. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER As a material inducement to Seller to enter into this Agreement, Buyer hereby represents and warrants to Seller that: 6.01 CORPORATE ORGANIZATION AND POWER. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to enter into this Agreement and the other agreements contemplated hereby to which Buyer is a party and perform its obligations hereunder and thereunder. 6.02 AUTHORIZATION. The execution, delivery and performance of this Agreement and the instruments and other agreements contemplated hereby to which Buyer is a party by Buyer and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of Buyer, and no other corporate proceedings on its part are necessary to authorize the execution, delivery or performance of this Agreement or the other instruments and agreements contemplated hereunder. This Agreement constitutes, and each of the other agreements contemplated hereby to which Buyer is a party will when executed constitute, a valid and binding obligation of Buyer, enforceable in accordance with their terms, except as enforceability hereof may be limited by bankruptcy or other laws affecting creditor's rights generally and limitations on the availability of equitable remedies. -24- 25 6.03 CAPITALIZATION. On the Closing Date, the authorized capital stock of Buyer will consist of (a) 1,300,000 shares of common stock, par value $.0l per share, of which 810,000 shares are issued and outstanding and 100,000 are reserved for issuance upon exercise of the Warrants, and (b) 200,000 shares of Class P common stock, par value $.01 per share, of which 90,000 shares are issued and outstanding. On the Closing Date, all of the issued and outstanding shares of capital stock of Buyer will be duly authorized, validly issued, fully paid and nonassessable, and not subject to, nor were they issued in violation of, any preemptive rights. 6.04 NO VIOLATION. Buyer is not subject to or obligated under its certificate of incorporation, its by-laws, any applicable law, or rule or regulation of any governmental authority, or any agreement or instrument, or any license, franchise or permit, or subject to any order, writ, injunction or decree, which would be breached or violated by its execution, delivery or performance of this Agreement and the other instruments and agreements contemplated hereby to which Buyer is a party. 6.05 GOVERNMENTAL AUTHORITIES AND CONSENTS. Buyer is not required to submit any notice, report or other filing with any governmental authority in connection with the execution or delivery by it of this Agreement and the other instruments and agreements contemplated hereby to which Buyer is a party or the consummation of the transactions contemplated hereby or thereby. No consent, approval or authorization of any governmental or regulatory authority or any other party or person is required to be obtained by Buyer in connection with its execution, delivery and performance of this Agreement and the other instruments and agreements contemplated hereby to which Buyer is a party or the transactions contemplated hereby or thereby. 6.06 LITIGATION. There are no actions, suits, proceedings, orders or investigations pending or, to the best of Buyer's knowledge, threatened against or affecting Buyer at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect Buyer's performance under this Agreement and the other agreements contemplated hereby to which Buyer is a party or the consummation of the transactions contemplated hereby or thereby. 6.07 CONDUCT OF BUSINESS. Except as contemplated herein or as necessary to consummate the transactions contemplated hereby, Buyer has not conducted any business, incurred any expenses, obligations or liabilities or entered into any contracts or agreements. 6.08 CLOSING DATE. All of the representations and warranties contained in this Article VI and elsewhere in this Agreement and all information delivered in any schedule, attachment or exhibit hereto or in any writing delivered to Seller are true and correct on the date of this Agreement and will be true and correct on the Closing Date, except to the extent that Buyer has advised Seller otherwise in writing prior to the Closing. -25- 26 ARTICLE VII BUYER SECURITIES 7.01 INVESTMENT REPRESENTATIONS OF SELLER. In connection with the issuance of the Buyer Securities to Seller hereunder, Seller hereby represents and warrants to Buyer that: (a) A duly authorized officer of Seller has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Buyer Securities, has had full access to such other information concerning Buyer as Seller has requested and possesses substantial information about, and familiarity with Buyer as a result of the information provided to Seller. (b) Seller is able to bear the economic risk of the investment in the Buyer Securities for an indefinite period of time. (c) Seller is acquiring the Buyer Securities hereunder for its own account with the present intention of holding such securities for investment purposes and has no intention of selling such security in a public distribution in violation of federal or state securities laws. 7.02 LEGEND. The Buyer Securities will be imprinted with a legend in substantially the following form: The Security represented by this [SECURITY] has not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be sold or transferred in the absence of an effective registration statement under the Act or an exemption from registration thereunder. Prior to any sale or transfer of this [SECURITY], except pursuant to an effective registration statement under the Act covering such sale or transfer, the holder hereof shall have delivered to the issuer hereof (the "Company") an opinion of counsel reasonably satisfactory to the Company to the effect that such sale or transfer is exempt from registration under the Act. The transfer of such security is subject to the conditions specified in the Stock Purchase Agreement, dated as of __________ __, 1993 between the Company and Lotus Development Corporation (the "Stock Purchase Agreement"), and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge. 7.03 TRANSFER OF BUYER SECURITIES. (a) Buyer Securities are transferable only pursuant to (i) public offerings registered under the Securities Act of 1933, (ii) Rule 144 of the Securities and Exchange Commission (or -26- 27 any similar rule then in force) if such rule is available or (iii) subject to the conditions specified in paragraph (b) below, any other legally available means of transfer. (b) In connection with the transfer of any Buyer Securities (other than a transfer described in paragraph 7.03 (a) (i) or (ii) above), the holder thereof shall deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of Kirkland & Ellis or O'Sullivan, Graev and Karabell or other counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such transfer of Buyer Securities may be effected without registration of such Buyer Securities under the Securities Act. In addition, if the holder of the Buyer Securities delivers to the Company an opinion of Kirkland & Ellis or such other counsel that no subsequent transfer of such Buyer Securities shall require registration under the Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates for such Buyer Securities which do not bear the Securities Act legend set forth in Section 7.02. If the Company is not required to deliver new certificates for such Buyer Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this paragraph and Section 7.02. 7.04 FINANCIAL STATEMENTS AND OTHER INFORMATION. Buyer shall deliver to Seller (so long as Seller holds the Note): (a) as soon as available but in any event within 45 days after the end of each fiscal quarter, unaudited consolidated statements of income and cash flows of Buyer and its subsidiaries, if any, for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and consolidated balance sheets of Buyer and its subsidiaries, if any, as of the end of such quarterly period, and all such statements shall be prepared in accordance with generally accepted accounting principles, consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments; and (b) within 90 days after the end of each fiscal year, audited consolidated statements of income and cash flows of Buyer and its subsidiaries, if any, for such fiscal year, and consolidated balance sheets of Buyer and its subsidiaries, if any, as of the end of such fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by, with respect to the consolidated portions of such statements, an opinion of an independent accounting firm of recognized national standing. 7.05 ADDITIONAL RESTRICTIONS ON TRANSFER. (a) TRANSFER OF THE WARRANT OR THE UNDERLYING COMMON STOCK. Seller shall not sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in the Warrant or any shares of Underlying Common Stock (a "TRANSFER"), except pursuant to (i) a Public Sale or a Sale of Buyer ("EXEMPT TRANSFERS") or (ii) the provisions of this Section 7.05; provided that in no event shall any Transfer of the Warrant or the Underlying Common Stock pursuant to this Section 7.05 be made for any consideration other than cash payable upon consummation of such -27- 28 Transfer or in installments over time. Prior to making any Transfer other than an Exempt Transfer, Seller will give written notice (the "SALE NOTICE") to Buyer and the Investors. The Sale Notice will disclose in reasonable detail the number of shares to be transferred and the terms and conditions of the proposed transfer. Seller will not consummate any Transfer until 30 days after the Sale Notice has been given to Buyer and to the Investors, unless the parties to the Transfer have been finally determined pursuant to this Section 7.05 prior to the expiration of such 30-day period (the "ELECTION PERIOD"). (b) FIRST REFUSAL RIGHTS. Buyer may elect to purchase all (but not less than all) of the Warrant or the shares of the Underlying Common Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Seller and the Investors within 15 days after the Sale Notice has been given to Buyer. If Buyer has not elected to purchase all of the Warrant or the Underlying Common Stock to be transferred, the Investors may elect to purchase all (but not less than all) of the Warrant or the Underlying Common Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Seller within 30 days after the Sale Notice has been given to the Investors. If more than one Investor elects to purchase the Warrant or the Underlying Common Stock, the portion of the Warrant or the shares of Underlying Common Stock to be sold will be allocated among the Investors pro rata according to the number of shares of Buyer Common Stock owned by each Investor on a fully diluted basis. If the Company or the Investors have elected to purchase the Warrant or the Underlying Common Stock to be transferred, the transfer of such shares shall be consummated as soon as practicable after the delivery of the election notices. If neither Buyer nor the Investors elect to purchase all of the Warrant or the shares of Underlying Common Stock specified in the Sale Notice, Seller may, within 90 days after the expiration of the Election Period, transfer the Warrant or the shares of Underlying Common Stock specified in the Sale Notice to one or more third parties at a price per share no less than the price set forth in the Sale Notice and on other terms no more favorable to the transferee(s) thereof than specified in the Sale Notice. The purchase price specified in the Sale Notice will be payable solely in cash at the closing of the transaction or in installments over time, and the Warrant and the Underlying Common Stock may not be pledged. Any portion of the Warrant or any shares of Underlying Common Stock not transferred within such 90-day period will be subject to the provisions of this Section 7.05(b) upon subsequent transfer. (c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this Section 7.05 will not apply with respect to transfers of the Warrant or shares of Underlying Common Stock to any entity controlled by, controlling, or under common control with Seller, so long as such transferee agrees to be bound by the terms and provisions of Article VII hereof. (d) TERMINATION OF RESTRICTIONS. The restrictions on the transfer of the Warrant and the shares of Underlying Common Stock set forth in this Section 7.05 will continue with respect to the Warrant and each share of Underlying Common Stock, respectively, following any transfer thereof; provided that in any event such restrictions (other than paragraph 7.05(e) below) will terminate on the first to occur of a Sale of Buyer or a Public Offering. -28- 29 (e) HOLDBACK. Each holder of the Warrant or Underlying Common Stock agrees not to effect any public sale or distribution of any portion of this Warrant or any Underlying Common Stock or other equity securities of Buyer, or any securities convertible into or exchangeable or exercisable for any of Buyer's equity securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten Public Offering, except as part of such underwritten Public Offering or if otherwise permitted by Buyer. 7.06 SALE OF BUYER. (a) If the board of directors of Buyer (the "Board") and the holders of a majority of Buyer Common Stock then outstanding approve a Sale of Buyer (the "APPROVED SALE"), the holders of Underlying Common Stock will consent to and raise no objections against such Approved Sale. If the Approved Sale is structured as a (i) merger of consolidation, each holder of Underlying Common Stock shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) sale of stock, each holder of Underlying Common Stock shall agree to sell all of his shares of Underlying Common Stock and rights to acquire shares of Underlying Common Stock on the terms and conditions approved by the Board and the holders of a majority of Buyer Common Stock then outstanding. Each holder of Underlying Common Stock shall take all necessary or desirable actions in connection with the consummation of the Approved Sale as requested by Buyer. (b) The obligations of the holders of Underlying Common Stock with respect to the Approved Sale are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, each holder of Buyer Common Stock shall receive the same form of consideration and the same portion of the aggregate consideration such holder would have received if such aggregate consideration had been distributed by Buyer in complete liquidation pursuant to the rights and preferences set forth in Buyer's Certificate of Incorporation as in effect immediately prior to such sale or exchange; (ii) if any holders of a class of Buyer Common Stock are given an option as to the form and amount of consideration to be received, each holder of such class of Buyer Common Stock shall be given the same option; and (iii) each holder of then currently exercisable rights to acquire shares of a class of Buyer Common Stock shall be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of such class of Buyer Common Stock or (B) upon the consummation of the Approved Sale, receive in exchange for such rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of a class of Buyer Common Stock received by holders of such class of Buyer Common stock in connection with the Approved Sale less the exercise price per share of such class of Buyer Common Stock of such rights to acquire such class of Buyer Common Stock by (2) the number of shares of such class of Buyer Common Stock represented by such rights. (c) If Buyer or the holders of Buyer's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Underlying Common Stock will, at the request of Buyer, appoint a purchaser representative (as such term is defined in -29- 30 rule 501) reasonably acceptable to Buyer if any holder of Underlying Common Stock appoints a purchaser representative designated by Buyer, Buyer will pay the fees of such purchaser representative, but if any holder of Underlying Common Stock declines to appoint the purchaser representative designated by Buyer such holder will appoint another purchaser representative (reasonably acceptable to Buyer), and such holder will be responsible for the fees of the purchaser representative so appointed. (d) Seller and the other holders of Underlying Common Stock (if any) will bear their pro rata share (based upon the number of shares sold) of the costs of any sale of Underlying Common Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Buyer Common Stock and are not otherwise paid by Buyer or the acquiring party. Costs incurred by Seller and the other holders of Underlying Common Stock on their own behalf will not be considered costs of the transaction hereunder. (e) The provisions of this Section 7.06 will terminate upon the completion of a Public Offering. 7.07 PUBLIC OFFERING. In the event that the Board and the holders of a majority of the shares of Buyer Common Stock then outstanding approve a Public Offering of Buyer Common Stock, the holders of Underlying Common Stock shall take all necessary or desirable actions in connection with the consummation of the Public Offering. In the event that such Public Offering is an underwritten offering and the managing underwriters advise Buyer in writing that in their opinion the Buyer Common Stock structure shall adversely affect the marketability of the offering, each holder of Underlying common stock shall consent to and vote for a recapitalization, reorganization and/or exchange of Buyer Common Stock into securities that the managing underwriters, the Board and holders of a majority of the shares of Buyer Common Stock then outstanding find acceptable and shall take all necessary or desirable actions in connection with the consummation of the recapitalization, reorganization and/or exchange; provided that the resulting securities reflect and are consistent with the rights and preferences set forth in Buyer's Certificate of Incorporation as in effect immediately prior to such Public Offering. 7.08 ADDITIONAL DEFINITIONS. The following terms have meanings set forth below: "BUYER COMMON STOCK" means, collectively, Buyers common stock, par value $.01 per share, Buyer's Class P Common Stock and any capital stock of any class of Buyer hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of Buyer. "INDEPENDENT THIRD PARTY" means any person who, immediately prior to the contemplated transaction, does not own in excess of 5% of Buyer Common Stock on a fully-diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of Buyer Common Stock and who is not the spouse or descendent (by birth or adoption) of any such 5% owner of Buyer Common Stock. -30- 31 "INVESTORS" means Information Partners Capital Fund, L.P. and William Blair Venture Partners III Limited Partnership and their successors and assigns. "1933 ACT" means the Securities Act of 1933, as amended from time to time. "PUBLIC OFFERING" means the sale, in an underwritten public offering registered under the 1933 Act, of shares of Buyer Common Stock. "PUBLIC SALE" means any sale pursuant to a registered public offering under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated under the 1933 Act effected through a broker, dealer or market maker. "SALE OF BUYER" means the sale of Buyer to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of Buyer possessing the voting power to elect a majority of Buyer's board of directors (whether by merger, consolidation or sale or transfer of Buyer's capital stock) or (ii) all or substantially all of Buyer's assets determined on a consolidated basis. "UNDERLYING COMMON STOCK" means shares of Buyer's common stock, par value $.01 per share; provided that if there is a change such that the securities issuable upon exercise of the Warrants are issued by an entity other than Buyer or there is a change in the class of securities so issuable, then the term "Underlying Common Stock" shall mean one share of the security issuable upon exercise of the Warrants if such security is issuable in shares, or shall mean the smallest unit in which such security is issuable if such security is not issuable in shares. Underlying Common Stock will continue to be Underlying Common Stock in the hands of any holder other than Seller (except for Buyer and the Investors and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Underlying Common Stock will succeed to all rights and obligations attributable to Seller as a holder of Underlying Common Stock hereunder. Underlying Common Stock will also include shares of Buyer's capital stock issued with respect to Underlying Common Stock by way of a stock split, stock dividend or other recapitalization. ARTICLE VIII TERMINATION 8.01 TERMINATION. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of Buyer and Seller; (b) by either Buyer or Seller if there has been a material misrepresentation or breach on the part of the other party in the representations and warranties set forth in this Agreement, or if events have occurred which have made it impossible to satisfy a condition precedent to the terminating party's obligations to consummate the transactions contemplated hereby, unless such -31- 32 terminating party's willful breach of this Agreement has caused the condition to be unsatisfied; or (c) by either Buyer or Seller if the Closing has not occurred on or prior to 45 days after the date hereof; PROVIDED that neither Buyer nor Seller will be entitled to terminate this Agreement pursuant to this Section 8.01(c) if such person's willful breach of this Agreement has prevented the consummation of the transactions contemplated hereby at or prior to such time. 8.02 EFFECT OF TERMINATION. In the event of termination of this Agreement by either Buyer or Seller as provided above, this Agreement will forthwith become void and there will be no liability on the part of any party hereto to any other party hereto or its shareholders or directors or officers in respect thereof, except for the obligations of the parties hereto in sections 10.05, 10.10(b) and 10.11 and except that nothing herein will relieve any party from any breach of this Agreement prior to such termination. ARTICLE IX INDEMNIFICATION AND RELATED MATTERS 9.01 SURVIVAL. All representations, warranties, covenants and agreements set forth in this Agreement or in any writing delivered in connection with this Agreement will survive the Closing Date and the consummation of the transactions contemplated hereby and will not be affected by any examination made for or on behalf of Buyer, the knowledge of any of its officers, directors, stockholders, employees or agents, or the acceptance of any certificate or opinion; provided that in the event that Seller updates the representations and warranties contained in Articles IV and V by written notice to Buyer prior to Closing and the Closing occurs, such updates will be considered to be part of the disclosure schedules to this Agreement as described in such updates. 9.02 INDEMNIFICATION. (a) Subject to the limitations set forth in (b) below, Seller agrees to indemnify Buyer, the Company, their officers, directors, stockholders and lenders and hold them harmless against any loss, liability, deficiency, damage or expense (including reasonable legal expenses and costs and including interest and penalties) (a "Loss") which Buyer or the Company, may suffer, sustain or become subject to, as a result of (i) the breach of any representation or warranty made by the Company or Seller contained in Article IV of this Agreement, (ii) the breach of any representation or warranty made by Seller contained in Article V of the Agreement, (iii) the breach of any covenant made by Seller or the Company contained in Article III of this Agreement, (iv) the breach of any representation, warranty, covenant or agreement (other than representations or warranties set forth in Articles IV and V hereof or the covenants contained in Article III hereof) made by Seller contained in this Agreement or any Exhibit hereto, (v) any claims of any brokers or finders claiming by, through or under Seller, (vi) the litigation, if any, between Seller and Disclosure Incorporated or any other obligations of Seller arising from the Settlement Agreement (the "SETTLEMENT AGREEMENT") dated as of July 16, 1993 between Seller and Disclosure Incorporated (other than obligations assumed by the Company under the -32- 33 Assignment and Assumption Agreement or resulting from a breach of the Assignment and Assumption Agreement by the Company) or (viii) any other litigation disclosed on Schedule 4.14 or 4.15. (b) The indemnification provided for in Section 9.02(a) above is subject to the following limitations: (i) Seller will be liable to Buyer with respect to claims referred to in (a) (i), (a) (ii) and (a) (iii) above only if Buyer gives Seller written notice thereof within two years after the Closing Date except for claims arising from breaches of the representations and warranties (A) set forth in Sections 4.12 as to which claims must be made prior to the expiration of the applicable statute of limitation with respect thereto and (B) set forth in Sections 4.01, 4.02, 4.03, 5.01 and 5.02 as to which claims may be made at any time; (ii) with respect to claims referred to in (a)(i), (a)(ii) and (a)(iii) above, Seller will not be liable for any such Loss until the aggregate amount of all such Losses exceeds $439,000 and then Seller shall be liable for $219,500 of the first $439,000 of such Losses and then 100% of all Losses in excess of the first $439,000 of Losses; provided that in the event that the Company utilizes the credit entitlements (the "Credit Entitlements") relating to royalty generating licensing agreements provided to Seller by Disclosure Incorporated pursuant to Section 4 of the Settlement Agreement, such Credit Entitlements, to the extent actually utilized by the Company (the "Actual Credit"), shall increase the basket amount of $439,000 dollar for dollar and Seller will not be liable for any such Loss until the aggregate amount of all such Losses exceeds an amount equal to the sum of $439,000 plus the Actual Credit (the "Amount"), and then Seller shall be liable for one half of the Amount and then 100% of all Losses in excess of the Amount; and (iii) with respect to claims referred to in (a)(i), (a)(ii) and (a)(iii) above, Seller's aggregate liability with respect to Losses will not exceed $7,500,000; provided that in the event that the Note is still outstanding and Seller has indemnified Buyer for Losses in an amount equal to $5,000,000, Buyer agrees that any remaining Losses to which it is entitled to be indemnified pursuant to this Section 9.02 shall be paid to Buyer by set off of the Note pursuant to paragraph 9.02(h) hereof. (c) Buyer agrees to indemnify Seller and hold Seller harmless against any Loss which Seller may suffer, sustain or become subject to, as the result of (i) a breach of any representation, warranty, covenant, or agreement by Buyer contained in this Agreement, and (ii) any claims of any brokers or finders claiming by, through or under Buyer. Buyer will not be liable for any Loss relating to breaches of Buyer's representations and warranties contained in Article VI (except Sections 6.01, 6.02 and 6.03) hereof unless written notice of such breach is given by Seller to Buyer within two years of the Closing Date. (d) If a party hereto seeks indemnification under this Section 9,02, such party (the "INDEMNIFIED PARTY") shall give written notice to the other party (the "Indemnifying Party") of the facts and circumstances giving rise to the claim. In that regard, if any suit, action, claim, -33- 34 liability or obligation shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Section 9.02, the Indemnified Party shall promptly notify the Indemnifying Party of the same in writing, specifying in detail the basis of such claim and the facts pertaining thereto and the Indemnifying Party, if it so elects (except that the Indemnifying Party may not so elect without the Indemnified Party's consent if such suit, action, claim, liability or obligation relates to the Indemnified Party's relationship with its customers or employees), shall assume and control the defense thereof (and shall consult with the Indemnified Party with respect thereto), including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of expenses. If the Indemnifying Party elects to assume and control the defense, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing or (ii) the Indemnifying Party has failed to assume the defense or employ counsel reasonably satisfactory to the Indemnified Party. The Indemnifying Party shall not be liable for any settlement of any action or proceeding, the defense of which it has elected to assume, which settlement is effected without the written consent of the Indemnifying Party. If there shall be a settlement to which the Indemnifying Party consents or a final judgment for the plaintiff in any action or proceeding, the defense of which the Indemnifying Party has elected to assume, the Indemnifying Party shall indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. (e) Except as otherwise provided in Section 9.02 (b) (iii), the Indemnifying party shall pay the Indemnified Party in immediately available funds promptly after the Indemnified Party provides the Indemnifying Party with written notice of a claim hereunder and the parties reasonably agree that there is a reasonable basis for such claim or a final result, determination, finding, judgment and/or award is made pursuant to the terms of Section 9.03 hereof. (f) The foregoing indemnification provisions are the sole remedy for monetary damages that any party may have for misrepresentation, breach of warranty or breach of covenant, provided that nothing herein shall limit or preclude the availability of injunctive relief or any other equitable remedy. (g) Amounts paid to or on behalf of Buyer or Seller as indemnification shall be treated as adjustments to the Purchase Price. (h) In the event that Seller is required to indemnify Buyer and/or the Company pursuant to Section 9.02 (e), Buyer, in its sole discretion, may set off all or a portion of the amount of such indemnity obligation against the outstanding principal amount and interest on the Note. 9.03 ARBITRATION PROCEDURE. (a) Buyer and Seller agree that the arbitration procedure set forth below shall be the sole and exclusive method for resolving and remedying claims for money damages arising out of -34- 35 the provisions of Article IX, other than disputes relating to (i) Proprietary Rights and breaches of Section 4.14 and (ii) the provisions of Section 10.07 (the "DISPUTES"). Nothing in this section 9.03 shall prohibit a party hereto from instituting litigation to enforce any Final Determination (as defined below). The parties hereby agree and acknowledge that, except as otherwise provided in this Section 9.03 or in the Commercial Arbitration Rules of the American Arbitration Association as in effect from time to time, the arbitration procedures and any Final Determination hereunder shall be governed by, and shall be enforced pursuant to the Uniform Arbitration Act as in effect in the Commonwealth of Massachusetts. (b) In the event that any party asserts that there exists a Dispute, such party shall deliver a written notice to each other party involved therein specifying the nature of the asserted Dispute and requesting a meeting to attempt to resolve the same. If no such resolution is reached within ten business days after such delivery of such notice, the party delivering such notice of Dispute (the "DISPUTING PERSON") may, within 45 business days after delivery of such notice, commence arbitration hereunder by delivering to each other party involved therein a notice of arbitration (a "NOTICE OF Arbitration"). Such Notice of Arbitration shall specify the matters as to which arbitration is sought, the nature of any Dispute, the claims of each party to the arbitration and shall specify the amount and nature of any damages, if any, sought to be recovered as a result of any alleged claim, and any other matters required by the Commercial Arbitration Rules of the American Arbitration Association as in effect from time to time to be included therein, if any. (c) Buyer and Seller each shall select one non-neutral arbitrator expert in the subject matter of the Dispute (the arbitrators so selected shall be referred to herein as the "BUYER'S ARBITRATOR" and the "SELLER'S ARBITRATOR," respectively). In the event that either party fails to select an arbitrator as set forth herein within 20 days from the delivery of a Notice of Arbitration, then the matter shall be resolved by the arbitrator selected by the other party. Seller's Arbitrator and Buyer's Arbitrator shall select a third independent neutral arbitrator expert in the subject matter of the dispute, and the three arbitrators so selected shall resolve the matter according to the procedures set forth in this Section 9.03. If Seller's Arbitrator and Buyer's Arbitrator are unable to agree on a third arbitrator within 20 days after their selection, Seller's Arbitrator and Buyer's Arbitrator shall each prepare a list of three independent arbitrators. Seller's Arbitrator and Buyer's Arbitrator shall each have the opportunity to designate as objectionable and eliminate one arbitrator from the other arbitrator's list within 7 days after submission thereof, and the third arbitrator shall then be selected by lot from the arbitrators remaining on the lists submitted by Seller's Arbitrator and Buyer's Arbitrator. (d) The arbitrator(s) selected pursuant to paragraph (c) will determine the allocation of the costs and expenses of arbitration based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if Buyer submits a claim for $1,000 and if Seller contests only $500 of the amount claimed by Buyer, and if the arbitrator(s) ultimately resolves the dispute by awarding Buyer $300 of the $500 contested, then the costs and expenses of arbitration will be allocated 60% (i.e., 300/500) to Seller and 40% (i.e., 200 / 500) to Buyer. -35- 36 (e) The arbitration shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association as in effect from time to time, except as modified by the agreement of all of the parties to this Agreement. The arbitrator(s) shall so conduct the arbitration that a final result, determination, finding, judgment and/or award (the "FINAL DETERMINATION") is made or rendered as soon as practicable, but in no event later than 90 business days after the delivery of the Notice of Arbitration nor later than 10 days following completion of the arbitration. The Final Determination must be agreed upon and signed by the sole arbitrator or by at least two of the three arbitrators (as the case may be). The Final Determination shall be final and binding on all parties and there shall be no appeal from or reexamination of the Final Determination, except for fraud, perjury, evident partiality or misconduct by an arbitrator prejudicing the rights of any party and to correct manifest clerical errors. (f) Buyer and Seller may enforce any Final Determination in any state or federal court having jurisdiction over the dispute. For the purpose of any action or proceeding instituted with respect to any Final Determination, each party hereto hereby irrevocably submits to the jurisdiction of such courts, irrevocably consents to the service of process by registered mail or personal service and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter have as to personal jurisdiction, the laying of the venue of any such action or proceeding brought in any such court and any claim that any such action or proceeding brought in any court has been brought in an inconvenient forum. (g) If any party shall fail to pay the amount of any damages, if any, assessed against it within 10 days of the delivery to such party of such Final Determination, the unpaid amount shall bear interest from the date of such delivery at the lesser of (i) the prime rate of interest announced by Morgan Guaranty Trust Company of New York, in effect from time to time (which rate shall be adjusted on the effective date of each change in such prime rate) plus 3.00% and (ii) the maximum rate permitted by applicable usury laws. Interest on any such unpaid amount shall be compounded semiannually, computed on the basis of a 360-day year consisting of twelve 30-day months and shall be payable on demand. In addition, such party shall promptly reimburse the other party for any and all costs and expenses of any nature or kind whatsoever (including but not limited to all attorneys' fees) incurred in seeking to collect such damages or to enforce any Final Determination. ARTICLE X ADDITIONAL AGREEMENTS 10.01 SALE OF BUYER. (a) In the event that the sale of Buyer or any transferee of the Business controlled by Buyer (whether by sale of at least two-thirds of Buyer's common stock, by merger or by sale of substantially all of its assets) (a "BUYER SALE") is consummated to Dun & Bradstreet Corporation or any of its Subsidiaries ("D&B") within 18 months following the Closing Date for a total aggregate cash purchase price (including assumed funded debt) which is in excess of $18 million, Buyer agrees to pay to Seller in immediately available funds all of the net proceeds in excess of $18 million within two business days of the receipt thereof. -36- 37 (b) In the event that a Buyer Sale is consummated to any third party (other than D&B) within one year following the Closing Date for a total cash purchase price (including assumed funded debt) which is in excess of $18 million, Buyer agrees to pay to Seller in immediately available funds 50% of the net proceeds in excess of $18 million within two business days of the receipt thereof. 10.02 EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Seller shall retain any and all liability with respect to benefits, claims or other entitlements arising as a result of events, incidents or illnesses incurred prior to the Closing Date with respect to former employees of the Company or the Division and employees of the Company or the Division on the Closing Date. Additionally, Seller shall retain any and all liability with respect to all Benefit Plans maintained or contributed to by Seller, the Company or the Division (or any predecessors thereto) with respect to current or former employees of the Company or the Division. The Buyer will not terminate the employment of a sufficient number of current employees of the Company or the Division during the six-month period commencing on the Closing Date which would result in a "plant closing" (as defined in the Worker Adjustment and Retraining Notification Act). 10.03 CONTINUING ASSISTANCE. Subsequent to the Closing, Seller and Buyer at their own cost will assist each other (including making records available) in the preparation of their respective tax returns and the filing and execution of tax elections, if required, as well as any audits or litigation that ensue as a result of the filing thereof, to the extent that such assistance is reasonably requested. 10.04 TAX MATTERS. (a) Any Tax sharing agreement between the Company and Seller or any other member of an Affiliated Group is terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year, or a past year). (b) The Seller agrees to indemnify the Buyer from and against the entirety of any losses the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Liability of the Company for Taxes (i) of the Company for all Taxes for all taxable periods ending on or before (or which includes) the Closing Date (or if a taxable period begins before and ends after the Closing Date, so much if such taxable period as falls on or before the Closing Date), or (ii) of any Person other than the Company (A) under Treasury Reg. ss.1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract, or (D) otherwise. (c) Seller shall prepare and timely file (or cause to be prepared and timely filed) (i) a consolidated federal income Tax Return for the Seller Affiliated Group for Tax years ending on or before (or which include) the Closing Date, and (ii) a combined or unitary state, local or foreign income Tax Return of which the Company has been included as a member for Tax years ending on or before (or which include) the Closing Date (collectively, "GROUP TAX RETURNS"). Seller will include the income of the Company (including any deferred income triggered into income by Reg. ss.1.1502-13 and Reg. ss.1.1502-14 and any excess loss accounts taken into income under Reg. ss.1.1502-19) on the Seller consolidated federal income Tax Return (and any -37- 38 applicable state local or foreign combined or unitary Tax Return) for the period which includes the Closing Date in accordance with the Company's past custom and practice. (d) Seller shall prepare and timely file (or cause to be prepared and timely filed) all state, local and foreign income Tax Returns for the Company for Tax years ending on or before the Closing Date. (e) Seller will allow the Buyer an opportunity to review and comment upon the Tax Returns described in (c) and (d) above (including any amended returns) to the extent that they relate to the Company and will take no position on such returns that relate to the Company that would adversely affect the Company after the Closing Date without the Buyer's consent, which consent shall not be unreasonably withheld. For purposes of the preceding sentence with respect to the Group Tax Returns, Seller need only provide Buyer with the stand-alone "pro forma Tax information that was used by Seller as consolidating entries on such Group Tax Returns, together with any such additional information necessary to understand such Tax information as Buyer may reasonably request. For purposes of preparing the Tax Returns described in (c) and (d) above, the income of the Company will be apportioned to the period up to and including the Closing Date and the period after the Closing Date by closing the books of the Company as of the end of the Closing Date. (f) Seller shall keep the Company and Buyer promptly advised as to the status of any Tax audits and litigation involving any issues relating to any Taxes pertaining to taxable periods on or prior to the Closing Date to the extent that such issue would affect the Company after the Closing Date, and shall provide such information pertaining to the Company as Buyer may reasonably request in writing. Seller will allow the Company and its counsel to participate (at the Company's own expense and upon the Company's written request) in any audits of Seller's consolidated federal income Tax Returns (or state, local or foreign combined or unitary Tax Returns) to the extent that such Returns relate to the Company. The Company's participation will be limited to those issues affecting the Company. Seller will not settle any such audit in a manner which would adversely affect the Company after the Closing Date without the prior written consent of the Buyer, which consent shall not unreasonably be withheld. (g) Seller will immediately pay to the Buyer any Tax refund (or reduction in Tax liability) resulting from a carryback of a post-acquisition Tax attribute of the Company into the Seller's consolidated Tax return(or state, local or foreign combined or unitary Tax Return), when such refund or reduction is realized by the Seller's group. Seller will, at the Company's expense, cooperate with the Company in obtaining such refunds (or reduction in Tax liability), including through the filing of amended Tax returns or refund claims. The Buyer agrees to indemnify Seller for any Taxes resulting from the disallowance of such post-acquisition Tax attribute on audit or otherwise. (h) No election shall be made under Code Section 338(g) and/or Code Section 338 (h) (10) with respect to the purchase and sale of the Company's stock hereunder. Notwithstanding anything to the contrary in this Agreement, Seller shall indemnify and hold harmless the Buyer and the Company against any Taxes arising from any actions taken by Seller or the Company on -38- 39 or before the Closing which causes (i) a deemed election under Code Section 338, or (ii) the transaction to otherwise be treated as an asset acquisition for Tax purposes. (i) Each party shall provide the other party, promptly upon written request, with such cooperation and assistance, documents, and other information as may be reasonably requested by such party in connection with the preparation and filing of any Tax Returns, the conduct of any audit or other examination or any judicial or administrative proceeding involving Taxes. The party requesting such assistance shall pay the reasonable costs of the party providing such assistance. (j) Seller agrees to indemnify and hold harmless Buyer and the Company against any Taxes (including loss of Tax benefits) that arise should there be a final determination that the total amount paid by Buyer for the licenses pursuant to the License Agreement pursuant to Section 1.04 (b) (iv) should be capitalized for Tax purposes without allowance for depreciation or amortization thereof (it being understood that the Tax basis in the licenses pursuant to the License Agreement that is recoverable only upon the sale, disposition or abandonment of the licenses pursuant to the License Agreement shall not be considered to give rise to an allowance for depreciation or amortization). However, Buyer will reimburse Seller the amount of any payments made by Seller pursuant to this paragraph to the extent Buyer actually receives a tax benefit for the capitalized cost of the License Agreement through a taxable sale, disposition or abandonment of the licenses on or before the date which ends five years after the Closing Date. 10.05 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company will be issued without the mutual approval of all parties hereto, except any public disclosure which any party in good faith believes is required by law or regulation (in which case the disclosing party agrees to provide to the other party reasonable notice of such disclosure and the opportunity to comment on the form and content of such disclosure). After the Closing Date, no press releases related to this Agreement and the transactions contemplated herein, or other announcements to the employees, customers or suppliers of the Company will be issued without Buyer's consent and Seller's consent (which shall not be unreasonably withheld). 10.06 FURTHER TRANSFERS. Seller will execute and deliver such further instruments of conveyance and transfer and take such additional action as Buyer may reasonably request to effect, consummate, confirm or evidence the transfer of the assets of the Division to the Company, the transfer to Buyer of the Company Stock and the Business and any other transactions contemplated hereby. 10.07 NON-COMPETE; NON-SOLICITATION (a) As a significant inducement to Buyer to enter into and to perform its obligations under this Agreement, Seller agrees that, for a period of three (3) years after the Closing, Seller shall not anywhere in the world, on its own behalf, develop, license or sell a Competing Product. Seller further agrees that, for a period of three (3) years after the Closing, Seller will not (1) acquire more than 5% of the equity of any entity which recognizes 50% or more of its net revenue -39- 40 from the license or sale of Competing Product (s) ; (2) acquire more than 10% of the equity of any entity which recognizes more than 20% percent but less than 50% of its net revenue from the license or sale of Competing Product(s); or (3) acquire more than 50% of the equity of any entity which recognizes less than or equal to 20% of net revenue from the license or sale of Competing Products(s) provided such 20% is greater than $5,000,000 annually for acquisitions during the first year after the Closing Date, greater than $10,000,000 annually for acquisitions during the second year after the Closing Date and greater than $20,000,000 annually for acquisitions during the third year after the Closing Date. "Competing Product" shall mean (i) financial information organized in database products similar to any one of those offered by the Company as of the Closing Date; (ii) business reference information organized in database products substantially similar to any one of those offered by the Company as of the Closing Date; or (iii) information organized in database products substantially similar to any one of those described in Schedule 10.07A hereto, which product the Company plans to offer in the future. "Competing Product" shall not include information organized in database products substantially similar to any one of those described in Schedule 10.07B hereto. For purposes of this Section 10.07, the term "Seller" shall mean Lotus Development Corporation ("Lotus") and any wholly owned subsidiary of Lotus as of the Closing Date. (b) As a further such inducement to Buyer, Seller agrees that, for a period of three (3) years after the Closing, if the Company offers consulting services to the Company's customers on an ongoing basis, commencing no later than six months after the Closing, Seller shall not anywhere in the world provide consulting or customized application development services where more than 20% of such consulting services (calculated on either an hourly or dollar basis) under any services contract within a one year period would directly enhance the value to the Company's customers of the financial and/or business reference databases of the Company or any directly competitive financial and/or business reference databases offered by third parties, including the Company's suppliers. (c) Seller agrees that (i) for a period of three years after the Closing, it will not directly or indirectly solicit employment to any current employee of the Company without the prior written consent of Buyer and (ii) for a period of two years after the Closing it will not directly or indirectly hire any current employee of the Company without the prior written consent of Buyer. (d) If, at the time of enforcement of this Section 10.07 a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area. (e) The Company agrees that in the event of any breach of any provisions of this Section 10.07, Buyer shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the Company's obligations under this Section 10.07 not only by an action or actions for damages but also by an action or actions for specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of the provisions of this Section 10.07. -40- 41 (f) As consideration for the non-compete agreement set forth in this Section 10.07, Buyer will pay to Seller at the closing an amount equal to $3,000,000 (the "NON-COMPETE PRICE"). 10.08 SPECIFIC PERFORMANCE. Seller acknowledges that the Company's business is unique and recognizes and affirms that in the event of a breach of this Agreement by Seller, money damages may be inadequate and Buyer may have no adequate remedy at law. Accordingly, Seller agrees that Buyer shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and Seller's obligations hereunder not only by an action or actions for damages but also, where money damages are inadequate, by an action or actions for specific performance, injunctive and/or other equitable relief. 10.09 TRANSITION ASSISTANCE. Seller will not in any manner take any action which is designed or intended to have the effect of discouraging customers, suppliers, lessors, licensors and other business associates from maintaining the same business relationships with the Company after the date of this Agreement as were maintained with the Company prior to the date of this Agreement. 10.10 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Closing Date, Buyer may make or cause to be made upon reasonable notice such investigation of the business and properties of the Company as it deems necessary or advisable to familiarize itself therewith. Seller and the Company agrees to permit Buyer, its authorized representatives and representatives of the financial institutions which are considering participation in the financing of this transaction upon reasonable notice to (i) have full access to the premises, books and records of the Company at reasonable hours, (ii) visit and inspect any of the properties of the Company, and (iii) discuss the affairs, finances and accounts of the Company with the directors, officers, key employees, key customers, key sales representatives, key suppliers and independent accountants of the Company. (b) If the transactions contemplated by this Agreement are not consummated, Buyer will not disclose or use at any time any information and materials reasonably designated by Seller as confidential, and Buyer and its representatives will return to Seller originals of and destroy copies of all memoranda, notes, plans, records, documentation and other materials obtained from Seller in connection with the transactions contemplated by this Agreement which Buyer may then possess or have under its control. Whether or not the transactions contemplated hereby are consummated, Seller will maintain the confidentiality of all information and materials regarding Buyer and its affiliates reasonably designated by Buyer as confidential. If the transactions contemplated by this Agreement are consummated, Seller will maintain the confidentiality of, and will not use for any purpose, all proprietary and other nonpublic information regarding the Company (including, without limitation, any of same included in the Proprietary Rights), except as necessary to file tax returns and other reports to governmental agencies or as required by law or in connection with any litigation with the consent of Buyer (which consent will not unreasonably be withheld) or in connection with the litigation between Seller and Disclosure Incorporated, and to turn over to Buyer at the Closing copies of all such -41- 42 materials they have in their possession. In the event of the breach of any of the provisions of this Section 10.10, the non-breaching party, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief (without the posting of bond or other security) in order to enforce or prevent any violations of the provisions hereof. This Section 10.10 shall survive any expiration or termination of this Agreement. 10.11 EXPENSES. Except as otherwise provided herein, Buyer and Seller will pay all of their own expenses (including fees and expenses of legal counsel, investment bankers, brokers or other representatives and consultants and appraisal fees and expenses) incurred in connection with the negotiation of this Agreement, the performance of its obligations hereunder, and the consummation of the transactions contemplated hereby; it being understood that Seller will pay the fees and expenses of the Company and that the Company will not pay any of Seller's costs and expenses (including legal and accounting) arising in connection with the transactions contemplated thereby if the transactions are consummated. All real estate taxes applicable to any parcel of real property identified as leased by the Company on the Leases Schedule and for which the Company is obligated to pay shall be prorated between Seller and Buyer as of the Closing Date. 10.12 EXCLUSIVITY. Until this Agreement is terminated by its terms, Seller will not (and Seller will not cause or permit any affiliate, director, officer, employee or agent of the Company and its affiliates to), (a) solicit, initiate or encourage the submission of any proposal or offer from any person or entity (including any of them) relating to any (i) liquidation, dissolution or recapitalization of, (ii) merger or consolidation with or into, (iii) acquisition or purchase of assets of or any equity interest in or (iv) similar transaction or business combination involving the Company or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any other person to do or seek any of the foregoing. Until the earlier of (a) the time this Agreement is terminated by its terms or (b) the Closing Date, Seller shall notify Buyer immediately if any person makes any proposal, offer, inquiry or contact with respect to any of the foregoing. 10.13 BOOKS AND RECORDS. Unless otherwise consented to in writing by Seller or Buyer (as the case may be), Buyer and Seller will not, for a period of seven (7) years following the date hereof, destroy, alter or otherwise dispose of any of the books and records of the Company acquired by Buyer hereunder or retained by Seller without first offering to surrender to Seller or Buyer such books and records or any portion thereof of which Seller or Buyer may intend to destroy, alter or dispose. Buyer and Seller will allow the other party's representatives, attorneys and accountants access to such books and records, upon reasonable request and during such party's normal business hours, for the purpose of examining and copying the same in connection with any matter whether or not relating to or arising out of this Agreement or the transactions contemplated hereby. 10.14 LOTUS UK TRANSFERS. Seller hereby agrees to take all actions as are necessary or reasonably requested by Buyer to transfer in accordance with this Section 10.14 and prior to the -42- 43 Closing all of the assets of the Division (the "LOTUS UK ASSETS") held by Lotus Development UK Ltd., a United Kingdom corporation ("LOTUS UK") (including, without limitation, those assets set forth on Schedule 10.14 attached hereto (the "UK OneSource Assets Schedule")) to the Company. Seller agrees to accomplish such transfer prior to the Closing by first causing Lotus UK to form a new corporation that is a wholly owned subsidiary of Lotus UK ("UK SUB"), then transferring all of the Lotus UK assets to the UK Sub, then selling all of the capital stock of the UK Sub to Seller, and then causing Seller to transfer all of the capital stock of the UK Sub to the Company in the form of a capital contribution. To the extent that the transactions contemplated by this Section 10.14 give rise to a charge pursuant to Section 178 or Section 179 of Taxation of Chargeable Gains Act 1992 (the "Charge"), Seller shall reimburse the Company or the UK Sub for the full amount of such Charge incurred by the Company or the UK Sub. Buyer agrees that the Company or UK Sub will notify the Seller if the Charge issue is raised by the UK Tax Authorities in their examination of the Company or UK Sub. Buyer further agrees that the Company and the UK Sub will allow the Seller and its counsel to participate (at the Seller's own expense and upon the Seller's written request) in any audits of the Company's or UK Sub's U.K. income Tax Returns to the extent that such audits relate to the Charge. Buyer agrees that the Company and the UK Sub will not settle any such audit in a manner which will result in a Charge reimbursable by the Seller to the Company or the UK Sub without the prior written consent of the Seller, which consent shall not unreasonably be withheld. 10.15 BONUSES. The Company and Seller acknowledge that the persons listed on Schedule 10.15 (the "Holders") hold options to acquire Seller's common stock in the amounts set forth opposite such Holder's name on Schedule 10.15 which have not vested pursuant to their terms and which will expire upon the Closing (the "Unvested Options"). The exercise prices of such Unvested Options are set forth on Schedule 10.15. The Company hereby covenants and agrees that so long as a Holder remains employed by the Company on the date which Unvested options would have vested had such Holder been employed by Seller, the Company will pay a bonus (a "Bonus") to such Holder equal to (a) 65%, multiplied by (b) the number of Unvested Options which would have vested on such date, multiplied by (c) the difference between the closing price of Seller's common stock on the Closing Date and the exercise price of the Unvested options which would have vested on such date (the "Spread"). At Closing, Seller agrees that it will pay to the Company an amount equal to (i) 50%, multiplied by (ii) the total Unvested Options, multiplied by (iii) the Spread with respect to the Unvested options. The Company agrees to use such funds to pay Bonuses. In the event that a Holder's employment with the Company terminates prior to the time all of his or her Unvested Options would have vested had such Holder been employed by Seller until such date, the Company agrees that it will pay to Seller an amount equal to (A) 50%, multiplied by (B) the number of Unvested Options which would have remained unvested had such Holder been employed by Seller until such date, multiplied by (C) the aggregate Spread with respect to such Unvested Options. Any amounts payable to Seller by the Company pursuant to the immediately preceding sentence shall be determined for each calendar year period following the closing and paid by the Company in an annual lump sum on each March 31 following each such calendar year period. Buyer and Seller hereby agree that Schedule 10.15 shall be delivered by Seller to Buyer at least 5 business days prior to the Closing. -43- 44 10.16 LOTUS 401(k) PLAN. Prior to the Closing Date and effective as of the Closing Date, Seller shall amend the Lotus Profit Sharing and 401(k) Plan (the "Plan") to provide that all employees of the Business who are participants in the Plan shall be fully vested in all of their account balances in the Plan. Following the Closing Date, Seller shall permit such participants to leave such fully vested account balances in the Plan or to roll over such account balances (including earnings thereon as of the date of transfer), in accordance with the terms of the Plan, to an individual retirement account or another qualified defined contribution plan (including such a plan established by the Company). In the alternative, and at Seller's sole discretion, Seller agrees to pay to each such employee an amount which represents the unvested portion of each such employee's account balance under the Plan as of the Closing Date. Such payment shall be made as soon as possible following the Closing Date. ARTICLE XI MISCELLANEOUS 11.01 AMENDMENT AND WAIVER. This Agreement may be amended and any provision of this Agreement may be waived, provided that any such amendment or waiver will be binding upon a party only if such amendment or waiver is set forth in a writing executed by Buyer and Seller. No course of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any party under or by reason of this Agreement. 11.02 NOTICES. All notices, demands and other communications given or delivered under this Agreement will be in writing and will be deemed to have been given when personally delivered, mailed by first class mail, return receipt requested, or delivered by express courier service or telecopied. Notices, demands and communications to the Company, Seller and Buyer will, unless another address is specified in writing, be sent to the address indicated below: NOTICES TO SELLER: Lotus Development Corporation 55 Cambridge Parkway Cambridge, MA 02142 Attn: General Counsel NOTICES TO BUYER: Datext Holding Corporation c/o Information Partners Capital Fund, L.P. Two Copley Place Boston, MA 02116 Attention: David Dominik -44- 45 WITH A COPIES TO: William Blair Venture Partners 135 South LaSalle Chicago, IL 60603 Attention: Gregg Newmark AND Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: Karl E. Lutz, P.C. James L. Learner 11.03 BINDING AGREEMENT: ASSIGNMENT. (a) This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by Seller without the prior written consent of Buyer or by Buyer (except as otherwise provided in this Agreement) without the prior written consent of Seller. (b) Buyer may (at any time prior to the Closing), at its sole discretion, assign, in whole or in part, its rights and obligations pursuant to this Agreement to one or more of its wholly-owned Subsidiaries; provided that in the event of any such assignment, Buyer will guarantee the obligations of any such assignee under this Agreement (such guarantee to be in form and substance reasonably satisfactory to Seller). Buyer's "wholly-owned Subsidiaries" include Subsidiaries which may be organized subsequent to the date hereof. (c) Buyer may assign its rights under this Agreement for collateral security purposes to the lenders providing financing for the transactions contemplated hereby and all extensions, renewals, replacements, refinancings and refundings thereof in whole or in part. 11.04 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. 11.05 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person. 11.06 CAPTIONS. The captions used in this Agreement are for convenience of reference only and do not constitute a part of this Agreement and will not be deemed to limit, characterize -45- 46 or in any way affect any provision of this Agreement, and all provisions of this Agreement will be enforced and construed as if no caption had been used in this Agreement. 11.07 ENTIRE AGREEMENT. This Agreement and the documents referred to herein contain the entire agreement between the parties and supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. 11.08 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which taken together will constitute one and the same instrument. 11.09 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Massachusetts, without giving effect to any choice of law or conflict of law provision (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Massachusetts. 11.10 PARTIES IN INTEREST. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties and their respective successors and assigns any rights or remedies under or by virtue of this Agreement. * * * * -46- 47 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. DATEXT HOLDING CORPORATION By: /s/ David Dominik ------------------------------ Its: President ------------------------------ LOTUS DEVELOPMENT CORPORATION By: /s/ David B. Fischer ------------------------------ Its: Vice President ------------------------------ DATEXT, INC. By: /s/ Daniel Schimmel ------------------------------ Its: President ------------------------------ -47- 48 LIST OF EXHIBITS Exhibit A - Note Exhibit B - Warrant Exhibit C - License Agreement Exhibit D - Transition Agreement Exhibit E - Assignment and Assumption Agreement Exhibit F - Opinion of Seller's Counsel Exhibit G - Officer's Certificate of the Company Exhibit H - Opinion of Buyer's Counsel Exhibit I - Officer's Certificate of Buyer -48- 49 LIST OF SCHEDULES Schedule 2.01(d) - Consents Schedule Schedule 3.02(f) - Managers Schedule Schedule 4.01 - Qualifications Schedule Schedule 4.04 - Subsidiaries Schedule Schedule 4.05 - Restrictions Schedule Schedule 4.09 - Developments Schedule Schedule 4.10(a) - Assets Schedule Schedule 4.10(c) - Encumbrances Schedule Schedule 4.11 - Accounts Receivable Schedule Schedule 4.12 - Taxes Schedule Schedule 4.13 - Contracts Schedule Schedule 4.14 - Proprietary Rights Schedule Schedule 4.15 - Litigation Schedule Schedule 4.16 - Brokerage Schedule Schedule 4.17 - Licenses Schedule Schedule 4.18 - Employee Schedule Schedule 4.19 - Employee Benefit Plans Schedule Schedule 4.20 - Insurance Schedule Schedule 4.21 - Officers and Directors Schedule Schedule 4.22 - Affiliate Transaction Schedule Schedule 4.24 - Product Warranty Schedule Schedule 10.07A - Non-Compete - Prohibited Activities Schedule 10.07B - Non-Compete - Permitted Activities Schedule 10.14 - UK OneSource Assets Schedule -49- 50 SCHEDULE 10.07A - PROHIBITED ACTIVITIES (a) In reference to paragraph (a) (iii) of Section 10.07, "Competing Product" shall mean any of the following specific databases: Thomas' Register Computer Intelligence Installed Computer Hardware/Software Database Dun's Market Identifiers Database The Economists' Intelligence Unit Country Information Database (b) The parties agree that, at the expiration of 18 months after the Closing Date, this Schedule 10.07A shall be automatically revised to contain only those items listed above with respect to which the Company then sells a commercial product to its customers. -50- 51 SCHEDULE 10.07B PERMITTED ACTIVITIES General, business, financial (including stock quotes) and/or consumer news information generally available in widely circulated publications, with the exception of archival compilations of such information which would constitute a Competing Product as defined in Sections 10.07(a) (i), (ii) and (iii). -51- 52 FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First Amendment") is made and entered into as of September 8, 1993, by and among Lotus Development Corporation, a Delaware corporation ("SELLER"), OneSource Information Services, Inc. (formerly known as Datext, Inc.), a Delaware corporation (the "COMPANY"), and OneSource Holding Corporation (formerly known as Datext Holding Corporation), a Delaware corporation ("BUYER"). Seller, Buyer and the Company are parties to that certain Stock Purchase Agreement dated as of August 3, 1993 (the "STOCK PURCHASE AGREEMENT"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Stock Purchase Agreement. The parties hereto desire to amend the Stock Purchase Agreement to modify the calculation of the Purchase Price thereunder. NOW, THEREFORE, the parties hereto agree as follows: 1. AMENDMENTS TO STOCK PURCHASE AGREEMENT. Upon the Effective Date, the Stock Purchase Agreement shall be amended as follows: (a) The first sentence of Section 1.02(b) of the Stock Purchase Agreement shall be amended by replacing the reference to "the day immediately preceding the Closing Date" therein with a reference to "August 28, 1993". (b) Section 1.02(c) of the Stock Purchase Agreement shall be amended in its entirety to read as follows: "(c) Seller will notify Buyer in writing of its good faith estimate of the Company's Closing Date Asset Value as of August 28, 1993 (the "Estimated Closing Date Asset Value") by delivering to Buyer at the Closing a detailed balance sheet for the Company as of the close of business on August 28, 1993. The "ESTIMATED PURCHASE PRICE" will be equal to $8,439,000, reduced (or increased) by the amount by which the Estimated Closing Date Asset Value is less (or greater) than $15,921,000. The Estimated Purchase Price shall be paid as follows: (i) $5,000,000 will be paid by Buyer to Seller by issuance of a subordinated promissory note of Buyer in the form of EXHIBIT A attached hereto (the "NOTE"); and (ii) an amount equal to the Estimated Purchase Price less $5,000,000 will be paid by Buyer to Seller in cash by wire transfer of immediately available funds. -52- 53 In addition, Buyer will issue to Seller a warrant to initially purchase 100,000 shares of Buyer's common stock in the form of EXHIBIT B attached hereto (the "WARRANT"). The Note, the Warrant and the common stock issued or issuable pursuant to the Warrant are referred to herein as the "BUYER SECURITIES." (c) The first sentence of Section 1.03 shall be amended by replacing the reference to "the day immediately preceding the Closing Date" therein with a reference to "August 28, 1993". (d) Clause (ii) of Section 1.04(b) of the Stock Purchase Agreement shall be amended by replacing the reference to "3,439,000" therein with a reference to "the amount specified in clause (ii) of Section 1.02(c)". (e) The following shall be added as Section 5.07 of the Stock Purchase Agreement: "5.07 UK SUBSIDIARY. The UK Sub formed pursuant to Section 10.14 is duly organized, validly existing and in good standing under the laws of the United Kingdom. The UK Sub has no obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing, including taxes with respect to or based upon transactions or events occurring on or before the Closing, except as reflected on the balance sheet attached hereto. (f) Section 6.03 of the Stock Purchase Agreement shall be amended in its entirety to read as follows: "6.03 CAPITALIZATION. On the Closing Date, the authorized capital stock of Buyer will consist of (a) 1,500,000 shares of common stock, par value $.0l per share, of which 729,000 shares are issued and outstanding, 100,000 shares are reserved for issuance upon exercise of the Warrant and 10,101 shares are reserved for issuance upon exercise of the warrants issued to Silicon Valley Bank and (b) 100,000 shares of Class P common stock, par value $.0l per share, of which 81,000 shares are issued and outstanding on the Closing Date, all of the issued and outstanding shares of capital stock of Buyer will be duly authorized, validly issued, fully paid and nonassessable, and neither subject to, nor issued in violation of, any preemptive rights." (g) Clause (c) of the third sentence of Section 10.15 of the Stock Purchase Agreement shall be amended to read as follows: "(c) the difference between the last traded price of Seller's common stock on the Closing Date and the exercise price of the Unvested Options which would have vested on such date (the "Spread")." (h) The following shall be added as Section 10.17 to the Stock Purchase Agreement: -53- 54 "10.17 OPERATION FOR BUYER'S BENEFIT. On and after August 28, 1993, the Company shall be deemed to be operated for Buyer's benefit. Accordingly, all items of income, expense, gain and loss shall be for Buyer's and the Company's account. In addition, in order to give effect to the foregoing, and in addition to the general provisions set forth in Sections 3.01 and 3.02, Seller agrees that all cash, cash equivalents, accounts receivable and other assets received or accrued by the Company from and including August 28, 1993 through the Closing Date are solely for Buyer's and the Company's account, and are not for the benefit of Seller. Seller shall, and shall cause the Company to, take all actions necessary or reasonably requested by Buyer in order to effectuate the foregoing, including without limitation reimbursing the Company or Buyer promptly, but in any event no later than five (5) days after the Closing, all cash and other property received by Seller on behalf of the Company on or prior to the Closing net of expenses paid by Seller on behalf of the Company and not previously taken into account in determining the Estimated Purchase Price." 2. EFFECTIVENESS. This First Amendment shall become effective at the time (the "EFFECTIVE DATE") at which Seller, Buyer and the Company have executed counterparts of this First Amendment (for purposes of which, receipt of a telecopied copy of a counterpart executed by such party shall be deemed receipt of such executed counterpart). 3. NO FURTHER EFFECT. Except as expressly affected by this First Amendment, the terms of the Stock Purchase Agreement shall continue in full force and effect. 4. MISCELLANEOUS. This First Amendment may be executed in multiple counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this First Amendment by signing any such counterpart. * * * * * * -54- 55 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written. ONESOURCE HOLDING CORPORATION By: ______________________________ Its:______________________________ LOTUS DEVELOPMENT CORPORATION By: ______________________________ Its:______________________________ ONESOURCE INFORMATION SERVICES, INC. By: ______________________________ Its:______________________________ -55- EX-10.11 12 LEASE 150 CAMBRIDGE PARK DRIVE 1 EXHIBIT 10.11 DATE OF LEASE EXECUTION: March 6, 1998 ARTICLE I REFERENCE DATA 1.1 SUBJECTS REFERRED TO: Each reference in this Lease to any of the following subjects shall be construed to incorporate the data stated for that subject in this Section 1.1: LANDLORD: CambridgePark Two Limited Partnership MANAGING AGENT: Spaulding and Slye Services Limited Partnership LANDLORD'S & MANAGING AGENT'S ADDRESS: Spaulding and Slye Services Limited Partnership 125 CambridgePark Drive Cambridge, MA 02140 TENANT: OneSource Information Services, Inc., a corporation organized under the laws of the State of Delaware. TENANT'S ADDRESS (FOR NOTICE AND BILLING): OneSource Information Services, Inc. 150 CambridgePark Drive Cambridge, MA 02140 Attn: Accounts Payable PREMISES: The space located on the fifth (5th) floor of the Building as shown on Exhibit B. RENTABLE FLOOR AREA OF THE PREMISES: approximately 28,766 square feet TOTAL RENTABLE FLOOR AREA OF THE BUILDING: approximately 252,180 square feet TERM COMMENCEMENT DATE: July 1, 1998 LEASE TERM OR TERM: Commencing on the Term Commencement Date as defined in Section 3.2 here of and continuing for twenty-one (21) months thereafter, plus the partial month at the beginning of the Term, if any, unless sooner terminated as provided herein. 2 ANNUAL RENT: (a) $30-50 per square foot of Rentable Floor Area of the Premises, or $73,113.58 per calendar month, for the first twelve (12) months of the Term, and (b) $31.00 per square foot of Rentable Floor Area of the Premises, on $74,312.17 per calendar month, for the remainder of the Term, and proportionally at such rate for any partial month (net of Tenant's charges for electrical consumption in the Premises). BASE ANNUAL ELECTRICITY CHARGE: $1.00 per square foot of Rentable Floor Area of the Premises PERMITTED USES: Office Uses COMMERCIAL GENERAL LIABILITY INSURANCE: $1,000,000 bodily injury, property damage combined single limit per occurrence, $2,000,000 annual aggregate. BROKER: Spaulding and Slye Services Limited Partnership and McCall & Almy TENANT'S PARKING ACCESS CARDS: 86 1.2 EXHIBITS. The exhibits listed below in this section are incorporated in this Lease by reference and are to be construed as part of this Lease: EXHIBIT A Description of Lot EXHIBIT B Plan showing Premises. EXHIBIT C Landlord's Work Letter EXHIBIT D Landlord's Services EXHIBIT E Rules and Regulations EXHIBIT F Building Standards -2- 3 ARTICLE II PREMISES AND TERM 2.1 DESCRIPTION OF PREMISES. Subject to and with the benefit of the provisions of this Lease, Landlord hereby leases to Tenant, and Tenant leases from Landlord, Tenant's Space in the Building, excluding exterior faces of exterior walls, the common facilities area and building service fixtures and equipment serving exclusively or in common other parts of the Building. Tenant's Space, with such exclusions, is hereinafter referred to as the Premises. Tenant shall have, as appurtenant to the Premises, the right to use in common with others entitled thereto: (a) common walkways, driveways, hallways, lobbies, ramps, loading docks and stairways located in the Building or on the parcel on which the Building is located (the "Lot"), (b) building service fixtures and equipment serving the Premises including elevators, (c) the parking facility, if any, on a first-come, first-served basis in the location from time to time designated by Landlord in the CambridgePark development, Tenant's use not to exceed the number of Tenant's Parking Access Cards, and (d) if the Premises include less than the entire Rentable Floor Area of any floor, the common toilets in the central core area of such floor. Such rights shall be always subject to the Rules and Regulations set forth in Exhibit E, attached hereto and incorporated herein by reference, as the same may be amended by the Landlord from time to time and such other reasonable Rules and Regulations from time to time established by the Landlord by suitable notice to Tenant, and to the right of the Landlord to designate and change from time to time such areas, facilities, fixtures and equipment, provided that in all events substitutions are substantially equivalent. 2.2 TERM. To have and to hold for a period (the "Term") commencing on the Term Commencement Date (as defined in Section 3.1 hereof) and continuing for the Term, unless sooner terminated as provided herein. Notwithstanding the foregoing, or any other provision hereof, either Landlord or Tenant may cause this Lease to expire prior to the expiration of the Term set forth in Section 1.1 hereof by notice to the other setting forth the date of expiration of the Term, which date shall not be sooner than nine (9) months after such notice (the "Early Expiration Date"). In the event of such notice, the Term shall expire on the Early Expiration Date with the same force and effect as though the Early Expiration Date had been the date set forth herein for the expiration of the Term. Without limitation of the foregoing, the provisions of Section 6.1.2 and Section 6.1.16 shall be applicable to expiration of the Term on the Early Expiration Date. ARTICLE III CONSTRUCTION 3.1 TERM COMMENCEMENT DATE. -3- 4 The Term of this Lease shall commence on, and the Term Commencement Date shall be, the Term Commencement Date set forth in Section 1.1 hereof. 3.2 DELIVERY OF PREMISES. Tenant acknowledges that Tenant has had an opportunity to inspect the Premises. Except as set forth hereinafter, the Premises, shall be delivered to Tenant As Is, Where Is with all faults and without representation, warranty or guaranty of any kind by Landlord to Tenant. Landlord shall perform the work, if any, identified in Exhibit C ("Landlord's Work"). 3.3 (INTENTIONALLY OMITTED). 3.4 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION. All construction work required or permitted by this Lease, whether by Landlord or by Tenant, shall be done in a good and workmanlike manner and in compliance with all applicable laws and all lawful ordinances, regulations and orders of governmental authority and insurers of the Building and the Lot. Either party may inspect the work of the other at reasonable times and promptly shall give notice of observed defects. Tenant acknowledges that the Building will be undergoing substantial renovation during the Term of the Lease. Tenant acknowledges that its quiet enjoyment and access to the Demised Premises during the Term may be disturbed by the noise, dust, vibrations and other effects of demolition in the Building, provided, however, that Landlord shall use reasonable efforts to avoid undue interference with Tenant's use of the Premises, including the institution of such reasonable measures as may be practicable to mitigate any unreasonable noise and disruption to Tenant's business. 3.5 ALTERATIONS AND ADDITIONS. This Section 3.5 shall apply before and during the Term. Tenant shall not make any alterations and additions to the Premises except in accordance with plans and specifications first approved by Landlord. In no event shall any alterations or additions be considered or approved by Landlord which (a) involve or might affect any structural or exterior element of the Building or building mechanical systems, including the common facilities of the Building, or (b) will require unusual expense to readapt the Premises to normal office use on Lease termination or increase the cost of construction or of insurance or taxes on the Building or the Lot. All alterations and additions shall become a part of the Premises, unless and until Landlord, at its option, shall specify the same for removal at the time of approval pursuant to Section 6.1.2. All of Tenant's alterations and additions and installation and delivery of telephone systems, furnishings, and equipment shall be coordinated with any work being performed by Landlord and shall be performed in such manner, and by such persons as shall maintain harmonious labor relations and not cause any damage to the Building or interference with Building construction or operation and, except for installation of furnishings, equipment and telephone systems, and except as otherwise expressly set forth herein, shall be performed by general contractors first approved by Landlord. Before commencing any work Tenant shall: secure all licenses and permits necessary therefor; deliver to Landlord a statement of the names of all its contractors and -4- 5 subcontractors (the identity of which must have been previously approved by Landlord as hereinabove contemplated) and the estimated cost of all labor and material to be furnished by them; and cause each contractor to carry (i) worker's compensation insurance in statutory amounts covering all the contractor's and subcontractor's employees and (ii) comprehensive public liability insurance with such limits as Landlord may reasonably require, but in no event less than a combined single limit of $1,500,000 (all such insurance to be written in companies approved by Landlord and insuring Landlord and Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance. Tenant agrees to pay promptly when due, and to defend and indemnify Landlord from and against, the entire cost of any work done on the Premises by Tenant, its agents, employees or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the Building or the Lot and immediately to discharge any such liens which may so attach. In connection with the installation of telecommunication equipment by Tenant, such installation shall occur only in such locations and in such a manner as approved in writing by the Landlord and none of such wires, ducts or equipment shall be located in areas outside the Premises (provided, however, that Tenant may install wires and cables in risers and ducts outside the Premises which are in existence on the date of this Lease (collectively, "Risers and Ducts") and for which there exists, in Landlord's sole discretion, adequate space for Tenant's wires and cables). Telephone switches, antennae, electronic distribution boxes and similar equipment shall only be located within the Premises. Landlord shall not be liable for any loss, damage or interruption of service related to such facilities. Landlord approves Tenant's existing telecommunication lines and equipment to the extent located in the Premises or in Risers and Ducts. 3.6 REPRESENTATIVES. Each party authorizes the other to rely in connection with their respective rights and obligations under this Article III upon approval and other actions on the party's behalf by Landlord's Representative in the case of Landlord or Tenant's Representative in the case of Tenant or by any person designated in substitution or addition by notice to the other party. ARTICLE IV RENT 4.1 ANNUAL RENT. Tenant agrees to pay rent to Landlord without any offset or reduction whatever (except as made in accordance with the express provisions of this Lease), the Annual Rent in equal monthly installments in advance on the first day of each calendar month included in the Term after the Term Commencement Date; and for any portion of a calendar month at the beginning or end of the Term, at the proportionate rate payable for such portion, in advance. 4.2 (INTENTIONALLY OMITTED). -5- 6 4.3 (INTENTIONALLY OMITTED). 4.4 ELECTRICITY. Tenant will be billed for electricity for Tenant's lights and outlet consumption on a monthly basis based on an annual estimate of $1.00 per rentable square foot. Should the actual average expense to Landlord per square foot for Tenant's electricity be different, an additional charge or a credit will be made at the end of each year's occupancy to be paid with or credited against the next monthly charge for Tenant's electricity. Notwithstanding the foregoing, Landlord reserves the right to assess Tenant's charge for electricity based on an engineer's survey of Tenant's electrical usage conducted from time to time or on the sub-metering of all or part of the Premises. Such charges for Tenant's electricity shall be paid by Tenant as additional rent at the same time and in the same manner as payments of Annual Rent. Tenant covenants and agrees that its use of electric current shall not exceed 4.0 watts per square foot of usable floor area and that its total connected lighting load will not exceed the maximum load from time to time permitted by applicable governmental regulations. In the event Tenant introduces into the Premises personnel or equipment which overloads the capacity of the Building's electrical system or in any other way interferes with the system's ability to perform properly, supplementary systems including check meters may, if and as needed, at Landlord's option, be provided by Landlord, at Tenant's expense. Landlord shall not in any way be liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if, during the Term of this Lease, either the quantity or character of electric current is changed or electric current is no longer available or suitable for Tenant's requirements due to a factor or cause beyond Landlord's control. Landlord reserves the exclusive right to provide electric and other utility service to the Building. Tenant may request permission from Landlord (which consent may be withheld in its sole discretion) to arrange electric and other utility service exclusively serving the Premises. Should such permission be granted, however, such service shall be installed only in such locations and in such manner as shall be specifically approved by Landlord in its sole discretion, Tenant shall be responsible for restoration of any damage caused by such installation and Tenant shall be responsible for removal of such installations at the termination of this Lease. Landlord may limit Tenant's choice of electrical or other utility providers in order to avoid proliferation of such services to the Building or for any other reason. In no event, however, shall Landlord be responsible for any damages or inconvenience caused by interruption in or poor quality of electricity or other utility services provided to the Building or the Premises unless such damages are caused by the negligence of Landlord, its agents or employees. 4.5 CHANGE OF FISCAL YEAR. Landlord shall have the right from time to time to change the periods of accounting under Section 4.2 to any annual period other than a calendar year, and upon any such change all items referred to in Section 4.2 shall be appropriately apportioned. In all Landlord's Statements rendered under Section 4.2, amounts for periods partially within and partially without the -6- 7 accounting periods shall be appropriately apportioned, and any items which are not determinable at the time of a Landlord's Statement shall be included therein on the basis of Landlord's estimate, and with respect thereto Landlord shall render promptly after determination a supplemental Landlord's Statement, and appropriate adjustment shall be made according thereto. All Landlord's Statements shall be prepared on an accrual basis of accounting. 4.6 PAYMENTS. All payments of Annual Rent and additional rent shall be made to Managing Agent, or to such other person as Landlord may from time to time designate. If any installment of Annual Base Rent or additional rent or payments due on account of leasehold improvements is paid more than 10 days after the due date thereof, at Landlord's election, it shall bear interest at a rate equal to the average prime commercial rate from time to time established by the three largest national banks in Boston, Massachusetts plus 4% per annum from such due date, which interest shall be immediately due and payable as further additional rent. ARTICLE V LANDLORD'S COVENANTS 5.1 LANDLORD'S COVENANTS DURING THE TERM. Landlord's covenants during the Term: 5.1.1 Building Services - To furnish during normal working hours heat, air-conditioning, elevator service and hot and chilled water service and after normal working hours on business days cleaning service as shown in Exhibit D. "Normal working hours" shall mean the hours of 8:00 a.m. through 6:00 p.m. Monday through Friday and the hours of 8:00 a.m. through 1:00 p.m. on Saturdays, and no hours on legal holidays and Sundays; provided, however, that Tenant shall have access to the Building 24 hours a day, 365 days a year, by means of a key or other access device to the main lobby of the Building to be provided to Tenant by Landlord. Tenant shall pay when due all amounts and charges for such services during hours other than normal working hours and shall indemnify and hold harmless Landlord from and against any and all claims, liabilities, damages, losses, costs and expenses (including reasonable attorneys' fees) in connection therewith. Landlord is not and shall not be required to furnish to Tenant or any other occupant of the Premises telephone or other communication service. 5.1.2 Additional Building Services - To furnish, through Landlord's employees or, independent contractors, reasonable additional Building operation services upon reasonable advance request of Tenant at equitable rates including an administrative fee from time to time established by Landlord to be paid by Tenant; 5.1.3 Repairs - Except as otherwise provided in Article VII, to make such repairs to the roof, exterior walls, floor slabs, other structural components and common facilities of the Building as may be necessary to keep them in serviceable condition; and -7- 8 5.1.4 Tenant Directory - To include Tenant's name on the Tenant directory maintained by Landlord in the main lobby of the Building and on the floor of the Building on which the Premises are located, and to provide a Building standard sign on or adjacent to the entrance door to the Premises. 5.1.5 Food Service - Landlord may provide, within the Building or the office park in which the Building is located, a food service of a size, type, location and serving capacity as Landlord shall deem suitable, in its sole discretion. All losses incurred by Landlord in operating the food service facility during any fiscal year and properly allocable to the Building (the "Food Service Losses") shall be added to the Landlord's Annual Operating Costs for the year in which such losses were incurred for the purpose of calculating the Annual Operating Costs Escalation pursuant to Section 4.2. All profits realized by the Landlord in operating the food service facility during any fiscal year and properly allocable to the Building (the "Food Service Profits") shall be credited against the Landlord's Annual Operating Costs for such year. For the purposes of this Section 5.1.5, the Food Service Profits of Losses for any year shall be calculated by deducting from the Gross Receipts of the Food Service (as hereinafter defined) all Expenses of Operation (as hereinafter defined). Gross Receipts of the Food Service as used herein are defined to mean the total amount in dollars of the actual prices charged, in cash, for food and beverages served or purchased at the facility, excluding sums collected for any sales tax or excise tax. The Expenses of Operation of the food service shall mean all expenses of operating the food service facility, including without limitation, salaries, wages, employment taxes and fringe benefits, food service administration costs, food costs, concessionaire's costs, operating costs, equipment maintenance and repair costs, if any, plus an annual return to the Landlord upon its investment in establishing the food service facility (including without limitation the cost of furniture, equipment, furnishings, and related mechanical systems) equal to fifteen percent (15%) of its investment or $50,000, whichever is less. If during any six-month period, the mathematical average of the number of luncheon meals served by the food service facility per day is fewer than 300, or the Food Service Losses incurred by the Landlord in operating the food service facility during such six-month period exceed $25,000, then the Landlord shall have the right and option, in its sole discretion, to take any steps necessary to reduce or eliminate the losses (including without limitation, modification or termination of the food service), unless one hundred percent (100%) of the tenants occupying the Building agree that the Landlord's Annual Operating Costs hereunder for the purpose of calculating the Annual Operating Expense Escalation shall include one hundred percent (100%) of the Food Service Losses, without limitation. The terms of this Section 5.1.5 shall not apply to any restaurant or other food service facility which leases space in the Building as a tenant and is not owned, operated or controlled by Landlord. Landlord reserves the right to approve Tenant's use of a food service operator other than the Landlord's food service operator, if any. Such approval will not be unreasonably withheld. -8- 9 5.1.6 Quiet Enjoyment - That Landlord has the right to make this Lease and that Tenant on paying the rent and performing its obligations hereunder shall peacefully and quietly have, hold and enjoy the Premises throughout the Term without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject however to all the terms and provisions hereof. 5.2 INTERRUPTIONS. Landlord shall not be liable to Tenant for any compensation or reduction of rent by reason of inconvenience or annoyance, injury, death or for loss of business arising from power or other utility losses or shortages, air pollution or contamination, or from the necessity of Landlord's entering the Premises for any of the purposes in this Lease authorized, or for repairing the Premises or any portion of the Building or the Lot or for any interruption or termination (by reason of any cause reasonably beyond Landlord's control, including without limitation, loss of any applicable license or government approval) of the food service provided by Landlord pursuant to Section 5.1.5. In case Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any service or performing any other covenant or duty to be performed on Landlord's part, by reason of any cause beyond Landlord's reasonable control, Landlord shall not be liable to Tenant therefor, nor, except as expressly otherwise provided in Article VII, shall Tenant be entitled to any abatement or reduction of rent by reason thereof, nor shall the same give rise to a claim in Tenant's favor that such failure constitutes actual or constructive total or partial, eviction from the Premises. Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency or until necessary repairs have been completed. Except in case of emergency repairs, Landlord will give Tenant reasonable advance notice of any contemplated stoppage and will use reasonable efforts to avoid unnecessary inconvenience to Tenant by reason thereof. Landlord also reserves the right to institute such policies, programs and measures as may be necessary, required or expedient for the conservation or preservation of energy or energy services or as may be necessary or required to comply with applicable codes, rules, regulations or standards. ARTICLE VI TENANT'S COVENANTS 6.1 TENANT'S COVENANTS DURING THE TERM. Tenant covenants during the Term and such further time as Tenant occupies any part of the Premises: 6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent, (b) all taxes which may be imposed on Tenant's personal property in the Premises (including, without limitation, -9- 10 Tenant's fixtures and equipment) regardless to whomever assessed, (c) as additional rent, Tenant's proportionate share of Annual Operating Costs, (d) all charges by public utilities for electricity, telephone (including service inspections therefor) and other services rendered to the Premises not otherwise required hereunder to be furnished by Landlord without charge and not consumed in connection with any services required to be furnished by Landlord without charge, and (e) as additional rent, all charges to Landlord for services rendered pursuant to Section 5.1.2 hereof. 6.12 Repairs and Yielding Up - Except as otherwise provided in Article VII and Section 5.1.3, to keep the Premises in as good order, repair and condition as the Premises were on the Term Commencement Date, reasonable wear only excepted; and at the expiration or termination of this Lease peaceably to yield up the Premises and all alterations and additions therein, including all telephone and data wiring installed by or at the request of Tenant, in such order, repair and condition, first removing all goods and effects of Tenant and any alterations and additions, the removal of which is required by agreement or specified to be removed by Landlord by notice to Tenant, and repairing all damage caused by such removal and restoring the Premises and leaving them clean and neat. Landlord agrees that the existing improvements in the Premises need not be removed. 6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use and occupy the Premises only for the Permitted Uses; not to injure or deface the Building or the Lot; to keep the Premises clean and in a neat and orderly condition; and not to permit in the Premises any use thereof which is improper, offensive, contrary to law or ordinances, or liable to create a nuisance or to create an unsafe or hazardous condition, or to invalidate or increase the premiums for any insurance on the Building or its contents or liable to render necessary any alteration or addition to the Building; not to dump, flush, or in any way introduce any Hazardous Materials or any other toxic substances into the septic, sewage or other waste disposal system serving the Premises, not to generate, store or dispose of Hazardous Materials in or on the Premises, or the Lot or dispose of Hazardous Materials from the Premises to any other location without the prior written consent of Landlord and then only in compliance with the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.ss.6901 et seq., and all other applicable laws, ordinances and regulations; to notify Landlord of any incident which would require the filing of a notice under applicable federal, state, or local law; not to use, store or dispose of Hazardous Materials on the Premises without first submitting to Landlord a list of all such Hazardous substances and all permits required therefor and thereafter providing to Landlord on an annual basis Tenant's certification that all such permits have been renewed with copies of such renewed permits; and to comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health and other codes, regulations, ordinances or laws applicable to the Premises. As used herein, "Hazardous Materials" shall mean and include, but shall not be limited to, any petroleum product and all hazardous or toxic substances or wastes including any asbestos-containing materials, waste oils, solvents and chlorinated oils, polychlorinated biphenyls (PCBs), or substances which are included under or regulated by any federal, state or local law, rule or regulation (whether now existing or hereafter enacted or promulgated, as they may be amended from time to time) pertaining to the environment, contamination or clean-up (all such laws, rules and regulations being referred to collectively as -10- 11 the "Environmental Laws"), including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 and regulations adopted pursuant to said Act. Nothing herein contained shall prohibit the use of cleaning solvents and other office supplies normally and customarily used by office tenants, provided such use in compliance with all applicable legal requirements and the other provisions hereof. 6.1.4 Rules and Regulations - To comply with the Rules and Regulations set forth in Exhibit E and all other reasonable Rules and Regulations hereafter made by Landlord, of which Tenant has been given notice, for the care and use of the Building and the Lot and their facilities and approaches, it being understood that Landlord shall not be liable to Tenant for the failure of other tenants of the Building to conform to such Rules and Regulations. Landlord agrees to apply such rules and regulations to the tenants of the Building in a uniform and non-discriminatory manner. 6.1.5 Safety Appliances - To keep the Premises equipped with all safety appliances required by law or ordinance or any other regulation of any public authority because of any use made by Tenant and to procure all licenses and permits so required because of such use and, if requested by Landlord, to do any work so required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way Tenant's Permitted Uses. 6.1.6 Assignment and Subletting. Not without the prior written consent of Landlord to assign, mortgage, pledge, encumber, sell or transfer this Lease, in whole or in part, to make any sublease, or to permit occupancy of the Premises or any part thereof by anyone other than Tenant, voluntarily or by operation of law (it being understood that in no event shall Landlord consent to any such assignment, sublease or occupancy if the same is on terms more favorable to the successor occupant than to the then occupant); as additional rent, to reimburse Landlord promptly for reasonable legal and other expenses incurred by Landlord in connection with any request by Tenant for consent to assignment or subletting; no assignment or subletting shall affect the continuing primary liability of Tenant (which, following assignment, shall be joint and several with the assignee); no consent to any of the foregoing in a specific instance shall operate as a waiver in any subsequent instance. Landlord's consent to any proposed assignment or subletting is required both as to the terms and conditions thereof, and as to the creditworthiness of the proposed assignee or subtenant and the consistency of the proposed assignee's or subtenant's business with other uses and tenants in the Building. In the event that any assignee or subtenant pays to Tenant any amounts in excess of the Annual Rent and additional rent then payable hereunder, or pro rata portion thereof on a square footage basis for any portion of the Premises, Tenant shall promptly pay 100% of said excess to Landlord as and when received by Tenant. If Tenant requests Landlord's consent to assign this Lease or sublet more than 25% of the Premises, Landlord shall have the option, exercisable by written notice to Tenant given within 10 days after receipt of such request, to terminate this Lease as of a date specified in such notice which shall be not less than 30 or more than 60 days after the date of such notice. Landlord may, in its sole discretion, withhold consent to any proposed assignment or subletting to another tenant of the -11- 12 Building or an affiliate of such tenant or an entity (or affiliate of any entity) with which Landlord was negotiating for space in the Building during the preceding eighteen (18) months. The foregoing provisions shall not apply to any assignment or sublease with a party controlling, controlled by or under common control with Tenant, or to any entity acquiring all or substantially all of Tenant's assets, provided such successor has a net worth which is at least equal to that of Tenant immediately preceding such transaction. If, at any time during the Term of this Lease, Tenant is: (i) a corporation, limited liability company or a trust (whether or not having shares of beneficial interest) and there shall occur any material change in the identity of any of the persons then having power to participate in the election or appointment of the directors, trustees or other persons exercising like functions and managing the affairs of Tenant; or (ii) a partnership or association or otherwise not a natural person (and is not a corporation, limited liability company or a trust) and there shall occur any change in the identity of any of the persons who then are members of such partnership or association or who comprise Tenant; Tenant shall so notify Landlord and Landlord may terminate this Lease by notice to Tenant given within 90 days thereafter if, in Landlord's reasonable judgment, the credit of Tenant is thereby materially impaired. This paragraph shall not apply if the initial Tenant named herein is a corporation and the outstanding voting stock thereof is listed on a recognized securities exchange. 6.1.7 Indemnity - To defend, with counsel approved by Landlord, all actions against Landlord, Managing Agent, any partner, member, trustee, stockholder, officer, director, employee or beneficiary of Landlord or Managing Agent, holders of mortgages secured by the Premises or the Building and Lot and any other party having an interest in the Premises ("Indemnified Parties") with respect to, and to pay, protect, indemnify and save harmless, to the extent permitted by law, all Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from or related to (i) injury to or death of any person, or damage to or loss of property, on the Premises or on adjoining sidewalks, streets or ways, or connected with the use, condition or occupancy of any of the foregoing unless caused by the negligence of Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any act, fault, omission, or other misconduct of Tenant or its agents, employees, contractors, licensees, sublessees or invitees or (iv) the use, generation, storage or disposal of Hazardous Materials by Tenant or its agents, employees or invitees on the Premises, the Building or Lot or any portion thereof or any surrounding area, including, without limitation, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands or judgments of any nature arising from or related to removal or other remediation of any Hazardous Materials or precautions required to protect against the release of Hazardous Materials by Tenant or its agents, employees, contractors, licensees, -12- 13 sublessees or invitees into the environment to the extent required by any Environmental Laws (as defined below). 6.1.8 Tenant's Insurance - To maintain (a) all risk property insurance in amounts sufficient to fully cover Tenant's improvements and all property in the Premises which is not owned by Landlord and (b) commercial general liability insurance on the Premises, with Landlord named as an additional insured, indemnifying Landlord and Tenant against all claims and demands for (i) injury to or death of any person or damage to or loss of property, on the Premises or adjoining walks, streets or ways, or connected with the use, condition or occupancy of any of the foregoing unless caused by the negligence of Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any act, fault or omission, or other misconduct of Tenant or its agents, employees, contractors, licensees, sublessees or invitees, in amounts which shall, at the beginning of the Term, be at least equal to the limits set forth in Section 1.1, and from time to time during the Term, shall be for such higher limits, if any, as are customarily carried in the area in which the Premises are located on property similar to the Premises and used for similar purposes, and shall be written on the "Occurrence Basis," and to furnish Landlord with certificates thereof. Such insurance shall be effected under valid and enforceable policies with insurers authorized to do business in Massachusetts as stock or mutual companies that are rated in the current edition of BEST'S KEY RATING GUIDE, PROPERTY AND CASUALTY as A and as Class VII or higher. Such policies shall name Landlord and Tenant as the insureds as their respective interests may appear. Not later than the first to occur of (a) the Commencement Date or (b) the commencement of any activities by Tenant in or about the Premises and thereafter not less than 30 days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this Section 6.1.8, Tenant shall deliver to Landlord certificates of insurance issued by the insurers evidencing all such policies in form satisfactory to Landlord, accompanied by evidence satisfactory to Landlord of payment of the first installment of the premiums. Each such policy shall provide that it may not be canceled and that its form, terms or conditions may not be changed without at least 30 days' prior written notice to each insured named therein. 6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's employees working in the Premises covered by worker's compensation insurance in statutory amounts and to furnish Landlord with certificates thereof. 6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents entry: to examine the Premises at reasonable times and, if Landlord shall so elect, to make repairs or replacements; to remove, at Tenant's expense, any changes, additions, signs, curtains, blinds, shades, awnings, aerials, or the like not consented to in writing; and to show the Premises to prospective tenants during the 12 months preceding expiration of the Term and to prospective purchasers and mortgagees at all reasonable times. Except in case of emergency, Landlord shall provide prior oral notice to Tenant prior to any such entry and shall use reasonable efforts to avoid undue interference with Tenant's use or occupancy of the Premises. 6.1.11 Loading - Not to place Tenant's Property, as defined in Section 6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live load per square foot and not to move any safe, vault or other heavy equipment in, about or out of the Premises except in such manner and -13- 14 at such times as Landlord shall in each instance approve; Tenant's business machines and mechanical equipment which cause vibration or noise that may be transmitted to the Building structure or to any other leased space in the Building shall be placed and maintained by Tenant in settings of cork, rubber, spring, or other types of vibration eliminators sufficient to eliminate such vibration or noise. 6.1.12 Landlord's Costs - In case Landlord shall be made party to any litigation commenced by or against Tenant or by or against any parties in possession of the Premises or any part thereof claiming under Tenant, to pay, as additional rent, all costs including, without implied limitation, reasonable counsel fees incurred by or imposed upon Landlord in connection with such litigation to the extent that Landlord prevails in such litigation and, as additional rent, also to pay all such costs and fees incurred by Landlord, including, without limitation, reasonable counsel fees, in connection with the successful enforcement by Landlord of any obligations of Tenant under this Lease. 6.1.13 Tenant's Property - All the furnishings, fixtures, equipment, effects and property of every kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or to be borne by Landlord unless due to the gross negligence of Landlord. 6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire cost of any work done on the Premises by Tenant, its agents, employees, or independent contractors; not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the Premises; and immediately to discharge any such liens which may so attach. 6.1.15 Changes or Additions - Not to make any changes or additions to the Premises without Landlord's prior written consent and only in accordance with Article III hereto, provided that Tenant shall reimburse Landlord for all costs reasonably incurred by Landlord in reviewing Tenant's proposed changes or additions, and provided further that, in order to protect the functional integrity of the Building, all changes and additions shall be performed by contractors selected from a list of approved contractors prepared by Landlord from time to time, or such other contractor approved by Landlord, such approval not to be unreasonably withheld or delayed. 6.1.16 Holdover - To pay to Landlord 150% for the first sixty (60) days of any holdover and 200% thereafter the total of the Annual Rent and all additional rent then applicable for each month or portion thereof Tenant shall retain possession of the Premises or any part thereof after the termination of this Lease, whether by lapse of time or otherwise, and also to pay all damages sustained by Landlord on account thereof; the provisions of this subsection shall not operate as a waiver by Landlord of the right of reentry provided in this Lease. 6.1.17 Security - To indemnify, and save Landlord harmless from any claim for injury to person or damage to property asserted by any personnel, employee, guest, invitee or agent of Tenant which is suffered or occurs in or about the Premises or in or about the Building or the Lot by reason of the act of any intruder or any other person in or about the Premises, the Building or the Lot. -14- 15 ARTICLE VII DAMAGE AND DESTRUCTION; CONDEMNATION 7.1 FIRE OR OTHER CASUALTY. 7.1.1 Subject to the provisions of Section 7.1.2 hereof, in the event during the Term hereof the Premises shall be partially damaged (as distinguished from "substantially damaged" as such term is hereinafter defined) by fire, explosion, casualty or any other occurrence covered or as may be required to be covered, as herein provided, by Landlord's insurance or by such casualty plus required demolition, or by action taken to reduce the impact of any such event, Landlord shall forthwith proceed to repair such damage and restore the Premises, or so much thereof as was originally constructed or delivered by Landlord to substantially its condition at the time of such fire, explosion, casualty or occurrence, provided that Landlord shall not be obligated to expend for such repair an amount in excess of the insurance proceeds recovered as a result of such damage and, further provided that Tenant is not then in default of any of its obligations under this Lease beyond any applicable cure period. Landlord shall not be responsible for any delay which may result from any cause beyond Landlord's reasonable control. 7.1.2 If, however, (i) the Premises should be damaged or destroyed (a) by fire or other casualty (1) to the extent of 25% or more of the cost of replacement, or (2) so that 25% or more of the principal area contained in the Premises shall be rendered untenantable, or (b) by any casualty other than those covered by insurance policies required to be maintained by Landlord under this Lease (hereinafter "substantially damaged"), or (ii) the Premises shall be damaged in whole or in part during the last year of the Term, or (iii) there shall be damage to the Premises of a character as cannot reasonably be expected to be repaired within 12 months from the date of casualty, or (iv) such restoration involves the demolition of or repair of damage to 25% percent or more of the Premises, or (v) applicable law requires the demolition of the Building or forbids the rebuilding of the damaged portion of the Building, or (vi) such restoration requires repairs in an amount in excess of the insurance proceeds recovered or recoverable, or (vii) Landlord's mortgagee shall require that the insurance proceeds from such damage or destruction be applied against the principal balance due on any mortgage, Landlord may, at its option, either terminate this Lease or elect to repair the Premises and Landlord shall notify Tenant as to its election within 90 days after such fire or casualty. If Landlord elects to terminate this Lease, the Term hereof shall end on the date specified in the notice (which shall be the end of a calendar month and not sooner than 30 days after such election was made). If Landlord does not elect to terminate this Lease, then Landlord shall perform such repairs set forth in Section 7.1.3 hereof and Tenant shall perform such repairs in the Building as set forth in Section 7.1.4 hereof, and the Term shall continue without interruption and this Lease shall remain in full force and effect. -15- 16 If Landlord has not elected to terminate this Lease and if there shall be damage to the Premises of a character as cannot (in the reasonable judgment of Landlord's engineer) reasonably be expected to be repaired within twelve (12) months from the date of casualty, then Tenant may, at its option, terminate this Lease provided that Tenant's election shall be made by notice to Landlord within thirty (30) days of Landlord's delivery of the estimate of Landlord's engineer as to the time period required for restoration. 7.1.3 If Landlord does not elect to terminate this Lease as provided in Section 7.1.2 hereof and if Tenant is not then in default of any of its obligations under the Lease beyond any applicable cure period provided for herein, Landlord shall, provided any third party mortgagee of the Building makes insurance proceeds available for restoration, reconstruct as much of the Premises as was originally constructed by Landlord (it being understood by Tenant that Landlord shall not be responsible for any reconstruction of leasehold improvements other than those existing at the time of execution of this Lease, which reconstruction is the sole responsibility of Tenant) to substantially its condition at the time of such damage, but Landlord shall not be responsible for any delays which may result from any cause beyond Landlord's reasonable control. 7.1.4 If Landlord does not elect to terminate this Lease as provided in Section 7.1.2 hereof; Tenant shall, at its own cost and expense, repair and restore the Premises in accordance with the provisions of Section 6.1.15 hereof to the extent not required to be repaired by Landlord pursuant to the provisions of this Section 7.1, including, but not limited to, the repairing and/or replacement of its merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to its damage or destruction. Tenant agrees to commence the performance of its work when notified by Landlord that the work to be performed by Tenant can, in accordance with good construction practices, then be commenced and Tenant shall complete such work as promptly thereafter as is practicable, but in no event more than 90 days thereafter. 7.1.5 All proceeds payable from Landlord's insurance policies with respect to the Premises shall belong to and shall be payable to Landlord. If Landlord does not elect to terminate this Lease as provided in Section 7.1.2 hereof, Landlord shall disburse and apply so much of any insurance recovery as shall be necessary against the cost to Landlord of restoration and rebuilding of Landlord's work referred to in Section 7.1.3 hereof, subject to the prior rights of any lessor under a ground or underlying lease covering the Building and/or the holder of any mortgage liens against the Building. 7.1.6 In the event that the provisions of Section 7.1.1 or Section 7.1.2 shall become applicable, the Annual Rent and additional rent shall be abated or reduced proportionately during any period in which, by reason of such damage or destruction, there is substantial interference with the operation of the business of Tenant in the Premises, having regard to the extent to which Tenant may be required to discontinue its business in the Premises, and such abatement or reduction shall continue for the period commencing with such destruction or damage and ending with the completion by Landlord of such work of repair and/or reconstruction as Landlord is obligated to do. -16- 17 7.2 EMINENT DOMAIN. If, after the execution and before termination of this Lease, the entire Premises shall be taken by eminent domain or destroyed by the action of any public or quasi-public authority, or in the event of conveyance in lieu thereof, the Term shall cease as of the day possession shall be taken by such authority, and Tenant shall pay rent up to that date with a pro-rata refund by Landlord of such rent and additional rent as shall have been paid in advance for a period subsequent to the date of the taking of possession. If less than 25% of the Premises shall be so taken or conveyed, this Lease shall cease only with respect to the parts so taken or conveyed, as of the day possession shall be taken, and Tenant shall pay rent up to that day, with an appropriate refund by Landlord of such rent as may have been paid in advance for a period subsequent to the date of the taking of possession, and thereafter the Annual Rent shall be equitably adjusted. Pending agreement of such rental adjustment, Tenant agrees to pay to Landlord the Annual Rent and additional rent in effect immediately prior to the taking by eminent domain. Landlord shall at its expense make all necessary repairs or alterations so as to constitute the remaining premises a complete architectural unit. If more than 25% of the Premises shall be so taken or conveyed, then the Term shall cease only as respects the part so taken or conveyed, from the day possession shall be taken, and Tenant shall pay rent to that date with an appropriate refund by Landlord of such rent as may have been paid in advance for a period subsequent to the date of the taking of possession, but either party shall have the right to terminate this Lease upon notice to the other party in writing within thirty (30) days after such taking of possession. If neither party elects to terminate the Lease, all of the terms herein provided shall continue in effect except that the Annual Rent shall be equitably adjusted, and Landlord shall make all necessary repairs or alterations so as to constitute the remaining premises a complete architectural unit. All compensation awarded for any such taking or conveyance, whether for the whole or a part of the Premises, shall be the property of Landlord, whether such damages shall be awarded as compensation for diminution in the value of the leasehold or of the fee of or underlying leasehold interest in the Premises, and Tenant hereby assigns to Landlord all of Tenant's right, title and interest in and to any and all such compensation; provided, however, that Tenant shall be entitled to seek a separate award for Tenant's stock, trade fixtures and relocation expense. In the event of any taking of the Premises or any part thereof for temporary use, this Lease shall be and remain unaffected thereby and rent shall not abate. ARTICLE VIII RIGHTS OF MORTGAGEE 8.1 PRIORITY OF LEASE. -17- 18 This Lease is and shall continue to be subject and subordinate to any presently existing mortgage or deed of trust of record covering the Lot or Building or both (the "mortgaged premises"). The holder of any such presently existing mortgage or deed of trust shall have the election to subordinate the same to the rights and interests of Tenant under this Lease exercisable by filing with the appropriate recording office a notice of such election, whereupon the Tenant's rights and interests hereunder shall have priority over such mortgage or deed of trust. Unless the option provided for in the next following sentence shall be exercised, this Lease shall be superior to and shall not be subordinate to, any mortgage, deed of trust or other voluntary lien hereafter placed on the mortgaged premises. The holder of any such mortgage, deed of trust or other voluntary lien shall have the option to subordinate this Lease to the same, provided that such holder enters into an agreement with Tenant by the terms of which the holder will agree to recognize the rights of Tenant under this Lease and to accept Tenant as tenant of the Premises under the terms and conditions of this Lease in the event of acquisition of title by such holder through foreclosure proceedings or otherwise and Tenant will agree to recognize the holder of such mortgage as Landlord in such event, which agreement shall be made to expressly bind and inure to the benefit of the successors and assigns of Tenant and of the holder and upon anyone purchasing the mortgaged premises at any foreclosure sale. Any such mortgage to which this Lease shall be subordinated may contain such terms, provisions and conditions as the holder deems usual or customary. 8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY. The word "mortgage" as used herein includes mortgages, deeds of trust or other similar instruments evidencing other voluntary liens or encumbrances, and modifications, consolidations, extensions, renewals, replacements and substitutes thereof. The word "holder" shall mean a mortgagee, and any subsequent holder or holders of a mortgage. Until the holder of a mortgage shall enter and take possession of the Premises for the purpose of foreclosure, such holder shall have only such rights of Landlord as are necessary to preserve the integrity of this Lease as security. Upon entry and taking possession of the Premises for the purpose of foreclosure, such holder shall have all the rights of Landlord. Notwithstanding any other provision of this Lease to the contrary, including without limitation Section 10.4, no such holder of a mortgage shall be liable, either as mortgagee or as assignee, to perform, or be liable in damages for failure to perform any of the obligations of Landlord unless and until such holder shall enter and take possession of the Premises for the purpose of foreclosure, and such holder shall not in any event be liable to perform or for failure to perform the obligations of Landlord under Section 3.2. Upon entry for the purpose of foreclosure, such holder shall be liable to perform all of the obligations of Landlord (except for the obligations under Section 3.2), subject to and with the benefit of the provisions of Section 10.4, provided that a discontinuance of any foreclosure proceeding shall be deemed a conveyance under said provisions to the owner of the equity of the Premises. 8.3 (INTENTIONALLY OMITTED). -18- 19 8.4 NO PREPAYMENT OR MODIFICATION, ETC. Tenant shall not pay Annual Rent, additional rent, or any other charge more than thirty (30) days prior to the due date thereof. No prepayment of Annual Rent, additional rent or other charge, no assignment of this Lease and no agreement to modify so as to reduce the rent, change the Term, or otherwise materially change the rights of Landlord under this Lease, or to relieve Tenant of any obligations or liability under this Lease, shall be valid unless consented to in writing by Landlord's mortgagees of record, if any. 8.5 NO RELEASE OR TERMINATION. No act or failure to act on the part of Landlord which would entitle Tenant under the terms of this Lease, or by law, to be relieved of Tenant's obligations hereunder or to terminate this Lease, shall result in a release or termination of such obligations or a termination of this Lease unless (i) Tenant shall have first given written notice of Landlord's act or failure to act to Landlord's mortgagees of record, if any, specifying the act or failure to act on the part of Landlord which could or would give basis to Tenant's rights and (ii) such mortgagees, after receipt of such notice, have failed or refused to correct or cure the condition complained of within a reasonable time thereafter, but nothing contained in this Section 8.5 shall be deemed to impose any obligation on any such mortgagee to correct or cure any such condition. "Reasonable time" as used above means and includes a reasonable time to obtain possession of the mortgaged premises, if the mortgagee elects to do so, and a reasonable time to correct or cure the condition if such condition is determined to exist. 8.6 CONTINUING OFFER. The covenants and agreements contained in this Lease with respect to the rights, powers and benefits of a mortgagee (particularly, without limitation thereby, the covenants and agreements contained in this Article VIII) constitute a continuing offer to any person, corporation or other entity, which by accepting or requiring an assignment of this Lease or by entry or foreclosure assumes the obligations herein set forth with respect to such mortgagee; such mortgagee is hereby constituted a party to this Lease as an obligee hereunder to the same extent as though its name were written hereon as such; and such mortgagee shall be entitled to enforce such provisions in its own name. Tenant agrees on request of Landlord to execute and deliver from time to time any agreement which may reasonably be deemed necessary to implement the provisions of this Article VIII. ARTICLE IX DEFAULT 9.1 EVENTS OF DEFAULT. If any default by Tenant continues, in case of Annual Rent, additional rent or any other monetary obligation to Landlord for more than 10 days after notice (provided, however, that if Tenant fails to timely pay any monetary obligation twice in any twelve (12) month period, no -19- 20 notice shall thereafter be required with respect to a monetary default by Tenant), or if Tenant fails to provide an estoppel certificate in accordance with Section 10.10 hereof, or if any default by Tenant continues in any other case for more than thirty (30) days after notice and such additional time, if any, as is reasonably necessary to cure the default if the default is of such a nature that it cannot reasonably be cured in thirty (30) days and Tenant promptly commences to cure such default and diligently pursues such cure without interruption to completion; or if Tenant becomes insolvent, fails to pay its debts as they fall due, files a petition under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may be amended (or any similar petition under any insolvency law of any jurisdiction); or if such petition is filed against Tenant and not dismissed within ninety (90) days thereafter; or if Tenant proposes any dissolution, liquidation, composition, financial reorganization or recapitalization with creditors, makes an assignment or trust mortgage for benefit of creditors, or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to any property of Tenant; or if the leasehold hereby created is taken on execution or other process of law in any action against Tenant; then, and in any such case, Landlord and the agents and servants of Landlord may, in addition to and not in derogation of any remedies for any preceding breach of covenant, immediately or at any time thereafter while such default continues and without further notice, at Landlord's election, do any one or more of the following: (1) give Tenant written notice stating that the Lease is terminated, effective upon the giving of such notice or upon a date stated in such notice, as Landlord may elect, in which event the Lease shall be irrevocably extinguished and terminated as stated in such notice without any further action, or (2) with or without process of law, in a lawful manner enter and repossess the Premises as of Landlord's former estate, and expel Tenant and those claiming through or under Tenant, and remove its and their effects, without being guilty of trespass, in which event the Lease shall be irrevocably extinguished and terminated at the time of such entry, or (3) pursue any other rights or remedies permitted by law. Any such termination of the Lease shall be without prejudice to any remedies which might otherwise be used for arrears of rent or prior breach of covenant, and in the event of such termination Tenant shall remain liable under this Lease as hereinafter provided. Tenant hereby waives all statutory rights (including, without limitation, rights of redemption, if any) to the extent such rights may be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's effects and those of any person claiming through or under Tenant at the expense and risk of Tenant and, if Landlord so elects, may sell such effects at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay over the balance, if any, to Tenant. 9.2 TENANTS OBLIGATIONS AFTER TERMINATION. In the event that this Lease is terminated under any of the provisions contained in Section 9.1 or shall be otherwise terminated for breach of any obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as compensation, (i) the present value as reasonably determined by Landlord of the excess of the total rent reserved for the residue of the Term over the rental value of the Premises for said residue of the Term and (ii) the unamortized portion of the actual out-of-pocket costs and expenses incurred by Landlord for fees and commissions paid to the Broker, amortized on a straight-line reduction basis from 100% to 0% over the Term of the Lease set forth in Section 1.1 hereof. In calculating the rent reserved, there shall be included, in -20- 21 addition to the Annual Rent and all additional rent, the value of all other consideration agreed to be paid or performed by Tenant for said residue. Tenant further covenants as an additional and cumulative obligation after any such ending to pay punctually to Landlord all the sums and perform all the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall be credited with any amount paid to Landlord as compensation as provided in the first sentence of this Section 9.2 and also with the net proceeds of any rents obtained by Landlord by reletting the Premises, after deducting all Landlord's expenses in connection with such relenting, including, without implied limitation, all Repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting, it being agreed by Tenant that Landlord may (i) relet the Premises or any part or Parts thereof for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term and may grant such concessions and free rent as Landlord in its sole judgment considers advisable or necessary to relet the same and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent under reletting shall operate or be construed to release or reduce Tenant's liability as aforesaid. So long as at least 12 months of the Term remain unexpired at the time of such termination, in lieu of any other damages or indemnity and in lieu of full recovery by Landlord of all sums payable under all the foregoing provisions of this Section 9.2, Landlord may by written notice to Tenant, at any time after this Lease is terminated under any of the provisions contained in Section 9.1, or is otherwise terminated for breach of any obligation of Tenant and before such full recovery, elect to recover and Tenant shall thereupon pay, as liquidated damages, an amount equal to the aggregate of the Annual Rent and additional rent accrued under Article IV in the 12 months ended next prior to such termination plus the amount of Annual Rent and additional rent of any kind accrued and unpaid at the time of termination and less the amount of any recovery by Landlord under the foregoing provisions of this Section 9.2 up to the time of payment of such liquidated damages. Nothing contained in this Lease shall, however, limit or prejudice the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. ARTICLE X MISCELLANEOUS 10.1 NOTICE OF LEASE. -21- 22 Upon request of either party, both parties shall execute and deliver, after the Term begins, a notice of this Lease in form appropriate for recording or registration, and if this Lease is terminated before the Term expires, an instrument in such form acknowledging the date of termination. 10.2 (INTENTIONALLY OMITTED). 10.3 NOTICES FROM ONE PARTY TO THE OTHER. All notices required or permitted hereunder shall be in writing and addressed, if to the Tenant, at Tenant's Address or such other address as Tenant shall have last designated by notice in writing to Landlord and, if to Landlord, at Landlord's Address or such other address as Landlord shall have last designated by notice in writing to Tenant. Any notice shall be mailed to such address postage prepaid, registered or certified mail, return receipt requested, or sent to such address by recognized overnight courier service, or delivered to such address by hand. Each notice shall be effective upon delivery or refusal to accept delivery. 10.4 BIND AND INURE. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Landlord named herein and each successive owner of the Premises shall be liable only for the obligations accruing during the period of its ownership. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Building and the Lot but not upon other assets of Landlord. No individual partner, member, trustee, stockholder, officer, director, employee or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Building and the Lot in pursuit of its remedies upon an event of default hereunder, and the general assets of the individual partners, trustees, stockholders, officers, employees or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant. 10.5 NO SURRENDER. The delivery of keys to any employee of Landlord or to Landlord's agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises. 10.6 NO WAIVER, ETC. The failure of either party to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease or any of the Rules and Regulations referred to in Section 6.1.4, whether heretofore or hereafter adopted by Landlord, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation, nor shall the failure of Landlord to enforce any of said Rules and Regulations against any other tenant in the Building be deemed a waiver of any such Rules or Regulations. The receipt by Landlord of -22- 23 Annual Rent or additional rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach by Landlord, unless such waiver be in writing and signed by Landlord. No consent or waiver, express or implied, by either party to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty. 10.7 NO ACCORD AND SATISFACTION. No acceptance by Landlord of a lesser sum than the Annual Rent and additional rent then due shall be deemed to be other than on account of the earliest installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed as accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy in this Lease provided. 10.8 CUMULATIVE REMEDIES. The specific remedies to which either party may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by the other of any provisions of this Lease. In addition to the other remedies provided in this Lease, either party shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease or to a decree compelling specific performance of any such covenants, conditions or provisions. 10.9 LANDLORD'S RIGHT TO CURE. If Tenant shall at any time default in the performance of any obligation under this Lease, Landlord shall have the right after notice and the expiration of the applicable cure period, if any (except in an emergency or except if Tenant is in default of any provision of this lease after notice and the expiration of any applicable cure period), but shall not be obligated, to enter upon the Premises and to perform such obligation, notwithstanding the fact that no specific provision for such substituted performance by Landlord is made in this Lease with respect to such default. In performing such obligation, Landlord may make any payment of money or perform any other act. All sums so paid by Landlord (together with interest at the rate of 4% per annum in excess of the then prime commercial rate of interest being charged by the three largest national banks in Boston, Massachusetts) and all necessary incidental costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be additional rent under this Lease and shall be payable to Landlord immediately on demand. Landlord may exercise the foregoing rights without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease. 10.10 ESTOPPEL CERTIFICATE. -23- 24 Tenant agrees, from time to time, upon not less than 15 days' prior written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect; that Tenant has no defenses, offsets or counterclaims against its obligations to pay the Annual Rent and additional rent and to perform its other covenants under this Lease; that there are no uncured defaults of Landlord or Tenant under this Lease (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications, and, if there are any defenses, offsets, counterclaims, or defaults, setting them forth in reasonable detail); and the dates to which the Annual Rent, additional rent and other charges have been paid. Any such statement delivered pursuant to this Section 10.10 shall be in a form reasonably acceptable to and may be relied upon by any prospective purchaser or mortgagee of premises which include the Premises or any prospective assignee of any such mortgagee. 10.11 WAIVER OF SUBROGATION. Any insurance carried by either party with respect to the Premises and property therein or occurrences thereon shall include a clause or endorsement denying to the insurer rights of subrogation against the other party to the extent rights have been waived by the insured prior to occurrences of injury or loss. Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any rights of recovery against the other for injury or loss due to hazards covered by insurance containing such clause or endorsement to the extent of the indemnification received thereunder. 10.12 ACTS OF GOD. In any case where either party hereto is required to do any act, delays caused by or resulting from Acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations, unusually severe weather, or other causes beyond such party's reasonable control shall not be counted in determining the time during which work shall be completed, whether such time be designated by a fixed date, a fixed time or a "reasonable time," and such time shall be deemed to be extended by the period of such delay. 10.13 BROKERAGE. Tenant and Landlord represent and warrant that they dealt with no brokers in connection with this transaction other than the Broker and agree to defend, with counsel approved by the other, indemnify and save the other harmless from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by a broker or agent, other than the Broker in connection with this Lease. Landlord hereby agrees to pay the brokerage fees to the Broker in connection with the execution and delivery of this Lease. 10.14 SUBMISSION NOT AN OFFER. -24- 25 The submission of a draft of this Lease or a summary of some or all of its provisions does not constitute an offer to lease or demise the Premises, it being understood and agreed that neither Landlord nor Tenant shall be legally bound with respect to the leasing of the Premises unless and until this Lease has been executed by both Landlord and Tenant and a fully executed copy has been delivered to each of them. 10.15 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstances shall be declared invalid or unenforceable by the final ruling of a court of competent jurisdiction having final review, the remaining terms, covenants, conditions and provisions of this Lease and their application to persons or circumstances shall not be affected thereby and shall continue to be enforced and recognized as valid agreements of the parties, and in the place of such invalid or unenforceable provision, there shall be substituted a like, but valid and enforceable provision which comports to the findings of the aforesaid court and most nearly accomplishes the original intention of the parties. There are no oral or written agreements between Landlord and Tenant affecting this Lease. This Lease may be amended, and the provisions hereof may be waived or modified, only by instruments in writing executed by Landlord and Tenant. The titles of the several Articles and Sections contained herein are for convenience only and shall not be considered in construing this Lease. Unless repugnant to the context, the words "Landlord" and "Tenant" appearing in this Lease shall be construed to mean those named above and their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively. If there be more than one tenant, the obligations imposed by this Lease upon Tenant shall be joint and several. 10.16 AUTHORITY OF TENANT. Tenant represents and warrants to Landlord (which representations and warranties shall survive the delivery of this Lease) that: (a) Tenant (i) is duly organized, validly existing and in good standing under the laws of its state of incorporation, (ii) has the corporate power and authority to carry on businesses now being conducted and is qualified to do business in every jurisdiction where such qualification is necessary and (iii) has the corporate power to execute and deliver and perform its obligations under this Lease and (b) the execution, delivery and performance by Tenant of its obligations under this Lease have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the corporate charter or by-laws of the Tenant or any indenture, agreement or other instrument to which it is a party or by which it is bound. -25- 26 EXECUTED as a sealed instrument in two or more counterparts on the day and year first above written. LANDLORD: CambridgePark Two Limited Partnership By: Its Agent: Spaulding and Slye Services Limited Partnership By: TENANT: ONESOURCE INFORMATION SERVICES, INC. By: /s/ Daniel Schimmel ____________________________________ Name: Daniel Schimmel Title: President Hereunto duly authorized -26- 27 EXHIBIT A --------- That certain parcel of land with buildings thereon situated in Cambridge, Middlesex County, Massachusetts, shown as Lot A on a plan entitled "Subdivision Plan of Land Cambridge, Mass." Scale 1" = 60', dated February 27, 1985, prepared by Harry R. Feldman, Inc. recorded with Middlesex South Registry of Deeds as Plan No. 1038 of 1985 more particularly bounded and described as follows: Northerly by CambridgePark Drive, four hundred seventy-three and 70/100 (473.70) feet; Easterly by Lot B as shown on said plan, two hundred sixty-two and 50/100 (262.50) feet; Southerly by said Lot B, sixteen and 70/100 (16.70) feet; Easterly again by said Lot B, one hundred ten (110.00) feet; Southerly again by said Lot B, by three lines of two hundred twenty-two and 24/100 (222.24) feet, two hundred eighteen and 12/100 (218.12) feet and twenty-three and 28/100 (23.28) feet; and Westerly by said Lot B, two hundred ninety-five and 15/100 (295.15) feet. Containing according to said plan 158,215 square feet. 28 EXHIBIT B --------- 29 EXHIBIT C --------- LANDLORD'S WORK None 30 EXHIBIT D --------- LANDLORD'S SERVICES I. CLEANING A. GENERAL 1. All cleaning work will be performed between 8 a.m. and 12 midnight, Monday through Friday, unless otherwise necessary for stripping, waxing, etc. 2. Abnormal waste removal (e.g., computer installation paper, bulk packaging, wood or cardboard crates, refuse from cafeteria operation, etc.) shall be Tenant's responsibility. B. DAILY OPERATIONS (5 TIMES PER WEEK) 1. Tenant Areas a) Empty and clean all waste receptacles; wash receptacles as necessary. b) Vacuum all rugs and carpeted areas. c) Empty, damp-wipe and dry all ashtrays. 2. Lavatories a) Sweep and wash floors with disinfectant. b) Wash both sides of toilet seats with disinfectant. c) Wash all mirrors, basins, bowls, urinals. d) Spot clean toilet partitions. e) Empty and disinfect sanitary napkin disposal receptacles. f) Refill toilet tissue, towel, soap, and sanitary napkin dispensers. 3. Public Areas a) Wipe down entrance doors and clean glass (interior and exterior). b) Vacuum elevator carpets and wipe down doors and walls. c) Clean water coolers. C. OPERATIONS AS NEEDED (BUT NOT LESS THAN EVERY OTHER DAY) 1. Tenant and Public Areas a) Buff all resilient floor areas. D-1 31 D. WEEKLY OPERATIONS 1. Tenant Areas, Lavatories, Public Areas a) Hand-dust and wipe clean all horizontal surfaces with treated cloths to include furniture, office equipment, window sills, door ledges, chair rails, baseboards, convector tops, etc., within normal reach. b) Remove finger marks from private entrance doors, light switches, and doorways. c) Sweep all stairways. E. MONTHLY OPERATIONS 1. Tenant and Public Areas a) Thoroughly vacuum seat cushions on chairs, sofas, etc. b) Vacuum and dust grillwork. 2. Lavatories a) Wash down interior walls and toilet partitions. F. AS REQUIRED AND WEATHER PERMITTING 1. Entire Building a) Clean inside of all windows. b) Clean outside of all windows. G. YEARLY 1. Public Areas a) Strip and wax all resilient tile floor areas. II. HEATING, VENTILATING, AND AIR CONDITIONING 1. Heating, ventilating, and air conditioning as required to provide reasonably comfortable temperatures for normal business day occupancy (excepting holidays); Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m. 2. Maintenance of any additional or special air conditioning equipment and the associated operating cost will be at Tenant's expense, which is estimated at $50 per hour. D-2 32 III. WATER Hot water for lavatory purposes and cold water for drinking, lavatory and toilet purposes, and cold water for tenant's kitchen and tenant's hot water heater (tenant is to supply hot water heater). IV. ELEVATORS (IF BUILDING IS ELEVATORED) Elevators for the use of all tenants and the general public for access to and from all floors of the Building. Programming of elevators (including, but not limited to, service elevators) shall be as Landlord from time to time determines best for the Building as a whole. V. RELAMPING OF LIGHT FIXTURES Tenant will reimburse Landlord for the cost of lamps, ballasts and starters and the cost of replacing same within the Premises. VI. CAFETERIA AND VENDING INSTALLATIONS 1. Any space to be used primarily for lunchroom or cafeteria operation shall be Tenant's responsibility to keep clean and sanitary, it being understood that Landlord's approval of such use must be first obtained in writing. 2. Vending machines or refreshment service installations by Tenant must be approved by Landlord in writing and shall be restricted in use to employees and business callers. All cleaning necessitated by such installations shall be at Tenant's expense. VII. ELECTRICITY A. Landlord, at Landlord's expense, shall furnish electrical energy required for lighting, electrical facilities, equipment, machinery, fixtures, and appliances used in or for the benefit of Tenant's Space, in accordance with the provisions of the Lease of which this Exhibit is part. B. Tenant shall not, without prior written notice to Landlord in each instance, connect to the Building electric distribution system any fixtures, appliances or equipment other than normal office machines such as personal computers, desk-top calculators and typewriters, or any fixtures, appliances or equipment which Tenant on a regular basis operates beyond normal building operating hours. In the event of any such connection, Tenant agrees to an increase in the ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE and a corresponding increase in Annual Rent by an amount which will reflect the cost to Landlord of the additional electrical service to be furnished by Landlord, such D-3 33 increase to be effective as of the date of any such installation. If Landlord and Tenant cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties, and the cost to Landlord will be included in Landlord's Operating Costs provided in Section 4.2 hereof. C. Tenant's use of electrical energy in Tenant's Space shall not at any time exceed the capacity of any of the electrical conductors or equipment in or otherwise serving Tenant's Space. In order to insure that such capacity is not exceeded and to avert possible adverse effect upon the Building electric service, Tenant shall not, without prior written notice to Landlord in each instance, connect to the Building electric distribution system any fixtures, appliances or equipment which operate on a voltage in excess of 120 volts nominal or make any alteration or addition to the electric system of Tenant's Space. Unless Landlord shall reasonably object to the connection of any such fixtures, appliances or equipment, all additional risers or other equipment required therefor shall be provided by Landlord, and the cost thereof shall be paid by Tenant upon Landlord's demand. In the event of any such connection, Tenant agrees to an increase in the ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE and a corresponding in Annual Rent by an amount which will reflect the cost to Landlord of the additional service to be furnished by Landlord, such increase to be effective as of the date of any such connection If Landlord and Tenant cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties, and the cost to Landlord will be included in Landlord's Operating Costs provided in Section 4.2 hereof. D. If at any time after the date of this Lease, the rates at which Landlord purchases electrical energy from the public utility supplying electric service to the Building, or any charges incurred or taxes payable by Landlord in connection therewith, shall be increased or decreased, the Annual Rent and ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE shall be increased or decreased, as the case may be, by an amount equal to the estimated increase or decrease, as the case may be, in Landlord's cost of furnishing the electricity referred to in Paragraph A above as a result of such increase or decrease in rates, charges, or taxes. If Landlord and Tenant cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties, and the cost to Landlord will be included in Landlord's Operating Costs as provided in Section 4.2 hereof. Any such increase or decrease shall be effective as of the date of the increase or decrease in such rate, charge or taxes. E. Landlord may, at any time, elect to discontinue the furnishing of electrical energy. In the event of any such election by Landlord: (1) Landlord agrees to give reasonable advance notice of any such discontinuance to Tenant; (2) Landlord agrees to permit Tenant to receive electrical service directly from the public utility D-4 34 supplying service to the Building and to permit the existing feeders, risers, wiring and other electrical facilities serving Tenant's Space to be used by Tenant and/or such public utility for such purpose to the extent they are suitable and safely capable; (3) Landlord agrees to pay such charges and costs, if any, as such public utility may impose in connection with the installation of Tenant's meters and to make or, at such public utility's election, to pay for such other installations as such public utility may require, as a condition of providing comparable electrical service to Tenant; (4) the Annual Rent shall be equitably decreased to reflect such discontinuance by an amount equal to the ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE then in effect; and (5) Tenant shall thereafter pay, directly to the utility furnishing the same, all charges for electrical services to the Premises. F. Whenever the Annual Rent is increased or decreased pursuant to any of the foregoing paragraphs of this Article, the parties agree, upon request of either, to execute and deliver each to the other an amendment to this Lease confirming such increase or decrease. D-5 35 EXHIBIT E --------- RULES AND REGULATIONS The following rules and regulations have been formulated for the safety and well-being of all tenants of the Project and to insure compliance with governmental and other requirements. Strict adherence to these rules and regulations is necessary to guarantee that each and every tenant will enjoy a safe and undisturbed occupancy of its premises in the Project. Any continuing violation of these rules and regulations by Tenant shall constitute a default by Tenant under the Lease. Landlord may, upon request of any tenant, waive the compliance by such tenant of any of the following rules and regulations, provided that (i) no waiver shall be effective unless signed by Landlord's authorized agent, (ii) any such waiver shall not relieve such tenant from the obligation to comply with such rule or regulation in the future unless otherwise agreed to by Landlord, (iii) no waiver granted to any tenant shall relieve any other tenant from the obligation of complying with these rules and regulations, unless such other tenant has received a similar written waiver from the Landlord, and (iv) any such waiver shall not relieve Tenant from any liability to Landlord for any loss or damage occasioned as a result of Tenant's failure to comply with any rule or regulation 1. The entrances, lobbies, passages, corridors, elevators, halls, courts, sidewalks, vestibules, and stairways shall not be encumbered or obstructed by Tenant, Tenant's agents, servants, employees, licensees or visitors or used by them for any purposes other than ingress or egress to and from the Premises. Landlord shall have the right to control and operate portions of the Project and the facilities furnished for common use of the tenants in such manner as Landlord deems best for the benefit of the tenants generally. 2. The moving in or out of all safes, freight, furniture, or bulky matter of any description shall take place during the hours which Landlord may determine from time to time. Landlord reserves the right to inspect all freight and bulky matter to be brought into the Building and to exclude from the Building all freight and bulky matter which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to have Landlord's structural engineer review Tenant's floor loads on the Premises at Tenant's expense. 3. Tenant, or the employees, agents, servants, visitors or licensees of Tenant shall not at any time place waste or discard any rubbish, paper, articles, or objects of any kind whatsoever outside the doors of the Premises or in the corridors or passageways of the Building. No animals or birds shall be brought or kept in or about the Building. Bicycles shall not be permitted in the Building. E-1 36 4. Tenant shall not place objects against glass partitions or doors or windows or adjacent to any common space which would be unsightly from the Building corridors or from the exterior of the Building and will promptly remove the same upon notice from Landlord. 5. Tenant shall not make noises, cause disturbances, create vibrations, odors (other than ordinarily acceptable tenant kitchen odors in the building) or noxious fumes or use or operate any electric or electrical devices or other devices that emit sound waves or are dangerous to other tenants and occupants of the Building or that would interfere with the operation of any device or equipment or radio or television broadcasting or reception from or within the Building or elsewhere, or with the operation of roads or highways in the vicinity of the Building, and shall not place or install any projections, antennae, aerials, or similar devices inside or outside of the Premises, without the prior written approval of Landlord. 6. Tenant may not (without Landlord's approval therefor, which approval will be signified on Tenant's Plans submitted pursuant to the Lease) and Tenant shall not permit or suffer anyone to: (a) cook in the Premises except as accessory to the use of a coffee room/kitchenette containing a microwave oven; (b) place vending or dispensing machines of any kind in or about the Premises; (c) at any time sell, purchase or give away, or permit the sale, purchase, or gift of food in any form. 7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for any immoral or illegal purposes; (b) use the Premises to engage in the manufacture or sale of, or permit the use of spirituous, fermented, intoxicating or alcoholic beverages on the Premises; (c) use the Premises to engage in the manufacture or sale of, or permit the use of, any illegal drugs on the Premises. 8. No awning or other projection's (including antennae) shall be attached to the outside walls or windows. No curtains, blinds, shades, screens or signs other than those furnished by Landlord shall be attached to, hung in, or used in connection with any window or door of the Premises without prior written consent of Landlord. 9. No signs, advertisement, object, notice or other lettering shall be exhibited, inscribed, painted or affixed on any part of the outside or inside of the Premises if visible from outside of the Premises. Interior signs on doors shall be painted or affixed for Tenant by Landlord or by sign painters first approved by Landlord at the expense of Tenant and shall be of a size, color and style acceptable to Landlord. 10. Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity without prior written consent of Landlord. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord's opinion, tends to impair the reputation of the Building or its E-2 37 desirability for offices, and upon written notice from Landlord, Tenant will refrain from or discontinue such advertising. 11. Card or door keys for doors in the Premises will be furnished at the Commencement of the Lease by Landlord. Tenant shall not affix additional locks on doors and shall purchase duplicate keys only from Landlord and will provide to Landlord the means of opening of safes, cabinets, or vaults left on the Premises. In the event of the loss of any keys so furnished by Landlord, Tenant shall pay to Landlord the cost thereof. Each tenant shall, upon the termination of its tenancy, restore to Landlord all keys of offices, storage and toilet rooms either furnished to, or otherwise procured by, such tenant. 12. Tenant shall cooperate and participate in all security programs affecting the Building. 13. Tenant assumes full responsibility for protecting its space from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed and secured. 14. Tenant shall not make any room-to-room canvass to solicit business from other tenants in the Building, and shall not exhibit, sell or offer to sell, use, rent or exchange any item or services in or from the Premises unless ordinarily embraced within Tenant's use of the Premises as specified in its Lease. Canvassing, soliciting and peddling in the Building are prohibited and Tenant shall cooperate to prevent the same. Peddlers, solicitors and beggars shall be reported to the Management Office. 15. Tenant shall not mark, paint, drill into, or in any way deface any part of the Building or Premises. No boring, driving of nails or screws (except for picture hanging, etc.), cutting or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as Landlord may direct. Tenant shall not construct, maintain, use or operate within their respective premises any electrical device, wiring or apparatus in connection with a loud speaker system or other sound system, except as reasonably required as part of a communication system approved in writing by Landlord, prior to the installation thereof. Tenant shall not install any resilient tile or similar floor covering in the Premises except with the prior written approval of Landlord. The use of cement or other similar adhesive material is expressly prohibited. 16. Tenant shall not waste electricity or water and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning and shall refrain from attempting to adjust controls. Tenant shall keep corridor doors closed except when being used for access. E-3 38 17. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damage resulting from misuse of said fixtures shall be borne by the tenant who, or whose servant, employees, agents, licensees, invitees, customers or guests shall have caused the same. 18. Building employees shall not be required to perform, and shall not be requested by any tenant or occupant to perform, any work outside of their regular duties, unless under specific instructions from the office of the Managing Agent of the Building. The requirements of tenants will be attended to only upon application to Landlord, and any special requirements shall be billed to Tenant (and paid when the next installment of rent is due) in accordance with the schedule of charges maintained by Landlord from time to time or at such charge as is agreed upon in advance by Landlord and Tenant. 19. Tenant may request heating and/or air conditioning during other periods in addition to normal working hours by submitting its request in writing to the office of the Managing Agent of the Building no later than 2:00 p.m. the preceding work day (Monday through Friday) on forms available from the office of the Managing Agent. The request shall clearly state the start and stop hours of the "off-hour" service. Tenant shall submit to the Building Manager a list of personnel authorized to make such request. The Tenant shall be charged for such operation in the form of additional rent; such charges are to be determined by the Managing Agent and shall be fair and reasonable and reflect the additional operating costs involved. 20. Tenant covenants and agrees that its use of the Premises shall not cause a discharge of more than the gallonage per foot of Premises Design Floor Area per day of sanitary (non-industrial) sewage allowed under the sewage discharge permit for the Building. Discharges in excess of that amount, and any discharge of industrial sewage, shall only be permitted if Tenant, at its sole expense, shall have obtained all necessary permits and licenses therefor, including without limitation permits from state and local authorities having jurisdiction thereof. Tenant shall submit to Landlord on December 31 of each year of the Term of this Lease a statement, certified by an authorized officer of Tenant, which contains the following information: name of all chemicals, gases, and hazardous substances, used, generated, or stored on the Premises; type of substance (liquid, gas or granular); quantity used, stored or generated per year; method of disposal; permit number, if any, attributable to each substance, together with copies of all permits for such substances; and permit expiration date for each substance. No flammable, combustible or explosive fluid, chemical or substance shall be brought into or kept upon the Premises, the Building or the Project (other than those fluids or chemicals customarily used by tenants of other first-class office buildings in E-4 39 connection with office purposes and then only those types and quantities permitted under Landlord's policies of insurance for the Building or the Project). 21. Landlord reserves the right to exclude from the Project at an times any person who is not known or does not properly identify himself to the Project management. Landlord may, at its option, require all persons admitted to or leaving the Project between the hours of 6:00 p.m. and 8:00 p.m., Monday through Friday, and at any hour on Saturdays, Sundays and legal holidays, to register. Each tenant shall be responsible for all persons for whom it authorizes entry into the Project, and shall be liable to Landlord for all acts or omissions of such persons. 22. Landlord reserves the right to inspect all freight to be brought into the Project and to exclude from the Project all freight which violates any of these rules and regulations. There shall not be used in any space or in the common halls of the Project, either by any tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. EX-10.12 13 LEASE - 300 BAKER AVE ASSOCIATES 1 EXHIBIT 10.12 LEASE 300 BAKER AVENUE ASSOCIATES, LIMITED PARTNERSHIP, LANDLORD, AND ONESOURCE INFORMATION SERVICES, INC., TENANT DATED: JANUARY 20, 1999 PROPERTY: 300 BAKER AVENUE, CONCORD, MASSACHUSETTS 2 TABLE OF CONTENTS ARTICLE I REFERENCE DATA.......................................................1 Section 1.01 Subjects Referred To...........................................1 Section 1.02 Exhibits.......................................................4 ARTICLE 2 PREMISES AND TERM....................................................4 Section 2.01 Lease of Premises..............................................4 Section 2.02 Appurtenant Rights and Reservations............................4 Section 2.03 Term...........................................................5 ARTICLE 3 LANDLORD'S WORK, DELIVERY OF THE PREMISES AND COMMENCEMENT DATE......5 Section 3.01 Landlord's Work................................................5 Section 3.02 Delivery of Possession and Commencement Date...................5 Section 3.03 Tenant's Early Access..........................................6 Section 3.04 Conclusiveness of Landlord's Performance.......................6 ARTICLE 4 RENT.................................................................6 Section 4.01 Fixed Rent.....................................................7 Section 4.02 Additional Rent................................................7 Section 4.03 Real Estate Taxes..............................................7 Section 4.04 Operating Expenses.............................................9 Section 4.05 Tenant's Electricity Payment..................................13 Section 4.06 Provisions Applicable to Tax Payments, Expense Payments and Tenant's Electricity Payments.............................14 Section 4.07 Proration of Fixed and Additional Rent........................14 Section 4.08 Late Payment of Rent..........................................14 Section 4.09 Late Payment of Rent..........................................15 ARTICLE 5 USE.................................................................15 Section 5.01 Permitted Uses................................................15 Section 5.02 Specific Prohibitions.........................................15 Section 5.03 Permits and Approvals.........................................15 Section 5.04 Floor Loads...................................................16 ARTICLE 6 INSURANCE...........................................................16 Section 6.01 Tenant's Insurance............................................16 Section 6.02 Landlord's Insurance..........................................16 Section 6.03 Tenant's Liability for Increased Insurance Costs..............17 Section 6.04 Waiver of Subrogation.........................................17 Section 6.05 No Release....................................................18 ARTICLE 7 COMPLIANCE WITH LAWS................................................18 Section 7.01 Tenant's Obligations..........................................18 Section 7.02 Tenant's Right to Contest....................................19 Section 7.03 Americans with Disabilities Act...............................19 Section 7.04 Environmental Compliance......................................19 ARTICLE 8 ALTERATIONS AND ADDITIONS...........................................20 Section 8.01 Tenant's Right to Make Alterations and Additions..............20 Section 8.02 Landlord's Consent............................................21 Section 8.03 Tenant's Performance of Alterations...........................21
3 Section 8.04 Notices of Violation..........................................22 Section 8.05 Costs of Alterations; Liens; Indemnification..................22 Section 8.06 Tenant's Contractor..........................................23 Section 8.07 Fixtures, Restoration.........................................23 ARTICLE 9 REPAIRS.............................................................24 Section 9.01 Tenant's Obligations..........................................24 Section 9.02 Landlord's Obligations........................................24 ARTICLE 10 HEATING, VENTILATION AND AIR CONDITIONING..........................25 Section 10.01 Landlord's Obligations.......................................25 Section 10.02 Services During Non-Business Hours...........................25 Section 10.03 Tenant's Supplemental Air Conditioning.......................26 Section 10.04 Excessive Demand.............................................26 ARTICLE II ELECTRICITY........................................................26 Section 11.01 Landlord's Obligations.......................................26 Section 11.02 Tenant's Obligations.........................................26 Section 11.03 Replacement Lighting........................................27 ARTICLE 12 CLEANING AND OTHER SERVICES........................................27 Section 12.01 Cleaning Services............................................27 Section 12.02 Elevator Service.............................................28 Section 12.03 Water........................................................28 Section 12.04 Interruptions in Service.....................................28 Section 12.05 Security.....................................................29 Section 12.06 Signs........................................................29 Section 12.07 Other Services...............................................29 ARTICLE 13 ASSIGNMENT, MORTGAGING AND SUBLETTING..............................29 Section 13.01 Prohibition..................................................29 Section 13.02 Permitted Assignments and Subleases..........................30 Section 13.03 Procedure....................................................31 Section 13.04 Rent.........................................................33 Section 13.05 Tenant's Ongoing Liability...................................34 Section 13.06 Non-Disturbance and Attornment...............................34 Section 13.07 Certain Landlord Rights......................................34 ARTICLE 14 DAMAGE TO OR DESTRUCTION OF THE PREMISES...........................35 Section 14.01 Landlord's Obligation to Repair; Rent Abatement..............35 Section 14.02 Tenant's Right to Terminate..................................35 Section 14.03 Landlord's Right to Terminate................................35 Section 14.04 Certain Landlord Rights......................................36 ARTICLE 15 EMINENT DOMAIN.....................................................36 Section 15.01 Total Taking.................................................36 Section 15.02 Partial Taking...............................................36 Section 15.03 Award........................................................37 Section 15.04 Temporary Taking.............................................38 Section 15.05 Agreement in Lieu of Taking..................................38 ARTICLE 16 DEFAULT............................................................38
(ii) 4 Section 16.01 Tenant's Performance a Condition.............................38 Section 16.02 Events of Default............................................38 ARTICLE 17 REMEDIES OF LANDLORD...............................................39 Section 17.01 Termination..................................................39 Section 17.02 Re-Entry and Reletting.......................................40 Section 17.03 Equitable Remedies...........................................40 Section 17.04 Tenant's Liability for Damages...............................41 Section 17.05 Landlord's Fees and Expenses.................................42 Section 17.06 Rights Cumulative............................................42 Section 17.07 Rights of Bankruptcy Trustee.................................42 ARTICLE 18 CURING TENANT'S DEFAULTS; APPLICATION OF PAYMENTS.................43 Section 18.01 Landlord's Option to Cure....................................43 Section 18.02 Application of Payments......................................43 ARTICLE 19 NON-LIABILITY AND INDEMNIFICATION..................................43 Section 19.01 Landlord's Liability.........................................43 Section 19.02 Limitations on Liability.....................................44 Section 19.03 Indemnification..............................................44 Section 19.04 Liability of Tenant..........................................45 ARTICLE 20 YIELD UP...........................................................45 Section 20.01 Yield Up.....................................................45 Section 20.02 Abandonment of Personal Property.............................45 Section 20.03 Indemnification..............................................46 Section 20.04 Holdover.....................................................46 Section 20.05 Survival of Provisions.......................................46 ARTICLE 21 SUBORDINATION AND ATTORNMENT.......................................46 Section 21.01 Subordination................................................46 Section 21.02 Successor Landlord...........................................47 ARTICLE 22 ESTOPPEL AND ERISA CERTIFICATES....................................48 Section 22.01 Estoppel Certificate.........................................48 Section 22.02 ERISA Certificate............................................49 ARTICLE 23 ACCESS, CHANGE IN FACILITIES.......................................49 Section 23.01 Reservations to Landlord.....................................49 Section 23.02 Landlord's Right to Change Common Areas......................49 Section 23.03 Landlord's Access............................................50 ARTICLE 24 MISCELLANEOUS......................................................51 Section 24.01 Security Deposit.............................................51 Section 24.02 Notices......................................................52 Section 24.03 Quiet Enjoyment..............................................53 Section 24.04 Rules and Regulations........................................53 Section 24.05 Notice of Accidents..........................................53 Section 24.06 No Representations...........................................54 Section 24.07 Brokerage....................................................54 Section 24.08 Consents.....................................................54 Section 24.09 Lease Not to be Recorded, Notice of Lease....................54 Section 24.10 Inability to Perform.........................................54
(iii) 5 Section 24.11 Waiver.......................................................55 Section 24.12 No Other Waiver..............................................55 Section 24.13 Successors and Assigns.......................................56 Section 24.14 Authority....................................................56 Section 24.15 Entire Agreement.............................................56 Section 24.16 Governing Law................................................56 Section 24.17 Financial Statements.........................................56 Section 24.18 No Third Party Beneficiaries.................................57 ARTICLE 25 DEFINITIONS; CONSTRUCTION OF TERMS.................................57 Section 25.01 Certain Definitions..........................................57 Section 25.02 Provisions Severable.........................................58 Section 25.03 Rules of Construction........................................59 Section 25.04 Captions.....................................................60 ARTICLE 26 EXTENSION RIGHTS...................................................60 Section 26.01 Renewal Option...............................................60 Section 26.02 Renewal Rental Rate..........................................61 Section 26.03 Amendment to Lease...........................................61 Section 26.04 Landlord's Rights............................................61 EXHIBIT A DESCRIPTION OF REAL PROPERTY A1 EXHIBIT B FLOOR PLAN FOR THE PREMISES B1 EXHIBIT C WORK LETTER C1 EXHIBIT D RULES AND REGULATIONS D1 EXHIBIT E CLEANING STANDARDS E1 EXHIBIT F NONDISTURBANCE, ATTORNMENT AND SUBORDINATION AGREEMENT FI EXHIBIT G LETTER OF CREDIT G1
(iv) 6 LEASE ARTICLE I REFERENCE DATA Section 1.01 SUBJECTS REFERRED TO. Each reference in this Lease to any of the following subjects shall be construed to incorporate the data set forth opposite that subject in this Section 1.01. Additional definitions are set forth throughout the Lease and in Article 25. Landlord: 300 Baker Avenue Associates, Limited Partnership, a Delaware limited partnership Landlord's Present Mailing Address: c/o Hall Properties, Inc. Three Center Plaza Boston, MA 02108 Tenant: OneSource Information Services, Inc., a Delaware corporation Tenant's Present Mailing Address: 150 Cambridge Park Drive, 5th Floor Cambridge, MA 02140 Attn: Real Estate Manager Building and Real Property: That certain office building (the "BUILDING") having an address at 300 Baker Avenue, Concord, Massachusetts situated on land (the "REAL PROPERTY") more particularly described in Exhibit A attached hereto. Premises: A portion of the third floor of the Building, substantially as shown on the floor plan attached hereto as Exhibit B consisting of approximately 35,770 square feet of rentable area (the "Premises"). 7 -2- Fixed Rent: From and after the Commencement Date, for the Initial Term, the Fixed Rent shall be Twelve and 66/100 ($12.66) Dollars per rentable square foot per annum payable in equal monthly installments. Fixed Rent for the Renewal Term will be determined in accordance with Article 26 hereof. Premises Rentable Area: Approximately 35,770 rentable square feet of space based upon the Building Owners and Managers Association method of measurement (ANSI/BOMA Z65.1, effective June 6, 1996). Building Rentable Area: Approximately 408,042 rentable square feet based upon the Building Owners and Managers Association method of measurement (ANSI/BOMA Z65. 1, effective June 6, 1996). Permitted Uses: General business, office, administrative, research and development, software development and clerical uses, and accessory uses thereto, but not professional office uses. As used herein "professional office use" shall have the meaning ascribed in the Concord Zoning By-Law, i.e., the use of the Premises for the office of a doctor, lawyer, accountant, architect, engineer or similar professionals. Floor Loads: 250 lbs. live load per square foot. Tenant's Share: A fraction, the numerator of which is the Premises Rentable Area and the denominator of which is the Building Rentable Area. Landlord estimates that Tenant's Share is 8.8%, subject to adjustment as provided in Section 2.01. 8 -3- Commencement Date: The date on which Landlord delivers possession of the Premises to Tenant pursuant to Section 3.02 hereunder, but no sooner than June 1, 1999. Scheduled Commencement Date: June 1, 1999. Term: Five (5) years commencing on the Commencement Date and expiring on the Expiration Date (the "INITIAL TERM"). (The Initial Term, as it may be extended by a Renewal Term, are hereinafter collectively referred to as the "Term"). Expiration Date: The last day of the calendar month in which the day preceding the fifth anniversary of the Commencement Date occurs. Extension Rights: One option to extend the Initial Term for a period of five (5) years (the "RENEWAL TERM"). Parking Spaces: Unallocated parking will be provided on the parking lots adjacent to the Building at the rate of 4.0 spaces per 1,000 square feet of Premises Rentable Area. Security Deposit: $415,000, in the form of an irrevocable letter of credit, which may be reduced at the end of the third and the fourth Lease Years, as further described in Section 24.01 hereof. Brokers: Fallon, Hines & O'Connor One Post Office Square Boston, MA 02109 Attn: Brian T. Hines and 9 -4- McCall & Almy One Post Office Square Boston, MA 02109 Attn: Mary L. Lentz Section 1.02 EXHIBITS. The Exhibits to this Lease are incorporated into this Lease by reference and are to be construed as part of this Lease. ARTICLE 2 PREMISES AND TERM Section 2.01 LEASE OF PREMISES. Landlord hereby leases to Tenant, and Tenant hereby accepts from Landlord, the Premises, for the rents hereinafter reserved, and upon and subject to the terms and conditions of this Lease. The rentable square footage set forth in Article 1, Reference Data, is based on the Building Owners and Managers Association method of measurement as adopted effective June 6, 1996 (ANSI/BOMA Z65.1). Within thirty (30) days after the Commencement Date, Tenant may, at it sole cost, measure the rentable square footage of the Premises. If Tenant disputes Landlord's measurement of Premises Rentable Area as set forth in Article 1, Reference Data, it shall promptly notify Landlord. If Landlord and Tenant cannot ` thereafter agree on the appropriate measurement within ten (10) days after Tenant's notice, then either party shall have the right to submit the issue to arbitration in accordance with the rules of the American Arbitration Association. If it is determined that the actual rentable square footage varies from the Premises Rentable Area determined by Landlord, then the Fixed Rent (and any other provisions of this Lease based upon a specific rentable square footage) shall be retroactively adjusted to reflect the applicable square footage figure as determined by arbitration. Landlord and Tenant, as applicable, shall pay any retroactive adjustment within twenty (20) days after the decision is rendered in the arbitration. Section 2.02 APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant to the Premises, the nonexclusive right to use and to permit its invitees to use in common with others, (a) public or common lobbies, hallways, stairways, passenger and freight elevators, the cafeteria, the exercise room, including showers and lockers, and sanitary facilities in the Building, (b) common pipes, ducts, conduits, wires and appurtenant fixtures serving the Premises, (c) if the Premises include less than the entire rentable area of any floor, the common toilets and other common facilities in the central core area of such floor, (d) common walkways and driveways necessary for access to the Building and (e) the unallocated Parking Spaces referred to in Section 1.01, but such rights shall always be subject to 10 -5- reasonable rules and regulations from time to time established by Landlord by appropriate notice and to the right of Landlord to reasonably designate and change from time to time areas and facilities so to be used. Section 2.03 TERM. The Premises are leased for the Term unless the Term shall terminate sooner pursuant to any of the terms of this Lease or pursuant to law. ARTICLE 3 LANDLORD'S WORK, DELIVERY OF THE PREMISES AND COMMENCEMENT DATE Section 3.01 LANDLORD'S WORK If so indicated in the Work Letter attached hereto as Exhibit C (the "WORK LETTER"), Landlord shall complete the Premises and prepare the same for occupancy in accordance with the plans, specifications and agreements and on the terms, conditions and provisions set forth in the Work Letter ("LANDLORD'S Work"). Except for Landlord's Work and as otherwise specified in this Lease, Landlord is leasing the Premises to Tenant "as is," without any representations or warranties of any kind (including, without limitation, any express or implied warranties of merchantability, fitness or habitability). Possession by Tenant before completion of Landlord's Work shall not relieve Landlord from completing or causing the completion of Landlord's Work in accordance with the requirements of this Lease. Section 3.02 DELIVERY OF POSSESSION AND COMMENCEMENT DATE. For purposes of determining the Commencement Date only, the Premises shall be considered as delivered upon the first to occur of, (a) the date on which Landlord or Landlord's architect gives notice of substantial completion (as hereinafter defined) of Landlord's Work; provided that said work has been substantially completed on said date; (b) the date on which Tenant takes occupancy of all or any portion of the ...... Premises for the conduct of its business; (c) if Landlord reasonably determines that the date of substantial completion of Landlord's Work is delayed by reason of Tenant Delays (as defined in the Work Letter), the date on which, in Landlord's reasonable judgment, Landlord's Work would have been substantially completed but for such Tenant Delays. 11 -6- "SUBSTANTIAL COMPLETION" of Landlord's Work shall mean completion of Landlord's Work except for items which can be completed after Tenant's occupancy without undue interference with Tenant's use of the Premises (i.e. so-called "PUNCHLIST ITEMS "). Landlord shall use reasonable efforts to complete all punchlist items within thirty (30) days or, if such completion is not feasible for any reason, as soon as conditions permit, and Tenant shall afford Landlord access to the Premises for such purpose pursuant to the terms of this Lease. If the Commencement Date has not occurred by the date that is fifteen (15) days after the Scheduled Commencement Date for any reason other than Force Majeure Delays (as defined in the Work Letter) and Tenant Delays, then Tenant shall receive a credit against Fixed Rent of one hundred percent (100%) of the daily Fixed Rent at the rate set forth in Section 1.01 for each day of delay until the Commencement Date. Additional Rent shall be abated until the Commencement Date occurs. Tenant waives any right to rescind this Lease and waives the right to recover any further damages, direct or indirect, which may result from Landlord's failure to substantially complete and deliver the Premises to Tenant on or before the Scheduled Commencement Date. Notwithstanding the foregoing, in the event the Commencement Date is delayed for more than six (6) months after the Scheduled Commencement Date for any reason other than Tenant Delays, Tenant shall have the right to terminate this Lease by giving thirty (30) days written notice to Landlord. When the Commencement Date has been finally established, each of Landlord and Tenant, upon the request of the other, shall execute a notice in recordable form stating the Commencement Date and Expiration Date as established. Any failure of either party to execute such statement shall not affect the Commencement Date and Expiration Date as established. Section 3.03 TENANT'S EARLY ACCESS. Landlord shall permit Tenant access (at Tenant's sole risk) for purposes of making measurements and installing equipment and furnishings in the Premises prior to Tenant's taking possession of the Premises if such can be done without interference with Landlord's Work in the Premises and in other portions of the Building and in harmony with Landlord's contractors and subcontractors. Section 3.04 CONCLUSIVENESS OF LANDLORD'S PERFORMANCE. Except to the extent Tenant shall have given Landlord notice not later than one hundred twenty (120) days after the Commencement Date (which shall be extended to one year after the Commencement Date in the case of latent defects) of respects in which Landlord has not performed Landlord's Work, Tenant shall have no claim that Landlord has failed to perform any of Landlord's Work. ARTICLE 4 RENT 12 -7- Section 4.01 FIXED RENT. Tenant shall pay when due to Landlord, without notice or demand, in lawful money of the United States of America, by check or wire transfer, at the office of Landlord or at such other place as Landlord may designate, the Fixed Rent. Fixed Rent shall be payable in equal monthly installments in advance on the first day of each month during the Term, the first installment to be paid on the Commencement Date; provided, however, that for the first forty-five (45) days of the Term, Fixed Rent shall be Six and 25/100 ($6.25) Dollars per square foot of Premises Rentable Area per annum, prorated on a per them basis. Section 4.02 ADDITIONAL RENT. Tenant shall pay when due all sums due from Tenant under the terms of this Lease, other than Fixed Rent, including, without limitation, (a) Tenant's Share of Real Estate Taxes and Expenses, (b) Tenant's own insurance costs, utility charges (including, without limitation, Tenant's Electricity Payment) and personal property taxes, and (c) all other charges and amounts payable by or due from Tenant, whether payable initially to Landlord or to a third party ("ADDITIONAL RENT"). For the first twelve months (12) `Months of the Term, Tenant's Share of Real Estate Taxes and Expenses shall not exceed Five and 65/100 ($5.65) Dollars per square foot of Premises Rentable Area. Section 4.03 REAL ESTATE TAXES. As used in this Lease, the term "REAL ESTATE TAXES" shall mean the total of all taxes and special or other assessments based on the value of, or income derived from, the Real Property and levied, assessed or imposed at any time by any governmental authority upon or against the Real Property or any part thereof, provided, however, that betterments or special assessments levied against the Real Property on a one time basis and not based on the assessed value of the Real Property or the general tax rate, will be amortized over the longest period allowed by law. If, due to a change in the method of taxation or for any other reason, any tax or assessment is levied, assessed or imposed at any time by any governmental authority in connection with the value of, or the receipt of income or rents from, the Real Property, or otherwise imposed with reference to the ownership, use or occupancy of the Real Property, shall be levied against Landlord or any owner of the Real Property in addition to or in substitution in whole or in part for Real Estate Taxes or in lieu of additions to or increases in Real Estate Taxes, then such other tax, assessment or governmental imposition shall be deemed to be included within the definition of Real Estate Taxes for the purposes hereof. If there are any special assessments which are payable over a period of time extending before or after the Term, only a pro rata portion thereof, covering the payment period occurring during the Term, shall be included in Real Estate Taxes. If, by law, any assessment may be paid in installments, then, for the purposes hereof, (1) such assessment shall be deemed to have been payable in the maximum number of installments permitted by law without penalty, and (2) there shall be included in Real Estate Taxes for each Tax Year in which such installments may be paid the installments of such assessment so becoming payable during such Tax Year, together with interest payable during such Tax Year. Included in Real Estate Taxes for any year shall be the expenses, including reasonable payments 13 -8- to attorneys, experts and appraisers, incurred by Landlord during such year in connection with any application, proceeding or settlement wherein Landlord obtains or seeks to obtain a reduction or refund of Real Estate Taxes payable or paid upon or against the Real Property. Tenant shall not be responsible for late fees, penalties, and interest for Landlord's failure to timely pay Real Estate Taxes. Tenant shall pay to Landlord, as Additional Rent for each Tax Year or portion of a Tax Year included in the Term, in the manner hereinafter provided, an amount equal to Tenant's Share of the Real Estate Taxes for such Tax Year (a "TAX PAYMENT"). (a) Before or within thirty (30) days after the start of each Tax Year, Landlord shall furnish to Tenant a statement of Landlord's reasonable estimate of Tenant's Share of Real Estate Taxes payable for such Tax Year and Tenant shall pay. to Landlord as Additional Rent, on the first (1st) day of each calendar month during such Tax Year, an amount equal to one-twelfth (1/12th) of Tenant's Share of such estimated Real Estate Taxes. (b) During any Tax Year included in the Term, Landlord may send to Tenant a revised statement of Landlord's reasonable estimate of Tenant's Share of Real Estate Taxes payable for such Tax Year. If, at the time of any such revised statement, the aggregate amount of the Tenant's Tax Payments during the preceding months of the Tax Year in question is less than the amount which would have been paid pursuant to such revised statement, the deficiency shall be due and payable in full as Additional Rent within thirty (30) days after the date of such statement and an appropriate adjustment shall be made to the monthly Tax Payments payable for the remainder of the Tax Year. If, at the time of any such revised statement, the aggregate amount of the monthly Tax Payments made by Tenant during the preceding months of the Tax Year in question exceeds the amount which would have been paid pursuant to such revised statement, Landlord shall credit such excess to the Tax Payment(s) next due from Tenant. (c) Within one hundred twenty (120) days after the end of each Tax Year, Landlord shall send to Tenant a final statement (a "TAX STATEMENT") of Tenant's Share of the actual Real Estate Taxes paid by Landlord with respect to the Real Property, which Tax Statement shall be accompanied by copies of all relevant tax bills issued by the Town of Concord. If Tenant's Share of such Real Estate Taxes is greater than the aggregate of Tenant's Tax Payments for such Tax Year, then within thirty (30) days after the date of such statement, Tenant shall pay any balance due as Additional Rent. If Tenant's Share of such Real Estate Taxes is less than the aggregate of Tenant's Tax Payments for such Tax Year, Landlord shall credit any such excess to the Tax Payment(s) next due from Tenant or refund such excess if the Term has ended. Each statement of Tenant's Share of actual Real Estate Taxes furnished by Landlord as provided above shall constitute a final determination as between Landlord and Tenant of Tenant's Share of Real Estate Taxes for the period represented thereby unless Tenant shall, within thirty (30) days after it is furnished, give notice to Landlord that it disputes the accuracy thereof, which notice shall specify the particular respects in which the statement may be inaccurate. Pending 14 -9- resolution of such dispute, Tenant shall pay Tenant's Share of Real Estate Taxes to Landlord in accordance with the statement furnished by Landlord. (d) Notwithstanding the foregoing, if and to the extent Real Estate Taxes are required by the taxing authority to be paid in advance on a quarterly, semiannual or annual basis for any Tax Year to avoid a penalty or a late charge, then Landlord may elect to bill Tenant for Tenant's Share of Real Estate Taxes then due for such calendar quarter, semiannual period or year, as the case may be, and Tenant's Share of Real Estate Taxes for such calendar quarter, semiannual period or Tax Year shall be due in its entirety within thirty (30) days thereafter, in lieu of monthly payments as hereinabove provided. (e) Until a new statement of estimated Tax Payments is rendered, Tenant's estimated Tax Payment for any Tax Year shall be deemed to be one-twelfth (1/12th) of the total amount of Tax Payments for the Preceding Tax Year as set forth in Landlord's most recent statement of the same to Tenant. If, after Tenant has made Tax Payments for a Tax Year, Landlord receives a refund of Real Estate Taxes payable for such Tax Year as a result of a reduction of such Real Estate Takes by final determination of an application, legal proceeding, settlement, or otherwise, and provided that Tenant is not in default under this Lease, Landlord shall, within thirty (30) days after receiving such refund, pay Tenant's Share of the refund to Tenant (after deducting from such refund all reasonable legal fees, expert fees, court costs and other expenses and fees incurred in connection with obtaining such refund to the extent such fees or expenses were not theretofore included in Real Estate Taxes), Tenant's Share to be prorated for any partial year if appropriate. Nothing herein shall be deemed to obligate Landlord and/or any Superior Lessor or Superior Mortgagee to seek a reduction in Real Estate Taxes or assessed valuation of the Real Property. Section 4.04 OPERATING EXPENSES. Tenant shall pay to Landlord, as Additional Rent, Tenant's Share of Expenses in accordance with the provisions of this Section 4.04 (an "EXPENSE PAYMENT"). For purposes of this Lease, the term "EXPENSES" shall mean the total of all costs and expenses incurred or borne by Landlord with respect to the operation, maintenance, management, repair and security of the Real Property and the Building and the services provided to tenants thereof unless provided exclusively to other tenants in any given Calendar Year, including, but not limited to, the costs and expenses incurred for and with respect to: heat; fuel; water rates and sewer rates; air conditioning, ventilation and heating (including, without limitation, repairs, maintenance and replacement of on-floor heating, ventilating and air conditioning equipment); electricity utilized with respect to common elements of the Building (there being excluded or deducted from such electrical utilization any cost or expense incurred or borne directly by Landlord and the portion of the cost of supplying electrical current to provide overtime heating, ventilating and/or air conditioning to a tenant which is allocable to electricity consumed in furnishing such service and which is paid by Tenant or any other tenant of the Building); elevator and elevator cab maintenance; lobby, atrium, interior and exterior plaza and common area 15 -10- maintenance; equipping, operating and maintaining cafeteria and food service areas; equipping, operating and maintaining common health or fitness facilities; parking lot maintenance and striping; operation and maintenance of fountains; costs of cleaning; equipment, services and personnel for protection and security of common areas; reasonable lobby decoration, lobby displays and interior and exterior landscape maintenance; sprinkler maintenance and alarm service; roof repair and replacement; refuse and snow removal; maintenance, repairs, replacements, and improvements which are appropriate for the continued operation of the Building as a first-class building with related structures and amenities including parking; rental (or depreciation) of equipment used in cleaning and maintenance; painting and decoration of non-tenant areas; fire, extended coverage, special extended coverage, owner's protective, and other casualty coverage, boiler and machinery, sprinkler, apparatus, public liability and umbrella liability and property damage, rent or rental value and plate glass insurance and any other insurance which Landlord may reasonably deem necessary or which is required by any Superior Lessor and/or Superior Mortgagee; supplies; wages, salaries and benefits, hospitalization, retirement plans, and group insurance and other indirect expenses respecting employees of Landlord and Landlord's contractors up to and including the grade of building manager; uniforms and working clothes for such employees and the cleaning thereof, expenses imposed on the Landlord pursuant to legal requirements or any collective bargaining agreement with respect to such employees; worker's compensation insurance, payroll, social security, unemployment, and other similar taxes with respect to such employees; telephone and other Building office expenses; professional fees (including, without limitation, reasonable fees of consultants, legal and auditing fees); computer time; reasonable annual fees for management of the Building and reserves for any or all of the foregoing. Expenses shall not, however, include the following: (a) Tenant's Electricity Costs, which are addressed in Section 4.05 hereof, (b) leasing commissions; (c) executives' salaries above the grade of building manager; (d) expenditures for capital improvements except (i) those which are paid for out of a capital reserve (in which case the expenditure shall be included in Expenses when the reserve is created or supplemented, but not when reserved funds are utilized for such capital expenditures), (ii) capital expenditures which Landlord reasonably anticipates will have the effect of reducing current and/or future Expenses by. a corresponding amount, and (iii) capital expenditures required by any law imposed after the date of this Lease. In all cases where the expenditure for capital improvements is not made out of reserved funds, the cost thereof shall be included in Expenses for the year in which the costs are incurred and subsequent years, on a straight line basis, to the extent that such items are depreciated over an appropriate useful life, with an interest factor equal to the Interest Rate at the time of Landlord's having incurred said expenditure. If Landlord shall lease any item of capital equipment the cost of which would not be excluded, as above provided, from Expenses, then the rentals and other costs paid pursuant to such lease shall be included in Expenses for the year in which they are incurred; 16 -11- (e) cost of repairs or replacements incurred by reason of fire or other casualty or by the exercise of the right of eminent domain, to the extent to which Landlord is compensated therefor through proceeds of insurance or a condemnation award; (f) advertising expenditures; (g) legal fees incurred in disputes with tenants; (h) costs incurred in performing work or furnishing services exclusively to or for the benefit of individual tenants; (i) debt service on any Superior Mortgage and rent payable under any Superior Lease; (j) expenses for which Landlord is entitled to be reimbursed or indemnified (either by an insurer, condemnor, tenant or otherwise); (k) legal expenses arising out of the negotiation or enforcement of any provisions of any leases; (1) wages, salaries or other compensation paid to any employees of Landlord and Landlord's contractors above the grade of building manager; (m) the cost of remediating any condition related to the presence on the Real Property of any Hazardous Substances; (n) any contribution by Tenant to supplement Landlord's capital reserves if as a consequence of such contribution the aggregate amount of capital reserves held by Landlord following such contribution would exceed an amount equal to the product of One ($1.00) Dollar times the Rentable Area of the Building; (o) fines or penalties incurred on account of violations of Legal Requirements; (p) general overhead and other costs associated with the operation of the business entity constituting Landlord; or (q) for the Initial Term only, annual fees for management and leasing of the Building exceeding four percent (4%) of gross collected rents for the Building. In addition, the cost of any service rendered to the Real Property or Building in conjunction with other properties owned by Landlord or any of its subsidiaries or affiliates shall be equitably apportioned. If, during all or part of any Calendar Year, Landlord shall not furnish any particular item(s) of work or service (which would constitute an Expense hereunder) to portions of the 17 -12- Building, due to the fact that such portions are not occupied or leased, or because such item(s) of work or service is not required or desired by the tenant of such portion, or such tenant is itself obtaining and providing such item(s) of work or service, or for other reasons, then, for the purposes of computing the Additional Rent payable hereunder, the amount of such item(s) included in Expenses for such period shall be increased by an amount equal to the additional operating and maintenance expenses which would reasonably have been incurred during such Calendar Year by Landlord if it had at its own expense furnished such item(s) of work or service to the Building as if 95% of the Building Rentable Area had been occupied by tenants. Furthermore, if during the Term, Landlord shall make a capital expenditure, the total cost of which is not properly includable in Expenses for the Calendar Year in which it was made, there shall nevertheless be included in such Expenses for each succeeding Year an annual charge-off of such capital expenditure. Said annual charge-off shall be determined by dividing the original capital expenditure plus an interest factor equal to the Interest Rate, by the number of years of useful life of the improvement made with the capital expenditure; and the useful life shall be reasonably determined by Landlord in accordance with generally accepted accounting principles and practices in effect at the time such expenditure is made. Tenant shall pay to Landlord, as Additional Rent for each Calendar Year, in the manner hereinafter provided, an amount equal to Tenant's Share. of Expenses for such Calendar Year. (a) Before or within thirty (30) days after the start of each Calendar Year, Landlord shall furnish to Tenant a statement of Landlord's reasonable estimate of Tenant's Share of the projected Expenses for such Calendar Year, and Tenant shall pay to Landlord as Additional Rent, on the first (1st) day of each calendar month during such Calendar Year, an amount equal to one-twelfth (1/12th) of Tenant's Share of such projected Expenses. (b) At any time during any Calendar Year, Landlord may deliver to Tenant a revised statement of projected Expenses to reflect known increases in rates for the current Calendar Year applicable to the items included in Expenses, and thereafter Tenant's monthly Expense Payment shall be adjusted accordingly. If, at the time of any such revised statement, the aggregate amount of the monthly Expense Payments made by Tenant during the preceding months of the Calendar Year in question is less than the amount which would have been paid pursuant to such revised statement, the deficiency shall be due and payable in full as Additional Rent within thirty (30) days after the date of such statement. If, at the time of any such revised statement, the aggregate amount of the monthly Expense Payments made by Tenant during the preceding months of the Calendar Year in question exceeds the amount which would have been paid pursuant to such revised statement, Landlord shall credit such excess to the Expense Payment(s) next due from Tenant. (c) Within one hundred twenty (120) days after the end of each Calendar Year, Landlord shall submit to Tenant an "EXPENSE STATEMENT" prepared by Landlord setting forth the Expenses for the preceding year and the adjustment, if any, due for such Calendar Year. If Tenant's Share of such Expenses is greater than the aggregate of 18 -13- Tenant's estimated Expense Payments for such Calendar Year, then within thirty (30) days after the date of such statement, Tenant shall pay any unpaid portion of its Expense Payment as Additional Rent. If Tenant's Share of such Expenses is less than the aggregate of Tenant's estimated Expense Payments for such Calendar Year, Landlord shall credit any such excess to the Expense Payment(s) next due from Tenant or refunded such excess if the Term has ended. Each Expense Statement of Tenant's Share of the actual Expenses furnished by Landlord as provided above shall constitute a final determination as between Landlord and Tenant of Tenant's Share of Expenses for the period represented thereby unless Tenant shall, within sixty (60) days after it is famished, give notice to Landlord that it disputes the accuracy thereof, which notice shall specify the particular respects in which the Statement may be inaccurate. Pending resolution of such dispute, Tenant shall pay Tenant's Share of Expenses to Landlord in accordance with the statement furnished by Landlord. Landlord shall allow Tenant reasonable access to the actual invoices and other books and records pertaining to Expenses. (d) Until a new statement of projected Expenses is rendered, Tenant's Estimated Expense Payment for any year shall be deemed to be one-twelfth (1/12th) of the total Expense Payment for the preceding year (or, prior to the rendering of the Expense Statement for such year, Tenant shall continue the same estimated Expense Payment). Section 4.05 TENANT'S ELECTRICITY PAYMENT. Tenant shall pay to Landlord, as Additional Rent, Tenant's Electricity Payment in accordance with the following: For purposes of this Lease, the term "TENANT'S ELECTRICITY PAYMENT" shall mean all costs and expenses incurred or borne by Landlord with respect to all electricity utilized by Tenant, including, without limitation, base and peak demand charges. Landlord shall charge Tenant for such electricity utilization by allocating Building electricity costs to Tenant by any reasonable method, including by the use of check meters, submeters or formulas based on square footage, intensity and timing of electricity usage. Within thirty (30) days after the end of each month during the Term, Landlord shall submit to Tenant a statement (an "ELECTRICALLY STATEMENT") as to Tenant's Electricity Payment for such month and Tenant shall pay to Landlord such amount as Additional Rent within thirty (30) days thereafter. Each Electricity Statement furnished by Landlord as provided above shall constitute a final determination as between Landlord and Tenant of Tenant's Electricity Payment for the period represented thereby unless Tenant shall, within thirty (30) days after it is furnished, give notice to Landlord that it disputes the accuracy thereof, which notice shall specify the particular respects in which the Statement may be inaccurate. Pending Irresolution of such dispute, Tenant shall pay Tenant's Electricity Payment to Landlord in accordance with the Statement furnished by Landlord. Landlord shall allow Tenant reasonable access to the actual invoices and other books and records pertaining to Tenant's Electricity Payment. 19 -14- Section 4.06 PROVISIONS APPLICABLE TO TAX PAYMENTS, EXPENSE PAYMENTS AND TENANT'S ELECTRICITY PAYMENTS. Subject to the terms of this Section 4.06, the following provisions shall be applicable to Tax Payments, Expense Payments and Tenant's Electricity Payments: (a) Landlord's and Tenant's obligation to make the adjustments referred to in Sections 4.03, 4.04 and 4.05 shall survive any expiration or termination of this Lease except that a final accounting shall be made within six (6) months following the then current Tax and Calendar Years. With respect to the year in which the Term expires or terminates, each of Tenant's Tax Payment, Expense Payment and Electricity Payment shall become immediately due and payable by Tenant to Landlord, if it has not already been paid, and Landlord, as soon as reasonably practicable, shall cause the Tax Statement, Expense Statement and Electricity Statement for that Tax Year, Calendar Year and month, as applicable, to be prepared and furnished to Tenant. Landlord and Tenant thereupon shall make appropriate adjustments of all amounts then owing. (b) Any delay or failure of Landlord in billing Tax Payments, Expense Payments and Tenant's Electricity Payments shall not constitute a waiver of, or in any way impair the continuing obligation of Tenant to pay, such amounts. (c) The allocation of Real Estate Taxes and Expenses shall be determined, where not otherwise explicitly set forth herein, in accordance with ANSI/BOMA Z65.1, with the exception that Real Estate Taxes and Expenses with respect to common areas on the first floor of the Building shall be allocable to all floors of the Building. Section 4.07 PRORATION OF FIXED AND ADDITIONAL RENT. In the event that the Initial Term or the Renewal Term shall commence on a day other than the first day of a calendar month, or expire on a day other than the last day of a calendar month, the Fixed Rent and Additional Rent for such month shall be prorated on a per diem basis. With respect to Expenses only, if the first Calendar Year in the Initial Term is not a full calendar year, then the Expenses for such first Calendar Year shall be annualized by Landlord, giving effect to seasonal variations, to obtain the amounts thereof which would have been incurred had said first Calendar Year been a full calendar year, and the Expense Payment shall be computed by Landlord based upon such annualized amounts. For purposes of the foregoing, amounts shall be computed on the basis of a three hundred sixty (360) day year comprised of twelve (12) thirty (30) day months. Section 4.08 LATE PAYMENT OF RENT. If Tenant shall fail to pay any installment of Fixed Rent or Additional Rent for a period of ten (10) days after such installment or payment shall become due, Tenant shall pay interest on such Fixed Rent or Additional Rent at the Interest Rate, from the date when such installment or 20 -15- payment became due to the date of payment thereof, which interest shall be deemed Additional Rent. Section 4.09 LATE PAYMENT OF RENT. There shall be no abatement of, deduction from, reduction of, or counterclaim or setoff against any rental unless otherwise specifically and expressly permitted in this Lease. The terms "RENT", "RENT" or "RENTAL" as used in this Lease, shall include Fixed Rent and Additional Rent. ARTICLE 5 USE Section 5.01 PERMITTED USES. Tenant shall use and occupy the Premises for the Permitted Uses, and for no other purpose. The provisions of this Article 5 or Section 1.01 as to the nature of Tenant's use of the Premises shall not constitute a representation or guaranty by Landlord that any use other than general business office use is lawful or permissible under any certificate of occupancy issued for the Premises or Building or is otherwise permitted by law. Section 5.02 SPECIFIC PROHIBITIONS. Notwithstanding any other provision of this Lease, including, without limitation, Section 5.01, Tenant shall not use, occupy, suffer or permit the Premises or any part thereof to be used in any manner, or suffer or permit anything to be brought into or kept therein, which would, in Landlord's reasonable judgment, (a) make unobtainable, at standard rates from any reputable insurance company authorized to do business in the State, any fire insurance with extended coverage or liability, elevator, boiler, umbrella or other insurance, (b) cause, or be likely to cause, injury or damage to the Building or to any Building Equipment on the Premises, (c) constitute a public or private nuisance, (d) violate any certificate of occupancy for the Building, (e) emit objectionable noise, fumes, vibrations, heat, chilled air, vapors or odors into or from the Building or the Building Equipment, (o subject Landlord to any liability for injury to any person or property, (g) cause any increase in the insurance rates applicable to the Building, (h) result in the cancellation of, or the assertion of any defense by any insurer to any claim under, any policy of insurance maintained by or for the benefit of Landlord, (i) impair or interfere with any of the Building services including the furnishing of electrical energy, or the proper and economical cleaning, heating, ventilating, air conditioning or other servicing of the Building, Building Equipment or the Premises or (j) violate the Rules and Regulations of the Building attached hereto as Exhibit D (the "RULES AND Regulations "). The restrictions imposed by this Section, and the application thereof, shall not be limited or modified by the terms of any other provision of this Lease. Section 5.03 PERMITS AND APPROVALS. 21 -16- If any governmental license or permit, other than a certificate of occupancy, shall be required for the proper and lawful conduct of Tenant's business in or occupancy of the Premises and if failure to secure such license or permit would in any way affect Landlord or the Building, then Tenant, at its expense, shall procure and thereafter maintain such license or permit and submit the same to Landlord for inspection. Tenant shall comply with the terms and conditions of each such license and/or permit. Section 5.04 FLOOR LOADS. Tenant shall not place a load upon any floor that exceeds the Floor Load. Subject to the preceding sentence, if Tenant wishes to place any safes or vaults in the Premises, it may do so at its own expense after giving prior notice to Landlord, but Landlord reserves the right to reasonably prescribe their weight and position. ARTICLE 6 INSURANCE Section 6.01 TENANT'S INSURANCE. Tenant shall obtain and keep in full force and effect during the Term, at its own cost and expense, to protect Landlord, Landlord's agents and employees, any Superior Lessor or Superior Mortgagee and Tenant as additional insureds (except as to Tenant) (a) Public Liability Insurance to afford protection against any and all claims for personal injury, death or property damage occurring in, upon, adjacent to or connected with the Premises, the Real Property or any part thereof in an amount of not less than $5,000,000 for injury or death arising out of any one occurrence, and $2,000,000 for damage to property in respect of one occurrence, or in any increased amount reasonably required by Landlord; and (b) insurance against loss or damage by fire, and such other risks and hazards as are insurable under then available standard forms of fire insurance policies with extended coverage, to Tenant's Property for the full insurable value thereof. During such time as Tenant shall be constructing any Improvements, Tenant shall carry builder's risk insurance, completed value form, covering all physical loss, in an amount reasonably satisfactory to, and to protect, the Landlord and any Superior Lessor or Superior Mortgagee. All such insurance shall be written in form and substance reasonably satisfactory to Landlord by an insurance company of recognized responsibility licensed ` to do business in the Commonwealth of Massachusetts which shall be reasonably satisfactory to Landlord. Upon failure of Tenant to procure, maintain and pay all premiums therefor, Landlord may, at its option, do so, and Tenant agrees to pay the cost thereof to Landlord as Additional Rent. Tenant shall cause to be included in all such insurance policies a provision to the effect that the same will be non-cancelable and not permitted to lapse except upon thirty (30) days' prior notice to Landlord, any Superior Lessor and any Superior Mortgagee. No later than the Commencement Date, original insurance policies or appropriate certificates shall be deposited with Landlord. Any renewals, replacements or endorsements thereto shall also be deposited with Landlord. Section 6.02 LANDLORD'S INSURANCE. 22 -17- Landlord shall obtain and keep in full force and effect during the Term, at its own cost and expense (a) Public Liability Insurance to afford protection against any and all claims for personal injury, death or property damage occurring in, upon, adjacent to or connected with the Premises, the Real Property or any part thereof in an amount of not less than $5,000,000 for injury or death arising out of any one occurrence, and $2,000,000 for damage to property in respect of one occurrence; and (b) insurance against loss or damage by fire, and such other risks and hazards as are insurable under then available standard forms of fire insurance policies with all risk coverage, to the Building and the Building Equipment for the full replacement cost thereof, and including flood insurance, if applicable. Section 6.03 TENANT'S LIABILITY FOR INCREASED INSURANCE COSTS. If, by reason of any act or omission on the part of Tenant, whether or not Landlord has consented to the same, the premiums for fire, rent or any other type of insurance maintained by Landlord or any other tenant in the Building covering the Building, the Building Equipment or other property of Landlord (or of such other tenant) shall be higher than they otherwise would be, Tenant shall promptly reimburse Landlord for the increased portion of the premiums for such insurance paid by Landlord because of such act or omission on the part of Tenant, which sum shall be Additional Rent payable on demand to Landlord. If due to Tenant's occupancy or failure to occupy the Premises any such insurance shall be canceled by any insurance carrier, Tenant hereby indemnifies Landlord against any loss which would have been covered by such insurance. Section 6.04 WAIVER OF SUBROGATION. Throughout the Term, each party agrees to use its reasonable efforts to include in each of its insurance policies (insuring the Building and the Building Equipment, in the case of Landlord, and insuring Tenant's Property and business interest in the Premises, including, without limitation, business interruption insurance, in the case of Tenant, against loss, damage or destruction by fire or other insured casualty) a waiver of the insurer's right of subrogation against the other party; or if such waiver should be commercially unobtainable or unenforceable, an express agreement that such policy shall not be invalidated if the insured waives or has waived, before occurrence of the casualty, any rights of recovery against any party responsible for a casualty covered by the policy. If such waiver or agreement shall not be obtainable without additional charge, the insured party shall so notify the other party promptly and, if the other party shall pay the insurer's additional charge therefor, such waiver or agreement shall be included in the policy. (a) So long as Landlord's insurance policies include the waiver of subrogation or agreement to release liability referred to in Section 6.04, Landlord, to the extent that such insurance is in force and is collectible, hereby waives any right of recovery against Tenant, any other permitted occupant of the Premises, and any of their employees or agents, for any loss occasioned by fire or other casualty. In the event that at any time Landlord's fire insurance carriers shall not include such or similar provisions in 23 -18- Landlord's policies, the waiver set forth in the foregoing sentence shall be of no further force or effect, and Landlord shall give notice thereof to Tenant. During any period that the foregoing waiver of right of recovery is in effect, Landlord shall look solely to the proceeds of such policies to compensate Landlord for any loss occasioned by any insured casualty. (b) So long as Tenant's insurance policies include the waiver of subrogation or agreement or permission to release liability referred to in Section 6.04, Tenant, to the extent that such insurance is in force and collectible, hereby waives, and agrees to cause all other occupants of the Premises to execute and deliver to Landlord instruments waiving any right of recovery against Landlord, any Superior Lessor and any Superior Mortgagee and any of their respective employees, agents or contractors, for any loss occasioned by fire or other insured casualty. In the event that at any time Tenant's insurance carriers shall not include such waiver or similar provisions in Tenant's policies, the waiver set forth in the foregoing sentence, upon prior notice given by Tenant to Landlord, shall be of no further force or effect with respect to any insured risks under such policy from and after the giving of such notice, or in the case such insurer shall not be willing to grant such waiver for all of the required parties, such waiver shall be of no force or effect with respect only to the required parties not included in such waiver. During any period that the foregoing waiver of right of recovery is in effect, Tenant, or any other occupant of the Premises, shall look solely to the proceeds of such policies to compensate Tenant or such other occupant for any loss occasioned by any insured casualty. Section 6.05 NO RELEASE. Except to the extent expressly provided in Section 6.04, nothing contained in this Lease shall relieve (a) Tenant of any liability to Landlord or to its insurance carriers which Tenant may have under law or the provisions of this Lease by reason of any damage to the Premises or the Building by fire or other casualty or (b) Landlord of any liability to Tenant or to its insurance carriers which Landlord may have under law or the provisions of this Lease by reason of any damage to the Premises or the Building by fire or other casualty. ARTICLE 7 COMPLIANCE WITH LAWS Section 7.01 TENANT'S OBLIGATIONS. Tenant, at its sole cost and expense, shall comply with all Legal Requirements and all Insurance Requirements applicable to the Premises and give Landlord prompt notice of any lack of compliance, except that Tenant shall have no obligation to make any alteration of the Premises required solely by reason of its use thereof for the purposes permitted by Section 5.01 unless said alteration (a) is necessitated by a condition which has been otherwise created by, or at the instance of, Tenant, (b) is attributable to the use, other than as expressly permitted by Section 24 -19- 5.01, to which Tenant puts the Premises, or Tenant's manner of use of the Premises, (c) is required by reason of a breach of Tenant's obligations hereunder, or (d) is occasioned, in whole or in part, by any act, omission or negligence of Tenant or any person claiming by, through or under Tenant, or any of their assignees, subtenants, employees, agents, contractors, invitees or licensees. Tenant shall pay all costs, expenses, fines, penalties and damages which may be imposed upon Landlord, any Superior Lessor, and/or any Superior Mortgagee by reason of or arising out of Tenant's failure fully and promptly to comply with the provisions of this Section. It shall be Landlord's responsibility to comply with all Legal Requirements and Insurance Requirements applicable to the base Building, (including the Building Equipment not installed by Tenant or other tenants of the Building), for which Tenant and other tenants of the Building are not responsible pursuant to the terms of their leases which are reasonably comparable hereto. Section 7.02 TENANT'S RIGHT TO CONTEST. Tenant, at its sole cost and expense, after notice to Landlord, by appropriate proceedings prosecuted diligently and in good faith, may contest the validity or applicability of any Legal Requirement or Insurance Requirement, provided that: (a) Landlord shall not be subject to civil or criminal fines or violations, nor shall the Building or the Real Property, or any part thereof, be subject to being condemned or vacated, by reason of noncompliance or otherwise by reason of such contest; (b) before the commencement of such contest, Tenant shall furnish to Landlord either (i) the bond of a surety company, in form and substance reasonably satisfactory to Landlord, in an amount at least equal to 125% of the cost of such compliance (as estimated by Landlord) and shall indemnify Landlord against any cost resulting from or incurred in connection with such contest or noncompliance, or (ii) other security reasonably satisfactory in all respects to Landlord; (c) such noncompliance or contest shall not, in Landlord's reasonable judgment, constitute or result in any material risk of material economic loss to Landlord (in which event Landlord may condition Tenant's noncompliance or contest upon the taking of action or furnishing of security by Tenant; and (d) Tenant shall keep Landlord regularly advised in writing as to the status of such proceedings. Section 7.03 AMERICANS WITH DISABILITIES ACT. Landlord acknowledges the existence of the Americans with Disabilities Act (the "ADA") and will meet the requirements of the ADA with regard to the common areas of the Building. Tenant consents to any and all actions reasonably necessary to be taken by Landlord in order to comply with the provisions of the ADA. Additionally, Tenant agrees to take any and all actions reasonably necessary in order to cause the Premises to comply with the ADA. Tenant hereby agrees to indemnify and hold Landlord harmless from and against any and all loss, damages, costs or expenses incurred by Landlord as a result of Tenant's failure to comply with the terms and provisions of the ADA insofar as the Premises are concerned. 25 -20- Section 7.04 ENVIRONMENTAL COMPLIANCE. (a) Tenant shall comply with all environmental laws, rules and regulations applicable to the Premises and Tenant's use thereof. Tenant shall not store, generate, handle, transport, treat, dispose of or use hazardous or toxic substances or waste as defined in any applicable Legal Requirement ("Hazardous Substances") except in compliance with all applicable Legal Requirements. In the event that Hazardous Substances violating applicable Legal Requirements are discovered in or on the Premises, then Tenant shall be liable for all costs and expenses associated with the treatment and removal thereof in compliance with all applicable Legal Requirements and shall immediately bring the Premises into compliance with all Legal Requirements applicable to Hazardous Substances. Tenant shall indemnify, defend and save Landlord harmless from and against all loss, cost, claims, fines, penalties, liabilities, damages and expenses (including, without limitation, costs associated with any investigation of site conditions or any cleanup, remedial action, removal or restoration work, diminution in the value of the Building or Real Property, damages for the loss or restriction on use of any portion of the Building or Real Property, damages arising from any adverse impact on marketing of space in Building, reasonable attorneys' fees, expert witness fees and other costs of defense) arising out Tenant's violation of this Section 7.04; provided, however, that Tenant shall not be liable for costs or expenses associated with Hazardous Substances which were located upon the Premises prior to the Commencement Date. This Section 7.04 (a) shall survive expiration or termination of this Lease. (b) If at any time during the Term any applicable Legal Requirements require the removal of the tiles affixed to either the floor slab or the unfinished ceiling, Landlord shall remove said tiles at its sole cost and expense and in accordance with said Legal Requirements. ARTICLE 8 ALTERATIONS AND ADDITIONS Section 8.01 TENANT'S RIGHT TO MAKE ALTERATIONS AND ADDITIONS. Tenant shall not make installations, alterations or additions in, to or on the Premises except in compliance with this Article 8. Provided Tenant is not in default under this Lease, Tenant, at its sole cost and expense, may make nonstructural improvements in the Premises ("TENANT'S ALTERATIONS" or "ALTERATIONS"), provided: (a) Tenant's Alterations will not result in a violation of or require a change in any certificate of occupancy, permit or governmental approval applicable to the Premises or to the Building or require Landlord to make changes in or about the Premises as a .result of Tenant's Alterations; (b) The character or outside appearance of the Building, appearance of any common area or atrium, or rentability, value or cubic content of the Premises or the Building or any part thereof shall not be affected in any way, and Tenant's Alterations shall not, in the reasonable opinion of Landlord, weaken or impair (temporarily or 26 -21- permanently) the structure of the Building either during the making of such Alterations or upon their completion; (c) Tenant shall not be permitted to install and make part of the Premises any materials, fixtures or articles which are subject to liens, chattel mortgages or security interests; and (d) No Alterations reasonably estimated by Landlord's architect, engineer or contractor to cost more than $50,000 ("Major Alterations") shall be undertaken (i) except under the supervision of a licensed architect or licensed professional engineer satisfactory to Landlord, (ii) except if Landlord has ` received thirty (30) days' prior written notice and (iii) prior to Tenant delivering to Landlord either (1) a performance bond and a labor and materials payment bond (issued by a surety company reasonably satisfactory to Landlord and licensed to do business in the State) each in an amount equal to 125% of such estimated cost, showing Landlord as an additional obligee thereunder, and otherwise in form reasonably satisfactory to Landlord or (2) such other security as shall be reasonably satisfactory to Landlord. Section 8.02 LANDLORD'S CONSENT. Before proceeding with any Alterations, Tenant shall submit to Landlord three copies of detailed drawings and specifications therefor for Landlord's written consent, which consent shall not be unreasonably withheld or delayed. Tenant shall upon demand reimburse Landlord for all reasonable expenses incurred by Landlord in connection with (a) its decision and the decision, if required, of any Superior Lessor and any Superior Mortgagee as to whether to approve the proposed Alterations and (b) inspecting the Alterations to determine whether the same are being or have been performed in accordance with the approved drawings and specifications therefor and with all Legal Requirements and Insurance Requirements, including the reasonable fees and expenses of any attorney, architect and/or engineer employed for such purpose. Any Alterations for which consent has been received shall be performed in accordance with the approved drawings and specifications therefor, and no changes thereto shall be made without the prior consent of Landlord, which consent shall not be unreasonably withheld or delayed. No approval of plans or specifications by Landlord, or consent by Landlord allowing Tenant to make Alterations in the Premises, or any inspection of Alterations made by or for Landlord shall in any way be deemed to be an agreement by Landlord that the contemplated Alterations comply with any Legal Requirements or Insurance Requirements or the certificate of occupancy for the Building, nor shall it be deemed to be a waiver by Landlord of Tenant's obligation to comply with any provision of this Lease. Notice is hereby given that neither Landlord, Landlord's agents, any Superior Lessor nor any Superior Mortgagee shall be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other lien for such labor or materials shall attach to or affect any estate or interest of the Landlord, any Superior Lessor or the Superior Mortgagee in and to the Real Property. Section 8.03 TENANT'S PERFORMANCE OF ALTERATIONS. 27 -22- All Alterations shall at all times comply with all Legal Requirements and Insurance Requirements and all Rules and Regulations and shall be made at such times and in such manner as Landlord may from time to time reasonably direct. Tenant, at its expense, shall (a) obtain all necessary municipal and other governmental permits, authorizations, approvals and certificates for the commencement, prosecution and final approval of such Alterations, and upon completion, deliver copies thereof to Landlord, and (b) cause all Alterations to be performed in a good and first-class workmanlike manner, using new materials and equipment at least equal in quality to the original installations of the Building or the then standards for the Building established by Landlord. Alterations shall be promptly commenced and completed and shall be performed in such manner so as not to interfere with the occupancy of any other tenant nor delay or impose any additional expense upon Landlord in the maintenance, cleaning, repair, safety, management, or security of the Building (or the Building Equipment) or in the performance of any Alterations. If any additional expense is reasonably incurred by Landlord, Tenant shall pay such additional expense as Additional Rent upon demand. Tenant shall not use the passenger elevators during Business Hours for haulage or removal of materials or debris except on moving day and Tenant shall not make loud noise during Business Hours in or about the Premises. Throughout the performance of Alterations, Tenant, at its sole cost and expense, shall carry, or cause to be carried, worker's compensation insurance covering all persons employed in connection with the Alterations in statutory limits and general liability insurance (with completed operations endorsement) for any occurrence in or about the Real Property in which Landlord, Landlord's agents, any Superior Lessor and any Superior Mortgagee shall be named as parties insured, in such limits as Landlord may reasonably prescribe, with insurers reasonably to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect before the commencement of its Alterations and, on request, at reasonable intervals thereafter. Upon completion of the Alterations, Tenant shall deliver a complete set of "As Built" drawings and plans to Landlord. No Alterations shall involve the removal of any fixtures, equipment or other property in the Premises which are not Tenant's Property without Landlord's prior consent and unless they shall be promptly replaced, at Tenant's expense, with fixtures, equipment or other property of like utility and at least equal value (which thereupon shall become the property of Landlord). Throughout the Term, Tenant shall keep full and complete records describing its Alterations costing in excess of $10,000 and of the aggregate cost thereof (including architect's and engineer's fees and expenses). Tenant shall, within thirty (30) days after demand by Landlord, furnish to Landlord full and complete copies of such records. Section 8.04 NOTICES OF VIOLATION. Tenant, at its expense, promptly shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with Alterations which shall be issued by any public authority having or asserting jurisdiction. Section 8.05 COSTS OF ALTERATIONS; LIENS; INDEMNIFICATION. Tenant promptly shall pay the cost of all Alterations. Tenant hereby indemnities Landlord against liability for any mechanics' and other liens filed in connection with Alterations or repairs, including the liens of any chattel mortgages, security agreements or financing 28 -23- statements upon any materials or fixtures installed in and constituting part of the Premises. Tenant, at its expense, shall procure the discharge of all such liens within twenty (20) days after notice of the filing of any such lien against the Real Property or any part thereof. If Tenant shall fail to cause any such lien to be discharged within the period aforesaid, then, in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or by deposit or bonding proceedings, and in any such event Landlord shall be entitled, if it elects, to compel the prosecution of an action for the foreclosure of such lien and to pay the amount of the judgment in favor of the lien or with interest, costs and allowance. Any amount so paid by Landlord, and all costs and expenses incurred by Landlord in connection therewith, shall constitute Additional Rent and shall be paid to Landlord by Tenant on demand. Section 8.06 TENANT'S CONTRACTOR. Only Landlord or persons first approved by Landlord in Landlord's reasonable discretion shall be permitted to act as contractor for any work to be performed in accordance with this Article 8. Landlord reserves the right to exclude from the Building any person attempting to act as construction contractor in violation of this Article. In the event Tenant shall employ any contractor permitted by this Section, such contractor or any subcontractor may have use of the Building Equipment subject to the provisions of this Lease and the Rules and Regulations governing construction. Tenant will present to Landlord the names of any such contractor or subcontractor Tenant proposes to use in the Premises for Landlord's approval as aforesaid as follows: (a) at least fifteen (15) days prior to the beginning of Major Alterations by such contractor or subcontractor, and (b) at least five (5) days prior to beginning any other Alterations by such contractor or subcontractor. Section 8.07 FIXTURES, RESTORATION. Upon the termination of this Lease, Tenant shall, on Landlord's request, restore the Premises to their condition prior to the making of any Alterations, reasonable wear and tear and damage by insured casualty excepted. Landlord acknowledges that Tenant shall not be required to restore Landlord's Work or any other Alterations which Landlord does not identify at or prior to the time of approval therefor. Except for Tenant's Property and as provided in this Section 8.07, all fixtures, equipment, Alterations and appurtenances attached to or built into the Premises at the commencement of or during the Term (collectively "FIXTURES"), whether or not at the expense of Tenant, shall be and remain a part of the Premises and shall be deemed the property of Landlord as of the date such Fixtures are completed, or as of the date such Fixtures are attached to or built into the Premises, and shall not be removed by Tenant, except as expressly provided in this Lease. The Fixtures shall include all electrical, plumbing, heating and sprinkling equipment, security systems fixtures, outlets, switches, public address and/or paging systems, venetian blinds, partitions, railings, gates, doors, vaults (including vault doors), paneling, molding, shelving, radiator enclosures, cork, rubber, linoleum, wall-to-wall carpeting, acoustical tiles, special ceilings, composition floors, ventilating, silencing, air conditioning and cooling equipment (excepting Tenant's supplemental air conditioning installed in the Premises by 29 -24- Tenant, at Tenant's sole cost and expense), and all fixtures, equipment, Alterations and appurtenances of a similar nature or purpose attached to or built into the Premises. ARTICLE 9 REPAIRS Section 9.01 TENANT'S OBLIGATIONS. Tenant, at its sole cost and expense, shall take good care of, and make all interior non-structural repairs to, the Premises, Building Equipment therein installed by Tenant at Tenant's expense and Tenant's Property and Fixtures. Tenant shall make and be responsible for (or, at Landlord's election,, Landlord shall make at Tenant's expense) all repairs, interior or exterior, as and when needed to preserve the Premises and the Building Equipment therein and Tenant's Property and Fixtures in good working order and condition, when the need therefor arises out of (a) the performance of or existence of Alterations made by or at the request of Tenant, (b) the installation, use or operation of Tenant's Property or Fixtures, (c) the moving of Tenant's Property or Fixtures in or out of the Building or the Premises, (d) the acts, omissions, negligence or, misuse of or by Tenant or any of its subtenants or any of its or their employees, agents, contractors, licensees or invitees or their use or occupancy of the Premises (except fire or other casualty caused by Tenant's negligence, if the fire or other casualty insurance policies insuring Landlord are not invalidated and the rights of Landlord are not adversely affected by this provision), or (e) Legal Requirements or Insurance Requirements pursuant to the provisions of Section 7.01. Tenant, at its sole cost and expense, shall promptly replace or repair scratched, damaged or broken doors and glass in and about the Premises and shall be responsible for all repairs and maintenance of wall and floor coverings in the Premises (including, without limitation, where Tenant shall lease an entire floor, the walls, elevator doors and floor coverings in the elevator lobby). Tenant, promptly and at its sole cost and expense, shall make all repairs in or to the Premises for which it is responsible. All repairs made by or on behalf of Tenant shall be made in conformity with the provisions of Articles 8 and 9 and shall be at least equal in quality and class to the original work or the then applicable standards for the Building established by Landlord. Section 9.02 LANDLORD'S OBLIGATIONS. Landlord shall operate the Building in a manner consistent with the standards for first class office buildings in the location in which the Building is located. Landlord shall make all necessary repairs to keep the Building in good repair, excluding, however, (a) repairs of Tenant's Property or Alterations made by or at the request of Tenant, not occasioned by Landlord's wrongful acts or negligence, and (b) repairs which Tenant is obligated to make pursuant to Section 9.01 and the other provisions of this Lease. Except to the extent occasioned by Tenant's acts or negligence or otherwise set forth in Section 9.01, Landlord shall perform all maintenance and make all necessary repairs to the Building Equipment servicing the Premises. Except for the foregoing, repair obligation, Landlord shall have no liability for the failure of any such Building Equipment. The cost of all repairs and maintenance by Landlord hereunder shall be included in 30 -25- Expenses. Tenant shall, at its sole expense, maintain, repair and operate in a first-class manner, any supplemental air conditioning system and any life safety or security system which connects to or affects in any manner the Building Equipment. Landlord reserves the right (a) to make emergency repairs to any such Tenant's system without notice, at Tenant's expense, and(by to requite changes to be made by Tenant to any such Tenant's system if the operation thereof adversely affects the Building Equipment. Tenant shall obtain service contracts for such Tenant's systems with contractors approved by Landlord (which approval shall be subject to review from time to time but shall not be unreasonably withheld or delayed). Tenant shall have no access to Building Equipment unless Landlord shall consent thereto. No liability of Landlord to Tenant shall accrue under this Section unless and until Tenant has given notice to Landlord of the necessity of any specific repair for which Landlord has agreed to be responsible under this Lease, and a reasonable time has elapsed in which to make such repair with same not being performed. ARTICLE 10 HEATING, VENTILATION AND AIR CONDITIONING Section 10.01 LANDLORD'S OBLIGATIONS. As long as this Lease is in full force and effect, Landlord shall maintain and keep in good repair the Building standard ` heating, ventilating and air conditioning systems servicing the Premises, as above provided, and furnish and distribute to the Premises sufficient condenser or hot water as may be necessary to maintain a reasonably comfortable occupancy of the Premises during Business Hours. The on-floor portion of the heating, ventilating and air conditioning equipment will be controlled by Landlord, except as provided below. Landlord agrees to operate the fans, heating, ventilating and air conditioning equipment servicing the Premises in accordance with their design criteria unless Legal Requirements, including but not limited to energy and/or water conservation programs or guidelines, shall provide for any reduction in operations below said design criteria in which case such equipment shall be operated so as to provide reduced service in accordance therewith. Tenant shall not be permitted to make any adjustments to the heating, ventilation and air conditioning equipment except by use of thermostatic controls within the Premises, which Tenant agrees to maintain within the range of settings mandated by any Legal Requirements or governmental standards for temperature or energy related matters. Building Equipment servicing the Premises shall be subject to Landlord's exclusive control, except for said thermostatic controls. Section 10.02 SERVICES DURING NON-BUSINESS HOURS. The Building windows are sealed. If Tenant shall require heating, ventilating or air conditioning service at any time other than during Business Hours, then, provided Tenant is not in default hereunder, Landlord shall furnish the same upon advance notice from Tenant as set forth in the Rules and Regulations, and Tenant shall pay Landlord's current charges, without premium, for such services as Additional Rent upon being billed therefor, provided, however, if other tenants of the Building are using such services simultaneously with Tenant, Tenant and 31 -26- such other tenant(s) shall each pay their pro-rata share of the cost of such services to Landlord as Additional Rent. Section 10.03 TENANT'S SUPPLEMENTAL AIR CONDITIONING. If Tenant installs supplemental air conditioning equipment, Tenant shall pay Landlord's charges therefor, without premium, as Additional Rent upon being billed therefor. Section 10.04 EXCESSIVE DEMAND. Notwithstanding the foregoing provisions of this Article, Landlord shall not be responsible if the normal operation of the Building heating or ventilating system or the air conditioning system serving the Premises shall fail to provide service in accordance with the requirements of this Lease in any portions of the Premises (a) which shall have an electrical load for all purposes (including lighting and power) in excess of the Building's electrical specifications, as reasonably determined by Landlord's consulting. engineer, or which shall have a human occupancy factor in excess of one person per 100 square feet of usable area, or (b) because of any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant or any person claiming by, through or under Tenant. Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements which Landlord may reasonably prescribe for the proper functioning and protection of the heating, ventilating and air conditioning systems. ARTICLE II ELECTRICITY Section 11.01 LANDLORD'S OBLIGATIONS. Notwithstanding the fact that the electricity serving the Premises may be separately submetered or otherwise separately measured, Landlord shall purchase the electricity for all Tenant's lighting and power, including, without limitation, the operation of the HVAC unit within the Premises, directly from the public utility serving the Building. Landlord shall not be liable in any way to Tenant for any change, failure, inadequacy or defect in the supply or character of electricity furnished to the Premises except if caused by Landlord acts or omissions. Section 11.02 TENANT'S OBLIGATIONS. Tenant shall be responsible for any repair, maintenance and replacement of any electric meter, panel board and all wires and wiring within the Premises and all feeders and risers serving the Premises installed by or at the request of Tenant, or shall pay Landlord's reasonable charges therefor within thirty (30) days of receipt of written notice from Landlord. At no time shall Tenant's connected electrical load in the Premises exceed `the Building's electrical specifications six (6) watts per square foot for HVAC, six (6) watts per square foot for Tenant's internal equipment and two (2) watts per square foot for lighting) without the prior written approval of the Landlord. Any additional riser or risers to supply Tenant's electrical requirements and all 32 -27- other equipment proper and necessary in connection therewith, upon request of Tenant, will be installed by Landlord, at Tenant's cost and expense, if, in Landlord's reasonable judgment, the same are necessary and will not cause or create a hazardous condition or entail excessive or unreasonable alterations, repairs, or expense, or interfere with or disturb other tenants or operate to preclude other tenants from expanding their electrical capacity. Rigid conduits only will be allowed. In order to ensure that such electrical capacity is not exceeded and to avert possible adverse effects upon the Building's electrical system, Tenant shall not, without the prior written consent of Landlord, make or perform or permit any alteration to wiring installations or other electrical facilities in or serving the Premises or any additions to the electrical fixtures, business machines, or office equipment or appliances (other than personal computers and similar low energy consuming office machines) in the Premises which utilize electrical energy. Landlord shall have the right upon reasonable notice to Tenant, at any time and from time to time during the Term, to cause an electrical survey to be made of the Premises to ensure compliance with the foregoing. Landlord, at its option, before commencing any work to be paid for by Tenant hereunder or at any time thereafter, may require Tenant to furnish to Landlord such security, whether by surety bond, issued by a corporation reasonably satisfactory to Landlord, in form and amount and licensed to do business in the Commonwealth of Massachusetts or otherwise, as Landlord shall deem reasonably necessary to assure the payment for such work by Tenant. Section 11.03 REPLACEMENT LIGHTING. Landlord shall furnish and install all replacement lighting, tubes, lamps, starters, bulbs, and ballasts required in the Premises (Landlord shall have the right to relamp the Building in sequence), and Tenant shall pay to Landlord or its designated contractor within thirty (30) days of receipt of written notice from Landlord the then established reasonable charges therefor as Additional Rent. ARTICLE 12 CLEANING AND OTHER SERVICES Section 12.01 CLEANING SERVICES. Provided Tenant keeps the Premises in reasonably good order, and subject to Tenant providing Landlord full access to the Premises, including, without limitation, unrestricted access to the windows, Landlord shall cause the Premises to be cleaned substantially in accordance with the standards set forth in Exhibit E. The cost of said cleaning by Landlord hereunder shall be included in Expenses. Tenant shall pay to Landlord as Additional Rent on demand Landlord's extra charges for: cleaning work or removal of refuse and rubbish in the Premises or the Building required because of (a) misuse or neglect on the part of Tenant or its agents, employees, contractors, licensees or invitees, (b) any glass surfaces other than exterior Building windows, (c) non-Building standard materials or finishes installed by Tenant or at its request, (d) increase in frequency or scope of any of the items set forth in Exhibit E requested by Tenant, and (e) the use of the Premises by Tenant after Business Hours. Landlord and its cleaning contractor and their employees shall have ready access to the Premises at all times except during Business Hours and, to the extent that it will not unreasonably interfere with the operation of Tenant's business, 33 -28- during Business Hours. If Tenant has a permitted separate area for the storage, preparation, service or consumption of food or beverages in the Premises, Tenant, at its sole cost and expense, shall cause all portions of the Premises so used to be kept in a neat and orderly condition to facilitate the cleaning thereof and regularly exterminated to prevent infestation with insects or vermin. Landlord's cleaning services required under this Section may be furnished by a contractor or contractors employed by Landlord. Landlord shall not be in default under this Section unless such default shall continue for an unreasonable period of time after notice from Tenant to Landlord setting forth the specific and continuing nature of such default. Section 12.02 ELEVATOR SERVICE. Landlord, at Landlord's expense, shall furnish necessary elevator service during Business Hours and shall have an elevator subject to call at all other times. The Building's service elevator may be a dual use freight and passenger car. In the event Tenant shall require the use of the Building's service elevator after hours, subject to scheduling thereof at Landlord's reasonable discretion, Landlord shall provide a service elevator or passenger elevator, as the case may be, for the use of Tenant, provided Tenant gives Landlord reasonable advance notice of the time, the nature of the use to be made of such elevator and Tenant pays Landlord's charge for the use thereof as Additional Rent on demand; provided, however, that there shall be no charge for the use of such elevator at any time before the Commencement Date. Landlord shall have the right to reasonably change the operation or manner of operating any of the elevators in the Building and shall have the right to discontinue, temporarily or permanently, the use of any one or more cars in any of the banks of elevators provided reasonable elevator service is provided to the Premises. Section 12.03 WATER. Landlord shall supply reasonably adequate quantities of hot and cold water to the Premises for ordinary lavatory, cleaning and drinking purposes. If Tenant requires, uses or consumes water for any other purpose, Tenant shall pay Landlord, as Additional Rent on demand, the cost of any water meter and its installation and of keeping such meter and equipment in good working order and repair and for water consumed as shown on said meter and all sewer and any other rent, tax, levy or charge based thereon which now or hereafter is assessed, imposed or a lien upon the Premises or the Building. Section 12.04 INTERRUPTIONS IN SERVICE. Landlord reserves the right to stop, interrupt or reduce service of the fans, heating, ventilating or air conditioning systems, elevator, electrical energy, or plumbing or any other service or Building Equipment, because of Legal Requirements, Force Majeure or for repairs or Alterations, which, in the reasonable judgment of Landlord, are desirable or necessary, until the reason for such stoppage, interruption or reduction has been eliminated; provided, however, Landlord shall provide reasonable notice to Tenant of any interruption of services required in connection with any Alterations or any work of a non-emergency nature to be performed by Landlord to the Building or the Building Equipment. If such interruption in service results in 34 -29- Tenant's inability to occupy the Premises for five (5) consecutive business days, Tenant shall be entitled to an equitable abatement of the rent for such period commencing on the date of such interruption and ending on the date such services are effectively restored. Landlord shall have no responsibility or ability to Tenant for failure to supply any such service or Building Equipment during such period, but agrees that any such repairs, alterations and replacements shall be made using reasonable efforts, subject to Force Majeure, to avoid material interference with the use of the Premises. Section 12.05 SECURITY. Landlord shall provide security and lighting for the common areas as is customarily provided by other first class office buildings similarly located to the Building in the greater Boston western suburban office building market. If Landlord adopts a building pass system, Landlord shall furnish passes (with the cost of said passes to be paid for by Tenant) to persons for whom Tenant requests the same in writing, and Tenant shall be responsible for all persons to whom it requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall in no case be liable for damages for any error with regard to the admission or exclusion from the Building of any person except for Landlord or all persons for whom Landlord is responsible. Section 12.06 SIGNS. Provided Tenant's signage is consistent with Landlord's reasonable design standards, building codes, zoning and local signage bylaws, Tenant shall be permitted to have signage comparable to signage, if any, of other tenants in the Building, placed in the Building entrance, in the elevator lobbies and on entrance doors to the Premises. Section 12.07 OTHER SERVICES. Landlord will not be required to furnish any services except as expressly provided in this Lease. ARTICLE 13 ASSIGNMENT, MORTGAGING AND SUBLETTING Section 13.01 PROHIBITION. Neither this Lease nor any part hereof, nor the interest of Tenant in any sublease or the rentals thereunder, shall, by operation of law or otherwise, be assigned, mortgaged, pledged, encumbered, or otherwise transferred by Tenant, Tenant's legal representatives or successors in interest, and neither the Premises nor any part thereof nor any of Tenant's Property shall be encumbered in any manner by reason of any act or omission on the part of Tenant, or anyone claiming under or through Tenant, or shall be sublet or be used, occupied, or utilized for desk space or for mailing privileges by anyone other than Tenant, without the prior written consent of 35 -30- Landlord, which shall not be unreasonably withheld or delayed, except as expressly otherwise provided in this Article. Section 13.02 PERMITTED ASSIGNMENTS AND SUBLEASES. (a) Subject to the provisions of Sections 13.02(c) and 13.030) herein, Tenant shall have the right to assign this Lease, or to sublet the whole or any part of the Premises, to any one or more present or future corporations or other business entities which directly or through one or more intermediaries controls, is controlled by, or is under common control with Tenant (each a "TENANT AFFILIATE"), but only for such periods as such Tenant Affiliate continues to control, continues to be controlled by or remains under common control with Tenant, and maintains a net worth not less than Ten Million ($10,000,000) Dollars. For purposes hereof, "control" shall mean ownership of not less than eighty percent (80%) of all of the legal and equitable interest in any other business entity. (b) Tenant shall also have the right to assign its entire interest in this Lease, subject to the provisions of Sections 13.02(c) and 13.030) herein, to: (i) any entity with which Tenant may merge or consolidate, provided the entity surviving such merger or consolidation assumes in writing all of the liabilities of Tenant under the Lease and maintains a net worth of not less than Seven Million Five Hundred Thousand ($7,500,000) Dollars; or (ii) any entity to which Tenant may sell all or substantially all the ownership interests in Tenant (e.g., capital stock, LLC membership interests, etc.) or all or substantially all the assets of Tenant, provided the purchasing entity assumes in writing all of the liabilities of Tenant under the Lease and maintains a net worth of not less than Seven Million Five Hundred Thousand ($7,500,000) Dollars (any of the foregoing permitted assignees or subleases, including Tenant Affiliates, hereinafter being referred to as a "PERMITTED ASSIGNEE"). (c) Tenant shall give Landlord thirty (30) days prior written notice of any proposed assignment or sublease to a Permitted Assignee, including (i) the name and address of the Permitted Assignee, (ii) a detailed description of the Permitted Assignee's business, character and financial references, (iii) a copy of the proposed assignment or sublease including the proposed effective date thereof, (iv) an agreement by Tenant to indemnify Landlord against liability resulting from any claims that may be made against Landlord by the proposed assignee or subleasee, or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease, and (v) sufficient information for Landlord to determine that the assignment or sublease is to a Permitted Assignee. To enable Landlord to determine the ownership of Tenant and any entity which Tenant seeks to have treated as a Permitted Assignee, Tenant agrees to furnish to Landlord, promptly after Landlord's request therefor in connection with a proposed assignment or sublease to such entity, a certificate, summary or listing as to the holders of its stock and/or the holders of the stock of the Permitted Assignee as of the date of the execution of this Lease and/or as of the date of Landlord's request. 36 -31- Section 13.03 PROCEDURE. In the event that at any time Tenant desires to assign or sublet all or any part of the Premises or to assign its interest in this Lease other than to a Permitted Assignee, the following procedure will apply: (a) Tenant shall submit to Landlord the name and address of the proposed subtenant or assignee, a detailed description of such person's business, character and financial references (including its most recent balance sheet and income statements certified by its chief financial officer or a certified public accountant), and any other information reasonably requested by Landlord. (b) Tenant shall submit to Landlord (i) a conformed or photostatic copy of the proposed executed assignment or sublease, expressly subject to Landlord's rights hereunder, the effective date of which shall be at least thirty (30) days after the date of the giving of such notice and which shall be conditioned on Landlord's consent thereto (which shall not be unreasonably withheld or delayed), and (ii) an agreement by Tenant to indemnify Landlord against liability resulting from any claims that may be made against Landlord by the proposed assignee or subleasee, or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease. (c) In the case of a proposed sublease for the remainder of the Term, Tenant shall grant Landlord the option, to be exercised within fifteen (15) days after receipt of all items to be submitted by Tenant pursuant to this Section, to cancel and terminate this Lease as to such portion of the Premises as are proposed to be subleased, to take effect as of the commencement date of such proposed sublease. (d) If Tenant's request is for an Assignment of this Lease, or for a subletting of all or substantially all of the Premises for the remainder of the Term and which will leave Tenant or its successor corporation and related corporations in possession of less than fifty percent (50%) of the original Premises, then Landlord may by notice given to Tenant within fifteen (15) days after receipt of all items to be submitted to Landlord by Tenant pursuant to this Section, terminate this Lease on a date to be specified in said notice ("EARLIER TERMINATION DATE"), which shall be not earlier than one (1) day before the effective date of the proposed assignment or subletting, nor later than ten (10) days after said effective date. Tenant shall then vacate and surrender the Premises on or before the Earlier Termination Date, and the Term of this Lease as to the entire Premises shall end on the Earlier Termination Date as if that were the Expiration Date, or the expiration of a Renewal Term, as applicable. (e) If Landlord shall elect to terminate this Lease in whole or in part, Landlord shall be free to, and shall have no liability to Tenant if Landlord should, lease the Premises (or such part thereof) to Tenant's prospective assignee or subtenant. If this 37 -32- Lease is terminated as to part of the Premises pursuant hereto or part of the Premises is sublet to Landlord, Tenant shall vacate and surrender such part of the Premises and (i) Landlord shall, at Tenant's sole cost and expense, (1) make such alterations as may be required physically to separate such surrendered space from the remainder of the Premises and to comply with all Legal Requirements and Insurance Requirements, and install all other equipment or facilities which may be required in order to use such sublet portion as a unit separate from the remainder of the Premises and (2) repair or restore to tenantable condition any part of the remainder of the Premises which is physically affected by such separation, if necessary; and (ii) Tenant shall afford Landlord and its tenants reasonably appropriate means of ingress and egress to and from such surrendered space; and (iii) in the event of a partial termination Landlord and Tenant shall execute and deliver a supplementary agreement modifying this Lease, as of the day following such surrender, by eliminating such surrendered space from the Premises, reducing the Rent allocable to the remaining Premises pro rata and appropriately modifying the other terms of this Lease to reflect the elimination of such surrendered space from the Premises. (f) In the event Landlord does not exercise its option to terminate this Lease in whole or in part within the fifteen (15) day period specified in this Section, Landlord's consent to such subletting or assignment, as the case may be, shall not be unreasonably withheld or delayed. However, Landlord shall not, in any event, be obligated to consent to any sublease or assignment of this Lease unless: (i) In the reasonable judgment of Landlord, the proposed subtenant or assignee, as the may be, is of a character and financial worth such as is in keeping with the reasonable standards of Landlord in those respects for the Building, and the nature of the proposed subtenant's or assignee's business and its reputation is in keeping with the character of the Building and its tenancies; (ii) The purposes for which the proposed subtenant or assignee intends to use the Premises or the applicable portion thereof are uses expressly permitted by this Lease; (iii) Tenant shall not have advertised or publicized in any way the availability of all or part of the Premises for less than market rent without Landlord's consent; (iv) The proposed occupancy shall not increase the Landlord's cleaning requirements or impose a disproportionate burden upon the Building Equipment or Building services; (v) The proposed sublease or assignment shall prohibit any assignment or further subletting except in conformity to the provisions of this Article; 38 -33- (vi) Tenant shall not be in default in the performance of any of its obligations hereunder; and (vii) The proposed subtenant or assignee shall not then be a tenant in the Building or a related corporation of any other tenant (unless Landlord does not have sufficient rentable space in the Building to meet the proposed subtenant's space requirements), or a person then negotiating with Landlord for the rental of any space. (g) In the event that Tenant fails to execute and deliver any assignment or "sublease to which Landlord shall have consented within forty-five (45) days after the giving of such consent, then Tenant shall again comply with all of the provisions and conditions of this Article before assigning this Lease or subletting all or any part of the Premises. (h) The consent by Landlord to an assignment, transfer, encumbering, or subletting pursuant to any provision of this Lease shall not in any way be deemed consent to any other or further assignment, transfer, encumbering or subletting. (i) Tenant shall pay to Landlord all reasonable attorneys' fees and disbursements incurred by Landlord in connection with any proposed assignment or sublease, including the costs of making investigations as to the acceptability of a proposed subtenant or assignee. In furtherance of the foregoing, Tenant shall pay to Landlord at the time it submits the items required by this Section a transfer fee of $1,000.00 towards Landlord's legal and other costs, which shall be payment in full for all such costs. (j) No assignment permitted or otherwise consented to by Landlord shall be valid unless, within ten (10) days after the execution thereof, Tenant shall deliver to Landlord a duplicate original instrument of assignment and assumption in form and substance reasonably satisfactory to Landlord, duly executed by Tenant and by the assignee, in which such assignee shall assume for the benefit of Landlord the performance of all of the provisions of this Lease. Section 13.04 RENT. Notwithstanding anything to the contrary contained herein, if Landlord shall consent to any assignment or subletting and Tenant shall either (a) receive any consideration from its assignee in connection with the assignment of this Lease, or (b) sublet the Premises to anyone for rents which for any period shall exceed the rents payable for the subleased space under this Lease for the same period, Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of such excess consideration less any costs or expenses (including without limitation brokerage commissions, attorneys' fees and improvement costs) incurred by Tenant arising out of such sublease or assignment; provided, however, that there shall be no payment required in the case of an assignment or sublease to a Permitted Assignee. Tenant shall not enter into any sublease 39 -34- whereby the rent received by Tenant depends in whole or in part on the income or profits derived by any person from the Premises excepting amounts based on a fixed percentage or percentages of receipts or sales. Section 13.05 TENANT'S ONGOING LIABILITY. No assignment, subletting, occupancy, or collection or application of rent shall be deemed a waiver of any of the provisions of Section 13.01, or the acceptance of the assignee, subtenant, or occupant as a tenant, or be deemed to relieve, impair, release, or discharge Tenant of its obligations fully to perform the terms of this Lease on Tenant's part to be performed. Section 13.06 NON-DISTURBANCE AND ATTORNMENT. If Landlord shall recover or come into possession of the Premises before the date herein fixed for the expiration of this Lease, or in the event of an occurrence of any of the events specified in Section 16.02(d), Landlord shall have the right, at its option, to take over any and all subleases of the Premises or any part thereof made by Tenant and to succeed to all the rights of Tenant in said subleases or such of them as it may elect to take over. Tenant hereby expressly assigns and transfers to Landlord such of the subleases as Landlord may elect to take over at the time of such recovery of possession, such assignment and transfer not to be effective until the termination of this Lease or reentry by Landlord hereunder or if Landlord shall otherwise succeed to Tenant's estate in the Premises, at which time Tenant shall upon request of Landlord execute, acknowledge and deliver to Landlord such further assignments and transfers as may be necessary to confirm the vesting in Landlord of the then existing subleases. Every sublease of all or any portion of the Premises is subject to the condition, and by its acceptance and entry into a sublease each subtenant thereunder shall be deemed conclusively to have thereby agreed, that from and after the termination of this Lease or reentry by Landlord hereunder, or if Landlord shall otherwise succeed to Tenant's estate in the Premises, such subtenant shall waive any right to surrender possession or to terminate the sublease, and, at Landlord's election, such subtenant shall attorn to and recognize Landlord as its landlord under all of the then executory terms of such sublease, except that Landlord shall not (a) be liable for any previous act, omission, or negligence of Tenant as sublandlord under such sublease, (b) be subject to any counterclaim or offset which theretofore accrued to such subtenant against Tenant, (c) be bound by any previous modification or amendment of such sublease or by any previous prepayment of more than one (1) month's rent and additional rent which shall be payable as provided in the sublease, (d) be obligated to repair the subleased space or the Building or any part thereof, in the event of total or substantial total damage or in the event of partial condemnation or (e) be obligated to perform any work in the subleased space, and the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed automatically, upon and as a condition of occupying or using the Premises or any part thereof, to have given a waiver of the type described in and to the extent and upon the conditions set forth in Section 6.04(b). Section 13.07 Certain LANDLORD RIGHTS. 40 -35- References in this Lease to use or occupancy by anyone other than Tenant shall include, without limitation, subtenants, licensees and others claiming under Tenant or under any subtenant, immediately or remotely. The listing of any name other than that of Tenant on any door of the Premises or on any directory or in any elevator in the Building, or otherwise, shall not operate to vest in the person so named any right or interest in this Lease or the Premises, or be deemed to constitute, or serve as a substitute for, any consent of Landlord required under this Article, and it is understood that any such listing shall constitute a privilege extended by Landlord, revocable at Landlord's will by notice to Tenant unless any such required consent has been obtained. ARTICLE 14 DAMAGE TO OR DESTRUCTION OF THE PREMISES Section 14.01 LANDLORD'S OBLIGATION TO REPAIR; RENT ABATEMENT. If the Premises or any part thereof shall be damaged or rendered Untenantable by fire or other insured casualty and if Tenant gives prompt notice thereof to Landlord and this Lease is not terminated pursuant to any provision of this Article, Landlord shall proceed to repair or cause to be repaired such damage to the Premises after and to the extent of Landlord's collection of the insurance proceeds attributable to such damage to the Premises. Except as provided in Section 6.05 and Section 14.04, the rental shall be equitably abated to the extent that the Premises shall have been rendered Untenantable, such abatement to be from the date of such damage to the date the Premises shall no longer be Untenantable; provided, however, should Tenant occupy a portion of the Premises during the period the repair work is taking place and prior to the date the Premises are no longer Untenantable, the rent allocable to such occupied portion, based upon the proportion which the occupied portion of the Premises bears to the Premises Rentable Area, shall be payable by Tenant from the date of such occupancy. Section 14.02 TENANT'S RIGHT TO TERMINATE. If the Premises shall be materially damaged or rendered substantially Untenantable by fire or other casualty, Landlord has not terminated this Lease pursuant to Section 14.03 and Landlord has not substantially completed the making of the required repairs to the Premises within nine (9) months from the date of the fire or other casualty, plus such additional time after such date as shall equal the aggregate period Landlord may have been delayed in doing so by Force Majeure (but not to exceed an additional three (3) months), Tenant may serve notice on Landlord of its intention to terminate this Lease, and if thirty (30) days thereafter Landlord shall not have completed the making of the required repairs, this Lease shall terminate on the expiration of such thirty (30) day period as if such termination date were the Expiration Date, or the expiration of the Renewal Term, as applicable, without prejudice to Landlord's rights under this Lease. Section 14.03 LANDLORD'S RIGHT TO TERMINATE. 41 -36- If the Premises shall be materially damaged or rendered substantially Untenantable by fire or other casualty or if the Building shall be so damaged by fire or other casualty that substantial alteration or reconstruction of the Building, in Landlord's reasonable, but sole opinion, shall be required (whether or not the Premises shall have been so damaged), then Landlord, at its option, may terminate this Lease by giving Tenant sixty (60) days' notice of such termination, such notice to be given within ninety (90) days after the date of such fire or other casualty. In the event that such notice of termination shall be given, this Lease shall terminate as of the date provided in such notice of termination (whether or not the Term shall have commenced) with the same effect as if that date were the Expiration Date, or the expiration of the Renewal Term, as applicable, without prejudice to Landlord's rights under this Lease. Section 14.04 CERTAIN LANDLORD RIGHTS. Landlord shall not be liable for any inconvenience to Tenant or injury to the business of Tenant resulting in any way from any such damage by fire or other casualty, or the repair thereof Landlord will not carry insurance of any kind on Tenant's Property, and Landlord shall not be obligated to repair any damage thereto, or replace the same, or bear any of the risk of loss of Tenant's Property. Except as expressly provided in Section 6.04, nothing herein contained shall relieve Tenant from any liability to Landlord or to its insurers in connection with any damage to the Premises or the Real Property by fire or other casualty if Tenant is liable in such respect. Notwithstanding any of the foregoing provisions of this Article, if, by reason of some action or inaction on the part of Tenant or any of its employees, agents, licensees or contractors, either (a) Landlord shall be unable to collect all of the insurance proceeds applicable to damage or destruction or (b) the Premises or the Building shall be damaged or destroyed on account of fire or other casualty then, without prejudice to any other remedy which may be available against Tenant, the abatement of rent provided for in this. Article shall not be effective, subject to Section 6.04 hereof. ARTICLE 15 EMINENT DOMAIN Section 15.01 TOTAL TAKING. If the whole of the Real Property or the Premises shall be acquired or condemned by eminent domain, this Lease shall terminate as of the date of the vesting of title in the condemning authority as if said date were the Expiration Date or the expiration of the Renewal Term, as applicable. Section 15.02 PARTIAL TAKING. If only a part of the Premises shall be acquired or condemned by eminent domain, then, except as otherwise provided in. this Article, this Lease shall continue in force and effect, but from and after the date of the vesting of title, the Fixed Rent shall be an amount which bears the same ratio to the Fixed Rent payable immediately prior to such condemnation as the value of the untaken portion of the Premises (appraised after the taking and repair of any damages to the 42 -37- Building pursuant to this Section) bears to the value of the entire Premises immediately before the taking and any Additional Rent payable shall be adjusted to reflect the diminution of the Premises. Such value of the Premises before and after the taking shall be determined by an independent appraiser chosen by Landlord and reasonably acceptable to Tenant. Pending such determination, Tenant shall pay to Landlord rent as fixed by Landlord, subject to adjustment after such determination. If only a part of the Real Property shall be so acquired or condemned, then (a) whether or not the Premises shall be affected, Landlord may, within sixty (60) days following the date of vesting of title, give Tenant thirty (30) days' notice of termination of this Lease or (b) if more than twenty percent (20%) of the total area of the then Premises is acquired or condemned, Tenant may, within sixty (60) days following the date upon which Tenant shall have received notice of vesting of title, give to Landlord thirty (30) days' notice of termination of this Lease. In the event any such thirty (30) day notice of termination is given by Landlord or Tenant, this Lease shall terminate upon the expiration of said thirty (30) days with the same effect as if that date were the Expiration Date, or the expiration of the Renewal Term, as applicable, without prejudice to Landlord's rights against Tenant under this Lease in effect prior to such termination, and the rental shall be apportioned as of such date or sooner termination. If a part of the Premises shall be acquired or condemned by eminent domain and this Lease is not terminated pursuant to any provision of this Article, Landlord shall proceed to repair .. or cause, to be repaired such damage to the Premises to the extent permissible by Legal Requirements and the taking authority and to the extent of Landlord's collection of the award for such acquisition or condemnation. Except as provided in Section 6.05 and the applicable portions of Section 14.04, the rental shall be equitably abated to the extent that the Premises shall have been rendered Untenantable, such abatement to be from the date of such condemnation or taking to the date the Premises shall be restored pursuant to the terms of this Section 15.02; provided, however, should Tenant occupy a portion of the Premises during the period the repair work is taking place, the rent allocable to such occupied portion, based upon the proportion which the occupied portion of the Premises bears to the Premises Rentable Area, shall be payable by Tenant from the date of such occupancy. If the entire Premises cannot be repaired pursuant to this Section 15.02, the rental after the completion of any repairs shall be determined pursuant to the first paragraph of this Section 15.02. Section 15.03 AWARD. In the event of any such acquisition or condemnation of all or any part of the Real Property, Landlord shall receive the entire award for any such acquisition or condemnation. Tenant shall have no claim against Landlord or the condemning authority for the value of any unexpired portion of the Term and agrees not to join in any claim made by Landlord and to execute all further documents that may be required in order to facilitate the collection of the award by Landlord. Landlord shall have the right, coupled with an interest, to sign such further documentation on behalf of Tenant. Tenant shall, however, retain the right to make a separate claim for its moving expenses and personal property taken, and the unamortized cost of any Alterations, the cost of which has been paid by Tenant. 43 -38- Section 15.04 TEMPORARY TAKING. If the temporary use or occupancy of all or part of the Premises shall be condemned or taken, this Lease shall remain unaffected by such condemnation or taking and Tenant shall continue to be responsible for all of its obligations hereunder (except to the extent prevented from so doing by reason of such condemnation or taking) and it shall continue to pay all Fixed and Additional Rent in full. Any lump sum award received by Tenant as compensation for temporary use and occupancy of the Premises shall be delivered to and held by Landlord in trust for the making of rent payments. The rights and interests of Landlord and Tenant to any award received or receivable with respect to a condemnation or taking for temporary use or occupancy shall be in all other respects governed by the applicable provisions of the Superior Lease and/or any Superior Mortgage. Section 15.05 AGREEMENT IN LIEU OF TAKING. The terms "CONDEMNATION" and "ACQUISITION" as used herein shall include any agreement in lieu of or in anticipation of the exercise of the power of eminent domain between Landlord and any governmental authority authorized to exercise the power of eminent domain. Landlord shall notify Tenant forthwith of any condemnation or acquisition affecting the Premises. ARTICLE 16 DEFAULT Section 16.01 TENANT'S PERFORMANCE A CONDITION. Tenant's performance of each of Tenant's obligations under this Lease is a condition as well as a covenant. Tenant's right to continue in possession of the Premises is conditioned upon such performance. Section 16.02 EVENTS OF DEFAULT. Each of the following shall be an "Event of Default" under this Lease: (a) if Tenant shall default in the payment when due of any Fixed Rent or Additional Rent and such default shall continue for a period of five (5) days after notice of default from Landlord to Tenant; or (b) if Tenant shall default in the payment when due of any Fixed Rent or Additional Rent, and any such default shall continue or be repeated for two (2) consecutive payments or for a total of three (3) payments in any twelve (12) month period, and notwithstanding that such defaults shall have each been cured within five (5) days of said notice from Landlord to Tenant; or (c) if Tenant shall default in the performance of any term of this Lease on Tenant's part to be performed (other than the payment of Fixed Rent and Additional Rent) and Tenant 44 -39- shall fail to remedy such default within thirty (30) days after notice of such default, or if such default is of such a nature that it cannot be completely remedied within said period of thirty (30) days if Tenant shall not (i) promptly upon the giving by Landlord of such notice, advise Landlord of Tenant's intention to institute all steps necessary to remedy such situation, (ii) promptly institute and thereafter diligently prosecute to completion all steps necessary to remedy the same, and (iii) complete such remedy within a reasonable time after the date of the giving of said notice by Landlord and in any event prior to such time as would either (1) subject Landlord, Landlord's agents, any Superior Lessor or any Superior Mortgagee to prosecution for a crime or (2) in Landlord's reasonable judgment, constitute or result in any material risk of material economic loss to Landlord; or (d) if (i) Tenant shall make a general assignment or general arrangement for the benefit of creditors, (ii) a petition for adjudication of bankruptcy or for reorganization or rearrangement shall be filed by or against Tenant and shall not be dismissed within ninety (90) days, or (iii) a trustee or receiver shall be appointed to take possession of substantially all of Tenant's assets located at the Premises or Tenant's interest in this Lease and possession shall be subjected to attachment, execution or other judicial seizure which shall not be discharged within ninety (90) days. If a court of competent jurisdiction shall determine that any of the acts described in subsection (iii) of this subsection (d) is not a default under this Lease, and a trustee shall be appointed to take possession (or if Tenant shall remain a debtor in possession) and such trustee or Tenant "shall assign, sublease or transfer Tenant's interest hereunder, then Landlord shall receive, as Additional Rent, the excess, if any, of the Rent (or any other consideration) paid in connection with such assignment, transfer or sublease over the Rent payable by Tenant under this Lease; or (e) if any event shall occur or any contingency shall arise whereby this Lease or the estate hereby granted or the unexpired balance of the Term would, by operation of law or otherwise, devolve upon or pass to any person other than Tenant except as is expressly permitted under Article 13; or (f) if the Premises shall become deserted or abandoned for a period of thirty (30) consecutive days or if Tenant shall fail to take occupancy of the Premises within forty-five (45.) days after the Commencement Date. ARTICLE 17 REMEDIES OF LANDLORD Section 17.01 TERMINATION. Upon the occurrence of an Event of Default, Landlord may give to Tenant notice of intention to terminate this Lease and to end the Term and the estate hereby granted on the date of the giving of notice, and, in the event such notice is given, this Lease and the Term and estate hereby granted (whether or not the Term shall have commenced) shall terminate with the same effect as if that day were the Expiration Date, or the expiration of the Renewal Term, as applicable, but Tenant shall remain liable for damages as provided in this Article 17. 45 -40- Section 17.02 RE-ENTRY AND RELETTING. Upon the occurrence of an Event of Default: (a) Landlord and Landlord's agents may immediately, or at any time after such Event of Default or after the date upon which this Lease and the term shall terminate, reenter the Premises or any part thereof, without notice, either by summary proceedings or by any other applicable action or proceeding or by force or otherwise (without being liable to indictment, prosecution or damages therefor), and may repossess the Premises and dispossess Tenant and any other persons from the Premises and remove any and all of its or their property and effects from the Premises, without liability for damage thereto, to the end that Landlord may have, hold and enjoy the Premises, and in no event shall reentry be deemed an acceptance of surrender of this Lease; and (b) Landlord, at its option, may relet the whole or any part of the Premises from time to time, either in the name of Landlord, Tenant or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, or the expiration of the Renewal Term, as applicable, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord in its sole discretion may determine. Landlord shall use reasonable efforts, as required by applicable Legal Requirements, to relet the Premises or any part thereof, and to otherwise mitigate its damages, provided, however, Landlord's inability to collect rent upon any such reletting, shall not operate to relieve Tenant of any liability under this Lease, or otherwise to affect any such liability. Landlord, at Landlord's option, may make such repairs, Alterations and other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability. Tenant, on its own behalf and on behalf of all persons claiming through or under Tenant, including all creditors, does hereby expressly waive, so far as is permitted by law, any and all rights which Tenant and all such persons might otherwise have to (a) the service of any notice of intention to reenter or to institute legal proceedings to that end, (b) redeem the Premises or any interest therein, (c) re-enter or repossess the Premises, or (d) restore the operation of this Lease, after Tenant shall have been dispossessed by a judgment or by a warrant of any court or judge, or after any reentry by Landlord, or after any termination of this Lease, whether such dispossess, reentry by Landlord or termination shall be by operation of law or pursuant to the provisions of this Lease. The word "RE-ENTER", "REENTRY" and "RE-ENTERED" as used in this Lease shall not be deemed to be restricted to their technical legal meanings. Section 17.03 EQUITABLE REMEDIES. In the event of any breach or threatened breach by Tenant or any person claiming through or under Tenant of any of the terms of this Lease, Landlord shall be entitled to seek to enjoin such breach or threatened breach and shall have the right to invoke any right allowed at ..law or 46 -41- in equity, by statute or otherwise, as if reentry, summary proceedings or other specific remedies were not provided for in this Lease. Section 17.04 TENANT'S LIABILITY FOR DAMAGES. If this Lease shall terminate as provided in this Article 17, or by or under any summary proceeding or any other action or proceeding, or if Landlord shall reenter the Premises as provided in this Article, or by or under any summary proceeding or any other action or proceeding, then, in any of said events: (a) Tenant shall pay to Landlord all rent to the date upon which this Lease shall have been terminated or to the date of reentry upon the Premises by Landlord, as the case may be; (b) Landlord shall be entitled to retain all monies, if any, paid by Tenant to Landlord, whether as advance rent, security or otherwise, but such monies shall be credited by Landlord against any rent due at the time of such termination or reentry or, at Landlord's option, against any damages payable by Tenant; (c) Tenant shall be liable for and shall pay to Landlord, as damages, any deficiency between the rent payable hereunder for the period which otherwise would have constituted the unexpired portion of the Term (conclusively presuming the Additional Rent to be the same as was payable for the year immediately preceding such termination or reentry) and the net amount, if any, of rents ("NET RENT") collected under any reletting effected pursuant to the provisions of Section 17.02 for any part of such period (first deducting from the rents collected under any such reletting all of Landlord's reasonable expenses in connection with the termination of this Lease or Landlord's reentry upon the Premises and in connection with such reletting including all reasonable repossession costs, brokerage commissions, legal expenses, alteration costs and other expenses of preparing the Premises for such reletting); (d) Any deficiency in accordance with subsection (c) above shall be paid in monthly installments by Tenant on the days specified in this Lease for the payment of installments of Fixed Rent. Landlord shall be entitled to recover from Tenant each monthly deficiency as the same shall arise and no suit to collect the amount of the deficiency for any month shall prejudice Laodlord's right to collect the deficiency for any prior or subsequent month by a similar proceeding. Alternatively, suit or suits for the recovery of such deficiencies may be. brought by Landlord from time to time at its election; (e) Whether or not Landlord shall have collected any monthly deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay Landlord, on demand, as and for liquidated and agreed final damages and not as a penalty, a sum equal to the amount by which the Fixed Rent and Additional Rent payable hereunder for the period to the Expiration Date, or the expiration of the Renewal Term, as applicable, from the earlier of (i) the last date to which all rental payments have been made, or (ii) the latest of the date of termination of this Lease, the date of reentry, or the date through which monthly deficiencies shall have been paid in full (conclusively presuming the Additional Rent to be the same as payable for the year 47 -42- immediately preceding such termination or reentry), exceeds the then fair and reasonable rental value of the Premises for the same period, both discounted at the prevailing interest rate to present worth; and (f) In no event shall Tenant be entitled (i) to receive any excess of any Net Rent under subsection (c) over the sums payable by Tenant to Landlord hereunder or (ii) in any suit for the collection of damages pursuant to this Section, to a credit in respect of any Net Rent from a reletting except to the extent that such Net Rent is actually received by Landlord prior to the commencement of such suit. If the Premises or any part thereof should be relet in combination with other space, then proper apportionment on a square foot area basis shall be made of the rent received from such reletting and the expenses of reletting. Section 17.05 LANDLORD'S FEES AND EXPENSES. In the event of an Event of Default, Tenant shall also be liable for all legal and other experts' fees and expenses reasonably paid or incurred by Landlord, whether directly or indirectly, in having any court determine that this Lease is terminated, or in Landlord's recovering possession of the Premises, or in Landlord's appearing in any court, or in Landlord's being a party to any appeal(s) from any such court's determination. Section 17.06 RIGHTS CUMULATIVE. Each right of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right provided for in this Lease or now or hereafter existing at law or in equity. The exercise or beginning of the exercise by Landlord of any one or more of such rights shall not preclude the exercise by Landlord of any other rights provided for in this Lease or now or hereafter existing. Nothing herein contained shall be construed as limiting the recovery by Landlord against Tenant of any sums or damages to which Landlord may lawfully be entitled by reason of any default hereunder. Section 17.07 RIGHTS OF BANKRUPTCY TRUSTEE. Without limiting any of the provisions of Section 17.01, if pursuant to the Federal Bankruptcy Code Tenant is permitted to assign this Lease in disregard of the restrictions contained in Article 13 (or if this Lease shall be assumed by a trustee) the trustee or assignee shall cure any default under this Lease and shall provide adequate assurance of future performance by the trustee or assignee, including (a) the source of payment of rent and performance of other obligations under this Lease, for which adequate assurance shall mean the deposit of cash security with Landlord in an amount equal to the sum of one year's Fixed Rent then reserved hereunder plus an amount equal to all Additional Rent payable under Article 4 and other provisions of this Lease for the Calendar Year preceding the year in which such assignment is intended to become effective, which deposit shall be held by Landlord, without interest, for the balance of the Term as security for the full and faithful performance of all of the obligations under this Lease on the part of Tenant yet to be performed and that any such assignee of this Lease shall have a net worth exclusive of good will, computed in accordance with generally 48 -43- accepted accounting principles, equal to at least ten (10) times the aggregate of the annual Fixed Rent reserved hereunder plus all Additional Rent for the preceding Calendar Year as aforesaid and (b) that the use of the Premises shall in no way diminish the reputation of the Building as a first-class office building or impose any additional burden upon the Building Equipment or increase the services to be provided by Landlord. If all defaults are not cured and such adequate assurance is not provided within sixty (60) days after there has been an order for relief under the Bankruptcy Code, then this Lease shall be deemed rejected, Tenant or any other person in possession shall vacate the Premises, and Landlord shall be entitled to retain any rent or security deposit previously received from Tenant and shall have no further liability to Tenant or any person claiming through Tenant or any trustee. If Tenant receives or is to receive any valuable consideration for such an assignment of this Lease, such consideration, after deducting therefrom (i) the brokerage commissions, if any, and other expenses reasonably incurred by Tenant for such assignment and (ii) any portion of such consideration reasonably designated by the assignee as paid for the purchase of Tenant's Property in the Premises, shall be and become the sole exclusive property of Landlord and shall be paid over to Landlord directly by such assignee. ARTICLE 18 CURING TENANT'S DEFAULTS; APPLICATION OF PAYMENTS Section 18.01 LANDLORD'S OPTION TO CURE. If Tenant shall default in the performance of any term of this Lease on Tenant's part to be performed, Landlord, without thereby waiving such default, may, but shall not be obligated to, perform the same for the account and at the expense of Tenant, without notice in case of emergency and upon five (5) days' prior notice after the expiration of the applicable grace period in all other cases. Landlord may enter the Premises at any time to cure any default. Bills for any expenses incurred by Landlord in connection with any such performance or involved in collecting or endeavoring to collect rent or enforcing or endeavoring to enforce any rights against Tenant under or in connection with this Lease or pursuant to law, including reasonable attorneys' fees and any cost, expense and disbursement involved in instituting and prosecuting summary proceedings, as well as bills for any property, material, labor or services provided, furnished or rendered, shall be paid by Tenant as Additional Rent on demand. Section 18.02 APPLICATION OF PAYMENTS. In the event that Tenant is in arrears in payment of rent, Tenant waives Tenant's right, if any, to designate the items against which any payments made by Tenant are to be credited and Landlord may apply any payments made by Tenant to any items Landlord sees fit, irrespective of any designation by Tenant as to the items against which any such payments shall be credited. ARTICLE 19 NON-LIABILITY AND INDEMNIFICATION Section 19.01 LANDLORD'S LIABILITY. 49 -44- No owner of the Real Property shall be liable under this Lease except for breaches of Landlord's obligations occurring while owner of the Real Property. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Real Property but not upon other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee, advisor or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Real Property in pursuit of its remedies upon an event of default hereunder, and the general assets of Landlord and its partners, trustees, stockholders, officers, employees, advisors or beneficiaries shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant. The term "Landlord" shall mean only the owner at the time in question of the present Landlord's interest in the Building and in the event of a sale or transfer of the Building (by operation of law or otherwise), or in the event of the making of a lease of all or substantially all of the Building, or in the event of a sale or transfer (by operation of law or otherwise) of the leasehold estate under any such lease, the grantor, transferor or lessor as the case may be, shall be and hereby is (to the extent of the interest or portion of the Building or leasehold estate sold, transferred or leased) automatically and entirely released and discharged, from and after the date of such sale, transfer or leasing, of all liability in respect of the performance of any of the terms of this Lease on the part of the Landlord thereafter to be performed; provided, that the purchaser, transferee or lessee (collectively "TRANSFEREE") shall be deemed to have assumed such liability and agreed to perform such terms, subject to the limitations of this Section 19.01 (and without further agreement between the then parties hereto, or among such parties and the Transferee) and only during and in respect of the Transferee's period of ownership of the Landlord's interest under this Lease. Section 19.02 LIMITATIONS ON LIABILITY. Except and to the extent a court of competent jurisdiction shall have determined that Landlord has failed to perform the obligations expressly imposed upon Landlord hereunder or shall have been negligent, neither any (a) performance by Landlord, Tenant or others of any repairs or Alterations in or to the Real Property, Building Equipment or Premises, (b) failure of Landlord or others to make any such repairs or Alterations, (c) damage to the Building Equipment, Premises or Tenant's Property, (d) injury to any persons, caused by other tenants or persons in the Building, or by operations in the construction of any private, public or quasi-public work, or by any other cause, (e) latent defect in the Building, Building Equipment or Premises, (f) temporary or permanent covering or bricking up of any windows of the Premises for any reason whatsoever including, without Limitation, Landlord's own acts, any Legal Requirement or any Insurance Requirement, nor (g) inconvenience or annoyance to Tenant or injury to or interruption of Tenant's business by reason of any of the events or occurrences referred to in the foregoing subdivisions (a) through (f) shall impose any liability on Landlord to Tenant. `No representation is made that the communications or security system, devices or procedures of the Building will be effective to prevent injury to Tenant or any other person or damage to, or loss (by theft or otherwise) of any of Tenant's Property or the property of any other person. Landlord reserves the right to discontinue or modify such communications or security systems or procedures without liability. Section 19.03 INDEMNIFICATION. 50 -45- Tenant hereby indemnifies Landlord against liability or expense (including reasonable attorneys fees and disbursements) in connection with or arising from (a) any default by Tenant in the performance of any provisions of this Lease, and/or (b) the use or occupancy or manner of use or occupancy of the Premises by Tenant or any person claiming by, through or under Tenant, and/or (c) any acts, omissions or negligence of Tenant or any such person, or the contractors, agents, employees, invitees or licensees of Tenant or any such person, in or about the Premises or the Real Property either prior to, during or after the expiration of the Term. Landlord hereby indemnifies Tenant against liability or expense (including reasonable attorneys fees and disbursements) in connection with or arising from (a) any default by Landlord in the performance of any provisions of this Lease, and/or (b) any acts, omissions or gross negligence of Landlord or any such person, or the contractors, agents, employees, invitees or licensees of Landlord or any such person, in or about the Premises or the Real Property. Tenant shall pay to Landlord as Additional Rent sums equal to all losses and other liabilities referred to in this Section 19.03. Section 19.04 LIABILITY OF TENANT . If at any time Tenant shall be comprised of two or more persons, or Tenant's obligations under this Lease shall have been guaranteed by any person or Tenant's interest shall have been assigned, the word "Tenant" as used herein shall mean any one or more of the persons primarily or secondarily liable for Tenant's obligations under this Lease. ARTICLE 20 YIELD UP Section 20.01 YIELD UP. On the Expiration Date or on the expiration of the Renewal Term, as applicable, or upon the sooner termination of this Lease or upon any reentry by Landlord upon the Premises, Tenant shall, at its sole cost and expense, quit, surrender, vacate and deliver the Premises to Landlord "broom clean" and in good order, condition and repair except for ordinary wear and tear or damage by fire or other casualty. Tenant shall remove from the Real Property all of Tenant's Property and all personal property and personal effects of all persons claiming through or under Tenant, and shall promptly pay Landlord the reasonable cost to repair all damage to the Premises and the Real Property occasioned by such removal. Section 20.02 ABANDONMENT OF PERSONAL PROPERTY. Any Tenant's Property or other personal property which shall remain in the Premises after the termination of this' Lease shall be deemed to have been abandoned and either may be retained by Landlord as its property or may be disposed of in such manner as Landlord may see fit; provided, however, that notwithstanding the foregoing, Tenant will, upon request of Landlord made not later than twenty (20) days after the termination of the Lease, promptly remove from the Building any such Tenant's Property or other personal property at Tenant's own cost and expense. If such Tenant's Property or other personal property or any part thereof not removed 51 -46- shall be sold by Landlord, Landlord may receive and retain the proceeds of such sale and apply the same, at its option, against the expenses of the sale, moving and storage, arrears of Parent and any damages to which Landlord may be entitled. Any excess expense incurred by Landlord in removing or disposing of such Tenant's Property or other personal property shall be reimbursed to Landlord by Tenant as Additional Rent on demand. Section 20.03 INDEMNIFICATION. If the Premises are not surrendered upon termination of this Lease, Tenant hereby indemnities Landlord and holds it harmless against any loss and/or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, any claims made by any succeeding tenant or prospective tenant founded upon such delay, or any loss of a prospective tenancy relating to such delay; provided, however, Landlord shall use reasonable efforts to mitigate its damages in connection with claims which may be made by a succeeding or prospective tenant. Section 20.04 HOLDOVER. In the event Tenant remains in possession of the Premises after the termination of this Lease without the execution of a new lease, Tenant, at the option of Landlord without waiving the liability of Tenant specified in Section 20.04, shall be deemed to be occupying the Premises as a tenant from month to month, at a monthly rental equal to one and one-half times the Fixed Rent and Additional Rent payable during the last month of the Term, subject to all of the other terms of this Lease insofar as the same are applicable on a month-to-month tenancy. After termination of the Lease, Landlord may accept payment from Tenant as on account for expenses or damages owed to Landlord or Landlord may credit such payment toward holdover rent, but no such acceptance shall be deemed to grant a new tenancy to Tenant or to otherwise grant Tenant any right to remain in the Premises. Notwithstanding the foregoing, if Tenant shall hold over or remain in possession of any portion of the Premises beyond the expiration or earlier termination of this Lease, Tenant shall be subject not only to a summary proceeding and all damages related thereto, but also to Landlord's indemnity claim pursuant to Section 20.03. All damages to Landlord by reason of such holding over by Tenant may be the subject of a separate action and need not be asserted by Landlord in any summary proceedings against Tenant. Section 20.05 SURVIVAL OF PROVISIONS. Tenant's obligations under this Article shall survive the termination of this Lease. ARTICLE 21 SUBORDINATION AND ATTORNMENT Section 21.01 SUBORDINATION. This Lease and all rights of Tenant hereunder are subject and subordinate in all respects to (a) all present and future ground leases, operating leases, superior leases, overriding leases and 52 -47- underlying leases and grants of term of the Real Property and the Building or any portion thereof (collectively, including the applicable items set forth in Subsection (d) of this Section 21.01, the "SUPERIOR LEASE") whether or not the Superior Lease shall also cover other lands or buildings, (b) all mortgages and building loan agreements, including leasehold mortgages, which may now or hereafter affect the Real Property, the Building, the Real Property or the Superior Lease (collectively, including the applicable items set forth in Subsections (c) and (d) of this Section 21.01, the "SUPERIOR MORTGAGE"), whether or not any Superior Mortgage shall also cover other lands or buildings or leases, (c) each advance made or to be made under any Superior Mortgage, and (d) all renewals, modifications, replacements, substitutions and extensions of the Superior Lease and any Superior Mortgage. The provisions of this Section 21.01 shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute and deliver, at its own cost and expense, any instrument, in recordable form if requested, that Landlord, the lessor under the Superior Lease (the "SUPERIOR LESSOR") or the holder of any Superior Mortgage (the "SUPERIOR MORTGAGEE") may reasonably request to evidence such subordination; and if Tenant fails to execute, acknowledge or deliver any such instrument within twenty (20) days after request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and deliver any such instruments for and on behalf of Tenant. Upon Tenant's request, Landlord shall deliver to Tenant a non-disturbance agreement in the form customarily provided by the applicable Superior Lessor or Superior Mortgagee and executed by Landlord and such Superior Lessor or Superior Mortgagee. Upon execution of this Lease, Landlord, Tenant and PNC Bank, National Association will execute a Non-Disturbance, Attornment and Subordination Agreement, substantially in the form of EXHIBIT F hereto. Landlord represents that as of the date of this Lease there is no Superior Lessor. Any Superior Mortgagee may elect that this Lease shall have priority over such Superior Mortgage and, upon notification thereof by such Superior Mortgagee to Tenant, this Lease shall be deemed to have priority over such Superior Mortgage, whether this Lease is dated prior to or subsequent to the date of such Superior Mortgage. If, in connection with the obtaining, continuing or renewing of financing for which the Building, Real Property or the interest of the lessee under the Superior Lease represents collateral, in whole or in part, any bank, insurance company, pension fund or other lending institution shall request reasonable modifications of this Lease as a condition of its granting such financing, Tenant will not unreasonably withhold its consent thereto, provided that such modifications do not increase the Fixed Rent, materially and adversely increase the obligations of Tenant hereunder or materially and adversely affect Tenant's rights hereunder. Tenant agrees that it will take no steps to terminate this Lease or abate rent payable hereunder without giving each Superior Lessor, and any Superior Mortgagee requesting same, written notice of any default by Landlord and the opportunity to cure such default (without any obligation on the part of any such person to cure such default) within (30) days thereafter or such longer period as may be reasonably necessary to effect such cure. Tenant agrees that this Lease shall not terminate or be terminable by Tenant by reason of any ..termination of a Superior Lease, by summary proceedings or otherwise and that this Lease shall not be affected in any way whatsoever by any such proceeding or termination. Section 21.02 SUCCESSOR LANDLORD. 53 -48- If the holder of any Superior Lease or Superior Mortgage shall succeed to the rights of Landlord under this Lease by possession, foreclosure, deed in lieu of foreclosure, summary proceedings or otherwise, Tenant shall, without further instruments of attornment, attorn to such holder. For purposes of this Section 21.02, the term "SUCCESSOR LANDLORD" shall mean and include (a) any person, including but not limited to any Superior Lessor or Superior Mortgagee, who, prior to the termination of this Lease, acquires or succeeds to the interest of Landlord under this Lease through summary proceedings, foreclosure action, assignment, deed in lieu of foreclosure or otherwise, and (b) the successors and assigns of any person referred to in clause (a) of this sentence. Upon any Successor Landlord's so acquiring, or so succeeding to, the interest of Landlord under this Lease, Tenant shall, at the election and upon the request of the Successor Landlord, and without further instruments of attornment, fully attorn to and recognize such Successor Landlord as Tenant's landlord under this Lease upon the then executory terms of this Lease. No Successor Landlord shall be bound by any prepayment of rent or additional rent for more than one month in advance or any amendment or modification of this Lease made without the consent of such Successor Landlord. Tenant waives the provisions of any statute or rule of law now or hereafter in effect which may give or purport to give Tenant any right of election to terminate this Lease or to surrender possession of the Premises in the event the Superior Lease is terminated. The foregoing provisions of this Section shall inure to the benefit of any such Successor Landlord, shall be self-operative, and no further instrument shall be required to give effect to said provisions. Upon demand of any such Successor Landlord, Tenant agrees to execute instruments to evidence and confirm the foregoing provisions of this Section 21.02 satisfactory to any such Successor Landlord. Tenant hereby constitutes and appoints Landlord attorney-in-fact for Tenant to execute any such instrument for and on behalf of Tenant, such appointment being coupled with an interest. Nothing contained in this Section shall be construed to impair any right otherwise exercisable by any such owner, holder or lessee. ARTICLE 22 ESTOPPEL AND ERISA CERTIFICATES Section 22.01 ESTOPPEL CERTIFICATE. At any time and from time to time upon not less than fifteen (15) days' prior notice by Landlord or any Superior Lessor or any Superior Mortgagee to Tenant, Tenant shall, without charge, execute, acknowledge and deliver to Landlord a statement in writing in recordable form prepared by Landlord addressed to such party as Landlord may designate or in form reasonably satisfactory to Landlord certifying (a) that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), (b) whether the Tenant has commenced and Fixed Rent and Additional Rent have become payable hereunder and, if so, the dates to which they have been paid, (c) whether or not, to the best knowledge of the signer of such certificate, Landlord is in default in performance of any of the terms of this Lease and, if so, specifying each such default of which the signer may have knowledge, (d) whether Tenant has accepted possession of the Premises, (e) whether Tenant has made any uncollected claim against Landlord under this Lease and, if so, the nature thereof and the dollar amount, if any, of such claim, (f) whether there exist any offsets or defenses against enforcement of any of the terms of this Lease upon the part of 54 -49- Tenant to be performed and, if so, specifying the same and (g) such further information with respect to the Lease or the Premises as Landlord may reasonably request or any Superior Mortgagee or any Superior Lessor may require, it being intended that any such statement delivered pursuant hereto may be relied upon by any prospective purchaser of the Real Property or any part thereof or of the interest of Landlord in any part thereof, by any mortgagee or prospective mortgagee thereof, by any lessor or prospective lessor thereof, by any lessee or prospective lessee thereof, or by any prospective assignee of any mortgage or lease thereof The failure of Tenant to execute, acknowledge and deliver to Landlord a statement in accordance with the provisions of this Section within said fifteen (15) day period shall constitute an acknowledgment by Tenant, which may be relied on by any person who would be entitled to rely upon any such statement, that such statement as submitted by Landlord is true and correct. Notwithstanding such acknowledgment, Tenant shall, at Landlord's option, be in default hereunder for its failure to execute such statement. Section 22.02 ERISA CERTIFICATE. Upon execution of this Lease, and periodically thereafter as requested by Landlord, Tenant agrees to provide Landlord with such information as Landlord may reasonably require in order to evaluate the compliance of this Lease and related transactions with the Employee Retirement Income Security Act of 1974, as amended. The foregoing shall not require Tenant to disclose material of a confidential or proprietary nature. ARTICLE 23 ACCESS, CHANGE IN FACILITIES Section 23.01 RESERVATIONS TO LANDLORD. All parts (except non-glass surfaces facing the interior of the Premises) of all walls, windows and doors bounding the Premises, all balconies, atrium access ways to atria not within any tenant's premises, terraces, stairs, landings and roofs adjacent to the Premises, all space in or adjacent to the Premises used for columns, shafts, stacks, stairways, risers, elevator shafts and machinery, conduits, air. conditioning rooms, telephone rooms, fan rooms, heating, ventilating, air conditioning, plumbing, electrical and other mechanical facilities, service closets and other Building Equipment, and the use thereof, as well as access thereto through the Premises for the purposes of operation, decoration, cleaning, maintenance, safety, security, alteration and repair, are hereby exclusively reserved to Landlord. Landlord may install, use, control and maintain pipes, fans, ducts, wires and conduits within or through the Premises, or through the walls, columns and ceilings therein, provided that the installation work will not unreasonably interfere with Tenant's use and occupancy of the Premises. Section 23.02 LANDLORD'S RIGHT TO CHANGE COMMON AREAS. Landlord reserves the right at any time and from time to time to subdivide, re-subdivide, add to, change, relocate, improve, or demolish all or any portion of the Real Property, Buildings, common areas, and parking areas so long as neither the total number of parking spaces available 55 -50- to Tenant nor the capacity of the cafeteria or exercise facilities are reduced (including without limitation the right to add additional floors, to the Buildings, to build new improvements adjoining the Buildings, to erect one or more additional buildings on the common areas, to expand the Building to cover a portion of the common areas, to convert common areas to a portion of the Building, to convert any portion of the Building to common areas, and to change, relocate, remove, or designate those parties who may use the lobbies, corridors, elevators, escalators, and loading docks). Landlord further reserves the right to enter into a ground lease, or to sell, lease, or finance all or any portion of the Real Property, Buildings, common areas and parking areas. Landlord may exercise any of these rights provided any such change (a) does not unreasonably deprive Tenant of access to the Premises and (b) does not diminish the size of the Premises or deprive Tenant of the substantial benefit and enjoyment of the Premises. Landlord's exercise of these rights shall not require Landlord to compensate Tenant in any way and shall not entitle Tenant to an abatement of Rent, nor shall it result in any liability to Landlord or in any way affect Tenant's obligations under this Lease unless otherwise provided in this Lease. Upon erection or change of the location of the buildings, the portion of the Real Property on which the buildings or structures have been erected shall no longer be deemed to be part of the common areas, except to the extent the building contains common areas. If any changes in the size or use of the Building or common areas are made, Landlord shall make an appropriate adjustment in the rentable area of the Building and in Tenant's share of the Expenses payable pursuant to Article 4 of this Lease. Section 23.03 LANDLORD'S ACCESS. Landlord or Landlord's agents (and any Superior Lessor, Superior Mortgagee and their agents) shall have the right to enter the Premises at all reasonable times, whether or not during Business Hours, and, except in cases of emergency, upon reasonable prior notice to Tenant and without unreasonably interfering with Tenant or its use or enjoyment of the Premises, for any of the purposes specified in this Lease and (a) to examine the Premises or for the purpose of performing any obligation of Landlord or exercising any right reserved to Landlord in this Lease, to the Superior Lessor in the Superior Lease, or to the Superior Mortgagee in the Superior Mortgage; (b) to exhibit the Premises to others during the final nine (9) months of the Term; (c) to make or cause to be made such repairs or Alterations, or to permit electrical or other utility meters to be read, or to perform such maintenance, including the maintenance of Building Equipment, as Landlord may deem reasonably necessary; (d) to take into and store upon the Premises all materials that may be required in connection with any such repairs, Alterations or maintenance; and (e) to alter, renovate and decorate the Premises at any time during the Term if Tenant shall have removed all or substantially all of Tenant's Property from the Premises. If Tenant, its agents or employees shall not be present or shall not permit an entry into the Premises at any time when such entry shall be permissible, Landlord may use a master key to enter the Premises without any liability therefor. Landlord or Landlord's agents shall have the right to permit access to the Premises at any time, whether or not Tenant shall be present, to any receiver, trustee, marshal or other person entitled to, or reasonably purporting to be entitled to, such access for the purpose of taking possession of, or removing, any Tenant's Property or property of any other occupant of the Premises, or for any other lawful purpose, or by any representative of the 56 -51- fire, police, building, sanitation or other department or instrumentality of the municipal, state or federal governments. Nothing contained in, nor any action taken by Landlord under, this Section shall be deemed to constitute recognition by Landlord that any person other than Tenant has any right or interest in this Lease or the Premises. ARTICLE 24 MISCELLANEOUS Section 24.01 SECURITY DEPOSIT. (a) Tenant has deposited with Landlord the Security Deposit as security for the full, faithful and punctual performance by Tenant of all of the terms of this Lease, whether in cash or by delivery to Landlord of a clean, irrevocable letter of credit in the amount of the Security Deposit. In the event Tenant defaults in the performance of any of the terms of this Lease, including the payment of Rent, Landlord may use, apply or retain the whole or any part of the Security Deposit to the extent required for the payment of any Rent or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any of the terms of this Lease, including any damages or deficiency in the reletting of the Premises, whether accruing before or after summary proceedings or other reentry by Landlord. In the case of every such use, application or retention, Tenant shall, on demand, pay to Landlord the sum so used, applied or retained which shall be added to the Security Deposit so that the same shall be replenished to its former amount and Tenant's failure to do so shall be a material breach of this Lease. Landlord shall keep such deposit separate from its general accounts in an interest bearing account, which accrued interest shall be added to the principal amount of the Security Deposit. The Security Deposit shall not be deemed a limitation on Landlord's damages or a payment of liquidated damages or a payment of the monthly Rent due for the last month of the Term of this Lease. The Security Deposit and accrued interest, or so much of it as has not been applied by Landlord to cure defaults, as described in this Section 24.01, shall be returned to Tenant together with an itemized account of any deductions therefrom after the termination of this Lease and within forty-five (45) days after delivery of exclusive possession of the Premises to Landlord. In the event of a sale or lease of the Building, Landlord shall have the right to transfer the Security Deposit to the vendee or lessee and Landlord shall immediately be released by Tenant from all liability for the return of such Security Deposit; and Tenant agrees to look solely to the new owner or landlord for the return of said Security Deposit; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new owner or landlord. Tenant shall not assign or encumber or attempt to assign or encumber the monies deposited herein as the Security Deposit and neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or encumbrance. This Lease does not create a trust relationship between Landlord and Tenant with respect to such Security Deposit, and Landlord shall be entitled to treat such Security Deposit as Landlord's own property, subject only to Tenant's right to receive repayment of it as and to the extent provided in this Section. (b) If the Security Deposit is in the form of an unconditional, irrevocable letter of credit, such letter of credit shall be issued by a financial institution reasonably acceptable to 57 -52- Landlord and in the form of Exhibit G hereto. The letter of credit shall be renewed by Tenant at least thirty (30) days prior to expiration and shall remain in effect until forty-five (45) days after the scheduled end of the Term of the Lease, as such Term may be renewed or extended. (c) On the last day of the third Lease Year and/or on the last day of the fourth Lease Year, if Tenant meets the Creditworthiness Test set forth in Section 24.01(d) below, is not in default under the Lease beyond any applicable grace or cure period, and in particular if Tenant is current in its payment of all amounts of Fixed Rent and Additional Rent then due, $103,750 of the Security Deposit shall be refunded to Tenant on each such date, or if the Security Deposit is in the form of an unconditional, irrevocable letter of credit, Landlord shall consent to a $103,750 reduction in the amount of said letter of credit on each such date. (d) Tenant shall be entitled to reductions in the amount of the Security Deposit as described in subsection (c), above, if and only if, within thirty (30) days prior to the expiration of the third and/or fourth Lease Years Tenant has delivered to Landlord evidence reasonably acceptable to Landlord evidencing that the Tenant has satisfied the following creditworthiness test (the "CREDITWORTHINESS TEST"): (i) If Tenant has rated long-term debt, its current rating must be: AA or better (if rated by Moody's Investors Service) and AA or better (if rated by Standard & Poor's); or (ii) If Tenant does not have rated long-term debt, Tenant must have: (1) current stockholder's equity of at least Seven Million Five Hundred Thousand ($7,500,000) Dollars, (2) current assets of at least Twenty Million ($20,000,000) Dollars, (3) EBIT of at least Seven Million Five Hundred Thousand ($7,500,000) Dollars for Tenant's most recently concluded fiscal year, (4) a current ratio of at least 1.5, and (5) a ratio of Gross Margin to Revenue of at least 60%. (e) If Tenant shall have exercised its Renewal Option (as such term is defined in Section 26.01 hereof), as a condition of the commencement of the Renewal Term, and provided that Tenant continues to meet the Creditworthiness Test, the Security Deposit, as it may have been reduced pursuant to this Section 24.01, shall continue to be held by Landlord pursuant to the terms of this Section 24.01 (a), and shall not be further reduced. If Tenant does not meet the Creditworthiness Test upon commencement of the Renewal Term, Tenant shall increase the Security Deposit as reasonably required by Landlord. Section 24.02 NOTICES. Whenever, by the terms of this Lease, notices, consents or approvals shall or may be given either to Landlord or to Tenant, they shall be in writing and shall be: (a) sent by United States Postal Service, certified mail, return receipt requested, (b) sent by any nationally known overnight delivery service for next business day delivery, (c) delivered in person to an authorized officer. All notices shall be addressed to the parties at the addresses below: 58 -53- (a) If intended for Landlord, addressed to Landlord at Landlord's Address for Notices set forth on page one of this Lease, with a copy to Lemer & Holmes PC, 265 Franklin Street, 18th Floor, Boston, MA 02110 (or. to such other address as may from time to time hereafter be designated by Landlord by like notice). (b) If intended for Tenant, addressed to Tenant at Tenant's Address for Notices set forth on page one of this Lease until the Commencement Date and thereafter to the Premises (or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice). Section 24.03 QUIET ENJOYMENT. If, and so long as, Tenant pays the rent and keeps, observes and performs each and every provision of this Lease on the part and on behalf of Tenant to be kept, observed and performed, Tenant shall peaceably and quietly enjoy the Premises throughout the Term without hindrance by Landlord or any person lawfully claiming through or under Landlord, subject to the terms of this Lease and, following the succession of any Superior Lessor or Superior Mortgagee to the interest of Landlord, to the rights of any Superior Lessor and/or any Superior Mortgagee, as they may be modified by a nondisturbance agreement between Tenant and any such Superior Lessor or Superior Mortgagee. Section 24.04 RULES AND REGULATIONS. Tenant and its employees, agents, invitees, legal representatives and licensees shall faithfully observe and strictly comply with, and shall not permit violation of, the Rules and Regulations and such reasonable changes therein as Landlord hereafter may make and communicate to Tenant. Tenant's right to dispute the reasonableness of any additional Rules and Regulations shall be deemed waived unless asserted to Landlord within twenty (20) days after Landlord shall have given Tenant notice of the adoption of any such additional Rules and Regulations. In case of any conflict or inconsistency between the provisions of the Rules and Regulations and the provisions of this Lease, the provisions of this Lease shall control. Landlord shall have no duty or obligation to enforce any Rule or Regulation, or any term, covenant or condition of any other lease, against any other tenant; provided, however if said Rules and Regulations are enforced by Landlord they shall be applied and enforced against all tenants of the Building in a nondiscriminatory fashion. Any consent, approval or the like required pursuant to said Rules and Regulations shall not be unreasonably withheld or delayed. Section 24.05 NOTICE OF ACCIDENTS. Tenant shall give notice to Landlord, promptly after Tenant learns thereof, of any accident, emergency, occurrence for which Landlord might be liable, fire or other casualty and all damages to or defects in the Premises, the Building or the Building Equipment, for the repair of which Landlord might be responsible or which constitutes Landlord's property. Such notice shall be given by facsimile or personal delivery to the address of Landlord then in effect for notices. 59 -54- Section 24.06 NO REPRESENTATIONS. Tenant expressly acknowledges that neither Landlord nor any of Landlord's agents has made or is making, and Tenant, in executing and delivering this Lease, is not relying upon, any warranties, representations, renderings, promises or statements, except to the extent that the same are expressly set forth in this Lease, and no rights, easements or licenses are or shall be acquired by Tenant by implication or otherwise unless expressly set forth in this Lease. Without limiting the generality of the foregoing, Tenant expressly acknowledges that neither Landlord nor any of Landlord's agents has made or is making, any warranties or representations concerning any hazardous materials, or other environmental matters affecting any part of the Real Property and Landlord hereby expressly disclaims and Tenant waives any express or implied warranties with respect to any such matter. Section 24.07 BROKERAGE. Tenant represents to Landlord and Landlord represents to Tenant that in the negotiation of this Lease it/they dealt with no broker other than Broker (whose fees shall be payable by Landlord) and no other brokers participated in bringing about this Lease. Tenant and Landlord hereby indemnify each other and agrees to defend and hold each other harmless from and against any claim or liability arising out of any inaccuracy or alleged inaccuracy of the above representation. Section 24.08 CONSENTS. Whenever Tenant requests Landlord to take any action or give any consent required or permitted under this Lease, Tenant shall reimburse Landlord, in an amount up to $1,000 for each such request for action or consent, for all of Landlord's reasonable costs incurred in reviewing the proposed action or consent, including, without limitation, reasonable attorneys', engineers' or architects' fees, on demand, as Additional Rent. Tenant shall be required to make such reimbursement without regard to whether Landlord consents to any proposed action. Section 24.09 LEASE NOT TO BE RECORDED, NOTICE OF LEASE. At the request of either party, Landlord and Tenant shall promptly execute, acknowledge and deliver a notice or short form of this Lease sufficient for recording. Such notice shall not in any circumstance be deemed to change, or be deemed a construction of this Lease, or, in the event of conflict, control or otherwise affect any of the terms of this Lease. Tenant agrees not to record this Lease (whether directly or indirectly) or any other document related hereto other than any such notice. Section 24.10 INABILITY TO PERFORM. This Lease and the obligations of Tenant to pay rent and perform all of the terms of this Lease on the part of Tenant to be performed shall in no way be affected because Landlord is 60 -55- unable or delayed in fulfilling any of its obligations under this Lease by reason of Force Majeure. Landlord shall be under no obligation to employ overtime labor in order to satisfy any of Landlord's obligations under this Lease. Section 24.11 WAIVER. In the event Landlord commences any summary proceeding (whether for nonpayment of rent, or for Tenant's holding over, or otherwise), or an ejectment action to recover possession of the Premises, or other action for nonpayment of rent, Tenant covenants and agrees that it will not interpose any counterclaim (excepting compulsory counterclaims) in any such action or proceeding, or seek by consolidation or otherwise to interpose any counterclaim. To the extent permitted by applicable law, Tenant hereby waives trial by jury and agrees that Tenant will not interpose any counterclaim (excepting compulsory counterclaims) or prosecute any independent claim of whatsoever nature or description in any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, or Tenant's use or occupancy of the Premises, any claim of injury or damage, or any emergency or other statutory remedy with respect thereto. Any claim that Tenant may have against Landlord shall be separately prosecuted. The provisions of this Section 24.12 shall survive the breach or termination of this Lease. Section 24.12 NO OTHER WAIVER. The failure of Landlord or Tenant to insist in any instance upon the strict performance of any term of this Lease, or to exercise any right herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such obligation or such right, but the same shall continue and remain in full force and effect with respect to any continuance thereof or any subsequent breach, act or omission. The following specific provisions of this Section shall not limit the generality of the provisions of this Section: (a) No agreement to accept a surrender of all or any part of the Premises or this Lease shall be valid unless in writing and signed by Landlord. No delivery of keys to the Premises by Tenant to Landlord shall operate as a termination of this Lease or a surrender of the Premises or this Lease. Without limiting the generality of the preceding sentences, if, subject to the provisions of Article 13, Tenant shall at any time request Landlord to sublet the Premises for Tenant's account, Landlord or Landlord's agent is authorized to receive said keys for such purpose without releasing Tenant from any of its obligations under this Lease, and Tenant hereby releases Landlord from any liability for loss or damage to any of Tenant's Property in connection with such subletting, unless said loss or damage is caused by Landlord's gross negligence or willful misconduct. (b) The receipt or acceptance by Landlord of Rent with knowledge of breach by Tenant of any term of this Lease shall not be deemed a waiver of such breach. 61 -56- (c) No payment by Tenant or receipt by Landlord of a lesser amount than the correct rent shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or any accompanying letter be deemed to effect or evidence an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance or pursue any other right of Landlord. Section 24.13 SUCCESSORS AND ASSIGNS. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. Section 24.14 AUTHORITY. Landlord and Tenant each represent to the other that it has fall power and authority to execute this Lease and to make and perform the agreements herein contained. Section 24.15 ENTIRE AGREEMENT. This Lease contains the entire agreement between the parties and all prior negotiations and agreements are merged into this Lease, which alone fully and completely expresses the agreement between Landlord and Tenant. This Lease may not be changed, modified, terminated or discharged, in whole or in part, nor any of its provisions waived except by a written instrument (unless expressly permitted by the terms of this Lease) which (a) expressly refers to this Lease, (b) is subscribed to by the party against whom enforcement of the change, modification, termination, discharge or waiver is sought and (c) is permissible under any Superior Mortgage and the Superior Lease, and is approved by any Superior Mortgagee or Superior Lessor if required by the terms of any Superior Mortgage or Superior Lease. In no event shall this Lease be binding upon the Landlord unless and until this Lease shall have been executed and acknowledged by Tenant and Landlord and unconditionally exchanged by and between Landlord and Tenant. Without limiting the foregoing, all drafts and redrafts of this Lease, memoranda with respect thereto, exchanges of correspondence between Landlord and Tenant and their respective representatives, brokers' statements, exchanges of floor plans, Tenant's drawings and specifications, Landlord's drawings and specifications, or any combination thereof, arising out of or with respect to any space in the Building shall not constitute an agreement to lease or a lease between Landlord and Tenant. Section 24.16 GOVERNING LAW. This Lease shall be governed in all respects by the internal laws of the Commonwealth of Massachusetts without reference to the choice of law or conflict of law provisions thereof. Section 24.17 FINANCIAL STATEMENTS. 62 -57- Tenant agrees to deliver its financial statements to Landlord at Landlord's request .,following Tenant's default or in connection with the proposed sale, syndication or mortgaging of the Building and Real Property, subject in each case to execution and delivery by Landlord and any prospective buyer, investor or lender of a Confidentiality Agreement equivalent to that between the Tenant and Gillespie and Co., Inc. dated September 25, 1998. All financial statements heretofore delivered to Landlord by Tenant are, and all financial statements hereafter delivered to Landlord by Tenant will be, true and correct in all material respects and fair presentations of the financial condition of Tenant as of the date thereof, prepared in accordance with generally accepted accounting practices. As of the effective date of this Lease, no material adverse change has occurred in the financial condition of Tenant since the date of the financial statements heretofore delivered to Landlord. Section 24.18 NO THIRD PARTY BENEFICIARIES. The provisions of this Lease shall inure to and be enforceable only by the parties hereto. Such provisions shall not inure to the benefit of or be relied upon by any other party. ARTICLE 25 DEFINITIONS; CONSTRUCTION OF TERMS Section 25.01 CERTAIN DEFINITIONS. For the purposes of this Lease and all agreements supplemental to this Lease each of the following defined terms shall have the meaning specified therefor: (a) "BUILDING EQUIPMENT" shall mean all machinery, apparatus, equipment, personal property, fixtures and systems of every kind and nature whatsoever now or hereafter attached to or used in connection with the operation or maintenance of the Real Property, including all electrical, heating, mechanical, sanitary, sprinkler, utility, power, plumbing, cleaning, fire prevention, refrigeration, ventilating, air cooling, air conditioning, elevator and escalator systems, apparatus and equipment and any and all additions, renewals and replacements of any thereof, but excluding however: (i) Tenant's Property, (ii) property of any other tenant, (iii) property of contractors servicing the Building and (iv) Alterations for water, gas, steam and electricity and other similar equipment owned by any public utility company or any governmental agency or body. (b) "BUSINESS HOURS" shall mean those hours from 8:00 A.M. to 6:00 P.M. Monday through Friday and 10:00 A.M. ` to 3:00 P.M. on Saturday except days observed by the Federal or the state or local governments in the Commonwealth of Massachusetts as public holidays and such other days as shall be designated, from time to time, as holidays by the applicable operating engineers union or building service employees union contract, provided however that the Premises shall be accessible to Tenant at all times. (c) "CALENDAR YEAR" shall mean a year beginning January 1 and ending December 31. 63 -58- (d) "INSURANCE REQUIREMENTS" shall mean all requirements of any insurance policy covering or applicable to all or any part of the Real Property or the Premises or the use thereof, all requirements of the issuer of any such policy and all orders, rules, regulations, recommendations and other requirements of the Board of Fire Underwriters of the location of the Premises or the Insurance Service office or any other body exercising the same or similar functions and having jurisdiction or cognizance of all or any part of the Real Property. (e) "INTEREST RATE" shall mean a rate per annum equal to the lesser of (i) two percent (2%) above the announced prime commercial lending rate as reported by the Wall Street Journal, in effect from time to time for ninety (90) day unsecured loans to customers of the highest credit standing, or (ii) the maximum applicable legal rate, if any. (f) "LEASE YEAR" shall mean the period from and after the Commencement Date through the first twelve (12) months from and after the Commencement Date, and each subsequent period of twelve (12) months, or part thereof. (g) "LEGAL REQUIREMENTS" shall mean laws, statutes and ordinances (including without limitation building codes, zoning regulations and ordinances, environmental laws and the Americans With Disabilities Act of 1990, as amended) and the orders, rules, regulations, directives and requirements of all federal, state, county, and municipal departments, bureaus, boards, agencies, offices, commissions, and other subdivisions thereof, or of any official thereof, or of any other governmental, public or quasi-public authority, whether now or hereafter in force, which may be applicable to the Real Property, Building, Building Equipment or the Premises or any part thereof or the sidewalks, curbs or areas adjacent thereto and all requirements, obligations and conditions of all instruments of record on the date of this Lease. (h) "TAX YEAR" shall mean a period beginning July 1 and ending June 30. (i) "TENANT'S PROPERTY" shall mean all fixtures, Improvements, additions and other property (i) installed at the sole expense of Tenant, (ii) with respect to which Tenant has not been granted any credit, concession or allowance by Landlord, (iii) which are removable without material damage to the Premises, and (iv) which are not replacements of any property of Landlord, whether any such replacement is made at Tenant's expense or otherwise. (j) "UNTENANTABLE" shall mean, as to any portion (or all) of the Premises, that Tenant is actually and physically unable to use such portion (or all) of the Premises in the regular course of its business. Section 25.02 PROVISIONS SEVERABLE. If any of the provisions of this Lease, or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 64 -59- Section 25.03 RULES OF CONSTRUCTION. For the purposes of this Lease and all agreements supplemental to this Lease, unless the context otherwise requires: (a) The terms "include", "including" and "such as" shall be construed as if followed by the phrase "without being limited to". The words "herein, "hereof', "hereby", "hereunder" and words of similar import shall be construed to refer to this Lease as a whole and not to any particular Article or Section unless expressly so stated. (b) The term "obligations of this Lease" and words of like import, shall mean the covenants to pay rent and to perform all of the other terms of this Lease. (c) Any provision in this Lease that one party or the other or both shall do or not do or shall cause or permit or not cause or permit a particular act, condition or circumstance shall be deemed to mean that such party so covenants or both parties so covenant, as the case may be. (d) Reference to Landlord as having "no liability to Tenant" or being "without liability to Tenant" shall mean that Tenant is not entitled to terminate this Lease, or to claim actual or constructive eviction, partial or total, or to receive any abatement or diminution of rent, or to be relieved in any manner of any of its other obligations hereunder, or to be compensated for loss or injury suffered or to enforce any other right or kind of liability whatsoever against Landlord under or with respect to this Lease or with respect to Tenant's use or occupancy of the Premises except as otherwise set forth herein. (e) The term "repair" shall be deemed to include restoration, rebuilding and replacement as may be necessary to achieve and maintain good working order and condition. (f) The term "in fall force and effect" when used in reference to this Lease as a condition to the existence or exercise of a right on the part of Tenant shall be construed in each instance as including the further condition that at the time in question no default on the part of Tenant exists, and no event has occurred which has continued to exist for such period of time (after notice, if any, required by this Lease), as would entitle Landlord in either such instance to terminate this Lease or to dispossess Tenant. (g) The term "the terms of this Lease", "the terms of this Article" or "the terms of this Section" shall be deemed to include all terms, covenants, conditions, provisions, obligations, limitations, restrictions, reservations and agreements of this Lease or such Article or such Section, as the case may be. (h) The term "Landlord's agents" shall be deemed to include all agents, contractors, and employees of Landlord. 65 -60- (i) The term "tenant" shall be deemed to include any and all occupants of the Building. The term "consent" shall mean prior consent and approval, and the consent by either party to any particular action shall not in any way be considered as relieving the other party from obtaining the express consent to any subsequent or further action. (k) The words "Tenant hereby indemnifies Landlord against liability" and words of similar import shall mean that Tenant hereby agrees to and hereby does indemnify, defend, hold and save Landlord and Landlord's agents and their respective employees harmless from and against any and all loss, cost, liability, claim, damage, fine, penalty and expense, including their respective reasonable attorneys' fees, costs and disbursements, and said definition shall apply reciprocally t6 any indemnification by Landlord in Tenant's favor. (l) The words "in default under this Lease" and words of similar import shall be deemed to include the phrase "beyond any applicable grace or cure periods". (m) Each term, covenant, agreement, obligation or other provision of this Lease on either party's part to be performed shall be deemed and construed as a separate and independent covenant of such party, not dependent upon any of the other terms of this Lease. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. In the event of any action, suit, arbitration, dispute or proceeding affecting the terms of this Lease, no weight shall be given to any deletions or striking out of any of the terms of this Lease contained in this Lease or any draft of this Lease (other than treating the deleted or stricken terms as if they had never been included) and no such deletion or strike out shall be entered into evidence in any such action, suit, arbitration, dispute or proceeding nor given any weight therein. Section 25.04 CAPTIONS. The Article and Section headings in this Lease and the Table of Contents to this Lease are inserted only as a matter of convenience or reference, and are not to be given any effect in construing this Lease. ARTICLE 26 EXTENSION RIGHTS Section 26.01 RENEWAL OPTION. Subject to the rights of Lucent Technologies Inc. under the current terms of its lease with Landlord and provided Tenant is not in default under this Lease and no event or condition exists which with notice and the expiration of any grace period would constitute a default under this Lease at the time, the option may be exercised, Landlord grants Tenant one option (the "RENEWAL OPTION") to renew this Lease with respect to all of the Premises for one additional period of five (5) years (the "RENEWAL TERM"). The Renewal Option may be exercised by Tenant delivering 66 -61- written notice to Landlord at least twelve (12) months prior to the expiration date of the Initial Term. Time is of the essence in the exercise of the Renewal Option. Section 26.02 RENEWAL RENTAL RATE. The renewal rental rate for the Renewal Terms shall be one hundred percent (100%) of the market rental rate for comparable space of comparable size and quality and in no event shall the fixed renewal rate for the Renewal Term be less than the annual Fixed Rent in effect for the last Lease Year of the Initial Term. Within thirty (30) days after Tenant's exercise of the Renewal Option, if exercised, Landlord shall notify Tenant in writing of the proposed renewal rental rate for the Renewal Term (the "RENEWAL RENTAL RATE") as determined by the above formula. Tenant shall have thirty (30) days from the receipt of Landlord's notice to either accept or dispute Landlord's determination of the Renewal Rental Rate. In the event that Tenant disputes Landlord's determination, Tenant shall so notify Landlord and advise Landlord of Tenant's determination of the Renewal Rental Rate for the Renewal Term as determined by the above formula ("Tenant's Notice"). If Landlord and Tenant cannot agree upon the market rental rate within fifteen (15) days of Tenant's Notice, the following "DISPUTE RESOLUTION MECHANISM" shall be utilized: The parties, within fifteen (I 5) days after the expiration of said fifteen (I 5) day period, shall jointly appoint as arbitrator, a certified commercial real estate appraiser with a minimum of ten (10) years experience in the applicable marker. If Landlord and Tenant cannot agree on an acceptable arbitrator, Landlord and Tenant shall each choose, within an additional fifteen (15) days thereafter, its own arbitrator who meets the qualifications described above. The arbitrators shall then jointly select, within an additional ten (10) days, an arbitrator to serve as the arbitrator hereunder. Within twenty (20) days after appointment, the arbitrator shall choose either Landlord's or Tenant's determination of market rental rate. The cost of the arbitrator(s) shall be borne by the party whose determination of the market rental rate was not selected by the arbitrator. Section 26.03 AMENDMENT TO LEASE. Landlord and Tenant shall execute an amendment to this Lease within sixty (60) days after the determination of the market rental rate for the Renewal Term, which amendment shall set forth the Renewal Term, the annual Fixed Rent and all other terms and conditions for the Renewal Term. Except as set forth above, the Renewal Term shall be subject to all of the terms and conditions of this Lease; provided, however, that there shall be no extension rights at the expiration of the Renewal Term. Section 26.04 LANDLORD'S RIGHTS. Neither any option granted to Tenant in this Lease or in any collateral instrument to renew or extend the Initial Term, nor the exercise of any such option by Tenant, shall prevent Landlord from exercising any option or right granted or reserved to Landlord in this Lease to 67 -62- terminate this Lease or any renewal or extension of the Term either during the Initial Term or during any Renewal Tenn. Any renewal or extension right granted to Tenant shall be personal to Tenant and may not be exercised by any assignee, subtenant or legal representative of Tenant, other than a Permitted Assignee. Any termination of this Lease shall serve to terminate any such renewal or extension of the Term, whether or not Tenant shall have exercised any option to renew or extend the Term. No option granted to Tenant to renew or extend the Term shall be deemed to give Tenant any further option to renew or extend. No option granted to Tenant to renew or extend the Term shall be effective unless both at the exercise of such option and at the commencement of such renewal or extension, this Lease shall be in full force and effect. IN WITNESS WHEREOF Landlord and Tenant have duly executed this Lease as of the day and year first above written. LANDLORD: 300 BAKER AVENUE ASSOCIATES, LIMITED PARTNERSHIP By: 300 Baker Avenue Managers, Limited Partnership, a general partner By: HG Concord Limited Partnership, its general partner By: HG Concord LLC, its general partner By: _________________________________________________ Name: Title: TENANT: ONE SOURCE INFORMATION SERVICES, INC., a Delaware corporation By: /s/ Daniel Schimmel ------------------- Name: Daniel Schimmel Title: President 68 EXHIBIT A DESCRIPTION OF REAL PROPERTY Lot 2 shown on a plan entitled, "Approval Not Required Plan" dated June 23, 1998, prepared by Rizzo Associates, Inc. for 300 Baker Avenue Associates, LP, Concord, MA recorded with the Middlesex South District Registry of Deeds on September 8, 1998 as Plan No. 980 of 1998. 69 EXHIBIT B FLOOR PLAN FOR THE PREMISES 70 EXHIBIT C WORK LETTER THIS WORK LETTER AGREEMENT ("WORK LETTER AGREEMENT") is entered into as of the _____ day of January, 1999 by and between 300 Baker Avenue Associates, Limited Partnership, ("LANDLORD"), and OneSource Information Services, Inc. ("TENANT"). RECITALS A. Concurrently with the execution of this Work Letter, Landlord and Tenant have entered into the Lease covering certain Premises more particularly described in the Lease. All terms not defined herein have the same meaning as set forth in the Lease. B. In order to induce Tenant to enter into the Lease and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant agree as follows: 1. LANDLORD'S WORK. As used in the Lease and this Work Letter Agreement, the term "LANDLORD'S WORK" means those items of general tenant improvement construction shown on the Final Plans (described in Paragraph 4(c) below), including, but not limited to, partitioning, doors, ceilings, floor coverings, wall finishes (including paint and wall coverings), electrical (including lighting, switching, telephone outlets, etc.), plumbing, heating, ventilating and air conditioning, fire protection, cabinets and other millwork and distribution of Building services such as sprinkler and electrical service. Landlord's Work includes the installation of windows along the rear of the Building, which windows have been installed by Landlord at Landlord's sole cost and expense in addition to the Tenant Improvement Allowance. All Landlord's Work and components thereof shall at all times be and remain the sole property of Landlord. 2. CONSTRUCTION REPRESENTATIVES. Landlord appoints the following person(s) as Landlord's representative ("LANDLORD'S REPRESENTATIVE") to act for Landlord in all matters covered by this Work Letter: Ian S. Gillespie 300 Baker Avenue Associates, Limited Partnership 300 Baker Avenue Concord, MA 01742 Tenant appoints the following person(s) as Tenant's representative ("TENANT REPRESENTATIVE") to act for Tenant in all matters covered by this Work Letter. Ken Coming One Source Information Services, Inc. 150 CambridgePark Drive, 5th Floor 71 -2- Cambridge, MA 02140 All communications with respect to the matters covered by this Work Letter are to be made to Landlord's Representative or Tenant's Representative, as the case may be, in writing, in compliance with the notice provisions of the Lease. Either party may change its representative under this Work Letter at any time by written notice to the other party in compliance with the notice provisions of the Lease. 3. DESIGN AND CONSTRUCTION. (a) All Landlord's Work shall be performed by or under the supervision of a general contractor selected and engaged by Landlord and reasonably acceptable to Tenant. Tenant acknowledges that John Moriarty & Associates, Inc. (the "CONTRACTOR") is an acceptable general contractor. Tenant shall engage a registered professional architect of its choice to design the interior space of the Premises ("TENANT'S Architect"). (b) Landlord shall, upon the written request of Tenant (which request shall be made not later than the date the Final Plans are approved), require Landlord's general contractor to have trades or subcontracts valued in excess of Fifty Thousand ($50,000) Dollars competitively bid by two (2) subcontractors selected by the Contractor (but who are not affiliated with the Contractor or with each other) and, if Tenant so desires, by an additional subcontractor selected by Tenant and reasonably satisfactory to Contractor. The name of the subcontractor selected by Tenant shall be delivered by Tenant to Contractor and Landlord within two (2) days of Landlord's or Contractor's notice to Tenant that bids are being sought. The competitive bids shall be delivered to Tenant within two (2) days of receipt by Landlord. The Contractor shall accept the bid of the subcontractor who submitted the lowest bid for the subcontract or trade, unless the Contractor has bona fide good faith reasons, including but not limited to availability of the low bidder's personnel, equipment and materials, special requirements of Landlord's Work and labor harmony, for accepting a bid other than the low bid; provided, however, if the Contractor wishes to accept a bid other than the lowest bid, as described above, and said bid is more than ten percent (10%) higher than the lowest bid, then prior to acceptance of such bid, Contractor or Landlord shall notify Tenant of the name of said subcontractor, the amount of its bid and the work covered by the bid (the "SUBCONTRACTOR NOTICE"), whereupon Tenant, by giving notice ("the TENANT NOTICE") to Landlord within two (2) Business Days of the Subcontractor's Notice, may consult with Landlord and Contractor to mutually and in good faith choose a subcontractor to perform said subcontract or trade. If Tenant does not timely give a Tenant Notice relative to a bid which is the subject of a Subcontractor Notice, then Contractor may let a subcontract based on such a bid. For every two (2) days which elapse between the date of the Tenant Notice and the date that the parties agree on an acceptable subcontractor, one (1) day of Tenant Delay shall be deemed to have occurred. Tenant and Tenant's designees shall at all times during construction of Landlord's Work be entitled, upon reasonable notice to Landlord and the Contractor, to review all books, records, costs and estimates associated with the construction of Landlord's Work. 72 -3- 4. TENANT IMPROVEMENT PLANS. (a) SPACE PLANS. On or before January 15, 1999, Tenant shall have caused Tenant's Architect to prepare schematic drawings for the layout of the Premises ("SPACE PLANS"). Such Space Plans will be submitted to Landlord on said date for Landlord's review and approval (which shall not be unreasonably withheld or delayed). If Landlord in its reasonable discretion does not approve the Space Plans, Tenant will then cause Tenant's Architect to redesign the Space Plans incorporating the revisions reasonably requested by Landlord so as to make the - -Space Plans consistent with Landlord's request, whereupon the revised Space Plans shall be submitted to Landlord for Landlord's review and approval. Based upon the approved Space Plans, Landlord will prepare a preliminary line item budget for the construction of Landlord's Work (the "PRELIMINARY Budget"). The Preliminary Budget will be submitted to Tenant for its approval. Tenant shall either approve or disapprove the Preliminary Budget based on the process established in Section 4(b) hereof for Tenant's review and approval of the Excess Cost Summary. At such time Tenant may request that Landlord consult with its subcontractor(s) to revise the Preliminary Budget. (b) PREPARATION OF FINAL PLANS. Not later than March 1, 1999, Tenant's Architect will prepare complete architectural plans, drawings and specifications and complete engineered mechanical, structural and electrical working drawings for all of Landlord's Work (collectively the "FINAL PLANS"). The Final Plans will show: (i) the subdivision (including partitions and walls), layout, lighting, finish and decoration work (including carpeting and other floor coverings) for the Premises; (ii) all internal and external communications and utility facilities which will require the installation of conduits or other improvements from the base Building shell and/or within common areas; and (iii) all other specifications for Landlord's Work. The Final Plans will be submitted to Landlord for Landlord's reasonable approval, and at such time Landlord shall provide Tenant with a written summary (the "EXCESS COST SUMMARY") of those elements of the Final Plans that will cost in excess of the Tenant Improvement Allowance (defined below) ("EXCESS COSTS"). Landlord agrees to advise Tenant in writing of any disapproval of -the Final Plans, and Tenant agrees to advise Landlord in writing of any disapproval of the Excess Cost Summary, and the reasons therefor within ten (10) business days of their respective receipt thereof. At such time, if Tenant has not previously requested that a particular trade or subcontract be competitively bid pursuant to Section 3 hereof, Tenant may exercise its Section 3 rights with respect to any such trade or subcontract and Landlord shall take any qualifying bids into account in revising the Excess Cost Summary. If Landlord in its reasonable discretion does not approve the Final Plans, Tenant will then cause Tenant's Architect to redesign the Final Plans incorporating the revisions reasonably requested by Landlord so as to make the Final Plans consistent with Landlord's reasonable request. If Tenant fails to timely deliver to Landlord Tenant's written disapproval of the Excess Cost Summary, the Excess Cost Summary shall be deemed approved by Tenant. If the revised Excess Cost Summary is timely disapproved by Tenant pursuant to this paragraph, Tenant shall provide to Landlord a written explanation of the reason(s) for such disapproval concurrently with its disapproval, and the Excess Cost Summary, as appropriate, shall be promptly revised and resubmitted to Tenant for approval. If Tenant fails to provide a written explanation as and when required by this paragraph, the Excess Cost Summary shall be deemed approved by Tenant. Tenant agrees to 73 -4- advise Landlord in writing of any disapproval of the revised Excess Cost Summary and the reasons therefor within ten (I 0) business days of its receipt thereof. If Tenant fails to timely deliver to Landlord written approval of the Excess Cost Summary, the Excess Cost Summary shall be deemed approved by Tenant. (c) REQUIREMENTS OF THE FINAL PLANS. The Final Plans will include locations and complete dimensions, and Landlord's Work, as shown on the Final Plans, will: (i) be compatible with the Building shell (a description of which is attached hereto as Schedule A-) and with the design, construction and equipment of the Building; (ii) if not comprised of the Building standard set forth in the written description thereof attached hereto as Schedule B ("BUILDING STANDARD"), be compatible with and of at least equal quality as Building Standard and approved by Landlord; (iii) comply with all Legal Requirements and Insurance Requirements; (iv) not require Building service beyond the level normally provided to other tenants in the Building and will not overload the Building floors; and (v) be of a nature and quality consistent with the overall objectives of Landlord for the Building, as determined by Landlord in its reasonable but subjective discretion. Tenant's approval of the Excess Cost Summary shall constitute Tenant's agreement to pay Landlord fifty percent (50%) of the Excess Costs before commencement of construction of Landlord's Work and the remaining fifty percent (50%) of the Excess Costs on or before the date that is forty-five days (45) after commencement of construction of Landlord's Work. (d) SUBMITTAL OF FINAL PLANS. Once approved by Landlord, Tenant's Architect will submit the Final Plans to the appropriate governmental agencies for plan checking and the issuance of a building permit. Tenant's Architect, with Landlord's cooperation, will make any changes to the Final Plans which are required by the applicable governmental authorities to obtain the building permit. Any changes required by governmental authorities will be made only with the prior written approval of Landlord, and only if Tenant agrees to pay any excess costs resulting from the design and/or construction of such requested changes (the "ADDITIONAL COSTS"). Landlord shall have the option to revise the Excess Cost Summary by increasing the Excess Costs by the amount of the Additional Costs resulting from plan modifications required by any governmental authority. Tenant hereby acknowledges that any such changes will be subject to the terms of Section 5 below. Any Additional Costs are to be paid by Tenant to Landlord fifty percent (50%) before commencement of construction of Landlord's Work and the remaining fifty percent (50%) on or before the date that is forty-five days (45) after commencement of construction of Landlord's Work. (e) CHANGES TO SHELL OF BUILDING. If the Final Plans or any amendment thereof or supplement thereto shall require changes in the building shell, the increased cost of the building shell work caused by such changes will be paid for by Tenant. 5. PAYMENT FOR LANDLORD'S WORK. (a) TENANT IMPROVEMENT ALLOWANCE AND EXCESS COSTS. Landlord shall pay for Landlord's Work up to a maximum of $17.50 per rentable square foot (the "TENANT IMPROVEMENT ALLOWANCE"). The Tenant Improvement Allowance shall only be used for: 74 -5- (i) Payment to Tenant's Architect for all usual design and architectural fees, including, without limitation, all reasonable architectural and engineering costs of preparing the Final Plans, including mechanical, electrical, plumbing and structural drawings, and all other aspects necessary to complete the Final Plans. The Tenant Improvement Allowance will not be used for the payment of extraordinary design work, all of which other costs shall be paid for by Tenant. (ii) Payment of plan check, permit and license fees relating to construction of Landlord's Work. (iii) Payment to Landlord of a space improvement fee ("IMPROVEMENT FEE") to, among other things, pay Landlord's space improvement costs for the Premises, including without limitation, costs for the following: plan check and permits; utilities, including electrical and water consumption; and elevator usage. The Improvement Fee shall be 2.5% of the Tenant Improvement Allowance. (iv) Construction of Landlord's Work, including, without limitation, the following: (A) Installation within the Premises of all partitioning, doors, floor coverings, ceilings, wall coverings and painting, millwork and similar items; (B) All electrical wiring, lighting fixtures, outlets and switches, and other electrical work to be installed within the Premises, excluding however, computer cable and wiring; (C) The furnishing and installation of all duct work, terminal boxes, diffusers and accessories required for the completion of the heating, ventilation and air conditioning systems within the Premises, including the cost of meter and key control for after-hour air conditioning; (D) Any additional tenant requirements including, but not limited to, air quality control, special heating, ventilation and air conditioning, noise or vibration control or other special systems; (E) All fire and life safety control systems such as fire walls, sprinklers, fire alarms, including piping and wiring, installed within the Premises; (F) All plumbing, including fixtures and pipes, to be installed within the Premises; (G) Testing and inspection costs; and 75 -6- (H) Contractor's fees of four and one-half percent (4-1/2%) of the total cost of Landlord's Work and general conditions in an amount not greater than 11% of the total cost of Landlord's Work (v) up to $2.00 per rentable square foot of the Tenant Improvement Allowance may be used, at Tenant's option, to pay Tenant's expenses (including moving consultant's fees) for moving to the Premises and installing cabling, telecommunications equipment and furniture in the Premises; said expenses to be billed to Tenant and submitted to Landlord by Tenant for reimbursement. (b) CHANGES. If, after the Final Plans and the Excess Costs Summary have been approved by Landlord and Tenant, as applicable, Tenant requests any changes or substitutions to the Final Plans or to Landlord's Work during construction, Tenant shall complete the change order request form approved by Landlord and forward it to Landlord's representative. All such changes shall be subject to Landlord's prior written approval in accordance with Paragraph 11. Prior to commencing any change, Landlord shall prepare and deliver to Tenant, for Tenant's approval, a change order setting forth the total cost of such change, which shall include associated architectural, engineering, construction contractor's costs and fees, and completion schedule changes in the Work Schedule. If Tenant fails to approve such change order within ten (10) business days after delivery by Landlord, Tenant shall be deemed to have withdrawn the proposed change and Landlord shall not proceed to perform the change. Any additional costs related to such change are to be paid by Tenant to Landlord within thirty (30) days after receipt by Tenant of an invoice for such additional costs from Landlord. (c) CREDIT. Tenant shall be entitled to credit for any portion of the Tenant Improvement Allowance which is not used. 6. CONSTRUCTION OF LANDLORD'S WORK. Until Landlord approves the Final Plans, Tenant approves the Excess Cost Summary, and all necessary permits have been obtained from the appropriate governmental authorities, Landlord will be under no obligation to cause the construction of any of Landlord's Work. Following Tenant's approval of the Excess Cost Summary and after Landlord approves the Final Plans, Landlord's contractor will commence and diligently proceed with the construction of the Landlord's Work, which will be completed within ninety (90) days from the date that the building permit has been obtained, subject to Tenant Delays (as described in Paragraph 8 below) and Force Majeure Delays (as described in Paragraph 9 below). The costs of such work shall be paid as provided in Paragraph 5. Promptly upon the commencement of Landlord's Work, Landlord will furnish Tenant with a construction schedule letter setting forth the projected completion dates therefor and showing the deadlines for any actions required to be taken by Tenant during such construction, and Landlord may from time to time during construction of Landlord's Work modify such schedule. Landlord will also furnish Tenant with written progress reports at the end of each week during construction. 7. FREIGHT/CONSTRUCTION ELEVATOR. Landlord will, consistent with its obligation to other tenants in the Building make the freight/construction elevator reasonably 76 -7- available to Tenant in connection with initial decorating, furnishing and moving into the Premises. 8. TENANT DELAYS. For purposes of this Work Letter, "TENANT DELAYS" means any delay in the completion of the Landlord's Work resulting from any or all of the following: (a) Tenant's failure to timely perform any of its obligations pursuant to this Work Letter, including any failure to approve any item or complete, on or before the due date therefor, any action item which is Tenant's responsibility pursuant to this Work Letter or any schedule delivered by Landlord to Tenant pursuant to this Work Letter; (b) Change orders requested by Tenant after approval of the Final Plans; (c) Tenant's request for materials, finishes, or installations which are not readily available or incompatible with Building Standard; (d) any delay of Tenant in making payment to Landlord for any costs due from Tenant under this Work Letter or the Lease; or (e) any other act or failure to act by Tenant, Tenant's employees, agents, architects, independent contractors, consultants and/or any other person performing or required to perform services on behalf of Tenant. Landlord shall give Tenant written notice when Landlord believes there has been a Tenant Delay. 9. FORCE MAJEURE DELAYS. For purposes of the Work Letter, "FORCE MAJEURE DELAYS" means any and all causes beyond Landlord's reasonable control, including, without limitation, delays caused by Tenant, other tenants, governmental regulation, governmental restriction, strike, labor dispute, riot, accident, mechanical breakdown, shortages of or inability to obtain labor, fuel, steam, water, electricity or materials, acts of God, war, enemy action, civil commotion, fire or other casualty. 10. APPROVALS. Whenever any party under this Work Letter must reasonably grant its approval such party shall also not unreasonably delay or condition its approval. Unless otherwise required by the terms of this Work Letter, any approval shall be deemed granted unless such party responds within ten (10) days after its receipt of the items for which approval is sought. 11. LANDLORD'S APPROVAL. Landlord, in its reasonable discretion, may withhold its approval of the Final Plans, change orders or other documents or plans that: (a) Exceeds or adversely affects the structural integrity of the Building, or any part of the heating, ventilating, air conditioning, plumbing, mechanical, electrical, communication, or other systems of the Building; 77 -8- (b) Is not approved by any Superior Mortgagee or Superior Lessee at the time the work in progress.: (c) Would not be approved by a prudent owner of property similar to the Building; (d) Violates any agreement which affects the Building or binds the Landlord; (e) Landlord reasonably believes will increase the cost of operation or maintenance of any of the systems of the Building; (f) Landlord reasonably believes will materially reduce the market value of the Premises or the Building at the end of the Term of the Lease; (g) Does not conform to the applicable building code or is not approved by any governmental, quasi-governmental, or utility authority with jurisdiction over the Premises; or (h) Does not conform to the Building Standard. 12. DEFAULTS BY TENANT. In the event of any default by Tenant with respect to any of the provisions of this Work Letter or any other agreement with Landlord relating to construction in or about the Premises, Landlord may, in addition to exercising any other right or remedy Landlord may have, treat such default as a default by Tenant under the Lease and exercise any or all rights available under the Lease in connection therewith, including, if applicable, the right of termination. In the event of any termination of the Lease by Landlord, Landlord may elect in its reasonable discretion, with respect to any work performed by or on behalf of Tenant prior to the date of such termination, to either: (a) retain for its own use part or all of any such work, without compensation to Tenant therefor; or (b) demolish or remove part or all of any such work and restore part or all of the Premises to its condition prior to the initial tender of possession thereof to Tenant, in which event Tenant shall reimburse Landlord upon demand for all costs reasonably incurred by Landlord in connection with such demolition, removal and/or restoration. 78 -9- IN WITNESS WHEREOF, the undersigned Landlord and Tenant have caused this Work Letter Agreement to be duly executed by their duly authorized representatives as of the date of the Lease. LANDLORD: 300 BAKER AVENUE ASSOCIATES, LIMITED PARTNERSHIP By: 300 Baker Avenue Managers, Limited Partnership, a general partner By: HG Concord Limited Partnership, its general partner By: HG Concord LLC, its general partner By: ________________________________________________________ Name: Title: TENANT: ONESOURCE INFORMATION SERVICES, INC. By: /s/ Daniel Schimmel --------------------- Name: Daniel Schimmel Title: President 79 SCHEDULE A DESCRIPTION OF BASE BUILDING SHELL a) Fully installed and operational Building Equipment (as defined in the Lease)- b) The base building shall be ADA compliant to the extent required by the governmental authorities enforcing the code. c) Sprinkler risers are delivered to the floor, valve connections and main sprinkler loop are provided and installed. Sprinkler coverage (including heads) will extend to all non-tenant areas including bathrooms, freight elevator lobbies, corridor and lobby areas on divided floors, storage and utility closets, air conditioning rooms, etc. d) Sheetrock core walls and exterior walls, above and below the windows, taped and spackled ready for painting. e) Drinking fountains in common corridors as required by the building code and the ADA. f) Electrical/telephone closets in central locations. The base building will provide 4-inch empty conduit from the substations to electric closets on each floor of the Building. Feeders from the substations, dry type step-down transformers, panelboards, and electric check metering are part of Landlord's Work. g) Building stair-ways as required by building code for emergency egress. h) Mechanical equipment rooms for base building and mechanical equipment, i) Primary HVAC duct loop from mechanical equipment room around the building core including VAV mixing boxes and thermostats. HVAC capacity and maintenance adequate to meet Tenant's reasonable needs. The Building HVAC system will be modified to a conventional variable air volume (VAV) system for the Premises. Four 464-ton capacity chillers deliver approximately one ton of cooling capacity per 215 square feet of space. The base building system will provide distribution of the medium pressure ductwork to new fanpowered VAV boxes. The average size of perimeter zones served by fan-powered VAV box is 900 SF, Interior VAV boxes (and additional zones, if required) are part of Landlord's Work. Around the perimeter, fan-powered boxes will be provided with electric heating coils. The existing base building system shall be utilized for morning warm up to maximize energy efficiency. Low pressure ductwork (including diffusers and registers) down stream of both the perimeter fan powered boxes and the interior VAV boxes are part of Landlord's Work. Specialty areas requiring 24-hour or supplemental cooling are also part of Landlord's Work. j) Fire protection alarm and communications system installed as required for base building according to building code. k) Life safety and life support systems required for base building according to building code. 80 EXHIBIT D RULES AND REGULATIONS 1. The sidewalks, and public portions of the Building, such as entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from any premises. 2. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades, louvered openings or screens shall be attached to or hung in, or used in connection with, any window or door of any premises, without the prior written consent of Landlord, unless installed by Landlord. 3. No sign, advertisement, object, notice or other lettering shall be exhibited, inscribed, painted or affixed by any tenant on any part of the outside of any premises or Building or on windows or corridor walls, or be readily visible from the street or any public atrium. Signs on entrance door or doors shall conform to building standard signs, samples of which are on display in Landlord's rental office. Signs on doors shall, at the tenant's expense, be inscribed, painted or affixed for each tenant by sign makers approved by Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any notice or liability, and may charge the expense incurred by such removal to the tenant or tenants violating this rule. 4. The sashes, sash doors, skylights, windows, heating, ventilating and air conditioning vents and doors that reflect or admit light and air into the halls, passageways or other, public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels, or other articles be placed outside of any premises. 5. Whenever Tenant shall submit to Landlord any plan, agreement or other document for Landlord's consent or approval, Tenant agrees to pay Landlord, on demand, a processing fee in a sum equal to the reasonable fee for review of same including the services of any architect, engineer and/or attorney employed by Landlord to review said plan, agreement or document. 6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. 7. No tenant or occupant shall install any resilient tile or similar floor covering in the premises demised to such tenant or occupant except in a manner approved by Landlord. 8. No bicycles, vehicles or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the premises. No cooking shall be done or permitted by Tenant on said premises except in conformity to law and then only in the utility kitchen, if any, as set 81 -2- forth in Tenant's layout. No tenant shall cause or permit any unusual or objectionable odors to be produced upon or emanate from any premises. 9. No space in the Building shall be used for the manufacturing or distribution or for the storage of merchandise or for the sale at auction or otherwise of merchandise, goods or property of any kind. 10. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of the Building or neighboring buildings or premises or those having business with them. No tenant shall throw anything out of the doors, or windows or down the passageways. 11. No tenant, nor any of the tenant's servants, employees, agents, visitors or licensees, shall at any time bring or keep upon any premises any inflammable, combustible or explosive fluid, material, chemical or substance or aerosol containers, other than reasonable amounts of cleaning fluids and solvents (stored in proper containers) required in the normal operation of tenant's business offices. 12. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof, without the prior written approval of the Landlord and unless and until a duplicate key is delivered to Landlord. Each tenant must, upon the termination of his tenancy, restore to the Landlord all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys, so furnished, such tenant shall pay to Landlord the cost of replacement thereof. 13. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which Landlord or its agent may determine from time to time. Landlord reserves the right to inspect all freight and other material to be brought into or out of the Building and to exclude from the Building all freight or other material which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. 14. No office tenant shall occupy or permit any portion of the premises demised to it to be occupied as, by or for a public stenographer or typist, barber shop, bootblacking, beauty shop or manicuring, telephone or secretarial service, messenger service, travel or tourist agency, employment agency, public restaurant or bar, commercial document reproduction or offset printing services, public vending machines, retail, wholesale or discount shop for display or sale of merchandise, retail service shop, school or classroom, governmental or quasi-governmental bureau, department or agency, or a company engaged in the business of renting office or desk space; or for a public finance (personal loan) business, or for manufacturing. No tenant shall advertise for laborers giving an address at said premises. 15. Landlord shall have the right to prohibit any advertising by any tenant mentioning the Building which, in Landlord's reasonable opinion, tends to impair the reputation of the 82 -3- Building or its desirability as a building for offices, and upon written notice from Landlord, tenants shall refrain from or discontinue such advertising. 16. In order that the Building can and will maintain a uniform appearance to those outside of same, each Tenant in building perimeter areas shall (a) use only building standard lighting in areas where lighting is visible from the outside of the Building unless Landlord specifically approves other lighting in writing and (b) use only building standard venetian or vertical blinds in window areas which are visible from the outside of the Building. 17. Landlord reserves the right to exclude from the Building between the hours of 6:00 P.M. and 8:00 A.M. and at all hours on non-business days all persons who do not present a pass to the Building signed by a tenant or otherwise comply with Landlord's security system. Each tenant shall be responsible for all persons for whom such pass is issued or entry given and shall be liable to Landlord for all acts of such persons. 18. The premises shall not be used for lodging or sleeping or for any illegal purpose. 19. The requirements of tenants will be attended to only upon application at the office of the Building. Building employees shall not perform any work or do anything outside of their regular duties, unless under special instructions from the office of Landlord. 20. Tenants shall purchase from Landlord or its designee all lighting tubes, lamps, bulbs and ballasts used in any premises and tenants shall pay Landlord's reasonable charges for providing and installing same, on demand. 21. Each tenant, before closing and leaving the premises demised to such tenant at any time, shall see that all entrance doors are locked and all windows closed. 22. Each tenant shall, at its expense, provide artificial light and electricity in the premises demised to such tenant for Landlord's agents, contractors and employees while performing janitorial or other cleaning services and making repairs or alterations on said premises. 23. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same. 24. There shall not be used in any space, or in the public halls of the Building, either by any tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. No hand trucks shall be used in passenger elevators. 25. If the premises demised to any tenant become infested with vermin, such tenant, at its sole cost and expense, shall cause its premises to be exterminated, from time to time, to the satisfaction of Landlord, and shall employ such exterminators therefor as shall be approved by Landlord. 83 -4- 26. Replacement of ceiling tiles after they are removed for Tenant by telephone or other similar installers, in both the premises and the public corridors, will be charged to Tenant. 27. All movers used by any tenant shall be appropriately licensed and shall maintain appropriate and adequate insurance coverage (proof of such coverage shall be delivered to Landlord prior to movers performing services in or about the Building). Insurance must be sufficient, in landlord's sole opinion, to cover all personal liability, theft or damage to the project, including but not limited to floor coverings, doors, walls, elevators, stairs, foliage, and landscaping. No tenant shall move, or permit to be moved into or out of the Building or the premises demised to such tenant, any heavy or bulky matter, without the specific approval of Landlord. No tenant shall place, or permit to be placed, on any part of the floor or floors of the premises demised to such tenant, a load exceeding the floor load per square foot which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight, position and method of weight distribution of safes and other heavy matter, which must be placed so as to distribute the weight. 28. All paneling, decoration or other wood products not considered furniture and draperies, carpeting and other furnishings shall be of fire retardant materials. Before installation of any such materials, certification of the materials' fire retardant characteristics shall be submitted to Landlord, or its agents, in a manner satisfactory to the Landlord. 29. Landlord may from time to time adopt appropriate systems and procedures for the security or safety of the building, any persons occupying, using, or entering the building, or any equipment, finishings, or contents of the building, and tenant will comply with landlord's reasonable systems and procedures. 30. The halls, passages, exists, entrances, elevators, escalators, and stairways are not for the general public, and landlord will in all cases retain the right to control and prevent access to such halls, passages, exits, entrances, elevators, and stairways of all persons whose presence in the judgment of landlord would be prejudicial to the safety, character, reputation, and -interests of the building and its tenants, provided that nothing contained in these rules and regulations will be construed to prevent such access to persons with whom a tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. No tenant and no employee or invitee of any tenant will go upon the roof of the building except such roof or portion of. such roof as may be contiguous to the premises of a particular tenant and may be designated in writing by landlord as a roof deck or roof garden area. No tenant will be permitted to place or install any object (including without limitation radio and television antennas, loudspeakers, sound amplifiers, microwave dishes, solar devices, or similar devices) on the exterior of the building or on the roof of the building. 31. Tenant, and all of Tenant's servants, employees, agents, visitors or licensees are prohibited from using any of the ponds on the Real Property for ice skating or for any other purpose. 84 -5- Whenever and to the extent that the above rules conflict with any of the rights or obligations of Tenant pursuant to the provisions. of this Lease, the provisions of this Lease shall govern. 85 EXHIBIT E CLEANING STANDARDS 1. General * All flooring swept nightly. * All carpeted areas and rugs carpet-swept nightly and vacuum cleaned weekly. * All private stairways swept nightly. * Wastepaper baskets ` ashtrays, receptacles, etc., emptied and cleaned nightly. * Cigarette urns cleaned nightly and sand or water replaced when necessary. * All furniture tops and window sills dusted nightly. * All glass furniture tops cleaned nightly. * All baseboards and trim dusted nightly. * All water fountains washed clean nightly. * Slopsink rooms cleaned nightly. 2. Lavatories * All flooring swept and washed nightly. * All mirrors, powder shelves, bright work, etc., including flushometers, piping and toilet seat hinges washed and polished nightly. * All basins, bowls, urinals and toilet seats (both sides) washed nightly. * All partitions, tile walls, dispensers and receptacles dusted nightly. * Paper towel and sanitary disposal receptacles emptied and cleaned nightly. * Paper towels, toilet paper and soap to be supplied by Landlord. * Remove wastepaper and refuse to designated area in the Premises. 3. Office Area-Quarterly high dusting. * Dust all pictures, frames, charts, graphs And panel wall hangings not reached in nightly cleaning. * Dust all vertical surfaces such as walls, partitions, ventilating louvres and other surfaces -not reached in nightly cleaning. * Dust all overhead pipes, sprinklers, etc. * Dust all venetian blinds and window frames. * Dust all lighting fixtures. 4. Periodic Cleaning - Office Area * Wipe clean all interior metal as necessary. * Dust all door louvres and other ventilating louvres within reach weekly. * Elevator, stairway, office and utility doors on all floors are to be checked for general cleanliness as necessary, removing fingerprints, smudges and other marks. 86 -2- * Remove all fingermarks, smudges and other marks from metal partitions and other surfaces as necessary. 5. Periodic Cleaning-Lavatories * Machine-scrub flooring when necessary. * Wash all partitions, tile walls and enamel surfaces monthly with proper disinfectant when necessary. * Dust exterior of lighting fixtures monthly. * High dust monthly. 6. Windows Clean a normal amount of partition glass approximately four times a year. EXCEPT AS OTHERWISE SPECIFIED, ALL OF THE CLEANING SERVICES AS LISTED ARE TO BE DONE FIVE (5) DAYS EACH WEEK, MONDAY THROUGH FRIDAY, EXCEPT ON LEGAL HOLIDAYS. 87 EXHIBIT F NON-DISTURBANCE, ATTORNMENT AND SUBORDINATION AGREEMENT THIS AGREEMENT is made and entered into as of this _____ day of December, 1998, by and among PNC Bank, National Association, a national banking association (hereinafter called the "Lender"), OneSource Information Services, Inc. (hereinafter called the "Tenant"), and 300 Baker Avenue Associates, Limited Partnership (hereinafter called the "Landlord"). WITNESSETH: WHEREAS, Landlord owns certain real property located in Concord, Middlesex County, Massachusetts, and more particularly described in Exhibit A attached hereto and made a part hereof (said property being hereinafter called the "Property"); and WHEREAS, Landlord and Tenant made and entered into that certain Lease, dated the _____ day of December, 1998, with respect to certain premises constituting a portion of the Property therein described, known as 300 Baker Avenue, Concord, Massachusetts (said Lease being hereinafter called the "Lease" and said premises being hereinafter called the "Leased Premises"); and WHEREAS, on November ___, 1998, Landlord entered into and delivered that certain Mortgage and Security Agreement in favor of Lender recorded with the Middlesex South District Registry of Deeds on November ___, 1998 as Instrument No. _, prior to the recording of this-Agreement said Mortgage and Security Agreement being hereinafter called the "Security Deed"), conveying the Property to secure the payment of the indebtedness described in the Security Deed; and WHEREAS, on November 1998, Landlord entered into and delivered that certain Assignment of Leases and Rents in favor of Lender recorded in the Middlesex South District Registry of Deeds on November __, 1998 as Instrument No. _, prior to the recording of this Agreement (said Assignment of Leases and Rents being hereinafter called the "Assignment of Leases"), assigning all of Landlord's right, title and interest as lessor under the Lease to further secure the indebtedness described in the Security Deed; and WHEREAS, the parties hereto desire to enter into this Non-Disturbance, Attormnent and Subordination Agreement; NOW, THEREFORE, for and in consideration of the mutual covenants hereinafter set forth and other good and valuable consideration,- the receipt and sufficiency of which are hereby acknowledged, Lender, Tenant and Landlord hereby covenant and agree as follows: 1. ESTOPPEL. Tenant hereby certifies to Lender that (i) the Lease, as described above, is the true, correct, and complete Lease, and has not been modified or amended and constitutes the entire agreement between Landlord and Tenant, and (ii) as far as is known to Tenant, there are no defaults of Landlord under the Lease and there are no existing circumstances which with 88 -2- the passage of time, or giving of notice, or both, would give rise to a default under the Lease and/or allow Tenant to terminate the Lease. 2. NON-DISTURBANCE. So long as no default exists, nor any event has occurred which has continued to exist for such period of time (after notice, if any, required by the Lease) as would entitle the lessor under the Lease to terminate the Lease or would cause, without any further action on the part of such lessor, the termination of the Lease or would entitle such lessor to dispossess the lessee thereunder, the Lease shall not be terminated, nor shall such lessee's use, possession or enjoyment of the Leased Premises or rights under the Lease be interfered with in any foreclosure or other action or proceeding in the nature of foreclosure instituted under or in connection with the Security Deed or in case Lender takes possession of the Property pursuant to any provisions of the Security Deed or the Assignment of Leases, unless the lessor under the Lease would have had such right if the Security Deed or the Assignment of Leases had not been made, except that neither the person or entity acquiring the interest of the lessor under the Lease as a result of any such action or proceeding or deed in lieu of any such action or proceeding (hereinafter called the "Purchaser") nor Lender if Lender takes possession of the Property shall be (a) liable for any act or omission of any prior lessor under the Lease, except in the case of defaults of a continuing nature as to which the Lender has been given written notice; or (b) liable for the return of any security deposit which lessee under the Lease has paid to any prior lessor under the Lease; or (c) subject to any offsets or defenses which the lessee under the Lease might have against any prior lessor under the Lease; or (d) bound by any base rent, percentage rent or any other payments which the lessee under the Lease might have paid for more than the current month to any prior lessor under the Lease; or (e) bound by any amendment or modification of the Lease made without Lender's prior written consent; or (f) bound by any consent by any lessor under the Lease to any assignment or sublease of the lessee's interest in the Lease made without also obtaining Lender's prior written consent; or (g) personally liable for any default under the Lease or any covenant or obligation on its part to be performed thereunder as lessor, it being acknowledged that Tenant's sole remedy in the event of such default shall be -to proceed against Purchaser's or Lender's interest in the Property, provided, however, in no event shall Purchaser's or Lender's rights and interests under the Security Deed be deemed an interest in the Property. Notwithstanding anything contained herein to be contrary, Lender shall have absolutely no obligation to perform any of Landlord's construction covenants under the Lease, provided that if Lender shall not perform such covenants in the event of foreclosure or deed in lieu thereof and within a reasonable time following taking of possession by Lender, then Tenant shall have the right to terminate its obligations under the Lease and to pursue any and all legal remedies it may have against Landlord and any third parties other than Lender. 3. ATTORNMENT. Unless the Lease is terminated in accordance with Paragraph 2, if the interests of the lessor under the Lease shall be transferred by reason of the exercise of the power of sale contained in the Security Deed (if applicable), or by any foreclosure or other proceeding for enforcement of the Security Deed, or by deed in lieu of foreclosure or such other proceeding, or if Lender takes possession of the Property pursuant to any provisions of the Security Deed [or the Assignment of Leases], the lessee thereunder shall be bound to the Purchaser or Lender, as the case may be, under all of the terms, covenants and conditions of the Lease for the balance of the term thereof and any extensions or renewals thereof which may be effected in accordance 89 -3- with any option therefor in the Lease, with the same force and effect as if the Purchaser or Lender were the lessor under the Lease, and Tenant, as lessee under the Lease, does hereby attorn to the Purchaser and Lender if it takes possession of the Property, as its lessor under the Lease. Such attornment shall be effective and self-operative without the execution of any further instruments upon the succession by Purchaser to the interest of the lessor under the Lease or the taking of possession of the Property by Lender. Nevertheless, Tenant shall, from time to time, execute and deliver such instruments evidencing such attornment as Purchaser or Lender may require. The respective rights and obligations of Purchaser, Lender and of the lessee under the Lease upon such attornment, to the extent of the then remaining balance of the term of the Lease and any such extensions and renewals, shall be and are the same as now set forth in the Lease except as otherwise expressly provided in Paragraph 2. 4. SUBORDINATION. Tenant hereby subordinates all of its right, title and interest as lessee under the Lease to the right, title and interest of Lender under the Security Deed, and Tenant further agrees that the Lease now is and shall at all times continue to be subject and subordinate in each and every respect to the Security Deed (including, without limitation, the casualty and condemnation provisions of the Lease, which are hereby specifically subordinated to the Security Deed) and to any and all increases, renewals, modifications, extensions, substitutions, replacements and/or consolidations of the Security Deed. 5. ASSIGNMENT OF LEASES. Tenant hereby acknowledges that all of Landlord's right, title and interest as lessor under the Lease is being duty assigned to Lender pursuant to the terms of the Security Deed and the Assignment of Leases, and that pursuant to the terms thereof all rental payments under the Lease shall continue to be paid to Landlord in accordance with the terms of the Lease unless and until Tenant is otherwise notified in writing by Lender. Upon receipt of any such written notice from Lender, Tenant covenants and agrees to make payment of all rental payments then due or to become due under the Lease directly to Lender or to Lender's agent designated in such notice and to continue to do so until otherwise notified in writing by Lender. Landlord hereby irrevocably directs and authorizes Tenant to make rental payments directly to Lender following receipt of such notice, and covenants and agrees that Tenant shall have the right to rely on such notice without any obligation to inquire as to whether any default exists under the Security Deed or the Assignment of Leases ` or the indebtedness secured thereby, and notwithstanding any notice or claim of Landlord to the contrary, and that Landlord shall have no right or claim against Tenant for or by reason of any rental payments made by Tenant to Lender following receipt of such notice. Tenant further acknowledges and agrees: (a) that under the provisions of the Security Deed and the Assignment of Leases, the Lease cannot be terminated other than pursuant to its express terms (nor can Landlord accept any surrender of the Lease) or modified in any of its terms, or consent be given to the waiver or release of Tenant from the performance or observance of any obligation under the Lease, without the prior written consent of Lender, and without such consent no rent may be collected or accepted by Landlord more than one month in advance; and (b) that the interest of Landlord as lessor under the Lease has been assigned to Lender for the purposes specified in the Security Deed and the Assignment of Leases, and Lender assumes no duty, liability or obligation under the Lease, except only under the circumstances, terms and conditions specifically set forth in the Security Deed and the Assignment of Leases. 90 -4- 6. NOTICE OF DEFAULT BY LESSOR. Tenant, as lessee under the Lease, hereby covenants and agrees to give Lender written notice properly specifying wherein the lessor under the Lease has failed to perform any of the covenants or obligations of the lessor under the Lease, simultaneously with the giving of any notice of such default to the lessor under the provisions of the Lease. Tenant agrees that Lender shall have the right, but not the obligation, within forty-five (45) days after receipt by Lender of such notice (or within such additional time as is reasonably required to correct any such default) to correct or remedy, or cause to be corrected or remedied, each such default before the lessee under the Lease may be relieved of its obligations under the Lease by reason of such default. Such notices to Lender shall be delivered in duplicate to: PNC Bank, National Association Real Estate Banking One PNC Plaza PI-POPP-19-2 249 Fifth Avenue Pittsburgh, PA 15222-2707 Attn: Jay C. Baker and Marcus & Shapira LLP One Oxford Centre, 35th Floor 301 Grant Street Pittsburgh, PA 15219 Attn: Charles G. Knox, Esq. or to such other address as the Lender shall have designated to Tenant by giving written notice to Tenant at 300 Baker Avenue, Concord, MA 01742, Attention: _______________, or to such other address as may be designated by written notice from Tenant to Lender. 7. NO FURTHER SUBORDINATION. Except as expressly provided to the contrary in Paragraph 4 hereof, Landlord and Tenant covenant and agree with Lender that there shall be no further subordination of the interest of lessee under the Lease to any lender or to any other party without first obtaining the prior written consent of Lender. Any attempt to effect a further subordination of lessee's interest under the Lease without first obtaining the prior written consent of Lender shall be null and void. 8. AS TO LANDLORD AND TENANT. As between Landlord and Tenant, Landlord and Tenant covenant and agree that nothing herein contained nor anything done pursuant to the provisions hereof shall be deemed or construed to modify the Lease. 9. AS TO LANDLORD AND LENDER. As between Landlord and Lender, Landlord and Lender covenant and agree that nothing herein contained nor anything done pursuant to the provisions hereof shall be deemed or construed to modify the Security Deed or the Assignment of Leases. 91 -5- 10. TITLE OF PARAGRAPHS. The titles of the paragraphs of this agreement are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this agreement. 11. GOVERNING LAW. This agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 12. PROVISIONS BINDING. The terms and provisions hereof shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, successors and permitted assigns, respectively, of Lender, Tenant and Landlord. The reference contained to .-successors and assigns of Tenant is not intended to constitute and does not constitute a consent by Landlord or Lender to an assignment by Tenant, but has reference only to those instances in which the lessor under the Lease and Lender shall have given written consent to a particular assignment by Tenant thereunder. 92 -6- IN WITNESS WHEREOF, the parties have hereunto set their respective hands and seals as of the day, month and year first above written. LENDER: PNC BANK, NATIONAL ASSOCIATION, a national banking association By: _________________________________ Name: Title: TENANT: ONESOURCE INFORMATION SERVICES, INC., a Delaware corporation By: _________________________________ Name: Title: LANDLORD: 300 Baker Avenue Associates, Limited Partnership By: 300 Baker Avenue Managers, Limited Partnership, its general partner By: HG/Concord, Limited Partnership, its general partner By: HG/Concord LLC, a Massachusetts limited liability company, its general partner By: ______________________________________________________ Name: Title: Authorized Manager 93 -7- Commonwealth of Massachusetts ___________________, ss. __________________, 1998 Then personally appeared before me ______________________, a manager of HG/Concord LLC, the general partner of HG/Concord, Limited Partnership, the general partner of 300 Baker Avenue Managers, Limited Partnership, the general partner of 300 Baker Avenue Associates, Limited Partnership, and acknowledged the foregoing to be his free act and deed and the free act and deed of HG/Concord LLC as general partner. ____________________________________ Notary Public My Commission Expires: Commonwealth of Massachusetts ___________________, ss. __________________, 1998 Then personally appeared before me __________________ the _________________ of OneSource Information Set-vices, Inc. and acknowledged the foregoing instrument to be his/her free act and deed and the free act and deed of OneSource Information Services, Inc. ____________________________________ Notary Public My Commission Expires: Commonwealth of Pennsylvania ___________________, ss. __________________, 1998 Then personally appeared before me ________________, the _________________, of PNC BANK, NATIONAL ASSOCIATION and acknowledged the foregoing to be his free act and deed and the free act and deed of PNC BANK, NATIONAL ASSOCIATION. ____________________________________ Notary Public My Commission Expires: 94 -8- EXHIBIT A PROPERTY DESCRIPTION 95 EXHIBIT G LETTER OF CREDIT [ON BANK'S LETTERHEAD] IRREVOCABLE LETTER OF CREDIT January ___, 1999 Irrevocable Letter of Credit No. _____ BENEFICIARY 300 Baker Avenue Associates, Limited Partnership c/o Hall Properties, Inc. Three Center Plaza, Suite 410 Boston, MA 02108 APPLICANT OneSource Information Services, Inc. 150 CambridgePark Drive, 5th Floor Cambridge, MA 02140 EXPIRATION DATE: _______________ Ladies and Gentlemen: ______________________ ("Issuer") hereby issues our Irrevocable Letter of Credit No. __________ in Beneficiary's favor in the amount of Four Hundred Fifteen Thousand ($415,000.00) U.S. Dollars available by your sight drafts drawn on us and accompanied by a written statement signed on behalf of 300 Baker Avenue Associates, Limited Partnership, its successors or assigns, stating as follows: "The undersigned certifies that 300 Baker Avenue Associates, Limited Partnership and/or its successors and assigns is entitled to draw under the Irrevocable Letter of Credit No. _____ pursuant to the terms of a Lease, dated January __, 1999, between 300 Baker Avenue Associates, Limited Partnership and OneSource Information Services, Inc." Partial drawings are permitted. We engage with you that all drafts drawn under and in compliance with the terms of this Irrevocable Letter of Credit will be duly honored if presented to us on or before the expiration date set forth above. Any draft drawn by you under this Irrevocable Letter of Credit must bear the clause "Drawn on Irrevocable Letter of Credit No. _____ of _____________________." 96 -2- This Irrevocable Letter of Credit is fully transferable and assignable by Beneficiary. Beneficiary shall send a written request to Issuer to assign or transfer this Irrevocable Letter of Credit and .,-upon presentation of this Irrevocable Letter of Credit, as it may be amended, to Issuer, Issuer shall re-issue this Irrevocable Letter of Credit in the then outstanding amount in favor of Beneficiary's successor, assign or transferee. This Irrevocable Letter of Credit sets forth in full the terms of our undertaking, and such undertaking shall not in any way be limited, modified, amended or amplified, except by a written document executed by the parties hereto. Except as otherwise expressly stated herein, this Irrevocable Letter of Credit is subject to the "Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500." Very truly yours, ______________________________ By: __________________________ Name: Title: 97 Description FRS APL Total - ----------------------------- ------- ------ ------- cc holding 900 Checking - georgia commercial 77,074 Checking - LEX2000 7,869 Checking Merril Lynch 154,263 Checking - Petting Cash 464 Checking: Temp Holding (0) CC Clearing 41,212 Checking - georgia commercial 12,871 Checking Merril Lynch 29,111 Checking: Temp Holding - ------- ------ Total Cash 250,570 83,193 323,762 EX-10.13 14 AGREEMENT & PLAN OF MERGER 1 EXHIBIT 10.13 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of the 26th day of February, 1999 between OneSource Information Services, Inc., a corporation organized under the laws of the State of Delaware ("SERVICES"), and OneSource Holding Corporation, a corporation organized under the laws of the State of Delaware ("HOLDING"). The two corporations are hereinafter sometimes called the "CONSTITUENT CORPORATIONS". Services is hereinafter also sometimes referred to as the "MERGED CORPORATION", and Holding is hereinafter also sometimes referred to as the "SURVIVING CORPORATION". WITNESSETH WHEREAS, pursuant to Section 251 of the Delaware General Corporation Law (the "DELAWARE CODE" the Constituent Corporations deem it advisable and generally to the welfare of the Constituent Corporations that Services be merged with and into Holding under the terms and conditions hereinafter set forth, such merger to be effected pursuant to the statute of the State of Delaware in a transaction qualifying as a liquidation within the meaning of Sections 332 and 337 of the Internal Revenue Code of 1986, as amended; and WHEREAS, Services by its Certificate of Incorporation has an authorized capital stock of 100 shares of Common Stock, $.01 par value per share, of which 100 shares of such Common Stock are now issued and outstanding, and such 100 shares of issued and outstanding Common Stock shall be canceled on the effective date of the merger; and WHEREAS, Holding by its Certificate of Incorporation has an authorized capital stock of 6,500,000 shares of Common Stock, $.01 par value per share, of which 3,292,192 shares of such Common Stock are now issued and outstanding and 500,000 shares of Class P Common Stock, $.01 par value per share, of which 354,200 shares of such Class P Common Stock are now issued and outstanding; and WHEREAS, the registered office of Services in the State of Delaware is located at 32 Lockerman Square, Suite L-100, Dover Delaware 19901; and the registered office of Holding in the State of Delaware is located at 32 Lockerman Square, Suite L-100, Dover Delaware 19901; and WHEREAS, this Agreement and Plan of Merger was duly approved and adopted by the Board of Directors of each of the Constituent Corporations and by the written consent of at least a majority of the stockholders entitled to vote on this Agreement, in accordance with Sections 228 and 251 of the Delaware Code. 2 NOW, THEREFORE, the Constituent Corporations, parties to this Agreement and Plan of Merger, in consideration of the mutual covenants, agreements and provisions hereinafter contained, do hereby prescribe the terms and conditions of such merger and mode of carrying the same into effect as follows: FIRST: Holding hereby merges into itself Services, and Services shall be and hereby is merged into Holding, which shall be the Surviving Corporation. On the effective date of the merger (the "MERGER") provided for in this Agreement and Plan of Merger, the separate existence of Services shall cease in accordance with applicable law. SECOND: The Certificate of Incorporation of Holding as in effect on the date of the Merger provided for in this Agreement and Plan of Merger, in substantially the same form as attached hereto as EXHIBIT A shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation except as provided herein until the same shall be altered, amended or repealed as provided therein or in accordance with applicable law. THIRD: The effect of the Merger on the capital stock of the Merged Corporation and the Surviving Corporation shall be as follows: (a) The one hundred (100) shares of Common Stock of the Merged Corporation, which are issued and outstanding on the date hereof shall, without any further action on the part of anyone, be canceled on and as of the effective date of the Merger. (b) The outstanding shares of capital stock of the Surviving Corporation shall be unaltered. (c) After the effective date of the Merger, each holder of a certificate or certificates which theretofore represented shares of Common Stock of the Merged Corporation shall cease to have any rights as a stockholder of the Merged Corporation except as are expressly reserved to such stockholder by statute. After the effective date of the Merger, each holder of any outstanding certificate or certificates representing shares of Common Stock of the Merged Corporation shall surrender the same to the Merged Corporation for cancellation. The certificates representing the outstanding shares of the capital stock of the Merged Corporation to be canceled, as provided herein, will be treated by the Surviving Corporation as of the effective date of the Merger as null and void for all corporate purposes and will be deemed canceled. FOURTH: The terms and conditions of the Merger are as follows: (a) The By-laws of the Merged Corporation as they shall exist on the effective date of the Merger shall become on the effective date of the Merger and shall remain the By-laws of the Surviving Corporation until the same shall be altered, amended and repealed as therein provided or in accordance with law. -2- 3 (b) At and after the effective date of the Merger, the directors of the Merged Corporation shall become the directors of the Surviving Corporation and the officers of the Merged Corporation shall become the officers of the Surviving Corporation. Such directors and officers shall continue in office and thereafter each shall serve until the next annual meeting of stockholders or meeting of directors, respectively, and until their successors shall have been duly elected and qualified. (c) At the effective date of the merger, and as set forth in its Certificate of Incorporation, the name of the Surviving Corporation shall be changed to "OneSource Information Services, Inc." (d) At and after the effective date of the Merger, the Surviving Corporation shall succeed to and possess, without further act or deed, all the rights, privileges, obligations, powers and franchises, both public and private, and all of the property, real, personal and mixed, of each of the Constituent Corporations; all debts due to either of the Constituent Corporations on whatever account, as well as for stock subscriptions, shall be vested in the Surviving Corporation; all claims, demands, property, rights, privileges, powers and franchises and every other interest of either of the Constituent Corporations shall be as effectively the property of the Surviving Corporation as they were of either of the respective Constituent Corporations; the title to any real estate vested by deed or otherwise in either of the Constituent Corporations shall not revert or be in any way impaired by reason of the Merger, but shall be vested in the Surviving Corporation; the title to any bank accounts of either of the Constituent Corporations shall not revert or be in any way impaired by reason of the Merger, but shall be vested in the Surviving Corporation; all rights of creditors and all liens upon any property of either of the Constituent Corporations shall be preserved unimpaired; all debts, liabilities and duties of the respective Constituent Corporations shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if such debts, liabilities and duties had been incurred or contracted by it; and the Surviving Corporation shall indemnify and hold harmless the officers and directors of each of the Constituent Corporations against all such debts, liabilities and duties and against all claims and demands arising out of the Merger. (e) As and when requested by the Surviving Corporation or by its successors or assigns, the Merged Corporation will execute and deliver or cause to be executed and delivered all such deeds and instruments and will take or cause to be taken all such further action as the Surviving Corporation may deem necessary or desirable in order to vest in and confirm to the Surviving Corporation title to and possession of any property of either of the Constituent Corporations acquired by the Surviving Corporation by reason or as a result of the Merger herein provided for and otherwise to carry out the intent and purposes hereof, and the officers and directors of the Merged Corporation and the officers and directors of the Surviving Corporation are fully authorized in the name of the Merged Corporation or otherwise to take any and all such action. (f) The Merged Corporation and the Surviving Corporation hereby agree that the Surviving Corporation will prepare and file specified employer tax returns and employee -3- 4 information returns in accordance with the method described in Revenue Procedure 96-60, 1996-2 C.B. 339, Section 5. (g) This Agreement and Plan of Merger has been submitted to the stockholders of each of the Constituent Corporations as and to the extent provided by law. The Merger shall take effect when any and all documents or instruments necessary to perfect the Merger, pursuant to the requirements of the Delaware Code, are accepted for filing by the appropriate office of the State of Delaware. (h) This Agreement and Plan of Merger may be terminated or abandoned by (i) either Constituent Corporation, by written action of its President at any time prior to its adoption by the stockholders of both of the Constituent Corporations as and to the extent provided by law, or (ii) the mutual consent of the Constituent Corporations, by written action of their respective Presidents, at any time after such adoption by such stockholders and prior to the effective date of the Merger for any reason or for no reason. In the event of such termination or abandonment, this Agreement and Plan of Merger shall become wholly void and of no effect and there shall be no further liability or obligation hereunder on the part of either of the Constituent Corporations or of their Board of Directors or stockholders. (i) This Agreement and Plan of Merger constitutes a Plan of Liquidation under the Internal Revenue Code, Sections 332 and 337, as well as a Plan of Merger, to be carried out in the manner, on the terms and subject to the conditions herein set forth. (j) Within thirty (30) days after the adoption of this Plan of Liquidation, the Merged Corporation will file a Form 966: "Corporation Dissolution or Liquidation" and a certified copy of the resolution or plan of liquidation with the Internal Revenue Service Center where the federal income tax return of the Merged Corporation is filed. The Merged Corporation will also file its final federal income tax return with the Internal Revenue Service on or before the fifteenth (15th) day of the third month following the date of the final distribution of its assets and the satisfaction of all its remaining liabilities. (k) The Surviving Corporation will file its 1999 federal income tax return, and any other taxable year in which a distribution is received from the Merged Corporation, a complete statement of all facts pertinent to the nonrecognition of gain or loss from all distributions received from the Merged Corporation as a result of the Plan of Liquidation. Such statement shall include: (1) a copy of the plan of complete liquidation, and of the resolutions under which the plan was adopted and the liquidation was authorized, together with a statement under oath showing in detail all transactions incident to, or pursuant to, the plan; (2) a list of all properties received upon the distribution, showing the cost or other basis of such properties to the Merged Corporation and the fair market value of such properties on the date of distribution; (3) a statement of any indebtedness of the Merged Corporation to the Surviving Corporation on the date the Plan of Liquidation was adopted and on the date of the first liquidating distribution and, if any such indebtedness was acquired at less than face value, the cost thereof to the Surviving Corporation; and (4) a statement as to the Surviving Corporation's ownership of all classes of -4- 5 stock of the Merged Corporation (showing as to each class the number of shares and percentage owned and the voting power of each share) as of the date of adoption of the Plan of Liquidation and at all times since, to and including the date of distribution, and the cost or other basis of such stock and the date or dates on which acquired. (l) All corporate acts, plans, policies, approvals and authorizations of the Merged Corporation, its stockholders, Board of Directors, committees elected or appointed by the Board of Directors, officers and agents, which were valid and effective immediately prior to the effective date of the Merger, shall be taken for all purposes as the acts, plans, policies, approvals and authorizations of the Surviving Corporation and shall be effective and binding thereon as they were on the Merged Corporation. The employees of the Merged Corporation shall become the employees of the Surviving Corporation and continue to be entitled to the same rights and benefits they enjoyed as employees of the Merged Corporation. (m) From the effective date of the Merger, the officers and directors of the Surviving Corporation are hereby authorized in the name of the corporations that were the Constituent Corporations to execute, acknowledge and deliver all instruments and to do all things as may be necessary or desirable to vest in the Surviving Corporation any property or rights of either of the Constituent Corporations or to carry out the purposes of this Agreement and Plan of Merger. [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY] -5- 6 IN WITNESS WHEREOF, the parties to this Agreement and Plan of Merger, pursuant to the approval and authority duly given by resolutions adopted by their respective Boards of Directors, have caused this Agreement and Plan of Merger to be executed by the President and attested by the Secretary of each party hereto. ONESOURCE HOLDING CORPORATION By: /s/ David Dominik ---------------------------------- Name: David Dominik Title: President ATTEST: By: /s/ Gregg Newmark ------------------------------ Name: Gregg Newmark Title: Secretary ONESOURCE INFORMATION SERVICES, INC. By: /s/ Daniel Schimmel ---------------------------------- Name: Daniel Schimmel Title: President ATTEST: By: /s/ Roy Landon ------------------------------ Name: Roy Landon Title: Secretary -6- 7 EXHIBIT A CERTIFICATE OF INCORPORATION OF ONESOURCE HOLDING CORPORATION -7- EX-21.01 15 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21.01 SUBSIDIARIES OF THE COMPANY --------------------------- 1. OneSource Information Services Limited, a United Kingdom corporation. EX-23.02 16 CONSENT OF PRICEWATERHOUSE COOPERS 1 Exhibit 23.02 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated February 26, 1999 relating to the consolidated financial statements of OneSource Information Services, Inc., which appears in such Prospectus. We also consent to the application of such report to the Consolidated Financial Statement Schedules for the three years ended December 31, 1998 listed under Item 16.(b) of this Registration Statement when such schedules are read in conjunction with the consolidated financial statements referred to in our report. The audits referred to in such reports also included these schedules. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 2, 1999 EX-27.01 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM S-1. 0001079880 ONESOURCE INFORMATION SERVICES, INC. 1 U.S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 8,665 0 9,921 300 0 25,374 5,804 4,034 27,646 27,492 0 0 0 3,557 (9,868) 27,646 30,428 30,428 13,655 13,655 21,737 0 595 7,238 250 6,988 0 0 0 6,988 1.72 1.20
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