-----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, ClU1tVO29h+JWvGo7VY+VbM83RMU9YQmDmhCqA2X2W350zMW/0M93xW7fSnqzVGa wEwgDkVI8LZiEr3f0pFM+g== 0000927016-96-001070.txt : 19960911 0000927016-96-001070.hdr.sgml : 19960911 ACCESSION NUMBER: 0000927016-96-001070 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 33 FILED AS OF DATE: 19960910 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIGA INFORMATION GROUP INC CENTRAL INDEX KEY: 0000948263 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061422860 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-11711 FILM NUMBER: 96628304 BUSINESS ADDRESS: STREET 1: ONE LONGWATER CIRCLE CITY: NORWELL STATE: MA ZIP: 02061 MAIL ADDRESS: STREET 1: ONE LONGWATER CIRCLE CITY: NORWELL STATE: MA ZIP: 02061 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- GIGA INFORMATION GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 8732 06-1422860 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER) INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NUMBER) ---------------- ONE KENDALL SQUARE, BUILDING 1400W, CAMBRIDGE, MASSACHUSETTS 02139 (617) 577- 9595 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- GIDEON I. GARTNER CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER GIGA INFORMATION GROUP, INC. ONE KENDALL SQUARE, BUILDING 1400W CAMBRIDGE, MASSACHUSETTS 02139 (617) 577-9595 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ---------------- Copies to: PAUL P. BROUNTAS, ESQ. GORDON H. HAYES, JR., ESQ. MARK G. BORDEN, ESQ. TESTA, HURWITZ & THIBEAULT, llp HALE AND DORR High Street Tower 60 State Street 125 High Street Boston, Massachusetts 02109 Boston, Massachusetts 02110 (617) 526-6000 (617) 248-7000 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. ---------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] 333- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [_] 333- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF OFFERING REGISTRATION SECURITIES TO BE REGISTERED PRICE(1) FEE(2) - -------------------------------------------------------------------------------- Common Stock, par value $.001 per share............... $50,600,000 $17,449 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933. (2) Calculated pursuant to Rule 457(o) based on an estimate of the maximum offering price. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to Completion, dated September 10, 1996 PROSPECTUS 4,000,000 SHARES [LOGO] COMMON STOCK ------------- All of the 4,000,000 shares of Common Stock offered hereby are being sold by Giga Information Group, Inc. ("Giga" or the "Company"). Prior to this Offering, there has been no public market for the Common Stock. It is currently anticipated that the initial public offering price will be between $9.00 and $11.00 per share. See "Underwriting" for the factors to be considered in determining the initial public offering price. The Company has applied for inclusion of the Common Stock on the Nasdaq National Market under the symbol "GIGX." THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING AT PAGE 5. ------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Price to Underwriting Discounts Proceeds to Public and Commissions(1) Company(2) - -------------------------------------------------------------------------------- Per Share.......................... - -------------------------------------------------------------------------------- Total(3)...........................
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Before deducting estimated expenses of $1,000,000 payable by the Company. (3) The Company has granted to the Underwriters a 30-day option to purchase up to an aggregate of 600,000 additional shares of Common Stock on the same terms and conditions set forth above, solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ------------- The shares of Common Stock offered by this Prospectus are offered by the Underwriters subject to prior sale, to withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the Underwriters and to certain other conditions. It is expected that delivery of certificates for the shares of Common Stock will be made at the offices of Lehman Brothers Inc., New York, New York, on or about , 1996. ------------- LEHMAN BROTHERS OPPENHEIMER & CO., INC. SALOMON BROTHERS INC , 1996 [PICTURES TO FOLLOW] The Giga logo(TM), Giga Information Group(TM), Giga Advisory Service(TM), GigaWeb(TM), Relevance Services(TM), Gigabots(TM), GigaNotes(TM), GigaTel(TM), GigaWorld(TM), Smart Search(TM) and ExperNet(TM) are trademarks of Giga Information Group, Inc. All other trademarks or trade names referred to in this Prospectus are the property of their respective owners. IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the financial statements, including notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information contained in this Prospectus (i) assumes no exercise of the Underwriters' over- allotment option, (ii) reflects the automatic conversion of all outstanding shares of the Company's Series A and Series B Preferred Stock (the "Preferred Stock") into an aggregate of 7,552,215 shares of Common Stock upon the closing of the Offering, and (iii) has been adjusted to reflect a four-for-one stock split of the Common Stock effected as a stock dividend in November 1995. THE COMPANY The Company provides information, analysis and advice relating to developments and trends in the computing, telecommunications and related industries (collectively, the information technology or "IT" industry). Information technologies have become increasingly critical to the competitiveness and long-term viability of a wide range of organizations. As a result, many of these organizations have turned to IT "Continuous Information Service" providers, which monitor and analyze IT developments and trends to support customers' IT decisions. The Company's customers include: users of IT products and services; vendors of IT hardware, software and services; and institutional and other investors in the IT industry. These customers access the Company's services and products through a personalized Internet-based interface, as well as through published reports and consultation with the Company's analysts and consultants. Giga was founded in 1995 by Gideon I. Gartner, who founded Gartner Group, Inc. in 1979 and served as its Chairman and Chief Executive Officer for twelve years. Building upon his extensive experience in the IT Continuous Information Services industry, Mr. Gartner formed Giga with the objective of creating a new approach to providing Continuous Information Services to address customers' needs more effectively than existing IT information providers. The Giga Advisory Service, the principal service offering of the Company, provides customers access to all of the Company's Giga Advisory Service information, analysis and advice, as well as inquiry access to analysts and practitioners, and participation in briefings, conferences, electronic forums and teleconferences. The Company believes that its integrated, single-service offering, which is provided to customers for an annual subscription fee, delivers significant advantages over its competitors' multiple product offerings that require customers to select, and separately purchase, subject- specific services. The Company also provides its customers with access to its ExperNet network of external IT practitioners who are available to answer inquiries by customers. The Company recently introduced its first of a planned series of specialized research products, called Relevance Services, which combine original analysis, data and information produced by proprietary surveys and methodologies with consulting, to assist in enhancing the IT practices and operations of Giga's customers. In addition, the Company is pursuing relationships with select content partners to complement the original information and analyses provided by Giga's analysts. The Company's GigaWeb system, an Internet-based interface to its services and products, is designed to make it easy and efficient for customers to navigate through the full spectrum of Giga's original research and third-party content. Through the use of intelligent software agents, the Company is able to provide customized information to each customer and also allow customers to search for and select the information that is most relevant to their particular needs. In addition, customers of the Giga Advisory Service and Relevance Services have access to the Company's information products, including various IT events, publications, consulting and econometric forecasting. These products are generally offered on a non-continuous basis and are also marketed outside the Company's Giga Advisory Service and Relevance Services customer base to generate incremental revenue and broaden the Company's IT industry visibility. Since the introduction of its Giga Advisory Service in April 1996, the Company's customers grew to 109 as of June 30, 1996 and reached 171 as of August 31, 1996. Customers of the Company's services include AIG, Alcatel Mobile Phones, The Boeing Co., Colonial Penn Insurance Company, Digital Equipment Corporation, Duracell Inc., IBM, KPMG Peat Marwick LLP, Oracle Corporation, Safeguard Scientifics, Inc. and Southwestern Bell Telephone Company. 3 THE OFFERING Common Stock offered.............. 4,000,000 shares Common Stock to be outstanding after the Offering............... 17,662,815 shares(1) Working capital and other general corporate Use of Proceeds................... purposes Proposed Nasdaq National Market symbol........................... GIGX
SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PREDECESSOR COMPANIES (2) COMPANY ---------------------------------------------------- ------------------------------------- SIX MONTHS JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 MARCH 17 TO MARCH 17 ENDED DECEMBER 15, DECEMBER 31, DECEMBER 31, TO APRIL 5, DECEMBER 31, TO JUNE 30, JUNE 30, 1993(3) 1993 1994 1995 1995 1995 1996 ------------ -------------- ------------ ----------- ------------ ----------- ----------- STATEMENT OF OPERATIONS DATA: Revenues............. $11,371 $ 329 $12,700 $3,237 $10,706 $3,571 $6,482 Loss from continuing operations, net of taxes............... (2,193) (462) (5,064) (449) (5,116) (733) (9,913) Income (loss) from discontinued BIS market research business, net of taxes............... 1,044 44 (1,469) 597 1,490 301 (2,390) Net income (loss).... (1,149) (418) (6,533) 148 (3,626) (432) (12,303) Pro forma results per common and common equivalent share(3): Loss from continuing operations......................................... $(0.34) $(0.61) Net loss................................................................ $(0.24) $(0.75) Pro forma weighted average common and common equivalent shares outstand- ing(3):.................................................................. 14,855,209 16,360,287
JUNE 30, 1996 ---------------------------------------- DECEMBER 31, PRO FORMA 1995 ACTUAL PRO FORMA (3) AS ADJUSTED (3)(4) ------------ ------- ------------- ------------------ BALANCE SHEET DATA: Cash and cash equiva- lents.................. $16,906 $ 9,331 $ 9,331 $45,531 Working capital......... 11,205 2,734 2,734 38,934 Total assets............ 24,684 19,220 19,220 55,420 Deferred revenues....... 2,480 4,995 4,995 4,995 Long-term debt, less current portion........ 1,437 1,472 1,472 1,472 Total stockholders' equity................. 13,660 4,053 4,053 40,253
- ------- (1) Based on shares outstanding as of June 30, 1996. Does not include (i) 3,627,473 shares of Common Stock issuable upon the exercise of outstanding options as of August 31, 1996 at a weighted average option exercise price of $0.61 per share; (ii) 3,400,000 shares of Common Stock reserved for issuance under the Company's stock plans as of August 31, 1996; (iii) 286,266 shares of Common Stock issuable upon conversion of outstanding convertible notes at a weighted average conversion price of $4.09 per share at August 31, 1996; (iv) 393,590 shares of Common Stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.95 per share at August 31, 1996, which will expire if not exercised prior to the closing of the Offering; and (v) shares of Common Stock issued by the Company to employees after June 30, 1996. See "Management--Executive Compensation" and "Description of Capital Stock." (2) Financial data included herein contains results of certain predecessor companies acquired by the Company in 1995. For a description of the predecessor companies and an explanation of the comparative periods presented herein, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Organization of the Company and Financial Statement Presentation." (3) Presented on a pro forma basis to give effect to the automatic conversion of all outstanding shares of the Company's Preferred Stock into an aggregate of 7,552,215 shares of Common Stock upon the closing of the Offering. See Note 2 of the Notes to Consolidated Financial Statements. (4) Adjusted to give effect to the sale by the Company of 4,000,000 shares of Common Stock offered hereby and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and "Capitalization." -------------- This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Prospectus, including the matters set forth under the caption "'Risk Factors," which could cause actual results to differ materially from those indicated by such forward-looking statements. 4 RISK FACTORS The following risk factors should be considered carefully in addition to the other information contained in this Prospectus before purchasing the Common Stock offered hereby. LIMITED OPERATING HISTORY; PRIOR LOSSES AND ANTICIPATION OF FUTURE LOSSES The Company was incorporated on March 17, 1995, and in April 1996 introduced the Giga Advisory Service, its principal service offering, and GigaWeb, the Company's Internet-based system for delivering information, analyses and advice to its customers. The Company introduced the first of its planned series of Relevance Services in July 1996. The Company has been marketing its Giga Advisory and Relevance Services for only a limited period of time, and the Company's future success will depend on its ability to successfully market and enhance these services. Substantially all of the Company's revenues through June 30, 1996 were derived from the operations of BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively, "BIS") which the Company acquired on April 5, 1995. The Company acquired BIS to obtain its marketing, sales, and other corporate infrastructures and certain of its personnel. BIS was engaged in compiling and providing data-intensive market research to vendors for use primarily in planning their product offerings and marketing programs. The BIS offerings were principally quantitative in nature; employed in large part relatively junior data specialists; marketed to purchasers of quantitative research; included little high level advice and analysis; were marketed in multiple separate service offerings; and focused principally on vendors (collectively, the "BIS Market Research Business"). In contrast, the Company's strategic business plan focuses on qualitative, analytical information and advice addressed to meet a broader range of customers; employs a single, integrated continuous information model; contemplates building a cadre of high-level research analysts and other professionals who are peers of its target customers to develop original ideas and knowledge; and concentrates marketing of its services and products to senior decision makers to support their critical IT decisions. The BIS Market Research Business did not fit with Giga's own business model. Accordingly, in June 1996 the Company decided to discontinue the BIS Market Research Business, including termination of the personnel employed in developing and compiling its data-intensive market research products; assignment of its obligations under existing BIS subscription agreements to two unrelated IT service providers; and cessation of operations at its two leased facilities in England. Results from the discontinued operations of the BIS Market Research Business are reflected in Loss From Discontinued Operations in the Company's historical financial statements, and results from the events, publications, consulting and econometric forecasting formerly provided by BIS, which the Company continues to offer, are included in the Company's continuing operating results. The Company does not consider the historical results of the discontinued BIS Market Research Business to be meaningful or indicative of the Company's future operating results. See "Risk Factors -- Risks Associated with Discontinuance of BIS Market Research Business." Since its inception, the Company has incurred substantial costs to develop its Giga Advisory Service, establish its GigaWeb system, build a management team and recruit, employ and train research analysts, sales and support staff for its Giga Advisory Service. As a consequence, the Company has incurred substantial operating losses since its inception, and at June 30, 1996 had an accumulated deficit of $16,537,000. The Company expects to incur losses through at least 1997 and expects that such losses will continue to be substantial as the Company expands and develops its services and products. The magnitude and duration of the Company's losses will depend on a number of factors both within and outside of the Company's control, including the Company's ability to successfully market its Giga Advisory Service and Relevance Services; customer acceptance of the Company's single-service model; the Company's ability to attract and retain qualified research analysts and sales personnel on a timely basis and the related costs of such efforts; the response of competitors to the Company's services and products; the ability of the Company to develop and market new services and products; and the continued acceptance by customers of subscription agreements providing for advance payments rather than equal monthly installments or some other payment model. In addition, the Company has significantly increased its operating expenses and expects to continue such increases in the future primarily to expand its staff 5 of research analysts and sales and support personnel and to further develop and enhance its Giga Advisory Service, Relevance Services, GigaWeb system and other information products. As a result, the Company may not be readily able to reduce or adjust expenses in the event that it does not generate planned revenues or if its revenues decrease. There can be no assurance when or if the Company will begin to generate revenue that is sufficient to achieve profitability, to maintain profitability on a quarterly or annual basis or to sustain or increase its revenue growth in future periods. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON SALES AND RENEWALS OF SUBSCRIPTION-BASED SERVICES; NEED TO ANTICIPATE CHANGING MARKET NEEDS The Company offers its Continuous Information Services on a subscription basis. Accordingly, the Company's prospects will depend on its ability to enter into a significant number of contracts for subscriptions to its services and to achieve and sustain high renewal rates, and no assurance can be given that it will be successful in doing so. The Company's ability to secure subscriptions and subscription renewals is dependent upon, among other things, its ability to deliver, through its Continuous Information Services, consistently high-quality and timely analysis and advice with respect to issues, developments and trends in the IT industry that clients view as important. To deliver valuable analysis and advice on a sustained basis, the Company must, among other things, recruit and retain a large and growing number of highly talented professionals in a very competitive job market, understand and anticipate market trends so as to keep its analysis focused on the changing needs of its customers, and deliver services and products of sufficiently high quality and timeliness to withstand competition. There can be no assurance that the Company will be able to sustain the necessary level of performance to enter into contracts for subscriptions to its services and to achieve and sustain high subscription renewal rates or that the Company's employees will be able to achieve expected sales productivity levels. Any material decline in subscriptions and subscription renewal rates or inability of the Company's employees to achieve expected sales productivity levels would have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." COMPETITION The Company competes in the market for IT information services and products directly with other independent providers of Continuous Information Services, including Gartner Group, Inc., META Group Inc. and Forrester Research Inc., and also competes with the internal planning, research and marketing staffs of current and prospective customer organizations. The Company also competes indirectly with other information providers, including market research firms, "Big Six" accounting firms, consulting firms and systems integrators. Many of the Company's direct and indirect competitors have substantially greater financial, information gathering and marketing resources than the Company. Some of the Company's direct and indirect competitors also have established research organizations with greater market recognition and experience in the IT industry. There can be no assurance that the Company will continue to be successful in establishing a competitive research organization. Delays, difficulty in developing and achieving market acceptance of the Giga Advisory Service and Relevance Services or customer dissatisfaction would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, there are few barriers to entry into the Company's market, and new competitors could readily seek to compete in one or more market segments addressed by the Company's services and products. There can be no assurance that the Company's current or potential competitors will not develop services and products comparable or superior to those developed by the Company or respond more quickly to new or emerging industry trends or changing customer requirements. Increased competition, direct and indirect, could adversely affect the Company's operating results through pricing pressure and loss of market share. There can be no assurance that the Company will be able to continue to compete successfully against existing or new competitors. In addition, any pricing pressures, reduced margins or loss of market share resulting from increased competition could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Competition." 6 DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL The Company's success will depend in large part upon the continued services of its executive officers and key employees, including its founder, Chairman of the Board of Directors and Chief Executive Officer, Gideon I. Gartner. Mr. Gartner, in particular, is well known in the IT community and his reputation in the Continuous Information Services industry and his network of contacts have been instrumental in establishing and building the Company's business and in obtaining financing for the Company. The loss of the services of either Mr. Gartner or of one or more of the Company's other key personnel would have a material adverse effect on the Company. The Company's success will also depend upon its ability to hire, train, motivate and retain a significant number of highly-skilled and experienced employees, particularly management, research analysts and sales personnel. The Company experiences, and expects to continue to experience, intense competition for professional personnel with, among others, producers of IT services and products, management consulting firms and system integrators. Many of these firms have substantially greater financial resources than the Company to attract and compensate qualified personnel. In addition, some of the Company's competitors require that their employees enter into non- competition agreements the terms of which could prohibit such individuals for a period of time from working for the Company. There can be no assurance that the Company will be successful in attracting a sufficient number of highly- skilled employees in the future, or that it will be successful in training, motivating and retaining the employees it is able to hire, and any inability to do so would have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Employees." RISKS ASSOCIATED WITH DISCONTINUANCE OF BIS MARKET RESEARCH BUSINESS In connection with the discontinuance of the BIS Market Research Business, the Company in August 1996 entered into contracts with two unrelated IT service providers to fulfill the Company's obligations under certain existing BIS subscription agreements, all of which expire on or before June 1997. There can be no assurance that these providers will be able to fulfill the Company's obligations under these subscription agreements satisfactorily. If such providers are not able to satisfactorily fulfill the terms of the subscription agreements, customers may seek refunds and other damages from the Company. As of August 15, 1996, the total remaining contract value of these agreements for which payment has been received by the Company was $1,982,000. Although the Company has established a reserve for these potential refunds which it believes is adequate, there can be no assurance that the amount of actual obligations of the Company to these BIS customers will not exceed the amount of this reserve. A substantial amount of claims in excess of the reserve established by the Company would have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company determined to cease or relocate former BIS operations at leased facilities in Luton, England at Rothesay Road (the "Rothesay Road Facility") and Napier Road (the "Napier Road Facility"). The lease at the Rothesay Road Facility has a remaining term of approximately 19 years and the lease at the Napier Road Facility has a remaining term of approximately five years. If the Company is not able to negotiate a termination of these lease agreements, it will seek to sublease the rental obligations for the remainder of each lease term. There can be no assurance that the Company will be able to enter into sublease contracts on terms that satisfy the Company's obligations under the leases, if at all. The Company has established a reserve for the Rothesay Road Facility and for the Napier Road Facility equal to the present value of the expected expenses of these facilities for two and one-half years plus 50% of the expected expenses over the remaining life of the leases. There can be no assurance that these reserves are adequate for such expenses or that the Company will be able to terminate these leases or enter into sublease agreements. Any failure to successfully negotiate a termination of the leases or to successfully enter into subleases on terms favorable to the Company would have a material adverse effect on the business, financial condition and results of operations of the Company. In connection with the cessation of operations at the Rothesay Road facility and Napier Road facility and the relocation of certain of the operations previously conducted at those facilities, the Company has terminated approximately eight employees and expects that, in addition, approximately 16 of the remaining 22 employees will determine not to relocate. Pursuant to certain United Kingdom labor laws, the Company will be required to 7 pay severance wages to its terminated employees as well as to those employees who elect not to relocate. The Company has established a reserve for the payment of such severance wages. Although the Company believes that this reserve is adequate, if additional employees elect not to relocate then the actual obligations of the Company would exceed the reserve. Significant claims in excess of the reserve established by the Company could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RISKS ASSOCIATED WITH DEVELOPMENT OF NEW SERVICES AND PRODUCTS The Company's future success will depend in part on its ability to anticipate emerging market trends and to develop or acquire new services and products that address the changing information and analysis needs of IT users, vendors and investors. The process of internally researching, developing, launching and gaining client acceptance of a new service or product, or assimilating and marketing an acquired service or product, is inherently risky and costly. Delays or failures during development or implementation, or lack of market acceptance of these services and products could have a material adverse effect on the Company. The future success of the Giga Advisory Service will depend in part of the Company's ability to expand the breadth and depth of its services through the addition of internal analysts and content from third party sources. The Company has recently introduced its first of a planned series of Relevance Services. The success of these services will depend on the Company's ability to add experienced consultants and to complete the development of additional Relevance Services on a timely basis. The Company's continued ability to differentiate itself through its Internet-based GigaWeb system will depend on its ability to continue to add features and functionality to GigaWeb. In addition, the Company has limited internal resources dedicated to its Web site development and relies on third parties, including consultants and software developers, for the design, development and testing of its GigaWeb system. Any technical or other related problems or deficiencies in GigaWeb in the areas of reliability, performance and scalability could have a material adverse effect on the Company's business, financial condition and results of operations. The Company has had limited experience introducing new services and products and there can be no assurance that its efforts to introduce new, or assimilate acquired, services or products, will be successful. If the Company is unable, for technical or other reasons, to develop and introduce new services or products or make enhancements to existing services and products in a timely manner in response to changing market conditions or customer requirements, or if its Giga Advisory Service or other services offered by the Company do not achieve market acceptance, the Company's business, financial condition and results of operations would be materially adversely affected. See "Business--Services and Products." POTENTIAL FLUCTUATIONS IN OPERATING RESULTS The Company's operating results may fluctuate significantly in the future due to various factors, including the level and timing of renewals of subscriptions to Continuous Information Services, the timing and amount of new business generated by the Company, the mix of domestic versus international business, the timing of the development, introduction and marketing of new services and products, the timing of the hiring of research analysts and sales people, changes in the spending patterns of the Company's target clients, the Company's accounts receivable collection experience, changes in market demand for IT research and analysis and competitive conditions in the industry. Due to these and other factors, the Company believes period-to-period comparisons of results of operations may not be meaningful and should not be relied upon as an indication of future results of operations. The potential fluctuations in the Company's operating results make it possible that, in some future period, the Company's operating results will be below the expectations of securities analysts and investors, which would have a material adverse effect on the price of the Company's Common Stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." UNCERTAINTIES RELATING TO PROPRIETARY RIGHTS AND USE OF THE INTERNET The Company's success and ability to compete is dependent in part upon its proprietary information and technology. The Company relies on a combination of copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements and contractual provisions and other methods to protect its proprietary 8 information and technology. There can be no assurance that the measures taken by the Company to protect its proprietary information and technology will be adequate to prevent misappropriation or that others will not develop similar proprietary information or technology independently. Furthermore, there can be no assurance that competitors will not develop similar or superior proprietary information or technologies. As a distributor of content over the Internet, the Company faces potential liability for libel, defamation, negligence, copyright and trademark infringement and other claims based on the nature of the content that it distributes, although the nature and extent of the liability is generally unsettled under law. In addition, the Company licenses certain content from a third party and may license content from other third parties in the future. There can be no assurance the Company will not be involved in expensive and time consuming litigation with respect to claims based on the third-party content that it distributes. Any such litigation, whether or not resulting in a ruling requiring the payment of damages, could have a material adverse effect on the Company's business, financial condition and results of operations. SUBSTANTIAL FUTURE CAPITAL NEEDS; RISKS OF WORKING CAPITAL DEFICIENCY The Company's business has significant fixed costs, primarily attributable to the costs associated with producing research to implement its single service strategy, which provides for coverage of many of the IT sectors and contemplates broad direct distribution worldwide. The Company has spent substantial amounts to date and expects capital and operating expenditures to increase in the near term as it hires additional sales people, research analysts and other support staff and continues to develop its services and products. The Company anticipates funding its ongoing working capital needs, including the hiring of additional research analysts and other personnel, the expansion of its sales force, the further enhancement of the GigaWeb system and the expansion of its international operations, principally through the net proceeds to the Company from the Offering. However, in the event that the Company encounters difficulties in collecting accounts receivable, experiences low or reduced subscription renewal rates or otherwise has revenues that are lower than planned, the Company might require additional working capital and there can be no assurance that such capital would be available to the Company on terms that are acceptable, if at all. If adequate funds are not available, the Company may be required to reduce its fixed costs and delay, scale back or eliminate certain of its products or services, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS Certain of the Company's operations are located outside of the United States and the Company expects that sales to customers outside of the United States will increase. The Company believes there are certain risks inherent in international operations, including changes in demand resulting from fluctuations in interest and exchange rates, changes in trade policies, regulatory requirements, difficulties in staffing and managing foreign sales operations, and higher levels of taxation on foreign income than domestic income. Most of the Company's international revenues are expected to be denominated in foreign currencies. Consequently, a decrease in the value of a relevant foreign currency in relation to the United States dollar could have an adverse impact on the Company's results of operations. Adverse developments in any one of these factors could have a material adverse effect on the Company's business, financial condition or results of operations. 9 MANAGEMENT OF GROWTH The Company's planned expansion is expected to place a significant strain on the Company's financial, operational and managerial resources. To manage its expansion, the Company must continue to implement and improve its operations and financial systems and to increase, train and manage its personnel. There can be no assurance that the Company's systems, procedures or controls currently in place will be adequate to support the Company's operations or that the Company will be able to implement additional systems successfully and in a timely manner if required. If the Company continues to grow, it will be required to expand its research staff, expand its sales and marketing force, recruit additional key management personnel, improve its operational and financial systems and train, motivate and manage additional employees. There can be no assurance that the Company will be able to manage these changes successfully. Any inability of the Company to manage its growth successfully could have a material adverse effect on the Company's business, financial condition and results of operations. LEGAL PROCEEDINGS The Company and Mr. Gartner are currently involved in a pending lawsuit with a former employee based upon allegations by the former employee that, among other things, the Company breached an oral employment agreement with him and that the Company and Mr. Gartner made fraudulent representations in inducing him to accept employment with the Company. The former employee has asserted that he is entitled to certain compensation, 60,000 shares of the Company's Common Stock (or cash in lieu thereof) and an option to purchase an additional 60,000 shares of the Company's Common Stock, as well as $2.5 million in compensatory damages and $1.0 million in punitive damages. See "Business-- Legal Proceedings." CONTROL BY MANAGEMENT Upon the closing of the Offering, Mr. Gartner will beneficially own approximately 36% of the outstanding Common Stock and Mr. Gartner, together with the Company's other executive officers and directors, including entities affiliated with them, will beneficially own approximately 54% of the outstanding Common Stock. As a result, these stockholders will be able to exercise control over matters requiring stockholder approval, including the election of directors and the approval of significant corporate matters such as transactions which may lead to a change of control of the Company. The effects of such control could be to delay or prevent a change of control of the Company unless the terms are approved by such stockholders. See "Management" and "Principal Stockholders." ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public market for the Company's Common Stock. There can be no assurance that, following the Offering, an active trading market for the Common Stock will develop or be sustained or that the market price of the Common Stock will not decline below the initial public offering price. The initial public offering price was determined through negotiations between the Company and the Representatives of the Underwriters and will not necessarily reflect the market price of the Common Stock after the Offering. See "Underwriting" for a discussion of the factors considered in determining the initial public offering price. The stock market in recent years has experienced extreme price and volume fluctuations that have particularly affected market prices of many growth-oriented companies in industries similar or related to that of the Company and that have often been unrelated or disproportionate to the operating performance of such companies. The market price of the Common Stock could also be subject to significant fluctuations in response to, and may be adversely affected by, variations in quarterly results, changes in earnings estimates or other actions by analysts and earnings or other announcements of the Company's clients or competitors as well as other factors. 10 IMMEDIATE AND SUBSTANTIAL DILUTION Purchasers of shares of Common Stock offered hereby will experience immediate and substantial dilution in the net tangible book value of the Common Stock from the initial public offering price. Additional dilution will occur upon exercise of outstanding stock options. See "Dilution" and "Shares Eligible for Future Sale." SHARES ELIGIBLE FOR FUTURE SALE Sales of a substantial number of shares of Common Stock in the public market following the Offering could adversely affect the market price for the Common Stock. See "Shares Eligible for Future Sale" and "Description of Capital Stock". EFFECT OF ANTI-TAKEOVER PROVISIONS A Restated Certificate of Incorporation (the "Restated Certificate") will be filed upon the closing of the Offering, pursuant to which the Company's Board of Directors will have the authority to issue up to 5,000,000 shares of Preferred Stock and to determine the price, rights, conversion ratios, preferences and privileges of those shares without any further vote or action by the Company's stockholders. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of Preferred Stock. Any such issuance, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company and could negatively impact the voting power or other rights of the holders of Common Stock. In addition, such Preferred Stock may have other rights, including economic rights senior to the Common Stock, and, as a result, the issuance thereof could have a material adverse effect on the market value of the Common Stock. The Restated Certificate will provide for a classified Board of Directors and will permit a member of the Board of Directors to be removed for cause only upon the affirmative vote of holders of a majority, or without cause only upon the affirmative vote of at least two-thirds, of the shares of capital stock of the Company entitled to vote. Furthermore, the Company is subject to the anti- takeover provisions of Section 203 of the Delaware General Corporation Law that prohibit the Company from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person first becomes an "interested stockholder," unless the business combination is approved in a prescribed manner. The application of Section 203 could also have the effect of delaying or preventing a change of control of the Company. Certain other provisions of the Restated Certificate may have the effect of delaying or preventing changes of control or management of the Company, which could adversely affect the market price of the Company's Common Stock. See "Description of Capital Stock-- Delaware Law and Certain Charter and By-Law Provisions; Anti-Takeover Effects." 11 USE OF PROCEEDS The net proceeds to Giga from the sale of the 4,000,000 shares of Common Stock offered hereby are estimated to be $36,200,000 ($41,780,000 if the Underwriters' over-allotment option is exercised in full) after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company and assuming an initial public offering price of $10.00 per share. The Company expects to use the net proceeds from the Offering for working capital and other general corporate purposes. A portion of the net proceeds may also be used for the acquisition of businesses, products and technologies that are complementary to those of the Company. The Company currently has no plans, commitments or agreements with respect to any such acquisitions as of the date of this Prospectus. Pending such uses, the Company intends to invest the net proceeds from the Offering in short-term, investment grade, interest- bearing instruments. DIVIDEND POLICY The Company has never declared or paid any cash dividends on its capital stock. The Company currently intends to retain earnings, if any, to support its growth strategy and does not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company's Board of Directors after taking into account various factors including the Company's financial condition, operating results, current and anticipated cash needs and plans for expansion. 12 CAPITALIZATION The following table sets forth as of June 30, 1996 (i) the actual capitalization of the Company, (ii) the pro forma capitalization of the Company as described in Note (1) below, and (iii) the pro forma capitalization of the Company as adjusted to reflect the issuance and sale by the Company of 4,000,000 shares of Common Stock offered hereby at an assumed initial public offering price of $10.00 per share and receipt of the estimated net proceeds therefrom. See "Use of Proceeds." This table should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
JUNE 30, 1996 --------------------------------------------------------- PRO FORMA ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2) --------------- ---------------- --------------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Long term debt, less current portion.......... $1,472 $1,472 $1,472 --------------- --------------- --------------- Stockholders' Equity(3): Preferred Stock, $.001 par value; 5,000,000 shares authorized; none issued or outstanding on an actual, pro forma and pro forma as adjusted basis................... -- -- -- Series A Preferred Stock, $.001 par value; 650,000 shares authorized; 570,000 shares issued and outstanding (actual); no shares authorized, issued or outstanding on a pro forma and pro forma as adjusted basis................... 1 -- -- Series B Preferred Stock, $.001 par value; 6,500,000 shares authorized; 5,272,215 shares issued and outstanding (actual); no shares authorized, issued or outstanding on a pro forma or pro forma as adjusted basis....... 5 -- -- Common Stock, $.001 par value; 60,000,000 shares authorized; 6,110,600 shares issued and outstanding (actual); 13,662,815 shares issued and outstanding (pro forma); 17,662,815 shares issued and outstanding (pro forma as adjusted)(2)......... 6 14 18 Additional paid-in capital................. 20,631 20,629 56,825 Stock subscriptions receivable.............. (75) (75) (75) Accumulated deficit...... (16,537) (16,537) (16,537) Cumulative translation adjustments............. 22 22 22 --------------- --------------- --------------- Total stockholders' equity................. 4,253 4,253 40,253 --------------- --------------- --------------- Total capitalization.... $ 5,525 $ 5,525 $ 41,725 =============== =============== ===============
- -------- (1) Presented on a pro forma basis to give effect to the conversion of all outstanding shares of Preferred Stock into an aggregate of 7,552,215 shares of Common Stock upon the closing of the Offering. See Note 2 of Notes to Consolidated Financial Statements. (2) Based on shares outstanding as of June 30, 1996. Does not include (i) 3,627,473 shares of Common Stock issuable upon the exercise of outstanding options at a weighted average option exercise price of $0.61 per share as of August 31, 1996; (ii) 3,400,000 shares of Common Stock reserved for issuance under the Company's stock plans as of August 31, 1996; (iii) 286,266 shares of Common Stock issuable upon conversion of outstanding convertible notes at a weighted average conversion price of $4.09 per share at August 31, 1996; (iv) 393,590 shares of Common Stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.95 per share at August 31, 1996, which will expire if not exercised prior to the closing of the Offering; and (v) shares of Common Stock issued by the Company to employees after June 30, 1996. See "Management--Executive Compensation" and "Description of Capital Stock." (3) Reflects the filing of the Company's Restated Certificate of Incorporation upon the closing of the Offering. 13 DILUTION The pro forma net tangible book value of the Company as of June 30, 1996 was $2,756,000 or $0.20 per share. Pro forma net tangible book value per share represents the amount of total tangible assets (total assets less intangible assets) of the Company reduced by the Company's total liabilities, divided by the pro forma number of shares of Common Stock outstanding. Assuming an initial public offering price of $10.00 per share, and after giving effect to the sale by the Company of 4,000,000 shares of Common Stock in the Offering (after deducting the estimated underwriting discounts and commissions and estimated offering expenses), the pro forma net tangible book value of the Company as of June 30, 1996 would have been $38,956,000 or $2.21 per share. This represents an immediate increase in pro forma net tangible book value of $2.01 per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $7.79 per share to new investors purchasing Common Stock in the Offering. The following table illustrates this per share dilution: Assumed price to public...................................... $10.00 Pro forma net tangible book value per share before the Offering................................................... $0.20 Increase per share attributable to new investors............ 2.01 ----- Pro forma net tangible book value per share after the Offering.................................................... 2.21 ------ Dilution per share to new investors.......................... $ 7.79 ======
The following table sets forth on a pro forma basis as of June 30, 1996, the number of shares of Common Stock purchased from the Company, the total consideration paid to the Company and the average price paid per share by the existing stockholders and by the investors purchasing shares of Common Stock offered hereby (at an assumed initial public offering price of $10.00 per share):
SHARES PURCHASED TOTAL CONSIDERATION ------------------ ------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- ----------- ------- ------------- Existing stockholders..... 13,662,815 77.4% $21,564,052 35.0% $ 1.58 New investors............. 4,000,000 22.6% $40,000,000 65.0% $10.00 ---------- ------ ----------- ------ Total................. 17,662,815 100.0% $61,564,052 100.0% ========== ====== =========== ======
The foregoing assumes no exercise of any outstanding stock options, warrants or convertible notes to purchase shares of Common Stock. As of August 31, 1996, there were outstanding (i) options to purchase 3,627,473 shares of Common Stock at a weighted average exercise price of $0.61 per share; (ii) warrants to purchase 393,590 shares of Common Stock at a weighted average exercise price of $2.95 per share, which will expire if not exercised prior to the closing of the Offering; and (iii) convertible notes that are convertible into 286,266 shares of Common Stock at a weighted average conversion price of $4.09 per share. In addition, as of August 31, 1996, 3,400,000 shares of Common Stock were reserved for future issuance pursuant to the Company's stock plans. To the extent that the outstanding options, warrants and convertible notes are exercised or converted at prices lower than the initial public offering price, there will be further dilution to new investors. See "Management--Executive Compensation," "Certain Transactions" and "Description of Capital Stock." 14 SELECTED FINANCIAL DATA The following selected financial data are derived from the consolidated financial statements of the Company and the combined financial statements of BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively, the "Predecessor Companies"). For the years ended December 31, 1991 and 1992 and the period January 1 to December 15, 1993, the operations comprising the Predecessor Companies were those of wholly-owned subsidiaries of NYNEX Corporation ("NYNEX"). For the period December 16 to December 31, 1993, the year ended December 31, 1994 and the period January 1 to April 5, 1995, the operations of the Predecessor Companies were those of wholly-owned subsidiaries of Friday Holdings, L.P. ("Friday Holdings"). Because of the impact to the statements of operations of the revaluation of the assets and liabilities in connection with the acquisitions and the application of different accounting methods, the results of operations of the Predecessor Companies for the periods under NYNEX and Friday Holdings ownership are not comparable with each other or with those reported by the Company. The consolidated financial statements of the Company as of December 31, 1995 and June 30, 1996 and for the period from March 17, 1995 to December 31, 1995 and the six months ended June 30, 1996 included elsewhere in this Prospectus have been audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated financial statements of the Company for the period March 17, 1995 to June 30, 1995 included elsewhere in this Prospectus are unaudited, however, in the opinion of management, such unaudited data include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information included therein. The results of operations for the periods March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996 are not necessarily indicative of the results for an entire fiscal year or any other interim period. The combined financial statements of the Predecessor Companies for the period January 1, 1995 to April 5, 1995 included elsewhere in this Prospectus have been audited by Coopers & Lybrand L.L.P. The combined financial statements of the Predecessor Companies as of December 31, 1994 and for the periods January 1, 1993 to December 15, 1993 and December 16, 1993 to December 31, 1993 and for the year ended December 31, 1994 included elsewhere in this Prospectus have been audited by Ernst & Young LLP, independent auditors. For the periods January 1, 1993 to December 15, 1993 and December 16, 1993 to December 31, 1993, the financial statements of BIS Shrapnel PTY Limited, one of the combined companies, were audited by other auditors. Ernst & Young LLP's report on the combined financial statements as of December 31, 1994 and for the periods January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31, 1993 and the year ended December 31, 1994, includes a description of uncertainties regarding the Predecessor Companies' ability to continue as a going concern which is discussed in Note 4 to the financial statements of BIS Strategic Decisions. The selected historical financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and accompanying notes thereto included elsewhere in this Prospectus. 15 SELECTED FINANCIAL DATA--(CONTINUED)
PREDECESSOR COMPANIES(1) PREDECESSOR COMPANIES PRO FORMA(2) ------------------------------ ----------------------------------- ----------------------- YEAR ENDED JANUARY 1 DECEMBER 16 YEAR JANUARY 1 DECEMBER 31, TO TO ENDED TO SIX MONTHS YEAR ENDED ---------------- DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, ENDED JUNE DECEMBER 31, 1991 1992 1993 1993(1) 1994 1995 30, 1995 1995 ------- ------- ------------ ------------ ------------ --------- ---------- ------------ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues: Continuous information services........ $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- Information products........ 14,415 12,774 11,371 329 12,700 3,237 6,880 14,015 ------- ------- ------- ----- ------- ------ ------ ------- Total revenues.. 14,415 12,774 11,371 329 12,700 3,237 6,880 14,015 ------- ------- ------- ----- ------- ------ ------ ------- Costs and Expenses: Cost of services and product development..... 7,169 6,462 5,530 357 6,172 2,208 4,803 10,775 Sales and marketing....... 2,617 1,685 1,448 92 1,589 266 457 1,282 General and administrative.. 9,802 9,132 6,901 307 8,108 1,197 2,672 7,455 Depreciation and amortization.... 1,064 963 744 38 3,068 250 927 1,797 ------- ------- ------- ----- ------- ------ ------ ------- Total costs and expenses....... 20,652 18,242 14,623 794 18,937 3,921 8,859 21,309 ------- ------- ------- ----- ------- ------ ------ ------- Operating loss... (6,237) (5,468) (3,252) (465) (6,237) (684) (1,979) (7,294) Interest income... 206 153 114 7 103 26 54 287 Interest expense.. (176) (57) (38) (4) (26) (4) (50) (134) ------- ------- ------- ----- ------- ------ ------ ------- Loss from continuing operations before income taxes (benefit)....... (6,207) (5,372) (3,176) (462) (6,160) (662) (1,975) (7,141) Benefit from income taxes..... -- (1,063) (983) -- (1,096) (213) (531) (1,311) ------- ------- ------- ----- ------- ------ ------ ------- Loss from continuing operations...... (6,207) (4,309) (2,193) (462) (5,064) (449) (1,444) (5,830) ------- ------- ------- ----- ------- ------ ------ ------- Discontinued operations: Income (loss) from the discontinued BIS market research business (net of tax effect)..... 4,922 4,623 1,044 44 (1,469) 597 899 2,097 Loss on disposal of discontinued BIS market research business (net of tax effect)..... -- -- -- -- -- -- -- -- ------- ------- ------- ----- ------- ------ ------ ------- Income (loss) from discontinued operations...... 4,922 4,623 1,044 44 (1,469) 597 899 2,097 ------- ------- ------- ----- ------- ------ ------ ------- Net income (loss).......... $(1,285) $ 314 $(1,149) $(418) $(6,533) $ 148 $ (545) $(3,733) ======= ======= ======= ===== ======= ====== ====== ======= Pro forma results per common and common equivalent share: Loss from continuing operations...... Net loss......... Pro forma weighted average common and common equivalent shares outstanding......
COMPANY -------------------------------- MARCH 17 MARCH 17 SIX MONTHS TO TO ENDED DECEMBER 31, JUNE 30, JUNE 30, 1995 1995 1996 ------------ -------- ---------- STATEMENT OF OPERATIONS DATA: Revenues: Continuous information services........ $ -- $ -- $ 627 Information products........ 10,706 3,571 5,855 ---------- ------ ---------- Total revenues.. 10,706 3,571 6,482 ---------- ------ ---------- Costs and Expenses: Cost of services and product development..... 8,445 2,473 9,648 Sales and marketing....... 1,016 191 1,982 General and administrative.. 6,216 1,433 4,257 Depreciation and amortization.... 1,397 527 1,088 ---------- ------ ---------- Total costs and expenses....... 17,074 4,624 16,975 ---------- ------ ---------- Operating loss... (6,368) (1,053) (10,493) Interest income... 259 26 375 Interest expense.. (100) (16) (52) ---------- ------ ---------- Loss from continuing operations before income taxes (benefit)....... (6,209) (1,043) (10,170) Benefit from income taxes..... (1,093) (310) (257) ---------- ------ ---------- Loss from continuing operations...... (5,116) (733) (9,913) ---------- ------ ---------- Discontinued operations: Income (loss) from the discontinued BIS market research business (net of tax effect)..... 1,490 301 (85) Loss on disposal of discontinued BIS market research business (net of tax effect)..... -- -- (2,305) ---------- ------ ---------- Income (loss) from discontinued operations...... 1,490 301 (2,390) ---------- ------ ---------- Net income (loss).......... $ (3,626) $ (432) $ (12,303) ========== ====== ========== Pro forma results per common and common equivalent share: Loss from continuing operations...... $(0.34) $(0.61) Net loss......... $(0.24) $(0.75) Pro forma weighted average common and common equivalent shares outstanding...... 14,855,209 16,360,287
16 SELECTED FINANCIAL DATA--(CONTINUED)
PREDECESSOR COMPANIES COMPANY ------------------------------ --------------------- DECEMBER 31, -------------------------------- DECEMBER 31, JUNE 30, 1991 1992 1993 1994 1995 1996 ------ ------- ------- ------- ------------ -------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents............ $2,177 $ 1,798 $ 2,814 $ 1,809 $ 16,906 $ 9,331 Working capital (deficit).............. (347) (680) 1,893 (1,777) 11,205 2,734 Total assets............ 7,124 6,632 12,979 8,601 24,684 19,220 Deferred revenues....... 1,194 386 1,299 1,681 2,480 4,995 Long term debt, less current portion........ 258 -- -- -- 1,437 1,472 Total stockholders' equity................. 1,784 1,843 8,679 1,823 13,660 4,053
- -------- (1) Effective January 1, 1993, the Predecessor Companies changed the method of accounting for revenue recognized from the BIS Market Research Business. For the years ended December 31, 1991 and 1992, the Predecessor Companies recognized 35% of the revenue upon execution of a services contract and the remaining 65% on a pro rata monthly basis over the contract period. Under the Company's current revenue recognition method, income after taxes from the discontinued BIS Market Research Business and net income would have been reduced by approximately $632,000 and $32,000 for the years ended December 31, 1991 and 1992, respectively. Subsequent to January 1, 1993, the Predecessor Companies recognized such revenue ratably over the related contract periods. The cumulative effect of this change in accounting method decreased income from the discontinued BIS Market Research Business and net income for the period ended December 15, 1993 by $1,928,000, net of applicable income taxes of $462,000. (2) The pro forma results reflect the results of operations as if the acquisitions of BIS and ExperNet had occurred on January 1, 1995. See Note 3 of the Notes to Consolidated Financial Statements. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ORGANIZATION OF THE COMPANY AND FINANCIAL STATEMENT PRESENTATION The Company was organized on March 17, 1995. On April 5, 1995, the Company acquired BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively, "BIS" or the "Predecessor Companies") as part of its strategic plan to accelerate the development of its Continuous Information Services business and to obtain the marketing, sales and other corporate infrastructures and certain personnel of BIS. On July 6, 1995, the Company acquired a 77.8% equity interest in ExperNet Corporation ("ExperNet"), which was owned by Gideon I. Gartner and David L. Gilmour, each a director and officer of the Company, and, on December 29, 1995, acquired the remaining 22.2% equity interest. This Prospectus includes the financial statements of BIS, as the predecessor to the Company, through the period ended April 5, 1995, the date of acquisition by the Company. The period December 16 to December 31, 1993 is shown separately for the Predecessor Companies because of a prior acquisition by an unrelated entity on December 16, 1993. The periods covered by the financial statements of the Company commence on March 17, 1995, the date of its incorporation, and include the results of operations of BIS from April 5, 1995 and the results of operations of ExperNet from July 6, 1995, their respective dates of acquisition. Results of operations of ExperNet are not included in results of Predecessor Companies, which are solely the results of BIS. The acquisition of BIS was accounted for under the purchase method; accordingly, acquired assets were recorded at their estimated fair values and related goodwill of approximately $3,059,000 was also recorded and is being amortized over two years. Because ExperNet was a related company under common control, its assets were recorded by the Company at their historical cost. OVERVIEW The Company's current services and products target three principal customer markets: IT users, IT vendors and IT institutional and other investors. The Company derives its revenues primarily from two sources: Continuous Information Services, which include its Giga Advisory Service and Relevance Services, and Information Products, which include events, publications, consulting and econometric forecasting. In June 1996, the Company discontinued the BIS Market Research Business. Results of operations from the discontinued BIS Market Research Business of BIS are reflected as Discontinued Operations in the Company's financial statements. The Company continues to generate revenues from the events, publications, consulting and econometric forecasting businesses acquired as part of the acquisition of BIS, which are reflected in the statements of operations as Information Products revenue. Revenues to date have been primarily attributable to Information Products. The Company expects these revenues will be a declining percentage of total revenues in future periods. As a result of the discontinuance of the BIS Market Research Business, Giga recorded a charge of approximately $2.3 million in the six months ended June 30, 1996. The Company does not consider the historical results of Predecessor Companies' operations which have been discontinued to be meaningful or indicative of the Company's future operating results. The Company has entered into agreements with two unrelated parties which have assumed responsibility for fulfillment of the Company's obligations to former BIS customers in exchange for a share of the deferred revenues recorded by Giga with respect to such customers. See "Risk Factors--Limited Operating History; Prior Losses and Anticipation of Future Losses," and "--Risks Associated with Discontinuance of BIS Market Research Business." In April 1996, the Company introduced its Giga Advisory Service and GigaWeb. In July 1996, the Company introduced the first of a planned series of specialized research products, called Relevance Services, which combine original analysis, data and information with consulting to address specific IT needs of customers. The Company expects that future revenues from its Continuous Information Services will significantly increase as a percentage of future total revenues. 18 The Company's Giga Advisory Service and Relevance Services are typically sold through annual subscriptions which generally provide for payment at the commencement of the subscription period and renew automatically unless the customer cancels the subscription. Amounts received in advance of services provided are reflected initially in the Company's financial statements as deferred revenues and are recognized on a pro rata monthly basis over the term of the subscription. The Company expects costs of services and product development to continue to significantly increase in the future primarily as a result of the Company's expansion of its staff of analysts and further development of its Giga Advisory Service, Relevance Services and other consulting services. The Company has incurred significant operating losses since its inception in 1995 due to its focus on building its research and sales and marketing capabilities, development and enhancement of its GigaWeb system and the development of the Giga Advisory Service and Relevance Services. The Company expects sales and marketing expenses to continue to significantly increase in the future as it expands its sales, marketing and support staff. The Company expects to incur losses through at least fiscal year 1997 as it continues to invest in these activities. The Company believes that a leading measure of the Company's anticipated future revenue is the annual value ("AV") of its Giga Advisory Service and Relevance Services subscription agreements. The Company calculates AV each month as the cumulative annualized value of all subscription agreements which either commence or continue on the first day of the following month, without regard to contract duration or cancellation risk. Agreements may be included in AV even though final terms and conditions may not have been agreed upon; however, revenues from these agreements will not begin to be recognized until all terms and conditions are finalized. AV has grown every month since the introduction of the Company's Giga Advisory Service and at August 31, 1996 totalled approximately $4.2 million, excluding approximately $1.1 million of subscriptions sold to former customers of the BIS Market Research Business. There can be no assurance that the Company's AV will continue to grow. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS ENDED JUNE 30, 1995 For purposes of the following discussion, the pro forma six month period ended June 30, 1995 reflects the results of operations of the Predecessor Companies from January 1, 1995 to April 5, 1995 (the date of acquisition of the Predecessor Companies by the Company) and the Company from March 17, 1995 (the date of inception) through June 30, 1995, and includes the amortization of goodwill incurred in connection with the acquisitions of the Predecessor Companies and ExperNet as though such acquisitions occurred on January 1, 1995. The Company's activities from March 17, 1995 to April 5, 1995 were principally devoted to the acquisition of the Predecessor Companies. Revenues. Revenues for the six months ended June 30, 1996 were approximately $6.5 million compared to revenues of approximately $6.9 million for the pro forma six months ended June 30, 1995. In the six months ended June 30, 1996, the Company recorded Continuous Information Services revenues of $0.6 million. Information Products revenues declined by approximately $1.0 million as compared to the pro forma six months ended June 30, 1995, primarily due to a reduction in the number of events sponsored by the Company. Cost of Services and Product Development. The Company's cost of services and product development increased to approximately $9.6 million in the six months ended June 30, 1996 from approximately $4.8 million in the pro forma six months ended June 30, 1995. The increase was principally attributable to the Company's substantial investment during the six months ended June 30, 1996 in research and technology related to the development of the Company's Giga Advisory Service and GigaWeb system. Sales and Marketing Expenses. Sales and marketing expenses in the six months ended June 30, 1996 increased to approximately $2.0 million compared to approximately $0.5 million in the pro forma six months 19 ended June 30, 1995. The increase was principally attributable to the increased investment in marketing programs and expansion of the Company's sales force to support the introduction and marketing of its Giga Advisory Service. General and Administrative Expenses. General and administrative expenses increased to approximately $4.3 million in the six months ended June 30, 1996 from approximately $2.7 million in the pro forma six months ended June 30, 1995. The increase resulted principally from significant investments for internal systems, facilities and infrastructure, including the hiring of a senior management team. Discontinued Operations. The Company recorded a loss from discontinued operations of approximately $2.4 million for the six months ended June 30, 1996 compared to income of approximately $0.9 million for the pro forma six months ended June 30, 1995. The 1996 loss included $2.3 million of charges related to the discontinuance of the BIS Market Research Business in June 1996. See Note 16 of Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS FOR 1995 PRO FORMA, 1994 AND 1993 For purposes of the following discussion, the pro forma year ended December 31, 1995 reflects the operations of the Predecessor Companies from January 1, 1995 to April 5, 1995 and the Company from March 17, 1995 to December 31, 1995. Revenues. Revenues were approximately $14.0 million, $12.7 million and $11.7 million for pro forma 1995, 1994 and 1993, respectively. The revenues were derived from the Predecessor Companies' Information Products business, consisting of events, publications, consulting and econometric forecasting. The increases in pro forma 1995 and 1994 were attributable primarily to increased events and consulting revenues in those years. Cost of Services and Product Development. Expenses for cost of services and product development increased year to year, with the major increase occurring in pro forma 1995, when these costs were approximately $10.8 million compared to approximately $6.2 million in 1994. The pro forma 1995 increase resulted primarily from increased expenditures relating to the development of the GigaWeb system and the hiring of research analysts. Sales and Marketing Expenses. Sales and marketing expenses in 1994 and 1993 were relatively unchanged, but declined to approximately $1.3 million in pro forma 1995 from $1.6 million in 1994. The pro forma 1995 decline resulted primarily from a curtailment of marketing investments in the Predecessor Companies' Information Products business and a reduction in the number of sponsored events. General and Administrative Expenses. General and administrative expenses for pro forma 1995, 1994 and 1993 did not vary significantly during the three year period. The decrease in these expenses to approximately $7.5 million in pro forma 1995 from approximately $8.1 million in 1994 resulted primarily from certain headcount reductions made by the Company shortly after its acquisition of BIS in April 1995 and severance expenses included in the 1994 results. Discontinued Operations. The income from discontinued operations increased to $2.1 million in pro forma 1995, compared with a loss of $1.5 million in 1994. The results for the year ended 1994 included a charge of $2.6 million for an impairment of goodwill recognized in connection with the planned sale of BIS by Friday Holdings. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations since inception primarily through private placements of equity securities. The private placements of equity securities have provided the Company with net proceeds of approximately $20.6 million, representing $1.0 from the sale of Common Stock, $2.0 million from the sale of Series A Preferred Stock and $17.6 million from the sale of Series B Preferred Stock. At June 30, 1996, the Company had cash and cash equivalents of $9.3 million. See Notes 10 and 11 of Notes to Consolidated Financial Statements. 20 The Company has used the proceeds of the private placements primarily to hire research analysts and sales personnel and to fund the development of its Continuous Information Services. In the period March 17 to June 30, 1995 and the six months ended June 30, 1996, the Company's capital expenditures totalled approximately $0.2 million and $1.1 million, respectively, primarily for computer equipment. The Company expects that additional purchases of computer equipment will be made as the Company's employee base grows. As of June 30, 1996, the Company had no material commitments for capital expenditures. The Company believes that the net proceeds from the Offering, together with its existing cash and cash equivalents and cash generated from operations, will be sufficient to fund the Company's working capital needs at least through 1997. In the event that the Company is unable to complete the Offering, certain of its existing investors have represented that they will, to the extent necessary, fund the Company through June 1997 on terms to be mutually agreed upon. The Company's actual future capital requirements will depend on numerous factors, including the Company's ability to successfully market its Giga Advisory Service and Relevance Services; the Company's ability to enter into contracts for the sale of its services and products and to achieve and sustain high renewal rates; its ability to attract and retain qualified research analysts and sales personnel on a timely basis and the related costs of such efforts; the response of competitors to the Company's services and products; the Company's ability to develop and market new services and products; and the continued acceptance by customers of annual membership agreements providing for advance payments rather than equal monthly installments or some other payment model. The Company expects that it may require additional working capital in the future and there can be no assurance that such capital would be available to the Company on terms that are acceptable, if at all. If adequate funds are not available, the Company may be required to reduce its fixed costs and delay, scale back or eliminate certain of its products or services, any of which could have a material adverse effect on the Company's business, financial condition or results of operations. See "Risk Factors--Substantial Future Capital Needs; Risks of Working Capital Deficiency." 21 BUSINESS The Company provides information, analysis and advice relating to developments and trends in the computing, telecommunications and related industries (collectively, the information technology or "IT" industry). Information technologies have become increasingly critical to the competitiveness and long-term viability of a wide range of organizations. As a result, many of these organizations have turned to IT "Continuous Information Service" providers, which monitor and analyze IT developments and trends to support customers' IT decisions. The Company's customers include: users of IT products and services; vendors of IT hardware, software and services; and institutional and other investors in the IT industry. These customers access the Company's services and products through a personalized Internet-based interface, as well as through published reports and consultation with the Company's analysts and consultants. Giga was founded in 1995 by Gideon I. Gartner, who founded Gartner Group, Inc. in 1979 and served as its Chairman and Chief Executive Officer for twelve years. Building upon his extensive experience in the IT Continuous Information Services industry, Mr. Gartner formed Giga with the objective of creating a new approach to providing Continuous Information Services to address customers' needs more effectively than existing IT information providers. The Giga Advisory Service, the principal service offering of the Company, provides customers access to all of the Company's Giga Advisory Service information, analysis and advice, as well as inquiry access to analysts and practitioners, and participation in briefings, conferences, electronic forums and teleconferences. The Company believes that its integrated, single-service offering, which is provided to customers for an annual subscription fee, delivers significant advantages over its competitors' multiple product offerings that require customers to select, and separately purchase, subject- specific services. The Company also provides its customers with access to its ExperNet network of external IT practitioners who are available to answer inquiries by customers. The Company recently introduced its first of a planned series of specialized research products, called Relevance Services, which combine original analysis, data and information produced by proprietary surveys and methodologies with consulting, to assist in enhancing the IT practices and operations of Giga's customers. In addition, the Company is pursuing relationships with select content partners to complement the original information and analyses provided by Giga's analysts. The Company's GigaWeb system, an Internet-based interface to its services and products, is designed to make it easy and efficient for customers to navigate through the full spectrum of Giga's original research and third-party content. Through the use of intelligent software agents, the Company is able to provide customized information to each customer and also allow customers to search for and select the information that is most relevant to their particular needs. In addition, customers of the Giga Advisory Service and Relevance Services have access to the Company's information products, including various IT events, publications, consulting and econometric forecasting. These products are generally offered on a non-continuous basis and are also marketed outside the Company's Giga Advisory Service and Relevance Services customer base to generate incremental revenue and broaden the Company's IT industry visibility. INDUSTRY BACKGROUND Information technologies have become increasingly critical to the competitiveness and long-term viability of a wide range of organizations. As organizations have recognized the importance of information technologies, they have made substantial and increasing financial commitments to IT systems and services. At the same time, IT products have become increasingly complex and diverse, and the rate of technological change and new product introductions has accelerated. Many organizations maintain an internal staff of IT professionals and also engage outside consultants to assist in IT decision support. However, these organizations often require greater capabilities than they can economically support internally and a more integrated approach than individual consultants can provide. As a result, they have increasingly turned for assistance to providers of Continuous Information Services which continuously monitor and analyze IT industry developments and trends and provide reports and information to clients on a subscription basis. 22 The overall market for IT Continuous Information Services consists primarily of three types of customers --users of IT products and services; vendors of IT hardware, software and services; and institutional and other investors in the IT industry. Users.Users continually assess new technologies and anticipate future trends in making major purchasing decisions and formulating long-term IT strategies. Decision-making has become increasingly complicated as the pace of technological change continues to accelerate. As a result, IT users require current information and analysis of new product introductions and other events, independent comparisons among competing platforms and vendors, accurate assessments of trends such as pricing and obsolescence and reasoned analysis of how issues will evolve over time. Users generally seek alternative points of view and rely on the advice and insights of more than one provider of Continuous Information Services for their IT requirements. Vendors.Vendors use Continuous Information Services primarily for product planning, evaluation of competitors' products and formulation of marketing and other business strategies. Vendors require a reliable source of information on areas such as new markets and market forecasts, competitive products, user preferences and buying trends, distribution and marketing strategies and evolving market needs. The Company believes that much of the information and analyses serving the needs of users can also benefit the vendor community. Investors.Institutional and other investors require Continuous Information Services to evaluate user and vendor strategies, new IT product performance, product purchase expectations and evolving market trends. By gaining timely access to this information and using it in their company and industry analyses, investors can make more informed decisions and enhance their ability to make successful IT investments. The IT information service industry began in the 1960s with companies that analyzed IT market trends and provided quantitative data to either vendors or users. The next generation of IT information providers, which emerged in the 1980s, generally offered IT analysis to both users and vendors. This second generation model is still prevalent and typically provides multiple information service offerings, each of which is focused on a specific subject within the IT industry. For example, a second generation provider might offer separate service offerings addressing mainframes, personal computers, operating systems, application development tools and relational databases. The Company believes that the second generation business model for IT information providers does not fulfill the evolving needs of IT users, vendors and investors. A solution to a customer's particular IT problem typically involves a broad range of platforms, technologies and services. Giga believes that separate reports addressing each distinct technology or issue do not provide integrated or cost-effective support for the customer. The planning, selection and implementation of IT solutions is becoming increasingly complex. Historically, IT users would typically purchase a vertically integrated solution involving hardware, operating systems and application software from a single large vendor. In the current environment, IT users must evaluate a variety of products based on emerging technologies from multiple vendors and design systems in which the products operate with one another, with existing legacy systems and, increasingly, within the Internet and emerging corporate intranet environments. Users have been confronted not only with an increasing number of technological choices but also with a proliferation of technical information from multiple independent sources, such as newsletters, vendors, trade publications, the World Wide Web and the news media. This glut of information makes it difficult for users to find the particular analysis and expertise that is most relevant to their particular operational needs and can lead to information-anxiety, confusion and frustration. In seeking to formulate their IT plans and strategies in an environment of rapid technological change and proliferation of available information, organizations desire Continuous Information Services that can best address the following needs: . Broad-Based Coverage. Since IT solutions generally require knowledge of multiple segments of the IT industry, the Company believes that customers will increasingly desire integrated broad-based coverage of the IT market, rather than a subject-specific approach. 23 . Practical Experience. Industry analysts who conduct IT research and analysis generally have an analytical or strategic orientation. However, the solutions to many of today's IT problems require practical hands-on experience. . Customized Services. The mass of content produced by IT information providers is often unconnected to the specific problem confronted by the IT customer. IT customers need services that can provide access to independent research while at the same time make that research relevant to their particular application or environment. . Efficient Information Retrieval. Customers want to quickly search for, find and retrieve the particular research, analyses and expertise that they require. The Company believes that these largely unsatisfied and evolving needs have created a market opportunity for a third generation IT information provider that is able, through the use of technological innovation and reorientation of the IT information provider business model, to satisfy the demand for comprehensive, easy-to-use and cost-effective Continuous Information Services. THE GIGA SOLUTION The Company has developed, and is continuing to develop, a range of innovative IT services and products that meet customers' needs for comprehensive and customized Continuous Information Services. The principal elements of Giga's solution for IT users, vendors and investors are as follows: . Single-Service Model. The Company's Giga Advisory Service is offered to customers as a single integrated service. Customers may, for a subscription fee, access the full spectrum of the Giga Advisory Service information, analysis and advice on a continuous basis, in contrast to the multiple services approach that requires customers to purchase multiple services which generally are neither integrated nor comprehensive. . ExperNet. Subscribers to the Giga Advisory Service have access to the Company's ExperNet network of external IT practitioners. These practitioners have significant practical experience in solving real-world IT problems and are available to answer customer inquiries and provide analysis and advice. . Relevance Services. The Company offers a series of Relevance Services that combine original analysis, data and information produced by proprietary surveys and methodologies with consulting, to assist in enhancing the IT practices and operations of the Company's customers. The Company believes its Relevance Services will be used by IT management to evaluate competitive industry practices, benchmark their IT practices against peer practices and assist in decision support. . GigaWeb. The Company has focused its efforts not only on developing original research and analyses content, but also on developing technologies and methodologies to effectively deliver such original content and other third-party content to customers in an efficient, flexible and personalized manner. The Company's Internet-based interface, GigaWeb, enables Giga's customers to gain personalized, interactive access to the Company's full range of information sources. The GigaWeb interface includes search and intelligent software agent technology ("Gigabots") that is designed to make it easy for customers to navigate through the full spectrum of the Company's available information and, based on the customer's profile, to obtain automatically the content that is of particular interest to the customer. THE GIGA STRATEGY Giga's objective is to become a leading provider of IT Continuous Information Services by delivering information, analysis and advice that is of high strategic relevance to customers. The Company's strategy includes the following key elements: . Expand Breadth of Research. The Company plans to broaden its research and analysis coverage both by hiring additional analysts and by recruiting additional IT practitioners for the ExperNet network. At August 31, 1996, the Company employed 50 in-house analysts, 32 of whom were Giga Advisory Service 24 analysts, and has established relationships with approximately 140 external IT practitioners as part of its ExperNet network. The Company seeks to hire analysts who have significant experience in existing and emerging areas of technology covering computer infrastructure, applications and development, networking and telecommunications and IT management. . Increase Penetration of Existing Customers. The Company seeks to expand its relationships with existing customers both by increasing the number of individual subscribers within an organization and by upgrading the status of subscribers from site license seat holders (who only have access to the Company's research databases) to members (who have full access to all of the Company's Continuous Information Services and may make inquiries to the Company's analysts and ExperNet practitioners). The Company will also seek to increase its penetration of existing accounts by developing and offering additional services, such as its Relevance Services, events, publications, consulting and econometric forecasting. . Leverage Technological Innovation. The Company seeks to take advantage of technological developments to enhance both the creation and delivery of its research and analyses to customers. For example, the Company has developed GigaWeb using both its own proprietary technology and licensed third-party technologies. The Company plans to continue to evaluate and implement technologies that can help to facilitate the flow of information between the Company and its customers. . Expand Worldwide Sales Force and Marketing. The Company's global strategy is to increase its market penetration on a worldwide basis. The Company plans to approximately double its worldwide direct sales force in the next six months and to continue to expand its sales force in the future. At August 31, 1996, the Company had 51 sales personnel worldwide. The Company also plans to expand its market presence through events and publications, the World Wide Web, direct mail, public relations, telesales, and additional strategic alliances. 25 SERVICES AND PRODUCTS The Company's three principal service and product areas are the Giga Advisory Service, Relevance Services and Information Products. The Company's services and products are designed to be accessed through the Company's personalized Internet-based interface, GigaWeb, as well as through published reports and consultation with the Company's analysts and consultants. -------------------- | GIGA INFORMATION | | GROUP | -------------------- | ---------------------------------------------------------- | | | | ------------------------- | | | GIGA ADVISORY | | - --------------------- | SERVICE | ----------------------- | RELEVANCE SERVICES | | | |INFORMATION PRODUCTS | | | |Continuous subscription-| | | | Survey/methodology | | based advisory service | | | | based research | | | | | | services combined | | ExperNet Network | |Events, Publications,| | with consulting | -------------------------- | Consulting and | |focusing on specific| | | Econometric | | user needs | | | Forecasting | - ---------------------- | ----------------------- | | | ---------------------------------------------------------- | GIGA WEB | | Internet-based information delivery system for | | proprietary research and third-party content | ---------------------------------------------------------- GIGA ADVISORY SERVICE The Company's Giga Advisory Service is the principal service offering of the Company. The Giga Advisory Service offers customers, generally for an annual subscription fee billed and payable in advance, access to all of the Company's Giga Advisory Service information, analysis and advice, as well as inquiry access to analysts and practitioners, and participation in briefings, conferences and teleconferences. The Giga Advisory Service offers the following deliverables to its customers: . PAs (Planning Assumptions). PAs are typically multi-page research reports that provide customers with in-depth analyses of IT topics and recommendations for action. Through August 31, 1996, the Company had produced approximately 465 PAs. . CQAs (Catalyst, Question and Answer). CQAs are brief presentations of developments or ideas, in question and answer format, that are intended to provide customers with quick, up-to-date findings and opinions, authored by the Company's analysts. Through August 31, 1996, the Company had produced approximately 3,000 CQAs. . Inquiry Support. The Company maintains a "Knowledge Center," which consists of experienced research associates who track customer inquiries and direct customers to the appropriate analyst or source of information. Customers also have direct access to the Company's analysts to answer specific questions. Customers can make their inquiries and track the status of an inquiry on-line through GigaWeb. 26 . ExperNet. ExperNet is a network of external IT practitioners who are available to respond to customer inquiries that require hands-on, practical advice. ExperNet practitioners may include consultants, system integrators, value-added resellers, IT vendor representatives and developers. The Company has developed a multi-dimensional database organized by topic that enables customers to access the particular ExperNet practitioner whose experience and skills match the customer's IT area of inquiry. Customers can direct their ExperNet inquiries to the Knowledge Center by telephone. The Company reimburses its ExperNet practitioners on a fee basis per customer inquiry. In addition, the Company permits its ExperNet practitioners to enter into follow-on consulting arrangements with the Company's customers for which Giga currently receives no compensation. . Events. The Company sponsors conferences on significant IT industry issues and trends. Since the beginning of 1996, Giga had sponsored or co- sponsored six conferences addressing various industry topics in North America and Europe, with attendance exceeding approximately 1,700 participants, and plans to sponsor or co-sponsor five additional conferences prior to the end of 1996. . GigaTels. GigaTels are audio-teleconferences that include presentations by analysts on selected topics and provide an open forum for questions, exchanges and debate. GigaTels typically take place from three to five times per week. Through August 31, 1996, the Company had produced over 70 GigaTels with over 1,000 participants. . Workgroups. Customers who have shared objectives or interests will be able to interact with each other through on-line discussion groups (electronic forums) and special interest groups, which the Company plans to introduce in the fourth quarter of 1996. Also, customers can respond to a PA by initiating discussion among analysts and other users of GigaWeb. . Partner Content. In May 1996, the Company entered into a content distribution agreement with Dow Jones & Company, Inc. ("Dow Jones") pursuant to which Dow Jones granted the Company a nonexclusive right to distribute and make available to GigaWeb users IT industry news and information via access to several leading business-oriented news sources, including Dow Jones Online News, The Wall Street Journal Interactive, Public Relations Newswire, and Canada Businesswire. The agreement is for an initial term ending in November 1997 and is renewable yearly thereafter. As a result of this collaboration, a user can, using the Company's Smart Search technology, supplement original Giga content with up-to-date news and information. Giga plans to add additional suppliers of third-party content in the future. At August 31, 1996, the Company employed 32 analysts to support its Giga Advisory Service and had relationships with approximately 140 external IT practitioners to support its ExperNet network. In addition, the Company employed 44 research and analysis support and fulfillment personnel. The Company plans to broaden its research and analysis coverage both by hiring additional analysts and by recruiting additional external IT practitioners for the ExperNet network. The Company actively monitors technology trends and industry issues. The Company's research process is designed to produce timely analysis that is responsive to day-to-day IT developments. In their research, analysts identify significant patterns from a broad range of inputs, formulate original ideas, collaborate with other Company analysts to refine these ideas, and document the results. 27 The following table sets forth certain technology areas covered by the Company's Giga Advisory Service: - -------------------------------------------------------------------------------- GIGA ADVISORY SERVICE RESEARCH COMPETENCIES - -------------------------------------------------------------------------------- MANAGEMENT OF IT APPLICATIONS AND SOLUTIONS . Asset Management . Application Development . Costs of Ownership Tools and Methods . Financial Strageties for IT . Object Technology . Help Desk and Customer Support . Packaged Solutions . Intellectual Property and Licensing . Personal Productivity . Organizing the IT Function . Programming Environments . Outsourcing . Web Development Tools . Process Management . Workgroup and Workflow . Project Management Computing . Quality and Testing . Re-engineering IT . Year 2000 Problem - -------------------------------------------------------------------------------- COMPUTER INFRASTRUCTURE NETWORKING AND COMMUNICATIONS . Client-Server Architectures . Electronic Commerce . Data Management on the Internet . Data Mining . Internet Security . Desktop Computing . LAN Hardware and Software Hardware . Network Operating Systems . Middleware . Private Networking . Operating Systems . Protocols and Interoperability . Server Hardware . Public Networking . Storage Management . Remote Access . Systems Configuration . Telecommunications and Management Environment . Transaction Processing . Web Browsers and Clients . Web Servers . Wireless Networking - -------------------------------------------------------------------------------- RELEVANCE SERVICES The Company has begun to offer a series of Relevance Services, which combine original analysis, data, and information produced by proprietary surveys and methodologies with consulting, to assist in enhancing the IT practices and operations of Giga's customers. The Company believes its Relevance Services will be used by IT management to evaluate competitive industry practices, benchmark their IT practices against peer practices and assist in decision support. In July 1996, the Company introduced the first of its Relevance Services which will consist of several studies relating to best industry practices ("Best Practices") for IT management job functions. The initial Relevance Service focuses on the human resources management function within organizations, and illustrates tested IT Best Practices of individuals performing that function. The first study within this service covers skills assessment and management best practices. Results of each Relevance Service will be furnished to customers through the studies, peer group meetings, GigaWeb-facilitated collaborations and periodic on-site visits by the Company's consultants. 28 The Company also plans to develop additional Relevance Services addressing other customer IT needs. One such planned service will assist clients in determining the benefits, productivity and returns from IT assets and investments. The Company is also developing Relevance Services that will focus on specific IT industry sectors and vertical applications. INFORMATION PRODUCTS Giga offers discrete information products which are not subscribed to on a continuous basis, including separately-priced events, publications, consulting services and econometric forecasting. Events. Through the acquisition of BIS, Giga acquired a conference development and management operation that produced more than 20 IT industry events in 1995 in the U.S. and Europe. In the first half of 1996, the Company sponsored or co-sponsored six events and five half-day briefings and plans to conduct five additional events and six half-day briefings during the remainder of 1996. The events are targeted to IT users and vendors, and cover such topics as business process reengineering, workflow, electronic commerce, mobile and wireless communications and data warehousing. The Company's events typically draw between 200 and 500 participants per conference and are designed to showcase its analysts and encourage networking among participants. The Company establishes strategic alliances with prominent industry associations, consulting firms, and publishing houses to enhance the quality of its conferences and gain marketing leverage. For example, the Company has relationships with Arthur D. Little, Inc. with which the Company co-sponsors conferences, Smith Bucklin, Inc. and Decision Support Technology, Inc. These relationships supplement the Company's marketing communications programs and help build awareness of the Giga name. Publications. The Company's publications business includes special reports and newsletters. The Company plans to publish approximately 35 reports and newsletters in 1996. These reports include original content as well as contributions from outside authors. Consulting. The Company offers engagement-based consulting that focuses on solving specific customer problems in areas such as market and product line strategy, competitive positioning, channel dynamics, product life cycle analysis, feature and functional specification requirements and market demand analysis. At August 31, 1996, the Company provided these consulting services through 11 consultants located at the Company's facilities in the United States, Europe and Australia. Econometric Forecasting. The Company's Australian subsidiary specializes in supporting a diverse range of industries with a mix of econometric forecasting and modeling, market research, and market analysis services. This organization offers customers multi-client studies, subscription-based information services in key industry sectors, including information technologies, building and construction, economics and government, financial services, manufacturing and commercial property. GIGAWEB GigaWeb is the Company's Internet-based information delivery interface. GigaWeb provides customers with on-line access to the Company's analysts, research and reports and third-party content. Customers who have shared objectives or interests can interact with each other through on-line discussion groups, such as electronic forums. GigaWeb is designed to optimize the search and retrieval of the information and analyses by enabling the selection and management of information from multiple sources based on the customer's specific needs. GigaWeb is designed to make it easy and efficient for a customer to navigate through the full spectrum of Giga's original research and third-party content. Subscribers to GigaAdvisory are provided with a personalized home page (the "Virtual Office") which may be accessed through a password using a standard Web browser. 29 Based on the individualized customer profile, GigaWeb automatically selects the particular subset of Giga original and third-party content most relevant to the customer and delivers it to the customer's Virtual Office. In addition, GigaWeb includes search technologies that enable customers to search for relevant information using word searches, concept and topic associations. GigaWeb also incorporates intelligent software agents that are designed to accept predetermined search criteria and apply them on a repetitive basis against selected sources of information, alerting the customer only when the criteria under which the agent is operating finds a match. These technologies enable the Company to provide customized information to each customer and also allow customers to search for and select information most relevant to their particular needs. GigaWeb is based on both proprietary and third-party software, including both text indexing and retrieval. The Company plans to continue to evaluate and implement technologies that can help facilitate the flow of information from the Company to its customers. For example, the Company has established an authoring environment based on Lotus Notes that automatically feeds research findings over GigaWeb. The Company also offers an alternative on-line delivery mechanism, GigaNotes, for customers that use the Lotus Notes platform for collaboration and information access. SALES, MARKETING AND CUSTOMERS At August 31, 1996 the Company had a North American direct sales force comprised of 41 field sales personnel. The Company's internal marketing organization, comprised of 12 marketing personnel located primarily at the Company's Norwell, Massachusetts facility, provide public relations, lead generation, direct mail support and other related services. The Company plans to approximately double its domestic sales force over the next six months and to continue to substantially expand its domestic marketing organization. The Company also plans to develop a domestic telemarketing group. At August 31, 1996 the Company had an international sales and marketing force of 10 sales personnel in Europe and Asia Pacific. The Company plans to expand its international sales force over the next six months and to explore the development of alternative worldwide distribution channels. The Company offers its Giga Advisory Service pursuant to subscription agreements which generally provide for payment promptly following the start of the subscription period and renew automatically each year unless cancelled by the customer. The Company initially records contractual subscription fees as deferred revenue and recognizes the revenue on a pro rata monthly basis over the term of the contract. The Company has three categories of subscribers: members (who have full access to original and third party content and may make inquiries to the Company's analysts and ExperNet practitioners); users (who have access only to to the Company's research databases and partner content), and site license seat holders (who have access to the Company's research databases). The Company's list annual subscription fee for these services is currently $12,000 per member, $1,200 per user and $150 per site license seat holder for up to 250 site license seats after which the price per site license seat varies. The Company also offers volume discounts and transaction-based options to qualified customers. The Company offers its Relevance Services pursuant to subscription agreements which provide for payment in full promptly after the start of the subscription period and renew automatically each year unless cancelled by the customer. The Company's annual list subscription fee for its Relevance Services ranges between $24,000 and $36,000 per customer. The Company initially records contractual subscription fees as deferred revenue and recognizes the revenue on a pro rata monthly basis over the term of the contract. The Company believes that a leading measure of the Company's anticipated future Continuous Information Services revenue is the annual value ("AV") of its Giga Advisory Service and Relevance Services subscription agreements. The Company calculates AV each month as the cumulative annualized value of all subscription agreements which either commence or continue on the first day of the following month, without regard to contract duration or cancellation risk. Agreements may be included in AV even though final terms and conditions may not have been agreed upon; however, revenues will not begin to be recognized from these agreements until all terms and conditions are finalized. 30 AV has grown every month since the introduction of the Company's Giga Advisory Service and at August 31, 1996 totalled approximately $4.2 million, excluding approximately $1.1 million of subscriptions sold to former customers of the BIS Market Research Business. The table set forth below shows the Company's cumulative monthly AV and customer growth since the introduction of the Company's Giga Advisory Service in April 1996. No assurance can be given that the Company's AV will continue to grow, and actual AV levels may differ materially in future periods.
CUMULATIVE CUMULATIVE AV FOR GIGA CUSTOMER 1996 ADVISORY SERVICE(1) ORGANIZATIONS ---- ------------------- ------------- April................................... $ 484,000 27 May..................................... 1,097,000 59 June.................................... 2,324,000 109 July.................................... 3,257,000 143 August.................................. 4,216,000 171
-------- (1) Excludes $1.1 million of AV realized prior to April 1996 with respect to subscriptions sold to customers of the BIS Market Research Business. Customers of the Company's Giga Advisory Service include: AIG IBM Alcatel Mobile Phones KPMG Peat Marwick LLP The Boeing Co. Lexmark International Group, Inc. Colonial Penn Insurance Company National Cash Register Company Digital Equipment Corporation Oracle Corporation Duracell Inc. Safeguard Scientifics, Inc. First USA Bank Southwestern Bell Telephone Company COMPETITION The Company competes in the IT information services and products market directly with other independent providers of Continuous Information Services including Gartner Group, Inc., META Group, Inc. and Forrester Research Inc, and will compete with the internal planning, research and marketing staffs of current and prospective customer organizations. The Company also competes indirectly with other information providers, including market research firms, "Big Six" accounting firms, consulting companies and system integrators. Many of the Company's direct and indirect competitors have substantially greater financial information gathering and marketing resources than does the Company. Some of the Company's direct and indirect competitors also have established research organizations with greater market recognition and experience in the IT industry. There can be no assurance that the Company will continue to be successful in establishing a competitive research organization. Delays, difficulty in developing and achieving market acceptance of the Giga Advisory Service and Relevance Services or customer dissatisfaction would have a material adverse effect on the Company's business, financial condition and results of operations. While the Company believes it can compete successfully on the basis of price, quality, distinctiveness, and responsiveness to customers, there are few barriers to entry into the Company's market and new competitors could readily seek to compete in one or more market segments addressed by the Company's products and service. There can be no assurance that the Company's current or potential competitors will not develop services and products comparable or superior to those developed by the Company or respond more quickly to new or emerging industry trends or changing customer requirements. Increased competition, direct and indirect, could adversely affect the Company's operating results through pricing pressure and loss of market share. There can be no assurance that the Company will be able to compete successfully against existing or new competitors. In addition, any pricing pressures, reduced margins or loss of market share resulting from increased competition could have a material adverse effect on the Company's business, financial condition or results of operations. 31 BIS STRATEGIC DECISIONS ACQUISITION The Company acquired BIS in April 1995 to obtain its marketing, sales, and other corporate infrastructures and certain of its personnel. BIS was engaged in compiling and providing data-intensive market research to vendors for use primarily in planning their product offerings and marketing programs. The BIS Market Research Business offerings were principally quantitative in nature; employed in large part relatively junior data specialists; marketed to purchasers of quantitative research; included little high level advice and analysis; were marketed in multiple separate service offerings; and focused principally on vendors. In contrast, the Company's strategic business plan focuses on qualitative, analytical information and advice addressed to meet a broader range of customers; employs a single, integrated continuous information model; contemplates building a cadre of high-level research analysts and other professionals who are peers of its target customers to develop original ideas and knowledge; and concentrates marketing of its services and products to senior decision makers to support their critical IT decisions. The BIS Market Research Business did not fit with Giga's own business model. Accordingly, in June 1996 the Company decided to discontinue the BIS Market Research Business, including termination of the personnel employed in developing and compiling its data-intensive market research products; assignment of its obligations under existing BIS subscription agreements to two unrelated IT service providers; and cessation of operations at its two leased facilities in England. See "Risk Factors--Risks Associated With Discontinuance of BIS Market Research Business." EMPLOYEES As of August 31, 1996, the Company employed 247 persons (excluding employees from the Company's discontinued BIS Market Research Business), including 50 analysts, 44 research and analysis support and fulfillment personnel, 51 sales personnel, 20 conferences, events and publications personnel, 12 marketing personnel, 11 consultants and 59 administrative and operational personnel. Of such employees, 100 are located at the Company's facilities in Cambridge and Norwell, Massachusetts, 67 are located at other domestic facilities or home offices and 80 are located overseas. None of the Company's employees is represented by a collective bargaining arrangement and the Company has experienced no work stoppages. The Company considers its relations with employees to be good. FACILITIES The Company's headquarters are located in approximately 8,000 square feet of office space in Cambridge, Massachusetts. This facility, together with the Company's approximately 27,000 square feet Norwell facility, accommodate corporate administration, research and analysis, marketing and sales and customer support. The lease on the Cambridge facility expires in November 2000 and the lease on the Norwell facility expires in April 1998. The Company also leases office space in four other domestic and seven international locations to support its research and analysis, domestic and international sales efforts and other functions. The Company believes its existing facilities and expansion options are adequate for its current needs and that additional facilities will be available for lease on reasonable terms to meet future needs. LEGAL PROCEEDINGS In July 1996, Alan J. Green, a former employee of the Company, filed a lawsuit against the Company and Gideon I. Gartner in the United States District Court for the Southern District of New York. In his complaint, Mr. Green alleged that the Company breached an oral employment agreement with him by failing to pay him certain compensation. In connection with this claim, Mr. Green is seeking damages of approximately $2,200 in cash; at his option, either the right to purchase 60,000 shares of Common Stock at a purchase price of $.50 per share or payment of an amount of money equal to the fair market value of 60,000 shares on the date that judgment is entered less $30,000; and an option to purchase an additional 60,000 shares of Common Stock at an exercise price of $0.50 per share. Mr. Green also alleged that the Company and Mr. Gartner, among other things, made fraudulent representations in inducing him to accept employment with the Company, and with respect to this claim Mr. Green is seeking compensatory damages of $2.5 million and punitive damages of $1.0 million. The Company believes it has meritorious defenses and intends to vigorously defend itself against these claims. 32 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company are as follows:
NAME AGE Position ---- --- -------- Gideon I. Gartner 61 Chairman of the Board of Directors and Chief Executive Officer Kenneth E. Marshall 43 President and Chief Operating Officer; Director David L. Gilmour 38 Senior Vice President, Research & Technology; Director Richard B. Goldman 50 Senior Vice President, Chief Financial Officer; Treasurer; Secretary Leander R. Jennings, Jr. 36 Senior Vice President, Worldwide Sales Jeffrey L. Swartz 42 Senior Vice President, Marketing Operations, Events, Publications Neill H. Brownstein 52 Director Richard L. Crandall 53 Director Irwin Lieber(1)(2) 57 Director James D. Robinson III(1)(2) 60 Director
- -------- (1) Member of Compensation Committee (2) Member of Audit Committee MR. GARTNER has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since its inception in March 1995. From 1993 to 1994, he was a private investor. From 1991 to 1992, he served as Chairman, and from 1979 to 1991 he served as President, Chairman and Chief Executive Officer, of Gartner Group, Inc., an information technology company which he founded. From 1972 to 1979, he served as a technology analyst and subsequently as a partner at Oppenheimer & Co., an entity engaged in the financial services business. Mr. Gartner received his B.S. in engineering from Massachusetts Institute of Technology ("MIT") and received an M.A. in management from MIT's Sloan School. MR. MARSHALL has served as President and Chief Operating Officer and as a director of the Company since December 1995. From 1990 to 1995, he served as President and Chief Executive Officer of Object Design, Inc., a computer software company ("Object Design"). From 1985 to 1989, he held a variety of management positions, the last being Group Vice President, East Operations, at Oracle Corporation, a computer software company ("Oracle"). From 1979 to 1985, he served as a consultant at Planmetrics, Inc., a management consulting firm. Mr. Marshall received his B.S. in education from Northeastern University and his M.A. in economics from Boston College. MR. GILMOUR has served as Senior Vice President, Research & Technology of the Company since April 1996 and as a director of the Company since July 1995. From December 1995 to April 1996, he served as Senior Vice President of Technology of the Company. From July 1993 to December 1995, he served as Chief Executive Officer of ExperNet Corporation ("ExperNet"), an information technology company which he founded with Mr. Gartner. From October 1992 to April 1993, Mr. Gilmour served as acting President and Chief Executive Officer, and from April 1991 to October 1992 and from April 1993 to July 1993 he served as Executive Vice President, Marketing, of Versant Object Technology Corporation, a computer software company. From 1989 to 1991, he served as Vice President--Database Systems Division, from 1986 to 1989 he served as General Manager--Advanced Products Division, and from 1984 to 1986 he served as Director--Product Planning, at Lotus 33 Development Corporation, a software company. Mr. Gilmour received a B.S. in Applied Physics, an M.E. in engineering and an M.B.A. with distinction from Harvard University. MR. GOLDMAN has served as Senior Vice President and Chief Financial Officer since May 1996, and as Treasurer and Secretary of the Company since August 1996. From October 1992 to May 1996, he served as Executive Vice President, Finance and Chief Financial Officer of Sequoia Systems, Inc., a manufacturer of fault tolerant servers, mobile computers and other computer products. From May 1991 to October 1992, he served as Senior Vice President, Finance and Chief Financial Officer for Connell Limited Partnership, a multi-business industrial equipment manufacturing company. From 1990 to 1991, he served as Senior Vice President, Finance and Administration and Chief Financial Officer of Alliant Computer Systems Corporation, a manufacturer of super computers. From 1978 to 1989, he served in a number of management capacities at Prime Computer, Inc., a supplier of mini computers and CAD/CAM services and products, the last of which was as Senior Vice President, Finance and Administration and Chief Financial Officer from 1988 to 1989. Mr. Goldman received a B.S. in accounting from Northeastern University and an M.B.A. in finance from Boston University. MR. JENNINGS has served as Senior Vice President, Worldwide Sales of the Company since February 1996. From June 1995 to February 1996, Mr. Jennings served as National Product and Sales Manager of the Telecom, Cable and Wireless Division of Oracle. From 1991 to June 1995, he served as the Western Regional Director of Object Design. From 1990 to 1991, he served as Vice President of Sales of Carlyle Sales, Inc., a developer of library automation systems. Mr. Jennings received a B.A. from Boston College. MR. SWARTZ has served as Senior Vice President, Marketing Operations, Events and Publications since April 1996. From March 1995 to February 1996, he served as Vice President, Conferences and Publications of the Company. From 1989 until 1995, he served in a number of capacities at BIS Strategic Decisions, Inc., serving as interim Co-CEO from January until March 1995, as Senior Vice President, Conferences and Publications Division from 1994 to 1995, as Senior Vice President, Consulting from 1992 to 1994, and as Vice President, Research Publications from 1989 to 1992. From 1986 to 1989 he served as an independent consultant, and from 1982 to 1986 he served as President, at Communications Publishing Group, Inc., a newsletter publishing company which he founded. Mr. Swartz received a B.S. in psychology from Boston College. MR. BROWNSTEIN has served as a director of the Company since July 1995 and has served as an advisor to the Company since its inception. Since January 1995, he has been a private investor. From 1970 to January 1995, Mr. Brownstein was associated with Bessemer Securities Corporation and was a founder and General Partner of three affiliated venture capital funds: Bessemer Venture Partners L.P., Bessemer Venture Partners II L.P. and Bessemer Venture Partners III L.P., for which he currently serves as a Special General Partner. Since 1970, he has been president of Neill H. Brownstein Corporation, an investment management counseling enterprise. He serves as a director of DSP Communications, Inc. Mr. Brownstein received a B.A. from Columbia College and an M.B.A. from the Kellogg School of Management at Northwestern University. MR. CRANDALL has served as a director of the Company since August 1995. Since April 1994, he has served as Chairman, and from 1970 until April 1994 he served as President and Chief Executive Officer, of Comshare, Incorporated, a software company which he founded ("Comshare"). He currently serves on the Board of Directors of Comshare, Computer Task Group, Incorporated and Diebold, Incorporated. Mr. Crandall received a B.S. in electrical engineering, a B.S. in mathematics and an M.S.E. in industrial engineering, each from the University of Michigan. MR. LIEBER has served as a director of the Company since November 1995. Since 1979, he has served as Chairman and Chief Executive Officer of Geo Capital Corporation, a investment advisory firm which he founded. Additionally, Mr. Lieber has served as a corporate officer of InfoMedia Associates Ltd., a general partner of 21st Century Communications Partners, L.P., an investment fund. From 1970 to 1979, Mr. Lieber was a General Partner of First Manhattan Co., an investment management, brokerage and investment banking firm. Mr. Lieber is a director of LeaRonal Inc. He received a B.S. degree in electrical engineering from City College of New York and an M.S. degree in electrical engineering from Syracuse University. 34 MR. ROBINSON has served as a director of the Company since August 1995. Since 1994, Mr. Robinson has served as Chairman and Chief Executive Officer of RRE Investors, L.L.C., a venture capital firm which he co-founded. From 1977 to 1993, Mr. Robinson served as Chairman and Chief Executive Officer of the American Express Company and held a series of executive positions with American Express Company from 1970 to 1976. Mr. Robinson is a director of The Coca-Cola Company, Union Pacific Corporation, Bristol-Meyers Squibb Company, First Data Corporation, New World Communications Group, Incorporated, Alexander & Alexander Services Inc. and Cambridge Technology Partners (Massachusetts), Inc. Mr. Robinson received a B.S. from the Georgia Institute of Technology and an M.B.A. from Harvard University. Following the Offering, the Board of Directors will be divided into three classes, each of whose members will serve for a staggered three-year term. The Board will consist of three Class I Directors (Messrs. Gilmour, Crandall and Lieber), two Class II Directors (Messrs. Marshall and Brownstein) and two Class III Directors (Messrs. Gartner and Robinson). At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed directors of the same class whose term is then expiring. The terms of the Class I Directors, Class II Directors and Class III Directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders held during the calendar years 1997, 1998 and 1999, respectively. Certain of the current directors of the Company were nominated and elected in accordance with a stockholders voting agreement. This agreement will terminate upon the consummation of the Offering. See "Certain Transactions." Mr. Marshall serves on the Board of Directors pursuant to the terms of his Employment Agreement. See "--Executive Compensation." Each officer serves at the discretion of the Board of Directors. There are no family relationships among any of the directors and executive officers of the Company. BOARD COMPENSATION Each non-employee director is reimbursed for expenses incurred in connection with his attendance at meetings of the Board of Directors and committees thereof. Directors who are employees of the Company currently receive no compensation for serving as directors. For a discussion of transactions between the Company and certain directors of the Company, see "Certain Transactions." 35 EXECUTIVE COMPENSATION The following table sets forth the compensation for the fiscal year ended December 31, 1995 for the Company's Chief Executive Officer and the Company's other most highly compensated executive officer whose annual cash compensation exceeds $100,000 (the Chief Executive Officer and such other executive officer are hereinafter referred to as the "Senior Executives"): SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION AWARDS --------------------- ------------ NUMBER OF SECURITIES NAME AND UNDERLYING PRINCIPAL POSITION SALARY($)(1) BONUS($) OPTIONS ------------------ ------------ -------- ------------ Gideon I. Gartner............................ 0(2) 0 660,000 Chairman of the Board of Directors and Chief Executive Officer David L. Gilmour(3).......................... 129,838 0 120,000 Senior Vice President, Research & Technology; Director
- -------- (1) Includes amounts payable in 1995 and/or 1996 for services rendered by the Senior Executives in 1995. Other compensation in the form of perquisites and other personal benefits has been omitted because it constitutes the lesser of $50,000 or ten percent of the total annual salary and bonus of each of the Senior Executives in 1995. (2) In 1995, Mr. Gartner was paid no compensation for his services as Chairman of the Board of Directors and Chief Executive Officer of the Company. In 1996, Mr. Gartner will receive annual compensation and will be entitled to receive a cash bonus in such amount as shall be determined by the Board of Directors or Compensation Committee thereof. (3) In 1995, Mr. Gilmour served as Chief Executive Officer of ExperNet, which became a wholly-owned subsidiary of the Company in that year. The following table sets forth certain information regarding options granted by the Company to each of the Senior Executives during the fiscal year ended December 31, 1995: OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ---------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER ANNUAL RATES OF OF PERCENT OF EXERCISE STOCK PRICE SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR UNDERLYING GRANTED TO PER OPTION TERM($)(1) OPTIONS EMPLOYEES IN SHARE EXPIRATION ----------------- GRANTED FISCAL YEAR ($) DATE 5% 10% ---------- ------------- -------- ---------- -------- -------- Gideon I. Gartner....... 500,000(2) 16.1% $0.50 10/16/05 $157,224 $398,436 160,000(2) 5.1 0.50 07/06/05 50,312 127,499 David L. Gilmour........ 120,000(3) 3.9 0.50 07/06/05 37,734 95,625
- -------- (1) The amounts shown on this table represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. These gains are based on assumed rates of stock appreciation of 5% and 10%, compounded annually from the date the respective options were granted to their expiration date. The gains shown are net of the option exercise price, but do not include deductions for taxes or other expenses associated with the exercise. Actual gains, if any, on stock option exercises will depend on the future performance of the Common Stock, the optionholders' continued employment through the option period and the date on which the options are exercised. (2) These stock options are immediately exercisable. (3) Twenty-five percent of the shares subject to the option vest on July 6, 1996 and one thirty-sixth of the remaining shares vest monthly thereafter. 36 The following table sets forth certain information concerning stock options held as of December 31, 1995 by each of the Senior Executives: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS NUMBER OF AT FISCAL YEAR-END AT FISCAL YEAR END(1) SHARES ACQUIRED VALUE ------------------------- ------------------------- NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ---- --------------- -------- ------------------------- ------------------------- Gideon I. Gartner....... 0 0 660,000/ 0 $6,207,000/$ 0 David L. Gilmour........ 0 0 0 /120,000 $ 0 /$1,140,000
- -------- (1) Represents the total gain which would be realized if all in-the-money options held at December 31, 1995 were exercised, determined by multiplying the number of shares underlying the options by the difference between the per share option exercise price and the assumed initial public offering price of $10.00 per share. An option is in-the-money if the fair market value of the underlying shares exceeds the exercise price of the option. Employment Agreements Gideon I. Gartner. The Company has entered into a non-competition agreement with Mr. Gartner, dated November 13, 1995, pursuant to which Mr. Gartner has agreed not to compete with the Company, solicit any employee or take away any customer of the Company either during his employment with the Company or for so long thereafter as the Company continues to pay Mr. Gartner annual compensation of at least $120,000 (whether as an employee, consultant or in the form of severance or post-employment benefits). Kenneth E. Marshall. Mr. Marshall serves as President and Chief Operating Officer pursuant to the terms of a five-year employment agreement with the Company, dated December 1, 1995. During the term of his employment, Mr. Marshall will serve as a director of the Company and will have the right to recommend one person to serve on the Board of Directors. Mr. Marshall is entitled to a base salary of $160,000 and a guaranteed bonus of $80,000 for 1996, and a base salary of $192,000 and a target bonus of $96,000, of which $48,000 is guaranteed, for 1997. Pursuant to the employment agreement, Mr. Marshall was granted a stock option to purchase 600,000 shares of Common Stock at an exercise price of $0.50 per share and received a loan from the Company in the amount of $20,000. Twenty-five percent of the shares subject to the option vest on January 31, 1997 and one thirty-sixth of the remaining shares vest monthly thereafter. In addition, the Company has agreed to grant Mr. Marshall an option to purchase 80,000 shares of Common Stock if the Company achieves certain goals for the year ended December 31, 1996. If Mr. Marshall terminates his employment for cause or is terminated by the Company other than for cause, the agreement provides for a severance payment of $160,000 in the event termination occurs prior to January 31, 1997, or, in the event such termination occurs on or following January 31, 1997, 50% of his average annual base salary during the twelve months prior to such termination. In addition, Mr. Marshall has agreed not to compete with the Company either during his employment and for a period of one year thereafter. David L. Gilmour. Mr. Gilmour serves as Senior Vice President, Research & Technology pursuant to the terms of a two-year employment agreement, dated July 6, 1995, with ExperNet, at the time a majority-owned subsidiary of the Company, to which the Company is successor by reason of the merger of ExperNet with the Company. Pursuant to the terms of the employment agreement, Mr. Gilmour was elected to serve as a director of the Company. Mr. Gilmour was entitled to receive a salary of $90,000 per year through August 1995 and a salary of $160,000 per year commencing on September 1, 1995. If Mr. Gilmour is terminated without cause before July 6, 1997, he is entitled to a severance payment equal to one year's salary and thirty percent of all unvested options become immediately exercisable. If Mr. Gilmour is terminated without cause, he has agreed to provide the Company with consultation services for up to one- quarter time for one year after such termination. 37 He also has agreed that he will not engage in any activities that are designed to impact the Company negatively in the marketplace, which agreement will terminate on the latter to occur of one year after such termination or the date Mr. Gilmour divests himself of all shares of the Company's capital stock then owned by him. Leander R. Jennings, Jr. Mr. Jennings serves as Senior Vice President, Worldwide Sales pursuant to the terms of an employment agreement with the Company, dated February 1, 1996. The employment agreement terminates on June 30, 1997. Mr. Jennings is entitled to receive a base salary of $120,000, plus commissions and relocation expenses, for the first twelve months, and thereafter as may be determined by the Compensation Committee of the Board of Directors. Pursuant to the employment agreement, Mr. Jennings was granted an option to purchase 120,000 shares of Common Stock at $.60 per shares. Twenty- five percent of the shares subject to the option vest on February 1, 1997 and one thirty-sixth of the remaining shares vest monthly thereafter. Mr. Jennings is also entitled to receive additional options if certain sales quotas are met in 1997. If his employment is terminated by the Company other than for cause, the agreement provides for a severance payment equal to the greater of (i) the base salary he would have received had his employment not been so terminated and (ii) the amount that would be payable to Mr. Jennings for the greater of the remainder of his term of employment or six months. In addition, Mr. Jennings has agreed not to compete with the Company either during his employment by the Company and for a period of one year thereafter. Stock Plans 1995 Stock Option/Stock Issuance Plan. The Company's 1995 Stock Option/Stock Issuance Plan, as amended (the "1995 Stock Plan") was adopted by the Board of Directors in September 1995 and was approved by the stockholders in February 1996. Under the terms of the 1995 Stock Plan, the Company is authorized to make awards of restricted stock and to grant incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("incentive stock options"), and stock options not intended to qualify as incentive stock options ("non-statutory stock options"), to employees, officers and directors of, and consultants and advisors to, the Company and its subsidiaries. A total of 6,000,000 shares of Common Stock may be issued upon the exercise of options or restricted stock awards granted under the 1995 Stock Plan. The Board of Directors is authorized to select the option recipients and to determine the kind and terms of each option, including (i) the number of shares of Common Stock subject to each option, (ii) the option exercise price, (iii) the vesting schedule of the option, and (iv) the duration of the option. Options are generally not assignable or transferable except by will or the laws of descent and distribution. Restricted stock awards under the 1995 Stock Plan entitle the recipient to purchase Common Stock from the Company under terms which provide for vesting over a period of time and a right of repurchase of unvested stock by the Company when the recipient's relationship with the Company terminates. The Board of Directors is authorized to select the recipients of restricted stock awards and to determine the terms of each award, including (i) the dates on which restricted stock awards are made, (ii) the number of shares of Common Stock subject to the award, (iii) the purchase price (which can be less than the fair market value of the Common Stock) of the award, and (iv) the vesting schedule of the award. The recipients may not sell, transfer or otherwise dispose of shares subject to a restricted stock award until such shares are vested. Upon termination of the recipient's relationship with the Company, the Company will be entitled to repurchase those shares which are not vested on the termination date at a price equal to their original purchase price. At August 31, 1996, 2,987,253 shares of Common Stock were available for future grant under the 1995 Stock Plan. However, in connection with the adoption of the 1996 Option Plan (defined below), the Board of Directors amended the 1995 Stock Plan to provide that all future options would only be granted under the 1996 Option Plan. 1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by the Board of Directors, subject to approval by the stockholders of the Company, in August 1996. The 1996 38 Option Plan provides for the grant of stock options to employees, officers and directors of, and consultants or advisors to, the Company and its subsidiaries. Under the 1996 Option Plan, the Company may grant incentive stock options or non-statutory stock options. Incentive stock options may only be granted to employees of the Company. A total of 3,000,000 shares of Common Stock may be issued upon the exercise of options granted under the 1996 Option Plan. The maximum number of shares with respect to which options may be granted to any employee under the 1996 Option Plan shall not exceed 100,000 shares of Common Stock during any calendar year. The 1996 Option Plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the 1996 Option Plan, the Compensation Committee has the authority to select option recipients and to determine the kind and terms of each option, including (i) the number of shares of Common Stock subject to the option, (ii) the option exercise price, which, in the case of incentive stock options, must be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's Common Stock) of the fair market value of the Common Stock as of the date of grant, (iii) the vesting schedule of the option, and (iv) the duration of the option (which, in the case of incentive stock options, may not exceed ten years). Payment of the option exercise price may be made in cash, shares of Common Stock, a combination of cash and Common Stock or by any other method (including delivery of a promissory note payable on terms specified by the Compensation Committee) approved by the Compensation Committee consistent with Section 422 of the Code and Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Options are not assignable or transferable except by will or the laws of descent and distribution and, in the case of non-statutory options, pursuant to a qualified domestic relations order (as defined in the Code). 1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock Purchase Plan (the "1996 Purchase Plan") was adopted by the Board of Directors, subject to approval by the stockholders, in August 1996, and will become effective upon the consummation of the Offering. The 1996 Purchase Plan authorizes the issuance of up to 400,000 shares of Common Stock to participating employees. All employees of the Company, including directors of the Company who are employees, and all employees of the Company's subsidiaries whose customary employment is more than 25 hours per week and for more than six months in any calendar year, are eligible to participate in the 1996 Purchase Plan. Employees who would immediately after the grant own 5% or more of the total combined voting power or value of the Common Stock of the Company or any subsidiary are not eligible to participate. On the first day of a payroll deduction period, as designated by the Compensation Committee of the Board of Directors (the "Offering Period"), the Company will grant to each eligible employee who has elected to participate in the 1996 Purchase Plan an option to purchase shares of Common Stock. The employee may authorize a percentage (as determined by the Compensation Committee, and in no event greater than 10%) of such employee's regular pay to be deducted by the Company during the Offering Period and applied to the purchase of Common Stock. On the last day of the Offering Period, the employee is deemed to have exercised the option, at the option exercise price, to the extent of all accumulated payroll deductions. Under the terms of the 1996 Purchase Plan, the option price is an amount equal to 85% of the fair market value per share of the Common Stock on either the first day or the last day of the Offering Period, whichever is lower. No employee may purchase Common Stock under the 1996 Purchase Plan at a rate which exceeds $25,000 of the fair market value of such Common Stock (determined on the commencement date of the Offering Period) in any calendar year. The Compensation Committee may, in its discretion, choose an Offering Period of 12 months or less for each Offering Period. If an employee is not a participant of the 1996 Purchase Plan on the last day of the Offering Period, such employee is not entitled to exercise any option and the amount of such employee's accumulated payroll deductions will be refunded. An employee's rights under the 1996 Purchase Plan terminate upon voluntary withdrawal from the 1996 Purchase Plan at any time or when such employee ceases employment for any reason, 39 except that upon termination of employment because of death, the employee's beneficiary has certain rights to elect to exercise the option to purchase the shares which the accumulated payroll deductions in the participant's account would purchase on the date of death. 401(k) Profit Sharing Plan. The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan"), a tax-qualified plan covering all of its employees who are at least 21 years of age and have completed one year of service with the Company. Each employee may elect to reduce his or her current compensation by up to 10% (on a pre-tax basis). The Company matches by 25% that portion of an employee's contribution representing the first 3% of an employee's base salary and by 50% that portion representing the next 3% of an employee's base salary. All employee and Company contributions to the 401(k) Plan are fully vested at all times. Upon termination of employment, an employee may elect a lump sum distribution of all amounts contributed by him or her under the 401(k) Plan. Early withdrawals from amounts contributed under the 401(k) Plan are allowed under certain circumstances, such as disability. In addition, subject to certain restrictions, employees may take a loan drawn on contributions made by the employee under the 401(k) Plan. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee are Irwin Lieber and James D. Robinson III. 40 CERTAIN TRANSACTIONS In 1995, Mr. Gartner, Chairman of the Board of Directors and Chief Executive Officer of the Company, contributed approximately $1.0 million to the capital of the Company. In consideration for such capital contribution, the Company issued to Mr. Gartner (i) in March 1995, 4,200,000 shares of Common Stock at a purchase price of $0.02375 per share, (ii) in July 1995, 240,000 shares of Series A Preferred Stock at a purchase price of $1.25 per share, and (iii) in October 1995, 1,200,000 shares of Common Stock at a purchase price of $0.50 per share. The shares of Common Stock and Series A Preferred Stock of the Company issued to Mr. Gartner are subject to restrictions on transfer and rights of first offer pursuant to an agreement entered into in November 1995 among Mr. Gartner, the Company and certain stockholders, which agreement will terminate upon the consummation of the Offering. In addition, Mr. Gartner has made loans totalling $221,000 to ExperNet and $186,000 to the Company, which loans were repaid, together with interest thereon, in December 1995 and August 1995, respectively. In July 1995, Giga acquired all of the ExperNet shares owned by Mr. Gartner and a majority of the ExperNet shares owned by Mr. Gilmour, aggregating 77.8% of ExperNet's outstanding common stock, in exchange for (i) 160,000 shares of Series A Preferred Stock (640,000 shares on an as-converted basis) of the Company, 80,000 shares (320,000 shares on an as-converted basis) of which were issued to Mr. Gartner and 80,000 shares (320,000 shares on an as-converted basis) of which were issued to Mr. Gilmour, and (ii) the issuance to Mr. Gartner of a fully-vested option to purchase 160,000 shares of Common Stock at an exercise price of $0.50 per share. In December 1995, the Company acquired Mr. Gilmour's remaining 22.2% interest in ExperNet in exchange for a $400,000 6% Convertible Note due December 31, 2005 (the "Convertible Note"). The Convertible Note is convertible at any time after December 31, 1996 at the option of Mr. Gilmour into shares of the Company's Series B Preferred Stock pursuant to a formula set forth in the Convertible Note. The shares of Series A Preferred Stock, as well as the shares of Series B Preferred Stock issuable upon the conversion of the Convertible Note held by Mr. Gilmour, are subject to repurchase by the Company under certain circumstances. In addition, Mr. Gilmour made loans totalling $101,000 to ExperNet, which loans were repaid in full, together with interest thereon, by ExperNet in December 1995. In July 1995, the Company issued and sold an aggregate of 2,280,000 shares of Series A Preferred Stock at a purchase price of $1.25 per share to a limited number of investors, including Mr. Brownstein (240,000 shares), Mr. Crandall (60,000 shares) and Mr. Robinson (40,000 shares). In August 1995, the Company entered into a Convertible Promissory Note and Warrant Purchase Agreement (the "Note and Warrant Agreement") with RRE Giga Investors, L.P. ("RRE Giga"), pursuant to which the Company borrowed $2.0 million from RRE Giga and issued RRE Giga a convertible promissory note (the "Note") in the principal amount of $2,000,000 and a warrant to purchase 285,714 shares of Common Stock at an exercise price of $2.345 per share (the "Series B Warrant"). In November 1995, the Note was converted into 571,428 shares of Series B Preferred Stock. Mr. Robinson, a director of the Company, is Chairman and Chief Executive Officer of RRE Investors, L.L.C., the General Partner of RRE Giga. In August 1995, the Company entered into a consulting arrangement with Mr. Crandall, a director of the Company. The arrangement provided for payment to Mr. Crandall of $50,000 per annum in 1995 and $60,000 per annum in 1996. In lieu of certain payments due to Mr. Crandall, the Company issued to Mr. Crandall 120,000 shares of Common Stock at a purchase price of $0.50 per share. The shares are subject to vesting and certain restrictions on transfer. In July 1996, as compensation for the consulting services Mr. Crandall will render to the Company for the twelve month period ending June 30, 1997, the Company granted to Mr. Crandall an option to purchase 20,000 shares of Common Stock at an exercise price of $0.60 per share. Twenty-five percent of the shares subject to the option vest one year from the date of grant and one thirty-sixth of the remaining shares vest monthly thereafter. In October 1995, the Company sold to Mr. Brownstein, a director of the Company, 80,000 shares of Common Stock at a purchase price of $.50 per share. The shares are subject to vesting and certain restrictions on transfer. 41 In November 1995 and February 1996, the Company sold an aggregate of 5,272,215 shares of Series B Preferred Stock, at a purchase price of $3.50 per share, to a limited number of investors, including the following persons and entities who are directors, affiliates of directors and/or principal stockholders of the Company:
TOTAL NAME NO. OF SHARES CONSIDERATION PAID ---- ------------- ------------------- 21st Century Communications Partners, L.P..................................... 968,615 $3,390,153 21st Century Communications T-E Partners, L.P..................................... 329,560 1,153,460 21st Century Communications Foreign Part- ners, L.P............................... 130,397 456,390 Quota Fund N.V........................... 224,000 784,000 Haussmann Holdings....................... 288,000 1,008,000 Montgomery Small Cap Partners, L.P....... 40,000 140,000 Montgomery Small Cap Partners II, L.P.... 96,000 336,000 Montgomery Small Cap Partners III, L.P... 40,000 140,000 Nosrob Investments Ltd................... 48,000 168,000 RRE Giga Investors, L.P.................. 571,428 2,000,000 RRE Giga Investors II, L.P............... 288,571 1,010,000 Neill and Linda Brownstein............... 16,000 56,000
Mr. Lieber, a director of the Company, is a corporate officer of InfoMedia Associates, Ltd., which is a General Partner of 21st Century Communications Partners, L.P., 21st Century Communications T-E Partners, L.P. and 21st Century Communications Foreign Partners, L.P. Mr. Robinson, a director of the Company, is Chairman and Chief Executive Officer of RRE Investors, L.L.C., the General Partner of RRE Giga and RRE Giga Investors II, L.P. Montgomery Securities served as private placement agent in connection with the sale by the Company of the Series B Preferred Stock. In consideration for such private placement agent services, Montgomery Securities received a placement agent fee of $695,105 and a warrant to purchase 107,876 shares of Series B Preferred Stock, exercisable for five years from the date of issuance at an exercise price of $4.625 per share. Montgomery Securities is a limited partner of Montgomery Asset Management, L.P., which is the investment advisor for Montgomery Small Cap Partners, L.P., Montgomery Small Cap Partners II, L.P., Montgomery Small Cap Partners III, L.P., Quota Fund N.V., Haussmann Holdings and Nosrob Investments Ltd. In December 1995, the Company loaned to Mr. Marshall, its President and Chief Operating Officer, $20,000 pursuant to the terms of a promissory note which bears interest at 5.74% per annum. The loan, plus interest, is payable in full on December 1, 1996. In January 1996, the Company entered into a one-year consulting agreement with the Neill H. Brownstein Corporation (the "Brownstein Corporation"), of which the sole shareholder is Neill H. Brownstein, a director of the Company. Pursuant to the consulting agreement, the Brownstein Corporation is entitled to receive a consulting fee of $60,000, plus reasonable expenses, payable quarterly. The Brownstein Corporation has agreed that during the term of the agreement and for a period of one year thereafter, the Brownstein Corporation will not use any of the Company's proprietary or confidential information or disclose such proprietary and confidential information to any third party. Messrs. Gartner, Gilmour, Robinson and Lieber were elected to the Board of Directors pursuant to the terms of an Investor Rights and Voting Agreement dated November 13, 1995 among the Company, Messrs. Gartner and Gilmour and certain stockholders of the Company. The agreement terminates upon the consummation of the Offering. For a description of certain transactions between the Company and certain directors of the Company, see "Management--Director Compensation." For a description of certain employment and other arrangements 42 between the Company and certain executive officers of the Company, see "Management--Executive Compensation" and "Management--Employment Agreements." The Company believes that the securities issued in the transactions involving the Company described above were sold by the Company at their then fair market value and that the terms of the transactions described above were no less favorable than the Company could have obtained from unaffiliated third parties. The Company has adopted a policy, effective following the consummation of the Offering, that all material transactions between the Company and its officers, directors and other affiliates must (i) be approved by a majority of the members of the Company's Board of Directors and by a majority of the disinterested members of the Company's Board of Directors, and (ii) be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. In addition, this policy will require that any loans by the Company to its officers, directors or other affiliates be for bona fide business purposes only. 43 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Common Stock of the Company as of July 31, 1996 (assuming the conversion of all outstanding shares of all series of Preferred Stock into Common Stock), and as adjusted to reflect the sale of the shares of Common Stock offered hereby, by (i) each person or entity known to the Company to beneficially own more than 5% of the Company's Common Stock, (ii) each of the Company's directors, (iii) each of the Senior Executives and (iv) all directors and executive officers as a group.
PERCENTAGE OF SHARES BENEFICIALLY OWNED(1)(2) ---------------------------- NUMBER OF SHARES NAME AND ADDRESS OF BENEFICIALLY OWNED BEFORE AFTER BENEFICIAL OWNER PRIOR TO OFFERING(1) OFFERING OFFERING ------------------- -------------------- ------------ ------------ 21st Century 1,428,572(3) 10.5% 8.1% Communications Partners L.P. .................... 767 Fifth Avenue, 45th Floor New York, NY 10153 Entities affiliated with 1,049,143(4) 7.7 5.9 S/2/ Technology Corporation.............. 515 Madison Avenue, Suite 4200 New York, NY 10022 Funds managed by 736,000(5) 5.4 4.2 Montgomery Asset Management, L.P.......... 101 California Street San Francisco, CA 94111 RRE Giga Investors, 1,145,713(6) 8.2 6.4 L.P...................... 126 East 56th Street, 22nd Floor New York, NY 10022 Gideon I. Gartner........ 6,608,000(7) 46.1 36.1 c/o Giga Information Group, Inc. One Kendall Square Cambridge, MA 02139 David L. Gilmour......... 355,000(8) 2.6 2.0 Neill H. Brownstein...... 360,000(9) 2.6 2.0 Richard L. Crandall...... 180,000(10) 1.3 1.0 Irwin Lieber............. 1,428,572(11) 10.5 8.1 James D. Robinson III.... 1,185,713(12) 8.5 6.6 Kenneth E. Marshall...... 0 -- -- Richard B. Goldman....... 0 -- -- Leander R. Jennings, 0 -- -- Jr. ..................... Jeffrey L. Swartz........ 14,166(13) * * All directors and execu- tive officers as a group (10 persons)............ 10,131,451(14) 69.1 54.3
- -------- * Less than 1% (1) Each stockholder possesses sole voting and investment power with respect to the shares listed, except as otherwise noted. Amounts shown include shares issuable within the 60-day period following July 31, 1996 pursuant to the exercise of options or warrants. (2) On July 31, 1996, there were 13,664,148 shares of Common Stock outstanding, assuming the conversion of all outstanding shares of all series of Preferred Stock into Common Stock. (3) Includes 968,615 shares of Common Stock held by 21st Century Communications Partners, L.P., a limited partnership ("21-CCP"), 329,560 shares of Common Stock held by 21st Century Communications T-E Partners, L.P., a limited partnership ("21-CCTEP") and 130,397 shares of Common Stock held by 21st Century Communications Foreign Partners, L.P., a limited partnership ("21-CCFP"). 44 (4) S/2/ Technology Corporation ("S Squared"), an investment manager, is the General Partner of (i) Sci-Tech Investment Partners L.P., which holds 98,058 shares of Common Stock, (ii) SG Partners, L.P., which holds 84,127 of Common Stock, and (iii) Executive Technology, L.P., which holds 66,080 shares of Common Stock. Seymour L. Goldblatt, the President of S Squared, is the Managing Director of both The Matrix Technology Group, which holds 39,746 shares of Common Stock, and Core Technology Fund, Inc., which holds 184,339 shares of Common Stock. S Squared serves as an investment advisor to each of the foregoing funds and exercises by agreement investment and voting power on behalf of each fund. Mr. Goldblatt, as President of S Squared, also exercises by agreement investment and voting power for the following funds: (i) Yale University, which holds 524,581 shares of Common Stock, (ii) Yale University Retirement Plan for Retired Employees, which holds 25,752 shares of Common Stock, and (iii) Monstol Investment N.V., which holds 26,460 shares of Common Stock. (5) Includes 224,000 shares of Common Stock held by Quota Fund N.V., 288,000 shares of Common Stock held by Haussmann Holdings, 40,000 shares of Common Stock held by Montgomery Small Cap, L.P., 96,000 shares of Common Stock held by Montgomery Small Cap Partners II, L.P., 40,000 shares of Common Stock held by Montgomery Small Cap Partners III, L.P. and 48,000 shares of Common Stock held by Nosrob Investments Ltd. Montgomery Asset Management, L.P. serves as the investment advisor to each of these funds and shares investment and voting power with the General Partners of each fund. (6) Includes 285,714 shares of Common Stock issuable to RRE Giga Investors, L.P. ("RRE Giga") upon the exercise of a warrant exercisable within 60 days of July 31, 1996, which warrant will terminate if not exercised prior to the consummation of the Offering, 571,428 shares of Common Stock held by RRE Giga and 288,571 shares of Common Stock held by RRE Giga Investors II, L.P ("RRE Giga II"). (7) Includes options to purchase 660,000 shares of Common Stock which are exercisable within 60 days of July 31, 1996. Also includes 660,000 shares of Common Stock which are held of record by members of Mr. Gartner's family. Mr. Gartner disclaims beneficial ownership of shares held by members of his family. (8) Includes options to purchase 35,000 shares of Common Stock which are exercisable within 60 days of July 31, 1996. (9) Includes 24,000 shares of Common Stock held by Mr. Brownstein's children and 16,000 shares of Common Stock held by Mr. Brownstein and his spouse jointly. Mr. Brownstein disclaims beneficial ownership of the 18,000 shares of Common Stock held by his adult children, Adam J. and Todd D. Brownstein, and Will Gordon, the adult child of his spouse. Mr. Brownstein disclaims beneficial ownership of the 6,000 shares of Common Stock held by his minor child, Emily Hamilton; however, Mr. Brownstein claims investment and voting power with respect to these shares. Of the shares held by Mr. Brownstein directly, 80,000 of such shares are subject to repurchase by the Company under certain circumstances. (10) Includes 120,000 shares of Common Stock which are subject to repurchase by the Company under certain circumstances. (11) Includes 968,615 shares of Common Stock held by 21-CCP, 329,560 shares of Common Stock held by 21-CCTEP and 130,397 shares of Common Stock held by 21-CCFP. Mr. Lieber, a director of the Company, is a General Partner of a General Partner of 21-CCP, 21-CCTEP and 21-CCFP. Mr. Lieber disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest in such shares. Mr. Lieber shares dispositive and voting power of such shares with the General Partners of the General Partner of each fund. (12) Includes 857,142 shares held by RRE Giga, including 285,714 shares issuable to RRE Giga upon the exercise of a warrant exercisable within 60 days of July 31, 1996, which warrant will terminate if not exercised prior to the consummation of the Offering, and 288,571 shares of Common Stock held by RRE Giga II. Mr. Robinson, a director of the Company, is a General Partner of the General Partner of RRE Giga and RRE Giga II. Mr. Robinson disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest in such shares. Mr. Robinson shares dispositive and voting power of such shares with the General Partners of the General Partner of RRE Giga and RRE Giga II. (13) Represents shares which Mr. Swartz has the right to acquire within 60 days of July 31, 1996 upon exercise of stock options. (14) Includes 994,880 shares of Common Stock issuable upon exercise of stock options and warrants held by all directors and executive officers as a group which are exercisable within 60 days of July 31, 1996. Also includes 200,000 shares of Common Stock held by all directors and executive officers as a group which may be repurchased by the Company under certain circumstances. 45 DESCRIPTION OF CAPITAL STOCK At June 30, 1996, there were outstanding an aggregate of 6,110,600 shares of Common Stock and 5,842,215 shares of Preferred Stock of the Company. Upon the closing of the Offering, all of such shares of Preferred Stock will automatically be converted into an aggregate of 7,552,215 shares of Common Stock. All of the shares of Preferred Stock that have been converted will cease to be outstanding and may not be reissued. Assuming conversion of all of the Company's Preferred Stock, at June 30, 1996, there were 13,662,815 shares of Common Stock outstanding, held of record by 81 stockholders. COMMON STOCK The Company's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation"), which will become effective upon the closing of the Offering, will authorize the issuance of up to 60,000,000 shares of Common Stock, $.001 par value per share. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor. Upon the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of Common Stock are, and the shares offered by the Company in the Offering will be, when issued and paid for, fully paid and nonassessable. PREFERRED STOCK Upon the consummation of the Offering, the Restated Certificate of Incorporation will authorize the issuance of up to 5,000,000 shares of Preferred Stock, $.001 par value per share. Under the terms of the Restated Certificate of Incorporation, the Board of Directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of Preferred Stock in one or more series. Each such series of Preferred Stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Board of Directors. The purpose of authorizing the Board of Directors to issue Preferred Stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding voting stock of the Company. The Company has no present plans to issue any shares of Preferred Stock. WARRANTS At August 31, 1996, there were outstanding warrants to purchase 285,714 shares of Common Stock at an exercise price of $2.345 per share and warrants to purchase 107,876 shares of Common Stock at an exercise price of $4.5625 per share. Such warrants confer upon the holders thereof no rights as stockholders until the exercise thereof and will terminate if not exercised prior to the consummation of the Offering. CONVERTIBLE NOTES The Company's 6% $400,000 convertible note (the "6% Note") is convertible at the option of the holder after December 31, 1995 and at any time prior to December 31, 2005 into the lesser of (i) the number of shares of 46 Common Stock arrived at by dividing the unpaid principal of the 6% Note being converted by $3.50 and (ii) the amount of such unpaid principal amount being converted, expressed as a fraction of the total unpaid principal of the 6% Note, multiplied by the Maximum Conversion Amount. The "Maximum Conversion Amount" equals 28,576 shares plus an additional 2,857 shares on the sixth day of each of the thirty months after January 1996. At August 31, 1996, the principal amount of the 6% Note is convertible into 48,575 shares of Common Stock of the Company. The Company's 5% $1.0 million convertible note (the "5% Note") is convertible at the option of the holder, Friday Holdings L.P., at any time prior to April 5, 1998, in whole or in part, into that number of shares that is equal to 2.67% of the outstanding Common Stock based upon an equity capitalization for the Company of up to $5.0 million. The Company intends to provide notice of repayment of the 5% Note promptly after closing of the Offering and therefore expects that the 5% Note will be converted into Common Stock at that time. DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS The Company is subject to the provisions of Section 203 of the General Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of a corporation's voting stock. The Restated Certificate of Incorporation provides for the division of the Board of Directors into three classes as nearly equal in size as possible with staggered three-year terms. See "Management." In addition, the Restated Certificate of Incorporation provides that directors may be removed only for cause by the affirmative vote of the holders of two-thirds of the shares of capital stock of the Company entitled to vote. Under the Restated Certificate of Incorporation, any vacancy on the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may only be filled by vote of a majority of the directors then in office. The classification of the Board of Directors and the limitations on the removal of directors and filling of vacancies could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, control of the Company. The Restated Certification of Incorporation also provides that after the consummation of the Offering, any action required or permitted to be taken by the stockholders of the Company at an annual meeting or special meeting of stockholders may only be taken if it is properly brought before such meeting and may not be undertaken by written action in lieu of a meeting. The Restated Certificate of Incorporation further provides that special meetings of the stockholders may only be called by the Chairman of the Board of Directors, the Chief Executive Officer or, if none, the President of the Company or by the Board of Directors. Under the Company's Amended and Restated By-Laws (the "By- Laws"), which will become effective upon the closing of the Offering, in order for any matter to be considered "properly brought" before a meeting, a stockholder must comply with certain requirements regarding advance notice to the Company. The foregoing provisions could have the effect of delaying until the next stockholders' meeting stockholder actions which are favored by the holders of a majority of the outstanding voting securities of the Company. These provisions may also discourage another person or entity from making a tender offer for the Company's Common Stock, because such person or entity, even if it acquired a majority of the outstanding voting securities of the Company, would be able to take action as a stockholder (such as electing new directors or approving a merger) only at a duly called stockholders meeting, and not by written consent. The General Corporation Law of Delaware provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation's certificate of incorporation or by-laws, unless a corporation's certificate of incorporation or by-laws, as the case may be, requires a greater percentage. The Restated Certificate of Incorporation and the By-Laws require the affirmative vote of the holders of at least two-thirds of the shares of capital stock of the Company issued and outstanding and entitled to vote to amend or repeal any of the provisions described in the prior two paragraphs. 47 The Restated Certificate of Incorporation contains certain provisions permitted under the General Corporation Law of Delaware relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in certain circumstances involving wrongful acts, such as the breach of a director's duty of loyalty or acts or omissions which involve intentional misconduct or a knowing violation of law. Further, the Restated Certificate of Incorporation contains provisions to indemnify the Company's directors and officers to the fullest extent permitted by the General Corporation Law of Delaware. The Company believes that these provisions will assist the Company in attracting and retaining qualified individuals to serve as directors. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is The First National Bank of Boston. 48 SHARES ELIGIBLE FOR FUTURE SALE Upon consummation of the Offering, based on the number of shares outstanding at June 30, 1996, there will be 17,662,815 shares of Common Stock outstanding. Of these shares, the 4,000,000 shares of Common Stock sold in the Offering will be freely transferable without restriction under the Securities Act, except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act ("Rule 144"), generally must be sold in compliance with the limitations of Rule 144 described below. The remaining 13,662,815 shares of Common Stock outstanding will be "restricted securities" as that term is defined in Rule 144 (the "Restricted Shares"). Restricted Shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules are summarized below. Subject to the lock-up agreements described below and the provisions of Rules 144, 144(k) and 701, additional shares will be available for sale in the public market (subject in the case of shares held by affiliates to compliance with certain volume restrictions) as follows: (i) no shares will be available for immediate sale in the public market on the date of the Prospectus, (ii) 2,600 shares will be eligible for resale 90 days after the date of this Prospectus, (iii) 4,200,000 shares will be eligible for resale upon expiration of lock-up agreements 180 days after the date of this Prospectus, and, thereafter (iv) the remaining 9,460,215 shares will be eligible for sale upon expiration of their respective two-year holding periods. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least two years, including persons who may be deemed affiliates of the Company, would be entitled to sell within any three-month period, subject to meeting certain manner of sale and notice requirements, a number of shares that does not exceed the greater of (i) one percent of the number of shares of Common Stock then issued and outstanding (176,628 shares upon consummation of the Offering) and (ii) the average weekly trading volume of the Common Stock during the four calendar weeks preceding the filing of a Form 144 notice of sale with the Securities and Exchange Commission. A person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least three years, is entitled to sell such shares under Rule 144(k) without regard to the volume limitations described above. Affiliates whose shares are not Restricted Shares must nonetheless comply with the same Rule 144 restrictions applicable to Restricted Shares with the exception of the two-year holding period requirement. The Securities and Exchange Commission has proposed to reduce the two- and three-year holding periods to one and two years, respectively. If enacted, such modification may have a material effect on the timing of when certain shares of Common Stock become eligible for resale. Rule 701 promulgated under the Securities Act provides that shares of Common Stock acquired on the exercise of outstanding options may be resold by persons, other than affiliates, beginning 90 days after the date of this Prospectus, subject only to the manner of sale provisions of Rule 144, and by affiliates, beginning 90 days after the date of this Prospectus, subject to all provisions of Rule 144 except its two-year minimum holding period. The Company's executive officers and directors of the Company (who in the aggregate will beneficially own approximately 10,033,714 Restricted Shares, including 709,166 shares of Common Stock that may be acquired by them upon the exercise of stock options exercisable with 60 days of June 30, 1996) have agreed not to sell or offer to sell or otherwise dispose of any shares of Common Stock currently held by them, or to exercise any right to acquire any shares of Common Stock or any securities exercisable for or convertible into any shares of Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of Lehman Brothers Inc. Lehman Brothers Inc. may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to these lock-up agreements. See "Underwriting." 49 The Company has agreed, subject to certain exceptions, not to offer, sell or otherwise dispose of any shares of Common Stock for a period of 180 days after the date of this Prospectus, except that the Company may issue, and grant options to purchase, shares of Common Stock under its current stock option and purchase plans and other currently outstanding options. The Company intends to file registration statements on Form S-8 under the Securities Act to register all shares of Common Stock issuable under the 1995 Stock Plan, 1996 Option Plan and 1996 Purchase Plan. These registration statements are expected to be filed approximately 180 days after the effective date of the Registration Statement of which this Prospectus is a part and will be effective upon filing. Shares issued upon the exercise of stock options after the effective date on the Form S-8 registration statements will be eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to affiliates and the lock-up agreements noted above. At August 31, 1996, the holders of 10,880,215 shares of Common Stock and warrants to purchase 393,590 shares of Common Stock are entitled to certain demand and/or piggyback registration rights with respect to such shares (the "Registrable Shares"). At any time after the earlier of November 1, 1999 or six months after the Company's initial public offering, holders of at least 40% of the Registrable Shares then outstanding may request that the Company file, at the Company's expense, a registration statement under the Securities Act covering at least 20% of the Registrable Shares then outstanding with aggregate gross proceeds of at least $5,000,000. The Company is obligated to effect only two demand registrations and, in any event, not more than one such registration in any twelve-month period. In addition, holders of Registrable Shares with piggyback registration rights may include their shares in any registration statement the Company intends to effect for the Company's shares for stockholders other than the holders of Registrable Shares. So long as the Company is qualified to effect a registration statement on Form S-3, holders of at least 20% of the Registrable Shares may request that the Company effect a registration on Form S-3 provided that (i) the aggregate price of the Registrable Shares to be sold on such Form S-3 exceeds $500,000, (ii) the Company is obligated to file only one such Form S-3 in any 6-month period and (iii) the Company is only obligated to effect a total of six such registrations. Prior to the Offering, there has been no public market for the Common Stock of the Company, and no prediction can be made as to the effect, if any, that market sales of shares of Common Stock or the availability of shares for sale will have on the market price of the Common Stock prevailing from time to time. Nevertheless, sales of significant numbers of shares of the Common Stock in the public market could adversely affect the market price of the Common Stock and could impair the Company's future ability to raise capital through an offering of its equity securities. 50 UNDERWRITING Under the terms of, and subject to the conditions contained in, an Underwriting Agreement (the "Underwriting Agreement"), the form of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, the underwriters named below (the "Underwriters"), for whom Lehman Brothers Inc., Oppenheimer & Co., Inc. and Salomon Brothers Inc are acting as Representatives (the "Representatives"), have severally agreed to purchase from the Company, and the Company has agreed to sell to the Underwriters, the aggregate number of shares of Common Stock set forth opposite the name of each Underwriter below:
NUMBER OF UNDERWRITERS SHARES ------------ --------- Lehman Brothers Inc. ............................................. Oppenheimer & Co., Inc. .......................................... Salomon Brothers Inc.............................................. --------- Total........................................................... 4,000,000 =========
The Underwriting Agreement provides that the obligations of the Underwriters to purchase shares of Common Stock are subject to certain conditions, and that if any of the shares of Common Stock are purchased by the Underwriters pursuant to the Underwriting Agreement, all shares of Common Stock agreed to be purchased by the Underwriters pursuant to the Underwriting Agreement must be purchased. The Company has been advised that the Underwriters initially propose to offer the shares of Common Stock directly to the public at the public offering price set forth on the cover page of this Prospectus and to certain selected dealers (who may include the Underwriters) at such public offering price less a selling concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other Underwriters or to certain other brokers or dealers. After the initial public offering, the public offering price, the concession to selected dealers and the reallowance to other dealers may be changed by the Underwriters. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, and to contribute to payments that the Underwriters may be required to make in respect thereof. The Company has granted to the Underwriters an option to purchase up to an additional 600,000 shares of Common Stock at the public offering price less the underwriting discounts and commissions shown on the cover page of this Prospectus, solely to cover over-allotments, if any. Such option may be exercised at any time until 30 days after the date of this Prospectus. To the extent that the Underwriters exercise such option, each of the Underwriters will be committed, subject to certain conditions, to purchase a number of option shares proportionate to such Underwriter's initial commitment. The Representatives of the Underwriters have informed the Company that the Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority. The Company, the directors and officers and certain other securityholders of the Company have agreed not to, directly or indirectly, offer, sell or contract to sell, or otherwise dispose of shares of Common Stock of the Company, or any securities convertible into, or exchangeable for, or any rights to acquire, shares of Common 51 Stock, for a period of 180 days after the date of this Prospectus without the prior written consent of Lehman Brothers Inc. on behalf of the Representatives, except that the Company may issue, and grant options to purchase, shares of Common Stock under its current stock option and purchase plans and other currently outstanding options. In addition, the Company may issue shares of Common Stock in connection with any acquisition of another company if the terms of such issuance provide that such Common Stock shall not be resold prior to the expiration of the 180-day period referenced in the preceding sentence. Prior to this Offering, there has been no public market for the Common Stock. The initial public offering price will be determined by negotiation among the Company and the Representatives of the Underwriters. Among the factors to be considered in determining the initial public offering price, in addition to prevailing market conditions, will be the Company's historical performance, capital structure, estimates of the business potential and earnings prospects of the Company, an overall assessment of the Company, an assessment of the Company's management, and the consideration of the above factors in relation to market valuation of companies in related businesses. The Underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares of Common Stock offered hereby for employees of the Company and certain other individuals who have expressed an interest in purchasing such shares of Common Stock in the Offering. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same basis as other shares offered hereby. LEGAL MATTERS The validity of the shares of Common Stock offered by the Company hereby will be passed upon for the Company by Hale and Dorr, Boston, Massachusetts. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. EXPERTS The consolidated balance sheets of the Company at December 31, 1995 and June 30, 1996 and the related consolidated statements of operations, cash flows and stockholders' equity for each of the periods March 17, 1995 to December 31, 1995 and January 1, 1996 to June 30, 1996 included in this Prospectus have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The combined balance sheet of BIS Strategic Decisions at April 5, 1995 and the related combined statements of operations, cash flows and stockholder's equity for the period January 1, 1995 to April 5, 1995 included in this Prospectus have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The combined balance sheet of BIS Strategic Decisions at December 31, 1994 and the related combined statements of operations, cash flows and stockholder's equity for the periods January 1, 1993 to December 15, 1993, December 16, 1993 to December 31, 1993 and for the year ended December 31, 1994 included in this Prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon (which contains explanatory paragraphs with respect to BIS Strategic Decision's ability to continue as a going concern and an accounting change as described in Notes 4 and 2, respectively, of the Notes to the Combined Financial Statements) appearing elsewhere herein, which, as to the periods from January 1, 1993 through December 15, 1993, and December 16, 1993 through December 31, 1993 are based in part on the report of Coopers & Lybrand and are included herein in reliance upon such reports, given upon the authority of such firms as experts in accounting and auditing. 52 The statements of operations, changes in stockholder's equity and cash flows of BIS Shrapnel PTY Limited for each of the periods of January 1, 1993 to December 15, 1993 and December 16, 1993 to December 31, 1993 on which the report of Ernst & Young LLP, independent auditors, for the related periods are based in part is given in reliance on the reports of Coopers & Lybrand, independent accountants, given on the authority of that firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration Statement (which term shall include all amendments, exhibits and schedules thereto) on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, to which Registration Statement reference is hereby made. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Registration Statement and the exhibits thereto may be inspected and copied at prescribed rates at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, the Company is required to file electronic versions of these documents with the Commission through the Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. 53 INDEX TO FINANCIAL STATEMENTS
PAGE ---- GIGA INFORMATION GROUP, INC.: Report of Independent Accountants--Coopers & Lybrand L.L.P............... F-2 Consolidated Balance Sheets at December 31, 1995 and June 30, 1996....... F-3 Consolidated Statements of Operations for the periods March 17, 1995 to December 31, 1995; March 17, 1995 to June 30, 1995 (unaudited) and January 1, 1996 to June 30, 1996........................................ F-4 Consolidated Statements of Changes in Stockholders' Equity for the periods March 17, 1995 to December 31, 1995 and January 1, 1996 to June 30, 1996................................................................ F-5 Consolidated Statements of Cash Flows for the periods March 17, 1995 to December 31, 1995; March 17, 1995 to June 30, 1995 (unaudited) and January 1, 1996 to June 30, 1996........................................ F-6 Notes to Consolidated Financial Statements............................... F-7 BIS STRATEGIC DECISIONS: Report of Independent Accountants--Coopers & Lybrand L.L.P............... F-19 Report of Independent Auditors--Ernst & Young LLP........................ F-20 Reports of Independent Accountants--Coopers & Lybrand ................... F-21 Combined Balance Sheet at December 31, 1994.............................. F-23 Combined Statements of Operations for the periods January 1, 1993 to December 15, 1993; December 16, 1993 to December 31, 1993; the year ended December 31, 1994 and for the period January 1, 1995 to April 5, 1995.................................................................... F-24 Combined Statements of Changes in Stockholder's Equity for the periods January 1, 1993 to December 15, 1993; December 16, 1993 to December 31, 1993; the year ended December 31, 1994 and for the period January 1, 1995 to April 5, 1995.................................................................... F-25 Combined Statements of Cash Flows for the periods January 1, 1993 to December 15, 1993; December 16, 1993 to December 31, 1993; the year ended December 31, 1994 and for the period January 1, 1995 to April 5, 1995.................................................................... F-26 Notes to Combined Financial Statements................................... F-27
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Giga Information Group, Inc.: We have audited the accompanying consolidated balance sheets of Giga Information Group, Inc. as of December 31, 1995 and June 30, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the periods from March 17, 1995 (date of inception) to December 31, 1995 and January 1, 1996 to June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Giga Information Group, Inc. as of December 31, 1995 and June 30, 1996, and the results of its operations and its cash flows for the period March 17, 1995 to December 31, 1995 and the six months ended June 30, 1996 in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Boston, Massachusetts August 31, 1996 F-2 GIGA INFORMATION GROUP, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, PRO FORMA 1995 JUNE 30, 1996 JUNE 30, 1996 ------------ ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents........... $16,906 $ 9,331 Trade accounts receivable, net of allowance for uncollectible accounts of $79 and $86 at December 31, 1995 and June 30, 1996, respectively....................... 2,180 3,030 Unbilled accounts receivable........ 90 925 Prepaid expenses and other current assets............................. 1,406 1,571 ------- ------- Total current assets................ 20,582 14,857 Property and equipment, net of accumulated depreciation and amortization of $562 and $1,136 at December 31, 1995 and June 30, 1996, respectively........................ 2,194 2,716 Leasehold intangible, net of accumulated amortization of $283 and $496 at December 31, 1995 and June 30, 1996, respectively.............. 1,028 815 Goodwill, net of accumulated amortization of $482 and $803 at December 31, 1995 and June 30, 1996, respectively........................ 803 482 Note receivable...................... 150 Other assets......................... 77 200 ------- ------- Total assets...................... $24,684 $19,220 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdrafts..................... $ 458 $ 479 Accounts payable.................... 1,519 651 Deferred revenues................... 2,480 4,995 Accrued compensation and benefits... 632 1,095 Other current liabilities and accrued expenses................... 3,427 3,337 Net liabilities of discontinued operations, current portion........ 861 1,566 ------- ------- Total current liabilities........... 9,377 12,123 Long-term debt - related party....... 400 412 Long-term debt - other............... 1,037 1,060 Other liabilities.................... 210 240 Net liabilities of discontinued operations, less current portion.... -- 1,332 ------- ------- Total liabilities................... 11,024 15,167 Commitments and other contingent liabilities (Note 17)............... Stockholders' equity: Preferred Stock, $.001 par value; 10,000,000 shares authorized; none issued or outstanding.............. -- -- -- Series A Preferred Stock; $.001 par value per share, 650,000 shares authorized: 570,000 shares issued and outstanding (liquidation preference of $2,850,000)........................ 1 1 -- Series B Preferred Stock; $.001 par value per share, 6,000,000 and 6,500,000 shares authorized: 4,598,200 and 5,272,215 shares issued and outstanding at December 31, 1995 and June 30, 1996, respectively (liquidation preference of $16,094,000 and $18,453,000 at December 31, 1995 and June 30, 1996, respectively)... 4 5 -- Common Stock; $.001 par value per share, 28,000,000 shares authorized: 6,108,000, 6,110,600 and 13,662,815 shares issued and outstanding at December 31, 1995, June 30, 1996 and June 30, 1996 pro forma, respectively................ 6 6 $ 14 Additional paid-in capital.......... 18,295 20,631 20,629 Stock subscriptions receivable...... (375) (75) (75) Accumulated deficit................. (4,234) (16,537) (16,537) Cumulative translation adjustments.. (37) 22 22 ------- ------- ------- Total stockholders' equity.......... 13,660 4,053 $ 4,053 ------- ------- ------- Total liabilities and stockholders' equity............. $24,684 $19,220 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-3 GIGA INFORMATION GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SIX MONTHS MARCH 17 TO MARCH 17 TO ENDED DECEMBER 31, JUNE 30, JUNE 30, 1995 1995 1996 ------------ ----------- ---------- (UNAUDITED) Revenues: Continuous Information Services........ $ -- $ -- $ 627 Information Products................... 10,706 3,571 5,855 ---------- ------ ---------- Total revenues....................... 10,706 3,571 6,482 Cost and Expenses: Cost of services and product development........................... 8,445 2,473 9,648 Sales and marketing.................... 1,016 191 1,982 General and administrative............. 6,216 1,433 4,257 Depreciation and amortization.......... 1,397 527 1,088 ---------- ------ ---------- Total costs and expenses............. 17,074 4,624 16,975 ---------- ------ ---------- Operating loss......................... (6,368) (1,053) (10,493) Interest income.......................... 259 26 375 Interest expense......................... (100) (16) (52) ---------- ------ ---------- Loss from continuing operations before income taxes.......................... (6,209) (1,043) (10,170) Income tax benefit....................... (1,093) (310) (257) ---------- ------ ---------- Loss from continuing operations........ (5,116) (733) (9,913) ---------- ------ ---------- Discontinued operations: Income (loss) from the discontinued BIS market research business, net of tax effect.................................. 1,490 301 (85) Loss on disposal of discontinued BIS market research business, net of tax effect.................................. -- -- (2,305) ---------- ------ ---------- Income (loss) from discontinued operations............................ 1,490 301 (2,390) ---------- ------ ---------- Net loss............................. $ (3,626) $ (432) $(12,303) ========== ====== ========== Results per common and common equivalent share--historical basis (Note 2): Pro forma results per common and common equivalent share: Loss from continuing operations........ $(0.34) $(0.61) Net loss............................... $(0.24) $(0.75) Pro forma weighted average common and common equivalent shares outstanding.... 14,855,209 16,360,287
The accompanying notes are an integral part of the consolidated financial statements. F-4 GIGA INFORMATION GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
SERIES A SERIES B ADDITIONAL STOCK CUMULATIVE TOTAL PREFERRED PREFERRED COMMON PAID-IN SUBSCRIPTIONS TRANSLATION ACCUMULATED STOCKHOLDERS' STOCK STOCK STOCK CAPITAL RECEIVABLE ADJUSTMENTS DEFICIT EQUITY --------- --------- ------ ---------- ------------- ----------- ----------- ------------- Issuance of 6,108,000 shares of Common Stock.................. $ 6 $1,054 $(350) $710 Issuance of 160,000 shares of Series A Preferred Stock and convertible note for acquisition of ExperNet Corporation............ $(608) (608) Issuance of 410,000 shares of Series A Preferred Stock ....... $ 1 2,049 (25) 2,025 Issuance of 4,026,772 shares of Series B Preferred Stock........ $ 4 13,212 13,216 Conversion of bridge financing to 571,428 shares of Series B Preferred Stock........ 1,980 1,980 Net loss................ (3,626) (3,626) Translation adjustments............ $(37) (37) --- --- --- ------- ----- ---- -------- -------- Balance at December 31, 1995................... 1 4 6 18,295 (375) (37) (4,234) 13,660 --- --- --- ------- ----- ---- -------- -------- Payment of stock subscription receivable............. 300 300 Issuance of 674,015 shares of Series B Preferred Stock........ 1 2,336 2,337 Issuance of 2,600 shares of Common Stock........ -- -- Net loss................ (12,303) (12,303) Translation adjustments............ 59 59 --- --- --- ------- ----- ---- -------- -------- Balance at June 30, 1996................... $ 1 $ 5 $ 6 $20,631 $ (75) $ 22 $(16,537) $ 4,053 === === === ======= ===== ==== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-5 GIGA INFORMATION GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS MARCH 17 TO MARCH 17 TO ENDED DECEMBER 31, JUNE 30, JUNE 30, 1995 1995 1996 ------------ ----------- -------- (UNAUDITED) Cash flows from operating activities: Net loss.............................. $(3,626) $ (432) $(12,303) Adjustments to reconcile net loss to net cash used in continuing operating activities: (Income) loss from discontinued operations......................... (1,490) (301) 85 Loss on disposal of discontinued operations......................... -- -- 2,305 Depreciation and amortization....... 1,397 527 1,088 Provision for (recovery from) doubtful accounts.................. 27 (24) 48 (Increase) decrease in deferred taxes.............................. 50 -- (8) Interest on long term debt added to principal.......................... 37 12 35 (Gain) loss on sale of fixed assets............................. 15 (6) 4 Changes in assets and liabilities net of effects of acquisitions: Decrease (increase) in accounts receivable........................ 1,638 525 (1,799) Decrease (increase) in prepaid expenses and other current assets............................ (1,462) 585 (142) Increase (decrease) in accounts payable and accrued liabilities... 2,067 (295) (292) Increase (decrease) in deferred revenues........................... 283 (936) 2,500 ------- ------ -------- Net cash provided by (used in) operating activities: Net cash used in continuing operations.......................... (1,064) (345) (8,479) Net cash provided by (used in) discontinued operations............. 335 352 (333) ------- ------ -------- Net cash provided by (used in) operating activities: (729) 7 (8,812) Cash flows from investing activities: Acquisition of equipment and improvements........................ (1,049) (34) (1,140) Net cash acquired in BIS acquisition......................... 1,013 1,013 -- Net cash acquired in ExperNet acquisition......................... 61 -- -- Issuance of note receivable.......... -- -- (150) Other, net........................... 96 2 (56) ------- ------ -------- Cash provided by (used in) investing activities............................ 121 981 (1,346) ------- ------ -------- Cash flows from financing activities: Proceeds from issuance of Common Stock............................... 710 100 -- Due to shareholder................... -- 1,086 -- Proceeds from issuance of Series A Preferred Stock..................... 2,025 -- -- Proceeds from bridge financing, net of issuance costs of $20............ 1,980 -- -- Proceeds from issuance of Series B Preferred Stock, net of issuance costs of $878 and $25............... 13,216 -- 2,337 Repayments of principal to related parties............................. (321) -- -- Proceeds from stock subscriptions receivable.......................... -- -- 300 Net short-term borrowings............ 40 193 23 Principal payments on long-term debt................................ (97) (34) (32) ------- ------ -------- Cash provided by financing activities.. 17,553 1,345 2,628 ------- ------ -------- Effect of exchange rates on cash....... (39) -- (45) Net increase (decrease) in cash and cash equivalents...................... 16,906 2,333 (7,575) Cash and cash equivalents, beginning of period................................ -- -- 16,906 ------- ------ -------- Cash and cash equivalents, end of period................................ $16,906 $2,333 $ 9,331 ======= ====== ======== Supplementary cash flow information: Income taxes paid.................... $39 $0 $22 Interest paid........................ $58 $2 $14
The accompanying notes are an integral part of the consolidated financial statements. F-6 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION WITH RESPECT TO THE PERIOD MARCH 17, 1995 TO JUNE 30, 1995 IS UNAUDITED) 1. THE COMPANY Giga Information Group, Inc. ("Giga" or the "Company") was incorporated on March 17, 1995 (date of inception) in the State of Delaware. The Company's principal business activity is to provide information, analysis and advice relating to developments and trends in the computing, telecommunications and related industries (collectively the information technology or "IT" industry) primarily through subscription based products. The Company derives its revenues primarily from two sources: Continuous Information Services, which include its Giga Advisory Service and Relevance Services; and Information Products, which include events, publications, consulting and econometric forecasting. On April 5, 1995, the Company acquired BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively "BIS" or "Predecessor Companies"). On July 6, 1995, Giga acquired a 77.8% equity interest in ExperNet Corporation ("ExperNet") which was owned by Gideon I. Gartner, Chairman of the Board of Directors and Chief Executive Officer of the Company, and David L. Gilmour, a director and officer of the Company, and, on December 29, 1995, acquired the remaining 22.2% interest. The results of operations of ExpertNet are included in the Company's results from July 6, 1995. The Company is subject to a number of risks similar to other companies in its industry, including a dependence on sales and renewals of subscription- based services, uncertainty of market acceptance of its services and products, competition from other companies including those with greater resources than the Company, dependence on key individuals, the need to obtain additional financing, protection of proprietary information and technology and the risks associated with international operations. In addition, the Company is subject to risks associated with the discontinuance of the BIS Market Research Business (see Note 16). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying financial statements include the results of operations, cash flows and changes in stockholders' equity for the periods from March 17, 1995 (date of inception) to December 31, 1995 and March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996. The financial statements pertaining to the period from the date of inception to June 30, 1995 have been prepared for comparative purposes only and as such have not been audited. In the opinion of the Company's management, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation. The comparison of the period from the date of inception to June 30, 1995 and the six months ended June 30, 1996 may not be meaningful because the periods are of different durations. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. The Company's 50% interest in BIS Japan, Inc. has been accounted for at cost which approximates equity. All significant intercompany balances and transactions have been eliminated. Pursuant to the purchase method of accounting, acquired assets and liabilities were revalued to their fair market value. The excess of the purchase price over the fair market value of the net assets acquired was recorded as goodwill. CASH AND CASH EQUIVALENTS Cash equivalents primarily represent liquid investments, with original maturities of 90 days or less, in money market funds which are convertible to a known amount of cash and bear an insignificant risk of change in value. FOREIGN CURRENCY TRANSLATION For international operations, the local currency is used as the functional currency. The assets and liabilities of the foreign entities are translated at the period-end rates of exchange and the related statements of operations and cash flows are translated at the weighted average rates of exchange for the respective periods. The resulting F-7 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) translation adjustments are excluded from the results of operations and charged to a separate component of stockholders' equity. Realized and unrealized exchange gains or losses arising from translation adjustments are reflected in operations and are not material. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of temporary cash investments in money market accounts and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions in accordance with its investment policy as approved by its board of directors. Trade receivables result from contracts with various customers. Giga generally does not require collateral or other security from these customers. Historically, no significant credit-related losses have been incurred. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"), which uses a balance sheet approach in accounting for income taxes. Under SFAS 109, deferred tax liabilities and assets are recognized based on differences between book and tax bases of assets and liabilities using presently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable for the period as determined by applying the provisions of enacted tax laws to taxable income for the period and the net changes during the period in the Company's deferred tax assets and liabilities. Income taxes on $807,000, $444,000 and $0 of cumulative undistributed earnings of subsidiaries outside of the United States for the periods from March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996, respectively, have not been provided for as these earnings will either be indefinitely reinvested or remitted substantially free of additional tax. REVENUE AND COMMISSION EXPENSE RECOGNITION Continuous Information Services provide customers with ongoing information, analysis and advice relating to developments and trends in the IT industry on a subscription basis. Revenues from Continuous Information Services are deferred and recognized on a pro rata monthly basis over the contract period, generally one year. The Company's policy is to record a receivable and related deferred revenues for the full amount of the contract on the date it is signed. Contracts are generally billable upon signing. The Company also records the related commission obligation upon the signing of these contracts and amortizes the corresponding deferred commission expense over the contract period in which the related Continuous Information Services revenues are earned. Information Products revenues from events, publications, consulting and econometric forecasting are recognized as earned. PROPERTY AND EQUIPMENT Property and equipment are stated at cost for items acquired after the initial acquisition of the respective entities and at estimated fair market value for those assets in existence at the date of acquisition. Expenditures for maintenance and repairs are charged to expense while the costs of significant improvements are capitalized. Depreciation is computed for financial reporting purposes principally by using the straight-line method over the following estimated useful lives: Computers and related equipment................ 3 years Furniture and fixtures.... 5 years Motor vehicles............ 4 years Leaseholds and related im- provements............... Shorter of economic life or remaining lease term
F-8 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated from the balance sheet and related gains or losses are reflected in income. GOODWILL Goodwill represents the excess of the purchase price of entities acquired over the fair values of amounts assigned to the net tangible assets acquired and liabilities assumed. Amortization is recorded using the straight-line method over two years. These amounts are subject to adjustment in accordance with the provisions of SFAS 109. Impairment of goodwill is measured on the basis of whether anticipated future undiscounted operating cash flows expected from the acquired businesses will recover the recorded respective intangible asset balances over the remaining amortization period. At June 30, 1996, approximately $666,000 of goodwill identifiable with the discontinued operations was written off to expenses in connection with the disposition of these operations. Amortization expense was $482,000, $160,000 and $321,000 for the periods from March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the dates of the financial statements and (iii) the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. NET LOSS PER COMMON SHARE The unaudited pro forma net loss per common share is computed based upon the weighted average number of common shares, on an as-if converted basis, and common equivalent shares outstanding after certain adjustments described below. Common equivalent shares comprise stock options and warrants using the treasury stock method. Common equivalent shares from stock options and warrants are excluded from the computation if their effect is antidilutive. In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB No. 83"), all common and common equivalent shares and other potentially dilutive instruments which include stock options, warrants and the Series A and Series B Preferred Stock issued at prices below the estimated initial public offering price of $10.00 per share during the twelve month period prior to the initial filing date of September 10, 1996 of the Registration Statement have been included in the calculation as if they were outstanding for all periods presented. Other than shares of Series A Preferred Stock and Series B Preferred Stock considered as Common Stock equivalents under SAB No. 83, shares of Series A Preferred Stock and Series B Preferred Stock are not included as Common Stock equivalents because their inclusion would be anti-dilutive. Results per common share on an historical basis are as follows:
SIX MONTHS MARCH 17 TO MARCH 17 TO ENDED JUNE DECEMBER 31, 1995 JUNE 30, 1995 30, 1996 ----------------- ------------- ---------- Loss from continuing operations... $(5,116) $(733) $(9,913) Net loss available to common shareholders..................... (3,626) (432) (12,303) Loss from continuing operations per common share................. $(0.38) $(0.06) $(0.70) ========== ========== ========== Net loss per common share......... $(0.27) $(0.04) $(0.87) ========== ========== ========== Weighted average number of common shares outstanding............... 13,486,788 12,299,420 14,180,287 ========== ========== ==========
F-9 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) PRO FORMA PRESENTATION (UNAUDITED) Upon the closing of an initial public offering of Common Stock at an offering price of not less than $5.25 per share and having aggregate proceeds of $15,000,000, all of the Company's shares of Series A Preferred Stock and Series B Preferred Stock will be converted into 7,552,215 shares of Common Stock. The unaudited pro forma presentation of the June 30, 1996 balance sheet reflects the conversion of outstanding shares of Series A Preferred Stock and Series B Preferred Stock into Common Stock. NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which is effective for fiscal year 1996. The Company has determined that it will elect the disclosure-only alternative. The Company will be required to disclose the pro forma net income or loss and per share amounts in the notes to the financial statements using the fair value based method for fiscal year 1996 with comparable disclosures for fiscal year 1995. The Company has not determined the impact of these pro forma adjustments. SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," which must be adopted in fiscal year 1996, requires that impairment losses be recognized when the carrying value of an asset exceeds its fair value. The Company regularly assesses all of its long-lived assets for impairment and, therefore, does not believe the adoption of the standard will have a material effect on its financial position or results of operations. 3. ACQUISITIONS BIS STRATEGIC DECISIONS, INC. AND AFFILIATES On April 5, 1995, the Company acquired 100% of the stock of BIS for $200,000 in cash and a $1,000,000 convertible promissory note (see Note 9). The acquisition was accounted for as a purchase and, accordingly, the cost (including acquisition costs of $204,000) was assigned to the tangible and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. As part of the transaction, an intangible asset (leasehold) of approximately $1,300,000 was recorded representing the fair value of payments being made through May 1998 by a former owner of BIS. The excess of the purchase price over the net assets acquired of approximately $3,059,000 has been recorded as goodwill. The Company's statements of operations include the results of operations of BIS from April 5, 1995. EXPERNET On July 6, 1995, the Company acquired a majority interest in ExperNet in exchange for (i) 160,000 shares of Series A Preferred Stock (640,000 shares of Common Stock on an as-converted basis), 80,000 shares (320,000 shares of Common Stock on an as-converted basis) of which were issued to Mr. Gartner and 80,000 shares (320,000 shares of Common Stock on an as-converted basis) of which were issued to Mr. Gilmour and (ii) the issuance to Mr. Gartner of an option to purchase 160,000 shares of Common Stock at an exercise price of $.50 per share which vested immediately. On December 29, 1995, the Company acquired Mr. Gilmour's remaining interest in ExperNet in exchange for a $400,000 6% convertible note (the "Note") due December 31, 2005 (see Note 9). As a result of the common control of the Company and ExperNet, there has been no adjustment to the historical cost basis of the net assets acquired and liabilities assumed of ExperNet. As a result of the transaction, the Company's accumulated deficit increased by $608,000 representing the net deficit of ExperNet at the date of acquisition ($208,000) and the obligation under the convertible note ($400,000). The results of operations include ExperNet from July 6, 1995. F-10 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following unaudited pro forma summary presents the consolidated results of operations as if the acquisitions of BIS and ExperNet had occurred on January 1, 1995 and does not purport to be indicative of what would have occurred had the acquisitions been made as of that date or of the results which may occur in the future (in thousands):
JANUARY 1, TO DECEMBER 31, 1995 ----------------- (UNAUDITED) Information Products revenues......................... $14,015 Cost of services and product development.............. 10,775 Sales and marketing................................... 1,282 General and administrative............................ 7,455 Depreciation and amortization......................... 1,797 ------- Total costs and expenses........................... 21,309 ------- Operating loss..................................... (7,294) Interest income, net.................................. 153 ------- Loss from continuing operations before income tax- es................................................. (7,141) Income tax benefit.................................... (1,314) ------- Loss from continuing operations.................... $(5,827) =======
4. RELATED PARTIES During the period from March 17, 1995 to December 31, 1995, the Company reimbursed Mr. Gartner $186,000 for disbursements made by him for items related to the acquisition of BIS and for other operational expenses prior to the incorporation of the Company. In addition, following the initial closing of the sale of Series B Preferred Stock by the Company in November 1995, ExperNet repaid a loan in the principal amount of approximately $221,000 plus accrued interest at a rate of 10%, or a total of approximately $248,000, to Mr. Gartner and a loan in the principal amount of approximately $101,000 plus accrued interest at a rate of 10%, or a total of approximately $113,000, to Mr. Gilmour. In the event the Company is unable to complete its proposed initial public offering, certain of its existing investors have represented that they will, to the extent necessary, fund the Company through June 1997 on terms to be mutually agreed upon. 5. PROPERTY AND EQUIPMENT Property and equipment at cost, less accumulated depreciation and amortization, consist of the following (in thousands):
DECEMBER 31, 1995 JUNE 30, 1996 ----------------- ------------- Computers and related equipment............ $1,815 $2,422 Furniture and fixtures..................... 498 1,000 Motor vehicles............................. 426 339 Leasehold improvements..................... 17 91 ------ ------ 2,756 3,852 Less accumulated depreciation and amortiza- tion...................................... (562) (1,136) ------ ------ Property and equipment, net................ $2,194 $2,716 ====== ======
F-11 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. LEASE COMMITMENTS The Company leases certain office space and equipment under operating lease agreements. As of June 30, 1996, future minimum rental commitments under all operating leases with remaining noncancelable terms of one year or more, including the rental payments being made by a former owner of the Company (see Note 3), are as follows (in thousands):
OPERATING YEAR LEASES ---- --------- 1996............................................................... $ 765 1997............................................................... 1,485 1998............................................................... 999 1999............................................................... 729 2000............................................................... 583 Thereafter......................................................... 3,364 ------ Total lease commitments ......................................... $7,925 ======
Rent expense, net of sublease income of approximately $60,000, $20,000 and $39,000, was $650,000, $218,000 and $452,000 for the periods March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and January 1, 1996 to June 30, 1996, respectively. Amortization expense includes $253,000, $63,000 and $190,000 amortization of the leasehold asset in lieu of rent expense for the periods March 17, 1995 to December 31, 1995, March 17, 1995 to June 1995 and January 1, 1996 to June 30, 1996, respectively. 7. INCOME TAXES The Company has deferred tax assets of approximately $2,833,000 and $6,421,000 at December 31, 1995 and June 30, 1996, respectively. For financial reporting purposes, valuation allowances of $2,772,000 and $6,351,000, respectively, have been recognized to offset these deferred tax assets. During the period March 17, 1995 to December 31, 1995 and the six month period ended June 30, 1996, the valuation allowance increased by approximately $1,006,000 and $3,579,000, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 31, 1995 JUNE 30, 1996 ----------------- ------------- Deferred revenue........................... $ 539 $ 370 Net operating loss carryforwards........... 2,395 5,910 Other, net................................. (101) 141 ------ ------ Total deferred tax assets................ 2,833 6,421 Valuation allowance for deferred tax assets.................................... 2,772 6,351 ------ ------ Net deferred tax assets.................. $ 61 $ 70 ====== ======
F-12 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) For financial reporting purposes, income before income taxes includes the following components (in thousands):
MARCH 17 TO SIX MONTHS DECEMBER 31, ENDED JUNE 30, 1995 1996 ------------ -------------- Pre-tax loss from continuing operations: United States.................................. $(4,972) $ (9,690) Non-United States.............................. (1,237) (480) ------- -------- Consolidated..................................... $(6,209) $(10,170) ======= ========
The Company has available net operating loss carryforwards of approximately $15,109,000 at June 30, 1996, which may be used to reduce future taxable income. Of this amount, U.S. carryforwards of approximately $11,804,000 expire in various years through 2011, certain non-U.S. carryforwards of approximately $1,589,000 expire in various years through 2001 and the balance may be carried forward indefinitely. If losses of acquired companies are used to reduce future taxable income, associated tax benefits will first reduce acquired goodwill and other noncurrent intangible assets before being recognized as a reduction of income tax expense in the period the benefits are realized. Utilization of the net operating loss carryforwards may be limited pursuant to the provisions of Section 382 of the Internal Revenue Code of 1986. The results of continuing operations for March 17, 1995 to December 31, 1995, the period March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996 include non-U.S. income tax benefits of approximately $(339,000), $(55,000) and $0, respectively, and U.S. federal, state and local income, franchise and minimum tax benefits of approximately $(754,000), $(255,000) and ($257,000), respectively. 8. JOINT VENTURE AGREEMENT In 1991, BIS Strategic Decisions, Inc. entered into a joint venture agreement with a Japanese company to provide additional market penetration in Japan for its products and services. BIS Strategic Decisions, Inc.'s initial equity ownership was 40%. Pursuant to the terms of the agreement, the Company purchased an additional 10% interest in the joint venture from its partner in March 1996 for approximately $85,000. In April 1996, the Company and its partner each increased their investment in the joint venture by approximately $24,000. At December 31, 1995 and June 30, 1996, the Company had accounts receivable due from the joint venture of $100,000 and $69,000, respectively. 9. LONG TERM DEBT In connection with the Company's acquisition of BIS, the Company issued a $1,000,000 5% convertible note due April 5, 1998 in favor of Friday Holdings, L.P. The note is convertible into 2.67% of the outstanding Common Stock of the Company based on equity capitalization for the Company of up to $5,000,000. In connection with the Company's acquisition of ExperNet, the Company issued a $400,000 6% convertible note to Mr. Gilmour (see Note 3). The Note is convertible into shares of Series B Preferred Stock. The Note may be prepaid in part, up to $150,000, at the option of the holder at any time between July 1, 1997 and July 1, 1999 and all, or any part, at the option of the holder on or after July 1, 1999. The holder may convert all or part of the unpaid principal amount of the Note to the Company's Series B Preferred Stock in increasing amounts over a 30-month period beginning December 31, 1996. As of June 30, 1996, the note is convertible into 42,861 shares of Series B Preferred Stock. F-13 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. PREFERRED STOCK The authorized capital stock of the Company includes 10,000,000 shares of Preferred Stock. Of the Preferred Stock, 650,000 shares have been designated as Series A Preferred Stock and 6,500,000 shares have been designated as Series B Preferred Stock. The remaining 2,850,000 shares of Preferred Stock have not been designated. Upon completion of the Company's proposed initial public offering, the Company will have authorized 5,000,000 shares of undesignated Preferred Stock. SERIES A PREFERRED STOCK During 1995, the Company issued 410,000 shares of Series A Preferred Stock (1,640,000 shares on an as- converted basis) for consideration of $2,050,000 which consisted of $2,025,000 cash and a $25,000 non-recourse note from an employee in connection with his acceptance of employment with the Company. In addition, 160,000 shares of Series A Preferred Stock (640,000 shares on an as- converted basis) were issued in connection with the acquisition of ExperNet as described in Note 3. SERIES B PREFERRED STOCK During 1995, the Company issued 4,026,772 shares of Series B Preferred Stock for cash consideration of $13,216,000, net of issuance costs of $878,000. In addition, bridge financing in the principal amount of $2,000,000 was automatically converted into 571,428 shares of Series B Preferred Stock at the first closing of the Series B Preferred Stock financing in November 1995. During the six months ended June 30, 1996, the Company issued 674,015 shares of Series B Preferred Stock for cash consideration of $2,337,000, net of issuance costs of $25,000. CONVERSION Each share of Series A Preferred Stock and Series B Preferred Stock is convertible, at the holder's option, into that number of shares of Common Stock as is determined by dividing the initial purchase price of such shares by the conversion price in effect at the time of conversion. The conversion price of each share of Series A Preferred Stock and Series B Preferred Stock is subject to adjustment upon the occurrence of certain events. At June 30, 1996 each share of Series A Preferred Stock is convertible into four shares of Common Stock and each share of Series B Preferred Stock is convertible into one share of Common Stock. The Series A Preferred Stock and Series B Preferred Stock will automatically convert into Common Stock at the then effective conversion price immediately prior to the closing of a firm commitment underwritten public offering of Common Stock at a price of at least $5.25 per share (as adjusted for any stock splits, stock dividends, subdivisions or combinations), and having aggregate gross proceeds of at least $15,000,000. In addition, the Series A Preferred Stock and Series B Preferred Stock will convert into Common Stock at the then effective conversion price upon the consent of the holders of at least two- thirds (2/3) of the then outstanding Series A Preferred Stock and Series B Preferred Stock. LIQUIDATION Upon (i) the liquidation, dissolution, or winding up of the Company (either voluntary or involuntary) or (ii) the merger or consolidation of the Company with another corporation or the sale or other transfer of all or substantially all of the assets of the Company which is not agreed to by the holders of not less than a majority of the Preferred Stock, voting together as a single class, and in which stockholders of the Company immediately prior to such transaction do not own more than a 50% interest in the surviving entity, (i) holders of the Series A Preferred Stock are entitled to receive out of the assets of the Company available for distribution to its stockholders, an amount equal to $5.00 per share, plus any declared but unpaid dividends, prior to any distribution to the holders of the Company's Common Stock, and (ii) holders of Series B Preferred Stock are F-14 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) entitled to receive out of the assets of the Company available for distribution to its shareholders, an amount equal to $3.50 per share, plus any declared but unpaid dividends, prior to any distribution to the holders of the Company's Common Stock. Following distribution of such preferential amounts, holders of Series A Preferred Stock and Series B Preferred Stock shall not participate in any further distribution. VOTING Except as provided by law or in the Company's Amended and Restated Certificate of Incorporation, the holders of the Series A Preferred Stock and Series B Preferred Stock vote with holders of the Company's Common Stock on an as converted basis and not as a separate class or series. In addition, so long as any shares of Series A Preferred Stock or Series B Preferred Stock are outstanding, the Company may not, without the approval of at least a majority of the outstanding shares of the Series A Preferred Stock and Series B Preferred Stock, take certain actions as described in the Certificate of Incorporation. 11. COMMON STOCK In November 1995, the Company amended its Certificate of Incorporation to increase the authorized number of shares of Common Stock from 10,000,000 to 28,000,000. In November 1995, the Company effected a four-for-one stock split of the Common Stock in the form of a stock dividend. All share and per share data presented herein have been restated to reflect the Common Stock split. Upon completion of the Company's proposed initial public offering, the Company will have authorized 60,000,000 shares of Common Stock. 12. STOCK OPTIONS AND WARRANTS STOCK OPTIONS In June 1995, the Company adopted the 1995 Stock Plan (the "Prior Stock Plan"). The Prior Stock Plan was superseded in October 1995 by the 1995 Stock Option/Stock Issuance Plan (the "1995 Stock Plan"). A total of 5,000,000 shares of Common Stock were reserved for issuance under the 1995 Stock Plan as of June 30, 1996. The 1995 Stock Plan provides for direct purchases of Common Stock and the grants of non-qualified and incentive options to purchase shares of the Company's Common Stock to employees (including officers and directors who are employed by the Company) of, and consultants to, the Company at the fair market value determined by the Board on the date of the grant. The Board may determine the date on which these shares vest and become exercisable. Shares purchased as the result of the exercise of these options are subject to the Company's right to repurchase such shares upon the occurrence of certain events and at a price equal to the fair market value as defined on the date of repurchase. At June 30, 1996, 2,271,361 shares were available for grant. F-15 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A summary of activity under the 1995 Stock Plan through June 30, 1996 follows:
NUMBER OF EXERCISE/ SHARES UNDER PURCHASE OPTION/PURCHASE PRICE --------------- ---------- Outstanding at March 17, 1995 Granted........................................ 2,550,400 $0.50-0.60 Exercised/purchased............................ (160,000) 0.50 Cancelled...................................... (60,000) 0.50 --------- Outstanding at December 31, 1995 2,330,400 Granted........................................ 586,050 0.50-0.90 Exercised/purchased............................ (2,600) 0.50 Cancelled...................................... (347,811) 0.50-0.90 --------- Outstanding at June 30, 1996..................... 2,566,039 0.50-0.90 =========
Through August 31, 1996, pursuant to the 1995 Stock Plan, the Company granted additional options to acquire a total of 371,000 shares of Common Stock at exercise prices ranging from $0.90 to $6.75, net of cancellations of options to purchase 86,892 shares of Common Stock. In addition, the Company has granted options to purchase a total of 780,000 shares of Common Stock granted other than pursuant to the 1995 Stock Plan at an exercise price of $0.50. WARRANTS In connection with certain financings of the Company, the Company has issued a warrant to purchase 107,876 shares of Series B Preferred Stock at an exercise price of $4.5625 per share and a warrant to purchase 285,714 shares of Series B Preferred Stock at an exercise price of $2.345 per share. Each of the warrants is for a term of five years, subject to earlier expiration upon the occurrence of certain events. 13. STOCK PURCHASE PLANS/AGREEMENTS In the period from inception to December 31, 1995, the Company sold 420,000 shares of Common Stock to certain employees of the Company at $0.50 per share under the provisions of the 1995 Stock Plan or separate stock purchase agreements. Employees vest in these shares over four years from their respective dates of purchase, with 25% vesting on the first anniversary of the purchase and the remainder vesting pro rata thereafter monthly over the remaining 36 months. If an employee who purchased stock under either the 1995 Stock Plan or separate agreements ceases to be employed by the Company, the Company at its option may elect to repurchase the employee's unvested shares at the original cost paid by the employee for such stock and vested shares at a price equal to the fair market value as defined on the date of repurchase. In October 1995, the Company sold 120,000 shares of Common Stock to Richard Crandall, a director who also serves as a consultant to the Company for $0.50 per share of which $10,000 was paid in cash and $50,000 was paid in the form of a non-recourse interest bearing note due March 31, 1996. In June 1996, the Company cancelled the promissory note plus interest accrued thereunder (totalling approximately $52,000), in lieu of payment to Mr. Crandall for services rendered to the Company in 1995 (for which Mr. Crandall was entitled to receive $25,000) and the first six months of 1996 (for which Mr. Crandall was entitled to receive $30,000) plus interest. These shares are also subject to certain repurchase rights by the Company in the event that Mr. Crandall ceases to be either a director of, or consultant to, the Company. 14. EMPLOYEE BENEFITS AND DEFERRED COMPENSATION PLANS In the United States, the Company maintains a Savings and Retirement Plan (the "401(k) Plan") under Section 401 of the Internal Revenue Code. Employees are eligible to participate in the 401(k) Plan who work a F-16 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) minimum of one year and have attained the age of 21. The Company matches by 25% that portion of a participant's contribution representing the first 3% of an employee's base salary and by 50% that portion representing the next 3% of an employee's base salary. The Company may also make additional contributions to the 401(k) Plan at the discretion of the Board of Directors. The Company has made mandatory contributions to the 401(k) Plan of $47,000, $17,000 and $33,000 during the periods March 17, 1995 to December 31, 1995, March 17, 1995 to June 30, 1995 and the six months ended June 30, 1996. The Company has not made any discretionary contributions to the 401(k) Plan during 1995 or 1996. 15. GEOGRAPHICAL MARKET INFORMATION The Company operates in one business segment and in the geographical markets indicated in the table below. Sales for continuing operations are reflected in the segment from which the sales are made. The Other International segment includes France, Italy, Germany and Korea.
(IN THOUSANDS) NORTH UNITED OTHER AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL ------- --------- ------- ------------- ------- MARCH 17, 1995 TO DECEMBER 31, 1995: Revenues: Total revenues......... $ 3,755 $ 3,832 $ 2,051 $1,185 $10,823 Transfers between areas................. -- -- (55) (62) (117) ------- ------- ------- ------ ------- Unaffiliated revenues.. 3,755 3,832 1,996 1,123 10,706 ======= ======= ======= ====== ======= Income (loss) from operations.............. (5,087) 215 (857) (639) (6,368) Total assets............. 20,222 1,163 2,077 1,222 24,684 MARCH 17, 1995 TO JUNE 30, 1995: Revenues: Total revenues......... $ 1,113 $ 1,337 $ 681 $ 472 $ 3,603 Transfers between areas................. -- -- (13) (19) (32) ------- ------- ------- ------ ------- Unaffiliated revenues.. 1,113 1,337 668 453 3,571 ======= ======= ======= ====== ======= Income (loss) from operations.............. (898) 135 (117) (173) (1,053) Total assets............. 7,517 996 2,017 1,351 11,881 JANUARY 1, 1996 TO JUNE 30, 1996: Revenues: Total revenues......... $ 2,364 $ 2,281 $ 1,239 $ 662 $ 6,546 Transfers between areas................. (12) -- (16) (36) (64) ------- ------- ------- ------ ------- Unaffiliated revenues.. 2,352 2,281 1,223 626 6,482 ======= ======= ======= ====== ======= Loss from operations..... (9,978) (9) (288) (218) (10,493) Total assets............. 15,014 1,434 1,773 999 19,220
16. DISCONTINUED OPERATIONS On June 25, 1996, the Company announced the discontinuation of the BIS Market Research Business. In connection with the discontinuance of such operations, the Company terminated the personnel employed in developing and compiling the BIS data-intensive market research products, ceased operations at two of its licensed facilities in England and entered into contracts with two independent IT service providers engaged to fulfill the Company's obligations to customers of BIS under certain existing subscription agreements, all of which expire on or before June 1997. The results of these operations prior to June 25, 1996 have been classified as discontinued operations and prior year financial statements have been restated to reflect the discontinuance. A charge of approximately $2,305,000 (net of taxes of approximately $158,000) was recorded in June 1996 for the loss on disposition of the operations consisting primarily of rent and compensation. F-17 GIGA INFORMATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The net liabilities of the discontinued operations of the BIS business have been segregated in the consolidated balance sheets and as of June 30, 1996 consist primarily of accounts receivable ($1,739,000) and amounts payable related to rent and facilities expenses ($1,893,000), customer refunds ($1,187,000) and salaries and related severance costs ($495,000). The operating results of the BIS business are summarized as follows (in thousands):
MARCH 17 TO MARCH 17, SIX MONTHS ENDED DECEMBER 31, 1995 TO JUNE 30, 1995 JUNE 30, 1996 ----------------- ---------------- ---------------- (UNAUDITED) Revenues................ $11,329 $3,829 $3,521 Pre-tax income.......... 2,987 731 29 Provision for income taxes.................. 1,497 430 114 ------- ------ ------ Net income (loss)....... $ 1,490 $ 301 $ (85) ======= ====== ======
17. COMMITMENTS AND CONTINGENT LIABILITIES The Company entered into an agreement in May 1996 with Dow Jones & Company, Inc. regarding the distribution of certain content provided by Dow Jones to GigaWeb subscribers. In exchange for the rights to distribute Dow Jones information, the Company is required to pay Dow Jones a monthly fee equal to the greater of a Guaranteed Minimum Monthly Payment or an established rate per GigaWeb subscriber. The Guaranteed Minimum Monthly Payment schedule is as follows: $5,000 per month for July and August 1996, $7,500 for September 1996, $10,000 for October 1996, $11,000 per month for November and December 1996 and $22,500 per month throughout calendar year 1997. The total minimum payments would be approximately $320,000 over the life of the Agreement. This agreement is due to expire on December 31, 1997. A subsidiary of the Company, BIS Strategic Divisions, Ltd., has an unused line of credit with a bank which is secured by all assets owned or leased by the Company. 18. SUBSEQUENT EVENTS In July 1996, an action was brought against the Company and its chairman by a former employee alleging breach of employment agreement and fraud and seeking, among other things, approximately $3.5 million in compensatory and punitive damages. The Company believes it has meritorious defenses and intends to vigorously defend its case. Management believes it is unlikely that the outcome of this case will have a material adverse effect on the financial condition of the Company. In August 1996, the Board of Directors authorized, subject to stockholder approval and the closing of an proposed initial public offering, the filing of a Restated Certificate of Incorporation which authorized 60,000,000 shares of Common Stock and 5,000,000 shares of undesignated Preferred Stock which is issuable in one or more series, each of such series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as shall be determined by the Board of Directors. On August 5, 1996, the Board of Directors amended the 1995 Stock Plan, subject to stockholder approval, to increase the number of shares of Common Stock reserved for issuance under the 1995 Stock Plan from 5,000,000 to 6,000,000. On August 28, 1996, the Board of Directors adopted, subject to stockholder approval, the 1996 Stock Option Plan (the "1996 Plan") to effectively supersede the 1995 Stock Plan. The 1996 Stock Plan will provide for the granting of options to purchase 3,000,000 shares of Common Stock. As a result, the Board of Directors also voted not to grant any additional stock options under the 1995 Stock Plan. On August 28, 1996, the Board of Directors also adopted, subject to stockholder approval and the closing of the proposed initial public offering, the 1996 Employee Stock Purchase Plan (the "Purchase Plan"). A total of 400,000 shares of Common Stock has been reserved for issuance under the Purchase Plan. F-18 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Giga Information Group, Inc.: We have audited the accompanying combined statements of operations, changes in stockholder's equity and cash flows of BIS Strategic Decisions for the period from January 1, 1995 to April 5, 1995. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1 to the combined financial statements, BIS Strategic Decisions was acquired by Giga Information Group, Inc. on April 5, 1995 and has been operated by the management of Giga since that date. The transaction involved the payment of $200,000 cash and a convertible note in the principal amount of $1,000,000 for all the outstanding shares of BIS Strategic Decisions. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined results of BIS Strategic Decisions' operations and its cash flows for the period from January 1, 1995 to April 5, 1995 in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Boston, Massachusetts August 31, 1996 F-19 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Shareholder BIS Strategic Decisions We have audited the accompanying combined balance sheet of the entities listed in Note 2 as of December 31, 1994, and the related combined statements of operations, stockholder's equity, and cash flows for the year ended December 31, 1994, the period from December 16, 1993 to December 31, 1993, and the period from January 1, 1993 to December 15, 1993. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We did not audit the financial statements of BIS Shrapnel PTY Limited for the periods January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31, 1993, which statements reflect total revenues of approximately $4,245,000 and $187,000, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion for the period from January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31, 1993, insofar as it relates to data included for BIS Shrapnel PTY Limited, is based solely on the reports of other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and, for the periods January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31, 1993, the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and, for the periods January 1, 1993 to December 15, 1993, and December 16, 1993 to December 31, 1993, the report of other auditors, the combined financial statements referred to above present fairly, in all material respects, the combined financial condition of the entities listed in Note 2 as of December 31, 1994, and the combined results of their operations and their cash flows for the year ended December 31, 1994, the period from December 16, 1993 to December 31, 1993, and the period from January 1, 1993 to December 15, 1993, in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared assuming that the Companies listed in Note 2 will continue as a going concern. As more fully described in Note 4, the Companies' expired line of credit with a bank and projected cash shortfalls for 1995 raise substantial doubt about their ability to continue as a going concern. The Companies are wholly-owned by Friday Holdings, L.P., a limited partnership that is in the process of winding up its affairs. In connection therewith, Friday Holdings, L.P. is in discussions with potential buyers of the Companies. On March 6, 1995, Friday Holdings, L.P. entered into a nonbinding letter of intent to sell the Companies. Among other things, the terms of the nonbinding letter of intent provide that the buyer infuse up to $1,800,000 into the Companies during the first year. See Note 4 for additional information about the nonbinding letter of intent and management's plans to address the projected cash shortfalls. The accompanying combined financial statements as of December 31, 1994, and for the year ended December 31, 1994, the period from December 16, 1993 to December 31, 1993, and the period from January 1, 1993 to December 15, 1993, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. As described in Note 2, effective January 1, 1993, the Companies changed their method of accounting for revenue recognized for continuous information services. Ernst & Young LLP Boston, Massachusetts March 13, 1995, except with respect to the matters described in Note 12, as to which the date is September 6, 1996. F-20 BIS SHRAPNEL PTY LIMITED INDEPENDENT AUDIT REPORT TO THE MEMBERS OF BIS SHRAPNEL PTY LIMITED SCOPE We have audited the attached financial package of the business BIS Shrapnel from 1 January 1993 to 15 December 1993. The results incorporate the operations of the two legal entities that carried on the business under the name BIS Shrapnel and have been prepared on the basis of the footnotes to the financial package. The company's directors are responsible for the preparation and presentation of the financial package and the information contained therein. We have conducted an independent audit of this financial package in order to express an opinion on the financial package to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards, which are substantially comparable to United States Generally Accepted Auditing Standards, to provide reasonable assurance as to whether the financial package is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial package, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial package is presented fairly in accordance with Australian accounting standards so as to present a view of the business which is consistent with our understanding of its financial position, the results of its operations and its cash flows. The audit opinion expressed in this report has been formed on the above basis. AUDIT OPINION In our opinion the financial package of the business of BIS Shrapnel is properly drawn up: (a) so as to give a true and fair view of the state of affairs of the business as at 15 December 1993 and of its result and cash flows for the period from 1 January 1993 to 15 December 1993; and (b) in accordance with applicable Accounting Standards. COOPERS & LYBRAND Chartered Accountants Signed at Sydney this 6th day of July 1994. F-21 BIS SHRAPNEL PTY LIMITED INDEPENDENT AUDIT REPORT TO THE MEMBERS OF BIS SHRAPNEL PTY LIMITED SCOPE We have audited the attached financial package of BIS Shrapnel Pty Limited from 16 December 1993 to 31 December 1993. The financial package has been prepared on the basis of the footnotes to the financial package. The company's directors are responsible for the preparation and presentation of the financial package and the information contained therein. We have conducted an independent audit of this financial package in order to express and opinion on the financial package to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards, which are substantially comparable to United States Generally Accepted Auditing Standards, to provide reasonable assurance as to whether the financial package is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial package, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial package is presented fairly in accordance with Australian accounting standards so as to present a view of the company which is consistent with our understanding of its financial position, the results of its operations and its cash flows. The audit opinion expressed in this report has been formed on the above basis. AUDIT OPINION In our opinion the financial package of the business of BIS Shrapnel is properly drawn up: (a) so as to give a true and fair view of the state of affairs of the company as at 31 December 1993 and of its result and cash flows for the period from 16 December 1993 to 31 December 1993; and (b) in accordance with applicable Accounting Standards. COOPERS & LYBRAND Chartered Accountants Signed at Sydney this 6th day of July 1994. F-22 BIS STRATEGIC DECISIONS COMBINED BALANCE SHEET DECEMBER 31, 1994 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ASSETS Current assets: Cash and cash equivalents.................................... $1,809 Trade accounts receivable, net of allowance for uncollectible accounts of $45............................................. 2,227 Unbilled accounts receivable................................. 663 Prepaid expenses and other current assets.................... 302 ------ Total current assets..................................... 5,001 Property and equipment, net of accumulated depreciation of $674.......................................................... 1,807 Goodwill, net of accumulated amortization of $2,299............ 1,778 Other assets................................................... 15 ------ Total assets........................................... $8,601 ====== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Bank loans................................................... $345 Accounts payable, other current liabilities and accrued ex- penses...................................................... 2,394 Deferred revenues............................................ 1,681 Accrued compensation and benefits............................ 791 Net liabilities of discontinued operations................... 1,567 ------ Total current liabilities................................ 6,778 Stockholder's equity: Common Stock: BIS Strategic Decisions, Inc. $0.01 par value per share; one share authorized, issued and outstanding.............. -- BIS Strategic Decisions, Ltd. (Pounds)1 par value per share; 2,160,791 shares authorized, issued and outstanding....... 3,220 BIS Shrapnel PTY Ltd. A$1 par value per share; 10,000,000 shares authorized, 2,467,841 shares issued and outstanding....... 1,654 BIS Strategic Decisions, GmbH DM 60,000 par value per share; one share authorized, issued and outstanding.............. 29 BIS Strategic Decisions, Srl Lire 200,000 par value per share; 100 shares authorized, issued and outstanding............. 11 BIS Strategic Decisions, Sarl FF 100 par value per share; 10,000 shares authorized, issued and outstanding.......... 171 Additional paid-in capital................................... 4,011 Accumulated deficit.......................................... (6,951) Cumulative translation adjustment............................ (322) ------ Total stockholder's equity............................... 1,823 ------ Total liabilities and stockholder's equity............. $8,601 ======
The accompanying notes are an integral part of the combined financial statements. F-23 BIS STRATEGIC DECISIONS COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR COMPANIES (NYNEX) PREDECESSOR COMPANIES (FHLP) --------------- ---------------------------------------- JANUARY 1 DECEMBER 16 YEAR ENDED JANUARY 1 TO DECEMBER 15, TO DECEMBER 31, DECEMBER 31, TO APRIL 5, 1993 1993 1994 1995 --------------- --------------- ------------ ----------- Information products revenues............... $11,371 $ 329 $12,700 $3,237 Cost and expenses: Cost of services and product development.. 5,530 357 6,172 2,208 Sales and marketing... 1,448 92 1,589 266 General and administrative....... 6,901 307 8,108 1,197 Depreciation and amortization......... 744 38 3,068 250 ------- ----- ------- ------ Total costs and expenses........... 14,623 794 18,937 3,921 ------- ----- ------- ------ Operating loss........ (3,252) (465) (6,237) (684) Interest income......... 114 7 103 26 Interest expense........ (38) (4) (26) (4) ------- ----- ------- ------ Loss from continuing operations before income taxes......... (3,176) (462) (6,160) (662) Income tax provision (benefit).............. (983) -- (1,096) (213) ------- ----- ------- ------ Loss from continuing operations........... (2,193) (462) (5,064) (449) Discontinued operations: Income (loss) from the discontinued BIS market research business, net of tax effect .............. 1,044 44 (1,469) 597 ------- ----- ------- ------ Net income (loss)....... $(1,149) $(418) $(6,533) $148 ======= ===== ======= ======
The accompanying notes are an integral part of the combined financial statements. F-24 BIS STRATEGIC DECISIONS COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL ---------------- PAID-IN TRANSLATION ACCUMULATED STOCKHOLDER'S SHARES AMOUNT CAPITAL ADJUSTMENTS DEFICIT EQUITY --------- ------ ---------- ----------- ----------- ------------- Predecessor Companies (NYNEX): Balance at December 31, 1992; $2,764 $(282) $(1,021) $1,461 BIS Strategic Deci- sions, Inc., par value $.01 per share................ 1 $ -- -- -- -- -- BIS Strategic Deci- sions, Ltd., par value (Pounds).1 per share................ 1,050,000 160 -- -- -- 160 BIS Shrapnel PTY Ltd., par value A$1 per share................ 230,000 206 -- -- -- 206 BIS Strategic Deci- sions, Srl, par value Lire 200,000 per share................ 100 16 -- -- -- 16 Reorganization adjust- ments: 135 -- (823) (688) BIS Strategic Deci- sions, GmbH, par value DM 50,000 per share................ 1 29 -- -- -- 29 BIS Strategic Deci- sions, Sarl, par value FF 100 per share................ 10,000 171 -- -- -- 171 BIS Strategic Deci- sions, Ltd. par value (Pounds).01 per share................ -- 31 -- -- -- 31 BIS Strategic, Srl, par value Lire 200,000 share........ -- (5) -- -- -- (5) Net income............ (1,149) (1,149) Common stock issued in conjunction with reor- ganization: BIS Strategic Deci- sions, Ltd., par value (Pounds)1 per share................ 1,110,791 3,029 -- -- -- 3,029 BIS Strategic PTY Ltd., par value A$1 per share............ 2,237,841 1,448 -- -- -- 1,448 Equity adjustment from translation........... -- -- -- 331 -- 331 --------- ------ ------ ----- ------- ------ Balance at December 15, 1993.................. 4,638,734 $5,085 $2,899 $ 49 $(2,993) $5,040 ========= ====== ====== ===== ======= ====== - ------------------------------------------------------------------------------------------- Predecessor Companies (FHLP): Pushdown of invest- ment................. -- -- 1,112 (49) 2,993 4,056 --------- ------ ------ ----- ------- ------ Balance at December 16, 1993.................. 4,638,734 5,085 4,011 -- -- 9,096 --------- ------ ------ ----- ------- ------ Net loss.............. -- -- -- -- (418) (418) Equity adjustment from translation.......... -- -- -- 1 -- 1 --------- ------ ------ ----- ------- ------ Balance at December 31, 1993.................. 4,638,734 5,085 4,011 1 (418) 8,679 --------- ------ ------ ----- ------- Net loss.............. -- -- -- -- (6,533) (6,533) Equity adjustment from translation.......... -- -- -- (323) -- (323) --------- ------ ------ ----- ------- ------ Balance at December 31, 1994.................. 4,638,734 5,085 4,011 (322) (6,951) 1,823 --------- ------ ------ ----- ------- ------ Net income............ -- -- -- -- 148 148 Equity adjustment from translation.......... -- -- -- (6) (6) --------- ------ ------ ----- ------- ------ Balance at April 5, 1995.................. 4,638,734 $5,085 $4,011 $(328) $(6,803) $1,965 ========= ====== ====== ===== ======= ======
The accompanying notes are an integral part of the combined financial statements. F-25 BIS STRATEGIC DECISIONS COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR COMPANIES (NYNEX) PREDECESSOR COMPANIES (FHLP) ------------ ---------------------------------------- JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, 1993 1993 1994 1995 ------------ -------------- ------------ ------------ Cash flows from operating activities Net income (loss)...... $(1,149) $(418) $(6,533) $148 Adjustments to reconcile net income (loss) to net cash used in continuing operating activities: Net (income) loss from discontinued operations.......... (1,044) (44) 1,469 (597) Depreciation expense............. 744 30 788 226 Amortization and writedown of goodwill............ -- 8 2,280 24 Loss (gain) on sale of fixed assets..... (11) -- 62 -- Provision for deferred income taxes............... -- -- (1,183) 58 Allowance for doubtful accounts... (1) (3) 27 9 Changes in certain operating assets and liabilities: Increase in accounts receivable......... (110) (123) (217) (608) Decrease (increase) in unbilled services........... (74) 10 (3) 183 Decrease (increase) in prepaid expenses and other current assets............. (805) 377 257 (314) Increase (decrease) in accounts payable and accrued expenses........... 461 (827) 589 (559) Increase (decrease) in deferred revenue............ 818 (221) 1,763 490 ------- ------- ------- ------ Net cash provided by (used in) operating activities of: Continuing operations........... (1,171) (1,211) (701) (940) Discontinued operations........... 3,302 812 1,136 642 ------- ------- ------- ------ Net cash provided by (used in) operating activities........... 2,131 (399) 435 (298) Cash flows from investing activities: Purchase of fixed assets............... (795) (19) (1,157) (197) Proceeds from sale of equipment............ 107 -- 70 32 ------- ------- ------- ------ Net cash used in investing activities........... (688) (19) (1,087) (165) Cash flows from financing activities: Proceeds from borrowings........... 176 -- 80 22 Principal payments on borrowings........... (157) -- -- (157) Principal payments on capital lease obligations.......... (61) -- -- (19) ------- ------- ------- ------ Net cash provided by (used in) financing activities............. (42) -- 80 (154) Effect of exchange rate changes on cash........ 37 (4) (433) 225 ------- ------- ------- ------ Net increase (decrease) in cash and cash equivalents............ 1,438 (422) (1,005) (392) Cash and cash equivalents at beginning of period... 1,798 3,236 2,814 1,809 ------- ------- ------- ------ Cash and cash equivalents at end of period................ $3,236 $2,814 $1,809 $1,417 ======= ======= ======= ====== Supplemental cash flow information: Income taxes paid..... $ 155 $ 0 $ 51 $ 7 Interest paid......... $ 17 $ 6 $ 35 $ 2
The accompanying notes are an integral part of the combined financial statements. F-26 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) 1. BACKGROUND During the period January 1, 1993 to December 15, 1993, BIS Strategic Decisions, Inc. and its five foreign affiliates (collectively "BIS Strategic Decisions," "BIS" or the "Predecessor Companies") were wholly-owned subsidiaries of NYNEX Corporation ("NYNEX"). On December 16, 1993, Friday Holdings, L.P. ("FHLP") acquired 100% of the common stock outstanding of each of the Predecessor Companies from NYNEX in exchange for $8,696,000 in cash. On April 5, 1995, Giga Information Group, Inc. ("Giga") acquired 100% of the common stock outstanding of each of the Predecessor Companies from FHLP for $200,000 in cash and a $1,000,000 convertible promissory note. The acquisition of the Predecessor Companies by Giga was accounted for as a purchase. As part of the transaction, a $1,300,000 intangible asset was recorded representing the fair value of payments being made on a property lease through May 1998 by a former owner of the Predecessor Companies. The financial data of the Predecessor Companies for the period January 1, 1993 to December 15, 1993 are reflected on the financial statements and referred to from time to time herein as "Predecessor Companies (NYNEX)." The financial data for the Predecessor Companies for the period December 16, 1993 to December 31, 1993, the year ended December 31, 1994 and for the period January 1 to April 5, 1995 are reflected on the financial statements and referred to from time to time herein as "Predecessor Companies (FHLP)." On June 25, 1996, the Company decided to discontinue the BIS Market Research Business. In connection with the discontinuance of such operations, the Company terminated the personnel employed in developing and compiling the BIS market research products, ceased operations at two of the licensed facilities in England and entered into contracts with two independent IT service providers engaged to fulfill the Company's obligations to customers of BIS under certain existing subscription agreements, all of which expire on or before June 1997. The continuing operations reflected in the financial statements represent revenues and expenses associated with the Predecessor Companies Information Products revenues, which include events, publications, consulting and econometric forecasting. The financial statements for the period January 1, 1993 to December 15, 1993 are presented as if the Predecessor Companies existed as an entity separate from NYNEX and include only financial information directly related to the Predecessor Companies. During 1993, in anticipation of the sale of the Predecessor Companies, NYNEX initiated certain reorganization efforts which changed the legal and capital structure of certain of the Predecessor Companies. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The combined financial statements of BIS Strategic Decisions include the accounts of BIS Strategic Decisions, Inc., BIS Strategic Decisions, Ltd., BIS Shrapnel PTY Ltd., BIS Strategic Decisions, GmbH, BIS Strategic Decisions, Srl and BIS Strategic Decisions, Sarl. All intercompany accounts and transactions have been eliminated in combination. Pursuant to the acquisition of BIS on December 16, 1993 by FHLP, identifiable assets acquired and liabilities assumed were carried over at net book value which approximates fair market value. The excess of the purchase price over the fair market value of the net identifiable assets acquired was recorded as goodwill. F-27 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Because of the impact to the combined statements of operations, changes in stockholder's equity and cash flows of the revaluation of the net assets acquired by FHLP on December 16, 1993, the combined statements of operations, changes in stockholder's equity and cash flows for the periods January 1, 1993 to December 15, 1993 are not comparable with those of December 16, 1993 to December 31, 1993, the year ended December 31, 1994 and the period January 1, 1995 to April 5, 1995. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING Effective January 1, 1993, the Predecessor Companies changed their method of accounting for revenue recognized for continuous information services (which services were provided solely by the BIS Market Research Business) to recognize revenue ratably over the contract period. Previously, 35% of the revenue was recognized at the start of the service term and the remaining 65% was recognized ratably over the service period. Management believes that the change in accounting principle results in better matching of revenues and expenses and is preferable given the current industry practice. The cumulative effect of the change in accounting at January 1, 1993, net of $462,000 in applicable income taxes, decreased the net income by $1,928,000 for the period ended December 15, 1993. The change in revenue recognition is reflected in its entirety in the results of discontinued operations. FOREIGN CURRENCY TRANSLATION For international operations, the local currency is used as the functional currency. The assets and liabilities of the foreign companies are translated at the year-end rates of exchange and the related income statement items are translated at the average rates of exchange for the year. The resulting translation adjustments are excluded from income and charged to a separate component of stockholder's equity. Realized and unrealized exchange gains or losses arising from transaction adjustments are reflected in operations and are not material. CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with maturities of three months or less at date of purchase. PROPERTY AND EQUIPMENT Property and equipment is stated on the basis of cost less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives;
Computers and related equipment... 3 years Furniture and fixtures............ 5 years Motor vehicles.................... 4 years Leasehold improvements............ Shorter of economic life or lease term
Major additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Upon retirement or disposition, the cost and related accumulated depreciation are removed from the account and the resulting gain or loss is included in the determination of net income. REVENUE RECOGNITION Information Product revenues from events, publications, consulting and economic forecasting are recognized as follows: Events--revenues and associated expenses are recognized during the month that the conference is held. Publications--revenues from general and research reports are recognized when the report is published. Newsletter revenues are recognized over the subscription period. Consulting Services--revenues are recognized based on the percentage of the service that has been performed. Econometric Forecasting--revenues are recognized based on the percentage of the service that has been completed. F-28 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) CONCENTRATIONS OF CREDIT RISK Cash equivalents are financial instruments which potentially subject the Predecessor Companies to concentrations of credit risk. The Predecessor Companies invest the majority of their excess cash in overnight investments in a money market account. The Predecessor Companies have not experienced any losses on their investments. The Predecessor Companies offer services to a diversified client base, many of which are large, well established companies. Accordingly, there is no one customer or industry that represents a significant portion of revenues or receivables. INCOME TAXES The Predecessor Companies account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which is a balance sheet approach for accounting for income taxes (see Note 3). Under SFAS 109, deferred tax liabilities and assets are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using current statutory tax rates. SFAS 109 also requires a valuation allowance against net deferred tax assets if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. For the period January 1, 1993 to December 15, 1993, NYNEX included BIS Strategic Decisions, Inc.'s U.S. tax return in its consolidated U.S. tax return. Income taxes pertaining to BIS Strategic Decisions, Inc. for the period January 1, 1993 to December 15, 1993 were calculated as if BIS Strategic Decisions, Inc. had filed a separate tax return. The Predecessor Companies' foreign affiliates file separate tax returns. From December 16, 1993 through April 15, 1995 the Predecessor Companies (FHLP) filed separate tax returns for all periods presented. GOODWILL Goodwill represents the excess of cost over the fair value of the net assets of companies acquired. This balance is amortized over 20 years using the straight-line method. 3. PROPERTY AND EQUIPMENT Property and equipment for continuing operations at December 31, 1994 consists of the following (in thousands): Computer and related equipment....................................... $1,143 Furniture and fixtures............................................... 522 Motor vehicles....................................................... 794 Leasehold improvements............................................... 22 ------ 2,481 Less accumulated depreciation and amortization....................... (674) ------ Property and equipment, net.......................................... $1,807 ======
4. LIQUIDITY In 1994, the Company made substantial changes in its operations and incurred nonrecurring restructuring costs, predominately severance, of approximately $905,000 of which $680,000 pertains to continuing operations. Further, in March 1995, there was an additional reduction in force with related severance costs of approximately $220,000 of which $198,000 pertains to continuing operations. The budgets for 1995 anticipate a net use of cash F-29 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) which is less than the December 31, 1994 cash balance, however, there are several months where the forecasted cash balance is negative. The Company's only bank financing arrangement expired on December 31, 1994 . The bank has, however, continued to honor the line on an informal month-to-month basis. As of March 13, 1995, all amounts outstanding under this agreement were paid. Should the bank not continue to extend the line, the Company will need to obtain alternative financing or modify the 1995 operating plan to meet its obligations. FHLP acquired 100% of the outstanding capital stock of each of the Predecessor Companies (NYNEX) on December 16, 1993. FHLP has substantial obligations to its limited partners which were due on December 31, 1994. FHLP is in technical default of these obligations. Currently, FHLP management is in the process of winding up its affairs. In connection therewith, on March 6, 1995, FHLP entered into a nonbinding letter of intent to sell the Predecessor Companies. Among other things, the terms of the nonbinding letter of intent includes a sales price of $1,800,000 (cash of $200,000 and a one-year note of $1,600,000) and a requirement that the buyer infuse up to $1,800,000 into the Predecessor Companies during the first year. Because of the terms of this agreement, the Company has recorded an adjustment in 1994 to the carrying value of goodwill of approximately $4,711,000 of which $2,617,000 is attributable to discontinued operations. 5. CREDIT ARRANGEMENTS One of the combined affiliates of the Company has a working capital line of credit agreement with a bank under which it may borrow amounts which ranged from $480,000 to $750,000. The line of credit bears interest at the bank's base rate plus 1.5% and is secured by all assets owned or leased by the affiliate. The agreement contains operational covenants and expired on December 31, 1994; however, the bank has allowed the affiliate to extend the line pending resolution of the sale of the affiliate. As of December 31, 1994, there was approximately $345,000 outstanding on the line of credit. As of March 13, 1995, all amounts outstanding under this agreement were paid. The weighted average interest rates of outstanding borrowings were 4.0%, 4.4% 6.1% and 7.5% for the periods January 1, 1993 to December 15, 1993 and December 16, 1993 to December 31, 1993, the year ended December 31, 1994 and the period January 1, 1995 to April 5, 1995, respectively. 6. INCOME TAXES At December 31, 1994, the Predecessor Companies have deferred tax assets of approximately $2,035,000. For financial reporting purposes, a valuation allowance of $2,035,000 has been recognized to offset the deferred tax assets. During the period ended December 31, 1994, the valuation allowance was increased by approximately $586,000. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Predecessor Companies' deferred tax liabilities and assets as of December 31, 1994 are as follows (in thousands): Deferred tax assets: Discontinued operations........................................... $ 1,025 Net operating loss carryforward................................... 1,116 Other, net........................................................ (106) ------- Total deferred tax assets......................................... $ 2,035 Valuation allowance for deferred tax assets......................... (2,035) ------- Net deferred tax assets............................................. $ 0 =======
F-30 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) For financial reporting purposes, income taxes (benefit) from continuing operations were based on the following components:
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, 1993 1993 1994 1995 ------------ -------------- ------------ ------------ Pretax loss from continuing operations: United States........................................................ $(1,609) $(338) $(1,458) $(497) Foreign.............................................................. (1,567) (124) (4,702) (165) ------- ----- ------- ----- Total pretax loss from continuing operations....................... $(3,176) $(462) $(6,160) $(662) - -------------------------------------------------- ======= ===== ======= =====
The Company had available net operating loss carryforwards of approximately $2,722,000 which may be used to reduce future taxable income. Domestic carryforwards of approximately $1,100,000 expire in 2008. These carryforwards have been limited to approximately $450,000 due to the purchase of the Predecessor Companies by Giga. Certain remaining foreign carryforwards expire in 1998 while others may be carried forward indefinitely. The results of continuing operations for January 1 to December 15, 1993, December 16 to December 31, 1993, the year ended December 31, 1994 and January 1 to April 5, 1995 include foreign tax expense (benefit) of $(345,000), $0, $(512,000) and $(3,000), respectively. 7. PENSION PLANS North America--In 1987, the Predecessor Companies established CAP International Savings and Retirement Plan (the 401(k) Plan), a profit sharing plan under Section 401 of the Internal Revenue Code. Employees are eligible to participate in the 401(k) Plan by meeting certain requirements, including length of service and minimum age. The Predecessor Companies match the first 3% of an employee's contribution by 25% and the next 3% of an employee's contribution by 50%. The Predecessor Companies may also make additional contributions to the plan at the discretion of the Board of Directors. The Predecessor Companies have not made any discretionary contributions to the profit sharing plan. From January 1 to December 15, 1993, the Predecessor Companies contributed $89,000 to the plan, $5,000 from December 16 to December 31, 1993, $101,000 in 1994 and $23,000 from January 1 to April 5, 1995. Australia--BIS Shrapnel maintains a Superannuation fund (a defined contribution plan) for its employees to which it contributes 5% of annual salary. Long service leave is provided for when employees become eligible to receive it (5 years). 8. LEASE COMMITMENTS The Predecessor Companies lease certain office space and equipment under operating lease agreements. Future minimum rental commitments under all leases with noncancelable terms of one year or more are as follows (in thousands):
OPERATING LEASES YEAR --------- 1995............................................................... $1,323 1996............................................................... 1,188 1997............................................................... 1,089 1998............................................................... 655 1999............................................................... 451 Thereafter......................................................... 3,271 ------ Total lease commitments....................................... $7,977 ======
F-31 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Rent expense was $1,195,000, $62,000, $1,169,000 and $296,000 for the periods January 1 to December 16, 1993 and December 16 to December 31, 1993, the year ended December 31, 1994 and the period January 1 to April 6, 1995, respectively. 9. JOINT VENTURE AGREEMENT On October 18, 1991, the Predecessor Companies entered into a joint venture agreement with a Japanese company. The purpose of the joint venture was to provide additional market penetration in Japan for its products and services. Under the terms of the joint venture agreement, the Predecessor Companies may be required to pay its Japanese partner approximately $75,000 if cumulative sales under the joint venture do not meet certain agreed upon levels by December 31, 1995. In addition, on or prior to April 1, 1996, the Predecessor Companies may be required to increase its investment in the joint venture by approximately $23,000. As of December 31, 1994, the Predecessor Companies had accounts receivable from the joint venture in Japan totalling approximately $100,000. 10. RELATED--PARTY TRANSACTIONS During 1994, management fees aggregating $236,000 were paid to FHLP. As of December 31, 1994, $50,000 in unpaid management fees due to FHLP are included in accounts payable. In 1994, the Predecessor Companies acquired computer equipment from FHLP (and one of its wholly-owned subsidiaries) for an aggregate purchase price of $100,000. As of December 31, 1994, the entire $100,000 was included in accounts payable. During 1994, a note in the amount of $458,000 from FHLP was repaid with interest of approximately $21,000. For the period January 1 to December 15, 1993 the Predecessor Companies paid to NYNEX a management fee of approximately $131,000. It was NYNEX's policy to charge a management fee on the basis of annual sales regardless of the amount of corporate services utilized by the Predecessor Companies. 11. GEOGRAPHIC MARKETS The Predecessor Companies operate in one business segment and in the geographical markets indicated in the table below. Revenues from continuing operations are reflected in the market from which the sales are made. The Other International market includes France, Italy and Germany. PREDECESSOR COMPANIES (NYNEX) JANUARY 1 TO DECEMBER 15, 1993
NORTH UNITED OTHER AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL ------- --------- ------- ------------- ----- Revenues: Total revenues............ $4,209 $4,245 $1,275 $2,249 $11,978 Transfers between areas... (118) (8) (48) (433) (607) ------ ------ ------ ------ ------- Unaffiliated revenues..... 4,091 4,237 1,227 1,816 11,371 ====== ====== ====== ====== ======= Income (loss) from opera- tions...................... (1,625) 116 (1,390) (353) (3,252) Total assets................ 6,318 1,628 2,585 2,015 12,546
F-32 BIS STRATEGIC DECISIONS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) PREDECESSOR COMPANIES (FHLP) DECEMBER 16, 1993 TO DECEMBER 31, 1993
NORTH UNITED OTHER AMERICA AUSTRALIA KINGDOM INTERNATIONAL TOTAL ------- --------- ------- ------------- ----- Revenues: Total revenues............. $ 36 $ 187 $ 37 $ 90 $ 350 Transfers between areas.... (6) -- -- (15) (21) ------ ------ ------ ------ ------- Unaffiliated revenues...... 30 187 37 75 329 ====== ====== ====== ====== ======= Income from operations....... (345) (12) (71) (37) (465) Total assets................. 8,977 1,500 1,077 1,425 12,979 JANUARY 1, 1994 TO DECEMBER 31, 1994 Revenues: Total revenues............. $4,722 $4,534 $1,831 $1,969 $13,056 Transfers between areas.... (61) -- (101) (194) (356) ------ ------ ------ ------ ------- Unaffiliated revenues...... 4,661 4,534 1,730 1,775 12,700 ====== ====== ====== ====== ======= Income from operations....... (3,577) (406) (1,569) (685) (6,237) Total assets................. 4,377 1,007 1,877 1,340 8,601 JANUARY 1, 1995 TO APRIL 5, 1995 Revenues: Total revenues............. $1,113 $1,121 $499 $586 $3,319 Transfers between areas.... -- -- (19) (63) (82) ------ ------ ------ ------ ------- Unaffiliated revenues...... 1,113 1,121 480 523 3,237 ====== ====== ====== ====== ======= Income from operations....... (537) 51 (22) (176) (684) Total assets................. 5,684 1,340 1,747 1,660 10,431
12. DISCONTINUED OPERATIONS On June 25, 1996, Giga decided to discontinue the BIS Market Research Business. The results of these operations have been classified as discontinued operations and the financial statements have been restated to reflect the discontinuance. The net liabilities of the BIS business have been segregated in the consolidated balance sheet and as of December 31, 1994, consisted primarily of deferred revenue ($7,002,000), accounts receivable ($3,763,000) and goodwill ($2,222,000). The operating results of the business are summarized as follows:
JANUARY 1 TO DECEMBER 16 TO YEAR ENDED JANUARY 1 TO DECEMBER 15, DECEMBER 31, DECEMBER 31, APRIL 5, 1993 1993 1994 1995 ------------ -------------- ------------ ------------ Revenues................ $14,204 $635 $15,608 $3,994 Pre-tax income (loss)... 2,037 44 (343) 876 Provision for income taxes.................. 993 -- 1,126 279 Net income (loss)....... 1,044 44 (1,469) 597
F-33 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR- MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PRO- SPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UN- LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 5 Use of Proceeds.......................................................... 12 Dividend Policy.......................................................... 12 Capitalization........................................................... 13 Dilution................................................................. 14 Selected Financial Data.................................................. 15 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 18 Business................................................................. 22 Management............................................................... 33 Certain Transactions..................................................... 41 Principal Stockholders................................................... 44 Description of Capital Stock............................................. 46 Shares Eligible for Future Sale.......................................... 49 Underwriting............................................................. 51 Legal Matters............................................................ 52 Experts.................................................................. 52 Additional Information................................................... 53 Index to Consolidated Financial Statements............................... F-1
------------------ UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF- FECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN AD- DITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN- DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 4,000,000 SHARES [LOGO] COMMON STOCK ------------------ PROSPECTUS , 1996 ------------------ LEHMAN BROTHERS OPPENHEIMER & CO., INC. SALOMON BROTHERS INC - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the various expenses in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the Securities and Exchange Commission registration fee and the NASD filing fee. SEC Registration Fee.......................................... $ 17,449 NASD Filing Fee............................................... 5,560 Nasdaq Listing Fee............................................ 50,000 Blue Sky Fees and Expenses.................................... 25,000 Transfer Agent and Registrar Fees............................. 48,000 Accounting Fees and Expenses.................................. 100,000 Legal Fees and Expenses....................................... 350,000 Printing, Engraving and Mailing Expenses...................... 125,000 Premium for directors and officers insurance.................. 200,000 Miscellaneous................................................. 78,991 ---------- Total..................................................... $1,000,000 ==========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Article Eight of the Registrant's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation") provides that no director of the Registrant shall be personally liable for any monetary damages for any breach of fiduciary duty as a director, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breach of fiduciary duty. Article Eight of the Registrant's Restated Certificate of Incorporation provides that a director or officer of the Registrant (a) shall be indemnified by the Registrant against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any litigation or other legal proceeding (other than an action by or in the right of the Registrant) brought against him by virtue of his position as a director or officer of the Registrant if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful and (b) shall be indemnified by the Registrant against all expenses (including attorneys' fees) and amounts paid in settlement incurred in connection with any action by or in the right of the Registrant brought against him by virtue of his position as a director or officer of the Registrant if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Registrant, except that no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the Registrant, unless a court determines that, despite such adjudication but in view of all of the circumstances, he is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that a director or officer has been successful, on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, he is required to be indemnified by the Registrant against all expenses (including attorneys' fees) incurred in connection therewith. Expenses shall be advanced to a director or officer at his request, provided that he undertakes to repay the amount advanced if it is ultimately determined that he is not entitled to indemnification for such expenses. Indemnification is required to be made unless the Registrant determines that the applicable standard of conduct required for indemnification has not been met. In the event of a determination by the Registrant that the director or officer did not meet the applicable standard of conduct required for indemnification, or if the Registrant fails to make an indemnification payment within 60 days after such payment is claimed by such person, such person is permitted to petition the court to make an independent determination as to whether such person is entitled to indemnification. As a condition precedent to the right of indemnification, the director or II-1 officer must give the Registrant notice of the action for which indemnity is sought and the Registrant has the right to participate in such action or assume the defense thereof. Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful; provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances. The Board of Directors on April 26, 1996 approved, in accordance with Section 145 of Delaware General Corporation Law, a Directors and Officers Indemnification Agreement to be entered into between the Registrant and each of Registrant's directors and officers. Pursuant to the terms of the agreement, the Registrant agrees to hold any director or officer harmless against any and all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such director or officer in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Registrant), to which the director or officer becomes a party at any time or is threatened to be made a party, by reason of the fact that the director or officer is a director, officer, employee or agent of the Registrant, or serves at the request of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; and otherwise to the fullest extent as may be provided to the director or officer by the Registrant under the non- exclusivity provisions of Article V of the Bylaws of the Registrant and the Delaware General Corporation Law. The agreement also obligates the Registrant under certain circumstances to advance amounts and contribute to any amounts paid out by a director or officer as a result of his or her role as a director or officer of the Registrant in cases where indemnification by the Registrant is not available. This agreement is also intended to indemnify special advisors of the Registrant. Under Section Eight of the Underwriting Agreement, the Underwriters are obligated, under certain circumstances, to indemnify directors and officers of the Registrant against certain liabilities, including liabilities under the Securities Act. Reference is made to the form of Underwriting Agreement filed as Exhibit 1 hereto. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Set forth in chronological order below is information regarding the number of shares of capital stock and other securities issued by the Registrant since the Registrant's inception in March 1995. Further included is the consideration, if any, received by the Registrant for such shares of capital stock and other securities and information relating to the section of the Securities Act, or rule of the Commission under which exemption from registration was claimed. All awards of options did not involve any sale under the Securities Act and none of these securities was registered under the Securities Act. 1. Since March 1995, the Registrant has issued options to purchase an aggregate of 3,627,473 shares of Common Stock at a weighted average exercise price of $0.61 per share. During this same time period, the Registrant has issued a total of 3,933 shares of Common Stock pursuant to the exercise of options previously granted. 2. In March 1995, the Registrant sold to its Chairman of the Board of Directors and Chief Executive Officer 4,200,000 shares of Common Stock at a purchase price of $0.02375 per share. 3. In April 1995, the Registrant issued to Friday Holdings, L.P. a 5% $1.0 million principal amount Convertible Promissory Note in connection with the Registrant's acquisition of BIS Strategic Decisions, Inc. and its five foreign affiliates. II-2 4. In July 1995 and October 1995, the Registrant issued and sold an aggregate of 410,000 shares of Series A Convertible Preferred Stock, $.001 par value ("Series A Preferred Stock") (1,640,000 shares on an as-converted basis) to a group of investors, including certain employees and directors, at a purchase price of $5.00 per share ($1.25 per share on as-converted basis). 5. In July 1995, the Registrant issued 160,000 shares of Series A Preferred Stock (640,000 on an as-converted basis) to its Chairman of the Board of Directors and Chief Executive Officer and to its Senior Vice President, Research & Technology in connection with the Registrant's acquisition of a majority of the shares of ExperNet Corporation ("ExperNet") and in December 1995, the Registrant issued to its Senior Vice President, Research & Technology, in connection with the Registrant's acquisition of the remaining shares of ExperNet, a 6% $400,000 Convertible Promissory Note. 6. In October 1995, the Registrant issued 2,080,000 shares of Common Stock to a group of employees, consultants and directors at a purchase price of $0.50 per share. 7. In November 1995 and February 1996, the Registrant issued and sold an aggregate of 5,272,215 shares of Series B Convertible Preferred Stock, $.001 par value ("Series B Preferred Stock") to a group of investors at a purchase price of $3.50 per share. 8. In August 1995, the Registrant issued a warrant to purchase 285,714 shares of Series B Preferred Stock to an investor at an exercise price of $2.345 per share. 9. In February 1996, the Registrant issued a warrant to purchase 107,876 shares of Series B Preferred Stock to Montgomery Securities in consideration for certain placement agent services at an exercise price of $4.5625 per share. 10. In August 1996, the Registrant issued 25,000 shares of Common Stock to an employee in connection with the acquisition of his business. Other than Montgomery Securities which served as placement agent in connection with the November 1995 and February 1996 sales by the Registrant of shares of its Series B Preferred Stock, no underwriters were engaged in connection with any of the foregoing sales of securities. Montgomery Securities was paid a placement agent fee of $695,105 and received a warrant to purchase 107,876 shares of Series B Preferred Stock, exercisable at a price of $4.5625 per share, in connection with its services as placement agent for the sale of shares of the Registrant's Series B Preferred Stock. The shares of capital stock and other securities issued in the above transactions were offered and sold in reliance upon the exemption from registration under Section 4(2) of the Securities Act or Regulation D or Rule 701 promulgated under the Securities Act, relative to sales by an issuer not involving any public offering. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (A) EXHIBITS
EXHIBIT NO. DESCRIPTION ------- ----------- 1* Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. 3.2 Form of Restated Certificate of Incorporation of the Registrant (to be filed with the State of Delaware upon the closing of the Offering to which this Registration Statement relates). 3.3 By-Laws of the Registrant. 3.4 Form of Restated Bylaws of the Registrant (to become effective upon the closing of the Offering to which this Registration Statement relates). 4.1 Specimen Certificate for shares of Common Stock, $.001 par value, of the Registrant.
II-3
EXHIBIT NO. DESCRIPTION ------- ----------- 5* Opinion of Hale and Dorr with respect to the validity of the securities being offered. 10.1 Stock Purchase Agreement dated July 6, 1995, as amended, between the Registrant and David L. Gilmour. 10.2 Series A Preferred Stock Purchase Agreement dated July 6, 1996 between the Registrant and the investors named on Schedule I thereto. 10.3 Series B Preferred Stock Purchase Agreement dated November 13, 1995, as amended, between the Registrant and the investors named on Exhibit A thereto. 10.4 Convertible Note and Warrant Purchase Agreement dated August 1995 between the Registrant and RRE Giga Investors, L.P. 10.5 Series B Preferred Stock Purchase Warrant dated August 1995 registered in the name of RRE Giga, L.P. 10.6 Registration Rights Agreement dated November 13, 1995 among the Registrant, the investors named on Exhibit A thereto, Gideon I. Gartner and David L. Gilmour. 10.7 Co-Sale and Stock Restriction Agreement dated November 13, 1995 among the Registrant, Gideon I. Gartner and the stockholders named on the signature pages thereto. 10.8* Series B Preferred Stock Purchase Warrant dated February 28, 1996 registered in the name of Montgomery Securities. 10.9 Registrant's 5% $1.0 Million Convertible Promissory Note dated April 5, 1995 naming Friday Holdings, L.P. as payee. 10.10 Registrant's 6% $400,000 Convertible Promissory Note dated December 31, 1995 naming David L. Gilmour as payee. 10.11 Employment Agreement dated February 1, 1996 between the Registrant and Leander R. Jennings, Jr. 10.12 Employment Agreement dated December 1, 1995 between the Registrant and Kenneth E. Marshall. 10.13 Employment Agreement dated July 6, 1995 between the Registrant and David L. Gilmour. 10.14 Non-competition Agreement dated November 13, 1995 between the Registrant and Gideon I. Gartner. 10.15 Consulting Agreement dated January 1, 1996 between the Registrant and Neill H. Brownstein Corporation. 10.16 Promissory Note dated December 1, 1995 naming the Registrant as payee issued by Kenneth E. Marshall. 10.17 Letter Agreement dated July 12, 1996 between the Registrant and Richard L. Crandall. 10.18 Lease dated October 31, 1995 between the Registrant and Cambridge 1400 Limited Partnership. 10.19 Lease dated October 6, 1987, as amended, between BIS Strategic Decisions, Inc. and Charles A. Pesko, Jr., as Trustee of Longwater Circle Trust. 10.20+ Content Distribution Agreement dated May 21, 1996 between the Registrant and Dow Jones and Company, Inc. 10.21+ Agreement dated August 1, 1996 between the Registrant and Peripheral Insight, Inc. 10.22+ Agreement dated August 15, 1996 between the Registrant and Decision Analytics, Inc. 11 Calculation of shares used in determining pro forma net loss per common share. 21 Subsidiaries of the Registrant. 23.1* Consent of Hale and Dorr (included in Exhibit 5). 23.2 Consent of Coopers & Lybrand L.L.P. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Coopers & Lybrand. 24 Powers of Attorney (included on page II-6). 27 Financial Data Schedule.
- -------- * To be filed by amendment. + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. II-4 (B) FINANCIAL STATEMENT SCHEDULES All other schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto. ITEM 17. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions contained in the Restated Certificate of Incorporation and Amended and Restated By-Laws of the Registrant and the laws of the State of Delaware, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the Offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CAMBRIDGE, COMMONWEALTH OF MASSACHUSETTS, ON THIS 10TH DAY OF SEPTEMBER, 1996. Giga Information Group, Inc. /s/ Gideon I. Gartner By: _________________________________ GIDEON I. GARTNER CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of Giga Information Group, Inc., hereby severally constitute and appoint Gideon I. Gartner, Kenneth E. Marshall, Richard B. Goldman and Mark G. Borden, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-1 filed herewith and any and all pre- effective and post-effective amendments to said Registration Statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and generally to do all such things in our names and on our behalf in our capacities as officers and directors to enable Giga Information Group, Inc. to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Registration Statement and any and all amendments thereto. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Gideon I. Gartner Chairman of the September 10, - ------------------------------------- Board of Directors 1996 GIDEON I. GARTNER and Chief Executive Officer (Principal Executive Officer) /s/ Kenneth E. Marshall President and Chief September 10, - ------------------------------------- Operating Officer; 1996 KENNETH E. MARSHALL Director /s/ Richard B. Goldman Senior Vice September 10, - ------------------------------------- President, Chief 1996 RICHARD B. GOLDMAN Financial Officer; Treasurer; Secretary (Principal Financial and Accounting Officer) II-6 SIGNATURE TITLE DATE /s/ David L. Gilmour Senior Vice September 10, - ------------------------------------- President, Research 1996 DAVID L. GILMOUR & Technology; Director /s/ Neill H. Brownstein Director September 10, - ------------------------------------- 1996 NEILL H. BROWNSTEIN /s/ Richard L. Crandall Director September 10, - ------------------------------------- 1996 RICHARD L. CRANDALL /s/ Irwin Lieber Director September 10, - ------------------------------------- 1996 IRWIN LIEBER /s/ James D. Robinson III Director September 10, - ------------------------------------- 1996 JAMES D. ROBINSON III II-7 EXHIBIT INDEX
EXHIBIT PAGE NO. DESCRIPTION NO. ------- ----------- ---- 1* Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. 3.2 Form of Restated Certificate of Incorporation of the Registrant (to be filed with the State of Delaware upon the closing of the Offering to which this Registration Statement relates). 3.3 By-Laws of the Registrant. 3.4 Form of Restated Bylaws of the Registrant (to become effective upon the closing of the Offering to which this Registration Statement relates). 4.1 Specimen Certificate for shares of Common Stock, $.001 par value, of the Registrant. 5* Opinion of Hale and Dorr with respect to the validity of the securities being offered. 10.1 Stock Purchase Agreement dated July 6, 1995, as amended, between the Registrant and David L. Gilmour. 10.2 Series A Preferred Stock Purchase Agreement dated July 6, 1996 between the Registrant and the investors named on Schedule I thereto. 10.3 Series B Preferred Stock Purchase Agreement dated November 13, 1995, as amended, between the Registrant and the investors named on Exhibit A thereto. 10.4 Convertible Note and Warrant Purchase Agreement dated August 1995 between the Registrant and RRE Giga Investors, L.P. 10.5 Series B Preferred Stock Purchase Warrant dated August 1995 registered in the name of RRE Giga, L.P. 10.6 Registration Rights Agreement dated November 13, 1995 among the Registrant, the investors named on Exhibit A thereto, Gideon I. Gartner and David L. Gilmour. 10.7 Co-Sale and Stock Restriction Agreement dated November 13, 1995 among the Registrant, Gideon I. Gartner and the stockholders named on the signature pages thereto. 10.8* Series B Preferred Stock Purchase Warrant dated February 28, 1996 registered in the name of Montgomery Securities. 10.9 Registrant's 5% $1.0 Million Convertible Promissory Note dated April 5, 1995 naming Friday Holdings, L.P. as payee. 10.10 Registrant's 6% $400,000 Convertible Promissory Note dated December 31, 1995 naming David L. Gilmour as payee. 10.11 Employment Agreement dated February 1, 1996 between the Registrant and Leander R. Jennings, Jr. 10.12 Employment Agreement dated December 1, 1995 between the Registrant and Kenneth E. Marshall. 10.13 Employment Agreement dated July 6, 1995 between the Registrant and David L. Gilmour. 10.14 Non-competition Agreement dated November 13, 1995 between the Registrant and Gideon I. Gartner. 10.15 Consulting Agreement dated January 1, 1996 between the Registrant and Neill H. Brownstein Corporation.
EXHIBIT PAGE NO. DESCRIPTION NO. ------- ----------- ---- 10.16 Promissory Note dated December 1, 1995 naming the Registrant as payee issued by Kenneth E. Marshall. 10.17 Letter Agreement dated July 12, 1996 between the Registrant and Richard L. Crandall. 10.18 Lease dated October 31, 1995 between the Registrant and Cambridge 1400 Limited Partnership. 10.19 Lease dated October 6, 1987, as amended, between BIS Strategic Decisions, Inc. and Charles A. Pesko, Jr., as Trustee of Longwater Circle Trust. 10.20+ Content Distribution Agreement dated May 21, 1996 between the Registrant and Dow Jones and Company, Inc. 10.21+ Agreement dated August 1, 1996 between the Registrant and Peripheral Insight, Inc. 10.22+ Agreement dated August 15, 1996 between the Registrant and Decision Analytics, Inc. 11 Calculation of shares used in determining pro forma net loss per common share. 21 Subsidiaries of the Registrant. 23.1* Consent of Hale and Dorr (included in Exhibit 5). 23.2 Consent of Coopers & Lybrand L.L.P. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Coopers & Lybrand. 24 Powers of Attorney (included on page II-6). 27 Financial Data Schedule.
- -------- * To be filed by amendment. + Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. EX-3.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GIGA INFORMATION GROUP, INC. Giga Information Group, Inc., a corporation organized and existing under the laws of the State of Delaware, does hereby certify that: 1. The name of the corporation is Giga Information Group, Inc. Giga Information Group, Inc. was originally incorporated under the name Giga Strategic Decisions, inc. and the original Certificate of Incorporation was filed with the Secretary of the State of Delaware on March 17, 1995. 2. Pursuant to Sections 242 and 228 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation has been duly approved by the Board of Directors and stockholders of Giga Information Group, Inc. 3. Pursuant to Section 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously filed. 4. The text of the Certificate of Incorporation is hereby restated and further amended to read in its entirety as follows: ARTICLE I The name of this corporation is Giga Information Group, Inc. ARTICLE II The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE III This corporation is authorized to issue two classes of shares designated "Common Stock", respectively. The total number of shares which this corporation shall have authority to issue is Thirty-eight Million (38,000,000), with a par value of $.001 per share. The number of shares of Preferred Stock authorized to be issued is Twenty-eight Million (28,000,000) and the number of shares of Preferred Stock authorized to be issued is Ten Million (10,000,000), of which Six Hundred and Fifty Thousand (650,000) shares shall be designated as "Series A Preferred Stock", and Six Million Five Hundred Thousand (6,500,000) shares shall be designated as "Series B Preferred Stock", having the rights, preferences, privileges and restrictions set forth herein. Subject to Section 6 of Article IV A hereof, the Board of Directors of the corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the remaining shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such shares and as may be permitted by the General Corporation Law of the State of Delaware. Subject to Section 6 of Article IV A hereof, the Board of Directors is also expressly authorized to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series, other than the Series A Preferred Stock and Series B Preferred Stock, subsequent to the issue of shares of the series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. ARTICLE IV A. Preferred Stock. ---------------- The rights, preferences, privileges and restrictions granted to or imposed upon the Series A Preferred Stock and Series B Preferred stock are as follows: 1. Definitions. For purposes of this Article IV, the following ------------ definitions shall apply: (a) "Board" shall mean the Board of Directors of the corporation. (b) "Company" shall mean this corporation. (c) "Common Stock" shall mean the Common Stock, $.001 par value, of the Corporation. (d) "Original Issue Date" shall mean the effective date of the initial sale of each Series of Preferred Stock issued by the corporation. (e) "Original Series A Purchase Price" shall mean $5.00 per share. (f) "Original Series B Purchase Price" shall mean $3.50 per share. (g) "Preferred Stock" shall mean, unless otherwise specified in this 2 Amended and Restated Certificate of Incorporation, ratably both the Series A Preferred Stock and the Series B Preferred Stock. (h) "Series A Preferred Stock" shall mean the Series A Preferred Stock, $.001 par value, of the Company. (i) "Series B Preferred Stock" shall mean the Series B Preferred Stock, $.001 par value, of the Company. (j) "Subsidiary" shall mean any corporation of which more than fifty percent (50%) of the outstanding voting stock is at the time owned directly or indirectly by the corporation or by one or more other Subsidiaries. 2. Voting Rights. Except as otherwise required by law or provided by this -------------- Amended and Restated Certificate of Incorporation, the holders of Preferred Stock will be entitled to notice of any meeting of stockholders of the corporation and to vote upon any matter submitted to stockholders or a class of stockholders of the corporation on the basis that each holder of shares of Preferred Stock will have the right to the number of votes equal to the number of shares of Common Stock into which such shares determined on an aggregate conversion basis being rounded to the nearest whole share). With respect to such vote, each such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock. 3. Dividends. The holders of the Series A Preferred Stock and Series B ---------- Preferred Stock shall be entitled to receive dividends from legally available funds when and if declared by the Company's Board of Directors. In the event this corporation shall declare a distribution (other than distributions payable solely in shares of Common Stock) payable in cash, securities of other persons, evidences of indebtedness issued by this corporation or other personal assets or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case the holders of the Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Preferred Stock were the holders of the number of shares of Common Stock of the corporation into which their respective shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such distribution. The holders of Preferred Stock which may hereinafter be issued in compliance with Section 6. 4. Liquidation Preference. ---------------------- (a) In the event of the liquidation, dissolution or winding up of the corporation, either voluntarily or involuntarily, the holders of the Series A Preferred Stock and Series B Preferred Stock will be entitled to receive out of the assets of the 3 corporation, prior and in preference to any distribution of any of the assets or surplus ends of the corporation to the holders of the Common Stock by reason of their ownership thereof, but after payment of any liquidation preference which may hereafter be provided for any other series of Preferred Stock issued in accordance with Section 6, an amount equal to the greater of (1) the Original Series A Purchase Price for each outstanding shares of Series A Preferred Stock and the Original Series B Purchase Price for each outstanding shares of Series B Preferred Stock then held by them (as appropriately adjusted for stock splits and combinations), plus all declared and unpaid dividends with respect thereto, or (ii) such amount per share as would have been payable had each such share been converted to Common Stock pursuant to paragraph 5 immediately prior to such liquidation, dissolution and winding up, and the holders of Series A Preferred Stock A and Series B Preferred Stock shall not be entitled to any further payment. If upon the occurrence of an event referred to in the preceding sentence the assets and funds thus distributed among the holders of the Preferred Stock are insufficient to permit the payment to such holders of the full preferential amount for each such series, then the entire assets and funds of the corporation legally available for distribution will be distributed ratably among the holders of the Preferred Stock of the full preferential amounts referred to above, the holders of Series A Preferred Stock and Series B Preferred Stock shall not participate with the Common Stock in any further distributions. (b) Unless otherwise agreed to by the holders of not less than a majority of the Preferred Stock then outstanding, voting together as a single class, a merger of this corporation with or into any other corporation or corporations, or a sale, transfer or lease (other than a pledge or grant of a security interest to a bona fide lender) of all or substantially all of the assets of this corporation shall be deemed to be a liquidation, dissolution or winding up for purposes of this subsection b, unless the stockholders of this corporation immediately prior to such transaction own more than fifty (50) percent of the voting power of the surviving entity held by holders of the capital stock of this corporation acquired by means other than the exchange or conversion of the capital stock of this corporation shall not be used in determining if the stockholders of this corporation own more than fifty (50) percent of the voting power of the surviving entity (or its parent), but shall be used for determining the total outstanding voting power of the surviving entity). (c) The corporation shall give each holder of record of Series A Preferred Stock and Series B Preferred Stock written notice of an impending transaction described in subsection 4(a) or 4(b) not later than fifteen (15) days prior to the stockholders' meeting called to approve such transaction, or fifteen (15) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than fifteen (15) days after the 4 corporation has given the first notice provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Series A Preferred Stock and Series B Preferred Stock which are entitled to such notice rights or similar notice rights and which represents at least a majority of the voting power of all then outstanding shares of such Series A Preferred Stock and Series B Preferred Stock each voting together as a single class. (d) Whenever the distribution provided for in this Section 4 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors. 5. Conversion Rights. ------------------ (a) Right to Convert. The holders of the Series A Preferred Stock and the ---------------- holders of the Series B Preferred Stock shall have conversion rights as follows: (i) Optional Conversion. Each share of Series A Preferred Stock and Series ------------------- B Preferred Stock will be convertible, at the option of the holder thereof, at the office of the corporation or any transfer agent for the Preferred Stock, into Common Stock. The number of shares of Common Stock into which each share of Preferred Stock will be converted will equal the Original Series A Purchase Price in the case of the Series A Preferred Stock or Original Series B Purchase Price, in the case of the Series B Preferred Stock, divided by the Conversion Price (as hereafter defined), such conversion ration being referred to hereafter as the "Conversion Rate" for such series. The initial Conversion Price for shares of Series A Preferred Stock and Series B Preferred Stock shall be $5.00 per share and $3.50 per share, respectively; provided, however, that such Conversion Prices shall be subject to adjustment as set forth in subsection 5(c), (d) and (c). Upon any decrease or increase of the Conversion Price or the Conversion Rate for the Preferred Stock as described in this Section 5, the Conversion Rate or Conversion Price, as the case may be, for the Preferred Stock will be increased or decreased proportionately. (ii) Automatic Conversion. Each share of Series A Preferred Stock and -------------------- Series B Preferred Stock will be converted automatically into shares of Common Stock at the then effective Conversion Rate upon the earlier to occur of (A) the approval by the holders of at least two-thirds (2/3) of the then outstanding shares of Series A or Series B Preferred Stock, respectively, or (B) immediately prior to the closing of a firmly underwritten public offering pursuant to a registration statement (other than a registration statement relating either to the sale of securities to employees of the corporation pursuant to a stock option, stock purchase or similar plan or a transaction pursuant to Rule 145 under the Securities Act of 1933, as amended (the "Act")) under the Act covering the corporation's Common Stock, which results in aggregate cash proceeds (prior to underwriters' commissions and expenses) 5 to the corporation and any selling stockholders of at least $15,000,00 and which has a public offering price of not less than $5.25 per share (as adjusted for any stock split, stock dividend, subdivision or combination of the Common Stock). (b) Mechanics of Conversion. Before any holder of Preferred Stock will be ----------------------- entitled to covert the same into shares of Common Stock, such holder will surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for the Preferred Stock, and such holder will give written notice to the corporation stating the name or names in which he wishes the certificate or certificates for shares of Common Stock to be issued. The corporation, as soon as practicable thereafter, will issue and deliver at such office to such holder or to his nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which he will be entitled as aforesaid. Such conversion will be deemed to have been made immediately prior to the close of business on the date of notice of conversion provided by the holder to the corporation, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion will be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (c) Adjustment for Subdivisions or Combinations of Common Stock. In the ----------------------------------------------------------- event the corporation at any time or from time to time after the Series A Original Issue Date effects a subdivision or combination of its outstanding Common Stock into a greater or lesser number of shares without a proportionate and corresponding subdivision or combination of its outstanding shares of the Series A Preferred Stock then the Conversion Price of the Series A Preferred Stock shall be decreased or increased, as applicable, so that the number of shares into which each share of the Series A Preferred Stock is convertible will be decreased or increased proportionately. In the event the corporation at any time or from time to time after the Series B Original Issue Date effects a subdivision or combination of its outstanding Common Stock into a greater or lesser number of shares without a proportionate and corresponding subdivision or combination of its outstanding shares of the Series B Preferred Stock, then the Conversion Price of the Series B Preferred Stock shall be decreased or increased, as applicable, so that the number of shares into which each share of the Series B Preferred Stock is convertible will be decreased or increased proportionately. (d) Adjustment for Dividends, Distributions and Common Stock Equivalents. -------------------------------------------------------------------- In the event the corporation at any time or from time to time after the Original Issue Date for any series of Preferred Stock makes or issues, or fixes a record date for the determination of holders of Common Stock (but not holders of the Preferred Stock) entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights (hereinafter referred 6 to as "Common Stock Equivalents") convertible into or entitling the holder thereof to receive additional shares of Common Stock without payment of any consideration by such holder for such Common Stock Equivalents or the additional shares of Common Stock, for the purpose of protecting the holders of the Preferred Stock from any dilution in connection therewith, then and in each such event the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents will be deemed to be issued and outstanding as of the time of such issuance or, in the event such a record date has been fixed, as of the close of business on such record date. In each such event the then existing Conversion Rate for each series of the Series A Preferred Stock and Series B Preferred Stock will be increased as of the time of such issuance or, in the event such a record date has been fixed, as of the close of business on such record date, by multiplying the Conversion Rate for such series of Preferred Stock by a fraction. (i) the numerator of which will be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents; and (ii) the denominator of which will be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; provided, however, (A) if such record date has been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Rate for such series of Preferred Stock will be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Rate for such series of Preferred Stock will be adjusted pursuant to this Section 5(d) as of the time of actual payment of such dividends or distribution; (B) if such Common Stock Equivalents provide, with the passage of time or otherwise, for any decreased in the number of shares of Common Stock issuable upon conversion or exercise thereof, the Conversion Rate for such series shall, upon any such decreased becoming effective, be recomputed to reflect such decrease insofar as it affects the rights of conversion or exercise of the Common Stock Equivalents then outstanding, and (C) upon the expiration of any conversion rights or exercise under any unexercised Common Stock Equivalents, the Conversion Rate for such series computed upon the original issue thereof shall, upon such expiration, be recomputed as if the only additional shares of Common Stock issued were the shares of such stock, if any, actually issued upon the conversion or exercise of such Common Stock Equivalents. (e) Adjustment for Sale of Shares. If at any time after the Original ----------------------------- 7 Issue Date for the Series A Preferred Stock or the Series B Preferred Stock the corporation issues or sells any Additional Stock for a consideration per share less than the Conversion Price for such series of Preferred Stock , then and in each such case, the Conversion Price for such series of Preferred Stock will be reduced to a price (calculated to the nearest cent) determined by multiplying such applicable Conversion Price by a fraction (1) the numerator of which will be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares of Common Stock which the aggregate consideration received by the corporation for such issue would purchase at such applicable Conversion Price, and (2) the denominator of which will be the number of shares of Common Stock outstanding immediately after the Additional Stock is issued or sold; provided, however, that such fraction will in no event be greater than one (1). Notwithstanding the foregoing, if after the Original Issue Date for the Series B Preferred Stock and prior to the earlier of (a) November 6, 1997 and (b) the consummation by the corporation of a sale or series of related sales of any series or class of its Preferred Stock or Common Stock at a price per share of not less than $4.00 and for aggregate proceeds to the corporation of at least Six Million Five Hundred Thousand Dollars ($6,500,000), the corporation issues or sells any Additional Stock for a consideration per share less than the Conversion Price for the Series B Preferred Stock will not be adjusted pursuant to the preceding sentence, but instead will be reduced to a price (calculated to the nearest cent) equal to the consideration per share received by the corporation for such Additional Stock, For purposes of this Section 5(e), the shares of Common Stock issuable upon conversion of any Series A Preferred Stock or Series B Preferred Stock and upon exercise or conversion of all warrants, options or other securities exercisable or exchangeable for, or convertible into, Common Stock, will be deemed to be outstanding on the Original Issue Date for such Preferred Stock. "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued as provided herein) by this corporation after the Original Issue Date for the Series B Preferred Stock other than: (i) the issuance (or deemed issuance) of up to Five Million (5,000,000) shares of Common Stock issuable or issued to officer, directors, employees, advisors and consultants of the corporation, at not less than fair market value (as determined by the corporation's Board of Directors) pursuant to the corporation's 1995 Stock Option/Stock Issuance Plan or stock option or purchase plans approved after the Original Issue Date for the Series B Preferred Stock by the corporation's Board of Directors (including a majority of the directors who are not then employees of the corporation nor purchasers or grantees of such shares or options); (ii) capital stock or warrants or options to purchase capital stock at not less than fair market value (as determined by the corporation's Board of Directors) issued in connection with bona fide acquisitions, licensing transactions, 8 mergers or similar transactions which do not violate clause (y) of Section 6, in which the majority of the value of the consideration received therefor (as determined by the corporation's Board of Directors) is not cash, and the terms of which are approved by the Board of Directors of the corporation; (iii) capital stock or warrants or options to purchase capital stock the issuance of which is determined to be excluded from the definition of "Additional Stock" upon the written consent of the holders of a least a majority of the then outstanding Preferred Stock of any Series as to which such issuance would otherwise result in an adjustment to the Conversion Price as provided above (without any requirement of an amendment to these Amended and Restated Certificate of Incorporation); (iv) shares of Common Stock issued or issuable upon conversion of Preferred Stock; (v) shares of Common Stock issued or issuable in a public offering before or in connection with which all outstanding shares of Preferred Stock are converted to Common Stock; (vi) except for any shares of Common Stock issued or issuable pursuant to the Corporation's 1995 Stock Option/Stock Incentive Plan, any securities issuable upon exercise of any options, warrants or rights to purchase any securities of the Corporation outstanding on the Original Issue Date for the Series B Preferred Stock ("Warrant Securities") and any securities issuable upon the conversion of any Warrant Securities or other securities or instruments outstanding on the Original Issue Date for the Series B Preferred Stock; (vii) shares of the Corporation's Common Stock or Preferred Stock issued in connection with any stock split or stock dividend with respect to which the Conversion Price is adjusted pursuant to Section 5(d); and (viii) shares of Common Stock issued (or deemed issued) in connection with the acquisition by the Corporation of capital stock in ExperNet, Inc. in accordance with the terms of the Stock Purchase Agreement between the corporation and David Gilmour dated as of July 9, 1995. For the purpose of making any adjustment in the Conversion Price as provided above, the consideration received by the corporation for any issue or sale of Common Stock will be computed: (x) to the extent it consists of cash, as the amount of cash received by the corporation before deduction of any offering expenses payable by the corporation and any underwriting or similar commissions, compensation, or 9 concessions paid or allowed by the corporation in connection with such issue or sale; (y) to the extent it consists of property other than cash, at the fair market value of that property as determined in good faith by the corporation's Board of Directors; and (z) if Common Stock is issued or sold together with other stock or securities or other assets of the corporation for a consideration which covers both, as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Common Stock. If the corporation (1) grants any rights or options to subscribe for, purchase, or otherwise acquire shares of Common Stock, or (2) issues or sells any security convertible into shares of Common Stock (in either case, other than rights or options issued to employees, officers, directors and consultants of the corporation pursuant to paragraph (i) above), then, in each case, the price per share of Common Stock issuable on the exercise of the rights or options or the conversion of the securities will be determined by dividing the total amount, if any, received or receivable by the corporation as consideration for the granting of the rights or options or the issue or sale for the convertible securities, plus the minimum aggregate amount of additional consideration payable to the corporation on exercise or conversion of the securities, by the maximum number of shares of Common Stock issuable on the exercise or conversion. Such granting or issue or sale will be considered to be an issue or sale for cash of the maximum number of shares of Common Stock issuable on exercise or conversion at the price per share determined under this subsection, and the Conversion Price for each series of Preferred Stock will be adjusted as and if above so provided to reflect (on the basis of that determination) the issue or sale. No further adjustment of the Conversion Price for any series of Preferred Stock will be made as a result of the actual issuance of shares of Common Stock on the exercise of any such rights or options or the conversion of any such convertible securities. Upon the redemption or repurchase of any such securities or the expiration or termination of the right to convert into, exchange for, or exercise with respect to, Common Stock, the Conversion Price for each series of Preferred Stock for which the Conversion Price had been adjusted upon the issuance of such securities will be readjusted (giving effect to all provisions hereof and all issuances after such original issuance) to such price as would have been obtained had the adjustment made upon their issuance been made upon the basis of the issuance of only the number of such securities as were actually converted into, exchanged for, or exercised with respect to, Common Stock. If the purchase price or conversion or exchange rate provided for in any such security changes at any time, then, upon such change becoming effective, the Conversion Price for each series of Preferred Stock for which 10 it has been adjusted upon the issuance of such securities then in effect will be readjusted (giving effect to all provisions hereof and all issuances after such original issuance) forthwith to such price as would have been obtained had the adjustment made upon the issuance of such securities been made upon the basis of (1) the issuance of only the number of shares of Common Stock theretofore actually delivered upon the conversion, exchange or exercise of such securities, and the total consideration received therefor, and (2) the granting or issuance, at the time of such change, of any such securities then still outstanding for the consideration, if any, received by the Company therefor and to be received on the basis of such changed price or rate. (f) No Impairment. The corporation, whether by amendment of its ------------- Certificate of Incorporation or through any reorganization, transfer of assets, merger, dissolution, issuance or sale of securities or any other voluntary action, will not avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Section 5 by the corporation, but at all times in good faith will assist in the carrying out of all of such actions as may be necessary or appropriate in order to protect the conversion rights pursuant to this Section 5 of the holders of Preferred Stock against impairment. (g) Certificate of Adjustments. Upon the occurrence of each adjustment or -------------------------- readjustment of the Conversion Rate for the Preferred Stock pursuant to this Section 5, the corporation at its expense promptly will compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of such Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The corporation, upon the written request at any time of any holder of Preferred Stock, will furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustments, (ii) the Conversion Rate for such Preferred Stock at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Preferred Stock held by such holder. (h) Notices of Record Date. In the event of any taking by the corporation ---------------------- of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any Common Stock Equivalents or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the corporation will mail to each holder of Preferred Stock at least then (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or rights, and the amount and character of such dividend, distribution or right. 11 (i) Reservation of Stock Issuable Upon Conversion. The corporation at all --------------------------------------------- times will reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Preferred Stock such number of its shares of Common Stock is not sufficient to effect the conversion of all then outstanding shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of all then outstanding shares of Preferred Stock, in addition to such other remedies as may be available to the holders of Preferred Stock for such failure, the corporation will take such corporate action as, in the opinion of its counsel, may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as will be sufficient for such purpose. (j) Notices. Any notices required by the provisions of this Section 5 to ------- be given to the holders of shares of any series of Preferred Stock shall be given in writing and shall be conclusively deemed effectively given to persons located in the United States five days after deposit in the United States mail by registered or certified mail postage prepaid, or upon actual receipt if given by any other method or to persons located outside of the United States, addressed to such holder at his address appearing on the books of the corporation. To persons located outside of the United States, such notice will be sent by telex or facsimile in cases where the corporation has notice of a telex or facsimile number of such person. (k) Recapitalizations. If at any time or from time to time there shall be ----------------- recapitalization of the Common Stock (other than a subdivision), combination or merger or sale of assets transaction provided for elsewhere in Section 4 or in this Section 5), provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of such shares of such Preferred Stock the number of shares of stock or other securities or property of the corporation or otherwise, to which a holder of Common Stock deliverable upon conversion of such Preferred Stock would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of the Preferred Stock after the recapitalizations to the end that the provisions of this Section 5 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of such Preferred Stock) shall be applicable after that event in as nearly an equivalent manner as may be practicable. 6. Covenants. In addition to any other rights provided by law, so long as --------- not less than an aggregate of 2,000,000 shares of Series A Preferred Stock and Series B Preferred Stock are outstanding, the corporation, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, each voting together as a single class, will not: 12 (a) amend or repeal any provision of, or add any provision to, this corporation's Certificate of Incorporation if such action would adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock or Series B Preferred Stock; (b) increase the number of shares of Series A Preferred Stock or Series B Preferred Stock authorized hereby; (c) reclassify any class or series of any Common Stock into shares having any preference or priority as to dividends or in liquidation over the Series A Preferred Stock or Series B Preferred Stock; (d) create any new series of preferred stock having a preference as to dividends or in liquidation over the Series A Preferred Stock or Series B Preferred Stock; (e) apply any of its assets to the redemption, retirement, purchase or acquisition, directly or indirectly, through subsidiaries or otherwise, of any shares of any class or series of equity securities of the corporation, except from (i) current or former employees, officers, directors, and consultants of the corporation under the terms of any stock option or stock purchase plans or agreements, upon or following termination of employment or association and (ii) holders of any series of Preferred Stock which may be issued hereafter which has a liquidation preference senior to that of the Series A Preferred Stock and Series B Preferred Stock; and (f) declare or pay any dividend or make any distribution on shares of Common Stock or any series of Preferred Stock which may be issued hereafter which is senior in dividend preference to the Series A Preferred Stock and Series B Preferred Stock. Notwithstanding the foregoing, if any of the actions referred to in clauses (a) through (d) would adversely affect the rights, preference, privileges or powers of either the Series A Preferred Stock or the Series B Preferred Stock in a different manner than the other such series, then such action shall require the approval of the holders of a majority of the then outstanding shares of Series A Preferred Stock voting separately as a class and Series B Preferred Stock voting separately as a class, and shall not require the approval of holders of any such series not adversely affect by such action. In addition to the foregoing and any other rights provided by law, so long as an aggregate of 2,000,000 shares of Series B Preferred Stock are outstanding, the corporation shall not without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series B Preferred Stock: 13 (x) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transaction in which more than 50% of the voting power of the corporation is transferred. (y) enter into any transaction with any director or Affiliate (as defined below) of the Company unless the terms of such transaction are at least as favorable to the Company than those which might be obtained at the time from persons who are not Affiliates and, in the case of a single transaction or series of transactions involving more than $50,000, has been approved by a written resolution duly adopted prior to such transaction by a majority of the independent directors. For purposes hereof, an "Affiliate" shall mean a holder of more than five percent of the existing Common Stock of the Company (on a fully diluted basis after giving effect to the conversion of any outstanding convertible Preferred Stock and the exercise of any exercisable warrants and options) or a member of the Board of Directors of the Company. (z) incur indebtedness for borrowed money in excess of $7,500,000 at any one time outstanding (excluding short term or revolving credit borrowings the proceeds of which are used to finance current assets, to repay current liabilities or for working capital). B. Common Stock. ------------ 1. Dividend Rights. Subject to the prior rights of holders of all classes --------------- of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation Rights. Upon the liquidation, dissolution or winding up of ------------------ the corporation, after payment has been made to the holders of Preferred Stock having prior rights in liquidation, the remaining assets and funds of this corporation legally available for distribution shall be distributed ratably among holders of Common Stock. 3. Voting Rights. The holder of each share of Common Stock shall have the ------------- right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. 14 ARTICLE V The address of the corporation's registered office in the State of Delaware is National Corporate Research, Ltd., 9 East Loockerman Street, County of Kent, Dover, 19901. The name of its registered agent at such address is National Corporate Research, Ltd., ARTICLE VI The Corporation is to have perpetual existence. ARTICLE VII In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation. ARTICLE VIII The number of directors which will constitute the whole Board of Directors of the Corporation shall be as specified in the Bylaws of the Corporation. ARTICLE IX The election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provided. ARTICLE X Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any statutory provision) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. ARTICLE XI To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or otherwise. The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be 15 made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the Corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation. Neither any amendment nor repeal of this Article XI, nor the adoption of any provision of this Certification of Incorporation inconsistent with this Article XI, shall eliminate or reduce the effect of this Article XI in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article XI, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE XII Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation. ARTICLE XIII The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as otherwise provided in this Amended and Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. The undersigned, being the Vice President-Finance, does make, file and record this Certificate, hereby declaring, certifying and acknowledging that the foregoing Amended and Restated Certificate of Incorporation in his act and deed and that the facts states therein are true, and has accordingly hereunto set his hand this 28th day of February, 1996. /s/ Michael J. Kolesar ----------------------- Michael Kolsear Attest: /s/ Tomas C. Tovar - ------------------ Tomas C. Tovar Assistant Secretary 16 EX-3.2 3 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.2 RESTATED CERTIFICATE OF INCORPORATION OF GIGA INFORMATION GROUP, INC. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware GIGA INFORMATION GROUP, INC., (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "General Corporation Law"), hereby certifies as follows: 1. The name of the corporation is Giga Information Group, Inc. Giga Information Group, Inc., was originally incorporated under the name Giga Strategic Decisions, Inc., and the original Certificate of Incorporation was filed with the Secretary of State of Delaware on March 17, 1995. An Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on February 28, 1996. 2. This Restated Certificate of Incorporation restates and integrates and further amends the Amended and Restated Certificate of Incorporation of the Corporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law, and was approved by written consent of the stockholders of the Corporation given in accordance with the provisions of Section 228 of the General Corporation Law (prompt notice of such action having been given to those stockholders who did not consent in writing). The resolution setting forth the Restated Certificate of Incorporation is as follows: RESOLVED: That the Amended and Restated Certificate of Incorporation of the - -------- Corporation, as amended, be and hereby is amended and restated in its entirety so that the same shall read as follows: FIRST. The name of this Corporation is: Giga Information Group, Inc. SECOND. The address of the Corporation's registered office in the State of Delaware is National Corporate Research, Ltd., 9 East Loockerman Street, County of Kent, Dover, 19901. The name of its registered agent at such address is National Corporate Research, Ltd. THIRD. The nature of the business or purposes to be conducted or promoted by the Corporation is as follows: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is [70,000,000] shares, consisting of (i) 60,000,000 shares of Common Stock, $.001 par value per share ("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.001 par value per share ("Preferred Stock"). The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation. A. COMMON STOCK. ------------ 1. General. The voting, dividend and liquidation rights of the ------- holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series. 2. Voting. The holders of the Common Stock are entitled to one vote ------ for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware. 3. Dividends. Dividends may be declared and paid on the Common Stock --------- from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock. 4. Liquidation. Upon the dissolution or liquidation of the ----------- Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock. B. PREFERRED STOCK. --------------- Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law or this Certificate of Incorporation. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law and this Certificate of Incorporation. Except as otherwise provided in this Certificate of Incorporation, no vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the designation or issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation. FIFTH. The Corporation shall have a perpetual existence. SIXTH. In furtherance of and not in limitation of powers conferred by statute, it is further provided: 1. Election of directors need not be by written ballot. 2. The Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation. SEVENTH. Except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. EIGHTH. 1. Action, Suits and Proceedings Other than by or in the ----------------------------------------------------- Right of the Corporation. The Corporation shall indemnify each person who was - ------------------------ or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) judgment, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a --------------- presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. 2. Actions or Suits by or in the Right of the Corporation. The ------------------------------------------------------ Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware or such other court shall deem proper. 3. Indemnification for Expenses of Successful Party. Notwithstanding ------------------------------------------------ the other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the --------------- Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto. 4. Notification and Defense of Claim. As a condition precedent to --------------------------------- his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. 5. Advance of Expenses. Subject to the provisions of Section 6 ------------------- below, in the event that the Corporation does not assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter; provided, however, that the payment of such expense incurred by an Indemnitee in - -------- ------- advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of the Indemnitee to make such repayment. 6. Procedure for Indemnification. In order to obtain indemnification ----------------------------- or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (c) independent legal counsel (who may be regular legal counsel to the Corporation), or (d) a court of competent jurisdiction. 7. Remedies. The right to indemnification or advances as granted by -------- this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advance of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. 8. Subsequent Amendment. No amendment, termination or repeal of this -------------------- Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 9. Other Rights. The indemnification and advancement of expenses ------------ provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 10. Partial Indemnification. If an Indemnitee is entitled under any ----------------------- provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal, therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 11. Insurance. The Corporation may purchase and maintain insurance, --------- at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation law of Delaware. 12. Merger or Consolidation. If the Corporation is merged into or ----------------------- consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation. 13. Savings Clause. If this Article or any portion hereof shall be -------------- invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees) judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Definitions. Terms used herein and defined in Section 145(h) and ----------- Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i). 15. Subsequent Legislation. If the General Corporation Law of ---------------------- Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended. NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. TENTH. This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation. 1. Number of Directors. The number of directors shall be fixed from ------------------- time to time by, or in the manner provided in, the Corporation's Bylaws. 2. Classes of Directors. The Board of Directors shall be and is -------------------- divided into three classes: Class I, Class II and Class III. 3. Election of Directors. Elections of directors need not be by --------------------- written ballot except as and to the extent provided in the By-Laws of the Corporation. 4. Terms of Office. Each director shall serve for a term ending on --------------- the date of the third annual meeting following the annual meeting at which such director was elected and until his successor is duly elected and qualified; provided, that each initial director in Class I shall serve for a term ending on - -------- the date of the annual meeting of stockholders in 1997 and until his successor is duly elected and qualified; each initial director in Class II shall serve for a term ending on the date of the annual meeting of stockholders in 1998 and until his successor is duly elected and qualified; and each initial director in Class III shall serve for a term ending on the date of the annual meeting of stockholders in 1999 and until his successor is duly elected and qualified; and provided further, that the term of each director shall be subject to his earlier - ---------------- death, resignation or removal. 5. Allocation of Directors Among Classes in the Event of Increases or ------------------------------------------------------------------ Decreases in the Number of Directors. In the event of any increase or decrease - ------------------------------------ in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors. 6. Quorum; Action at Meeting. A majority of the directors at any ------------------------- time in office shall constitute a quorum for the transaction of business. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each director so disqualified, provided that in no case shall less than one-third of the number of directors fixed pursuant to Section 1 above constitute a quorum. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of those present may adjourn the meeting from time to time. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law, by the Bylaws of the Corporation or by this Restated Certificate of Incorporation. 7. Removal. Directors of the Corporation may be removed only for ------- cause by the affirmative vote of the holders of at least two-thirds of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote. 8. Vacancies. Any vacancy in the Board of Directors, however --------- occurring, including a vacancy resulting from an enlargement of the board, shall be filled only by a vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected to hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of his successor and to his earlier death, resignation or removal. 9. Stockholder Nominations and Introduction of Business, Etc. ---------------------------------------------------------- Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the bylaws of the Corporation. 10. Amendments to Article. Notwithstanding any other provisions of --------------------- law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, each as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH. ELEVENTH. Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions of law, the Restated Certificate of Incorporation or the Bylaws of the Corporation, each as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article ELEVENTH. TWELFTH. Special meetings of stockholders may be called at any time by only the Chairman of the Board of Directors, the Chief Executive Officer (or if there is no Chief Executive Officer, the President) or the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, each as amended, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TWELFTH. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Restated Certificate of Incorporation to be signed by its President and Chief Operating Officer this ____ day of ______________, 1996. GIGA INFORMATION GROUP, INC. By:______________________________ Kenneth Marshall President and Chief Operating Officer EX-3.3 4 BY-LAWS EXHIBIT 3.3 BYLAWS OF GIGA INFORMATION GROUP, INC. (A DELAWARE CORPORATION) TABLE OF CONTENTS
Page ---- ARTICLE I - CORPORATE OFFICES.................................................. 5 1.1 REGISTERED OFFICE.................................................... 5 1.2 OTHER OFFICES........................................................ 5 ARTICLE II -- MEETINGS OF STOCKHOLDERS......................................... 5 2.1 PLACE OF MEETINGS.................................................... 5 2.2 ANNUAL MEETING....................................................... 5 2.3 SPECIAL MEETING...................................................... 6 2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................... 6 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES............................... 6 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................... 7 2.7 QUORUM............................................................... 7 2.8 ADJOURNED MEETING; NOTICE............................................ 8 2.9 CONDUCT OF BUSINESS.................................................. 8 2.10 VOTING............................................................... 8 2.11 WAIVER OF NOTICE..................................................... 9 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.............................................................. 9 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS............................................................. 10 2.14 PROXIES.............................................................. 10 ARTICLE III -- DIRECTORS....................................................... 11 3.1 POWERS............................................................... 11 3.2 NUMBER OF DIRECTORS.................................................. 11 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTOR................................................... 11 3.4 RESIGNATION AND VACANCIES............................................ 11 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE............................. 12 3.6 REGULAR MEETINGS..................................................... 13 3.7 SPECIAL MEETINGS; NOTICE............................................. 13 3.8 QUORUM............................................................... 13 3.9 WAIVER OF NOTICE..................................................... 14 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................................... 14 3.11 FEES AND COMPENSATION OF DIRECTORS................................... 14 3.12 APPROVAL OF LOANS TO OFFICERS........................................ 14
-i- 3.13 REMOVAL OF DIRECTORS................................................. 15 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS................................... 15 ARTICLE IV -- COMMITTEES........................................................ 15 4.1 COMMITTEES OF DIRECTORS.............................................. 15 4.2 COMMITTEE MINUTES.................................................... 16 4.3 MEETINGS AND ACTION OF COMMITTEES.................................... 16 ARTICLE V -- OFFICERS........................................................... 17 5.1 OFFICERS............................................................. 17 5.2 APPOINTMENT OF OFFICERS.............................................. 17 5.3 SUBORDINATE OFFICERS................................................. 17 5.4 REMOVAL AND RESIGNATION OF OFFICERS.................................. 17 5.5 VACANCIES IN OFFICES................................................. 18 5.6 CHIEF EXECUTIVE OFFICER.............................................. 18 5.7 PRESIDENT............................................................ 18 5.8 VICE PRESIDENTS...................................................... 18 5.9 SECRETARY............................................................ 18 5.10 CHIEF FINANCIAL OFFICER.............................................. 19 5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................... 19 5.12 AUTHORITY AND DUTIES OF OFFICERS..................................... 20 ARTICLE VI -- INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS................................................ 20 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................ 20 6.2 INDEMNIFICATION OF OTHERS............................................ 20 6.3 INSURANCE............................................................ 21 ARTICLE VII -- RECORDS AND REPORTS.............................................. 21 7.1 MAINTENANCE AND INSPECTION OF RECORDS................................ 21 7.2 INSPECTION BY DIRECTORS.............................................. 21 7.3 ANNUAL STATEMENT TO STOCKHOLDERS..................................... 22 ARTICLE VIII -- GENERAL MATTERS................................................. 22 8.1 CHECKS............................................................... 22 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS..................... 22 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................... 22 8.4 SPECIAL DESIGNATION ON CERTIFICATES.................................. 23 8.5 LOST CERTIFICATES.................................................... 23 8.6 CONSTRUCTION; DEFINITIONS............................................ 24
-ii- 8.7 DIVIDENDS............................................................ 24 8.8 FISCAL YEAR.......................................................... 24 8.9 SEAL................................................................. 24 8.10 TRANSFER OF STOCK.................................................... 24 8.11 STOCK TRANSFER AGREEMENTS............................................ 25 8.12 REGISTERED STOCKHOLDERS.............................................. 25 ARTICLE IX -- AMENDMENTS........................................................ 25 ARTICLE X -- DISSOLUTION........................................................ 25 ARTICLE XI -- CUSTODIAN......................................................... 26 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................... 26 11.2 DUTIES OF CUSTODIAN.................................................. 27
-iii- BYLAWS OF GIGA INFORMATION GROUP, INC. ARTICLE I CORPORATE OFFICES ------------------ 1.1 REGISTERED OFFICE ----------------- The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES ------------- The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------- 2.1 PLACE OF MEETINGS ----------------- Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation. 2.2 ANNUAL MEETING -------------- The annual meeting of stockholders shall be held each year at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the board of directors from time to time. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING --------------- A special meeting of the stockholders may be called at any time by the board of directors, the president, the chairman of the board, the president or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. If a special meeting is called by any person or persons other than the board of directors, the president or the chairman of the board, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS -------------------------------- All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES -------------------------------------- Only persons who are nominated in accordance with the procedures set forth in this Section 2.5 shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.5. Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal -2- executive offices of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than sixty (60) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re- election as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (1) the name and address, as they appear on the corporation's books, of such stockholder and (2) the class and number of shares of the corporation which are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the secretary of the corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 2.5. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE -------------------------------------------- Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.7 QUORUM ------ The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is -3- not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.8 ADJOURNED MEETING; NOTICE ------------------------- When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.9 CONDUCT OF BUSINESS ------------------- The Chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. 2.10 VOTING ------ The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.14 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as provided in the last paragraph of this Section 2.10, or as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. At a stockholders' meeting at which directors are to be elected, each stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such stockholder normally is entitled to cast) if the candidates' names have been properly placed in nomination (in accordance with these Bylaws) prior to commencement of the voting and the stockholder requesting cumulative voting has given notice prior to commencement of the voting of the stockholder's intention to cumulate votes. If cumulative voting is -4- properly requested, each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes which (absent this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his or her shares of stock multiplied by the number of directors to be elected by him or her, and he or she may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he or she may see fit. 2.11 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these Bylaws. 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------------- Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. -5- 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS ----------------------------------------------------------- In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the Board of Directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the - ----------------- adjourned meeting. 2.14 PROXIES ------- Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. -6- The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. ARTICLE III DIRECTORS --------- 3.1 POWERS ------ Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. 3.2 NUMBER OF DIRECTORS/1/ ------------------- The Board of Directors shall consist of one (1) person until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTOR ------------------------------------------------------ Except as provided in Section 3.4 of these Bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these Bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Elections of directors need not be by written ballot. 3.4 RESIGNATION AND VACANCIES ------------------------- Any director may resign at any time upon written notice to the attention of the secretary of the corporation. When one or more directors so resigns and the - ---------------------- /1/ AMENDED - SEE CERTIFICATE OF AMENDMENT ATTACHED. -7- resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. Unless otherwise provided in the certificate of incorporation or these Bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ---------------------------------------- The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. -8- Unless otherwise restricted by the certificate of incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS ---------------- Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.7 SPECIAL MEETINGS; NOTICE ------------------------ Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. 3.8 QUORUM ------ At all meetings of the Board of Directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. -9- A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these Bylaws. 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------- Unless otherwise restricted by the certificate of incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.11 FEES AND COMPENSATION OF DIRECTORS ---------------------------------- Unless otherwise restricted by the certificate of incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 3.12 APPROVAL OF LOANS TO OFFICERS ----------------------------- The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this -10- section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.13 REMOVAL OF DIRECTORS -------------------- Unless otherwise restricted by statute, by the certificate of incorporation or by these Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, -------- that, so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board of Directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. 3.14 CHAIRMAN OF THE BOARD OF DIRECTORS ---------------------------------- The corporation may also have, at the discretion of the Board of Directors, a chairman of the Board of Directors who shall not be considered an officer of the corporation. ARTICLE IV COMMITTEES ---------- 4.1 COMMITTEES OF DIRECTORS ----------------------- The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in the Bylaws of the corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power -11- or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the Bylaws of the corporation; and, unless the board resolution establishing the committee, the Bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES ----------------- Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES --------------------------------- Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be - -------- determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws. -12- ARTICLE V OFFICERS -------- 5.1 OFFICERS -------- The officers of the corporation shall be a chief executive officer, a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the Board of Directors, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS ----------------------- The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall be appointed by the Board of Directors, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS -------------------- The Board of Directors may appoint, or empower the chief executive officer or the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS ----------------------------------- Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. -13- 5.5 VACANCIES IN OFFICES -------------------- Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. 5.6 CHIEF EXECUTIVE OFFICER ----------------------- Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the board, the chief executive officer of the corporation shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation. The chief executive officer shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the Board of Directors. The chief executive officer shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. 5.7 PRESIDENT --------- Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the board or the chief executive officer, the president shall have general supervision, direction, and control of the business and other officers of the corporation. The President shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. 5.8 VICE PRESIDENTS --------------- In the absence or disability of the chief executive officer and president, the vice presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the president or the chairman of the board. 5.9 SECRETARY --------- The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and -14- stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders, meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these Bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws. 5.10 CHIEF FINANCIAL OFFICER ----------------------- The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the president and directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws. 5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ---------------------------------------------- The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board of Directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any -15- other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.12 AUTHORITY AND DUTIES OF OFFICERS -------------------------------- In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors or the stockholders. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, -------------------------------------- EMPLOYEES AND OTHER AGENTS -------------------------- 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS ----------------------------------------- The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 INDEMNIFICATION OF OTHERS ------------------------- The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a -16- predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporat1on. 6.3 INSURANCE --------- The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware. ARTICLE VII RECORDS AND REPORTS ------------------- 7.1 MAINTENANCE AND INSPECTION OF RECORDS ------------------------------------- The corporation shall, either at its principal executive offices or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. 7.2 INSPECTION BY DIRECTORS ----------------------- Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the -17- exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS -------------------------------- The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. ARTICLE VIII GENERAL MATTERS ---------------- 8.1 CHECKS ------ From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ------------------------------------------------ The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES -------------------------------------- The shares of a corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption -18- of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the Board of Directors, or the chief executive officer or the president or vice president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES ----------------------------------- If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, ------------------ except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES ----------------- Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the -19- corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS ------------------------- Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS --------- The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR ----------- The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors. 8.9 SEAL ---- The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK ----------------- Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, -20- assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS ------------------------- The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS ----------------------- The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS ---------- The Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws. ARTICLE X DISSOLUTION ----------- If it should be deemed advisable in the judgment of the Board of Directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder -21- entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation. ARTICLE XI CUSTODIAN --------- 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES ------------------------------------------- The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or -22- (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the Board of Directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 11.2 DUTIES OF CUSTODIAN ------------------- The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. -23- CERTIFICATE OF AMENDMENT TO THE BYLAWS OF GIGA INFORMATION GROUP, INC. The undersigned, being the Secretary of Giga Information Group, Inc., a Delaware corporation, hereby certifies that the stockholders and the sole director of the corporation approved the following amendment to the Bylaws of the corporation, effective as of June 23, 1995 and June 26, 1995, respectively: "3.2 NUMBER OF DIRECTORS ------------------- The Board of Directors shall consist of three (3) persons until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires." Date: July 6, 1995 /s/ Craig W. Johnson --------------------------- Craig W. Johnson, Secretary -24- EX-3.4 5 FORM OF RESTATED BY-LAWS OF THE REGISTRANT EXHIBIT 3.4 AMENDED AND RESTATED BYLAWS OF GIGA INFORMATION GROUP, INC.
AMENDED AND RESTATED BYLAWS --------------------------- TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1 - Stockholders 1 Section 1.1 Place of Meetings 1 Section 1.2 Annual Meeting 1 Section 1.3 Special Meetings 1 Section 1.4 Notice of Meetings 1 Section 1.5 Voting List 2 Section 1.6 Quorum 2 Section 1.7 Adjournments 2 Section 1.8 Voting and Proxies 2 Section 1.9 Action at Meeting 2 Section 1.10 Nomination of Directors 3 Section 1.11 Notice of Business at Annual Meetings 3 Section 1.12 Action without Meeting 4 Section 1.13 Organization 4 ARTICLE 2 - Directors 5 Section 2.1 General Powers 5 Section 2.2 Number; Election and Qualification 5 Section 2.3 Classes of Directors 5 Section 2.4 Terms of Office 5 Section 2.5 Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of Directors 5 Section 2.6 Vacancies 6 Section 2.7 Resignation 6 Section 2.8 Regular Meetings 6 Section 2.9 Special Meetings 6 Section 2.10 Notice of Special Meetings 6 Section 2.11 Meetings by Telephone Conference Calls 7 Section 2.12 Quorum 7 Section 2.13 Action at Meeting 7 Section 2.14 Action by Consent 7 Section 2.15 Removal 7 Section 2.16 Committees 7 Section 2.17 Compensation of Directors 8 ARTICLE 3 - Officers 8 Section 3.1 Enumeration 8
Section 3.2 Election 8 Section 3.3 Qualification 8 Section 3.4 Tenure 8 Section 3.5 Resignation and Removal 8 Section 3.6 Vacancies 9 Section 3.7 Chairman of the Board and Vice Chairman of the Board 9 Section 3.8 President 9 Section 3.9 Vice Presidents 9 Section 3.10 Secretary and Assistant Secretaries 10 Section 3.11 Treasurer and Assistant Treasurers 10 Section 3.12 Salaries 10 ARTICLE 4 - Capital Stock 11 Section 4.1 Issuance of Stock 11 Section 4.2 Certificates of Stock 11 Section 4.3 Transfers 11 Section 4.4 Lost, Stolen or Destroyed Certificates 11 Section 4.5 Record Date 12 ARTICLE 5 - General Provisions 12 Section 5.1 Fiscal Year 12 Section 5.2 Corporate Seal 12 Section 5.3 Waiver of Notice 12 Section 5.4 Voting of Securities 13 Section 5.5 Evidence of Authority 13 Section 5.6 Certificate of Incorporation 13 Section 5.7 Transactions with Interested Parties 13 Section 5.8 Severability 14 Section 5.9 Pronouns 14 ARTICLE 6 - Amendments 14 Section 6.1 By the Board of Directors 14 Section 6.2 By the Stockholders 14 Section 6.3 Certain Provisions 14
AMENDED AND RESTATED BYLAWS OF GIGA INFORMATION GROUP, INC. ARTICLE 1 - Stockholders ------------------------ 1.1 Place of Meetings. All meetings of stockholders shall be held at ----------------- such place within or without the State of Delaware as may be designated from time to time by the Board of Directors or the President or, if not so designated, at the registered office of the corporation. 1.2 Annual Meeting. The annual meeting of stockholders for the -------------- election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held within six months after the end of each fiscal year of the corporation on a date to be fixed by the Board of Directors or the President (which date shall not be a legal holiday in the place where the meeting is to be held) at the time and place to be fixed by the Board of Directors or the President and stated in the notice of the meeting. If no annual meeting is held in accordance with the foregoing provisions, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these Bylaws to the annual meeting of the stockholders shall be deemed to refer to such special meeting. 1.3 Special Meetings. Special meetings of stockholders may be called ---------------- at any time by the Chairman of the Board of Directors, the Chief Executive Officer (or, if there is no Chief Executive Officer, the President) or the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 1.4 Notice of Meetings. Except as otherwise provided by law, written ------------------ notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. 1.5 Voting List. The officer who has charge of the stock ledger of ----------- the corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present. 1.6 Quorum. Except as otherwise provided by law, the Certificate of ------ Incorporation or these Bylaws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. 1.7 Adjournments. Any meeting of stockholders may be adjourned to ------------ any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 1.8 Voting and Proxies. Each stockholder shall have one vote for ------------------ each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these Bylaws. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for him by written proxy executed by the stockholder or his authorized agent and delivered to the Secretary of the corporation. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. 1.9 Action at Meeting. When a quorum is present at any meeting, the ----------------- holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) shall decide any matter to be voted upon by the stockholders at such meeting, except when a different vote is required by express provision of law, the Certificate of Incorporation or these By-Laws. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. 1.10 Nomination of Directors. Only persons who are nominated in ----------------------- accordance with the following procedures shall be eligible for election as directors. Nomination for election to the Board of Directors of the corporation at a meeting of stockholders may be made by the Board of Directors or by any stockholder of the corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 1.10. Such nominations, other than those made by or on behalf of the Board of Directors, shall be made by notice in writing delivered or mailed by first class United States mail, postage prepaid, to the Secretary, and received not less than 60 days nor more than 90 days prior to such meeting; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the meeting is given to stockholders, such nomination shall have been mailed or delivered to the Secretary not later than the close of business on the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made, whichever occurs first. Such notice shall set forth (a) as to each proposed nominee (i) the name, age, business address and, if known, residence address of each such nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee, and (iv) any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to be named as a nominee and to serve as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation's books, of such stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by such stockholder. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 1.11 Notice of Business at Annual Meetings. At an annual meeting of ------------------------------------- the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, if such business relates to the election of directors of the corporation, the procedures in Section 1.10 must be complied with. If such business relates to any other matter, the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever occurs first. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 1.11 and except that any stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Securities Exchange Act of 1934, as amended, and is to be included in the corporation's proxy statement for an annual meeting of stockholders shall be deemed to comply with the requirements of this Section 1.11. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.11, and if he should so determine, the chairman shall so declare to the meeting that any such business not properly brought before the meeting shall not be transacted. 1.12 Action without Meeting. Stockholders may not take any action by ---------------------- written consent in lieu of a meeting. 1.13 Organization. The Chairman of the Board, or in his absence the ------------ Vice Chairman of the Board designated by the Chairman of the Board, or the President, in the order named, shall call meetings of the stockholders to order, and shall act as chairman of such meeting; provided, however, that the Board of -------- Directors may appoint any stockholder to act as chairman of any meeting in the absence of the Chairman of the Board. The Secretary of the corporation shall act as secretary at all meetings of the stockholders; but in the absence of the Secretary at any meeting of the stockholders, the presiding officer may appoint any person to act as secretary of the meeting. ARTICLE 2 - Directors --------------------- 2.1 General Powers. The business and affairs of the corporation -------------- shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2.2 Number; Election and Qualification. The number of directors ---------------------------------- which shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the corporation. 2.3 Classes of Directors. The Board of Directors shall be and is -------------------- divided into three classes: Class I, Class II and Class III. 2.4 Terms of Office. Each director shall serve for a term ending on --------------- the date of the third annual meeting following the annual meeting at which such director was elected; provided, that each initial director in Class I shall -------- serve for a term ending on the date of the annual meeting of stockholders in 1997; each initial director in Class II shall serve for a term ending on the date of the annual meeting of stockholders in 1998; and each initial director in Class III shall serve for a term ending on the date of the annual meeting of stockholders in 1999; and provided further, that the term of each director shall -------- ------- be subject to the election and qualification of his successor and to his earlier death, resignation or removal. 2.5 Allocation of Directors Among Classes in the Event of Increases --------------------------------------------------------------- or Decreases in the Number of Directors. In the event of any increase or - --------------------------------------- decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors. 2.6 Vacancies. Any vacancy in the Board of Directors, however --------- occurring, including a vacancy resulting from an enlargement of the Board, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of his successor and to his earlier death, resignation or removal. 2.7 Resignation. Any director may resign by delivering his written ----------- resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 2.8 Regular Meetings. Regular meetings of the Board of Directors may ---------------- be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. 2.9 Special Meetings. Special meetings of the Board of Directors may ---------------- be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board, President, two or more directors, or by one director in the event that there is only a single director in office. 2.10 Notice of Special Meetings. Notice of any special meeting of -------------------------- directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy, or telex, or delivering written notice by hand, to his last known business or home address at least 24 hours in advance of the meeting, or (iii) by mailing written notice to his last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 2.11 Meetings by Telephone Conference Calls. Directors or any -------------------------------------- members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 2.12 Quorum. A majority of the total number of the whole Board of ------ Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 2.13 Action at Meeting. At any meeting of the Board of Directors at ----------------- which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these Bylaws. 2.14 Action by Consent. Any action required or permitted to be taken ----------------- at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing, and the written consents are filed with the minutes of proceedings of the Board or committee. 2.15 Removal. Directors of the corporation may be removed only for ------- cause by the affirmative vote of the holders of two-thirds of the shares of the capital stock of the corporation issued and outstanding and entitled to vote. 2.16 Committees. The Board of Directors may, by resolution passed by ---------- a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Dela ware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these Bylaws for the Board of Directors. 2.17 Compensation of Directors. Directors may be paid such ------------------------- compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service. ARTICLE 3 - Officers -------------------- 3.1 Enumeration. The officers of the corporation shall consist of a ----------- President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate. 3.2 Election. The President, Treasurer and Secretary shall be -------- elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting. 3.3 Qualification. No officer need be a stockholder. Any two or ------------- more offices may be held by the same person. 3.4 Tenure. Except as otherwise provided by law, by the Certificate ------ of Incorporation or by these Bylaws, each officer shall hold office until his successor is elected and qualified, unless a different term is specified in the vote choosing or appointing him, or until his earlier death, resignation or removal. 3.5 Resignation and Removal. Any officer may resign by delivering ----------------------- his written resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation. 3.6 Vacancies. The Board of Directors may fill any vacancy occurring --------- in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is elected and qualified, or until his earlier death, resignation or removal. 3.7 Chairman of the Board and Vice Chairman of the Board. The Board ---------------------------------------------------- of Directors may appoint a Chairman of the Board. If the Board of Directors appoints a Chairman of the Board, he shall perform such duties and possess such powers as are assigned to him by the Board of Directors. If the Board of Directors appoints a Vice Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be vested in him by the Board of Directors. 3.8 President. The President shall, subject to the direction of the --------- Board of Directors, have general charge and supervision of the business of the corporation. Unless otherwise provided by the Board of Directors, he shall preside at all meetings of the stockholders, if he is a director, at all meetings of the Board of Directors. Unless the Board of Directors has designated the Chairman of the Board or another officer as Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The President shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe. 3.9 Vice Presidents. Any Vice President shall perform such duties --------------- and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and when so performing shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 Secretary and Assistant Secretaries. The Secretary shall ----------------------------------- perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting. 3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform ---------------------------------- such duties and shall have such powers as may from time to time be assigned to him by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 3.12 Salaries. Officers of the corporation shall be entitled to such -------- salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE 4 - Capital Stock ------------------------- 4.1 Issuance of Stock. Unless otherwise voted by the stockholders ----------------- and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any unissued balance of the authorized capital stock of the corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine. 4.2 Certificates of Stock. Every holder of stock of the corporation --------------------- shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by him in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. 4.3 Transfers. Except as otherwise established by rules and --------- regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these Bylaws. 4.4 Lost, Stolen or Destroyed Certificates. The corporation may -------------------------------------- issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar. 4.5 Record Date. The Board of Directors may fix in advance a date as ----------- a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE 5 - General Provisions ------------------------------ 5.1 Fiscal Year. Except as from time to time otherwise designated by ----------- the Board of Directors, the fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year. 5.2 Corporate Seal. The corporate seal shall be in such form as -------------- shall beapproved by the Board of Directors. 5.3 Waiver of Notice. Whenever any notice whatsoever is required to ---------------- be given by law, by the Certificate of Incorporation or by these Bylaws, a waiver of such notice either in writing signed by the person entitled to such notice or such person's duly authorized attorney, or by telegraph, cable or any other available method, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice. 5.4 Voting of Securities. Except as the directors may otherwise -------------------- designate, the President or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. 5.5 Evidence of Authority. A certificate by the Secretary, or an --------------------- Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action. 5.6 Certificate of Incorporation. All references in these Bylaws to ---------------------------- the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time. 5.7 Transactions with Interested Parties. No contract or transaction ------------------------------------ between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 5.8 Severability. Any determination that any provision of these ------------ Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws. 5.9 Pronouns. All pronouns used in these Bylaws shall be deemed to -------- refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. ARTICLE 6 - Amendments ---------------------- 6.1 By the Board of Directors. These Bylaws may be altered, amended ------------------------- or repealed or new bylaws may be adopted by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. 6.2 By the Stockholders. Except as otherwise provided in Section ------------------- 6.3, these Bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any regular or special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new bylaws shall have been stated in the notice of such regular or special meeting. 6.3 Certain Provisions. Notwithstanding any other provision of law, ------------------ the Certificate of Incorporation or these Bylaws, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the shares of the capital stock of the corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with Section 1.3, Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or Article 6 of these Bylaws. EX-4.1 6 SPECIMEN CERTIFICATE EXHIBIT 4.1 GIGA Number Shares FBU GIGA INFORMATION GROUP, INC. ---------- ------- THIS CERTIFICATE IS INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN TRANSFERABLE IN BOSTON, OF THE STATE OF DELAWARE DEFINITIONS MA OR NEW YORK, NY COMMON STOCK CUSIP This Certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF ONE TENTH OF ONE CENT ($.001) EACH GIGA INFORMATION GROUP, INC. (hereinafter called the "Corporation") transferable upon the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all the provisions of the Restated Certificate of Incorporation and the Amended and Restated By-Laws of the Corporation as from time to time amended (copies of which are on file with the Corporation) to all of which the holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the facsimile signatures of its duly authorized officers and its facsimile corporate seal to be hereunto affixed. Dated: /s/ Richard B. Goldman (Corporate Seal) /s/ Kenneth E. Marshall SENIOR VICE PRESIDENT, PRESIDENT AND CHIEF OPERATING OFFICER CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY COUNTERSIGNED AND REGISTERED: THE FIRST NATIONAL BANK OF BOSTON TRANSFER AGENT AND REGISTRAR BY /s/ M. RINGIC AUTHORIZED SIGNATURE (reverse side) GIGA INFORMATION GROUP, INC. The Corporation is authorized to issue more than one class of stock. A statement of the powers, designations, preferences, and the relative participating, optional or other rights of each class and series of stock and the qualifications, limitations or restrictions thereon will be provided without charge to each stockholder upon request to the Corporation. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws of regulations: UNIF GIFT ACT -- Custodian --------- --------- TEN COMM-- as tenants in common (Cust) (Minor) TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors JT TEN -- as joint tenants with right of Act survivorship and not as tenants ------------------------ in common (State) Additional abbreviations may also be used though not in the above list. For value received,____________________ hereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSSIGNEE - ---------------------------------------- - ---------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------Shares of the capital stock represented by the within Certificate, and to hereby irrevocably constitute and appoint - ------------------------------------------------------------------------Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated, -------------------- --------------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration or enlargement, or any change whatever. SIGNATURE(S) GUARANTEED: ------------------------------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-10.1 7 STOCK PURCHASE AGREEMENT 6-JUL-1995 EXHIBIT 10.1 ================================================================================ STOCK PURCHASE AGREEMENT BETWEEN GIGA INFORMATION GROUP, INC., A DELAWARE CORPORATION, AND DAVID GILMOUR, AN INDIVIDUAL _________________________ Dated as of July 6, 1995 _________________________ ================================================================================ TABLE OF CONTENTS ----------------- Page ---- SECTION 1. SALE AND PURCHASE OF STOCK............................ 1 1.1 Purchase of Stock..................................... 1 1.2 Purchase Price........................................ 1 1.3 Tax-Free Transaction.................................. 2 1.4 Transfer Taxes........................................ 2 1.5 Other Agreements and Transactions..................... 3 1.6 Earn-Out of Second Stock Installment Payment.......... 3 SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.............. 3 2.1 Title to Stock........................................ 3 2.2 Capitalization........................................ 4 2.3 Authority; Binding Nature of Agreements............... 4 2.4 Conflicts............................................. 4 2.5 Financial and Other Information About the Company..... 4 2.6 Seller's Access to Information About Purchaser........ 4 SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................. 5 3.1 Authority; Binding Nature of Agreements............... 5 3.2 Title to Stock........................................ 5 3.3 Access................................................ 5 3.4 Acquisition of Purchased Stock........................ 5 3.5 Preferred Stock Payment............................... 5 3.6 Brokers............................................... 5 3.7 Tax Treatment......................................... 5 3.8 Election to Board of Directors........................ 5 SECTION 4. CERTAIN SECURITIES MATTERS............................ 5 SECTION 5. CONDITIONS TO SECOND CLOSING.......................... 7 5.1 Obligations of Purchaser.............................. 7 5.2 Obligations of Seller................................. 7 SECTION 6. RIGHT OF REPURCHASE................................... 7 6.1 Purchaser Option to Repurchase Shares................. 7 6.2 Vesting of Stock...................................... 8 6.3 Exercise of Purchase Option........................... 8 6.4 Restrictions.......................................... 8 6.5 Legends............................................... 8 SECTION 7. MISCELLANEOUS PROVISIONS.............................. 9 7.1 Termination of Agreement.............................. 9 7.2 Governing Law......................................... 9 7.3 Venue and Jurisdiction................................ 9 7.4 Notices............................................... 9 7.5 Headings.............................................. 10 7.6 Assignment............................................ 10 7.7 Parties in Interest................................... 10 7.8 Severability.......................................... 10 7.9 Entire Agreement...................................... 10 7.10 Waiver................................................ 10 7.11 Amendments............................................ 10 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of July 6, 1995 (the "Effective Date"), by and between GIGA INFORMATION GROUP, INC., a Delaware corporation ("Purchaser"), and DAVID GILMOUR ("Seller"). Certain capitalized terms used in this Agreement are defined on Exhibit A. RECITALS Seller owns 50% of the outstanding common stock of ExperNet Corporation, a California corporation (the "Company"). Purchaser wishes to purchase such stock from Seller on the terms set forth in this Agreement. AGREEMENT Purchaser and Seller, intending to be legally bound, agree as follows: SECTION 1. SALE AND PURCHASE OF STOCK 1.1 PURCHASE OF STOCK. Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, four hundred fifty thousand (450,000) shares of Common Stock of the Company as follows: (a) Contemporaneously with the execution and delivery of this Agreement, Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, two hundred fifty thousand (250,000) shares of Common Stock of the Company (the "First Stock Installment") in accordance with this Agreement. (b) Subject to the conditions set forth in Section 5 below, on the Second Closing Date (as hereinafter defined), Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, two hundred thousand (200,000) shares of Common Stock of the Company (the "Second Stock Installment") in accordance with this Agreement. The First Stock Installment and the Second Stock Installment are hereinafter referred to collectively as the "Purchased Stock." As used in this Agreement, "Second Closing Date" shall mean a date, as mutually agreed by the parties, after October 1, 1995 but no later than December 31, 1995, provided that if Purchaser requires that the Second Stock Installment close after December 15, 1995, then the Second Closing Date shall be a date determined at Seller's option up to and including January 2, 1996, but no later. 1.2 PURCHASE PRICE. As consideration for the sale of the Purchased Stock to Purchaser: (a) Contemporaneously with the execution and delivery of this Agreement, Purchaser shall: (i) issue to Seller eighty thousand (80,000) shares of Series A Preferred Stock of Purchaser (the "Preferred Stock Payment"); and (ii) ensure that the Company immediately pays Seller all accrued and unpaid salary owed to Seller by the Company, in the total amount of $54,475.96 (which Seller agrees and represents is the total accrued and unpaid salary). (b) On the Second Closing Date, Purchaser shall deliver to Seller, at Seller's option, either: (i) the sum of four hundred thousand dollars ($400,000) by check or wire transfer; or (ii) an option to purchase forty thousand (40,000) shares of the Common Stock of Purchaser, in the form attached hereto as Exhibit B (the "Option"), which option will have an exercise price equal to the fair market value of Purchaser's Common Stock as of the date of grant (as determined by Purchaser's Board of Directors in accordance with its normal practice); or (iii) a pro-rated combination of the consideration set forth in Sections 1.2(b)(i) and 1 .2(b)(ii) above (for example, a $200,000 payment and an option to purchase 20,000 shares). (c) Within thirty (30) days from the closing of any equity or debt financing by Purchaser (excluding the Preferred and Common Stock issuances described in the first sentence of Section 1.2(d)), but in no event later than January 2, 1996, Purchaser shall ensure that the Company pays Seller all unpaid principal and interest due under that certain promissory note dated September 20, 1994, issued to Seller by the Company (a copy is attached as Exhibit C). (d) Notwithstanding the provisions of this Section 1.2, Purchaser may delay satisfying its obligation to pay Seller amounts owed under Section 1.2 (b)(i), Section 1 .2(b)(iii) and/or Section 1.2(c) to the extent that any such payment obligation, when combined with previous payments made to Seller under such sections (if any), would exceed 12.5% of the aggregate net 2. proceeds received by Purchaser in its equity financings (other than the sale and issuance of the shares of Purchaser's Series A Preferred Stock for an aggregate purchase price of up to $2.5 million and other than proceeds from sale of Purchaser's Common Stock sold to employees, consultants and directors) through the date that such payment is due. Any amounts owed Seller under Sections 1.2(b)(i), 1 .2(b)(iii) or 1.2(c) that are not paid by Purchaser when due under such Sections, pursuant to operation of the limitation under this Section 1.2(d), shall be paid to Seller upon Purchaser receiving additional equity financing, but subject to the same limitation of 12.5% of the aggregate net proceeds of such financings. In the event Purchaser has not completed paying Seller all such obligations under Section 1.2(b) and 1.2(c) by the second anniversary of the date of the Agreement, the amount remaining to be paid shall commence accruing interest at 10% per annum until paid in full. Purchaser shall complete payment of all amounts owed Seller hereunder in any event by the third anniversary of the Agreement. 1.3 TAX-FREE TRANSACTION. The sale of the First Stock Installment to Purchaser and the Preferred Stock Payment to Seller is intended to be a tax-free transaction under Section 351 of the Internal Revenue Code of 1986, as amended. 1.4 TRANSFER TAXES. Any transfer taxes, stamp duties, filing fees, registration fees, recordation expenses, escrow fees or other similar taxes, fees, charges or expenses incurred by Seller, the Company or any other party in connection with the transfer of the Purchased Stock to Purchaser or in connection with any of the other transactions contemplated by this Agreement shall be borne and paid exclusively by Seller. 1.5 OTHER AGREEMENTS AND TRANSACTIONS. Contemporaneously with the execution and delivery of this Agreement: (a) Seller and Purchaser are entering into an Employment Agreement, of even date herewith, in the form attached hereto as Exhibit D; (b) Purchaser is issuing to Seller an option to purchase 30,000 shares of Common Stock of Purchaser, in the form attached hereto as Exhibit B; (c) Purchaser is selling eighty thousand (80,000) shares of its Series A Preferred Stock to Gideon Gartner in exchange for his 450,000 shares of the Company's common stock. (d) Purchaser is issuing to Eric Sarjeant an option to purchase 1,500 shares of Common Stock of Purchaser. 3. (e) Gideon Gartner is terminating the warrant issued to Mr. Gartner to purchase 555,556 shares of the Company's Series A Preferred Stock and is delivering such original warrant marked "Canceled" to Seller. (f) Seller, Mr. Gartner, and Neill Brownstein are entering into that certain Voting Agreement in the form attached hereto as Exhibit F. 1.6 EARN-OUT OF SECOND STOCK INSTALLMENT PAYMENT. The parties agree that the entire consideration paid by Purchaser to Seller under Section 1.2(b) shall constitute the purchase price for the purchase by Purchaser of the Second Stock Installment. The parties agree further that, if Seller voluntarily terminates his employment by ExperNet (and is not thereafter employed by Purchaser or an affiliate of Purchaser), then Seller shall be obligated to repay to Purchaser one-half of the amount Purchaser pays to Seller in cash on the Second Closing Date based on Seller's election under Section 1.2(b). On the Second Closing Date and upon Purchaser's delivery to Seller of the amounts owed under Section 1.2(b) (subject to the limitations in Section 1.2(d)), Seller shall execute and deliver to Purchaser a promissory note in the form attached hereto as Exhibit E, evidencing such obligation of Seller to repay. As set forth in detail in such promissory note, the note shall not bear any interest, shall be payable by Seller within 30 days after Seller voluntarily terminates his employment with ExperNet (and is not hired by Purchaser or its affiliate), and shall be forgiven by Purchaser upon earlier of the involuntary termination of Seller's employment or the date two years after the date of the Agreement provided that Seller remains employed by ExperNet, Purchaser or an affiliate of Purchaser on such date. SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser that the following statements are accurate in all material respects: 2.1 TITLE TO STOCK. On the date hereof and on the Second Closing Date, Purchaser will acquire good title to the First Stock Installment and Second Stock Installment, respectively, free and clear of all liens and encumbrances. There are no agreements or arrangements in effect that restrict the transfer, voting or sale of the Purchased Stock, other than the stock purchase agreement with the Company under which Seller acquired the Purchased Stock. 2.2 CAPITALIZATION. The Purchased Stock represents all of capital stock of the Company owned by Seller. The Purchased Stock and the shares held of record by Gideon Gartner represent all of the issued and outstanding shares of capital stock of the Company, and there are no options, warrants or other securities exercisable for or convertible into shares of capital stock of the Company (with the exception of the warrant referred to in Section 1.5(e) hereof). 4. 2.3 AUTHORITY; BINDING NATURE OF AGREEMENTS. Seller has the absolute and unrestricted right, power and capacity to enter into and to perform his obligations under each of the Transactional Agreements to which he is a party. Each of the Transactional Agreements to which Seller is a party constitutes the legal, valid and binding obligation of Seller and is enforceable against Seller in accordance with its terms. 2.4 CONFLICTS. Seller is not subject to any order and is not bound by any contract that may have an adverse effect on his ability to comply with or perform any of his covenants or obligations under any of the Transactional Agreements. There is no proceeding pending, and no Person has threatened to commence any proceeding, that may have an adverse effect on the ability of Seller to comply with or perform any of his covenants or obligations under any of the Transactional Agreements. No event has occurred, and no claim, dispute or other condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such proceeding. 2.5 FINANCIAL AND OTHER INFORMATION ABOUT THE COMPANY. Seller has provided to Purchaser financial statements (including an income statement and balance sheet) for and as of the end of the last completed fiscal year of the Company and for and as of the end of the last calendar month preceding the date of this Agreement, and such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied, and, to the best of Seller's knowledge, fairly reflect the financial position and operating results of the Company for the periods presented therein. To the best of Seller's knowledge, the Company has no material liabilities (contingent or otherwise) that are not reflected in such financial statements, except for the liabilities created under the agreement with SIM. Seller has made available to Purchaser true and complete copies of other books and records of the Company. Except for the note described in Section 1.3(c) above and deferred salary as described in Section 1 .2(a)(ii), the Company has not obligations of any kind to Seller, relating to the payment of money, provision of benefits or otherwise. 2.6 SELLER'S ACCESS TO INFORMATION ABOUT PURCHASER. Seller further represents that he has had an opportunity to ask questions and receive answers from Purchaser regarding the organization and operations of Purchaser and the terms and conditions of the offering of the Preferred Stock Payment and the Option and has received and reviewed a copy of the "Giga Information Group, Inc. Summary of Business Plan and Proposal." Seller acknowledges that (i) Purchaser is in its development or start-up stage; (ii) Seller's investment is highly speculative and risky and Seller could lose his entire investment; (iii) Seller is relying upon not only the representations and covenants contained in this Agreement and in the Series A Preferred Stock Purchase Agreement, but also his own investigation of the contemplated project, and (iv) it is difficult to estimate the likely revenues to be earned by Purchaser, and any specific financial projections provided by Purchaser are based only on Purchaser's reasonable assumptions regarding Purchaser's future results. Nothing in the foregoing will limit 5. in any way Sellers right to rely on the representations and warranties of Purchaser contained in the Agreement and in the Series A Preferred Stock Purchase Agreement. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants that the following statements are accurate in all material respects: 3.1 AUTHORITY; BINDING NATURE OF AGREEMENTS. Purchaser has the absolute and unrestricted right, power and authority to enter into and perform its obligations under the Transactional Agreements. The execution, delivery and performance of the Transactional Agreements by Purchaser have been duly authorized by all necessary action on the part of Purchaser and its board of directors. The Transactional Agreements constitute the legal, valid and binding obligations of Purchaser and are enforceable against Purchaser in accordance with their terms. Purchaser's financial resources are sufficient to enable it to purchase the Purchased Stock. 3.2 TITLE TO STOCK. On the date hereof, Seller will acquire good title to the Preferred Stock Payment, free and clear of all liens and encumbrances. 3.3 ACCESS. Prior to the First Closing, Seller has been given full access to the assets, books, records, contracts and employees of the Purchaser, and has been given the opportunity to meet with officers and other representatives of Purchaser for the purpose of investigating and obtaining information regarding Purchaser's business, operations and legal affairs. 3.4 ACQUISITION OF PURCHASED STOCK. Purchaser is acquiring the Purchased Stock for its own account and for investment, and not with a view to, or for sale in connection with, any distribution of any of such Purchased Stock. 3.5 PREFERRED STOCK PAYMENT. The Preferred Stock Payment being issued by Purchaser has been duly authorized and, upon issuance, will be fully paid and nonassessable. 3.6 BROKERS. Purchaser has not agreed or become obligated to pay, and has not taken any action that might result in any Person claiming to be entitled to receive, any brokerage commission, finder's fee or similar commission or fee in connection with any of the transactions contemplated by the Transactional Agreements. 3.7 TAX TREATMENT. Purchaser shall not claim any amount of the purchase price for the Purchased Stock, set forth in Section 1.2, as a tax deduction from Purchaser's income. 6. 3.8 ELECTION TO BOARD OF DIRECTORS. As of the date of this Agreement, Seller has been elected to serve as a member of Purchaser's Board of Directors. In addition to the above representations and warranties, Purchaser represents and warrants to and for the benefit of Seller that all of the statements set forth under Section 2 of the Series A Preferred Stock Purchase Agreement are accurate in all material respects as if made on the Effective Date. SECTION 4. CERTAIN SECURITIES MATTERS. Seller represents and warrants as follows: 4.1 Seller is aware that the Preferred Stock Payment to be received by Seller in connection with the Transactions is being issued under an exemption from the registration requirements of the Securities Act; 4.2 Seller (i) is aware that because the issuance of the Preferred Stock Payment to be received by Seller in connection with the transactions contemplated by this Agreement has not been registered under the Securities Act, such shares must be held indefinitely unless their resale or other disposition is registered under the Securities Act or is exempt from the registration requirements of the Securities Act, and (ii) is aware of the provisions of Rule 144 promulgated under the Securities Act which permits limited resales of shares purchased in certain exempt transactions, subject to the satisfaction of various requirements; 4.3 Seller realizes that, if the requirements of Rule 144 are not satisfied, any disposition by Seller of the Preferred Stock Payment to be received by Seller in connection with the transactions contemplated by this Agreement may require registration under the Securities Act, and that Purchaser is not under any obligation to take any action to register any of such Purchaser Stock; 4.4 Seller is acquiring the Preferred Stock Payment that Seller is to receive in connection with the Transactions for investment and for Seller's own account and not with a view to, or for resale in connection with, any unregistered distribution thereof, and Seller has no present intention to sell or otherwise dispose of any interest in or risk related to the Preferred Stock Payment that Seller is to receive in connection with the Transactions; 4.5 Seller understands that the certificates representing the Preferred Stock Payment to be received by Seller may bear a legend identical or similar in effect to the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED 7. UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION." 4.6 Seller is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 4.7 Seller hereby agrees that during the one hundred eighty (180) day period following the effective date of a registration statement of Purchaser filed under the Securities Act in connection with Purchaser's initial public offering of Securities, Seller will not, to the extent requested by Purchaser and Purchaser's underwriters, sell, offer to sell, or otherwise transfer or dispose of any Common Stock of the Company held by it at any time during such period except Common Stock (if any) included in such registration. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such securities of Seller until the end of such period. Seller agrees to execute the form of such market stand-off agreement as may be reasonably requested by the underwriters. SECTION 5. CONDITIONS TO SECOND CLOSING 5.1 OBLIGATIONS OF PURCHASER. The obligation of Purchaser to purchase the Second Stock Installment and otherwise consummate the transactions that are to be consummated on the Second Closing Date is subject to the satisfaction of the following conditions (any of which may be waived by Purchaser in whole or in part): (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller set forth in Sections 2.1, 2.3 and 2.4 shall be accurate in all material respects as of the Second Closing Date. (b) PERFORMANCE. Seller shall have performed, in all material respects, all obligations required by this Agreement to be performed by Seller on or before the Second Closing Date. (c) NO INJUNCTION. There shall not be in effect, at the Second Closing Date, any injunction or other binding order of any court or other tribunal having jurisdiction over Purchaser that prohibits the purchase of the Second Stock Installment by Purchaser. 5.2 OBLIGATIONS OF SELLER. The obligation of Seller to cause the Second Stock Installment to be sold to Purchaser and otherwise consummate the transactions 8. that are to be consummated on the Second Closing Date is subject to the satisfaction of the following conditions (any of which may be waived by Seller in whole or in part): (a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of Purchaser set forth in Section 3 shall be accurate in all material respects as of the date of this Agreement. (b) PERFORMANCE. Purchaser shall have performed, in all material respects, all obligations required by this Agreement to be performed by Purchaser on or before the Second Closing Date. (c) NO INJUNCTION. There shall not be in effect, at the Second Closing Date, any injunction or other binding order of any court or other tribunal having jurisdiction over Seller or the Company that prohibits the sale of the Second Stock Installment to Purchaser. SECTION 6. RIGHT OF REPURCHASE 6.1 PURCHASER OPTION TO REPURCHASE SHARES. All of the shares of Purchaser's Series A Preferred Stock being acquired by Seller pursuant to Section 1 .2(a)(i) of this Agreement (hereinafter sometimes collectively referred to as the "Stock") shall be subject to the option set forth in this Article 6 (the "Purchase Option"). In the event at any time prior to the third anniversary of the date of this Agreement, (a) Seller shall voluntarily terminate employment by ExperNet Corporation (and shall not within ten days thereafter be employed by Purchaser or a parent or subsidiary of the Purchaser), or (b) Seller's employment shall terminate as a result of Seller's death or permanent disability, then Purchaser shall have the right, at any time within 30 days after the date of such termination of employment, to exercise the Purchase Option, which consists of the right to purchase from the Seller or his personal representative, as the case may be, at a purchase price per share equal to the greater of $2.00 per share or the fair market value of a share of the Common Stock of Purchaser at that time as determined in good faith by Purchaser's Board of Directors (the "Option Price"), up to but not exceeding the number of shares of Stock which have not vested under the provisions of Section 6.2 below, upon the terms hereinafter set forth. 6.2 VESTING OF STOCK. The Purchaser may exercise the Purchase Option as to the maximum portion of the Stock specified in the following table:
PORTION OF THE STOCK IF EMPLOYMENT TERMINATES SUBJECT TO (AS DESCRIBED IN SECTION 6.1) PURCHASE OPTION - --------------------------------- ---------------------
9. Within 12 months of the Date of This Agreement 100% After 12 months and within 24 75% months After 24 months and within 36 50% months After 36 months none
6.3 EXERCISE OF PURCHASE OPTION. The Purchase Option shall be exercised by written notice signed by an officer of Purchaser and delivered or mailed as provided in Section 7.4. The Option Price shall be paid in cash (by check or wire transfer). Purchaser may assign its rights under this Article 6. 6.4 RESTRICTIONS. Seller may not sell, assign, pledge or otherwise transfer (by operation of law or otherwise) any Sock that remains subject to the Purchase Option; any attempted transfer in violation of the foregoing shall be void. The Secretary of Purchaser will hold in escrow the certificates representing the shares of Stock subject to the Purchase Option, until such Purchase Option lapses as to such shares. The Secretary of Purchaser will issue promptly to Seller a certificate representing the shares of Stock that no longer are subject the Purchase Option, under the provisions of Sections 6.1 and 6.2 above. Seller will be solely responsible for determining whether to make an election under Internal Revenue Code Section 83(b), and to effect such election. Seller will take all actions reasonably requested by Purchaser relating to Purchaser's obtaining insurance, at Purchaser's cost, on Seller's life (including submitting to a relevant medical exam). 6.5 LEGENDS. All certificates representing any shares of Stock subject to the provisions of this Agreement shall have endorsed thereon the following legends: (a) The shares represented by this certificate are subject to an option set forth in an agreement between the Corporation and the registered holder, or the predecessor in interest, a copy of which is on file at the principal office of this corporation. Any transfer or attempted transfer of any shares subject to such option is void without the prior express written consent of the issuer of these shares. (b) The securities represented by this certificate have not been registered under the Securities Act of 1933 (the "Act"). They may not be sold or offered for sale or otherwise distributed unless the securities are registered under the Act or an exemption therefrom is available. (c) Any legend required to be placed thereon by the Purchaser's 10. Bylaws. (d) Any legend required to be placed thereon by appropriate Blue Sky officials. SECTION 7. MISCELLANEOUS PROVISIONS 7.1 TERMINATION OF AGREEMENT. This Agreement may be terminated prior to the Second Closing Date: (a) by the mutual agreement of Seller and Purchaser; (b) by Purchaser, if any condition set forth in Section 5.1 shall not have been satisfied or waived; provided that Seller shall have been provided with written notice of such failure of condition and such failure shall not have been cured or remedied within ten (10) business days following such notice; or (c) by Seller, if any condition set forth in Section 5.2 shall not have been satisfied or waived; provided that Purchaser shall have been provided with written notice of such failure of condition and such failure shall not have been cured or remedied within ten (10) business days following such notice. 7.2 GOVERNING LAW. This Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of California (without giving effect to principles of conflicts of law). 7.3 VENUE AND JURISDICTION. If any legal proceeding or other legal action relating to this Agreement is brought or otherwise initiated, the venue therefor shall be in Santa Clara County, California, which shall be deemed to be a convenient forum. Purchaser and Seller hereby expressly and irrevocably consent and submit to the jurisdiction of the courts in Santa Clara County, California. 7.4 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given and duly delivered when received by the intended recipient at the following address (or at such other address as the intended recipient shall have specified in a written notice given to the other party hereto): if to Purchaser: --------------- Giga Information Group, Inc. 146 West 57th Street New York, NY 10019 with a copy to: -------------- Venture Law Group 2800 Sand Hill Road 11. Menlo Park, CA 94025 Attn: Craig W. Johnson, Esq. if to Seller: ------------ David Gilmour 331 South El Monte Avenue Los Altos, CA 94022 with a copy to: -------------- Cooley Godward Castro Huddleson & Tatum 5 Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306 Attn: Andrei M. Manoliu, Esq. 7.5 HEADINGS. The headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement. 7.6 ASSIGNMENT. Neither party hereto may assign any of its rights or delegate any of its obligations under this Agreement to any other Person without the prior written consent of the other party hereto. 7.7 PARTIES IN INTEREST. Nothing in this Agreement is intended to provide any rights or remedies to any Person (including any employee or creditor of the Company) other than the parties hereto. 7.8 SEVERABILITY. In the event that any provision of this Agreement, or the application of such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be affected and shall continue to be valid and enforceable to the fullest extent permitted by law. 7.9 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding of Purchaser and Seller and supersedes all other agreements and understandings between Purchaser and Seller relating to the subject matter hereof. 7.10 WAIVER. No failure on the part of either party hereto to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of 12. either party hereto in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver thereof; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. 7.11 AMENDMENTS. This Agreement may not be amended, modified, altered or supplemented except by means of a written instrument executed on behalf of both Purchaser and Seller. 13. Purchase and Seller have caused this Agreement to be executed as of July 6, 1995. GIGA INFORMATION GROUP, INC. By: /s/ Gideon Gartner ----------------------------------------- Gideon Gartner Chairman and Chief Executive Officer /s/ David Gilmour -------------------------------------------- DAVID GILMOUR 14. EXHIBIT A DEFINED TERMS For purposes of this Agreement: "AGREEMENT" shall mean the Stock Purchase Agreement to which this Exhibit A is attached. "COMPANY" shall mean ExperNet Corporation, a California corporation. "FIRST STOCK INSTALLMENT" shall have the meaning specified in Section 1.1(b). "OPTION" shall have the meaning specified in Section 1.2(b). "PERSON" shall mean any individual, corporation, association, general partnership, limited partnership, venture, trust, association, firm, organization, company, business, entity, union, society, government (or political subdivision thereof) or governmental agency, authority or instrumentality. "PREFERRED STOCK PAYMENT" shall have the meaning specified in Section 1.2(a). "PURCHASED STOCK shall have the meaning specified in Section 1.1(b). "PURCHASER" shall mean Giga Information Group, Inc., a Delaware corporation. "SECOND CLOSING DATE" shall have the meaning set forth in Section 1.1(b). "SECOND STOCK INSTALLMENT" shall have the meaning set forth in Section 1.1(b). "SELLER" shall mean David Gilmour, an individual. "SERIES A PREFERRED STOCK PURCHASE AGREEMENT" shall mean that agreement to be entered into between Purchaser and the purchasers of Purchaser's Series A Preferred Stock, which agreement shall be substantially in the form attached hereto as Exhibit 6. "TRANSACTIONAL AGREEMENTS" shall mean this Agreement, the Employment Agreement and the Option. 15. AMENDMENT NUMBER ONE TO STOCK PURCHASE AGREEMENT THIS AMENDMENT NUMBER ONE TO STOCK PURCHASE AGREEMENT (this "Amendment") is entered into as of December 29, 1995 (the "Effective Date") by and between GIGA INFORMATION GROUP, INC., a Delaware corporation ("Purchaser"), and DAVID GILMOUR ("Seller") in order to amend the Stock Purchase Agreement dated as of July 6, 1995 (the "Purchase Agreement") between the Purchaser and the Seller. Certain capitalized terms used in this Amendment are defined on Exhibit A to the Purchase Agreement. WHEREAS the Purchaser and the Seller have entered into the Purchase Agreement to provide for the purchase by the Purchaser of all of the Common Stock of ExperNet, Inc. ("ExperNet") held by Seller, subject to certain conditions precedent; and WHEREAS the Purchaser purchased certain of such shares on July 6, 1995, and the Purchase Agreement provides for the purchase by the Purchaser of the remainder of such shares on a Second Closing Date; WHEREAS as there has existed between the Purchaser and the Seller a dispute as to (1) the required date of the Second Closing Date, and (2) whether certain conditions precedent to the Second Closing Date have been satisfied; and WHEREAS as the Purchaser and the Seller have agreed to settle such dispute by amending the terms of the Purchase Agreement as set forth herein; NOW THEREFORE, the Purchaser and the Seller agree as follows: 1. The third sentence of Section 1.1(b) of the Agreement is hereby amended to read in its entirety as follows: "As used in this Agreement, "Second Closing Date" shall mean December 29, 1995." 2. Section 1.2(b) of the Purchase Agreement is hereby amended to read in its entirety as follows: "(b) On the Second Closing Date, Purchaser shall deliver to Seller a Convertible Note in the form attached hereto as Exhibit A to --------- that certain Amendment Number One to this Agreement, dated December 29, 1995, in the principal amount of $400,000 (the "Convertible Note") 3. Section 1.6 of the Purchase Agreement is hereby amended to read in its entirety as follows: "1.6 EARN-OUT OF SECOND STOCK INSTALLMENT PAYMENT. The parties agree that 16. the entire consideration paid by Purchaser to Seller under Section l.2(b) shall constitute the purchase price for the purchase by Purchaser of the Second Stock Installment. The parties agree further that, if Seller voluntarily terminates his employment by ExperNet or Purchaser (and is not thereafter employed by Purchaser or an affiliate of Purchaser) prior to July 6, 1997, then Seller shall be obligated to repay to Purchaser one-half of any amount paid in cash by Purchaser to Seller as payment of principal of or interest on the Convertible Note. Prior to Purchaser's payment to Seller of any principal or interest under the Convertible Note before July 6,1997, Seller shall execute and deliver to Purchaser a promissory note in the form attached hereto as Exhibit E, evidencing --------- such obligation of Seller to repay. As set forth in detail in such promissory note, the note shall not bear any interest, shall be payable by Seller within 30 days after Seller voluntarily terminates his employment with ExperNet (and is not hired by Purchaser or its affiliate), and shall be forgiven by Purchaser upon earlier of the involuntary termination of Seller's employment or July 7,1997 provided that Seller remains employed by ExperNet, Purchaser or an affiliate of Purchaser on such date." 4. Section 3.7 Of the Purchase Agreement is hereby amended to read in its entirety as follows: "3.7 TAX TREATMENT. Purchaser shall not claim any amount of the purchase price for the Purchased Stock, set forth in Section 1.2 (except for the accrued interest in the Convertible Note), as a tax deduction from Purchaser's income." 5. Section 4 of the Purchase Agreement is hereby amended to read in its entirety as follows: "SECTION 4. CERTAIN SECURITIES MATTERS. Seller represents and warrants as follows: 4.1 Seller is aware that the Preferred Stock Payment, the Convertible Note and the shares of Preferred Stock issuable upon conversion of the Convertible Note (the "Conversion Shares") are being issued under an exemption from the registration requirements of the Securities Act; 4.2 Seller (i) is aware that because the issuance of the Preferred Stock Payment, the Convertible Note and the Conversion Shares have not been registered under the Securities Act, such securities must be held indefinitely unless their resale or other disposition is registered under the Securities Act or is exempt from the registration requirements of the Securities Act, and (ii) is aware of the provisions of Rule 144 promulgated under the Securities Act which permits limited resales of securities purchased in certain exempt transactions, subject to the satisfaction of various requirements; 4.3 Seller realizes that, if the requirements of Rule 144 are not satisfied, any 17. disposition by Seller of the Preferred Stock Payment, the Convertible Note or the Conversion Shares may require registration under the Securities Act, and that Purchaser is not under any obligation to take any action to register any of such Preferred Stock Payment, the Convertible Note or the Conversion Shares; 4.4 Seller is acquiring the Preferred Stock Payment, the Convertible Note and the Conversion Shares for investment and for Seller's own account and not with a view to, or for resale in connection with, any unregistered distribution thereof, and Seller has no present intention to sell or otherwise dispose of any interest in or risk related to the Preferred Stock Payment, the Convertible Note or the Conversion Shares; 4.5 Seller understands that the certificates representing the Preferred Stock Payment, the Convertible Note and the Conversion Shares may bear a legend identical or similar in effect to the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION." 4.6 Seller is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 4.7 Seller hereby agrees that during the one hundred eighty (180) day period following the effective date of a registration statement of Purchaser filed under the Securities Act in connection with Purchaser's initial public offering of Securities, Seller will not, to the extent requested by Purchaser and Purchaser's underwriters, sell, offer to sell, or otherwise transfer or dispose of any Common Stock of the Company held by it at any time during such period except Common Stock (if any) included in such registration. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such securities of Seller until the end of such period. Seller agrees to execute the form of such market stand-off agreement as may be reasonably requested by the underwriters." 6. Section 6.1 of the Purchase Agreement is hereby amended to read in its entirety as follows: "6.1 PURCHASER OPTION TO REPURCHASE SHARES. All of the shares of Purchaser's Series A Preferred Stock being acquired by Seller pursuant to Section l.2(a)(i) of this 18. Agreement and all of the Conversion Shares (hereinafter sometimes collectively referred to as the "Stock") shall be subject to the option set forth in this Article 6 (the "Purchase Option"). In the event at any time prior to the third anniversary of the date of this Agreement, (a) Seller shall voluntarily terminate employment by ExperNet Corporation (and shall not within ten days thereafter be employed by Purchaser or a parent or subsidiary of the Purchaser), or (b) Seller's employment shall terminate as a result of Seller's death or permanent disability, then Purchaser shall have the right, at any time within 30 days after the date of such termination of employment, to exercise the Purchase Option, which consists of the right to purchase from the Seller or his personal representative, as the case may be, at a purchase price (the "Option Price") per share (i) of the Series A Preferred Stock equal to the greater of (A) $2.00 per share or the fair market value of a share of the Common Stock of Purchaser at that time as determined in good faith by Purchaser's Board of Directors, or (ii) of the Series B Preferred Stock equal to the greater of $3.50 per share or the fair market value of a share of the Common Stock of Purchaser at that time as determined in good faith by Purchaser's Board of Directors up to but not exceeding the number of shares of Stock which have not vested under the provisions of Section 6.2 below, upon the terms hereinafter set forth." 7. Section 7.4 of the Purchase Agreement is hereby amended to read in its entirety as follows: "7.4 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given and duly delivered when received by the intended recipient at the following address (or at such other address as the intended recipient shall have specified in a written notice given to the other party hereto): if to Purchaser: --------------- Giga Information Group, Inc, One Longwater Circle Norwell, MA 02061 with a copy to: -------------- Brobeck, Phleger & Harrison One Market, Spear Street Tower San Francisco, California 94105 Attn: Thomas A. Bevilacqua, Esq. 19. if to Seller: ------------- David Gilmour 331 South El Monte Avenue LosAltos, CA 94022 with a copy to: -------------- Cooley Godward Castro Huddles & Tatum 5 Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306 Attn: Andrei M. Manoliu, Esq." 8. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 9. Purchaser agrees to close the purchase of the Second Stock Installment as of the Second Closing Date. IN WITNESS WHEREOF, Purchaser and Seller have caused this Amendment to be executed as of December 29, 1995. GIGA INFORMATION GROUP, INC. By: /s/ Kenneth Marshall ----------------------------------------- Kenneth Marshall President and Chief Operating Officer /s/ David Gilmour -------------------------------------------- DAVID GILMOUR 20. EX-10.2 8 PREFERRED STOCK PURCHASE AGREEMENT 6-JUL-1995 EXHIBIT 10.2 SERIES A PREFERRED STOCK PURCHASE AGREEMENT AMONG GIGA INFORMATION GROUP, INC. AND THE PURCHASERS SHOWN ON SCHEDULE 1 JULY 6, 1995 SERIES A PREFERRED STOCK PURCHASE AGREEMENT THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made as of July 6, 1995 by and among Giga Information Group, Inc., a Delaware corporation (the "COMPANY"), and the persons listed on Schedule I hereto (the "PURCHASERS"). THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Purchase and Sale of Series A Preferred Stock. --------------------------------------------- 1.1 Sale and Issuance of Series A Preferred Stock. --------------------------------------------- (a) The Company shall adopt and file with the Secretary of State of the State of Delaware on or before the Closing (as defined below) the Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit A (the "CERTIFICATE OF INCORPORATION"). (b) Subject to the terms and conditions of this Agreement, the Purchasers agree to purchase and the Company agrees to sell and issue to the Purchasers at the Closing (as defined below), an aggregate of up to 550,000 shares of the Company's Series A Preferred Stock (the "SHARES") at a purchase price of $5.00 per share, for an aggregate amount of up to $2,750,000 (the "PURCHASE PRICE"). The number of Shares and the Purchase Price to be paid by each Purchaser is shown on Schedule 1 hereto. The Purchase Price shall be paid by way of cash or other consideration as agreed upon by the parties. 1.2 Closing. ------- (a) The purchase and sale of the Shares shall take place at the offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, concurrently with the execution and delivery of this Agreement by the parties (the "CLOSING"), or at such other time and place as the Company and the Purchasers mutually agree upon, orally or in writing. At the Closing, the Company shall deliver to the Purchasers certificates representing the Shares being purchased against delivery to the Company by the Purchasers of the Purchase Price. 1.3 Additional Closings. The Company may, if the Company and any ------------------- Purchaser so agree, delay the sale of Shares to such Purchaser hereunder until July 31, 1995, and the Company may, in its sole discretion, issue Shares to additional purchasers at the Purchase Price specified above, at any time prior to such date. In such event, one or more further closings ("ADDITIONAL CLOSINGS") shall take place at such time and place as the Company and such additional purchasers agree, each such additional purchaser shall execute this Agreement and be included on Schedule 1 hereto, the Company's representations and warranties set forth in Section 2 shall be deemed to be restated solely with respect to such additional purchasers as of the Additional Closing, and each reference herein to "Purchaser" and "Shares" shall include such additional purchasers and the shares purchased by them. 2. Representations, and Warranties of the Company. The Company hereby ---------------------------------------------- represents and warrants to the Purchasers that: 2.1 Organization Good Standing and Qualification. The Company is a -------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties. 2.2 Capitalization. The authorized capital of the Company consists, or -------------- will consist, immediately prior to the Closing, of: (a) Preferred Stock. 1,000,000 shares of Series A Preferred Stock, 160,000 --------------- shares of which are outstanding prior to closing, the rights, privileges and preferences of which are as stated in the Certificate of Incorporation. (b) Common Stock. 5,000,000 shares of Common Stock, of which 1,050,000 ------------ shares will be issued and outstanding immediately prior to the Closing. (c) Except for the conversion privileges and other rights of the Shares issued pursuant to this Agreement and the rights of holders of options or proposed options to purchase up to 70,000 shares of Common Stock committed to employees or future employees of the Company, there are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock. Notwithstanding the foregoing, the Company's Board of Directors has approved option grants and Common Stock purchases by employees and consultants for approximately 804,500, in each case at a purchase price of exercise price of $2.00 per share. 2.3 Authorization. All corporate action on the part of the Company, and ------------- each of its officers, directors and shareholders, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and thereunder and the authorization, issuance and delivery of the Shares and the Common Stock issuable upon conversion of the Preferred Shares (collectively, the "SECURITIES") has been taken or will be taken prior to the Closing. The Agreements, when executed and delivered by the Company, shall constitute -2- valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms. 2.4 Valid Issuance of Securities. The Shares being issued to the ---------------------------- Purchasers hereunder, when issued, sold and delivered in accordance with the terms hereof for the consideration provided for herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Agreements and applicable state and federal securities laws. Subject to the provisions of Section 2.5 below, the Shares will be issued in compliance with all applicable state and federal securities laws. The Common Stock issuable upon conversion of the Shares has been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Certificate of Incorporation, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Agreements and applicable state and federal securities laws 2.5 Governmental Consents. No consent, approval, order or authorization --------------------- of or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for appropriate state securities filings and for the filing pursuant to Rule 503 of Regulation D promulgated under the Securities Act of 1933, as amended (the "SECURITIES ACT"), which filing will be effected in accordance with such rule. 2.6 Litigation. There is no material action, suit, proceeding or ---------- investigation pending or currently threatened against the Company. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. 2.7 Compliance with Other Instruments. The Company is not in violation or --------------------------------- default in any material respect of any provisions of its Certificate of Incorporation or Bylaws or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or of any provision of federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of the Agreements and the consummation of the transactions contemplated hereby or thereby will not result in any such violation or be in material conflict with or constitute, with or without the passage of time and giving of notice, either a material default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any material lien, charge or encumbrance upon any assets of the Company. -3- 2.8 Corporate Documents. The Certificate of Incorporation and Bylaws of ------------------- the Company are in the forms attached hereto as Exhibit A. 3. Representations and Warranties of the Purchasers. Each Purchaser, ------------------------------------------------ severally but not jointly, hereby represents and warrants to the Company that: 3.1 Authorization. He has full power and authority to enter into this ------------- Agreement, and this Agreement constitutes his valid and legally binding obligation, enforceable against the Purchaser in accordance with its terms. 3.2 Purchase Entirely for Own Account. This Agreement is made with the --------------------------------- Purchaser in reliance upon the Purchaser's representation to the Company, which by the Purchaser's execution of this Agreement the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. The Purchaser understands that this sale of the Securities has not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the Purchaser's investment intent and the accuracy of the Purchaser's representations as expressed herein. 3.3 Disclosure of Information. The Purchaser believes he has received all ------------------------- the information he considers necessary or appropriate for deciding whether to acquire the Securities. The Purchaser further represents that he has had an opportunity to ask questions and receive answers from the Company regarding the organization and operations of the Company and the terms and conditions of the offering of the Securities and has received and reviewed a copy of the "Giga Information Group, Inc. Summary of Business Plan and Proposal" as supplemented June 26, 1995. Purchaser acknowledges that (i) the Company is in its development or start-up stage; (ii) Purchaser's investment is highly speculative and risky and Purchaser could lose his entire investment; (iii) Purchaser is relying upon not only the representations and covenants contained in this Agreement but also his own investigation of the contemplated project; and (iv) it is difficult to estimate the likely revenues to be earned by the Company, and any specific financial projections provided by the Company are based only on the Company's reasonable assumptions regarding the Company's future results. -4- 3.4 Investment Experience. Purchaser has substantial experience in --------------------- evaluating and investing in private placement transactions and in the securities of companies in the development or startup stage, and Purchaser acknowledges that Purchaser is capable of evaluating the merits and risks of Purchaser's investment in the Company. Purchaser, by reason of his business or financial experience or the business or financial experience of his professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, has the capacity to protect his own interests in connection with the purchase of the Securities hereunder. Purchaser acknowledges that he can bear the economic risk and complete loss of his investment. 3.5 Restricted Securities. Purchaser understands that the Securities are --------------------- characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Securities may be resold without registration under the Securities Act only in certain limited circumstances. In this respect, the Purchaser represents that he is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and otherwise by the Securities Act. 3.6 Further Limitations on Disposition. Without in any way limiting the ---------------------------------- representations set forth above, the Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until: (a) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement, or (b) (i) The Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if reasonably requested by the Company, the Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act. 3.7 Legends. It is understood that the Securities, and any securities ------- issued in respect thereof or exchange therefor, may bear one or all of the following legends: (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE -5- COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT." (b) Any legend required by the laws of the State of Delaware. (c) Any legend required by the Blue Sky laws of any other state to the extent such laws are applicable to the shares represented by the certificate so legended. 3.8 Accredited Investor. Purchaser is an accredited investor as defined ------------------- in Rule 501(a) of Regulation D promulgated under the Securities Act. 4. Conditions of the Purchasers' Obligations at Closing. The obligations ---------------------------------------------------- of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions: 4.1 Representations and Warranties. The representations and warranties of ------------------------------ the Company contained in Section 2 shall be true on the Closing with the same effect as though such representations and warranties had been made on and as of such date. 4.2 Performance. The Company shall have performed and complied with all ----------- agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 4.3 Compliance Certificate. At the Closing, the President of the Company ---------------------- shall deliver to the Purchasers a certificate certifying that the conditions specified in Sections 5.1 and 5.2 have been fulfilled. 4.4 Proceedings and Documents. At the Closing, all corporate and other ------------------------- proceedings in connection with the transactions contemplated under this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser, and they shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request. 5. Conditions of the Company's Obligations at Closing. The obligations of -------------------------------------------------- the Company to each Purchaser under this Agreement are subject to the fulfillment. on or before each respective Closing, of each of the following conditions: 5.1 Representations and Warranties. The representations and warranties of ------------------------------ the Purchaser contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of such date. -6- 5.2 Payment of Purchase Price. Each Purchaser shall have delivered the ------------------------- purchase price for such Purchaser's respective Shares specified in Section 1.1 and shown on Schedule 1 hereto. 6. Miscellaneous. ------------- 6.1 Survival of Warranties. Except as otherwise provided herein, the ---------------------- warranties, representations and covenants of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the Closing. 6.2 Transfer; Successors and Assigns. The terms and conditions of this -------------------------------- Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 6.3 Governing Law. This Agreement shall be governed by and construed ------------- under the laws of the State of Delaware in the United States of America. 6.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 6.5 Titles and Subtitles. The titles and subtitles used in this Agreement -------------------- are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.6 Notices. ------- (a) All notices, requests, demands and other communications under this Agreement or in connection herewith shall be given to or made upon as follows: If to a Purchaser: To the address shown next to such Purchaser's name on Schedule 1 hereto. If to the Company: Giga Information Group, Inc. c/o Gideon Gartner BIS Strategic Decisions, Inc. One Longwater Circle Norwell, MA 02061 -7- with a copy to: Venture Law Group 2800 Sand Hill Road Menlo Park, CA 94025 Attn: Craig Johnson, Esq. (b) All notices, requests, demands and other communications given or made in accordance with the provisions of this Agreement shall be in writing, and shall be sent by airmail, return receipt requested, or by telex or telecopy (facsimile) with confirmation of receipt, and shall be deemed to be given or made when receipt is so confirmed. (c) Any party may, by written notice to the other, alter its address or respondent, and such notice shall be considered to have been given ten (10) days after the airmailing, telexing or telecopying thereof. 6.7 Finder's Fee. Each party represents that it neither is nor will be ------------ obligated for any finder's fee or commission in connection with this transaction. Each party agrees to indemnify and hold harmless the other party from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the first party or any of its officers, employees or representatives is responsible. 6.8 Expenses. The Company and each Purchaser shall bear their own -------- respective expenses incurred with respect to this Agreement and the transactions contemplated hereby. 6.9 Amendments and Waivers. Any term of this Agreement may be amended and ---------------------- the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section shall be binding upon each transferee of any Securities, each future holder of all such Securities, and the Company. 6.10 Severability. If one or more provisions of this Agreement are held ------------ to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.11 Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the parties hereto pertaining to the subject matter hereof, and any and all other prior written or oral agreements existing between the parties hereto are expressly canceled. -8- 6.12 "Market Stand-Off" Agreement. Each Purchaser hereby agrees that ---------------- ---------- during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act in connection with the Company's initial public offering of Securities, it shall not, to the extent requested by the Company and the Company's underwriter, sell, offer to sell, or otherwise transfer or dispose of any Common Stock of the Company held by it at any time during such period except Common Stock (if any) included in such registration. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of the Purchaser (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Each Purchaser agrees to execute the form of such market stand-off agreement as may be reasonably requested by the underwriters. COMPANY: GIGA INFORMATION GROUP, INC. PURCHASER: By:/s/Gideon Gartner /s/Neill H. Brownstein ------------------------------ ------------------------------ Title: CEO --------------------------- PURCHASER: /s/Richard J. Crandall Trust ------------------------------ UAD June 13, 1986 Richard J. Crandall, Trustee PURCHASER: /s/M E Faherty, General PTR. ------------------------------ Faherty Properties Co., Ltd. PURCHASER: /s/Bert Fingerhut ------------------------------ PURCHASER: /s/Gideon Gartner ------------------------------ PURCHASER: /s/David Gilmour ------------------------------ PURCHASER: /s/Seymour Goldblatt ------------------------------ Yale University Endowment S Squared Technology for Yale University Endowment PURCHASER: /s/Bernard Goldstein ------------------------------ PURCHASER: /s/George J. W. Goodman ------------------------------ PURCHASER: /s/Stewart H. Greenfield ------------------------------ PURCHASER: /s/Michael J. Kolesar ------------------------------ PURCHASER: /s/Stephen R. Levy ------------------------------ PURCHASER: /s/Thomas W. Malone ------------------------------ PURCHASER: /s/James D. Robinson III ------------------------------ PURCHASER: /s/Hugh M. Tietjen ------------------------------ PURCHASER: /s/Cornelius T. Ryan ------------------------------ PURCHASER: /s/Arno Schefler ------------------------------ PURCHASER: /s/Scott M. Smith ------------------------------ PURCHASER: /s/Peter A. Wright ------------------------------ -9- SCHEDULE 1 SCHEDULE OF PURCHASERS
PURCHASERS SHARES PURCHASED PURCHASE PRICE - --------------------------------------------------------------------- Neill H. Brownstein 60,000 $ 300,000.00 536 West Crescent Drive Palo Alto, CA 94301 - --------------------------------------------------------------------- Richard L. Crandall Trust 15,000 $ 75,000.00 U/A/D 6/13/86, Richard L. Crandall, Trustee 2129 Devonshire Road Ann Arbor, MI 48104 - --------------------------------------------------------------------- Faherty Properties Co., Ltd. 10,000 $ 50,000.00 6133 Higate Lane Dallas, TX 75214 - --------------------------------------------------------------------- Bert Fingerhut 10,000 $ 50,000.00 1520 Silver King Drive Aspen, CO 81611 - --------------------------------------------------------------------- Gideon Gartner 80,000 $ 400,000.00/1/ 64 Bermuda Road 60,000 $ 300,000.00 Westport, CT 06880 - --------------------------------------------------------------------- David Gilmour 80,000 $ 400,000.00/1/ c/o ExperNet 350 Second Street Los Altos, CA 94022 - --------------------------------------------------------------------- Yale University 48,000 $ 240,000.00 c/o Seymour L. Goldblatt S Squared Technology Corp. 515 Madison Avenue New York, NY 10022-5474 - --------------------------------------------------------------------- Bernard Goldstein 20,000 $ 100,000.00 Broadview Associates 1 Bridge Plaza Fort Lee, NJ 07024 - ---------------------------------------------------------------------
-10- George J.W. Goodman 5,000 $ 25,000.00 45 W 45th Street, 15th Floor New York, NY 10036 - ------------------------------------------------------------------ Stewart H. Greenfield 40,000 $ 200,000.00 279 Sturges Highway Westport, CT 06880 - ------------------------------------------------------------------ Michael J. Kolesar 5,000 $ 25,000.00 35 Park Avenue Ardsley, NY 10502 - ------------------------------------------------------------------ Stephen R. Levy 20,000 $ 100,000.00 Bolt Beranek & Newman, Inc. 150 Cambridge Park Drive Cambridge, MA 02140 - ------------------------------------------------------------------ Thomas W. Malone 5,000 $ 25,000.00 50 Memorial Drive E53-333 Cambridge, MA 02142 - ------------------------------------------------------------------ James R. Robinson III 10,000 $ 50,000.00 RRE Investors 126 E. 56th Street, 22nd Floor New York, NY 10022 - ------------------------------------------------------------------ Rutherford Group 20,000 $ 100,000.00 Attn: Hugh M. Tietjen 5514 Calumet Avenue La Jolla, CA 92037 - ------------------------------------------------------------------ Cornelius T. Ryan 10,000 $ 50,000.00 315 Post Road West Westport, CT 06880 - ------------------------------------------------------------------ Arno D. Schefler 10,000 $ 50,000.00 2049 McLain Flats Road Aspen, CO 81611 - ------------------------------------------------------------------ Scott M. Smith 5,000 $ 25,000.00 Camelot Capital 10 Glenville Street Greenwich, CT 06831 - ------------------------------------------------------------------
-11- Peter A. Wright 12,000 $ 60,000.00 P.A.W. Partners, L.P. 10 Glenville Street Greenwich, CT 06831 - ------------------------------------------------------------------ ================ ============== - ------------------------------------------------------------------ 525,000 $ 1,825,000.00 - ------------------------------------------------------------------
-12- EX-10.3 9 PREFERRED STOCK PURCHASE AGREEMENT 13-NOV-1995 EXHIBIT 10.3 GIGA INFORMATION GROUP, INC. SERIES B PREFERRED STOCK PURCHASE AGREEMENT NOVEMBER 13, 1995 TABLE OF CONTENTS -----------------
PAGE ----- 1. AGREEMENT TO PURCHASE AND SELL STOCK ........................ 1 1.1 Authorization .......................................... 1 1.2 Agreement to Purchase and Sell ......................... 1 2. CLOSING ..................................................... 2 2.1 The Closing ........................................... 2 2.2 Additional Closing .................................... 2 (a) Conditions of Additional Closing ................ 2 (b) Amendments ...................................... 2 (c) Status of New Investors ......................... 2 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 3 3.1 Organization, Good Standing and Qualification ......... 3 3.2 Authorization ......................................... 3 3.3 Valid Issuance of Preferred and Common Stock .......... 4 3.4 Capitalization ........................................ 4 (a) Preferred Stock ................................. 4 (b) Common Stock .................................... 4 (c) Options, Warrants, Reserved Shares .............. 4 (d) Outstanding Security Holders .................... 5 (e) Valid Issuance .................................. 5 3.5 Subsidiaries .......................................... 5 3.6 Governmental Consents ................................. 6 3.7 Contracts and Other Commitments ....................... 6 3.8 Litigation ............................................ 6 3.9 Invention Assignment and Confidentiality Agreement .... 6 3.10 Proprietary Assets .................................... 7 3.11 Compliance with Law and Charter Documents ............. 7 3.12 Registration Rights ................................... 7 3.13 Financial Statements .................................. 7 3.14 Disclosure ............................................ 8 3.15 Certain Actions ....................................... 8 3.16 Activities Since Balance Sheet Date ................... 8 3.17 Employee Benefit Plans ................................ 8 3.18 Tax Returns, Payments and Elections ................... 9 3.19 Related Party Transactions ............................ 9
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PAGE 4. REPRESENTATIONS WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS ........................................ 9 4.1 Authorization ............................................ 9 4.2 Purchase for Own Account ................................. 9 4.3 Disclosure of Information ................................ 10 4.4 Investment Experience .................................... 10 4.5 Accredited Investor Status ............................... 10 4.6 Restricted Securities .................................... 10 4.7 Further limitations on Disposition ....................... 11 4.8 Legends .................................................. 11 4.9 Waiver of Conflicts ...................................... 12 5. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING ................ 12 5.1 Representations and Warranties True ...................... 13 5.2 Performance .............................................. 13 5.3 Restated Articles Effective .............................. 13 5.4 Compliance Certificate ................................... 13 5.5 Securities Exemptions .................................... 13 5.6 Proceedings and Documents ................................ 13 5.7 No Material Change ....................................... 13 5.8 Registration Rights Agreement; Voting Agreement; Co-Sale Agreement ................................................ 13 5.9 Opinion of Counsel ....................................... 14 5.10 Directors ................................................ 14 5.11 Minimum Shares Purchased ................................. 14 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING ............. 14 6.1 Representations and Warranties ........................... 14 6.2 Payment of Purchase Price ................................ 14 6.3 Restated Certificate Effective ........................... 14 6.4 Securities Exemptions .................................... 14 6.5 Registration Rights Agreement ............................ 14 6.6 Minimum Shares Purchased ................................. 15 7. COVENANTS OF THE COMPANY ....................................... 15 7.1 Delivery of Financial Statements ......................... 15 7.2 Inspection ............................................... 16 8. MISCELLANEOUS .................................................. 16
ii TABLE OF CONTENTS (continued)
Page ---- 8.1 Survival of Warranties and Covenants ............. 16 8.2 Successors and Assigns ........................... 16 8.3 Governing Law .................................... 17 8.4 Counterparts ..................................... 17 8.5 Headings ......................................... 17 8.6 Notices .......................................... 17 8.7 Expenses ......................................... 17 8.8 No Finder's Fees ................................. 18 8.9 Amendments and Waivers ........................... 18 8.10 Severability ..................................... 18 8.11 Entire Agreement ................................. 18 8.12 Further Assurances ............................... 18
Exhibit A - Schedule of Investors Exhibit B - Amended and Restated Certificate of Incorporation Exhibit C - Schedule of Exceptions Exhibit D - List of Stockholders Exhibit E - List of Subsidiaries Exhibit F - Non Competition Agreement Exhibit G - Registration Rights Agreement Exhibit H - Voting Agreement Exhibit I - Co-Sale Agreement Exhibit J - Opinion of Brobeck, Phleger & Harrison iii GIGA INFORMATION GROUP, INC. SERIES B PREFERRED STOCK PURCHASE AGREEMENT This SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into as of November 13, 1995 by and among Giga Information Group, Inc., a Delaware corporation (the "COMPANY"), and the parties listed on the Schedule of Investors attached to this Agreement as Exhibit A (each --------- hereinafter individually referred to as an "Investor" and collectively referred to as the "INVESTORS"). RECITAL A. The Company desires to sell to the Investors, and the Investors desire to purchase from the Company, shares of the Company's Series B Preferred Stock on the terms and conditions set forth in this Agreement. NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. AGREEMENT TO PURCHASE AND SELL STOCK. ------------------------------------- 1.1 Authorization. As of the Closing (as defined below) the Company ------------- will have authorized the issuance, pursuant to the terms and conditions of this Agreement, of the shares of the Company's Series B Preferred Stock, $.001 par value (the "SERIES B STOCK") to be sold by it pursuant to this Agreement, having the rights, preferences, privileges and restrictions set forth in the Amended and Restated Certificate of Incorporation of the Company attached to this Agreement as Exhibit B (the "RESTATED CERTIFICATE"). --------- 1.2 Agreement to Purchase and Sell. The Company agrees to sell to ------------------------------ each Investor at the Closing, and each Investor agrees, severally and not jointly, to purchase from the Company at the Closing, the number of shares of Series B Stock set forth beside such Investor's name on Exhibit A at a price of --------- $3.50 per share. The shares of Series B Stock purchased and sold pursuant to this Agreement will be collectively hereinafter referred to as the "PURCHASED SHARES" and the shares of the Company's Common Stock, $.001 par value per share, issuable upon conversion of the Purchased Shares will be hereinafter referred to as the "CONVERSION SHARES". 1 2. CLOSING. ------- 2.1 The Closing. The purchase and sale of the Purchased Shares will ----------- take place at the offices of Brobeck, Phleger & Harrison, Spear Street Tower, One Market, San Francisco, California 94105, at 10:00 a.m. Pacific Time, November 13, 1995 or at such other time and place as the Company and Investors who have agreed to purchase a majority of the Purchased Shares listed on Exhibit ------- A mutually agree (which time and place are referred to in this Agreement as the "CLOSING"). At the Closing, the Company will deliver to each Investor a certificate representing the number of Purchased Shares that such Investor has agreed to purchase hereunder as shown on Exhibit A, and each Investor shall pay --------- to the Company the full purchase price of such Purchased Shares, by (i) a check payable to the Company's order, or (ii) wire transfer of funds to the Company. 2.2 Additional Closing. ------------------ (a) Conditions of Additional Closing. At any time or times within -------------------------------- thirty (30) days immediately following the Closing, the Company may, at one or more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or permission of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that number of shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock less the number of shares of Series B Stock actually issued and sold by the Company prior to such Additional Closing pursuant to this Agreement and upon conversion of the Convertible Note (as defined in Section 3.4(c)). New Investors may include persons or entities who are already Investors under this Agreement. (b) Amendments. The Company and the New Investors purchasing Series B ---------- Stock at any Additional Closing will execute counterpart signature pages to this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co- Sale Agreement (each as defined in Section 5.8), and such New Investors will, upon delivery to the Company of such signature pages, become parties to, and bound by, this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-Sale Agreement, each to the same extent as if they had been Investors at the Closing. Immediately after any Additional Closing, Exhibit A to --------- this Agreement will be amended by the Company to list the New Investors purchasing shares of Series B Stock hereunder and the number of shares of Series B Stock purchased by each New Investor under this Agreement at the Additional Closing. (c) Status of New Investors. Upon the completion of the Additional ----------------------- Closing as provided in this Section 2, each New Investor will be deemed to be an "INVESTOR" for all purposes of this Agreement, the Registration Rights 2 Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of the Voting Agreement. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby --------------------------------------------- represents and warrants to each Investor that, except as set forth in the Schedule of Exceptions ("SCHEDULE OF EXCEPTIONS") attached to this Agreement as Exhibit C the statements in the following paragraphs of this Section 3 are all - --------- true and correct in all material respects: 3.1 Organization, Good Standing and Qualification. The Company and ---------------------------------------------- each Significant Subsidiary (as defined below) is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted, and, in the case of the Company, to execute and deliver this Agreement, the Registration Rights Agreement and the Voting Agreement, to issue and sell the Series B Stock, to issue the Conversion Shares, and to carry out the provisions of this Agreement, the Registration Rights Agreement, the Voting Agreement and the Restated Certificate. The Company and each Significant Subsidiary are duly qualified to transact business and are in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the business, properties, financial condition or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). As used in this Agreement, the term "Significant Subsidiary" shall have the meaning set forth in Regulation S-X under the Securities Act of 1933, as amended (the "Securities Act"), except that all references therein to 10% shall be deemed to refer to 20%; provided, that the term "Significant Subsidiary" shall include ExperNet, Inc. 3.2 Authorization. All corporate action on the part of the Company ------------- and its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Agreement, the Registration Rights Agreement and the Voting Agreement, the performance of all obligations of the Company hereunder and thereunder, as the case may be, and the authorization, issuance, sale, and delivery of the Purchased Shares and the authorization and registration for issuance of Conversion Shares has been duly taken or will be taken prior to the closing or the applicable Additional Closing, as the case may be, and this Agreement, the Registration Rights Agreement and the Voting Agreement constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable federal or state securities laws. 3 3.3 Valid Issuance of Preferred and Common Stock. -------------------------------------------- (a) The Purchased Shares, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement, the Registration Rights Agreement and the Voting Agreement and under applicable state and federal securities laws. The Conversion Shares have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Restated Certificate, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on transfer other than restrictions on transfer under this Agreement, the Registration Rights Agreement and the Voting Agreement, and under applicable state and federal securities laws. (b) Based in part on the representation made by the Investors in Section 4 hereof, the Purchased Shares and (assuming no change in applicable law and no unlawful distribution of Purchased Shares by Investors or other parties) the Conversion Shares will be issued in full compliance with applicable U.S. state and federal securities laws (provided that with respect to the Conversion -------- ---- Shares, no commission or other remuneration is paid or given, directly or indirectly, for soliciting the issuance of Conversion Shares upon the conversion of the Purchased Shares and no additional consideration is paid for the Conversion Shares other than surrender of the applicable Purchased Shares upon conversion thereof in accordance with the Restated Certificate). 3.4 Capitalization. Immediately prior to the Closing the -------------- capitalization of the Company will consist of the following: (a) Preferred Stock. A total of Ten Million (10,000,000) authorized --------------- shares of preferred stock, $.001 par value per share (the "PREFERRED STOCK"), consisting of Six Hundred Fifty Thousand (650,000) shares designated as Series A Preferred Stock (the "SERIES A STOCK"), not more than 590,000 of which will be issued or outstanding and Six Million (6,000,000) shares designated as Series B Preferred Stock ("SERIES B STOCK"), none of which will be issued and outstanding. The rights of the Series A Stock are, and the rights, preferences and privileges of the Series B Stock will be, as stated in the Restated Certificate and as provided by law. (b) Common Stock. A total of Twenty-Eight Million (28,000,000) ------------ authorized shares of common stock, $.001 par value per share (the "COMMON STOCK"), of which not more than 6,172,000 shares will be issued and outstanding. (c) Options, Warrants, Reserved Shares. Except for: (i) the ---------------------------------- conversion privileges of the Series A Stock and Series B Stock; (ii) the Five Million 4 (5,000,000) shares of Common Stock reserved for issuance under the Company's 1995 Stock Option/Stock Issuance Plan (of which Two Hundred Thousand (200,000) shares have been issued and options have been granted to purchase an additional One Million Seven Hundred Thirty-Two Thousand (1,732,000) shares); (iii) options to purchase Seven Hundred Eighty Thousand (780,000) shares granted under contractual arrangements and not under such plan; (iv) a Convertible Promissory Note of the Company with an aggregate principal amount of $2,000,000 which is convertible into Five Hundred Seventy-One Thousand Four Hundred Twenty-Eight (571,428) shares of the Company's Series B Stock at the Closing (the "CONVERTIBLE NOTE"); (v) warrants to purchase an aggregate of Two Hundred Eighty-Five Thousand Seven Hundred Fourteen (285,714) shares of Series B Stock issued in connection with the Convertible Note at a price equal to 66-2/3% of the purchase price for the Purchased Shares; (vi) a warrant to purchase 100,000 shares of Series B Preferred Stock to be issued to Montgomery Securities in connection with its services as placement agent; (vii) a convertible note dated April 5, 1995 payable to Friday Holdings, L.P.; and (viii) up to 160,000 shares of Common Stock issuable to David Gilmour pursuant to the terms of the Stock Purchase Agreement dated July 6, 1995, between the Company and Mr. Gilmour; there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company's capital stock. Apart from the exceptions noted in this Section 3.4(c), and except for rights of repurchase and rights of first refusal held by the Company to repurchase shares of its stock issued to founders of the Company, no shares of the Company's outstanding capital stock, or stock issuable upon exercise or exchange of any outstanding options, warrants or rights, or other stock issuable by the Company, are subject to any preemptive rights or rights of first refusal or other rights to purchase such stock (whether in favor of the Company or any other person), pursuant to any agreement or commitment of the Company, and, to the Company's knowledge, no officer, director or holder of the Company's Common Stock is a party to any voting agreement or voting trust other than the Voting Agreement. (d) Outstanding Security Holders. Exhibit C attached hereto contains ---------------------------- --------- a listing of all holders of the outstanding Common Stock and Series A Stock immediately prior to the Closing. (e) Valid Issuance. The outstanding Series A Preferred Stock and -------------- Common Stock referred to in Section 3.4(a) and (b) are duly and validly issued, fully paid and nonassessable. 3.5 Subsidiaries. Exhibit E attached hereto contains a listing of ------------ --------- all of the Company's subsidiaries. The Company beneficially owns or has the right to acquire all of the outstanding capital stock of each of its subsidiaries. 5 3.6 Governmental Consents. No consent, approval, qualification, --------------------- order or authorization of, or filing with, any local, state, or federal governmental authority is required on the part of the Company in connection with the Company's valid execution, delivery, or performance of this Agreement, the offer, sale or issuance of the Series B Stock by the Company or the issuance of Common Stock upon conversion of the Series B Preferred Stock, except (i) the filing of the Restated Certificate with the Secretary of State of the State of Delaware, and (ii) such filings as have been or will be made prior to the Closing, except that any notices of sale required to be filed with the Securities and Exchange Commission under Regulation D of the Securities Act, or such post-closing filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor. 3.7 Contracts and Other Commitments. Neither the Company nor any of ------------------------------- its Significant Subsidiaries has any material contract, agreement, lease, commitment or proposed transaction, written or oral, absolute or contingent, other than (i) contracts for the purchase of supplies and services that do not involve more than $100,000, and do not extend for more than one (1) year beyond the date hereof, (ii) contracts entered into in the ordinary course of business, (iii) contracts terminable at will by the Company on no more than thirty (30) days, notice without cost or liability to the Company which are not material to the conduct of the Company's business, (iv) contracts described in the Placement Memorandum (as defined in Section 3.13 and leases of offices and facilities identified therein), and (v) employment or consulting agreements with persons who are not directors or executive officers of the Company. Neither the Company nor any of its Significant Subsidiaries has a collective bargaining agreement with any of its United States employees. 3.8 Litigation. There is no action, suit, proceeding, claim, ---------- arbitration or investigation ("ACTION") pending (or, to the best of the Company's knowledge, currently threatened) against the Company or any of its subsidiaries, or their activities, properties or assets or, to the best of the Company's knowledge, against any officer or director of the Company or its subsidiaries in connection with such officer's, director's or employee's relationship with, or actions taken on behalf of, the Company or any of its subsidiaries or questioning the validity of this Agreement or any action taken or to be taken in connection herewith that could reasonably be expected to have a Material Adverse Effect. The Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality and there is no Action by the Company currently pending or which the Company has threatened, and intends, to initiate. 3.9 Invention Assignment and Confidentiality Agreement. Each -------------------------------------------------- employee and contractor of the Company, BIS Strategic Decisions, Inc. ("BIS") and ExperNet, Inc. ("ExperNet") who is engaged in information technology research and analysis, or software development, has entered into and executed an agreement 6 containing confidentiality obligations in the form attached to this Agreement as Exhibit F or an agreement containing substantially similar terms, or terms no - --------- less favorable to the Company. 3.10 Proprietary Assets. The Company and its Significant Subsidiaries ------------------ have full title and ownership of, or are duly licensed under or otherwise authorized to use, all patents, patent applications, trademarks, service marks, trade names, copyrights, trade secrets, confidential and proprietary information, designs and proprietary rights necessary to enable them to carry on their business as now conducted (the "PROPRIETARY ASSETS") and have or expect in good faith to be able to obtain or create the Proprietary Assets necessary to carry on their business as proposed to be conducted, without, to the best of their knowledge, any conflict with or infringement of the rights of others, where the same would have a Material Adverse Effect. Neither the Company nor, to its knowledge, any of its subsidiaries, has granted any options, licenses or agreements of any kind giving any third party any exclusive rights to any material Proprietary Assets of the Company. The Company has not received any communications alleging that the Company has violated or, by conducting its business as now conducted and as proposed to be conducted, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. 3.11 Compliance with Law and Charter Documents. Neither the Company ----------------------------------------- nor any of its Significant Subsidiaries is in violation or default of any provisions of their Certificate or Articles of Incorporation or Bylaws, both as amended (or foreign equivalents thereof), and to the best of the Company's knowledge, except for any violations that would have no Material Adverse Effect, the Company and its Significant Subsidiaries are in compliance with all material indentures, instruments or agreements by which it is bound, all applicable statutes, laws, regulations and executive orders of the United States of America and all states, foreign countries or other governmental bodies and agencies having jurisdiction over their business or properties. 3.12 Registration Rights. Except as provided in the Registration ------------------- Rights Agreement, the Company has not granted or agreed to grant to any person or entity any rights (including piggyback registration rights) to have any securities of the Company registered with the United States Securities and Exchange Commission ("SEC") or any other governmental authority. 3.13 Financial Statements. The statements of operations and balance -------------------- sheets of BIS as of December 31, 1994 and June 30, 1995 and for the twelve (12) and six (6) month periods then ended (the "Financial Statements"), of BIS, included in the Private Placement Memorandum dated September 15, 1995 and previously delivered to the Investors (the "Placement Memorandum") are in accordance with the books and records of BIS and fairly set forth the consolidated operating results and financial 7 condition of BIS for the twelve-month and six-month periods then ended and as of December 31, 1994 and June 30, 1995, respectively, on the basis described in the Placement Memorandum. The Financial Statements as of, and for the twelve months ended, December 31, 1994 have been prepared in accordance with generally accepted accounting principles ("GAAP"). The statement of operations data (shown on a pro forma basis) and balance sheet data (shown on an actual basis) of the Company, BIS and ExperNet as of June 30, 1995 and for the six-month period then ended, included in the Placement Memorandum, are in accordance with the books and records of the Company, BIS and ExperNet. Except as set forth or reserved for in the Financial Statements or as disclosed in the Placement Memorandum, the Company has no material liabilities, other than (i) liabilities incurred in the ordinary course of business subsequent to June 30, 1995, (ii) liabilities not in excess of $100,000 in the aggregate, and (iii) liabilities incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements. 3.14 Disclosure. This Agreement and the statements made in the ---------- Placement Memorandum, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements herein or therein, under the circumstances under which they were made, not misleading when taken as a whole; provided, that with respect to the -------- ---- projections, forecasts and expressions of opinion included therein and the statements set forth therein under the caption "Investment Considerations," the Company represents only that such projections, forecasts, expressions of opinion and statements were made in good faith and that the Company believes there is a reasonable basis therefor. 3.15 Certain Actions. Since June 30, 1995, (i) the Company has not --------------- declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock and (ii) except as disclosed in the Placement Memorandum, neither the Company nor any Significant Subsidiary has (A) sold, exchanged or otherwise disposed of any material assets or rights other than in the ordinary course of business, or (B) entered into any material transactions with any of its officers, directors or employees or any entity controlled by any of such individuals. 3.16 Activities Since Balance Sheet Date. To the best of the ----------------------------------- Company's knowledge, since June 30, 1995, there has not been any event or condition of any type that has had or would reasonably be expected to have a Material Adverse Effect. 3.17 Employee Benefit Plans. None of the Company, BIS or ExperNet has ---------------------- any outstanding liabilities or accrued and unpaid funding obligations with respect to any Employee Benefit Plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974). 8 3.18 Tax Returns. Payments and Elections. The Company and each ----------------------------------- Significant Subsidiary has filed all United States federal and, to its knowledge, state tax returns and reports as required by law, and, to its knowledge, these returns and reports are true and correct in all material respects, except in each case where the same would not have a Material Adverse Effect or where adequate reserves therefor have been reflected in the Financial Statements. The Company and its Significant Subsidiaries have not been notified, nor do they otherwise have knowledge that, they are currently the subject of any ongoing audit by federal or state tax authorization. The Company has paid all taxes and other assessments shown on such returns as due, except those contested by it in good faith. 3.19 Related Party Transactions. Except as described in the -------------------------- Placement Memorandum, (i) no executive officer or director of the Company or member of his or her immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them; and (ii) to the best of the Company's knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a material business relationship, or any firm or corporation that competes with the Company, except through ownership of stock in publicly traded companies. 4. REPRESENTATIONS WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each -------------------------------------------------------------- Investor hereby represents and warrants to, and agrees with, the Company, severally and not jointly, that: 4.1 Authorization. This Agreement, the Voting Agreement and the ------------- Registration Rights Agreement constitute such Investor's valid and legally binding obligations, enforceable in accordance with their respective terms except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Each Investor represents that such Investor has full power and authority to enter into this Agreement, the Registration Rights Agreement and the Voting Agreement. 4.2 Purchase for Own Account. This Agreement is made with each ------------------------ Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Series B Stock to be purchased by such Investor and the Conversion Shares issuable upon conversion thereof are being acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, each Investor further represents that such Investor does not have any 9 contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Series B Stock and/or the Conversion Shares. 4.3 Disclosure of Information. Such Investor has received or has had ------------------------- full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Purchased Shares to be purchased by such Investor under this Agreement. Such Investor further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Purchased Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Investor or to which such Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3. 4.4 Investment Experience. Such Investor understands and --------------------- acknowledges that the purchase of the Purchased Shares involves substantial risk. Such Investor: (i) has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor's investment in the Purchased Shares and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting its own interests in connection with this investment and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Investor to be aware of the character, business acumen and financial circumstances of such persons. 4.5 Accredited Investor Status. Unless otherwise expressly indicated -------------------------- on Exhibit A to this Agreement, such Investor is an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act. 4.6 Restricted Securities. Each Investor understands that the --------------------- Purchased Shares and the Conversion Shares are characterized as "restricted securities" under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Securities Act and applicable regulations thereunder such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, such Investor represents that such Investor is familiar with Rule 144 of the U.S. Securities and Exchange Commission, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Such Investor understands that the Company is under no obligation to register any of the securities sold hereunder (or any securities issuable upon conversion thereof) except 10 as provided in the Registration Rights Agreement. Such Investor understands that no public market now exists for any of the Purchased Shares or the Conversion Shares and that it is uncertain whether a public market will ever exist for the Purchased Shares or the Conversion Shares. 4.7 Further Limitations on Disposition. Without in any way limiting ----------------------------------- the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Purchased Shares or the Conversion Shares unless and until: (a) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (b) (i) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) such Investor shall have furnished the Company, at the expense of such Investor or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such securities under the 1933 Act. Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be required: (i) for any transfer of any Purchased Shares or Conversion Shares in compliance with SEC Rule 144 or Rule 144A, or (ii) for any transfer of Purchased Shares or Conversion Shares by an Investor that is a partnership or a corporation to (A) a partner of such partnership or shareholder of such corporation, (B) a retired partner of such partnership who retires after the date hereof, (C) the estate of any such partner or shareholder, or (iii) for the transfer by gift, will or interstate succession by any Investor to his or her spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided that in each of the -------- foregoing cases the transferee agrees in writing to be subject to the terms of this Section 4 (other than Section 4.5) to the same extent as if the transferee were an original Investor hereunder. 4.8 Legends. It is understood that the certificates evidencing the ------- Purchased Shares and the Conversion Shares will bear the legends set forth below: (a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. 11 INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (b) Any legend required by the laws of the State of Delaware or any other state securities laws, including a legend substantially in the form of the following: THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE INTO SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER AT ANY TIME PRIOR TO AUTOMATIC CONVERSION THEREOF, AND (2) AUTOMATICALLY CONVERT INTO COMMON STOCK OF THE COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN REQUIREMENTS OR UPON CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED STOCK; ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE COMPANY'S CERTIFICATE OF INCORPORATION. A COPY OF SUCH CERTIFICATE OF INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE. The legend set forth in (a) above shall be removed by the Company from any certificate evidencing Purchased Shares or Conversion Shares upon delivery to the Company of an opinion by counsel, reasonably satisfactory to the Company, that a registration statement under the 1933 Act is at that time in effect with respect to the legended security or that such security can be freely transferred in a public sale without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Purchased Shares or Conversion Shares. 4.9 Waiver of Conflicts. Each Investor acknowledges that Morrison & ------------------- Foerster has represented other Investors in connection with transactions other than this Agreement and may represent others having interests adverse to the Investors in connection with matters unrelated to this Agreement. Each Investor hereby waives any conflict or alleged conflict arising as a result of such representation. 5. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING. The obligations of ----------------------------------------------- each Investor under Section 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent to such waiver. 12 5.1 Representations and Warranties True. Each of the representations ----------------------------------- and warranties of the Company contained in Section 3 shall be true and correct on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. 5.2 Performance. The Company shall have performed and complied with ----------- all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein. 5.3 Restated Articles Effective. The Restated Certificate shall have --------------------------- been duly adopted by the Company by all necessary corporate action of its Board of Directors and stockholders, and shall have been duly filed with and accepted by the Secretary of State of the State of Delaware. 5.4 Compliance Certificate. The Company shall have delivered to each ---------------------- Investor at the Closing a certificate signed on its behalf by its President, Chief Executive Officer, or Vice President-Finance certifying, on behalf of the Company, that the conditions specified in Sections 5.1, 5.2 and 5.3 have been fulfilled and stating that there shall have been no material adverse change in the business, affairs, prospects, operations, properties, assets or condition of the Company not previously disclosed to the Investors in writing. 5.5 Securities Exemptions. The offer and sale of the Purchased --------------------- Shares to the Investors pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. 5.6 Proceedings and Documents. All corporate and other proceedings ------------------------- in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investor's special counsel, Morrison & Foerster, which shall have received all such counterpart originals and certified or other copies of such documents as it may reasonably request. 5.7 No Material Change. There shall have been no material adverse ------------------ change in the business, affairs, prospects, operations, properties, assets or condition of the Company. 5.8 Registration Rights Agreement: Voting Agreement: Co-Sale -------------------------------------------------------- Agreement. The Company and each Investor shall have executed and delivered the - --------- Registration Rights Agreement in the form attached to this Agreement as Exhibit ------- G (the "REGISTRATION RIGHTS AGREEMENT"); the Company, Gideon Gartner and each - - 13 Investor shall have executed and delivered the Amended and Restated Investor Rights and Voting Agreement in the form attached as Exhibit H (the "VOTING --------- AGREEMENT"); and the Company, Gideon Gartner and each Investor shall have executed and delivered the Co-Sale and Stock Restriction Agreement in the form attached as Exhibit I (the "CO-SALE AGREEMENT"). --------- 5.9 Opinion of Counsel. The Investors shall have received the ------------------ opinion of Brobeck, Phleger & Harrison, dated the date of the Closing, as to the matters set forth in Exhibit J. --------- 5.10 Directors. The Company's Bylaws shall provide for at least six --------- Directors and the Company's Board of Directors shall have resolved to appoint Irwin Lieber to the position of Director effective as of the Closing. 5.11 Minimum Shares Purchased. A minimum of 2,285,696 shares of ------------------------ Series B Stock shall be purchased by the Investors at the Closing under this Agreement for a minimum aggregate purchase price of $8,000,000 and, effective as of the Closing, the Convertible Note shall be converted into an aggregate of 571,428 shares of Series B Stock. 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of -------------------------------------------------- the Company to each Investor under this Agreement are subject to the fulfillment or waiver on or before the Closing of each of the following conditions by such Investor: 6.1 Representations and Warranties. The representations and ------------------------------ warranties of such Investor contained in Section 4 shall be true and correct on the date of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 6.2 Payment of Purchase Price. Each Investor shall have delivered to ------------------------- the Company the purchase price specified for such Investor on Exhibit A in --------- accordance with the provisions of Section 2. 6.3 Restated Certificate Effective. The Restated Certificate shall ------------------------------ have been accepted by the Secretary of State of the State of Delaware. 6.4 Securities Exemptions. The offer and sale of the Purchased --------------------- Shares to the Investors pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. 6.5 Registration Rights Agreement. Each Investor shall have ----------------------------- 14 executed and delivered the Registration Rights Agreement and the Voting Agreement. 6.6 Minimum Shares Purchased. A minimum of 2,285,696 shares of ------------------------ Series B Stock shall be purchased by the Investors at the Closing under this Agreement for a minimum aggregate purchase price of $8,000,000.00 and, effective as of the Closing, the Convertible Note shall be converted into an aggregate of 571,428 shares of Series B Stock. 7. COVENANTS OF THE COMPANY. ------------------------ 7.1 Delivery of Financial Statements. -------------------------------- (a) The Company shall furnish to each Investor as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company (one hundred and twenty days in the case of the fiscal year ending December 31, 1995), an income statement for such fiscal year, a balance sheet of the Company and statement of stockholders' equity as of the end of such year, and a schedule as to the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with GAAP, and audited by a nationally recognized firm of independent public accountants selected by the Company and approved by its Board of Directors. (b) The Company shall deliver to each Investor as soon as practicable, but in any event within sixty (60) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter. (c) The Company shall furnish to each Investor who (together with Investors which control it, are controlled by it, or are under common control with it) holds at least 800,000 shares of Series B Preferred Stock or Common Stock issued upon conversion thereof (each a "Major Investor") as soon as practicable, but in any event within thirty (30) days after the end of each month, an unaudited income statement and balance sheet as of the end of such month, in reasonable detail. (d) The Company shall furnish to each Major Investor as soon as practicable, but in any event thirty (30) days after the end of each fiscal year (sixty (60) days in the case of the fiscal year ended December 31, 1995), a budget and business plan for the next fiscal year; provided, however, that the Company's obligation to furnish a business plan may be waived by the Board of Directors (either by express waiver or by the failure of the Board of Directors to request preparation of a business plan). 15 (e) Notwithstanding any provisions contained in this Section 7.1 to the contrary, the Company shall not be obligated under this Section 7.1 to provide information which it deems in good faith to be a trade secret or similar confidential information. 7.2 Inspection. The Company shall permit each Major Investor, at ---------- such Major Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, and shall provide such other information as may reasonably be requested by such, all at such reasonable times as may be requested by the Major Investor; provided, however, that the Company -------- ------- shall not be obligated pursuant to this Section 8.2 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information except to Major Investors who execute a confidentiality agreement in such form as the Company may reasonably request. 8. MISCELLANEOUS. ------------- 8.1 Survival of Warranties and Covenants. The representations, ------------------------------------ warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of any of the Investors, their counsel or the Company, as the case may be. The Company's obligations under Section 7.1 and 7.2 shall terminate (a) immediately prior to the closing of an underwritten public offering pursuant to a registration statement (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a transaction pursuant to Rule 145 under the Securities Act of 1933, as amended (the "Act")) under the Act covering the Company's Common Stock, which results in aggregate cash proceeds (prior to underwriters' commissions and expenses) to the Company and any selling stockholder of at least $15,000,000, and which has a public offering price of not less than $5.25 per share (as appropriately adjusted for stock splits, combinations, reclassifications and the like), or (b)upon an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company's outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) or more of the voting power of the corporation or other entity surviving such transaction. 8.2 Successors and Assigns. The terms and conditions of this ---------------------- Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 16 8.3 Governing Law. This Agreement shall be governed by and construed ------------- under the internal laws of the State of New York as applied to agreements among New York residents entered into and to he performed entirely within New York, without reference to principles of conflict of laws or choice of laws. 8.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.5 Headings. The headings and captions used in this Agreement are -------- used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference. 8.6 Notices. Unless otherwise provided, any notice required or ------- permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on Exhibit A or, in the case of the Company, at --------- Giga Information Group, Inc. One Longwater Circle Norwell, MA 02061 Attention: Vice President - Finance with a copy to: Thomas A Bevilacqua, Esq. Brobeck, Phieger & Harrison One Market, Spear Street Tower San Francisco, CA 94105 or at such other address as any party or the Company may designate by giving ten (10) days advance written notice to all other parties. 8.7 Expenses. Irrespective of whether the Closing is effected, the -------- Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. If the Closing is effected, the Company shall, at the Closing, reimburse the reasonable fees of special counsel for all of the Investors not to exceed $18,000. 17 8.8 No Finder's Fees. Each party represents that it neither is nor ---------------- will be obligated for any finder's or broker's fee or commission in connection with this transaction, except as disclosed in the Placement Memorandum. Each Investor agrees to indemnity and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' or broker's fee (and any asserted liability) for which the Investor or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnity and hold harmless each Investor from any liability for any omission or compensation in the nature of a finder's or broker's fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 8.9 Amendments and Waivers. Except as specified in Section 2.2, any ---------------------- term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of Purchased Shares and/or Conversion Shares representing at least a majority of the aggregate number of shares of Common Stock into which the Purchased Shares then are convertible and/or have been converted (excluding any of such shares that have been sold to the public or pursuant to SEC Rule 144). Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Purchased Shares and/or Conversion Shares at the time outstanding, each future holder of such securities, and the Company; provided, however, that no condition set forth in Section 5 may be waived with - --------- ------- respect to any Investor who does not consent thereto; and provided further, that -------- ------- New Investors may become parties to this Agreement in accordance with Section 2.2 without any amendment of this Agreement or any consent or approval of any Investor. 8.10 Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms. 8.11 Entire Agreement. This Agreement, together with all exhibits and ---------------- schedules hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings duties or obligations between the parties with respect to the subject matter hereof. 8.12 Further Assurances. From and after the date of this Agreement, ------------------ upon the request of any Investor or the Company, the Company and the Investors shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. 18 SIGNATURE PAGE TO THE SERIES B PREFERRED STOCK PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. THE COMPANY: - ----------- GIGA INFORMATION GROUP, INC. (A DELAWARE CORPORATION) By: /s/ Gideon Gartner ------------------- Title: ---------------- 19 SIGNATURE PAGE TO THE SERIES B PREFERRED STOCK PURCHASE AGREEMENT THE INVESTORS: - ------------- Name of Investor: 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer Montsol Investments NV By: S/2/ Technology Corp. By: /s/ Seymour L. Goldblatt ----------------------------------- Title: President S/2/ Technology Corp. -------------------------------- Executive Technology L.P. By: S/2/ Technology Corp. its General Partner By: /s/ Seymour L. Goldblatt ----------------------------------- Title: President S/2/ Technology Corp. -------------------------------- which is the GP of Executive Technology - --------------------------------------- Core Technology Fund Inc. By: /s/ Seymour L. Goldblatt ----------------------------------- Title: Managing Director -------------------------------- Sci Tech Investment Partners L.P. By: S/2/ Technology Corp., its General Partner By: /s/ Seymour L. Goldblatt ----------------------------------- Title: President, S/2/ Technology Corp. --------------------------------- which is the GP of Sci-Tech Investment - -------------------------------------- Partner - -------------------------------------- The Matrix Technology Group NV By: /s/ Seymour L. Goldblatt ------------------------------------ Title: Managing Director --------------------------------- Yale University By: S/2/ Technology Corp. By: /s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- Yale University Retirement Plan for Staff Employees By: S/2/ Technology Corp. By: /s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- 20 SG Partners L.P. By: S/2/ Technology Corp., its General Partner By: /s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- which is the GP of SG Partners - --------------------------------------- Derek Lemke-von Ammon /s/ Derek Lemke-von Ammon -------------------------- (Derek Lemke-von Ammon) Haussmann Holdings By: /s/ Dana Schmidt ----------------------------------- Title: Principal --------------------------------- Montgomery Growth Partners, L.P. By: /s/ Dana Schmidt ----------------------------------- Title: Principal -------------------------------- Its General Partner, Montgomery Asset Management, L.P. Montgomery Growth Partners, II, L.P. By: /s/ Keith High ----------------------------------- Title: Keith High -------------------------------- Its General Partner Nosrob Investments, Ltd. By: /s/ Dana Schmidt ----------------------------------- Title: Principal -------------------------------- Quota Fund, N.V. By: /s/ Dana Schmidt ------------------------------------ Title: Principal --------------------------------- Montgomery Small Cap Partners III, L.P. By: /s/ Keith High ------------------------------------ Title: Keith High --------------------------------- Its General Partner 21 Lagunitas Partners, L.P. By: /s/ John D. Gruber ------------------------------------ Gruber & McBaine International By: /s/ J. Patterson McBaine ------------------------------------ Jon D. Gruber /s/ John D. Gruber -------------------------------------- J. Patterson McBaine /s/ J. Patterson McBaine -------------------------------------- (J. Patterson McBaine) Kensington Partners L.P. By: /s/ Dick Keim , its General Partner ----------------------------- By: Dick Keim Title: --------------------------------- Acorn Investment Trust By:/s/ Roger Wagner ------------------------------------ Title: Chief Executive Officer --------------------------------- 22 EXHIBIT A --------- SCHEDULE OF INVESTORS
Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------- CLOSING OF NOVEMBER 9, 1995 1. Geo Capital 21st Century Communications Partners, L.P. 968,615 $ 3,390,150.00 11/14 767 Fifth Avenue New York, NY 10153 Attention: Mr. Matthew Smith 21st Century Communications Foreign Partners, L.P. 130,397 $ 456,390.00 11/14 767 Fifth Avenue New York, NY 10153 Attention: Mr. Matthew Smith 21st Century Communications T-E Partners, L.P. 329,560 $ 1,153,460.00 11/14 767 Fifth Avenue New York, NY 10153 Attention: Mr. Matthew Smith 2. S. Squared Montsol Investments N.V. 26,460 $ 92,610.00 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague Executive Technology L.P. 66,080 $ 231,280.00 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague Core Technology Fund Inc. 184,339 $ 645,186.50 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague
A-1 Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------ Sci-Tech Investment Partners L.P. 98,058 $ 343,203.00 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague The Matrix Technology Group N.V. 39,746 $ 139,111.00 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague Yale University 332,581 $ 1,164,033.50 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague Yale University Retirement Plan for Staff Employees 25,752 $ 90,132.00 11/14 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague SG Partners L.P. 84,127 $ 294,444.50 11/13 c/o S/2/ Technology Corp. 515 Madison Avenue, Suite 4200 New York, NY 10022 Attention: Ms. Nancy Sprague 3. Wanger Acorn Fund 600,000 $ 2,100,000.00 11/08 c/o Wagner Asset Management 227 West Monroe Street Chicago, IL 60606 Attention: Ms. Ellie Giorgis 4. Montgomery
A-2 Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------ Montgomery Small Cap Partners III, L.P. 40,000 -$140,000.00 11/08 c/o Fiduciary Trust (Cayman) Limited One Capital Place P.O. Box 1062 George Town, Grand Cayman, Cayman Islands Attention: Dana Schmidt Montgomery Asset Management 224,000 $ 784,000.00 11/08 600 Montgomery Street San Francisco, CA 94111 Attention: Dana Schmidt Haussmann Holdings 288,000 $ 1,008,000.00 11/08 c/o Montgomery Asset Management 600 Montgomery Street San Francisco, CA 94111 Attention: Dana Schmidt Montgomery Growth Partners, L.P. 400,000 $ 140,000.00 11/08 c/o Montgomery Asset Management 600 Montgomery Street San Francisco, CA 94111 Attention: Dana Schmidt Montgomery Growth Partners II, L.P. 96,000 $ 336,000.00 11/08 c/o Fiduciary Trust (Cayman) Limited One Capital Place George Town, Grand Cayman, Cayman Islands Attention: Dana Schmidt Nosrob Investments Ltd. 48,000 $ 168,000.00 11/08 c/o Montgomery Asset Management 600 Montgomery Street San Francisco, CA 94111 Attention: Dana Schmidt Derek Lemke-von Ammon 2,857 $ 9,999.50 11/10 c/o Montgomery Asset Management 600 Montgomery Street San Francisco, CA 94111 5. Kensington Partners
A-3 Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------ Kensington Partners, L.P. 88,000 -$308,000.00 11/13 237 Park Avenue New York, New York 10017 Attention: Dick Kine 6. Gruber & McBaine Lagunitas Partners, L.P. 221,400 $ 774,900.00 11/09 c/o Gruber and McBaine Capital Management 50 Osgood Place San Francisco, CA 94133 Gruber & McBaine International 35,680 $ 124,880.00 11/09 c/o Gruber and McBaine Capital Management 50 Osgood Place San Francisco, CA 94133 Jon D. Gruber 28,560 $ 99,960.00 11/09 c/o Gruber and McBaine Capital Management 50 Osgood Place San Francisco, CA 94133 J. Patterson McBaine 28,560 $ 99,960.00 11/09 c/o Gruber and McBaine Capital Management -------------- 50 Osgood Place San Francisco, CA 94133 Total: $14,093,700.00 ==============
A-4 AMENDMENT NO. 1 TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT THIS AMENDMENT NO. 1 dated as of December 5, 1995 to the Series B Preferred Stock Purchase Agreement, dated November 13, 1995 (the "Purchase Agreement") by and among Giga Information Group, Inc. (the "Company"), and the purchasers listed on Exhibit A thereto (the "Purchasers"). WHEREAS, Section 2.2(a) of the Purchase Agreement, as executed on November 13, 1995, provides that: Conditions of Additional Closing. At any time or times within thirty (30) -------------------------------- days immediately following the Closing, the Company may, at one or more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or permission of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that number of shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock less the number of shares of Series B Stock actually issued and sold by the Company prior to such Additional Closing pursuant to this Agreement and upon conversion of the Convertible Note (as defined in Section 3.4(c)). New Investors may include persons or entities who are already Investors under this Agreement. WHEREAS, the Company has requested an extension of the period in which it may hold an Additional Closing to enable it to offer and sell shares of its Series B Preferred Stock ("Series B Stock") to certain persons who are currently stockholders, directors, or officers of, or advisors to, or who have other business relationships with, the Company; WHEREAS, the parties hereto wish to amend the Series B Purchase Agreement pursuant to Section 8.9 thereof, to provide for such an extension, as hereinafter provided; NOW THEREFORE, in consideration of the foregoing, and intending to be legally bound hereby, the parties hereto agree as follows: 1. The Company and each of the Purchasers signing below hereby agree that Section 2.2(a) of the Purchase Agreement is hereby amended to read in its entirety as follows: Conditions of Additional Closing. At any time or times on or before January -------------------------------- 20, 1996, the Company may, at one or more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or permission A-5 of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that number of shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock less the number of shares of Series B Stock actually issued and sold by the Company prior to such Additional Closing pursuant to this Agreement and upon conversion of the Convertible Note (as defined in Section 3.4(c)); provided that each New Investor shall have been, as of November 13, 1995: (i) an employee of, or advisor to, the Company, (ii) an individual specified in Exhibit I to Amendment No. 1 to the --------- Purchase Agreement, or (iii) an affiliate of any of the foregoing. New Investors may include persons or entities who are already Investors under this Agreement. Wherever the Purchase Agreement is itself referred to in the Purchase Agreement, it shall mean the Purchase Agreement as amended by this Amendment No. 1. 2. The Company and the New Investors purchasing Series B Stock at any Additional Closing will execute counterpart signature pages to this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-Sale Agreement (each as defined in the Purchase Agreement), and such New Investors will, upon delivery to the Company of such signature pages, become parties to, and bound by, this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-Sale Agreement, each to the same extent as if they had been Investors at the Closing. Immediately after any Additional Closing, Exhibit A to --------- the Purchase Agreement will be amended by the Company to list the New Investors purchasing shares of Series B Stock hereunder and the number of shares of Series B Stock purchased by each New Investor under the Purchase Agreement at the Additional Closing. 3. Upon the completion of an Additional Closing as provided in the Purchase Agreement as amended hereby, each New Investor will be deemed to be an "INVESTOR" for all purposes of the Purchase Agreement, the Registration Rights Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of the Voting Agreement. 4. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. A-6 IN WITNESS WHEREOF, the undersigned (or sufficient of them) have executed this Amendment No. 1 to the Series B Preferred Stock Purchase Agreement as of the date first written above. THE COMPANY: - ----------- GIGA INFORMATION GROUP, INC. (a Delaware corporation) By:/s/Gideon Gartner ------------------------------ Title: --------------------------- A-7 SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE SERIES B PREFERRED STOCK PURCHASE AGREEMENT THE INVESTORS: - ------------- Name of Investor: 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ------------------------------------ Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------------------------- Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------------------------- Irwin Lieber Title: Treasurer A-8 Montsol Investments NV By: S/2/ Technology Corp. By:/s/Seymour L. Goldblatt ----------------------------------- Title: President S/2/ Technology Corp. -------------------------------- Executive Technology L.P. By: S/2/ Technology Corp. its General Partner By:/s/Seymour L. Goldblatt ----------------------------------- Title: President S/2/ Technology Corp. -------------------------------- which is the GP of Executive Technology - --------------------------------------- Core Technology Fund Inc. By: /s/Seymour L. Goldblatt ----------------------------------- Title: Managing Director -------------------------------- A-9 Sci Tech Investment Partners L.P. By: S/2/ Technology Corp., its General Partner By: /s/Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- which is the GP of Sci-Tech Investment - --------------------------------------- Partner - ------- The Matrix Technology Group NV By:/s/Seymour L. Goldblatt ------------------------------------ Title: Managing Director --------------------------------- Yale University By: S/2/ Technology Corp. By:/s/Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- Yale University Retirement Plan for Staff Employees By: S/2/ Technology Corp. By:/s/Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- A-10 SG Partners L.P. By: S/2/ Technology Corp., its General Partner By:/s/Seymour L. Goldblatt ------------------------------------- Title: President, S/2/ Technology Corp. ---------------------------------- which is the GP of SG Partners - ---------------------------------------- A-11 Derek Lemke-von Ammon /s/ Derek Lemke-von Ammon -------------------------- (Derek Lemke-von Ammon) A-12 Kensington Partners L.P. By:/s/Dick Keim ------------------------------------ By: Dick Keim Title: --------------------------------- Acorn Investment Trust By: /s/Roger Wagner ------------------------------------ Title: Chief Executive Officer -------------------------------- A-13 AMENDMENT NO.2 TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT THIS AMENDMENT NO. 2 dated as of February 19, 1996 to the Series B Preferred Stock Purchase Agreement, dated November 13, 1995 (the "Purchase Agreement") by and among Giga Information Group, Inc. (the "Company"), and the purchasers listed on Exhibit A thereto (the "Purchasers"). WHEREAS, Section 2.2(a) of the Purchase Agreement, as executed on November 13, 1995, provides that: Conditions of Additional Closing. At any time or times within thirty (30) -------------------------------- days immediately following the Closing, the Company may, at one or more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or permission of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that number of shares of Series B Stock that is equal to 5,142,856 shares of Series B Stock less the number of shares of Series B Stock actually issued and sold by the Company prior to such Additional Closing pursuant to this Agreement and upon conversion of the Convertible Note (as defined in Section 3.4(c)). New Investors may include persons or entities who are already Investors under this Agreement. WHEREAS, the Company has requested an extension of the period in which it may hold an Additional Closing to enable it TO OFFER and sell shares of its Series B Preferred Stock ("Series B Stock") to certain persons who are currently stockholders, directors, or officers of, or advisors to, or who have other business relationships with, the Company; WHEREAS, the parties hereto wish to amend the Series B Purchase Agreement pursuant to Section 8.9 thereof, to provide for such an extension, as hereinafter provided; NOW THEREFORE, in consideration of the foregoing, and intending to be legally bound hereby, the parties hereto agree as follows: 1. The Company and each of the Purchasers signing below hereby agree that Section 2.2(a) of the Purchase Agreement is hereby amended to read in its entirety as follows: Conditions of Additional Closing. At any time or times on or before -------------------------------- February 29, 1996, the Company may, at one or more closings (each an "ADDITIONAL CLOSING"), without obtaining the signature, consent or permission A-14 of any of the Investors, offer and sell to other investors ("NEW INVESTORS"), at a price of not less than $3.50 per share, up to that number of shares of Series B Stock that is equal to 5,400,000 shares of Series B Stock less the number of shares of Series B Stock actually issued and sold by the Company prior to such Additional Closing pursuant to this Agreement and upon conversion of the Convertible Note (as defined in Section 3.4(c)); provided that each New Investor shall have been, as of November 13, 1995: (i) an employee of, or advisor to, the Company, (ii) an individual specified in Exhibit I to Amendment No. 2 to the --------- Purchase Agreement, or (iii) an affiliate of any of the foregoing. New Investors may include persons or entities who are already Investors under this Agreement. Wherever the Purchase Agreement is itself referred to in the Purchase Agreement, it shall mean the Purchase Agreement as amended by this Amendment No.2. 2. The Company and the New Investors purchasing Series B Stock at any Additional Closing will execute counterpart signature pages to this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-Sale Agreement (each as defined in the Purchase Agreement), and such New Investors will, upon delivery to the Company of such signature pages, become parties to, and bound by, this Agreement, the Registration Rights Agreement, the Voting Agreement and the Co-Sale Agreement, each to the same extent as if they had been Investors at the Closing. Immediately after any Additional Closing, Exhibit A to --------- the Purchase Agreement will be amended by the Company to list the New Investors purchasing shares of Series B Stock hereunder and the number of shares of Series B Stock purchased by each New Investor under the Purchase Agreement at the Additional Closing. 3. Upon the completion of an Additional Closing as provided in the Purchase Agreement as amended hereby, each New Investor will be deemed to be an "INVESTOR" for all purposes of the Purchase Agreement, the Registration Rights Agreement and the Co-Sale Agreement, and a "SERIES B PURCHASER" for purposes of the Voting Agreement. 4. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. A-15 IN WITNESS WHEREOF, the undersigned (or sufficient of them) have executed this Amendment No. 2 to the Series B Preferred Stock Purchase Agreement as of the date first written above. THE COMPANY: - ----------- GIGA INFORMATION GROUP, INC. (a Delaware corporation) By: /s/ Kenneth E Marshall ------------------------------------ Title: President & CEO ----------------------------- A-16 SIGNATURE PAGE TO AMENDMENT NO.2 TO THE SERIES B PREFERRED STOCK PURCHASE AGREEMENT THE INVESTORS: - ------------- Name of Investor: 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ------------------------------------- Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ------------------------------------- Irwin Lieber Title: Treasurer 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ------------------------------------ Irwin Lieber Title: Treasurer A-17 Montsol Investments NV By: S/2/ Technology Corp. By:/s/ Seymour L. Goldblatt ------------------------------------ Title: President S/2/ Technology Corp. --------------------------------- Executive Technology L.P. By: S/2/ Technology Corp. its General Partner By:/s/ Seymour L. Goldblatt ------------------------------------ Title: President S/2/ Technology Corp. --------------------------------- which is the GP of Executive Technology - --------------------------------------- Core Technology Fund Inc. By: /s/ Seymour L. Goldblatt ------------------------------------ Title: Managing Director --------------------------------- A-18 Sci Tech Investment Partners L.P. By: S/2/ Technology Corp., its General Partner By: /s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- which is the GP of Sci-Tech Investment - --------------------------------------- Partner - --------------------------------------- The Matrix Technology Group NV By:/s/ Seymour L. Goldblatt ------------------------------------ Title: Managing Director -------------------------------- Yale University By: S/2/ Technology Corp. By:/s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- Yale University Retirement Plan for Staff Employees By: S/2/ Technology Corp. By:/s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- A-19 SG Partners L.P. By: S/2/ Technology Corp., its General Partner By:/s/ Seymour L. Goldblatt ------------------------------------ Title: President, S/2/ Technology Corp. --------------------------------- which is the GP of SG Partners - --------------------------------------- A-20 Derek Lemke-von Ammon /s/ Derek Lemke-von Ammon -------------------------- (Derek Lemke-von Ammon) A-21 Kensington Partners L.P. By: /s/ Dick Keim ------------------------------------- By: Dick Keim Title: General Partner --------------------------------- Acorn Investment Trust By:/s/ Roger Wagner ------------------------------------ Title: Cheif Executive Officer --------------------------------- A-22
Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------ CLOSING OF FEBRUARY 29, 1996 Neill and Linda Brownstein 16,000 $ 56,000.00 2/29 536 West Crescent Drive Palo Alto, CA 94301 Adam J. Brownstein 6,000 $ 21,000.00 2/29 536 West Crescent Drive Palo Alto, CA 94301 Todd D. Brownstein 6,000 $ 21,000.00 2/29 536 West Crescent Drive Palo Alto, CA 94301 Will P. Gordon 6,000 $ 21,000.00 2/29 536 West Crescent Drive Palo Alto, CA 94301 Emily G. Hamilton 6,000 $ 21,000.00 2/29 536 West Crescent Drive Palo Alto, CA 94301 Richard J. Foudy 14,286 $ 50,001.00 780 Cedar Brook Lane Southport, CT 06490 Cornelius T. Ryan 14,286 $ 50,001.00 315 Post Road West Westport, CT 06880 Frederick G. Smith 57,143 $ 200,000.50 435 East 57th Street, Apt. 5C New York, NY 10022 Michael J. Kolesar 20,000 $ 70,000.00 2/28 Giga Information Group, Inc. 1 Longwater Circle Norwell, MA 02061 Christopher J. DiVecchio 6,000 $ 21,000.00 2/28 254 Main Street, #1C Southport, CT 06490
A-23 Shares Cash Date Investor Name Purchased Tendered Rec'd ------------- --------- --------- ------ Martin P. DuRoss 1,300 $ 4,550.00 2/28 15120 Eclipse Drive Manassas, VA 22111 Susan Tracy Wheeler 25,000 $ 87,500.00 2/28 2 Bonnie Brook Road Westport, Connecticut 06880 John B. Landry 28,571 $ 99,998,50 62 Old Connecticut Path Wayland, MA 01778 RRE Giga Investors II, L.P. 288,571 $ 1,009,998.50 2/28 126 East 56th Street, 22nd Floor New York, New York 10022 Attention: Mr. Stuart Ellman Harry Edelson 14,286 $ 50,001.00 Edelson Technology Partners Whiteweld Centre 300 Tice Boulevard Woodcliff Lake, NJ 07675 Edelson Technology Partners III 85,715 $ 300,002.50 Whiteweld Centre 300 Tice Boulevard Woodcliff Lake, NJ 07675 Attention: Mr. Harry Edelson Derek Lemke-von Ammon 2,857 $ 9,999.50 2/28 Montgomery Securities 600 Montgomery Street San Francsico, CA 94111 Gilo Family Partnership 16,000 $ 56,000.00 2/28 100 Why Worry Lane Woodside, CA 94062 Attention: Davidi Gilo Robert E. Cook 60,000 $ 210,000.00 2/28 572 Park Avenue, 2nd Floor -------------- Park City, UT 84060 Total: $ 2,359,052.50 ==============
A-24 THE INVESTORS: - ------------- Name of Investor: Neill and Linda Brownstein - -------------------------------------- By: /s/ Neill H. Brownstein ---------------------------------- Name: ---------------------------------- Title: --------------------------------- Name of Investor: Adam J. Brownstein - --------------------------------------- By:/s/ Adam J. Brownstein ------------------------------------ Name: ----------------------------------- Title: --------------------------------- Name of Investor: Robert E. Cook - --------------------------------------- By:/s/ Robert E. Cook ------------------------------------ Name: ---------------------------------- Title: --------------------------------- A-25 Name of Investor: Christopher J. DiVecchio - ------------------------ By: /s/ Christopher J. DiVecchio ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- Name of Investor: By: /s/ Martin P. DuRoss ------------------------------------ Name: Martin P. DuRoss ---------------------------------- Title: --------------------------------- Name of Investor: Harry Edelson - --------------------------------------- By:/s/ Harry Edelson ------------------------------------ Name: ----------------------------------- Title: ---------------------------------- Name of Investor: Edelson Technology Partners III - --------------------------------------- By: /s/ Harry Edelson ------------------------------------ Name: ---------------------------------- Title: --------------------------------- A-26 Name of Investor: Richard J. Foudy - ---------------------------------------- By: /s/ Richard J. Foudy ------------------------------------ Name: ----------------------------------- Title: ---------------------------------- Name of Investor: Gilo Family Partnership - --------------------------------------- By: /s/ Davidi Gilo ---------------------------------- Name: Davidi Gilo ---------------------------------- Title: ---------------------------------- Name of Investor: Michael J. Kolesar - -------------------------------------- By:/s/ Michael J. Kolesar ------------------------------------ Name: ---------------------------------- Title: --------------------------------- A-27 Name of Investor: /s/ John B. Landry - --------------------------------------- By: John B. Landry ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- Name of Investor: Derek Lemke-von Ammon - --------------------------------------- By: /s/ Derek Lemke-von Ammon ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- Name of Investor: RRE GIGA INVESTORS II, L.P. By: RRE PARTNERS, L.L.C., as General Partner - --------------------------------------- By: RRE Investors, L.L.C., as Managing Member By: /s/ Stuart J. Ellman ---------------------------------- Name: Stuart J. Ellman ----------------------------------- Title: Class A Member ----------------------------- Name of Investor: Cornelius T. Ryan - --------------------------------------- By: /s/ Cornelius T. Ryan ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- A-28 Name of Investor: Frederick G. Smith - --------------------------------------- By: /s/ Frederick G. Smith ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- Name of Investor: Susan Tracy Wheeler - --------------------------------------- By: /s/ Susan Tracy Wheeler ---------------------------------- Name: ---------------------------------- Title: --------------------------------- Name of Investor: Will P. Gordon - --------------------------------------- By: /s/ Will P. Gordon ---------------------------------- Name of Investor: Todd D. Brownstein - --------------------------------------- By: /s/ Todd D. Brownstein ---------------------------------- Name of Investor: Emily G. Hamilton - --------------------------------------- By: /s/ Neill H. Brownstein ---------------------------------- Father A-29 EX-10.4 10 CONVERTIBLE NOTE AND WARRANT PURCHASE AUG, 1995 EXHIBIT 10.4 CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT This CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made as of August ___, 1995 by and between Giga information Group, inc., a Delaware corporation (the "Company"), and RRE Giga investors, L.P. (the "Purchaser"/1/). THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Purchase and Sale of Notes and Warrants. --------------------------------------- 1.1 Sale and issuance of Notes and Warrants. Subject to the terms and --------------------------------------- conditions of this Agreement, the Purchaser agrees to purchase from the Company, and the Company agrees to sell and issue to the Purchaser, at the Closing (as defined below), its convertible promissory note, in an aggregate principal amount of $2,000,000, in the form attached as Exhibit I (the "Note"") and a warrant to purchase shares of its Series B Preferred Stock in the form attached as Exhibit II (the "Warrant"), for an aggregate purchase price of $2,000,000 (the "Purchase Price"), of which $1,990,000 shall be allocable to the Note and $ 10,000 shall be allocable to the Warrant. 1.2 Closing. The purchase and sale of the Notes and Warrants shall ------- take place at the offices of Brobeck, Phleger & Harrison, One Market, Spear Street Tower, San Francisco, California, 94105, concurrently with the execution and delivery of this Agreement by the parties (the "Closing"), or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing. At the Closing, the Company shall deliver the Note and Warrants to the Purchaser against delivery to the Company by the Purchaser of the Purchase Price. 2. Representations and Warranties of the Company. --------------------------------------------- The Company hereby represents and warrants to the Purchasers that: 2.1 Organization. Good Standing and Qualification. The Company is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties. -1- 2.2 Capitalization. The authorized capital of the Company consists, -------------- or will consist, immediately prior to the Closing, of: (a) Preferred Stock. 1,000,000 shares of Preferred Stock, of which --------------- 945,000 shares are designated as Series A Preferred Stock, 545,000 of which shares of Series A Preferred Stock will be issued and outstanding immediately prior to the Closing, and the rights, privileges and preferences of which are as stated in the Restated Certificate of incorporation. (b) Common Stock. 5,000,000 shares of Common Stock, of which no more ------------ than 1,493,000 shares will be issued and outstanding immediately prior to the Closing. (c) immediately prior to the Closing, and assuming the conversion of the Series A Preferred Stock, the granting of any stock options then committed to be granted and the acceleration of vesting and exercise of options to purchase shares of Common Stock granted or committed to employees, future employees, directors or consultants of the Company, the number of shares of Common Stock outstanding would not exceed 2,558,500. There are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock, other than (a) those options, warrants, rights and agreements the exercise or conversion of which is assumed in the preceding sentence, (b) a warrant to purchase 25,000 shares of Preferred Stock agreed to be issued to Montgomery Securities in connection with its services as placement agent, (c) convertible note dated April 5,1995 payable to Friday Holdings, L.P. or it successors and assigns, a copy of which has been provided to counsel for the Purchaser, and (d) up to 40,000 shares of Common Stock issuable to David Gilmour pursuant to the terms of the Stock Purchase Agreement dated July 6,1995, between Giga and Mr. Gilmour (a copy of which has been provided to counsel for the Purchaser). 2.3 Authorization. All corporate action on the part of the Company, ------------- and each of its officers, directors and shareholders, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and thereunder and the authorization, issuance and delivery of the Note and Warrants, the Series A Preferred Stock initially issuable upon conversion of the Note (the "Preferred Shares") and the Common Stock issuable upon conversion of the Preferred Shares (collectively, the "Securities") has been taken or will be taken prior to the Closing. This Agreement constitutes, and when executed and delivered by the Company, the Note and Warrants shall constitute, valid and -2- legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms. 2.4 Valid issuance of Securities. The Preferred Shares, when issued, ---------------------------- sold and delivered in accordance with the terms of the Warrants for the consideration provided for therein or upon conversion of the Note, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws. The Common Stock issuable upon conversion of the Preferred Shares has been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Restated Certificate of Incorporation, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer UNDER applicable state and federal securities laws. 2.5 Governmental Consents. No consent, approval, order or --------------------- authorization of or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for appropriate state securities filings and for the filing pursuant to Rule 503 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), which filing will be effected in accordance with such rule. 2.6 Corporate Documents. The Restated Certificate of incorporation ------------------- and Bylaws of the Company are in the forms attached hereto as Exhibit ill. 2.7 Compliance with Other Instruments. The Company is not in --------------------------------- violation or default in any material respect of any provision of its Restated Certificate of incorporation or Bylaws, or any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to the best of its knowledge, of any provision of any federal or state statute, rule or regulation applicable to the Company, in each case which violation or default could reasonably be expected to have a material adverse effect on the business, operations or prospects of the Company. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or be in conflict with or constitute either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company. 2.8 Litigation. To the Company's knowledge, there is no action, suit, ---------- proceeding or investigation pending or currently threatened against the Company that questions the validity of this Agreement, the Warrant or the Note, or the right of -3- the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that could reasonably be expected to have a material adverse effect on the business, operations or prospects of the Company. 2.9 Not an investment Company. The Company is not an "investment ------------------------- company" or an entity "controlled" by an "investment company," as such terms are defined in the investment Company Act of 1940, as amended. 3. Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- hereby represents and warrants to the Company that: 3.1 Purchase Entirely for Own Account. This Agreement is made with --------------------------------- the Purchaser in reliance upon the Purchaser's representation to the Company, which by the Purchaser's execution of this Agreement the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. The Purchaser understands that this sale of the Note and Warrants has not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the Purchaser's investment intent and the accuracy of the Purchaser's representations as expressed herein. 3.2 Disclosure of information. The Purchaser believes it has received ------------------------- all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the organization, operations and plans of the Company and the terms and conditions of the offering of the Securities. The Purchaser acknowledges that (i) the Company is in its start-up stage; (ii) Purchaser's investment is highly speculative and risky and Purchaser could lose its entire investment; and (iii) the Purchaser is relying upon not only the representations and covenants contained in this Agreement but also its own investigation of the Company. The Purchaser has received a draft dated August 3, 1995 of the Company's Private Placement Memorandum relating to its private placement of its Series B Convertible Preferred Stock (the "Draft Memorandum"), and acknowledges that the Draft Memorandum is only a draft and is subject to revision, -4- which may materially change the information and projections set forth therein, and that no representation is made with respect thereto. 3. Investment Experience. The Purchaser has substantial experience in --------------------- evaluating and investing in private placement transactions and in the securities of companies in the development stage, and the Purchaser acknowledges that Purchaser is capable of evaluating the merits and risks of the Purchaser's investment in the Company. The Purchaser, by reason of its business or financial experience or the business or financial experience of its professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, has the capacity to protect its own interests in connection with the purchase of the Note and Warrants hereunder. The Purchaser acknowledges that it and its partners can bear the economic risk and complete loss of its investment. 3.4 Restricted Securities. Purchaser understands that the Note and --------------------- Warrants are "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations the Note and Warrants may be resold without registration under the Securities Act only in certain limited circumstances. in this respect, the Purchaser represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and otherwise by the Securities Act. 3.5 Further Limitations on Disposition. Without in any way limiting ---------------------------------- the representations set forth above, the Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until: (a) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement, or (b) (i) The Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a description of the proposed disposition, and (ii) if requested by the Company, the Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act. 3.6 Legends. it is understood that the Notes and Warrants, and any ------- securities issued in respect thereof or exchange therefor, may bear one or all of the following legends: -5- (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT." (b) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. 3.7 Accredited investor. The Purchaser is an accredited investor as ------------------- defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 4. Covenants of the Company. The Company agrees that subject to ------------------------ Section 7.1: 4.1 Registration and Other Contractual Rights. The Company shall, at ----------------------------------------- such time as it shall consummate a Qualified Series B Financing (as defined in the Note), offer to the Purchaser the right to become a party, as a holder of Series B Preferred Stock, to any agreement that the Company may enter into with purchasers of the Series B Preferred Stock, in their capacity as such, in the Qualified Series B Financing that sets forth rights and obligations of such purchasers, including any stock purchase agreement, registration rights agreement or stockholders' agreement. 4.2 Information Rights. The Company shall furnish the Purchaser with ------------------ the following financial statements for so long as the Purchaser shall hold a Note or Notes with an aggregate principal amount of at least $500,000: (a) Within 120 days after the end of each fiscal year, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of income and consolidated statements of cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles, audited by independent public accountants selected by the Company. (b) Within 60 days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, by beginning with the third quarter of 1995, a consolidated balance sheet of the company and its subsidiaries, if any, as of the end of each such quarterly period, and consolidated statements of income and consolidated statements of cash flows of the Company and its subsidiaries for such period and for the current fiscal year to date, prepared in -6- accordance with generally accepted accounting principles (other than for accompanying notes), subject to changes resulting from year-end audit adjustments. 4.3 Board of Directors. For so long as the Purchaser shall hold a ------------------ Note or Notes with an aggregate principal amount of at least $2,000,000 (or the Preferred Stock issuable upon conversion of such principal amount), the Purchaser will have the right to elect one member to the Board of Directors; provided that such person must be approved by the Company (which approval shall be deemed granted if such person is James D. Robinson III or, if James D. Robinson III is not reasonably able to so serve, if such person is James D. Robinson IV or Stuart Ellman). 4.4 Insurance. The Company will use its best efforts to obtain, no --------- later than January 31, 1996, key man life insurance on Gideon Gartner in an amount of at least $3 million, naming the Company as beneficiary. The Company shall thereafter maintain such insurance for so long as both (a) the Purchaser shall hold a Note or Notes with an aggregate principal amount of at least $500,000 (or the Preferred Stock issuable upon conversion thereof) and (b) Gideon Gartner shall remain an officer of the Company. 4.5 Employment/Non-Compete Agreement. The Company will execute an -------------------------------- employment contract with Gideon Gartner no later than September 30, 1995. The terms of such agreement shall be determined by the Company's Board of Directors and Mr. Gartner; provided, that such agreement shall in any event provide for a three-year employment term and shall include a three-year non-competition provision. 4.6 Right to Additional Warrant. In the event that the Company shall --------------------------- issue warrants ("Series B Financing Warrants") to purchasers of its Series B Preferred Stock in a Qualified Series B Financing, then the Company shall issue to the Purchaser a warrant (the "Additional Warrant") of like terms and exercisable for the same class of stock (the "Additional Warrant Stock") as are the Series B Financing Warrants. The number of shares issuable upon exercise of the Additional Warrant shall equal the product of (i) the quotient of 2,000,000 divided by the gross proceeds to the Company from the sale for cash of its Series B Preferred Stock on or before February 28, 1996 in such Qualified Series B Financing (other than the stock issued or issuable on conversion of this Promissory Note), multiplied by (ii) the number of shares of Additional Warrant Stock initially issuable upon exercise of the Series B Financing Warrants. For the purpose of any calculation hereunder or under the Note or Warrant of the purchase price of the Series B Preferred Stock, no portion of the proceeds of the Qualified Series B Financing shall be allocated to any Series B Financing Warrant. -7- 5. Conditions of the Purchasers' Obligations at Closing. The ---------------------------------------------------- obligations of the Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions: 5.1 Representations and Warranties. The representations and ------------------------------ warranties of the Company contained in Section 2 shall be true on the Closing with the same effect as though such representations and warranties had been made on and as of such date. 5.2 Performance. The Company shall have performed and complied with ----------- all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 5.3 Directors. The Company's Bylaws shall provide for five Directors --------- and the Company's Board of Directors shall have resolved to appoint James Robinson III to the position of Director effective as of the Closing. 5.4 Voting Agreement. A Voting Agreement in the form attached hereto ---------------- as Exhibit IV shall have been executed by the parties thereto. 6. Conditions of the Company's Obligations at Closing. The -------------------------------------------------- obligations of the Company to the Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions: 6.1 Representations and Warranties. The representations and ------------------------------ warranties of the Purchaser contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of such date. 6.2 Payment of Purchase Price. The Purchaser shall have delivered ------------------------- the Purchase Price specified in Section 1.1. 7. Miscellaneous. ------------- 7.1 Survival. Except as otherwise provided herein, the warranties, -------- representations and covenants of the Company and the Purchaser contained in or made pursuant to this Agreement shall survive the Closing; provided, that (a) the covenants set forth in Section 4 (other than Sections 4.3 and 4.6) shall terminate immediately prior to the earlier of (i) the consummation of a Qualified Series B Financing or (ii) the closing eof a firm underwritten public offering pursuant to a registration statement (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or -8- similar plan or a transaction pursuant to Rule 145 under the Securities Act of 1933, as amended (the "Act")) under the Act covering the Company's Common Stock, which results in aggregate cash proceeds (prior to underwriters' commissions and expenses) to the Company and any selling stockholder of at least $7,500,000, and which has a public offering price of not less than $7.50 per share (as appropriately adjusted for stock splits, combinations, reclassifications and the like) (a "Qualifying Public Offering), (b) the covenant set forth in Section 4.3 shall terminate immediately prior to the consummation of a Qualifying Public Offering, and (c) the covenant set forth in Section 4.6 shall terminate concurrently with the consummation of a Qualified Series B Financing. 7.2 Transfer: Successors and Assigns. The terms and conditions of -------------------------------- this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 7.3 Governing Law. This Agreement shall be governed by and construed ------------- under the laws of the State of Delaware. 7.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 7.5 Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 7.6 Notices. ------- (a) All notices, requests, demands and other communications under this Agreement or in connection herewith shall be given to or made upon as follows: If to the Purchaser: RRE Investors, L.L.C. 126 East 56th Street, 22nd Floor New York, N.Y. 10022 Attention: Stuart Ellman If to the Company: Giga Information Group, Inc. c/o Michael Kolesar -9- BIS Strategic Decisions, Inc. One Longwater Circle Norwell, MA 02061 with a copy to: Brobeck, Phleger & Harrison One Market Spear Street Tower San Francisco, CA 94105 Attn: Thomas Bevilacqua, Esq. (b) All notices, requests, demands and other communications given or made in accordance with the provisions of this Agreement shall be in writing, and shall be sent by airmail, return receipt requested, or by telex or telecopy (facsimile) with confirmation of receipt, and shall be deemed to be given or made when receipt is so confirmed. (c) Any party may, by written notice to the other, alter its address or respondent, and such notice shall be considered to have been given ten (10) days after the airmailing, telexing or telecopying thereof. 7.7 Finder's Fee. Each party agrees to indemnify and hold harmless ------------ the other party from any liability for any commission or compensation in the nature of a finder's or broker's fee or commission (and the costs and expenses of defending against such liability or asserted liability) for which the first party or any of its officers, employees or representatives is responsible. 7.8 Expenses. The Company and the Purchaser shall bear their own -------- respective expenses incurred with respect to this Agreement and the transactions contemplated hereby, except that the Company will reimburse the Purchaser for reasonable legal and related expenses not to exceed $20,000. 7.9 Amendments and Waivers. Any term of this Agreement may be amended ---------------------- and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section shall be binding upon each transferee of any Notes and Warrants, each future holder of the Notes and Warrants, and the Company. 7.10 Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision shall be excluded from this -10- Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 7.11 Entire Agreement. This Agreement constitutes the entire ---------------- agreernent between the parties hereto pertaining to the subject matter hereof, andy and all other prior written or oral agreements existing between the parties hereto are expressly cancelled. 7.12 "Market Stand-Off" Agreement. The Purchaser hereby agrees that ---------------------------- during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act in connection with the Company's initial public offering of securities, it shall not, to the extent requested by the Company and the Company's undewriter, sell, offer to sell, or otherwise transfer or dispose of any Common Stock or preferred stock of the Cornpany held by it at any time during such period except Common Stock (if any) included in such registration To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Common Stock and prcferred stock held by the Purchaser (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Each Purchaser agrees to execute the form of such market stand-off agreement as may be reasonably requested by the underwriters. COMPANY: GIGA INFORMATION GROUP, INC. PURCHASER: By: /s/ Michael J. Kolesar /s/ Stuart Ellman ----------------------------- ------------------------------ Title: Vice President - Finance RRE Giga Investors, L.P. -------------------------- By: Stuart Ellman Managing Director -11- EX-10.5 11 PREFERRED STOCK PURCHASE WARRANT AUG,1995 EXHIBIT 10.5 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. Warrant No. 1 Void after February 28, 2001 GIGA INFORMATION GROUP, INC. PREFERRED STOCK PURCHASE WARRANT -------------------------------- This Warrant is issued, for good and valuable consideration, receipt of which is hereby acknowledged, to RRE Giga Investors, LP. (the "Holder") by Giga Information Group, Inc., a Delaware corporation (the "Company"), in connection with and as part of the issuance of a Convertible Promissory Note of even date herewith (the "Note"). Each capitalized term not defined herein shall have the meaning ascribed to it in the Note. 1. Purchase of Shares. Subject to the terms and conditions hereinafter ------------------ set forth, if a Qualified Series B Financing (as defined below) shall have occurred on or before February 28, 1996, the Holder shall be entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder hereof in writing), to purchase from the Company such number of shares (the "Shares") of Series B Preferred Stock ("Series B Preferred Stock") as shall equal the quotient obtained by dividing 1,000,000 by the average price per share of the Series B Preferred Stock issued as of the time the Company first consummates a Qualified Series B Financing (excluding from the calculation of such price per share the shares issued or issuable hereunder or upon conversion of the Note). For example, if the Company shall consummate a Qualified Series B Financing with an average price per share of $ 15, the aggregate number of shares issuable upon exercise of this Warrant shall be 1,000,000/15, or 66,667 shares of Series B Preferred Stock. In the event that the Company shall issue warrants ("Series B Financing Warrants") to purchasers of its Series B Preferred Stock in a Qualified Series B Financing, then the Company shall issue to the Holder a warrant (the "Anti-Dilution Warrant") of like terms and exercisable for the same class of stock as are the Series B Financing Warrants. The number of shares issuable upon exercise of the Anti- Dilution Warrant shall equal the product of the quotient of (i) 1,000,000 divided by the sum of (A) the gross proceeds to the Company from the sale for cash of its Series B Preferred Stock on or before February 28, 1996 in such Qualified Series B Financing (other than the 1 stock issued or issuable on conversion of the Note or exercise of this Warrant) plus (B) the aggregate initial exercise price of the Series B Financing Warrants, multiplied by (ii) the number of shares of capital stock initially issuable upon exercise of the Series B Financing Warrants (excluding shares of capital stock issuable pursuant to any Additional Warrant issued pursuant to Section 4.6 of the Purchase Agreement). For the purpose of any calculation hereunder, of the purchase price of the Series B Preferred Stock, no portion of the proceeds of the Qualified Series B Financing shall be allocated to any Series B Financing Warrant. A "Qualified Series B Financing" shall mean the sale, on or before February 28, 1996, for cash, in one or a series of transactions, of shares of its Preferred Stock having terms no less favorable, take as a whole, to the purchasers than those set forth in Exhibit I hereto, for gross proceeds to the Company of at least $8 million (excluding the proceeds from the sale of the Note upon its initial issuance). 2. Exercise Price. The exercise price for the Shares shall be 67% of the -------------- average per share price (prior to expenses and commissions) at which the Company shall sell shares of its Series B Preferred Stock in a Qualified Series B Financing (excluding from the calculation of such price per share the shares issued or issuable hereunder or upon conversion of the Note). Such price shall be subject to adjustment pursuant to Section 7 hereof (such price, as adjusted from time to time, is herein referred to as the "Exercise Price"). Fractional shares will be payable by the Company in cash. 3. Exercise Period. This Warrant is exercisable at any time and from time --------------- to time, in whole or in part following the consummation by the Company of a Qualified Series B Financing and, except as provided below, shall remain so exercisable until and including the earlier of February 28, 2001 and the date five years from which the Company shall have first consummated a Qualified Series B Financing. If not otherwise exercised pursuant to Section 4 hereof, this Warrant shall immediately terminate upon (a) the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, (the "Initial Public Offering"), (b) the sale of all or substantially all the assets of the Company or (c) the merger of the Company into or consolidation with any other entity in which at least 50% of the voting power of the Company is transferred (an "Acquisition"). In the event of a transaction of the kind described above in this paragraph, the Company shall notify the Holder at least ten (10) days prior to the consummation of such event or transaction. 4. Method of Exercise. ------------------ (a) Exercise for Cash. The purchase right represented by this Warrant may ----------------- be exercised by the holder hereof, in whole or in part and from time to time, by either, at the election of the holder hereof, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit B duly executed) at --------- the principal office of the Company and by the payment to the Company, by check, of an amount equal to the then applicable Exercise Price per share multiplied by the number of Shares then being purchased. The person or 2 persons in whose name(s) any certificate(s) representing Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty (30) days of receipt of such notice and, unless this Warrant has been fully exercised or expired, a new warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period. (b) Net Issue Exercise. ------------------ (i) In lieu of exercising this Warrant, the holder hereof may elect to receive shares equal to the value of this Warrant (or the portion thereof being cancelled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to the holder hereof a number of shares of Series B Preferred Stock computed using the following formula: X = Y(A-B) ----- A Where X = The number of shares of Series B Preferred Stock to be issued to the holder hereof. Y = the number of shares of Series B Preferred Stock purchasable under this Warrant. A = the fair market value of one share of Series B Preferred Stock. B = Exercise Price (as adjusted to the date of such calculations). (ii) For purposes of this Section, fair market value of the Company's Preferred Stock shall mean the price determined by the Company's Board of Directors, acting in good faith upon a review of all relevant factors; provided, however, that if this Warrant is exercised in conjunction with the Company's Initial Public Offering, the fair market value of the Series B Preferred Stock shall be equal to the offering price less any applicable underwriters' discounts and commissions. 5. Reservation of Shares. The Company covenants that it will, at all times --------------------- after the Qualified Series B Financing, keep available such number of authorized shares of its Series B Preferred Stock and Common Stock, free from all preemptive rights with respect thereto, which will be sufficient to permit the exercise of this Warrant for the full number of Shares 3 specified herein and the conversion of the Shares, if any, upon exercise of this Warrant. The Company further covenants that such Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof. 6. Adjustment of Exercise Price and Number of Shares. The number of and ------------------------------------------------- kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Conversion or Redemption of Series B Preferred Stock. Should all of ---------------------------------------------------- the Company's Series B Preferred Stock be, at any time prior to the expiration of this Warrant, redeemed or converted into shares of the Company's Common Stock in accordance with the Company's Articles of Incorporation, as amended and/or restated and effective immediately prior to the redemption or conversion of all of the Company's Series B Preferred Stock, then this Warrant shall immediately become exercisable for that number of shares of the Company's Common Stock equal to the number of shares of Common Stock which would have been received if this Warrant had been exercised in full and the Shares received thereupon had been simultaneously converted into Common Stock immediately prior to such event. The Exercise Price per share of Common Stock shall be immediately adjusted to equal the quotient obtained by dividing (x) the aggregate purchase price of the number of shares of Series B Preferred Stock for which this Warrant was exercisable immediately prior to such conversion or redemption by (y) the number of shares of Common Stock for which this Warrant is exercisable immediately after such conversion or redemption. (b) Subdivisions and Combinations. If the Company shall at any time prior ----------------------------- to the expiration of this Warrant subdivide its Series B Preferred Stock, by split up or otherwise, or combine its Series B Preferred Stock, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 7(b) shall become effective at the close of business on the date the subdivision or combination becomes effective. (c) Stock Dividends and Distributions. In case the Company shall at any --------------------------------- time while this Warrant is outstanding and unexpired pay a dividend with respect to Series B Preferred Stock, payable in shares of such stock (except any distribution provided for in Section 6(b) or 6(d) herein), then the Exercise Price in effect immediately prior to the record date for distribution of such dividend or in the event that no record date is fixed, upon the making of such dividend shall be adjusted to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of shares of such stock outstanding immediately prior to such dividend and (ii) the denominator of which shall be the total number of shares of such stock outstanding immediately after such dividend. 4 (d) Reclassification, Reorganization and Consolidation. In case of any -------------------------------------------------- reclassification, conversion of Series B Preferred Stock into Common Stock, or capital reorganization or change in the Series B Preferred Stock, of the Company (other than as provided for in Sections 6(a), (b) and (c) above), then, as a condition of such reclassificonversion, reorganization or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder of this Warrant, so that such Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, conversion, reorganization or change by a holder of the same number of shares of Series B Preferred Stock as were purchasable by the Holder of this Warrant immediately prior to such reclassification, conversion, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same. (e) Notice of Adjustment. When any adjustment is required to be made in -------------------- the number or kind of shares purchasable upon exercise of the Warrant, or in the Warrant Price, the Company shall promptly notify the Holder of such event and of the number of shares of Series B Preferred Stock or other securities or property thereafter purchasable upon exercise of the Warrant. 7. No Fractional Shares. No fractional shares shall be issued upon the -------------------- exercise of this Warrant, and the number of shares of stock issued upon exercise of this Warrant shall be rounded to the nearest whole share. In lieu of the Company issuing any fractional shares to the Holder upon a net exercise under Section 4(b) hereof, the Company shall pay to the Holder the fair market value of such fractional share, as determined in good faith by the Company's Board of Directors. 8. No Stockholder Rights. Prior to exercise of this Warrant, the Holder --------------------- shall not be entitled to any rights of a shareholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of shareholder meetings, and such Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. 9. Exchange of Warrant. Subject to any restriction upon transfer set ------------------- forth in this Warrant, each Warrant may be exchanged for another Warrant or Warrants of like tenor and representing in the aggregate a like number of Warrants. Any Holder desiring to exchange a Warrant or Warrants shall make such request in writing delivered to the Company, and 5 shall surrender, properly endorsed, the Warrant or Warrants to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled thereto a new Warrant or Warrants, as the case may be, as so requested. 10. Mutilated or Missing Warrants. In case any Warrant shall be ----------------------------- mutilated, lost, stolen or destroyed, the Company shall issue and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant and indemnity or bond, if requested, also reasonably satisfactory to the Company. An applicant for such substitute Warrant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 11. Payment of Taxes. The Company will pay all taxes (other than any ---------------- income taxes or other similar taxes), if any, attributable to the initial issuance of the Warrant and the issuance of the Shares upon the exercise of the Warrant, provided, however, that the Company shall not be required to pay any -------- ------- tax or taxes which may be payable in respect of the issuance or delivery of any Warrant, or the transfer thereof, and no such issuance, delivery or transfer shall be made unless and until the person requesting such issuance or transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that no such tax is payable or such tax has been paid. 12. Registration. The Warrants shall be numbered and shall be registered ------------ in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration of transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with knowledge of such facts that its participation therein amounts to bad faith. 13. Transfer of Warrants. The Warrants shall be transferable on the books -------------------- of the Company (the "Warrant Register") only upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer, and only with the prior written consent of the Company. In all cases of transfer by an attorney, the original power of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced, and may be required to be deposited with the Company in its discretion. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause Warrants 6 to be transferred on its books to any person, unless the Holder of such Warrants shall furnish to the Company evidence of compliance with the Securities Act of 1933, as amended and applicable state blue sky laws. 14. Successors and Assigns. The terms and provisions of this Warrant ---------------------- shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns. 15. Amendments and Waivers. Except for the number of shares purchasable ---------------------- under this Warrant and except for the "Purchase Price" (as set forth in Section 2 hereof), any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the holders of this Warrant and other warrants of like tenor and effect issued of even date herewith entitled to a majority of the total number of Shares issuable pursuant to this Warrant and such other warrants (except that such consent will not be required for variations necessary to express the name of the holder). Any waiver or amendment effected in accordance with this section shall be binding upon each holder of this Warrant and any such other warrants at the time outstanding, each future holder of all such warrants, and the Company. 16. Governing Law. This Warrant shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Delaware without regard to the possible application of principles of conflict of laws. 7 IN WITNESS WHEREOF, the undersigned hereby executes this Stock Purchase Warrant as of August ___, 1995. GIGA INFORMATION GROUP, INC. By: /s/ Michael J. Kolesar _________________________________________ Michael Kolesar, Vice President - Finance 8 EX-10.6 12 REGISTRATION RIGHTS AGREEMENT 13-NOV-1995 EXHIBIT 10.6 GIGA INFORMATION GROUP, INC. REGISTRATION RIGHTS AGREEMENT ----------------------------- NOVEMBER 13, 1995 TABLE OF CONTENTS
PAGE Section 1. Amendment .............................................. 1 1.1 Amendment and Waiver.................................. 1 Section 2. Registration Rights .................................... 2 2.1 Definitions........................................... 2 2.2 Requested Registration................................ 3 2.3 Company Registration.................................. 5 2.4 Obligations of the Company............................ 5 2.5 Furnish Information................................... 6 2.6 Expenses of Demand Registration....................... 6 2.7 Expenses of Company Registration...................... 7 2.8 Underwriting Requirements............................. 7 2.9 Delay of Registration................................. 8 2.10 Indemnification....................................... 8 2.11 Reports Under Securities Exchange Act of 1934......... 10 2.12 Form S-3 Registration................................. 10 2.13 Assignment of Registration Rights..................... 11 2.14 "Market Stand-Off" Agreement.......................... 12 2.15 Termination of Registration Rights.................... 12 Section 3. Miscellaneous .......................................... 12 3.1 Assignment............................................ 12 3.2 Third Parties......................................... 12 3.3 Governing Law......................................... 12 3.4 Counterparts.......................................... 13 3.5 Notices............................................... 13 3.6 Severability.......................................... 13 3.7 Rights of Holders..................................... 13 3.8 Delays or Omissions................................... 13 3.9 Attorney's Fees....................................... 13
i REGISTRATION RIGHTS AGREEMENT ----------------------------- THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of the 9th day of November, 1995, by and among Giga Information Group, Inc., a Delaware corporation (the "Company"), the investors listed on Exhibit A hereto --------- (collectively, the "Investors") and those key members of the Company's management listed on Exhibit B hereto as may be designated from time to time by --------- the Board of Directors (collectively, the "Management Persons"). RECITALS WHEREAS, as of the date hereof each of the Investors is acquiring the number of shares of the classes and series of the Company's capital stock set forth opposite its name on Exhibit A hereto; --------- WHEREAS, as of the date hereof each of the Management Persons owns the number of shares of the classes and series of the Company's capital stock set forth opposite his or her name on Exhibit B hereto (which, collectively with any --------- additional shares of the Company's securities acquired by the Management Persons after the date of this Agreement, shall be deemed to be "Management Shares"); WHEREAS, the execution of this Agreement is a condition precedent to the consummation of the transactions contemplated by the Series B Preferred Stock Purchase Agreement dated as of November 13, 1995 among the Company and the Investors (the "Series B Purchase Agreement"); NOW, THEREFORE, the parties agree as follows: Section 1. Amendment. --------- 1.1 Amendment and Waiver. Except as expressly provided herein, -------------------- neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that any provisions hereof may be amended, waived, discharged or terminated upon the written consent of all of (i) the Company, (ii) the Holders of at least a majority of the Registrable Securities, excluding the then outstanding Management Shares; and (iii) the Holders of at least a majority of the then outstanding Management Shares; provided further that the inclusion of additional purchasers of the Company's Common Stock, as agreed from time to time by the Company's Board of Directors, as "Management Persons" hereunder shall not be deemed an amendment to this Agreement. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder of Registrable Securities, and the Company. 1 Section 2. Registration Rights. ------------------- 2.1 Definitions. As used in this Agreement: ----------- (a) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act of 1933, as amended (the "Securities Act") and the subsequent declaration or ordering of the effectiveness of such registration statement. (b) The term "Registrable Securities" means: (i) Management Shares, except for purposes of the registration rights set forth under Sections 2.2 and 2.12 to which the Management Persons shall not be entitled under this Agreement, except that the Management Persons may request the inclusion of the Management Shares held by them upon receipt of the notice from the Company to all Holders as specified in Section 2.2(a); (ii) the shares of Common Stock issuable or issued upon conversion of the Company's Series B Preferred Stock (the shares of Common Stock referred to in clauses (i) and (ii) hereof are collectively referred to hereafter as the "Stock"); and (iii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Stock, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned; provided, however, that: (i) Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale, or (C) sold, assigned or otherwise transferred in a transaction in which the rights under this Section 2 have not been assigned in accordance with Section 2.13; and (ii) if the Company shall have consummated a Qualified Public Offering, Common Stock that is eligible to be sold pursuant to Rule 144(b) promulgated under the Securities Act (or any successor rule). 2 (c) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (d) The term "Holder" means any person owning of record Registrable Securities who acquired such Registrable Securities in a transaction or series of transactions not involving any registered public offering or pursuant to Rule 144. (e) The term "Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Securities and Exchange Commission ("SEC") which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (f) The term "Qualified Public Offering" means an underwritten initial public offering pursuant to a registration statement (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a transaction pursuant to Rule 145 under the Securities Act) under the Securities Act covering the Company's Common Stock, which results in aggregate cash proceeds (prior to underwriters' commissions and expenses) to the Company and any selling stockholder of at least $15,000,000, and which has a public offering price of not less than $5.25 per share (as appropriately adjusted for stock splits, combinations, reclassifications and the like). (g) Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in the Series B Purchase Agreement. 2.2 Requested Registration. ---------------------- (a) If the Company shall receive at any time after the earlier of (i) November 1, 1999, or (ii) six (6) months after the effective date of the first registration statement for a Qualified Public Offering, a written request from the Holders of at least forty percent (40%) of the Registrable Securities then outstanding (excluding the Management Shares, for which the Management Persons shall not be entitled to initiate a request under this Section 2.2(a)), that the Company file a registration statement under the Securities Act covering the registration of at least twenty percent (20%) of the Registrable Securities then outstanding (excluding the Management Shares), and for which the anticipated aggregate gross proceeds to the Company and any selling stockholder would exceed $5,000,000, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders (including Management Persons, who shall be entitled to request registration of the Management Shares held by them pursuant to this sentence) and shall, subject to the limitations of subsection 2.2(b), effect as soon as practicable, and in any event within ninety (90) days 3 of the receipt of such request, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.5. (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in subsection 2.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 2.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting that are held by Holders other than the Management Persons shall not be reduced unless all Management Shares are first entirely excluded from the underwriting; provided, further, that the number of shares of Registrable Securities (including Management Shares) to be included in such underwriting shall not be reduced unless all other securities proposed to be sold by persons other than the Holders (including the Management Persons) and the Company are first entirely excluded from the underwriting. (c) The Company is obligated to effect only two (2) such registrations pursuant to this Section 2.2 and, in any event, no more than one (1) such registration in any twelve (12) month period. (d) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2, a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating 4 Holders; provided, however, that the Company may not utilize this right more than twice in any twelve month period nor for a total of more than 120 consecutive days. 2.3 Company Registration. If the Company proposes to register -------------------- (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its Common Stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating either to the sale of securities to participants in a Company stock option, stock purchase or similar plan or in an SEC Rule 145 transaction, or a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section 2.8, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. 2.4 Obligations of the Company. Whenever required under this Section -------------------------- 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective until the distribution contemplated in the Registration Statement has been completed (but not for more than 270 days). (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to 5 qualify to do business or, except as required under the Securities Act, to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 2, if such securities are being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters. (h) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed. 2.5 Furnish Information. It shall be a condition precedent to the ------------------- obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 2.6 Expenses of Demand Registration. All expenses other than ------------------------------- underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 2.2, including (without limitation), all registration, filing and qualification fees, printers and accounting fees, fees and 6 disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all Participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 2.2. 2.7 Expenses of Company Registration. The Company shall bear and pay -------------------------------- all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 2.3 for each Holder (which right may be assigned as provided in Section 2.13), including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them, but excluding underwriting discounts and commissions relating to Registrable Securities. 2.8 Underwriting Requirements. In connection with any offering ------------------------- involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 2.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as will not, in the written opinion of the underwriters, jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters reasonably believe is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders, provided that (i) if the number of shares of Registrable Securities to be included in any such offering shall be reduced, such reduction shall first be made by a reduction of the number of Management Shares to be so sold; (ii) the number of shares of Registrable Securities included in any such offering shall not be so reduced unless all other securities proposed to be sold by persons other than (A) the Holders (including the Management Persons), (B) the Company, and (C) Pari Passu Holders (as defined below) are first entirely excluded from the underwriting. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing 7 persons shall be deemed to be a single "selling stockholder," and any pro rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. "Pari Passu Holders" means persons who are contractually entitled to inclusion in the offering, on a pari passu basis with the Holders, of shares of Common Stock issued or issuable to such persons, which shares will be subject to reduction of the number to be included in the registration on a pro rata basis with the Registrable Securities held by the Investors; provided that the Company may not grant such rights to Pari Passu Holders with respect to an aggregate of more than 50% of the number of Registrable Securities (excluding Management Shares) issued or issuable upon conversion of the aggregate number of Shares of the Company's Series B Preferred Stock issued pursuant to the Series B Purchase Agreement without the written consent of the Holders of at least a majority of the Registrable Securities (excluding Management Shares). 2.9 Delay of Registration. No Holder shall have any right to obtain --------------------- or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 2.10 Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 2: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Securities Act, the 1934 Act or any state securities law; and the Company will pay as incurred to each such Holder, underwriter or controlling person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 2.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the 8 consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 2.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 2.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided that in no event shall any indemnity under this subsection 2.10(b) exceed the gross proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 2.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, only if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.10, but the omission 9 so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.10. (d) The obligations of the Company and Holders under this Section 2.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2, and otherwise. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 2.11 Reports Under Securities Exchange Act of 1934. With a view to --------------------------------------------- making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the 1934 Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Securities Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 10 2.12 Form S-3 Registration. In case the Company shall receive from --------------------- any Holder or Holders owning in the aggregate at least 20% of the Registrable Securities a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 20 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 2.12, (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $500,000; (3) if the Company shall furnish to the Holders a certificate signed by the president of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than sixty (60) days after receipt of the request of the Holder or Holders under this Section 2.12; provided, however, that the Company shall not utilize this right more than once in any twelve month period; (4) if the Company has, within the six month period preceding the date of such request, already effected one registration on Form S-3 for the Holders pursuant to this Section 2.12; (5) if the Company has already effected a total of six registrations on Form S-3 for the Holders pursuant to this Section 2.12; or (6) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. All expenses incurred in connection with a registration requested pursuant to Section 2.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees, auditing expenses and the fees and disbursements of counsel for the Company shall be borne by the Company, but excluding underwriting discounts and commissions relating to Registrable Securities and the fees and disbursements of counsel 11 to the selling Holder or Holders. Registrations effected pursuant to this Section 2.12 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2 or 2.3. 2.13 Assignment of Registration Rights. The rights to cause the --------------------------------- Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of all of such Holder's Registrable Securities or at least 400,000 shares (as adjusted to reflect stock splits, stock dividends or recapitalizations) of such securities provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. The foregoing 400,000 share limitation shall not apply, however, to transfers by a Holder to stockholders, partners or retired partners of the Holder, or to spouses, ancestors, lineal descendants and siblings of the Holder, if all such transferees or assignees of a single Holder agree in writing to appoint a single representative as their attorney in fact for the purpose of receiving any notices and exercising their rights under this Section 2. 2.14 "Market Stand-Off" Agreement. The Holder hereby agrees that --------------------------- during the period of duration specified by the Company and an underwriter of Company Common Stock or other securities of the Company following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, sell or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Common Stock of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: (a) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements; and (b) such market stand-off period shall not exceed 180 days. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of the Investor (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 2.15 Termination of Registration Rights. No Holder shall be entitled ---------------------------------- to exercise any right provided for in this Section 2 after the later of (a) three (3) years following the consummation of a Qualified Public Offering or (b) such time following the Company's initial public offering as such Holder is entitled under Rule 144 to 12 dispose of all the Registrable Securities held by such Holder during any 90-day period. Section 3. Miscellaneous. ------------- 3.1 Assignment. Subject to the provisions of Section 2.13 hereof, ---------- the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto. 3.2 Third Parties. Nothing in this Agreement, express or implied, is ------------- intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 3.3 Governing Law. This Agreement shall be governed by and construed ------------- under the laws of the State of New York in the United States of America as applied to agreements among New York residents entered into and to be performed entirely within New York. 3.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 3.5 Notices. Any notice required or permitted by this Agreement ------- shall be in writing and shall be sent by prepaid registered or certified mail, return receipt requested, addressed to the other party at the address shown below or at such other address for which such party gives notice hereunder. Such notice shall be deemed to have been given three (3) days after deposit in the mail. 3.6 Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, portions of such provisions, or such provisions in their entirety, to the extent necessary, shall be severed from this Agreement, and the balance of this Agreement shall be enforceable in accordance with its terms. 3.7 Rights of Holders. Each holder of Registrable Securities shall ----------------- have the absolute right to exercise or refrain from exercising any right or rights that such holder may have by reason of this Agreement, including, without limitation, the right to consent to the waiver or modification of any obligation under this Agreement, and such holder shall not incur any liability to any other holder of any securities of the Company as a result of exercising or refraining from exercising any such right or rights. 3.8 Delays or Omissions. No delay or omission to exercise any right, ------------------- power or remedy accruing to any party to this Agreement, upon any breach or default of the other party, shall impair any such right, power or remedy of such non-breaching party nor shall it be construed to be a waiver of any such breach or default, or an 13 acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative. 3.9 Attorney's Fees. If any action at law or in equity is necessary --------------- to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the day and year first above written. COMPANY: GIGA INFORMATION GROUP, INC. a Delaware corporation By: /s/ Gideon Gartner ------------------------- Title: ---------------------- MANAGEMENT PERSONS: /s/ Gideon Gartner - ---------------------------- (Gideon Gartner) /s/ David Gilmour - ---------------------------- (David Gilmour) 14 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT THE INVESTORS: - ------------- Name of Investor: Neill & Linda Brownstein - ------------------------ By:/s/ Neill & Linda Brownstein ---------------------------- Name of Investor: Todd D. Brownstein - ------------------ By:/s/ Todd D. Brownstein ---------------------- Name of Investor: Emily G. Hamilton - ----------------- By: /s/ Neill H. Brownstein ------------------------ Father Name of Investor: Will P. Gordon - -------------- By:/s/ Will P. Gordon ------------------ Name of Investor: Robert E. Cook - -------------- By: /s/ Robert E. Cook ------------------- 15 Name of Investor: Christopher J. DiVecchio - ------------------------ By:/s/ Christopher J. DiVecchio ---------------------------- Name of Investor: Martin P. DuRoss - ---------------- By:/s/ Martin P. DuRoss -------------------- Name of Investor: Harry Edelson - ------------- By:/s/ Harry Edelson ----------------- Name of Investor: Edelson Technology Partners III - ------------------------------- By:/s/ Harry Edelson ----------------- Name: Harry Edelson -------------- Title: General Partner --------------- Name of Investor: Richard J. Foudy - ---------------- By:/s/ Richard J. Foudy -------------------- 16 Name of Investor: Gilo Family Partnership - ----------------------- By:/s/ Davidi Gilo --------------- Name: Davidi Gilo ----------- Title: President of Davidi and Shamaja ------------------------------- Gilo Inc., General Partner -------------------------- Name of Investor: Michael J. Kolesar - ------------------ By:/s/ Michael J. Kolesar ---------------------- Name of Investor: John B. Landry - -------------- By:/s/ John B. Landry ------------------ Name of Investor: Derek Lemke-von Ammon - --------------------- By:/s/ Derek Lemke-von Ammon ------------------------- 17 Name of Investor: RRE GIGA INVESTORS II, L.P. By: RRE PARTNERS, L.L.C., as General Partner ------------------ By: RRE Investors, L.L.C., as Managing Member By:/s/ Stuart J. Ellman -------------------- Name: Stuart J. Ellman ----------------- Title: Class A Member -------------- Name of Investor: Cornelius T. Ryan - ----------------- By:/s/ Cornelius T. Ryan --------------------- Name of Investor: Frederick G. Smith - ------------------ By:/s/ Frederick G. Smith ---------------------- Name of Investor: Susan Tracy Wheeler - ------------------- By:/s/ Susan Tracy Wheeler ----------------------- 18 Name of Investor: Adam J. Brownstein - ------------------ By: /s/ Adam J. Brownstein ----------------------- Name: Adam J. Brownstein ------------------- Name of Investor: 21st Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer 21st Century Communications Foreign Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer 21st Century T-E Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ----------------- Irwin Lieber Title: Treasurer Name of Investor: Executive Technology L.P. - ------------------------- By: /s/ Seymour L. Goldblatt ------------------------------------- Title: President of S/2/ Technology Corp ---------------------------------- which is the General Partner of Executive Technology L.P. 19 Name of Investor: Monstol Investments NV - ---------------------- By: /s/ Seymour L. Goldblatt --------------------------------- Seymour L. Goldblatt Title: ------------------------------ President S/2/ Technology Corp Name of Investor: Core Technology Fund Inc. - ------------------------- By: /s/ Seymour L. Goldblatt ------------------------- Seymour L. Goldblatt Title: ---------------------- Managing Director Name of Investor: Sci-Tech Investment Partners L.P. - --------------------------------------- By: /s/ Seymour L. Goldblatt ------------------------------------ Seymour L. Goldblatt Title: --------------------------------- President of S/2/ Technology Corp which is the General Partner of SciTech Investment Ptr. Name of Investor: The Matrix Technology Group NV - ------------------------------ By: /s/ Seymour L. Goldblatt ------------------------- Seymour L. Goldblatt Title: ---------------------- Managing Director 20 Name of Investor: Yale University - --------------- By: /s/ Seymour L. Goldblatt --------------------------------- Seymour L. Goldblatt Title: ------------------------------ President S/2/ Technology Corp Name of Investor: Yale University Retirement Plan for Staff Employees - --------------------------------------------------- By: /s/ Seymour L. Goldblatt ---------------------------------- Seymour L. Goldblatt Title: ------------------------------- President, S/2/ Technology Corp Name of Investor: SG Partners, L.P. - ----------------- By: /s/ Seymour L. Goldblatt ------------------------------------ Seymour L. Goldblatt Title: --------------------------------- President of S/2/ Technology Corp which is the General Partner of SG Partners L.P. Haussmann Holdings By: /s/ Dana Schmidt ----------------- Title: PRINCIPAL -------------- Montgomery Growth Partners, L.P. By: Montgomery Asset Management, L.P., Its General Partner ------------------------------------------------------- By: /s/ Dana Schmidt ----------------- Title: PRINCIPAL -------------- Montgomery Growth Partners II, L.P. By: /s/ Keith High ------------------- Title: GENERAL PARTNER ---------------- 21 Nosrob Investments, Ltd. By: /s/ Dana Schmidt ----------------- Title: PRINCIPAL -------------- Quota Fund, N.V. By: /s/ Dana Schmidt ----------------- Title: PRINCIPAL -------------- Montgomery Small Cap Partners III, L.P. By: /s/ Keith High, Its General Partner ---------------- By: KEITH HIGH ------------------------------------ TITLE: GENERAL PARTNER --------------------------------- RRE Giga Investors, L.P. By: RRE Investors L.L.C., its General Partner By: /s/ Stuart Ellman ------------------------------------ Title: Managing Director --------------------------------- 22 Lagunitas Partners, L.P. By: /s/ John D. Gruber, its General Partner -------------------- Gruber & McBaine International By: /s/ J. Patterson McBaine ------------------------- Jon D. Gruber /s/ John D. Gruber - ---------------------------- (Jon D. Gruber) J. Patterson McBaine /s/ J. Patterson McBaine - ---------------------------- (J. Patterson McBaine) Kensington Partners L.P. By: /s/ Richard Keim, its General Partner ------------------ By: Dick Keim Title: G.P. ---------------------------------- Acorn Investment Trust By: /s/ Ralph Wanger ------------------------------------- Ralph Wanger Title: President 23 REGISTRATION RIGHTS AGREEMENT ----------------------------- EXHIBIT A --------- INVESTORS 21st Century Communications Partners, L.P. Sci-Tech Investment Partners, L.P. 767 5th Avenue c/o S/2/ Technology New York, NY 10153 515 Madison Avenue, Suite 4200 Attention: Irwin Lieber New York, NY 10022 Attention: Sy Goldblatt 21st Century Communications The Matrix Technology Group, N.V. Foreign Partners, L.P. c/o S/2/ Technology 767 5th Avenue 515 Madison Avenue, Suite 4200 New York, NY 10153 New York, NY 10022 Attention: Irwin Lieber Attention: Sy Goldblatt 21st Century Communications Yale University T-E Partners, L.P. c/o S/2/ Technology 767 5th Avenue 515 Madison Avenue, Suite 4200 New York, NY 10153 New York, NY 10022 Attention: Irwin Lieber Attention: Sy Goldblatt Montsol Investments N.V. Yale University Retirement Plan for c/o S/2/ Technology Staff Employees 515 Madison Avenue, Suite 4200 c/o S/2/ Technology New York, NY 10022 515 Madison Avenue, Suite 4200 Attention: Sy Goldblatt New York, NY 10022 Attention: Sy Goldblatt Executive Technology L.P. SG Partners L.P. c/o S/2/ Technology c/o S/2/ Technology 515 Madison Avenue, Suite 4200 515 Madison Avenue, Suite 4200 New York, NY 10022 New York, NY 10022 Attention: Sy Goldblatt Attention: Sy Goldblatt Core Technology Fund Inc. Acorn Fund Investment Trust c/o S/2/ Technology c/o Wanger Asset Mgmt. 515 Madison Avenue, Suite 4200 227 West Monroe Street New York, NY 10022 Chicago, IL 60606 Attention: Sy Goldblatt Attention: Ralph Wanger A-1 Montgomery Small Cap Partners III, L.P. Derek Lemke-von Ammon c/o Fiduciary Trust (Cayman) Limited c/o Montgomery Securities One Capital Place 600 Montgomery Street P.O. Box 1062 San Francisco, CA 94111 George Town, Grand Cayman, Cayman Islands Attention: Keith High Quota Fund N.V. Kensington Partners L.P. c/o Montgomery Asset Management 237 Park Avenue 600 Montgomery Street New York, NY 10017 San Francisco, CA 94111 Attention: Dick Kline Attention: Dana Schmidt Haussmann Holdings Lagunitas Partners, L.P. c/o Montgomery Asset Management c/o Gruber and McBaine Capital 600 Montgomery Street Management San Francisco, CA 94111 50 Osgood Place Attention: Dana Schmidt San Francisco, CA 94133 Montgomery Growth Partners, L.P. Gruber & McBaine International c/o Montgomery Asset Management c/o Gruber and McBaine Capital 600 Montgomery Street Management San Francisco, CA 94111 50 Osgood Place Attention: Dana Schmidt San Francisco, CA 94133 Montgomery Growth Partners, II, L.P. Jon D. Gruber c/o Fiduciary Trust (Cayman) Limited c/o Gruber and McBaine Capital One Capital Place Management P.O. Box 1062 50 Osgood Place George Town, Grand Cayman, Cayman San Francisco, CA 94133 Islands Attention: Keith High Nosrob Investments Ltd. J. Patterson McBaine c/o Montgomery Asset Management c/o Gruber and McBaine Capital 600 Montgomery Street Management San Francisco, CA 94111 50 Osgood Place Attention: Dana Schmidt San Francisco, CA 94133 A-2 Neill and Linda Brownstein Martin P. DuRoss 536 West Crescent Drive 15120 Eclipse Drive Palo Alto, CA 94301 Manassas, VA 22111 Adam J. Brownstein Susan Tracy Wheeler 536 West Crescent Drive 2 Bonnie Brook Road Palo Alto, CA 94301 Westport, Connecticut 06880 Todd D. Brownstein John B. Landry 536 West Crescent Drive 62 Old Connecticut Path Palo Alto, CA 94301 Wayland, MA 01778 Will P. Gordon RRE Giga Investors II, L.P. 536 West Crescent Drive 126 East 56th Street, 22nd Floor Palo Alto, CA 94301 New York, New York 10022 Attention: Mr. Stuart Ellman Emily G. Hamilton Harry Edelson 536 West Crescent Drive Edelson Technology Partners Palo Alto, CA 94301 Whiteweld Centre 300 Tice Boulevard Woodcliff Lake, NJ 07675 Richard J. Foudy Edelson Technology Partners III 780 Cedar Brook Lane Whiteweld Centre Soutport, CT 06490 300 Tice Boulevard Woodcliff Lake, NJ 07675 Cornelius T. Ryan Attention: Mr. Harry Edelson 315 Post Road West Derek Lemke-von Ammon Westport, CT 06880 Montgomery Securities 600 Montgomery Street San Francisco, CA 94111 Frederick G. Smith Gilo Family Partnership 435 East 57th Street, Apt. 5C 100 Why Worry Lane New York, NY 10022 Woodside, CA 94062 Attention: Davidi Gilo A-3 Michael J. Kolesar Robert E. Cook Giga Information Group, Inc. 572 Park Avenue, 2nd Floor 1 Longwater Circle Park City, UT 84060 Norwell, MA 02061 Christopher J. DiVecchio 254 Main Street, #1C Southport, CT 06490 A-4 REGISTRATION RIGHTS AGREEMENT ----------------------------- EXHIBIT B --------- MANAGEMENT PERSONS Gideon Gartner David Gilmour B-1 EX-10.7 13 CO-SALE AND STOCK RESTRICTION AGREEMENT 13/11/95 EXHIBIT 10.7 GIGA INFORMATION GROUP, INC. CO-SALE AND STOCK RESTRICTION AGREEMENT --------------------------------------- This Co-Sale and Stock Restriction Agreement (the "Agreement") is made as of the 13th day of November, 1995 by and among Gideon Gartner ("Founder"), Giga Information Group, Inc., a Delaware corporation (the "Company"), and the undersigned holders of Series B Preferred Stock (the "Stockholders"). In consideration of the mutual covenants set forth herein, the parties agree as follows: 1. Definitions. ------------ (a) "Stock" shall mean, on a fully diluted basis, the shares of the Company's Common Stock now owned by the Founder, including any shares of Common Stock issuable upon conversion or exercise of any warrants, options or Preferred Stock held by the Founder. (b) "Preferred Stock" shall mean the Company's outstanding Series B Preferred Stock, $.001 par value. (c) "Common Stock" shall mean the Company's Common Stock, $.001 par value. 2. Sales by Founder. ----------------- (a) Except in the case of any sale or transfer pursuant to the provisions of paragraphs 4(a) or 4(b) of this Agreement, if the Founder proposes to sell or transfer shares of Stock in one or more transactions then the Founder shall promptly give written notice (the "Notice") to the Company and the Stockholders at least twenty (20) days prior to the closing of such sale or transfer. The Notice shall describe in reasonable detail the terms of such proposed sale or transfer including, without limitation, the number of shares of Stock to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee. (b) Each Stockholder shall have the right, exercisable upon written notice to such Founder within fifteen (15) days after receipt of the Notice, to participate pro-rata in such sale of Stock on the same terms and conditions. To the extent one or more of the Stockholders exercise such right of participation in accordance with the terms and conditions set forth below, the number of shares of Stock that the Founder may sell in the transaction shall be correspondingly reduced subject to the proviso in the preceding sentence. ------- (c) Each Stockholder may sell all or any part of that number of shares of Preferred Stock, or Common Stock then owned by it, or Common Stock issuable upon conversion of Preferred Stock then owned (the "Stockholder Shares") equal to the product obtained by multiplying (i) the aggregate number of shares of Stock covered by the Notice by (ii) a fraction the numerator of which is the number of Stockholder Shares owned by such Stockholder at the time of the sale or transfer and the denominator of which is the total number of shares of Preferred Stock and Common Stock then held by the Stockholders and the Founder (subject to Section 2(e)). (d) If any Stockholder fails to elect to fully participate in such Founder's sale pursuant to this Section 2, the Founder shall give notice of such failure to the Stockholders who did so elect (the "Participants"). Such notice may be made by telephone if confirmed in writing within two (2) days. The Participants shall have five (5) days from the date such notice was given to agree to sell their pro rata share of the unsold portion. For purposes of this paragraph, and subject to Section 2(e), a Participant's pro rata share shall be the ratio of (x) the number of shares of Common Stock or Preferred Stock held by such Participant to (y) the total number of shares of Common Stock and Preferred Stock held by all Participants and the Founder. (e) In the event that the Founder shall sell Stock in one or more exempt trans actions pursuant to clause (a) of Section 4 representing the full amount of Stock permitted to be sold under such clause, then as to any subsequent proposed sales of Stock by the Founder representing up to the lesser of (a) 200,000 shares or (b) shares sold or to be sold for aggregate proceeds of up to $1,000,000, then for purposes of Section 2(c), a Stockholder's pro rata share shall be the ratio of (x) the number of shares of Common Stock, and Common Stock issuable upon conversion of Preferred Stock, held by such Stockholder to (y) the total number of shares of Common Stock, and Common Stock issuable upon conversion of Preferred Stock, held by all Stockholders. (f) Each Participant shall effect its participation in the sale by promptly delivering to the Founder for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent: (i) the type and number of shares of Common Stock which such Participant elects to sell; or (ii) that number of shares of Series A or Series B Preferred Stock which is at such time convertible into the number of shares of Common Stock which such Participant elects to sell; provided, however, that if the prospective purchaser objects to the delivery of Series A or Series B Preferred Stock in lieu of Common Stock, such Participant shall convert such Preferred Stock into Common Stock and deliver Common Stock as provided in subparagraph 2(e)(i) above. The -2- Company agrees to make any such conversion concurrent with the actual transfer of such shares to the purchaser. (g) The stock certificate or certificates that the Participant delivers to the Founder pursuant to paragraph 2(e) shall be transferred to the prospective purchaser in consummation of the sale of the Stock pursuant to the terms and conditions specified in the Notice, and the Founder shall concurrently therewith remit to such Participant that portion of the sale proceeds to which such Participant is entitled by reason of its participation in such sale. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase shares or other securities from a Participant exercising its rights of co-sale hereunder, the Founder shall not sell to such prospective purchaser or purchasers any Stock unless and until, simultaneously with such sale, the Founder shall purchase such shares or other securities from such Participant. (h) The exercise or non-exercise of the rights of the Participants hereunder to participate in one or more sales of Stock made by the Founder shall not adversely affect their rights to participate in subsequent sales of Stock subject to paragraph 2(a). 3. Right Of First Offer. --------------------- 3.1 General. Each Stockholder has the right of first offer to purchase ------- such Stockholder's Pro Rata Share (as defined below), of all (or any part) of any stock that the Founder may from time to time propose to sell after the date of this Agreement. A Stockholder's "Pro Rata Share" for purposes of this right of first offer is the ratio of (x) the number of shares of Common Stock and Preferred Stock held by such Stockholders to (y) the total number of shares of Common Stock and Preferred Stock held by the Stockholders and the Founder. 3.2 Subordination. The right of first offer granted herein to the ------------- Stockholders under this Section 3 shall be subject to any right of first offer, or similar right, granted by the Founder to the Company relating to the Common Stock of the Company pursuant to any agreements or instruments executed by the Founder in connection with the grant to the Founder or exercise by the Founder of any options, or the purchase by the Founder of any Common Stock. 3.3 Procedures. In the event that the Founder proposes to sell Stock, it ---------- shall give to each Stockholder written notice of his intention to sell Stock (the "Notice"), describing the type of Stock and the price and the general terms upon which the Founder proposes to sell such Stock. Each Stockholder shall have ten (10) business days from the date of receipt of any such Notice to agree in writing to purchase such Stockholder's Pro Rata Share of such Stock for the price and upon the general terms specified in the Notice by giving written notice to the Founder and -3- stating therein the number of shares of Stock to be purchased (not to exceed such Stockholder's Pro Rata Share). If any Stockholder fails to so agree in writing within such ten (10) day period to purchase such Stockholder's full Pro Rata Share of a sale of Stock (a "Nonpurchasing Stockholder"), then such Nonpurchasing Stockholder shall forfeit the right hereunder to purchase that part of his Pro Rata Share of such Stock that he did not so agree to purchase, and the Founder shall give notice of such failure to the Stockholders who did so elect (the "Purchasing Stockholders"). Such notice may be made by telephone if confirmed in writing within two (2) days. The Purchasing Stockholders shall have five (5) days from the date such notice was given to agree to sell their pro rata share of the unsold portion. For purposes of this paragraph, and subject to Section 2(e), a Participant's pro rata share shall be the ratio of (x) the number of shares of Common Stock or Preferred Stock held by such Participant to (y) the total number of shares of Common Stock and Preferred Stock held by all Purchasing Stockholders and the Founder. 3.4 Failure to Exercise. In the event that the Stockholders fail to ------------------- exercise in full their rights of first offer as set forth in this Section 3 within the prescribed period, then the Founder shall have 120 days thereafter to sell the Stock with respect to which the Stockholders' rights of first offer hereunder were not exercised, at a price and upon general terms not materially more favorable to the purchasers thereof than specified in the Founder's Notice to the Stockholders. In the event that the Founder has not sold the Stock within such 120-day period, then the Founder shall not thereafter sell any Stock without again first offering such Stock to the Stockholders pursuant to this Section 3. 4. Exempt Transfers. Notwithstanding the foregoing: ---------------- (a) Section 2 hereof shall not apply to (i) sale of Stock if, after giving effect thereto, the Founder shall have sold less than an aggregate of the lesser of (a) 200,000 shares or (b) shares for aggregate proceeds of less than $1,000,000 after the date of this Agreement, or (ii) any sale of Stock to the Company; (b) neither Section 2 nor Section 3 hereof shall apply to (i) sales and transfers of not more than 200,000 shares in any year to employees, directors or strategic partners of the Company or its subsidiaries in connection with bona fide compensation arrangements, licensing transactions, consulting arrangements and the like; (ii) any pledge of Stock made pursuant to a bona fide loan transaction that creates a mere security interest; (iii) any transfer to the ancestors, descendants or spouse of the Founder or to trusts for the benefit of such persons or the Founder; or (iv) any bona fide gift; provided that (A) the Founder shall inform the Stockholders of such sale, pledge, transfer or gift prior to effecting it and (B) in the case of transfers or gifts under clauses (iii) and (iv), the transferee or donee shall furnish the Stockholders with a written agreement to be bound by and comply with all provisions of Sections 2 and 3; -4- (c) upon and after the consummation of a Qualified Public Offering (as defined in Section 7.4), the provisions of Section 2 and Section 3 hereof shall only apply to privately negotiated sales, and shall not apply to offers and sales to the public; and (d) the provisions of Section 2 and Section 3 hereof shall not apply to the sale of any Stock (i) to the public pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) if prior to such sale, the Founder held less than 5% of the Company's outstanding shares. In the case of a transfer pursuant to clauses (b)(iii) or (iv), such transferred Stock shall remain "Stock" hereunder, and such pledgee, transferee or donee shall be treated as a "Founder" for purposes of this Agreement. 5. Prohibited Transfers. --------------------- (a) Notwithstanding any other provision set forth herein, the Founder agrees that he will not sell or transfer more than an aggregate of 800,000 shares of Stock during the three year period ending November 1, 1998 except in transactions permitted by Section 4. (b) In the event the Founder sells any Stock in contravention of the terms of this Agreement (a "Prohibited Transfer"), the Stockholders, in addition to such other remedies as may be available at law, in equity or hereunder, shall have the put option provided below, and the Founder shall be bound by the applicable provisions of such option. (c) In the event of a Prohibited Transfer, each Stockholder shall have the right to sell to the Founder the type and number of shares of Stock equal to the number of shares each Stockholder would have been entitled to transfer to the purchaser under Section 2(c) hereof had the Prohibited Transfer been effected pursuant to and in compliance with the terms hereof. Such sale shall be made on the following terms and conditions: (i) The price per share at which the shares are to be sold to the Founder shall be equal to the price per share paid by the purchaser to the Founder in the Prohibited Transfer. (ii) Within ninety (90) days after the later of the dates on which the Stockholder (A) received notice of the Prohibited Transfer or (B) otherwise become aware of the Prohibited Transfer, each Stockholder shall, if exercising the option created hereby, deliver to the Founder the certificate or certificates representing shares to be sold, each certificate to be properly endorsed for transfer. -5- (iii) The Founder shall, upon receipt of the certificate or certificates for the shares to be sold by a Stockholder, pursuant to this subparagraph 5(b), pay the aggregate purchase price therefor, in cash or by other means acceptable to the Stockholder. (iv) Notwithstanding the foregoing, any attempt by the Founder to transfer Stock in violation of Section 2 of this Agreement shall be void and the Company agrees it will not effect such a transfer nor will it treat any alleged transferee as the holder of such shares without the written consent of a majority in interest of the Stockholders. 6. Legend. ------- (a) Each certificate representing shares of Stock now or hereafter owned by the Founder or issued to any person in connection with a transfer pursuant to Section 4(a) hereof shall be endorsed with the following legend: "THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AND STOCK RESTRICTION AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION." (b) The Founder agrees that the Company may instruct its transfer agent to impose transfer restrictions on the shares represented by certificates bearing the legend referred to in Section 6(a) above to enforce the provisions of this Agreement and the Company agrees to promptly do so. The legend shall be removed upon termination of this Agreement. 7. Miscellaneous. -------------- 7.1 Governing Law. This Agreement shall be governed by and construed under ------------- the laws of the State of New York. 7.2 Amendment. Any provision may be amended and the observance thereof may --------- be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of (i) as to the Company, only by the Company, (ii) as to the Stockholders, by persons holding more than fifty percent (50%) in interest of the Common Stock and Preferred Stock held by the Stockholders and their assignees, pursuant to Section 7.3 hereof, and (iii) as to the Founder, only by the Founder, provided that any Stockholder may waive any of his -6- rights hereunder without obtaining the consent of any other Stockholder. Any amendment or waiver effected in accordance with clauses (i), (ii) and (iii) of this paragraph shall be binding upon each Stockholder, its successors and assigns, the Company and the Founder. 7.3 Assignment of Rights. This Agreement and the rights and obligations of -------------------- the parties hereunder shall inure to benefit of, and be binding upon, the parties hereto and their respective successors, assigns and legal representatives. The rights of the Stockholders hereunder are only assignable (i) by each of such Stockholders to any other person or entity who, immediately prior to such transfer, is a Stockholder or (ii) to an assignee or transferee who acquires the lesser of (a) at least one hundred percent (100%) of the Common Stock and Preferred Stock held by a Stockholder or (b) 800,000 shares of Common Stock or Preferred Stock. 7.4 Term. This Co-Sale and Stock Restriction Agreement shall terminate ---- upon the earlier of (i) the date two years following the closing of a firmly underwritten public offering (a "Qualified Public Offering") pursuant to a registration statement (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a transaction pursuant to Rule 145 under the Securities Act of 1933, as amended (the "Act")) under the Act covering the Company's Common Stock, which results in aggregate cash proceeds (prior to underwriters' commissions and expenses) to the Company and any selling stockholders of at least $15,000,000 and which has a public offering price of not less than $5.25 per share (as adjusted for any stock split, stock dividend, subdivision or combination of the Common Stock), or (ii) the closing of the Company's sale of all or substantially all of its assets or the acquisition of the Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of the Company's capital stock for securities or consideration issued, or caused to be issued, by the acquiring entity or its subsidiary. If, at any time, any Stockholder sells or contracts to sell, in one or more transactions, an aggregate of 50% or more of the Stock held by such Stockholder, this Agreement shall terminate with respect to such Stockholder upon the consummation of any such sale. 7.5 Ownership. The Founder represents and warrants that he is the sole --------- legal and beneficial owner of the shares of stock subject to this Co-Sale and Stock Restriction Agreement and that no other person has any interest (other than a community property interest) in such shares. 7.6 Notices. All notices required or permitted hereunder shall be in ------- writing and shall be deemed effectively given upon personal delivery to the party to be notified or five days after deposit in the United States mail, by registered or certified mall, postage prepaid and properly addressed to the party to be notified (a) as set forth on Annex A to the Series B Preferred Stock ------- Purchase Agreement, dated as -7- of November 17, 1995 among the Company and the Stockholders, in the case of the Stockholders, (b) to the Founder at 146 West 57th Street, New York, N.Y. 10019; (c) to the Company at 1 Longwater Circle, Norwell, MA 02061, attention: Vice President-Finance; or at such other address as such party may designate by ten (10) days' advance written notice to the other parties hereto. Notwithstanding the foregoing, the telephone notice permitted by Section 2(d) shall be effective at the time it is given. 7.7 Severability. In the event one or more of the provisions of this Co- ------------ Sale and Stock Restriction Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Co-Sale and Stock Restriction Agreement, and this Co-Sale and Stock Restriction Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 7.8 Attorney Fees. In the event that any dispute among the parties to this ------------- Co- Sale and Stock Restriction Agreement should result in litigation, the prevailing party in such dispute shall be entitled to recover from the closing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Co-Sale and Stock Restriction Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 7.9 Counterparts. This Co-Sale and Stock Restriction Agreement may be ------------ executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -8- The foregoing agreement is hereby executed as of the date first above written. GIGA INFORMATION GROUP, INC. By /s/ Gideon Gartner --------------------------------- Title _____________________________ Address __________________________ __________________________ __________________________ FOUNDER: ----------------------------------- /s/ Gideon Gartner ----------------------------------- Gideon Gartner Address ___________________________________ ___________________________________ ___________________________________ -9- SIGNATURE PAGE TO THE CO-SALE AND STOCK RESTRICTION AGREEMENT THE STOCKHOLDERS: - ---------------- Name of Stockholder: Neill & Linda Brownstein - ------------------------------------ By: /s/ Neill H. Brownstein ------------------------------- Name of Stockholder: Robert E. Cook - ------------------------------------ By: /s/ Robert E. Cook ------------------------------- Name of Stockholder: Christopher J. DiVecchio - ------------------------------------ By: /s/ Christopher J. DiVecchio ------------------------------- Name of Stockholder: Martin P. DuRoss - ------------------------------------ By: /s/ Martin P. DuRoss ------------------------------- -10- Name of Stockholder: Harry Edelson - ------------------------------------ By: /s/ Harry Edelson ------------------------------- Name of Stockholder: Edelson Technology Partners III - ------------------------------------ By: /s/ Harry Edelson ------------------------------- Title: General Partner ---------------------------- Name of Stockholder: Richard J. Foudy - ------------------------------------ By: /s/ Richard J. Foudy ------------------------------- Name of Stockholder: Gilo Family Partnership - ------------------------------------ By: /s/ Davidi Gilo ------------------------------- -11- Name of Stockholder: Michael J. Kolesar - ------------------------------------ By: /s/ Michael J. Kolesar ------------------------------- 2/29/96 ------------------------------- Name of Stockholder: /s/ John B. Landry - ------------------------------------ By: John B. Landry ----------------------------- Name of Stockholder: Derek Lemke-von Ammon - ------------------------------------ By: /s/ Derek Lemke-von Ammon ------------------------------- -12- Name of Stockholder: RRE GIGA INVESTORS II, L.P. By: RRE PARTNERS, L.L.C., as General Partner - ------------------------------------ By: RRE Investors, L.L.C., as Managing Member By: /s/ Stuart J. Ellman ------------------------------- Title: Class A Member ---------------------------- Name of Stockholder: Cornelius T. Ryan - ------------------------------------ By: /s/ Cornelius T. Ryan ------------------------------- Title: Individual ---------------------------- Name of Stockholder: Frederick G. Smith - ------------------------------------ By: /s/ Frederick G. Smith ------------------------------- Title: Sup. Sales ---------------------------- Name of Stockholder: Susan Tracy Wheeler - ------------------------------------ By: /s/ Susan Tracy Wheeler ------------------------------- -13- 21st. Century Communications Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ---------------------------- Irwin Lieber Title: Treasurer 21st. Century Communications Foreign Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ---------------------------- Irwin Lieber Title: Treasurer 21st. Century Communications T-E Partners, L.P. By: Infomedia Associates, Ltd., a General Partner By: /s/ Irwin Lieber ---------------------------- Irwin Lieber Title: Treasurer Name of Stockholder: S.G. Partners L.P. - -------------------------------- By: /s/ Seymour Goldblatt ---------------------------- Title: -------------------------- -14- Lagunitas Partners, L.P. By: /s/ John Gruber, Its General Partner ---------------- Gruber & McBaine International By: /s/ J. Patterson McBaine --------------------------------------- Jon D. Gruber /s/ John Gruber - ----------------------------------------- (Jon D. Gruber) J. Patterson McBaine /s/ J. Patterson McBaine - ----------------------------------------- (J. Patterson McBaine) Derek Lemke-von Ammon /s/ Derek Lemke-von Ammon - ----------------------------------------- (Derek Lemke-von Ammon) Haussmann Holdings: By: /s/ Dana Schmidt -------------------------------------- Title: Dana Schmidt ----------------------------------- Montgomery Growth Partners, L.P. By: Montgomery Asset Management, its G.P. ------------------------------------- By: /s/ Dana Schmidt ------------------------------------- Title: Principal ---------------------------------- -15- Quota Fund, N.V. By: /s/ Dana Schmidt ---------------------------- Title: Principal ------------------------- Montgomery Small Cap Partners III, L.P. By: /s/ Keith High , its General Partner ---------------------------- By: Keith High ---------------------------- Title: General Partner ------------------------- RRE Giga Investors, L.P. By: RRE Investors L.L.C., its General Partner By: /s/ Stuart Ellman ---------------------------- Title: Managing Director ------------------------- Kensington Partners L.P. By: /s/ Richard Keim, , Its General Partner ---------------------------- By: Dick Keim ---------------------------- Title: G.P. ------------------------- -16- Name of Stockholder: The Matrix Technology Group N.V. - -------------------------------------- By: /s/ Seymour Goldblatt ----------------------------------- Title: Managing Director ------------------------------- Name of Stockholder: Core Technology Fund Inc. - -------------------------------------- By: /s/ Seymour Goldblatt ---------------------------------- Title: Managing Director ------------------------------- Name of Stockholder: Executive Technology L.P. - -------------------------------------- By: /s/ Seymour Goldblatt ---------------------------------- Title: Pres. of S/2/ Tech which is -------------------------------- Gen'l Ptr. of Exec. Tech. Name of Stockholder: Yale University - -------------------------------------- By: /s/ Seymour Goldblatt ---------------------------------- Title: President of S/2/ Tech ------------------------------- -17- Name of Stockholder: Yale University Retirement Plan for Staff Employees - ------------------------------------------------- By: /s/ Seymour Goldblatt --------------------------------------------- Title: President of S2 Tech ------------------------------------------ Name of Stockholder: Sci-Tech Investment Partners L.P. - ------------------------------------------------- By: /s/ Seymour Goldblatt --------------------------------------------- Title: President of S2 Tech ------------------------------------------ which is Gen'l Ptr of Sci-Tech Name of Stockholder: Montsol Investments N.V. - ------------------------------------------------- By: /s/ Seymour Goldblatt --------------------------------------------- Title: Managing Director ------------------------------------------ Montgomery Small Cap Partners II, L.P. By: /s/ Keith High --------------------------------------------- -18- Name of Stockholder: Acorn Fund - ------------------------------------ By: /s/ Bruce H. Lauer -------------------------------- Title: Treasurer ----------------------------- Name of Stockholder: Nosrob Investments Ltd. - ------------------------------------ By: /s/ Dana Schmidt -------------------------------- Title: Dana Schmidt - Principal ----------------------------- Name of Stockholder: Adam J. Brownstein - ------------------------------------ By: /s/ Adam J. Brownstein -------------------------------- Name of Stockholder: Todd D. Brownstein - ------------------------------------ By: /s/ Todd D. Brownstein -------------------------------- Name of Stockholder: Emily G. Hamilton - ------------------------------------ By: Neill H. Brownstein, Father Name of Stockholder: Will P. Gordon - ------------------------------------ By: /s/ Will P. Gordon -------------------------------- -19- EX-10.9 14 CONVERTIBLE PROMISSORY NOTE 5-APR-1995 EXHIBIT 10.9 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM. 5% CONVERTIBLE NOTE $1,000,000 New York, New York April 5, 1995 FOR VALUE RECEIVED, Giga Information Group, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of Friday Holdings, L.P. or its successors and assigns (the "Payee" or "Holder"), the principal sum of $1,000,000 on April 5, 1998 (the "Maturity Date"), and to pay interest on the unpaid principal amount hereof from the date hereof until such principal is paid at the rate of five percent (5%) per annum, non-compounded, payable as set forth below. All amounts referred to in this Note are expressed and payable in United States dollars. Section 1. Interest. -------- Interest (computed on the basis of a 360 day year for the actual number of days elapsed in the period for which interest is being computed) shall be payable on the Maturity Date. If the Maturity Date shall not be a business day, then the interest that would otherwise become due and payable on such date shall instead become due and payable on the next succeeding business day; provided, -------- however, that such extension of time shall be included in the computation of - ------- interest due in conjunction with such payment. Section 2. Prepayment. ---------- The Company may, at its option at any time and from time to time, upon 20 days' prior written notice to the Holder, prepay the principal amount of this Note, in whole or in part, without premium or penalty. Such prepayment of principal shall be accompanied by the payment of all accrued and unpaid interest on the amount so prepaid to the date of prepayment. Section 3. Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Company of this Note are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Company's charter or by-laws or (ii) any law or any contractual restriction binding on or affecting the Company. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of this Note. (d) This Note is the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Section 4. Conversion of Note. ------------------ Section 4.1. Conversion. From the date hereof until the Maturity Date (or ---------- such earlier date, if this Note is prepaid in accordance with Section 2 hereof), at the election of the Holder, $1,000,000 principal amount of this Note may be converted at any time and from time to time, in whole or in part, on a pro rata basis, into 2.67% of the fully paid and nonassessable shares of the Common Stock of the Company based upon an equity capitalization for the company of up to $5 million. To the extent the equity capitalization of the Company exceeds $5 million, all shareholders of the Company will be diluted proportionately. Section 4.2. Manner of Conversion. This Note may be converted in whole or -------------------- in part by the Holder as provided above by surrender of the Note (the "Converted Note") together with a written notice from the Holder (a "Conversion Notice") addressed to the Company at the address set forth in Section 7. The Conversion Notice shall specify the principal amount of the Note as to which the Holder elects to exercise its conversion right and, if other than the Holder, the name and address of the person or persons to whom share certificates for the shares of Common stock to be issued upon such conversion are to be issued. The conversion shall be deemed to have been effected at the close of business on the date on which the converted Note shall have been so surrendered to the Company, and at such time the rights of the Holder shall, to the extent of the principal amount thereof converted, cease and the person or persons in whose name or names any certificate or certificates for shares of Common stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record thereof. Upon such conversion, the accrued but unpaid interest on the Note shall be cancelled to the extent of the pro rata portion of the Note so converted. Section 4.3. Partial Conversion. Upon a conversion, the Company shall, at ------------------ its expense, issue to the Holder a new note in substantially the form of this Note representing the principal amount not so converted. 2 Section 4.4. Delivery of Share Certificates; Fractional Shares. As ------------------------------------------------- promptly as practicable after the surrender of the converted Note, the Company at its expense will cause to be issued in the name of and delivered to the Holder (or in the name of and to the person or persons specified in the Conversion Notice) a certificate or certificates representing the number of shares of Common stock to which the Holder shall be entitled upon such conversion. No fractional shares of Common stock or scrip representing such fractional shares shall be issued upon any such conversion hereunder. If any fractional shares otherwise would be deliverable upon conversion, such fraction shall be rounded up if one-half or more, or otherwise rounded down, to the nearest whole number. Section 4.5. Adjustment Upon Merger, etc. If any capital reorganization ---------------------------- or reclassification of the capital stock of the Company or any consolidation or merger of the Company with another corporation, or the sale of all or a material amount of the Company's assets to another corporation shall be effected in such a way that holders of the Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for the Common Stock, then lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified in this Section 4.5 and in lieu of the shares of the Common Stock immediately theretofore receivable upon the conversion of this Note, securities or assets as may be issued or distributable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common stock immediately theretofore receivable upon conversion of this Note had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of this Note. Section 4.6. Notice of Adjustment. In case at any time: -------------------- (a) there shall be any capital reorganization, or classification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its stock or assets to, another person or persons; or (b) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in any one or more of said cases, the Company shall give, by first class mail, postage prepaid, addressed to the Holder at the address set forth in Section 7, (1) at least 30 days' prior written notice of the date on which the books of the Company shall close or a record date shall be selected for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, 3 liquidation or winding up, and (2) in the case of any such reorganization, reclassification, consolidation, merger, sale dissolution, liquidation, winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause shall also specify the date on which the holders of the Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. The failure to give any such notice shall not invalidate any such corporate action. Section 5. Events of Default; Remedies. --------------------------- Section 5.1. Events of Default. An "Event of Default" occurs if: ----------------- (a) there is a default in the payment of the principal or interest of this Note when the same becomes due and payable at maturity or otherwise; (b) any representation or warranty made by the Company (or any of its officers) under or in connection with this Note shall prove to have been incorrect in any material respect when made; (c) the Company shall fail to perform or observe any other term, covenant or agreement contained in this Note on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof sh all have been given to the Company by the Holder; (d) the Company or any subsidiary of the Company pursuant to or within the meaning of any Bankruptcy Law; (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors; or (e) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any subsidiary of the Company in an involuntary case, 4 (ii) appoints a Custodian of the Company or any subsidiary of the Company or for all or substantially all of its property, or (iii) orders the liquidation of the Company or any subsidiary of the Company, and, in each case, the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 5.2. Acceleration. If any Event of Default (other than an Event ------------ of Default in respect of the company specified in clause (d) or (e) of Section 5.1) occurs and is continuing, the Holder may, by written notice to the Company, declare the unpaid principal of and any accrued interest on this Note to be due and payable. Upon such declaration the principal and interest shall be due and payable immediately. If an Event of Default specified in clause (d) or (e) of Section 5.1 occurs in respect of the Company, such an amount shall become and be immediately due and payable without any declaration or other act on the part of the Holder. The Holder may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree of a court or governmental agency and if all existing Events of Default except nonpayment of principal or interest that has become due solely because of the acceleration) have been cured or waived. No such rescission shall affect any subsequent default or Event of Default or impair any right consequent thereto. Section 6. No Distributions. ---------------- The Company will not, so long as the Note remains unpaid, pay any cash dividends or make any cash distributions in respect of its capital stock. Section 7. Replacement of Note. ------------------- Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any loss, theft or destruction, upon delivery of an appropriate indemnification agreement rom the Holder, or, in the case of any such mutilation, upon surrender and cancellation of such Note, the Company at its expense will execute and deliver, in lieu thereof, a new Note of like tenor, dated the date to which interest on such lost, stolen, destroyed or mutilated Note has been paid. 5 Section 8. Notices. ------- Any notice or communication hereunder is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company: Gideon Gartner 64 Bermuda Road Westport, CT 06880 Telecopy: (303) 544-0536 If to the Holder: Friday Holdings, L.P. c/o Kenneth H. Heitner Weil, Gotshal & Manges 767 Fifth Avenue New York, N.Y. 10153 Attention: Paul Zazzera Telecopy: (212) 310-8007 The Company or the Holder by notice to the other may designate additional or different addresses for subsequent notices or communications. Section 9. No Waiver. --------- No failure on the part of the Holder to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Holder or any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies provided herein are cumulative and not exclusive and are in addition to all others that may be provided by application of law and other agreements and documents. Section 10. Successors and Assigns. ---------------------- This Note may be assigned (including, without limitation, distributing this Note to the partners of Holder or their respective affiliates) or pledged as security by the Holder from time to time without the consent of the Company, and in the event 6 of any such assignment, the obligations of the company hereunder shall inure to the benefit of all such assigns and successors thereto. Section 11. Severability. ------------ The terms and provisions of this Note are severable, and if any term or provision shall be determined to be superseded, illegal, invalid or otherwise unenforceable in whole or in part pursuant to applicable law by a governmental authority having jurisdiction, such determination shall not in any manner impair or otherwise affect the validity, legality or enforceability of that term or provision in any other jurisdiction or any of the remaining terms and provisions of this Note in any jurisdiction. Section 12. Amendment. --------- This Note may not be changed or terminated orally, and in any event no amendment, modification or waiver of any term or provision of this Note, shall be effective unless in writing and signed by the Holder. Section 13. Governing Law. This Note is made and delivered in New York, ------------- and shall be construed in accordance with and governed by the internal laws of New York. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered to the Holder by a duly authorized officer on the date and year first above written. GIGA INFORMATION GROUP, INC. By: /s/ Michael J. Kolesar ----------------------- Name: MICHAEL KOLESAR --------------------- Title: PRESIDENT & CFO ------------------- 7 EX-10.10 15 6% $400,000 CONVERTIBLE PROMISSORY NOTE 12/31/95 EXHIBIT 10.10 EXHIBIT A --------- THE SECURITIES EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO GIGA INFORMATION GROUP, INC., SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN FULL COMPLIANCE THEREWITH. GIGA INFORMATION GROUP, INC. 6% CONVERTIBLE NOTE Giga Information Group, Inc., a Delaware corporation (the "Company"), for value received, promises to pay to David Gilmour (the "Holder"), in lawful money of the United States, on December 31, 2005 (the "Maturity Date") subject to the right of the Holder to require prepayment of all or part of the principal pursuant to paragraph 1 hereof, the principal sum of Four Hundred Thousand Dollars ($400,000), plus interest thereon from December 31, 1995 (the date of issuance) until paid at the rate of six percent (6%) per annum, compounded annually. The Company may, at its option, defer the payment of accrued interest until the date of repayment. The Company waives presentment, notice of dishonor and protest. The following is a statement of the rights of the holder of this Note and the conditions to which this Note is subject, to which the holder hereof, by the acceptance of this Note, agrees: 1. Prepayment at Option of Holder. ------------------------------ The Holder shall be entitled to require that the Company prepay (i) up to $150,000 principal amount hereof at any time between July 1, 1997 and July 1, 1999, and (ii) all or any part of the principal amount hereof at any time or after January 1, 1999, in each case to the extent such principal amount shall then be outstanding, and shall not have been previously converted. In order to require any such prepayment, the Holder must deliver a written notice to the Company at least thirty (30) days before the date of prepayment, specifying the date of prepayment and the amount of principal to be prepaid. On the date so specified for prepayment, the Company shall pay to the Holder such amount of principal, together with interest accrued thereon. 2. Conversion. ---------- 2.1 The Holder of this Note may, at his option, at any time on or after December 31, 1996, convert all or part of the unpaid principal amount of this Note into the lesser of (i) that number of shares of the Company's Series B Preferred Stock arrived at by dividing such unpaid principal being converted by $3.50 (the "Conversion Price") and (ii) the amount of such unpaid principal amount being converted, expressed as a fraction of the total unpaid principal amount of this Note, multiplied by the Maximum Conversion Amount. The "Maximum Conversion Amount" shall initially mean an aggregate of 28,576 shares, which number shall be increased by an additional 2,857 shares on the sixth day of each of the thirty (30) months after January 1996. In order to convert this Note in whole or in part, the holder hereof must duly complete, execute and deliver to the Company a Conversion Notice, in the form attached hereto as Attachment 1 (a "Conversion Notice"). Such Conversion Notice shall be delivered to the Company by registered mail not less than five (5) days prior to the date fixed for the conversion to the Company at the address indicated on the signature page hereof, or at such other address as the Company may designate from time to time by written notice to the Holder. In case of the conversion of only part of this Note, the Conversion Notice shall specify the portion of the face amount being converted; and upon conversion of the specified portion, the Note shall be cancelled and a new Note issued for the unpaid balance of the principal, which new Note shall also allow for conversion. Should any change be made to the Series B Preferred Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Series B Preferred Stock as a class without the Company's receipt of consideration, appropriate adjustments shall be made to (i) the Maximum Conversion Amount and (ii) the Conversion Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. The adjustments determined by the Board of Directors shall be final, binding and conclusive. In the event of the conversion of all of the outstanding Series B Preferred Stock into Common Stock of the Company, all references herein to Series B Preferred Stock shall thereafter be deemed to refer to Common Stock. Upon conversion, the accrued by unpaid interest on this Note attributable to the portion of the principal amount converted in accordance with this subsection shall no longer be payable to the Holder. 2.2 No fractional shares will be issued on exchange of this Note, but in lieu thereof, the Company will pay the cash value of such fractional share calculated on the basis of the conversion price provided above. The Company covenants and agrees that so long as this Note is outstanding, the Company shall reserve a sufficient number of shares of Series B Preferred Stock (and shares of Common stock of the Company (the "Common Stock") issuable upon conversion of the Series B Preferred Stock) sufficient to enable the holder hereof to exercise the conversion rights contained herein with respect to an amount equal to 100% of the principal outstanding under this Note. 3. Events of Default. Any of the following events shall constitute an ----------------- Event of Default, and holders hereof may declare the entire unpaid principal and accrued interest on this Note immediately due and payable, by a notice and in writing to the Company: 3.1 The institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the Federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing or any such petition or the appointment of a receiver, liquidator, assignee, trustee, or other similar official, of the Company, or any substantial part of its property, or the making by it of any assignments for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the consent by it to any liquidation, dissolution or winding-up of the Company, or the taking of corporate action by the Company in furtherance of any such action; 3.2 If, within 60 days after the commencement of any action against the Company seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been dismissed or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be se aside, or if, within 60 days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated; or 3.3 The Company fails to pay any amounts owing hereunder when due or fails to provide the Holder the conversion rights specified hereunder. 4. Registration. The Company may deem and treat the person in whose name ------------ this note shall be registered as the absolute owner of such Note for the purpose of receiving payment of principal and interest and for all other purposes and the Company shall not be affected by any notice to the contrary. 5. Transfer of Note. This Note may be transferred only upon surrender of ---------------- the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new Note for like principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of the Note. 6. Expenses. The Company agrees to pay the holder's costs and expenses in -------- collecting and enforcing its rights under this Note, including attorneys' fees. 7. Severability. If one or more provisions of this Note are hold to be ------------ unenforceable under applicable law, such provision shall be excluded from this Note, and the remaining provisions of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with their terms, with the effect of the excluded provision being taken into consideration and the remaining terms construed in accordance with the intent of this Note. 8. Governing Law. This Note shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name this 31st day of December, 1995. GIGA INFORMATION GROUP, INC. - -Seal- By: /s/ Kenneth E. Marshall -------------------------------- Kenneth Marshall, President EX-10.11 16 EMPLOYMENT AGREEMENT DATED 1-FEB-1996 EXHIBIT 10.11 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made as of the 1st day of February, 1996 by and between Giga Information Group, Inc. a Delaware corporation (the "Company") and Leander Jennings (the "Executive"). WHEREAS, the Company and the Executive, desire that the Executive serve as the Senior Vice President, Worldwide Sales of the Company on the terms and conditions contained herein. NOW, THEREFORE, in consideration of the mutual covenants and obligations herein contained, it is mutually agreed between the parties hereto as follows: ARTICLE I. TERM OF EMPLOYMENT ---------- Section 1.1. The company hereby employs the Executive and the Executive hereby accepts employment with the Company for a period (the "Period of Employment") commencing February 1, 1996 and ending on June 30, 1997 (or such earlier date on which the Period of Employment may be terminated pursuant to Article V hereof). ARTICLE II. DUTIES OF EXECUTIVE ------ Section 2.1. General. The Executive shall serve as Senior Vice President, ------- Worldwide Sales of the Company. Consistent with this position Executive shall perform all services and do all things necessary or advisable to oversee the sales operation of the Company, subject always to the authority of the Board of Directors of the Company (the "Board of Directors") and the President and Chief Operating Officer of the Company. Section 2.2. Duties. Executive will be responsible for overseeing the ------ sales operation of the Company and will perform such duties as are consistent with his position as the Senior Vice President, Worldwide Sales of the Company and shall have such powers and authorities as may be needed to carry out those duties and as set forth in the Company's Bylaws. In addition, Executive shall perform such other duties and undertake responsibilities as are reasonably assigned to him by the President and Chief Operating Officer or the Board of Directors. The Executive agrees to devote substantially all of his business time, attention and services to the diligent, faithful and competent discharge of such duties for the successful operation of the Company's business. Section 2.3. Vacations. The Executive shall be entitled to such paid --------- vacation time as is consistent with the Company's vacation policy for senior executives as it exists from time to time. ARTICLE III. COMPENSATION ------------ Section 3.1. Salary. During the Period of Employment, as compensation for ------ his services hereunder, the Executive shall receive a per annum base salary (the "Base Salary") of at least (i) $120,000 for the twelve (12) months ended June 30, 1997, and (ii) thereafter such amount per annum [but not less than $120,000 per annum] as may be approved by the Compensation Committee of the Board of Directors. The Base Salary shall be payable in periodic installments on the dates of the company's usual payroll which shall be at least once per calendar month, and shall be paid pro-rata for any periods of less than twelve (12) months. Section 3.2. Commission. The Executive shall be on an annualized ---------- commission plan based upon a worldwide sales quota. In 1996, the amount of the overall commission earnings target at 100% of plan shall equal $120,000 on a worldwide quota of $15.5M in NAVI. For each year after 1996, the Executive's bonus shall be redefined based upon the the business plan. Section 3.3. Expenses. The Company shall reimburse Executive, upon -------- receipt from Executive if appropriate documentation for reasonable costs and expenses incurred by him during the Period of Employment in connection with his services and duties to the Company, including travel expenses, monthly fees and usage fees payable for his cellular phone and other telecommunications services (excluding usage fees solely attributable to personal matters), and his automobile operating expenses. ARTICLE IV. EXECUTIVE BENEFITS ------------------ Section 4.1. Stock Options. Company has granted to the Executive an ------------- incentive stock option ("ISO") to purchase 120,000 shares of Common Stock of the Company at an exercise price of $.60 per share, subject to vesting and subject to the Board's approval. In addition, the Executive will receive 30,000 additional stock options at the then current price, subject to the Board of Directors' approval, once the Executive has achieved 100% of the Executive's assigned 1996 quota; and 30,000 additional stock options upon achievement of your assigned 1997 quota, also at the then current price, subject to the Board of Directors' approval. Further in addition, the Company will grant to the Executive ISOs to purchase such number of shares of Common Stock of the Company as shall be determined from time to time by the Board of Directors or such committee. All options granted to Executive shall have an exercise price equal to the then fair market value of the Company's Common Stock, as determined in good faith by the Board of Directors or a duly authorized committee thereof, shall be ISOs, and shall be subject to the terms and condition as set forth in an option agreement in substantially the form as may be generally in 2 effect for options granted to employees of the Company at the time of the grant to the Executive. Section 4.2. Location: Relocation Expenditures. The Executive's ---------------------------------- principle place of business shall be either Norwell, Massachusetts or Cambridge, Massachusetts, as determined by the President of the Company. The Company shall reimburse Executive for the reasonable expenses of moving Executive and his immediate family to such location in accordance with the Company's practice as in effect for its senior executives generally (See Attached). Section 4.3. Life Insurance. The Company or an affiliate thereof shall -------------- provide term life insurance payable to a beneficiary or beneficiaries designated by Executive in accordance with the Company's practice from time to time in effect for its senior executives generally. Section 4.4. Other Benefits. The Executive shall be eligible to -------------- participate in such other employee benefit programs (including pension benefits, and medical, dental, life and disability insurance) as the Company shall maintain or establish from time to time for the benefit of its other senior executives generally. ARTICLE V. TERMINATION OF AGREEMENT ------------------------ Section 5.1. Company Termination for Cause. Notwithstanding anything to ----------------------------- the contrary herein, the Period of Employment, and the Company's employment of the Executive, may be terminated by the Board of Directors at any time for cause immediately upon written notice to the Executive, if any of the following events occur: (a) The Executive is convicted of a felony or a misdemeanor involving moral turpitude and having a material impact on the Company by a court of competent jurisdiction; (b) The Executive breaches a fiduciary duty owed to the Company, or engages in acts of gross misconduct or personal dishonesty toward the Company; (c) The Executive materially breaches any of his obligations under this Agreement and fails to correct the same within thirty (30) days after written notice thereof from the Company to the Executive. 3 (d) The Executive engages in habitual absenteeism or drug addiction and fails to correct the same within (30) days after written notice thereof from the Company to the Executive. The Executive shall be entitled to a full hearing before a quorum of the Board of Directors at a Board of Directors' meeting prior to any termination of his employment under this Section 5.1. Section 5.2. Unconditional Termination. ------------------------- (a) By Company. The company may terminate the Period of Employment, and ---------- the Company's employment of the Executive, for any reason, or for no reason, by giving at least twenty-eight (28) days' prior written notice thereof to the Executive. (b) By Executive. The Executive may terminate the Period of Employment and ------------ the Company's employment of the Executive, for any reason, or for no reason, by giving at least twenty-eight (28) days' prior written notice thereof to the Company. Section 5.3. Rights upon Termination. ----------------------- (a) Termination by Company Not For Cause. Upon any termination of the ------------------------------------ Period of Employment under Section 5.3(a) prior to June 30, 1997, the Company shall pay the Executive the greater of (i) the amount of Base Salary which the Executive would have received under Section 3.1 (exclusive of any increase in Base Salary not yet approved by the Board of Directors and committed to the Executive) had the Period of Employment not been terminated, and (ii) the amount that would be payable to Executive as follows: the greater of the remainder of Executive's term of employment or six months. Any payment under clause (i) shall be paid on the Company' normal payroll schedule, and any payment under clause (ii) shall be paid at such times as shall be in accordance with such severance policy. [In the event that the Company shall elect to exercise any rights it may have to repurchase any shares of capital stock of the Company held by the Executive following termination of the Period of Employment, it shall be entitled to apply any amount paid by it pursuant to this paragraph as a credit against any amount it is required to pay to repurchase such shares]. The Company's obligations in this Section 5.3 shall constitute Executive's exclusive remedy for termination during the Period of Employment by the Company under Section 5.2(a). Except as expressly set forth in this Section 5.3(a), upon termination under Section 5.2(a), all compensation and benefits (except the ability to exercise options, to the extent then vested, in 4 accordance with, and during the period provided under, the terms thereof) shall immediately cease. (b) Termination by Company for Cause. Upon termination by the Company for -------------------------------- cause under Section 5.1, or termination by the Executive pursuant to Section 5.2(b), the Executive shall not be entitled to any severance or similar payments, and all compensation and benefits (except the ability to exercise options, to the extent then vested, in accordance with, and during the period provided under, the terms thereof) shall immediately cease. Termination for cause under this Section 5.3 shall be without prejudice to any other remedy to which the Company may be entitled either at law or in equity or under this Agreement. [ARTICLE VI. NON-COMPETITION] --------------- (Section 6.1 Agreement Not to Compete.) ------------------------ [(a) During the Period of Employment and for a twelve-month period beginning on the last day of the Period of Employment the Executive will not, directly or indirectly: (i) as an individual proprietor, partner, stockholder, officer, employee, director, joint venture, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than five percent (5%) of the total outstanding stock of a publicly held company), engage in the business of developing, providing and marketing Continuous IT Information Services (as defined in Section 6.1(d). (ii) recruit, solicit or induce, or attempt to induce any employee or employees to the Company to terminate their employment with, or otherwise cease their relationship with the Company or any subsidiary thereof; or (iii) solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers, subscribers, or accounts, or prospective clients, customers or accounts, of the Company or any subsidiary thereof which were contacted, solicited, or served by the Company while the Executive was employed by the Company.] (b) The parties acknowledge that the type and period of restriction imposed pursuant to this Section 6.1 are fair and reasonable and are reasonably required for the protection of the Company and the goodwill associated with the business of the Company. The parties desire that 5 the restrictions be reasonable both now and at any time they are sought to be enforced, and accordingly agree that if any restriction set forth in this Section 6.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. The Executive agrees that any remedy available to the Company at law for the breach of this Section 6.1 may be inadequate and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. (c) The Executive's obligations under Section 6.1 shall terminate upon the Company's termination of the Period of Employment pursuant to Section 5.2(a). (d) For the purposes of this Section 6, "Continuous IT Information Services" mean the performance or development of original or synthesized research or analysis with respect to information technologies or information technology industries and the marketing and sale of the results of such research and analysis through subscription or retainer relationships which (i) have a stated term (which may be subject to renewal or extension) or which may be open- ended and (ii) involve the delivery of products and services on an ongoing basis throughout the term through a number of different means including one or more of (A) oral, written and/or on-line delivery; (B) collaboration with analysts or experts and/or (C) events; provided that Continuous IT Information Services shall not include consulting services of an engagement nature intended to provide advice or solutions addressing specific problems or issues of specific clients. ARTICLE VII. GENERAL PROVISIONS ------------------ Section 7.1. Confidentiality Agreement. The Executive agrees to adhere to ------------------------- the invention and Non-Disclosure Agreement attached hereto as Exhibit A. --------- Section 7.2. Successors. The Company will require any successor (whether ---------- direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the company to Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 6 Section 7.3. Governing Law. This Agreement shall be construed and ------------- enforced in accordance with and be governed by the laws of the State of Massachusetts. Section 7.4. Entire Agreement. This Agreement sets forth the entire ---------------- agreement and understanding between the Executive and the Company, and supersedes any other negotiations, agreements, understandings, oral agreements, representations and past or future practices whether written or oral. Section 7.5. Severability and Interpretation. In the event that pay ------------------------------- provision or any portion of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, such provision or portion thereof shall be considered separate, and apart from the remainder of this Agreement and the other provisions shall remain fully valid and enforceable. In the event that any provision is held to be overly broad as written such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended. Section 7.6. Notices. All notices required by this Agreement shall be ------- given in writing either by personal delivery or by first class mail return receipt requested, to the then most current address of the parties notified to the other. Notice given by mail shall be deemed given five (5) days following the date of mailing. Section 7.7. Waivers and Modifications. This Agreement may be modified, ------------------------- and the rights and remedies of any provision hereof may be waived, only in accordance with Section 7.7. No modification or waiver by the Company shall be effective without the consent of at least a majority of the Board of Directors then in office at the time of such modification or waiver. No waiver by either party of any breach by the other or any provision hereof shall be deemed to be a waiver of any later or other breach thereof as a waiver of any other provision of this Agreement. This Agreement sets forth all of the terms of the understandings between the parties with reference to the subject matter set forth herein and may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. Section 7.8. Attorneys' Fee. In the event either party shall bring any -------------- action or legal proceeding of an alleged breach of any provision of this Agreement or to enforce, protect or establish any term or covenant of this Agreement or right of either party under this Agreement the prevailing party shall be entitled to recover as part of such action or proceeding, or in a separate action brought for that purpose, reasonable attorneys' fees and court costs as may be fixed by the court. 7 Section 7.9. Withholding Taxes. All amounts payable to Executive under ----------------- this Agreement shall be subject to applicable withholding of income, wage and other taxes, and such other deductions or withholdings as may be required by law. Section 7.10. Indemnification. The Executive shall be entitled to the --------------- benefit of the indemnification provisions contained on the date hereof in the Bylaws of the Company as the same may hereafter be amended, and of any indemnification provisions that may hereafter by added to the Certificate of Incorporation of the Company (not including any amendments or additions that limit or narrow, but including any that add to or broaden, the protection afforded to the Executive by those provisions), or, if greater, to the full extent permitted by applicable law at the of the assertion of any liability against the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. GIGA INFORMATION GROUP, INC. By: /s/ Kenneth E. Marshall ----------------------------- Ken Marchall EXECUTIVE /s/ Leander Jennings ----------------------------- Leander Jennings 8 EX-10.12 17 EMPLOYMENT AGREEMENT DATED 1-DEC-1995 EXHIBIT 10.12 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made as of the 1st day of December, 1995 by and between Giga Information Group, Inc., a Delaware corporation (the "Company") and Kenneth Marshall (the "Executive"). WHEREAS, the Company and the Executive desire that the Executive serve as the President and Chief Operating Officer of the Company on the terms and conditions contained herein. NOW THEREFORE, in consideration of the mutual covenants and obligations herein contained, it is mutually agreed between the parties hereto as follows: ARTICLE 1. TERM OF EMPLOYMENT ------------------ Section 1.1. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company for a period (the "Period of Employment") commencing December 1, 1995 and ending on November 30, 2000 (or such earlier date on which the Period of Employment may be terminated pursuant to Article V hereof); provided, however, that commencing on November 30, 2000 -------- ------- and on November 30 of each year thereafter, the Period of Employment shall automatically be extended for one additional year unless, at least thirty (30) days prior to any such December 31, the Executive or the Company shall have given notice to the other that he or it does not wish to extend this Agreement. ARTICLE II. DUTIES OF EXECUTIVE ------------------- Section 2.1. General. The Executive shall serve as President and Chief ------- Operating Officer of the Company. Consistent with this position Executive shall perform all services and do all things necessary or advisable to oversee the operations and business of the Company, subject always to the authority of the Chairman and the Board of Directors of the Company (the "Board of Directors"). The Company shall increase the number of members of the Board of Directors by two and the Executive shall be appointed to fill one of such vacancies. During the Period of Employment, the Executive shall remain a member of the Board of Directors, and shall be entitled to recommend to the Board of Directors one additional person, who is not an employee or officer of the Company, for nomination or appointment as a director. The Company shall use its best efforts to communicate with its stockholders, and take such other actions, as are necessary so that the Executive shall continue to be a member of the Board of Directors for the Period of Employment. Section 2.2. Duties. Executive will be responsible for overseeing the ------ business of the Company and will perform such duties as are consistent with his position as the President and Chief Operating Officer of the Company and shall have such powers and authorities as may be need to carry out those duties and as set forth in the Company's Bylaws. In addition, Executive shall perform such other duties and undertake responsibilities as are reasonably assigned to him by the Chairman or the Board of Directors. The Executive agrees to devote substantially all of his business time, attention and services to the diligent, faithful and competent discharge of such duties for the successful operation of the Company's business, except that Executive may continue to serve on the Board of Directors of VISIX Software. Section 2.3. Vacations. The Executive shall be entitled such paid --------- vacation time as is consistent with the Company's vacation policy for senior executives as it exists from time to time. ARTICLE III. COMPENSATION ------------ Section 3.1. Salary. During the Period of Employment, as compensation for ------ his services hereunder (including his services as a member of the Board of Directors), the Executive shall receive a per annum base salary (the "Base Salary") of at least (i) $160,000 plus the aggregate amount of interest paid by Executive to the Company on the Note (as defined below in Section 3.5), for the twelve (12) months ended December 31, 1996, (ii) $192,000 for the twelve (12) months ended December 31, 1997, and (iii) thereafter such amount per annum (but not less than $192,000 per annum) as may be approved by the Board of Directors. The Base Salary shall be payable in periodic installments on the dates of the Company's usual payroll, which shall be at least once per calendar month, and shall be paid pro rata for any periods of less than twelve (12) months. Section 3.2. Bonus. The Executive shall be entitled to receive a cash bonus ----- for the twelve (12) months ended December 31, 1996 of $80,000 (prorated in the case of a partial year of employment). Thereafter, the Executive shall receive annual cash bonuses for each year based upon the degree to which the Company has achieved the cash flow, net annual value increase in subscriptions ("NAVI"), operating income and qualitative goals set for the in the budget or business plan approved by the Board of Directors for such year. In 1997, the amount of the bonus payable shall be not less than $46,500, (the "1997 Minimum Bonus") regardless of degree to which such goals shall have been met, and the amount of the bonus payable if such goals shall be achieved in full in 1997 shall equal $96,000. For each year after 1997, Executive's bonus shall be in such amount as shall be determined by the Board of Directors (or a duly authorized committee thereof). The bonus payable in 1996 shall be payable in four monthly installments of $20,000 each, payable in advance on each of January 1, 1996, April 1, 1996, July 1, 1996 and October 1, 1996. If the Period of Employment shall terminate prior to December 31, 1996, then the Executive shall repay to the Company an amount equal to $20,000 divided by a fraction of which the numerator is the number of days since the most recent of January 1, 1996, April 1, July 1, 2 1996 or October 1, 1996 that were included in the Period of Employment and the denominator of which shall equal 92. Any bonus payable for 1997 in excess of the 1997 Minimum Bonus, and any bonus payable for any year after 1996, shall be payable promptly following the availability to the Company of audited financial statements with respect to such year, but in no event later than April 30 of the following year. Section 3.3. Expenses. The Company shall reimburse Executive, upon receipt -------- from Executive of appropriate documentation, for reasonable costs and expenses incurred by him during the Period of Employment in connection with his services and duties to the Company, including travel expenses, monthly fees and usage fees payable for his cellular phone and other telecommunications services (excluding usage fees solely attributable to personal matters), and his automobile operating expenses. Section 3.4. Loan. The Company will make an interest-free loan to the ---- Executive of $20,00 on December 1, 1995. Such loan shall be evidenced by a note (the "Note") in the form of Exhibit A to this Agreement, and Executive agrees to --------- execute such Note as a condition to receiving such loans. ARTICLE IV. EXECUTIVE BENEFITS ------------------ Section 4.1. Stock Options. The Company has previously granted to the ------------- Executive an incentive stock option to purchase 600,000 shares of Common Stock of the Company at an exercise price of $.50 per share, subject to vesting. In addition to such option, the Company will grant to the Executive incentive stock options ("ISOs") to purchase such number of shares of Common Stock of the Company as shall be determined from time to time by the Board of Directors or a duly authorized committee thereof, at such times as shall be determined by the Board of Directors or such committee. By March 31, 1996, the Board of Directors will approve the Company's business plan for 1996, which plan will include goals for cash flow, NAVI, and such qualitative and other matters, as may be determined by the Board of Directors. If the Company's performance for the year ending December 31, 1996 meets or exceeds the goals contained in such business plan, the Executive shall, in 1997, receive an option to purchase an additional 80,000 shares of Common Stock. All options granted to Executive shall have an exercise price equal to the then-fair market value of the Company's Common Stock, as determined in good faith by the Board of Directors or a duly authorized committee thereof, shall be ISOs, and shall be subject to the terms and conditions set forth in an Option Agreement in substantially the form of attached as Exhibit B hereto or on such other terms as may be generally in --------- effect for options granted to employees of the Company at the time of the grant to the Executive. 3 Section 4.2. Relocation Expenditures. If the Board of Directors shall ----------------------- require that the principal place of business of the Executive be located more than thirty (30) miles from Boston or Cambridge, Massachusetts, the Company shall reimburse the Executive in amounts which, after provision of the net amount of all income taxes payable by Executive with respect to the receipt of such amounts (taking into account any moving expense or other deductions available to Executive), shall be equal to all reasonable expenses of moving Executive and his personal effects to such location, including closing costs of acquiring a new residence and temporary housing costs. Section 4.3. Life Insurance. The Company or an affiliate thereof or a trust -------------- funded by the Company shall provide term life insurance payable to a beneficiary or beneficiaries designated by Executive in the amount of three times the Base Salary, inclusive of any life insurance or death benefit coverage provided Executive under any of the benefit plans or arrangements of the Company. Section 4.4. Other Benefits. The Executive shall be eligible to participate -------------- in such other employee benefit programs (including pension benefits, and medical, dental, life and disability insurance) as the Company shall maintain or establish from time to time for the benefit of its other executive officers, on the same basis as such other executive officers. The Executive may receive such other and additional benefits as the Board of Directors may determine from time to time in its sole discretion. ARTICLE V. TERMINATION OF AGREEMENT ------------------------ Section 5.1. Company Termination for Cause. Notwithstanding anything in the ----------------------------- contrary herein, the Period of Employment, and Company's employment of the Executive, may be terminated by the Board of Directors at any time for cause immediately upon written notice to the Executive, if any of the following events occur: (a) The Executive is convicted of a felony or a misdemeanor involving moral turpitude and having a material impact on the Company by a court of competent jurisdiction; (b) The Executive breaches a fiduciary duty owed to the Company, or engages in acts of gross misconduct or personal dishonesty toward the Company; (c) The Executive materially breaches any of his obligations under the Agreement and fails to correct the same within thirty (30) days after written notice thereof from the Company (which notice shall have been approved by the Board of Directors) to the Executive; or 4 (d) The Executive engages in habitual absenteeism or drug addiction and fails to correct the same within thirty (30) days after written notice thereof from the Company (which notice shall have been approved by the Board of Directors) to the Executive. The Executive shall be entitled to a full hearing before a quorum of the Board of Directors at a Board of Directors meeting prior to any termination of his employment under this Section 5.1. Section 5.2. Executive Termination for Cause. Notwithstanding anything to ------------------------------- the contrary herein, the Period of Employment, and the Company's employment of the Executive, may be terminated by the Executive at any time for cause immediately upon written notice to the Company in the event of any adverse change in the Executive's title, any material reduction by the Company (or its successor) in the Executive's responsibilities specified hereunder (or those otherwise assumed by Executive in the ordinary course of the Company's business), any requirement that Executive's place of employment be more than 30 miles from Boston or Cambridge, Massachusetts are or any material breach by the Company of its obligations hereunder, in each case which continues for thirty (30) days after written notice thereof by the Executive identifying such change in title, reduction in responsibility, change in place of employment or breach. Section 5.3. Unconditional Termination. ------------------------- (a) By Company. The Company may terminate the Period of Employment, ---------- and the Company's employment of the Executive, for any reason, or for no reason, by giving at least twenty-eight (28) days' prior written notice thereof to the Executive. (b) By Executive. The Executive may terminate the Period of ------------ Employment, and the Company's employment of the Executive, for any reason, or for no reason, by giving at least twenty-eight (28) days' prior written notice thereof to the Company. Section 5.4. Rights upon Termination. ----------------------- (a) Upon any termination of the Period of Employment under Section 5.2 or 5.3(a), the Company shall pay the Executive an aggregate amount equal to (i) $160,000 in the event that such termination occurs prior to January 31, 1997 or (ii) fifty percent (50%) of the average annual Base Salary paid to the Executive during the twelve months ending on the last day of the last full month of the Employment Period, in the event that such termination occurs on or following the date January 31, 1997 one year from the date hereof. Such amount shall be paid over a period of one year commencing with the date of termination, in the case of termination prior to 5 January 31, 1997, and over a period of six months in the case of termination after January 31, 1997, on the Company's normal payroll schedule in approximately equal installments. In the event that the Company shall elect to exercise any rights it may have to repurchase any shares of capital stock of the Company held by the Executive following termination of the Period of Employment, it shall be entitled to apply any amount paid by it pursuant to this paragraph as a credit against any amount it is required to pay to repurchase such shares unless such termination shall have been effected pursuant to Section 5.3(a) and the notice referred to therein shall have been delivered after January 31, 1997. Except as expressly set forth in this Section 5.4(a), upon termination of the Period of Employment by the Company under Section 5.3(a), all compensation and benefits (except the ability to exercise options, to the extent then vested, in accordance with, and during the period provided under, the terms thereof) shall immediately cease. The Company's obligations in this Section 5.4 shall constitute Executive's exclusive remedy for termination during the Period of Employment by the Company under Section 5.3(a). (b) Upon termination by the Company for cause under Section 5.1, or termination by the Executive pursuant to Section 5.3(b), all compensation and benefits (except the ability to exercise options, to the extent then vested, in accordance with, and during the period provided under, the terms thereof) shall immediately cease. Termination for cause under this Section 5.4 shall be without prejudice to any other remedy to which the Company may be entitled either at law or in equity or under this Agreement. Section 5.5. Resignation upon Termination. If the Company or the ---------------------------- Executive exercises its or his right to terminate the Period of Employment under this Article V, Executive shall resign voluntarily as a member of the Board of Directors, as a member of the board of directors of any of the Company's subsidiaries and as an employee of the Company and any of its subsidiaries on the date such termination of employment becomes effective as provided in this Article V. ARTICLE VI. NON-COMPETITION --------------- Section 6.1. Agreement Not to Compete. ------------------------ (a) During the Period of Employment and for a twelve-month period beginning on the last day of the Period of Employment, the Executive will not, directly or indirectly: (i) as an individual proprietor, partner, stockholder, officer, employee, director, joint venture, investor, lender, or in any other capacity 6 whatsoever (other than as the holder of not more than five percent (5%) of the total outstanding stock of a publicly held company), engage in the business of developing, providing and marketing Continuous IT Information Services (as defined in Section 6.1(d)). (ii) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company or any subsidiary thereof; or (iii) solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers, subscribers or accounts, or prospective clients, customers or accounts, of the Company or any subsidiary thereof which were contacted, solicited or served by the Company while the Executive was employed by the Company. (b) The parties acknowledge that the type and period of restriction imposed pursuant to this Section 6.1 are fair and reasonable and are reasonably required for the protection of the Company and the goodwill associated with the business of the Company. The parties desire that the restrictions be reasonable both now and at any time they are sought to be enforced, and accordingly agree that if any restriction set forth in this Section 6.1 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities of in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. The Executive agrees that any remedy available to the Company at law for the breach of this Section 6.1 may be inadequate and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. (c) The Executive's obligations under this Section 6.1 shall terminate upon the termination of the Period of Employment by the Executive for "cause" pursuant to Section 5.2, or the Company's termination of the Period of Employment pursuant to Section 5.3(a). (d) For the purposes of this Section 6, "Continuous IT Information Services" means the performance or development of original or synthesized research or analysis with respect to information technologies or information technology industries and the marketing and sale of the results of such research and analysis through subscription or retainer relationships which (i) have a stated term (which may be subject to renewal or extension) or which may be open- ended and (ii) involve the delivery of products and services on an ongoing basis throughout the term through a number of different means including one or more of (A) oral, written 7 (A) oral, written and/or on-line delivery; (B) collaboration with analysts or experts, and/or (C) events; provided that Continuous IT Information Services shall not include consulting services of an engagement nature intended to provide advice or solutions addressing specific problems or issues of specific clients. ARTICLE VII. GENERAL PROVISIONS ------------------ Section 7.1. Confidentiality Agreement. The Executive agrees to adhere to ------------------------- the Invention and Non-Disclosure Agreement attached hereto as Exhibit C. --------- Section 7.2. Successors. The Company will require any successor (whether ---------- direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Section 7.3. Governing Law. This Agreement shall be construed and enforced ------------- in accordance with and be governed by the laws of the State of Massachusetts. Section 7.4. Entire Agreement. This Agreement sets forth the entire ---------------- agreement and understanding between the Executive and the Company, and supersedes any other negotiations, agreements, understandings, oral agreements, representations and past or future practices whether written or oral. Section 7.5. Severability and Interpretation. In the event that any ------------------------------- provision or any portion of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, such provision or portion thereof shall be considered separate and apart from the remainder of this Agreement and the other provisions shall remain fully valid and enforceable. In the event that any provision is held to be overly broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended. Section 7.6 Notices. All notices required by this Agreement shall be given ------- in writing either by personal delivery or by first class mail, return receipt requested, to the then most current address of the parties notified to the other. Notice given by mail shall be deemed given five (5) days following the date of mailing. Section 7.7. Waivers and Modifications. This Agreement may be modified, and ------------------------- the rights and remedies of any provision hereof may be waived, only in accordance with this Section 7.7. No modification or waiver by the Company shall be effective without the consent of at least a majority of the Board of Directors (excluding the Executive) then in office at the time of such modification or waiver. No waiver by either party of any breach by the other or any provision hereof shall be 8 deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement sets forth all of the terms of the understandings between the parties with reference to the subject matter set forth herein and may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. Section 7.8. Attorneys' Fees. In the event either party shall bring any --------------- action or legal proceeding of an alleged breach of any provision of this Agreement or to enforce, protect or establish any term or covenant of this Agreement or right of either party under this Agreement, the prevailing party shall be entitled to recover as part of such action or proceeding, or in a separate action brought for that purpose, reasonable attorneys' fees and court costs as may be fixed by the court. Section 7.9. Withholding Taxes. All amounts payable to Executive under this ----------------- Agreement shall be subject to applicable withholding of income, wage and other taxes, and such other deductions or withholdings as may be required by law. Section 7.10. Indemnification. The Executive shall be entitled to the --------------- benefit of the indemnification provisions contained on the date hereof in the Bylaws of the Company as the same may hereafter be amended, and of any indemnification provisions that may hereafter be added to the Certificate of Incorporation of the Company (not including any amendments or additions that limit or narrow, but including any that add to or broaden, the protection afforded to the Executive by those provisions), or, if greater, to the full extent permitted by applicable law at the time of the assertion of any liability against the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. GIGA INFORMATION GROUP, INC. By /s/ Neill H. Brownstein --------------------------------- Compensation Committee EXECUTIVE /s/ Kenneth E. Marshall ----------------------------------- Kenneth Marshall 9 EX-10.13 18 EMPLOYMENT AGREEMENT DATED 7/6/95 EXHIBIT 10.13 EXPERNET CORPORATION July 6, 1995 Mr. David Gilmour 331 S. El Monte Avenue Los Altos, CA 94022 Dear Mr. Gilmour: Coincident with the acquisition of a majority of the outstanding shares of the capital stock of ExperNet Corporation (the "Company") by GIGA Information Group, Inc. ("GIGA"), and in consideration for the termination of that certain employment agreement between you and the Company dated September 20, 1994, and the substitution of this agreement in its stead, the Company is pleased to offer you the position of President. This letter embodies the terms of our offer of employment to you and, if you accept such offer under these terms by signing on the indicated line below, will constitute the employment agreement between you and the Company. As the President, you will be responsible for the general management and oversight of all the Company's activities and strategic development. You will report to and be given general direction by the Chief Executive Officer or Chief Operating Officer of GIGA. Of course, the Company may change your responsibilities and duties from time to time as it deems necessary. Your starting salary will be $90,000 per year through August, 1995, and commencing on September 1, 1995 your salary shall be at an annualized rate of $160,000. This employment agreement has a term of two years. During the term of this agreement, the Company may terminate your employment hereunder for Cause, as defined below, or without Cause for any reason, provided, however, that if the Company terminates your employment without Cause hereunder, you shall receive compensation as set forth below. 1. If such termination without Cause occurs within one year after the date of this agreement, the Company shall pay you one year's salary at the rate then in effect (payable at regular payroll intervals), and all unvested options to purchase common stock of GIGA granted to you shall immediately vest under all stock option agreements between you and GIGA. 2. If such termination without Cause occurs more than one year but less than two years after the date of this agreement, the Company shall pay you one year's salary (payable at regular payroll intervals) at the rate then in effect, and 30% of the remaining unvested options under all stock option agreements between you and GIGA shall immediately vest. Mr. David Gilmour Page 2 3. If, without your consent, you are demoted or forced to relocate to an area outside the San Francisco bay area, such action will be deemed termination without Cause, provided, however, that if you perform the role of President of ExperNet as an operating unit GIGA or of another entity owned by GIGA, or if you continue to report directly to the GIGA CEO or COO in a substantive role, such role will not be considered a demotion hereunder. The term "Cause" shall mean only: a material breach of the employment agreement by you; conviction of a felony or a misdemeanor involving moral turpitude having a material impact on the Company; breach of fiduciary duty owed to or personal dishonesty towards the Company; or habitual absenteeism or drug addiction. Subsequent to your termination without Cause, you agree to provide the Company consultation at one-quarter time for one year after such termination. You further agree that after such termination you will not to engage in any activities that are designed to impact ExperNet negatively in the marketplace. Such agreement regarding your post-termination activities shall terminate on the later to occur of: the end of the one year salary continuation after such termination, or the date when you divest yourself of all shares of GIGA capital stock that you own. The Company and you hereby agree that the vesting of options and continued salary, pursuant to the termination provisions above, shall be allocated specifically as follows: 25% to pursuant to the termination provisions above, shall be allocated specifically as follows: 25% to the consulting services hereunder, and 75% for your agreement restricting your post-termination activities. You will be provided three weeks of paid vacation per year. It is agreed (and you represent and warrant) that you have accrued 12.1 days of vacation pursuant to your earlier employment by the Company that such accrued vacation shall be carried forward under this agreement. In addition, you will be eligible for the standard package of employee benefits provided by the Company, including medical insurance, sick leave, and holidays. You also shall be considered for receiving such bonuses and other performance incentives as may provided to other GIGA senior management employees (i.e., those who report directly to GIGA's CEO or COO). You should note that the Company may modify the other benefits from time to time as it deems necessary. Promptly after execution of this agreement, you will be elected to the Board of Directors of GIGA. You will be expected to abide by Company rules and regulations. Mr. David Gilmour Page 3 If you wish to accept continued employment at the Company under the terms set out above, please sign and date this letter on the line below. We look forward to your favorable reply and to a productive and exciting work relationship. Sincerely, /s/ Gideon I. Gartner - --------------------- Gideon I. Gartner Chairman of the Board Accepted and Agreed to: /s/ David L. Gilmour 7/6/95 - -------------------- ------------ David L. Gilmour Date GIGA Information Systems, Inc. By: /s/ Gideon I. Gartner CEO ---------------------- ------------ Date EX-10.14 19 NON-COMPETITION AGREEMENT 11/13/95 EXHIBIT 10.14 November 13, 1995 Mr. Gideon Gartner 0126 Magnifico Drive Aspen, CO 81611 Re: Non-Competition --------------- Dear Gideon: As you know, Giga Information Group, Inc. (the "Company") has agreed to sell shares of its Series B Preferred Stock (the "Shares") to certain investors (the "Investors") under the Series B Preferred Stock Purchase Agreement between the Company and such Investors. One condition of the Investors' obligation to purchase the Shares is your agreement to be bound by the terms of this letter agreement; the Investors will make their investment in the Company in reliance upon your agreement to be so bound. Please signify your acceptance of the terms of this letter agreement and your understanding that the Investors will purchase Shares in reliance upon this agreement by counter-signing this letter agreement in the place indicated. 1. For the Non-Competition Period (as defined below), you will not, directly or indirectly: a. as an individual proprietor, partner, stockholder, officer, employee, director, joint venture, investor, lender, or in any other capacity whatsoever (other than as the holder of less five percent (5%) of the total outstanding stock of a publicly held company), engage in the business of developing, providing, marketing or selling Continuous IT Information Services. b. recruit, solicit or induce, or attempt to induce, any employee or employees to the Company or any subsidiary thereof to terminate their employment with, or otherwise cease their relationship with, the Company or any subsidiary thereof; or c. solicit, divert or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers, subscribers or accounts, or prospective clients, customers or accounts, of the Company or any subsidiary thereof which were contacted, solicited or served by you while you were employed by the Company. 2. For the purposes of this letter agreement: (a) "Continuous IT Information Services" means the performance or development of original research or analysis with respect to information technology industries and the marketing and sales of the results of such research and analysis through subscription or retainer relationships which (i) have a stated term (which may be subject to renewal or extension) and (ii) which involve the delivery of analysis in a number of formats and vehicles, including oral, written, and on-line vehicles and through events; provided that Continuous IT Information Services shall not include consulting services intended to address specific problems or issues of specific clients. (b) the "Non-Competition Period" shall mean (i) the period for which you are employed by the Company or a subsidiary thereof, and (ii) so long thereafter as the Company continues to pay to you compensation of at least $120,000 per year (whether as an employee, a consultant or in the form of severance or post-employment benefits, but excluding dividends, interest or other income or gains attributable to your investment in the Company or upon the exercise of stock options). 3. You acknowledge that the type and period of restriction imposed pursuant to this letter agreement are fair and reasonable and are reasonably required for the protection of the Company and the goodwill, trade secrets, proprietary information and other intangible assets associated with the business of the Company. The parties desire that the restirctions be reasonable both now and at any time they are sought to be enforced, and accordingly agree that if any restriction set forth in this agreement is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. You agree that any remedy available to the Company at law for the breach of this agreement may be inadequate and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. 4. This letter agreement will be construed and enforced in accordance with and governed by the law of the State of Massachusetts. Very truly yours, GIGA INFORMATION GROUP, INC. By: /s/ Michael J. Kolesar -------------------------------------- Name: Michael Kolesar Title: Vice President-Finance ACCEPTED AND AGREED /s/ Gideon Gartner - ------------------------------- Gideon Gartner EX-10.15 20 CONSULTING AGREEMENT DATED 1/1/96 EXHIBIT 10.15 CONSULTING AGREEMENT -------------------- CONSULTING AGREEMENT, dated as of January 1, 1996, by and between GIGA INFORMATION GROUP, INC., a Delaware corporation (the "Company"), and Neill H. Brownstein Corporation, at 536 West Crescent Drive, Palo Alto, California 94301 (the "Consultant"). INTRODUCTION ------------ A. The Consultant has expertise which would be of benefit to the Company and, as a director of the Company, has extensive knowledge of the operations of the Company, as well as its personnel and prospects. B. The Company now desires to retain the Consultant as a consultant in order to make the expertise of the Consultant more fully available to the Company, and the Consultant desires to be so retained by the Company. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- SERVICES; TERM; DUTIES ---------------------- 1.1. Services. The Company hereby agrees to retain the Consultant upon -------- the terms and conditions hereinafter set forth to provide, as an independent contractor and not as an employee, consulting and advisory services with respect to the business and affairs of the Company as requested, from time to time by the Board of Directors of the Company or a duly appointed officer of the Company, and the Consultant hereby agrees to provide such services. 1.2. Term. The service of the Consultant hereunder shall be provided for ---- a period (the "Term") of one (1) year commencing on the date hereof. 1.3. Extent of Services. During the term, Consultant shall, if and when ------------------ so requested by the Company, and at a time and place mutually convenient to the parties hereto, furnish to the Company, consulting and advisory services with respect to the Company's business and affairs. The Consultant shall devote 25% of his working time to the services rendered under this Agreement. Nothing herein shall preclude Consultant from rendering any services, whether as a consultant or otherwise, to any person, firm or corporation; provided, however, that Consultant shall not engage in any activities in contravention of (i) the provision of any other agreement with the Company to which he is a party or (ii) his fiduciary duties as a member of the Company's board of directors. 1 ARTICLE II ---------- COMPENSATION ------------ 2.1. Compensation. For all services rendered by the Consultant hereunder ------------ and all covenants and conditions undertaken by him pursuant to this Agreement, the Company shall pay a consulting fee (the "fee") at the rate of $60,000 per annum, payable no less frequently than quarterly in arrears. 2.2. Deductions. The Company shall deduct from the fee described in this ---------- Article II any federal, state or local withholding taxes, social security contributions and any other amounts which are required to be deducted or withheld by the Company pursuant to any federal, state or local laws, rules or regulations. ARTICLE III ----------- DEATH; DISABILITY ----------------- 3.1. Death or Disability. In the event of the death or disability of ------------------- Consultant during the term hereof, or in the event that the parties hereto mutually agree that the Consultant will not render services during a portion of a quarter, the Consultant shall be paid for services rendered in such quarter on a pro-rated basis. ARTICLE IV ---------- CONFIDENTIALITY --------------- 4.1. Confidentiality. Consultant covenants and agrees that during the --------------- period that he provides services hereunder and for a period of one year thereafter (the "Effective Period") he will not use for his own account, directly or indirectly, any of the proprietary information, customer lists, trade names, goodwill or trade secrets owned or used by the Company in its business as of the date hereof, or directly or indirectly, disclose or furnish to any other person, firm, corporation or entity, the methods by which the business of the Company is conducted, any of the methods of which the customers or business of the Company is obtained, or any confidential or proprietary information of the Company, including without limitation, the names of any of the customers or prospective customers of the Company; provided, however, the foregoing shall not apply to the extent such information is general public knowledge or to the extent Consultant is compelled to disclose it by subpoena or by applicable law. 2 ARTICLE V --------- MISCELLANEOUS ------------- 5.1. Independent Contractor. Under this Agreement, Consultant shall, at ---------------------- all times, be an independent contractor and not an employee. This Agreement does not grant Consultant any authority to bind or commit the Company, including any subsidiary or any affiliate of the Company, with respect to any matter. 5.2. Waiver. A waiver by a party hereto of a breach of any term, covenant ------ or condition of this Agreement by the other party hereto shall not operate or be construed as a waiver of any other or subsequent breach by such party of the same or any other term, covenant or condition hereof. 5.3. Applicable Law. This Agreement shall be governed by and construed in -------------- accordance with the substantive laws of the State of Washington without giving effect to principles relating to conflicts of law. 5.4. Expenses. During the Term, the Consultant shall be entitled to incur -------- reasonable expenses in the performance of his duties in accordance with Company policies in effect from time to time. Upon presentation by the Consultant of appropriate supporting documentation to the Company, the Consultant shall be entitled to reimbursement of such expenses. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. GIGA INFORMATION GROUP, INC. By: /s/ Kenneth E. Marshall ------------------------------ Name: Kenneth E. Marshall Title: President & COO CONSULTANT /s/ Neill H. Brownstein --------------------------------- Neill H. Brownstein Corporation By: Neill H. Brownstein President EX-10.17 21 PROMISSORY NOTE DATED 1-DEC-1995 EXHIBIT 10.17 PROMISSORY NOTE --------------- $20,000 December 1, 1995 Cambridge, Massachusetts FOR VALUE RECEIVED, Kenneth Marshall, a Massachusetts resident (the "Maker") hereby promises to pay to Giga Information Group, Inc., a Delaware corporation ("Lender"), the principal sum of Twenty Thousand Dollars ($20,000) on December 1, 1996 upon demand of Lender, together with interest on such principal sum from the date of this note until paid in full. Interest shall accrue on the unpaid balance of this Note at the minimum per annum rate, compounded annually, required to avoid the imputation of income to the Maker under the Federal tax law which on the date hereof is five and 73/100 percent (5.74%) per annum. All payments shall be made in lawful money of the United States of America to the Lender at Cambridge, Massachusetts or at such other place as the Lender may from time to time designate in writing to the Maker. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of principal, together with accrued interest, may be made at any time without penalty. The entire unpaid balance of the principal sum of this Note, together with accrued and unpaid interest on that balance, shall become immediately due and payable upon the demand of the Lender or upon the execution by the Maker of a general assignment for the benefit of creditors, the filing by or against the Maker of any petition in bankruptcy or any petition for relief under the provisions of the Federal Bankruptcy Act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of thirty (30) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Maker (together "Events of Default"). Acceptance by Lender of any partial payment shall not be deemed to constitute a waiver by Lender to require prompt payment of all sums when demanded. In the event of any action to enforce payment of this Note, in addition to all other relief, the prevailing party in such action shall be entitled to reasonable attorneys' fees and expenses. The Maker hereby waives presentment, protest and demand, notice of protest, demand, nonpayment and dishonor. This Note is to be governed by and construed in accordance with the laws of the State of Massachusetts as applied to agreements among Massachusetts residents entered into and to be performed entirely within Massachusetts. /s/ Kenneth E. Marshall ------------------------------- Kenneth Marshall 2 EX-10.18 22 CRANDALL AGREEMENT 07/12/96 EXHIBIT 10.18 July 12, 1996 Mr. Richard Crandall 2129 Devonshire Road Ann Arbor, MI 48401 Dear Rick: Effective July 1, 1996, you will be granted 20,000 non-qualified stock options at the then current exercise price subject to the Board of Directors' approval, in exchange for your services for the next twelve months as an Advising Cabinet member to Giga Information Group. These options will be issue under the 1995 Stock Option/Stock Issuance Plan, exercisable to purchase shares of Common Stock and will provide for 25% vesting after one year from initial date of grant (July 1, 1996) and continued monthly vesting thereafter over the next thirty-six (36) months ensuring that you will be fully vested after forty- eight (48) months. In the event that you discontinue your role as a cabinet member, but continue as a board member, your shares will continue to vest at this rate. You will receive the formal Stock Option Agreement following approval of this grant after the next board meeting. If you have any questions, please call me at 617-577-4800. Sincerely, /s/ Kenneth E. Marshall Kenneth Marshall President & COO Giga Information Group, Inc. EX-10.19 23 LEASE DATED 31-OCT-1995 EXHIBIT 10.19 LEASE ----- 1. PARTIES. CAMBRIDGE 1400 LIMITED PARTNERSHIP, a Massachusetts limited ------- partnership, ("LESSOR"), which expression shall include its successors and assigns where the context so permits, do hereby lease to GIGA INFORMATION GROUP, INC., a Massachusetts corporation, ("LESSEE"), which expression shall include its successors and assigns, and the LESSEE hereby leases and shall peaceably hold and enjoy the following described premises. 2. LEASED PREMISES. On the Commencement Date, or such earlier date as --------------- LESSEE shall take occupancy thereof, the "Leased Premises" shall consist of that portion of the first floor in Building No. 1400 (the "Building"), located at One Kendall Square, Cambridge, Massachusetts, located in the mixed use retail and office complex known as "One Kendall Square" (the "Complex") which first floor space contains Seven Thousand Eight Hundred and Sixty-Eight (7,868) square feet of space, more or less, and outlined on the sketch contained in Exhibit A1 (herein called the "Leased Premises"). The Leased Premises shall have as appurtenant thereto: (a) the right to use in common with others entitled thereto, the entrances, lobbies, hallways, stairways, walkways, sidewalks, driveways, loading docks, elevators and other common facilities in the Building containing any portion of the Leased Premises and on the land constituting the Lot more particularly described in Exhibit B hereto (herein called the "Lot") necessary for access to and enjoyment of the Leased Premises, or portion, and (b) the pipes, conduits, wires, and appurtenant equipment serving the Leased Premises, or portion thereof, in common with other portions of the Building containing any part of the Leased Premises, subject, however, to the following rights which are expressly excepted and reserved by LESSOR: (i) the right, from time to time, to install, maintain, use, repair, relocate, place and replace utility lines, pipes, ducts, conduits, wires, gas, electric, or any other meters and fixtures located on or passing through any portion of the Leased Premises to serve other portions of the LESSOR's property of which the Leased Premises, or a portion thereof, are a part, provided, however, LESSOR shall not unreasonably interfere with LESSEE's occupancy and use of the Leased Premises; (ii) the right to enter into, upon and across any portion of the Leased Premises to exercise any reserved right of LESSOR hereunder or to complete LESSOR's construction of the Leased Premises, or part thereof, and the Building, provided, however, LESSOR shall not unreasonably interfere with LESSEE's occupancy and use of the Leased Premises; and (iii) the right from time to time to make alterations or additions to the Building and to construct other buildings or improvements on the Lot and to make additions to such buildings or improvements, and to permit others to do so from time to time all as LESSOR may determine in its sole discretion, and without LESSEE's consent in any instance; any such alterations or additions or construction of other buildings or improvements on the Lot, being performed to the greatest possible extent in a manner so as not unreasonably to interfere with the LESSEE's use and occupancy of the Leased Premises. Subject to LESSOR's reserved rights specified above, there shall be appurtenant 2 to the Leased Premises the right to park forty (40) passenger motor vehicles in the One Kendall Square parking garage. LESSOR reserves the right to designate the locations of the spaces to be utilized for such parking rights by written notice to LESSEE, and to change the location of any or all of such spaces by notice to LESSEE at any time and from time to time as LESSOR shall reasonably determine. The parking spaces provided hereunder need not be contiguous. 3.1 TERM. The term (the "Term") of this Lease shall be for a period of ---- five (5) years following the "Commencement Date." The "Commencement Date" shall be the later to occur of (a) November 1, 1995 or (b) the completion of LESSOR's work on the initial Five Thousand Five Hundred (5,500) square feet of space as outlined in Exhibit C. Notwithstanding the above, base rent, and common area/real estate tax reimbursements on Two Thousand Three Hundred and Sixty- Eight (2,368) rentable square feet of the Leased Premises shall not commence until all of the LESSOR's work under Paragraph 3.2 is complete or until LESSEE has occupied that portion of the Leased Premises. As soon as may be convenient after the Commencement Date has been determined, the LESSOR and the LESSEE agree to join with each other in the execution, in recordable form, of a written declaration in which the Commencement Date shall be stated. 3.1.1 PHASED OCCUPANCY. In the event a portion of the Leased Premises are ---------------- substantially completed and ready for occupancy, and LESSOR shall have given notice to LESSEE thereof, then LESSEE shall have the right to commence use and 3 occupancy of such portion of the Leased Premises subject to the terms and conditions of this Lease. During the period of such partial use and occupancy, Base Rent and additional rent payable under Paragraphs 4 and 5 hereof shall be payable on a pro rata basis in the same proportion as the square footage of the space being used and occupied bears to the total square footage of the Leased Premises, and LESSEE shall perform, comply with and abide by all of its obligations, undertakings and covenants as if, and to the same extent, as though the Term had commenced. 3.2 COMPLETION OF IMPROVEMENTS. The Two Thousand Three Hundred and Sixty- -------------------------- Eight (2,368) rentable square feet of the Leased Premises that will be rebuilt shall be considered "ready for occupancy" on the date upon which the improvements described in Exhibit C - Column 2 hereto to be constructed by LESSOR with respect to the Leased Premises are substantially completed, and LESSEE is given a copy of a certificate of occupancy issued by the City of Cambridge Building Department covering the Leased Premises. The Leased Premises shall be deemed substantially completed notwithstanding that completion of work and adjustment of equipment and fixtures or minor items of uncompleted work (so- called "punch list" work items) remain to be done, if such work can be completed after occupancy has been taken without causing unreasonable interference with LESSEE's use of the Leased Premises. Except for latent defects and except to the extent to which the LESSEE shall have given the LESSOR written notice, not later than thirty (30) days after LESSEE occupies the Two Thousand Three Hundred and Sixty-Eight (2,368) square feet of space, of matters or items as to which the LESSOR has not 4 properly performed its obligations with respect to the construction and installation of the improvements called for under the Lease, the LESSEE shall have no claim that the LESSOR has failed to perform such obligations, and LESSEE's taking possession shall be conclusive evidence as against LESSEE that said space and improvements were in good order and satisfactory condition when LESSEE took possession. The LESSOR shall complete all items of work not properly performed as to which the LESSEE shall have given the LESSOR such timely written notice as soon as conditions practicably permit thereafter in such a manner as not to unreasonably disturb the LESSEE or its business operations carried out in the Leased Premises. 4. RENT. LESSEE covenants and agrees to pay to LESSOR annual base rent ---- ("Base Rent") in the amounts set forth or provided for below, by equal payments of one-twelfth (1/12) of such annual rate on the first day of each calendar month in advance, the first monthly payment to be made on the Commencement Date, and by payment in advance of a pro-rata portion of a monthly payment for any portion of a month at the beginning or end of the Term based on the actual number of days in any such month; all payments to be made to LESSOR or such agent, and at such place, as LESSOR shall from time to time in writing designate, the following being now so designated: CAMBRIDGE 1400 LIMITED PARTNERSHIP c/o THE ATHENAEUM GROUP 215 First Street Cambridge, MA 02142-1268 The annual Base Rent for each of the first and second years of the Term shall be One Hundred and Ten Thousand and One Hundred Fifty-Two Dollars 5 ($110,152.00). The annual Base Rent for third year of the Term shall be One Hundred and Sixteen Thousand and Fifty-Three Dollars ($116,053.00). The annual Base Rent for each of the fourth and fifth years of the Term shall be One Hundred and Twenty-One Thousand Nine Hundred and Fifty-Four Dollars ($121,954.00). In addition, on a monthly basis the LESSEE shall pay to the LESSOR the fair rental value of LESSEE's parking spaces (currently $115.00 per month per space) in the parking garage as reasonably determined by LESSOR ("Garage Parking"). 5. RENT ADJUSTMENTS. ---------------- 5.1 RENT ADJUSTMENT - COMMON AREA OPERATING EXPENSES FOR THE LOT. ------------------------------------------------------------ Commencing as of the Commencement Date but as limited by the provisions of Paragraph 3.1 and with respect to any calendar year or any fraction of a calendar year thereafter falling within the Term, the LESSEE shall pay to the LESSOR as additional rent, the "LESSEE's Proportionate CAO Lot Share" (defined below) of all costs and expenses incurred by the LESSOR in connection with the maintenance, repair, upkeep, and cleaning of those common areas and facilities of the Lot delineated or described in Exhibit B hereto, which LESSEE has the right to use in common with others such as but not limited to common walkways, accessways and parking facilities and the costs of heating and electricity, snow-plowing and snow and ice removal, trash removal services, janitorial and security services, landscaping and lawn care services, walkway, driveway, parking, and common entryway upkeep and paving costs, and all other costs reasonably incurred by or for LESSOR in connection with the insurance, maintenance and operation of the common areas and 6 facilities of the Lot to keep the same in safe, secure and first-class order and condition (hereinafter called "CAO Lot"). LESSEE's Proportionate CAO Lot Share means that percentage which is equal to the ratio of the square footage of space constituting the Leased Premises to the aggregate square footage of space within the Complex which is completed and as to which a Certificate of Occupancy has issued. As additional buildings are completed within the Complex, LESSEE'S Proportionate CAO Lot Share shall be adjusted to that percentage which is equal to the ratio of the square footage constituting the Leased Premises to the aggregate square footage of space within the complex which is completed and as to which a certificate of occupancy has issued. As of the date hereof, the parties have agreed that LESSEE's Proportionate CAO Lot Share (on the 7,868 rentable square feet) shall initially be l.29%. Notwithstanding anything contained in this Lease to the contrary, LESSEE shall not be responsible for any costs, fees or expenses associated with construction of additional buildings in the Complex, including, but not limited to, demolition and grading costs, management fees, contractor fees, architectural fees, material and building costs, permit fees and costs incurred due to damage to the existing Complex and Common Areas caused by such new construction. 5.2 RENT ADJUSTMENT - COMMON AREA OPERATING EXPENSES FOR THE BUILDING. ----------------------------------------------------------------- Commencing as of the Commencement Date but as limited by the provisions of Paragraph 3.1 and with respect to any calendar year falling within the term, or fraction of a calendar year at the beginning or end of the term, the 7 LESSEE shall pay to the LESSOR, as additional rent, the "LESSEE's Proportionate Building Share" (defined below) of operating expenses attributable to the Building ("CAO Building"). CAO Building shall include, but is not limited to the following: all costs and expenses incurred by the LESSOR in connection with the insurance, operation, repair, maintenance and cleaning of or for the Building and heating, plumbing, elevators, electrical, air-conditioning and other systems thereof, trash removal, janitorial services, security systems and general expenses incurred by the LESSOR in connection with the insurance, operation and maintenance of the Building, to keep the same in safe, secure and first-class order and condition. LESSEE's Proportionate Building Share shall be that percentage, which is equal to the ratio of the square footage of space constituting the Leased Premises to the aggregate square footage of space in the Building. The LESSEE's Proportionate Building Share with respect to the Leased Premises is 6.26%. The following shall not constitute Common Area Operating Expenses for the Lot or Common Area Operating Expenses for the Building (collectively, "Common Area Operating Expenses") for the purposes of this Lease, and nothing contained herein shall be deemed to require LESSEE to pay any of the following as Common Area Operating Expenses: (i) damage and repairs attributable to condemnation, fire or other casualty; (ii) damage and repairs covered under any warranty or insurance policy carried by LESSOR in connection with the Building, Complex or Common Areas; (iii) damage and repairs necessitated by the negligence or willful misconduct 8 of LESSOR or LESSOR's employees, contractors or agents; (iv) executive salaries of LESSOR; (v) LESSOR's general overhead expenses not related to the Building; (vi) payments of principal or interest on any mortgage or other encumbrance including ground lease payments and points, commissions and legal fees associated with financing; (vii) depreciation; (viii) any cost or expense related to the testing for, removal, transportation or storage of hazardous materials from the Leased Premises, Building, Complex or Common Areas; and (ix) interest, penalties or other costs arising out of LESSOR's failure to make timely payments of its obligations. LESSOR shall not collect in excess of one hundred percent (100%) of Common Area Operating Expenses for the Lot or Common Area Operating Expenses for the Building or any item of cost more than once. Any Common Area Operating Expenses charged LESSOR by any of its affiliates for goods and service provided to the Building, Leased Premises, Complex or Common Areas shall not exceed the prevailing cost thereof that would be charged to LESSOR by non-affiliated parties. All Common Area Operating Expenses shall be directly attributable to the operations, maintenance, management and repair of the Leased Premises, Building, Complex or Common Areas. 5.3 MONTHLY PAYMENTS. Beginning with the calendar year in which the ---------------- Commencement Date occurs, and in subsequent years during the Term of this Lease, the LESSEE shall pay to the LESSOR pro rata monthly installments of amounts due under Paragraphs 5.1 and 5.2 on account of projected CAO Lot and CAO Building for such year, calculated by the LESSOR on the basis of the best and most 9 recent budget or data available. Appropriate adjustments of estimated amounts shall be made between LESSOR and LESSEE promptly after the close of each calendar year to account for actual CAO Lot and CAO Building for such year, except that LESSOR may, at its option, credit any amounts due from it to LESSEE as provided above against any sums then due from LESSEE to LESSOR under this Lease. The balance of any amounts due shall be paid within thirty (30) days after written notice thereof. 5.4 RENT ADJUSTMENT - TAXES. ----------------------- 5.4.1 LESSOR TO PAY TAXES. The LESSOR shall be responsible for the ------------------- payment, before the same becomes delinquent, of all general and special taxes of every kind and nature, including assessments for local improvements, and other governmental charges which may be lawfully charged, assessed or imposed (herein collectively called the "Taxes") upon the Building and the Lot. If at any time during the Term the present system of ad valorem taxation of real property shall be changed to that in lieu of the whole or any part of the ad valorem tax on real property, there shall be assessed on LESSOR a capital levy or other tax on the gross rents received with respect to the Lot or the Building or a federal, state, county, municipal, or other local income, franchise, excise or similar tax, assessment, levy or charge (distinct from any now in effect) measured by or based, in whole or in part, upon any such gross rents, then any and all of such taxes, assessments, levies or charges to the extent so measured or based, shall be deemed to be included within the term "Taxes" but only to the extent that the same would be payable if the Lot and the Building were the only property of LESSOR. 10 5.4.2 LESSEE'S SHARE OF TAXES. As limited by the provisions of ----------------------- Paragraph 3.1, the LESSEE shall pay to the LESSOR, as additional rent, the LESSEE's Proportionate Building Share of that portion of the Taxes solely attributable to the Building and LESSEE's Proportionate CAO Lot Share of that portion of the Taxes solely attributable to the land which constitutes the Lot. Notwithstanding anything to the contrary in this Lease, the following shall not constitute Taxes for the purpose of this Lease, and nothing contained herein shall be deemed to require LESSEE to pay any of the following: (i) any franchise, succession or transfer taxes, or (ii) interest on taxes or penalties resulting from LESSOR's failure to pay taxes. LESSOR shall cause any Taxes which may be evidenced by improvement or other bonds or which may be paid in annual or other periodic installments to be paid in installments over the maximum period provided by law. 5.4.3 RENT ADJUSTMENT - PAYMENT. Beginning with the calendar year in ------------------------- which the Commencement Date occurs and in subsequent years during the Term of this Lease, LESSEE shall pay to the LESSOR monthly installments of one-twelfth (1/12) of the amounts due to LESSOR under Paragraphs 5.4.1 and 5.4.2 on account of projected Taxes for such year, calculated by the LESSOR on the basis of the best and most recent data available as set forth in a statement from LESSOR (and, when available, based upon the real estate tax bill covering any such period). Appropriate adjustments of estimated amounts shall be made between LESSOR and LESSEE promptly after LESSOR shall have received the tax bill covering any such period. 11 5.4.4 TAX ADJUSTMENT. If the LESSOR or any other tenant (excluding -------------- LESSEE) in the Building shall construct an addition to the Building, or construct improvements within the Building of unusual value so as to result in an increase in Taxes over the Taxes which would have been assessed to that Building but for such construction, there shall not be included in Taxes for purposes of this Lease the amount of such increase in Taxes unless such additions or improvements directly benefit the LESSEE. If the LESSEE, or the LESSOR at the direction of the LESSEE, shall construct improvements within the Leased Premises, or any part thereof, of unusual value so as to result in an increase in Taxes over the Taxes which would have been assessed to the Building, or part, but for such unusually valuable improvements, the LESSEE shall be responsible for the payment of the full amount of such increase. 6. UTILITIES AND OTHER SERVICES. ---------------------------- (a) The LESSOR shall provide and the LESSEE shall pay charges for all heat, air-conditioning, electricity, and water and sewer use charges and all other utilities separately metered or sub-metered to the Leased Premises, and LESSEE shall be responsible for all utility company deposits applicable to the supply of such services to the Leased Premises. LESSEE shall also be responsible for the payment of its proportionate share of such utilities not separately metered or sub-metered to the Leased Premises but which serve the Leased Premises, all as reasonably determined by LESSOR. Upon request by the LESSOR, the LESSEE shall provide the LESSOR with evidence of payment of such charges. LESSEE shall defend, indemnify and hold 12 LESSOR harmless from and against any claim or liability arising out of LESSEE's failure to pay for such charges for which LESSEE is responsible. (b) LESSOR agrees to furnish reasonable heat to the stairways, elevators and other common areas in the Building, or portions thereof, as necessary for comfortable occupancy twenty-four (24) hours, seven (7) days per week of the heating season of each year and to provide lighting to passageways and stairways and all parking areas and walkways providing access from the Building to the parking area in the evening twenty-four (24) hours, seven (7) days per week and to furnish ordinary repairs and cleaning of the common areas and facilities of the Complex and removal of snow and ice reasonably promptly after snowfall and ice accumulation have ended to all walkways, accessways and approaches to the Building and the parking facility as is customary in or about similar buildings in Cambridge. LESSOR shall not be liable to LESSEE for any compensation or reduction of rent by reason of inconvenience or annoyance or for loss of business arising from the necessity of LESSOR or its agents entering the Leased Premises, or for LESSEE's repairing the Leased Premises if such repair is not performed by LESSOR, or for making repairs or renovations to any portion of the Building, however the necessity may occur. In case LESSOR is prevented or delayed from making any such repairs or alterations, or supplying the utilities or services provided for herein, or performing any other covenant or duty to be performed on LESSOR's part, by reason of any cause beyond LESSOR's control, LESSOR shall not be liable to LESSEE therefor, nor shall LESSEE be entitled to any abatement or reduction of rent by reason thereof, nor 13 shall the same give rise to a claim in LESSEE's favor that such failure constitutes actual or constructive, total or partial, eviction from the Leased Premises, or any portion thereof. LESSOR reserves the right to stop any service or utility system, when necessary by reason of accident or emergency, until necessary repairs have been completed. (c) LESSOR has installed at its own expense separate meters for all utilities including heat, electricity, water and sewer, and air conditioning. The LESSEE shall pay its utility chargzes directly to the suppliers of such utility services, as billed by the LESSOR within ten (10) days of receipt of said bill and at least before the same become delinquent. The LESSEE and LESSOR shall have the right to audit said charges and payments upon reasonable notice. 7. USE OF LEASED PREMISES. The LESSEE may use the Leased Premises only ---------------------- for the purpose of general office. 8. COMPLIANCE WITH LAWS. The LESSEE acknowledges that no trade or -------------------- occupation shall be conducted in the Leased Premises or use made thereof which shall be unlawful, improper, noisy or offensive, or be contrary to any law or any municipal by-law or ordinance in force in the City of Cambridge. LESSEE shall keep the Leased Premises equipped with all safety appliances and shall procure and keep in force all licenses and permits required by law or ordinance of any public authority because of the uses made of the Leased Premises by LESSEE and shall maintain in good condition on the Leased Premises all safety and fire protection devices required by the Board of Fire Underwriters, or other body having similar functions, and of 14 every insurance company and policy by which LESSOR or LESSEE is insured. If any use of the Leased Premises by LESSEE results in the cancellation of any insurances carried by LESSOR, or increases the cost thereof, the LESSEE shall on demand reimburse the LESSOR all extra insurance premiums incurred as a result of such use of the Leased Premises by the LESSEE. 9. RISK OF LOSS OF PERSONAL EFFECTS. LESSEE acknowledges and agrees that -------------------------------- all of the furnishings, equipment, effects and property of LESSEE and of all persons claiming by, through or under LESSEE which may be on the Leased Premises or elsewhere in any building in the Complex, shall be at the sole risk and hazard of LESSEE and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft or from any other cause, no part of said loss or damage is to be charged to or to be borne by LESSOR, except that LESSOR shall in no event be indemnified or held harmless or exonerated from any liability to LESSEE or to any other person, arising from any injury, loss, damage or liability caused by LESSOR's negligence or willful misconduct. 9A. INSURANCE - WAIVER OF SUBROGATION. LESSOR agrees to keep the Building --------------------------------- and LESSEE agrees to keep the Leased Premises, and all equipment, machinery and fixtures therein insured in amounts equal to the actual cash value of the same, against fire and other perils included in a standard extended coverage endorsement, and against breakdown of boilers and other machinery and equipment, and LESSEE agrees to procure and keep in force comprehensive general liability 15 insurance indemnifying LESSOR against all claims and damages for any injury to or death of person or damage to property which may be claimed to have occurred upon or to have been caused by activities or conditions within the Leased Premises and indemnifying LESSOR to the extent any such claims and demands are the responsibility or obligation of LESSEE pursuant to this Lease or as a matter of law, in amounts not less than One Million Dollars ($1,000,000) for property damage, Five Hundred Thousand Dollars ($500,000) for injury or death of one person, and One Million Dollars ($1,000,000) for injury or death of more than one person in a single accident. All insurance required hereunder shall be written by insurance carriers qualified to do business and in good standing in Massachusetts and approved by LESSOR, which approval shall not be unreasonably withheld. All policies of insurance, shall name LESSOR and LESSEE as the insured parties. Each required policy of insurance shall provide that, notwithstanding any act or omission of LESSEE which might otherwise result in forfeiture of said insurance: (a) it shall not be cancelled nor its coverage reduced without at least ten (10) days prior written notice to each insured named therein, and (b) any proceeds shall be first payable to LESSOR or to the holder of any mortgage encumbering the Leased Premises, as their respective interests may appear. As of the commencement of the Term hereof, and thereafter not less than fifteen (15) days prior to the expiration dates of the expiring policies, the original policies to be obtained by LESSEE hereto issued by the respective insurers or 16 certificates thereof including photocopies of the original policies, shall be delivered to LESSOR. Any insurance carried by either party with respect to the Leased Premises or property therein or occurrences thereon shall include a clause or endorsement denying to the insurer rights of subrogation against the other party to the extent rights have been waived by the insured prior to occurrence of injury or loss. Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any rights of recovery against the other for injury of loss due to hazards covered by such insurance to the extent of the indemnification received thereunder. 10. MAINTENANCE OF LEASED PREMISES. The LESSEE agrees to maintain the ------------------------------ Leased Premises in the same condition as they are at the commencement of the Term or as they may be put in during the Term of this Lease, reasonable wear and tear, damage by fire, other casualty and eminent domain, and matters for which the LESSOR is responsible hereunder only excepted, to provide its own interior janitorial service, to install and maintain its own security system as it considers appropriate and, whenever necessary, to replace plate glass and other glass therein with that of the same quality as that damaged or injured. LESSOR shall maintain and LESSEE shall pay its proportionate share of the maintenance of the HVAC System servicing the Leased Premises, but LESSEE shall be responsible for all repairs and replacements to said system if the same is caused by any act or omission of LESSEE or its agents. The LESSEE shall not permit the Leased Premises to be overloaded, damaged, stripped, or defaced, nor suffer any waste. LESSEE shall 17 obtain written consent of LESSOR before erecting any sign on or about the Leased Premises, which consent shall not be unreasonably withheld or delayed. LESSEE further covenants and agrees: to take all reasonably necessary actions to insure that smoke, fumes, vapors and odors will not permeate any building containing the Leased Premises and will not be removed only through the exhaust and ventilating system servicing the Leased Premises; to keep all trash garbage and debris stored on the Leased Premises (and not in any other portions of the Lot or the Building) in adequate covered containers, approved by LESSOR and placed in locations or areas approved by LESSOR in writing and to arrange for the regular removal thereof once each day; to provide for the frequent and adequate cleaning of the Leased Premises and all walls, floors, fixtures and equipment therein consistent with its use. LESSOR shall maintain in good condition the structural elements and the roof of the Building, the mechanical equipment and systems in the Building (other than such equipment and systems which are located within or exclusively serve the Leased Premises, and other than LESSEE's maintenance obligations otherwise provided herein), and the common areas of the Building. LESSEE shall pay its proportionate share for these expenses and services as set out in Paragraph 5 above. Notwithstanding anything to the contrary in this Lease, in no event shall LESSEE's obligation to repair under this section extend to (i) damage and repairs covered under any insurance policy carried by LESSOR in connection with the Leased Premises or Building; (ii) damage caused by any defects in the design, construction or materials of the Building, including the Leased Premises, and 18 improvements installed therein by LESSOR; (iii) damage caused in whole or in part by the negligence or willful misconduct of LESSOR or LESSOR's agents, employees, invitees or licensees; (iv) repairs covered under any Common Area Operating Expenses; (v) reasonable wear and tear; (vi) conditions covered under any warranties of LESSOR's contractors. 11. ALTERATIONS - ADDITIONS. The LESSEE shall not make structural ----------------------- alterations or additions to the Leased Premises, but may make nonstructural alterations and improvements, provided the LESSOR consents thereto in advance in writing in each instance, which consent shall not be unreasonably withheld or delayed provided that LESSOR is furnished with detailed plans and specifications reasonably approved by LESSOR. Notwithstanding the foregoing, LESSEE shall not be required to obtain LESSOR's consent (but will provide LESSOR with prior written notice of, and to the extent required, permits for) any alterations to the Leased Premises by LESSEE that (i) cost less than Ten Thousand Dollars ($10,000), (ii) do not affect the electrical, mechanical, plumbing, sewage, heating, ventilating or air conditioning systems serving the Building, and (iii) are not structural in nature. All such allowed alterations or additions shall be at LESSEE's expense and shall be in quality at least equal to the present construction. LESSEE shall not permit any mechanics' liens, or similar liens, to remain upon the Leased Premises for labor and materials furnished to LESSEE or claimed to have been furnished to LESSEE in connection with the work of any character performed or claimed to have been performed at the direction of LESSEE, and shall cause any such lien to be released of 19 record forthwith without cost to LESSOR. Any alterations, additions or improvements made by the LESSEE, except for moveable partitions and furnishings, installed at the LESSEE's cost, shall become the property of the LESSOR at the termination of the Lease as provided herein. With respect to all such LESSEE work, LESSEE further agrees as follows: that such work shall commence only after all required municipal and other governmental permits and authorizations have been obtained (the LESSOR agreeing to join in any application therefor at the LESSEE's expense, whenever necessary) and all such work shall be done in a good and workmanlike manner in compliance with building and zoning laws and with all other laws, ordinances, regulations and requirements of all federal, state and municipal agencies, and in accordance with the requirements and policies issued by any insurer of LESSOR or LESSEE; that all such work shall be prosecuted with reasonable dispatch to completion; that at all times when any such work is in progress, LESSEE shall maintain or cause to be maintained adequate workers' compensation insurance for those employed in connection therewith with respect to whom death or injury claims could be asserted against LESSOR, the LESSEE or the Leased Premises and comprehensive general liability or builder's risk insurance (for mutual benefit of LESSEE and LESSOR) in coverages reasonably approved by LESSOR: and that all such work of LESSEE shall be coordinated with any work being performed by LESSOR and other tenants of the Building in which the work is taking place in such manner as to maintain harmonious labor relations and not to interfere with the operation of the Building or the Complex or the construction 20 work of others. 12. ASSIGNMENT - SUBLETTING. The LESSEE shall not assign or sublet the ----------------------- whole or any part of the Leased Premises without the LESSOR's prior written consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the payment of all rent and for the full performance of the covenants and conditions of this Lease (which following assignment shall be joint and several with assignee). Notwithstanding the foregoing, LESSOR's consent shall not be required in the event LESSEE transfers this Lease to an entity which purchases all or substantially all of the assets of LESSEE. In the event LESSEE sub-leases all or a portion of the Leased Premises and the rent to be paid by the Sublessor is greater than the rent paid by LESSEE pursuant to the Lease, LESSEE and LESSOR shall share in such excess rent on a 50/50 basis; provided LESSEE is first reimbursed out of such excess rent for any expenses associated with the sublease of the Leased Premises, including but not limited to brokerage commission, attorneys' fees and alterations. 12. QUIET ENJOYMENT, COVENANT OF TITLE. The LESSEE, on paying the rent ---------------------------------- and other charges hereunder, as and when the same shall become due and payable and observing and performing the covenants, conditions and agreements contained in this Lease on the part of the LESSEE to be observed and performed, all as herein provided, shall and may lawfully, peaceably and quietly have, hold and enjoy the Leased Premises during the Term, subject to all of the terms and provisions hereof, without hindrance, ejection or disturbance by the LESSOR by or by any 21 person or persons claiming by, through or under the LESSOR or by anyone claiming paramount title. 13. SUBORDINATION. The Lease and LESSEE's interest hereunder, subject to ------------- the provisions of this Paragraph 13, shall be subordinate to the lien of any present or future mortgage or mortgages upon the Leased Premises or any property of which the Leased Premises are a part, irrespective of the time of execution or the time of recording of any such mortgage or mortgages, and to each advance made or to be made thereunder and to all renewals, modifications, consolidations, and extensions thereof, and all substitutions therefor. Any subordination of this Lease pursuant to the provisions of this Paragraph 13 is made and granted upon the condition that, in the event of any entry by the holder of any such mortgage to foreclose, a default under any such mortgage, a foreclosure of any such mortgage of LESSOR'S interest under this Lease or in the Leased Premises through foreclosure or otherwise, the LESSEE shall (provided the LESSEE is not then in default beyond any applicable cure period) peaceably hold and enjoy the Leased Premises as a lessee of such holder, during the Term upon the terms, covenants and conditions as set forth in this Lease without any hindrance or interruption from such holder. In the event of such entry, foreclosure, acquisition or other action by such holder, LESSEE shall recognize the holder of the mortgage with respect to which such action is taken as the LESSOR under this Lease. As used in this Paragraph 13, the word "holder" includes any person claiming through or under any such mortgage, including any purchaser at a foreclosure sale, and the word "LESSEE" shall include LESSEE's successors and 22 assigns. The word "mortgage" as used in this Paragraph shall mean mortgages, deeds of trust, and other similar instruments held by any institutional lender and all modifications, extensions, renewals and replacements thereof. This Paragraph 13 is self-operative, and no further instrument of subordination shall be required. Notwithstanding the self-operative effect of this Paragraph 13, the LESSEE agrees to execute such further documents in recordable form as the LESSOR or any lender may reasonably require, consistent with the terms of this Paragraph 13 and 21. Should the LESSEE fail to execute and deliver to the LESSOR any such reasonable document within twenty (20) days of a written notice requesting the LESSEE to execute and deliver such document, LESSEE shall pay to LESSOR (as liquidated damages and not as a penalty) the sum of Five Hundred Dollars ($500) per day for each day after such twentieth (20th) day during which such failure to deliver such instrument continues. 14. LESSOR'S ACCESS. The LESSOR or agents of the LESSOR may, at --------------- reasonable times and upon twenty-four (24) hours reasonable prior written notice to the LESSEE, (and in a manner so as not to unreasonably interfere with LESSEE's business operation), enter to view the Leased Premises, or any part thereof and may remove placards and signs not approved and affixed as herein provided, and make repairs and alterations which LESSOR may deem necessary or desirable and, at LESSEE's expense, to remove any alterations, additions, signs, or other improvements made by LESSEE and not consented to by LESSOR; to show the Leased Premises to others, upon twenty-four (24) hours reasonable prior written notice, in a manner so 23 as not to unreasonably interfere with the normal conduct of the LESSEE's business, at any time within the four (4) month period prior to the expiration of the Term; to affix to any suitable part of the Leased Premises a notice for letting or selling the Leased Premises are a part and keep the same so affixed without hindrance or molestation. 15. INDEMNIFICATION AND LIABILITY. The LESSEE shall defend, save harmless ----------------------------- and indemnify LESSOR from any claims of liability for injury, loss, accident or damage to any person or property while on the Leased Premises, if not due to the negligence or willful misconduct of LESSOR, or LESSOR's employees or agents, and to any persons or property while in the Building or Complex occasioned by any omission, fault, negligence or other willful misconduct of LESSEE and persons for whose conduct LESSEE is legally responsible. LESSOR shall defend, hold harmless and indemnify LESSEE from any claims of liability for injury, loss, accident or damage to any person or property while in the Building, Complex or Common Areas, unless due to the omission, fault, negligence or willful misconduct of LESSEE or LESSEE's employees or agents. 16. HOLDING OVER. LESSEE agrees to pay to LESSOR one and one-half times ------------ the total of the Base Rent set forth in Paragraph 4 in effect for the period immediately prior to LESSEE's holding over and one and one-half times the additional rent provided for under this Lease then applicable for each month or portion thereof LESSEE shall retain possession of the Leased Premises or any part thereof after the termination of this Lease, whether by lapse of time or otherwise, and also to pay all damages sustained by LESSOR on account thereof; the provisions of 24 this Paragraph shall not operate as a waiver by LESSOR of any right of re-entry provided in this Lease. 16A. FURTHER LESSEE COVENANTS. LESSEE further covenants and agrees during ------------------------ the Term and such further time as LESSEE holds any part of the Leased Premises: (a) to pay when due all rent and other sums herein specified, without offset, deduction set off or counterclaim except as otherwise specifically provided in this Lease; (b) not to obstruct in any manner any portion of any building not hereby leased or the sidewalks or approaches to such building or any inside windows or doors; (c) that neither the original LESSOR nor any successor LESSOR who or which is trustee or a partnership, nor any beneficiary of the original LESSOR or any successor LESSOR nor any partner, general or limited, of such partnership shall be personally liable under any term, condition, covenant, obligation or agreement expressed herein or implied hereunder or for any claim or damage or cause at law or in equity arising out of the occupancy of the Leased Premises or the use or maintenance of the Building and LESSEE specifically agrees to look solely to the LESSOR's interest in the Complex for the recovery of any judgment against LESSOR; and (d) if any payment of rent or other sums due hereunder is not paid within ten days of when due, LESSEE shall pay to LESSOR a late charge equal to five (5%) 25 percent of the unpaid amount per month, or part thereof, that such amount remains unpaid. 17. FIRE, CASUALTY. -------------- 17.1 DEFINITION OF "SUBSTANTIAL DAMAGE" AND "PARTIAL DAMAGE". The term ------------------------------------------------------- "substantial damage", as used herein, shall refer to damage which is of such a character that the same cannot, in ordinary course, be expected to be repaired within ninety (90) calendar days from the time that such repair work would commence. Any damage which is not "substantial damage" is "partial damage." In the event of substantial damage to the Building, the LESSOR shall notify the LESSEE as soon as is practicable and in no event later than thirty (30) days after such damage of LESSOR's estimated time for repair of such damage. 17.2 PARTIAL DAMAGE TO THE BUILDING. If during the Lease Term there shall ------------------------------ be partial damage to the Building by fire or other casualty and if such damage shall materially interfere with the LESSEE's use of the Leased Premises as contemplated by this Lease, the LESSOR shall, to the extent insurance proceeds are available to LESSOR, promptly proceed to restore the Building to substantially the condition in which it was immediately prior to the occurrence of such damage. Notwithstanding the foregoing, if there shall be partial damage to the Building, and if such damage shall materially interfere with the LESSEE's use of the Leased Premises as contemplated by this Lease occurring during the last twelve (12) months of the Lease Term of such a character that the same cannot, in ordinary course, be expected to be repaired within thirty (30) days from the time such repair work would begin, 26 the LESSOR or LESSEE may, withing ten (10) days of the date of such damage, elect to terminate this Lease. If such election is not made, the LESSOR shall promptly proceed with such restoration. 17.3 SUBSTANTIAL DAMAGE TO THE BUILDING. If during the Lease Term there ---------------------------------- shall be substantial damage to the Building by fire or other casualty and if such damage shall materially interfere with the LESSEE's use of the Leased Premises as contemplated by this Lease, the LESSOR shall, to the extent insurance proceeds are available to LESSOR, promptly restore the Building to an architectural unit that is not less suitable than that which existed prior to such fire or casualty, unless the LESSOR or the LESSEE, within forty-five (45) days after the occurrence of such damage, shall give notice to the other of its election to terminate this Lease. If at any time during such forty-five (45) day period the LESSOR notifies the LESSEE of its intention to restore the Building, the LESSEE must then give notice to the LESSOR, within ten (10) days of its receipt of the LESSOR's notice of intention to restore the Building, as to whether the LESSEE will elect to terminate the Lease. Should the LESSEE fail to elect to terminate the Lease within such ten (10) day period, the LESSEE's right to terminate under this Paragraph 17.3 shall expire. If the LESSOR proceeds with the restoration of the Building and if such damage shall not have been repaired to the extent necessary for the LESSEE to resume its normal business operations at the Leased Premises by the end of the 180th day following the date of such fire or casualty, or if the LESSOR shall fail diligently to cause such repair and restoration work to be performed, then the LESSEE may, at any time thereafter while 27 the damage remains unrepaired, terminate this Lease upon notice to the LESSOR. If the LESSOR or the LESSEE shall give such notice of termination, then this Lease shall terminate as of the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof. 17.4 ABATEMENT OF RENT. If during the Lease Term the Building shall be ----------------- damaged by fire or casualty and if such damage shall materially interfere with the LESSEE's use of the Leased Premises as contemplated by this Lease, a just proportionate amount of the rent, additional rent and other charges payable by the LESSEE hereunder shall abate proportionately for the period in which, by reason of such damage, there is such interference with the LESSEE's use of the Leased Premises. 17A. EMINENT DOMAIN. If the Building is totally taken by condemnation or -------------- right of eminent domain, this Lease shall terminate as of the date of such taking. If the Building, or such portion thereof as to render the balance (if reconstructed to the maximum extent practicable in the circumstances) physically unsuitable in the LESSEE's reasonable judgment for the LESSEE's purposes, shall be taken by condemnation or right of eminent domain (including a temporary taking in excess of 180 days), the LESSEE or the LESSOR shall have the right to terminate this Lease by notice to the other of its desire to do so, provided that such notice is given not later than ten (10) days after the LESSEE has been deprived of possession. Should any part of the Building be so taken or condemned or receive such damage and should this Lease not be terminated in accordance with the foregoing 28 provisions, the LESSOR shall, to the extent condemnation proceeds are available to LESSOR, promptly restore the Leased Premises to an architectural unit that is suitable to the uses to the LESSEE permitted hereunder. In the event of a taking described in this Paragraph 17A, the rent, additional rent, and other charges payable hereunder, or a fair and just proportion thereof according to the nature and extent of the loss of use, shall be suspended or abated. The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the LESSEE may have for damages or injury to the Leased Premises for any taking by eminent domain, except for damage to the LESSEE's trade fixtures, personal property or equipment, if any, the LESSEE's right to relocation expenses, if any, and the LESSEE's right for business interruption, if any. 18. DEFAULT AND BANKRUPTCY. In the event that: ---------------------- (a) The LESSEE, or any guarantor of LESSEE's obligations hereunder, shall default in the payment of any installment of rent or other sum herein specified; or (b) The LESSEE shall default in the observance or performance of the LESSEE's covenants, agreements, or obligations hereunder (except as provided in Paragraph 18(a) above) and the LESSEE shall not cure such default within thirty (30) days after written notice thereof or if such default cannot be cured within thirty (30) days, then if LESSEE shall not commence to cure the same within thirty (30) days and diligently pursue the curing of the same; or (c) LESSEE or any guarantor of LESSEE's obligations under this Lease makes any assignment for the benefit of creditors, commits any act of bankruptcy or 29 files a petition under any bankruptcy or insolvency law; or if such a petition is filed against LESSEE or any guarantor of LESSEE's obligations under this Lease and is not dismissed within ninety (90) days; or if a receiver or similar officer becomes entitled to LESSEE's leasehold hereunder and it is not returned to LESSEE within ninety (90) days, or if such leasehold is taken on execution or other process of law in any action against LESSEE; then in any such case the LESSOR shall have the right thereafter, while such default continues, to re-enter and take complete possession of the Leased Premises, to declare the Term of this Lease ended, and remove the LESSEE's effects at LESSEE's sole cost and expense, without prejudice to any remedies which might be otherwise used for arrears of rent or other default. The LESSEE shall indemnify the LESSOR against all loss and reasonable payment of rent and other payments which the LESSOR may incur by reason of such termination during the residue of the Term. In the event of default, LESSOR shall use its reasonable efforts to re-let the Leased Premises so as to mitigate any damages to the LESSEE hereunder. If LESSOR re-lets the Leased Premises, LESSEE may off- set its payable rent by the amount of rent received by LESSOR. If the LESSEE shall default, after written notice thereof as provided herein, in the observance or performance of any conditions or covenants on its part to be observed or performed under or by virtue of any of the provisions of this Lease and after the expiration of any period within which the LESSEE is entitled to cure such default as is provided above in this Paragraph 18, the LESSOR, without being under 30 any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the LESSEE. If the LESSOR makes any expenditures or incurs any obligations for the payment of money in connection therewith, including, but not limited to, reasonable attorneys' fees (except for unsuccessful suits against the LESSEE) in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest at the rate of twelve (12%) percent per annum and costs, shall be paid to the LESSOR by the LESSEE as additional rent. Nothing contained in this Lease shall limit or prejudice the right of LESSOR to claim and obtain in proceedings for bankruptcy, insolvency or like proceedings by reason of the termination of this Lease an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which the damages are to be claimed or proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. 19. RULES AND REGULATIONS. The LESSOR shall have the right to institute --------------------- and to change from time to time, rules and regulations for the use of the Building and the Lot by commercial office lessees, and by commercial retail lessees, which shall be reasonable in all instances and shall be uniformly applicable to all commercial lessees in the Building and the LESSEE agrees to abide thereby. 19A. PARAGRAPH HEADINGS. The paragraph headings throughout this ------------------ instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, 31 construction or meaning of the provisions of this Lease. 20. BROKER. The LESSOR and LESSEE each represent and warrant to the other ------ that each has had no dealings with any Brokers concerning this Lease, except Spaulding and Slye (Robert Burr) and ROBERT A. JONES AND COMPANY and each party agrees to indemnify and hold the other harmless for any damages occasioned to the other by reason of a breach of this representation and warranty. LESSOR shall pay a commission to Spaulding & Slye. 21. ESTOPPEL CERTIFICATE. LESSOR and LESSEE each agree at any time from -------------------- time to time, upon not less than ten (10) days' prior notice to execute, acknowledge and deliver to the other, a statement in writing, certifying to the extent possible that this Lease is unmodified and in full force and effect, or if there have been modifications, that the same is in full force and effect as modified and stating such modifications and otherwise certifying if there exists any default under the terms of this Lease and such other information as may be reasonably requested concerning this Lease by the other party or any other third party with a bona fide interest. Should either party fail to deliver to the other party any such statement within twenty (20) days of receipt of a written notice requesting any such statement, the party failing to deliver any such statement shall pay to the requesting party, the sum of Five Hundred Dollars ($500) per day (as liquidated damages and not as a penalty), for each day after such twentieth (20th) day during which such failure continues. 22. NOTICE. Any notice from the LESSOR to the LESSEE relating to the ------ 32 Leased Premises or to the occupancy thereof shall be deemed duly served, if in writing and mailed by registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSEE, GIGA Information Group, Inc. One Kendall Square - Building 1400 Cambridge, MA 02139 Any notice from the LESSEE to the LESSOR relating to the Leased Premises or to the occupancy thereof, shall be deemed duly served, if in writing and mailed to the LESSOR by registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSOR at such address as the LESSOR may from time to time advise in writing, the following now being designated: CAMBRIDGE 1400 LIMITED PARTNERSHIP c/o THE ATHENAEUM GROUP 215 First Street Cambridge, MA 02142-1268 23. SURRENDER. The LESSEE shall at the expiration or other termination of --------- this Lease yield up and peaceably surrender all portions of the Leased Premises to LESSOR and shall remove all LESSEE's goods and effects therefrom (including, without hereby limiting the generality of the foregoing, all signs and lettering affixed or painted by the LESSEE, either inside or outside the Leased Premises). LESSEE shall deliver to the LESSOR the Leased Premises and all keys, locks thereto, and all fixtures, alterations and additions made to or upon the Leased Premises, except for moveable partitions and furnishings installed at the LESSEE's expense, in the same condition as they were at the commencement of the term, or as they were put in during the Term hereof, reasonable wear and tear and damage by fire, other casualty 33 or eminenet domain and matters for which the LESSOR is responsible hereunder only excepted. All moveable partitions and furnishings, installed in the Leased Premises at the LESSEE's expense prior to or during the Term of the Lease may be removed by the LESSEE at the expiration or other termination of the Lease. The LESSEE shall, at its expense, promptly repair any and all damage to the Leased Premises resulting from such removal. In the event of the LESSEE's failure to remove any of the LESSEE's property from the Leased Premises, LESSOR is hereby authorized, upon fifteen (15) days' written notice to the LESSEE without liability to LESSEE for loss or damage thereto, and at the sole risk of LESSEE, to remove and store any of the property at LESSEE's sole cost and expense. 24. OPTION TO EXTEND. If the LESSEE is not then in default, LESSOR does ---------------- hereby grant to LESSEE the option to extend this Lease for one (1) additional five (5) year term, commencing on the expiration of the initial Term upon the same terms and conditions as herein contained except the annual base rent set forth in Paragraph 4 hereof shall be at the fair market rate. The option shall be exercised by written notice from LESSEE and received by LESSOR at least four (4) months prior to the expiration of the initial term. In the event LESSEE gives timely extension notice in accordance with the provisions of this Paragraph 24 and the parties are unable to agree as to the fair market rent within thirty (30) days after the receipt of LESSEE's extension notice, then LESSOR and LESSEE may initiate the appraisal process provided for herein by giving notice to that effect to the other, and the party so initiating the appraisal 34 process (the "Initiating Party") shall specify in such notice the name and address of the person designated to act as an appraiser on its behalf. Within thirty (30) days after the designation of the appraiser, the other party (the "Other Party") shall give notice to the Initiating Party specifying the name and address of the person designated to act as an appraiser on its behalf. The two appraisers as chosen shall meet within ten (10) days after the second appraiser is appointed and if, within ten (10) days after the second appraiser is appointed, the two appraisers shall not agree on a fair market rent, then on the second Business Day following the close of such ten (10) day period, the two appraisers shall, within thirty (30) days after the second appraiser is appointed, together appoint a third appraiser. In the event of their being unable to agree upon such appointment within forty (40) days after the appointment of the second appraiser, the third appraiser shall be selected by the parties themselves if they can agree thereon within a further period of fifteen (15) days. If the parties do not so agree, then either party, on behalf of both and on notice to the other, may request such appointment by the Boston Office of the American Arbitration Association (or successor organization) in accordance with its rules then prevailing. Within five (5) days after the appointment of the third appraiser, the first appraiser and second appraiser shall submit to such third appraiser their respective determinations of the fair market rent as described in the immediately preceding clause. Such third appraiser shall, within fifteen (15) days after the end of such five (5) day period, choose the fair market rent specified by either the first appraiser or the second appraiser in such submissions and the fair market rent selected by the 35 third appraiser from the fair market rents submitted by the first appraiser and the second appraiser shall conclusively be deemed to be the fair market rent. Each party shall pay the fees and expenses of the appraiser selected by it. The fees and expenses of the third appraiser and all other expenses (not including the attorney's fees, witness fees and similar expenses of the parties which shall be borne equally by the parties thereto) shall be borne equally 50/50 by the parties. Under no circumstances may the appraisers modify or disregard any provision of this Lease and the jurisdiction of the appraisers is restricted accordingly. The appraisers shall include the fair market rent such cost escalators as are then customary and appropriate. Fair Market Rental Value is intended to be calculated in a fair and comprehensive manner so that Landlord shall achieve, and Tenant shall pay based upon, an amount which is no less than the same net rental which Landlord would actually receive upon a re-letting of the applicable space in an arms'-length transaction to an unrelated third party tenant where neither party is under any compulsion or undue influence. Fair Market Value shall not include alterations or improvements made to the Leased Premises at LESSEE's expense during the initial Lease Term. In the event LESSOR or LESSEE initiates the appraisal process pursuant to this Paragraph and as of the commencement of the Extension Term the amount of the fair market rent has not been determined, LESSEE shall pay the amount specified by the LESSOR's appraiser, and when such determination has been made, it shall be retroactive as of the commencement date of the Extension Term and any excess shall 36 be credited by LESSOR to LESSEE as against the next monthly Base Rent payment or payments. 25. SECURITY DEPOSIT. Not required. ---------------- 26. SIGNAGE ALLOWANCE. LESSOR shall provide LESSEE with a Two Thousand ----------------- Dollar ($2,000) signage allowance to be used at Leased Premises. All signage shall be subject to LESSOR's reasonable approval. 27. MISCELLANEOUS. ------------- (a) Upon LESSOR's request, LESSEE shall submit annual financial statements to the LESSOR containing statements of cash flow. If the LESSEE is a publicly traded corporation it shall supply LESSOR, on a quarterly basis, with its 10Q filings. (b) The LESSOR reserves the right to assign or transfer any and all of its right, title and interest under the Lease, including but not limited to the benefit of all covenants of the LESSEE hereunder. Notwithstanding anything contained in this Lease to the contrary, it is specifically understood and agreed that the obligations imposed upon the LESSOR hereunder shall be binding upon the LESSOR and LESSOR's successors' ownership of LESSOR's interest hereunder the LESSOR and its said successors in interest shall not be liable for acts and occurrences arising from and after the transfer of their interest as LESSOR hereunder, provided such successor fully assumes the obligations of the LESSOR hereunder from and after the date of such assignment or transfer. (c) This Lease shall be governed by and construed in accordance with the 37 laws of the Commonwealth of Massachusetts, as the same may from time to time exist. (d) This Lease contains all of the agreements of the parties with respect to the subject matter thereof and supersedes all prior oral and written negotiations and dealings between them with respect to such subject matter. The agreement of the parties contained in this Lease shall not be modified or amended unless such modification or amendment is in writing and signed by the parties. (e) The LESSEE acknowledges that LESSEE has not been influenced to enter into this Lease nor has it relied upon any warranties or representations not set forth or incorporated in this Lease or previously made in writing. The undersigned General Partner of CAMBRIDGE 1400 LIMITED PARTNERSHIP does hereby certify that it is authorized by all of the beneficiaries of said Partnership to execute and acknowledge the within Lease on behalf of the Partnership. IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and common seals this 31st day of October, 1995. CAMBRIDGE 1400 LIMITED PARTNERSHIP By Its General Partner CAMBRIDGE 1400 INC. /s/ Allen R. Jones /s/ - ------------------------------ ------------------------------ By: Allan R. Jones, President Witness 38 GIGA INFORMATION GROUP, INC. /s/ David Thor /s/ Kathleen M. Doyle - ------------------------------ ------------------------------ By: David Thor, President Witness Duly Authorized /s/ Michael J. Kolesar /s/ Kathleen M. Doyle - ------------------------------ ------------------------------ By: Vice President, Finance Witness Duly Authorized 39 EX-10.20 24 AMENDED LEASE DATED 6-OCT-1987 EXHIBIT 10.20 LEASE Lease made this 6th day of October, 1987 by Charles A. Pesko, Jr. as he is Trustee of Longwater Circle Trust established u/d/t dated October 6, 1987, and not individually, of Marshfield, Plymouth County, Massachusetts, as landlord (hereinafter called "Landlord"), and CAP International, Inc., a Massachusetts corporation having a business office in Marshfield, Massachusetts as tenant (hereinafter called "Tenant"). PREMISES 1. In consideration of the rents, agreements and conditions herein reserved and contained on the part of Tenant to be paid, performed and observed, Landlord does hereby demise and lease to Tenant, for the term hereinafter set forth, premises hereinafter described ("the demised premises") in Norwell, Plymouth County, Massachusetts, as shown upon a certain plan ("the lease plan") attached to this lease and marked Exhibit A. The demised premises consist of the building shown upon the lease plan containing approximately 27,100 square feet of floor area ("the Building") and the area outlined by a bold line on the lease plan and are more fully described in Exhibit A-1 hereto. CONSTRUCTION 2.1 Landlord agrees that the work described in Exhibit B attached hereto as "Landlord's construction work" will be prosecuted to completion with due diligence and that said work, except as provided in Exhibit B, will be done at its own cost and expense. Landlord agrees that Landlord's construction work shall be substantially completed and the demised premises suitable for occupancy on or before April 4, 1988. The demised premises shall be deemed "substantially completed" when (i) the Building shall be completely enclosed with all openings secure; (ii) heating, air conditioning, electric, gas (if any), sprinkler and water systems of the demised premises shall be installed and operational; (iii) parking areas and walkways shown upon the lease plan shall be paved; (iv) interior ceilings, floors, floor coverings, lighting and toilet facilities of the demised premises shall be installed; and (v) a temporary or permanent certificate of occupancy shall have been issued for the demised premises by the appropriate authority of the Town of Norwell; provided, however, if any construction which shall not be part of Landlord's construction work shall be required upon the demised premises as a condition precedent to the issuance of any such certificate of occupancy, the issuance of such certificate of occupancy shall not be a requirement for substantial completion of the demised premises. Landlord shall deliver possession of the demised premises to Tenant upon subtantial completion of Landlord's construction work by delivering the keys to the demised premises to Tenant. 2.2 Landlord agrees to give Tenant at least ten (10) days prior written notice of the date upon which Landlord estimates that Landlord's construction work shall be substantially completed. Landlord further agrees that Landlord shall diligently proceed to fully complete Landlord's construction work if the same shall not have been fully completed prior to delivery of possession of the demised premises to Tenant. TERM 3.1 The original term of this lease shall be a period of ten (10) years commencing upon the first to occur of (i) May 1, 1988, (ii) the date that Landlord's construction work shall be substantially completed or (iii) the date upon which Tenant shall commence business operations upon the demised premises and expiring upon the tenth (10th) anniversary of such commencement date. 3.2 Tenant agrees that it will not record this lease. Upon the written request of either party hereto, Landlord and Tenant will execute an instrument, recordable in form, setting forth the term and commencement date and such other information as may be necessary to constitute a "Notice of Lease" under Massachusetts laws. Tenant will pay the cost of recording said notice of lease. If this lease is terminated before the expiration of the term hereof, the parties shall execute, deliver and record an instrument acknowledging such fact and the actual date of termination of this lease and Tenant hereby appoints Landlord its attorney-in-fact in its name and behalf to execute such instrument. SECURITY 4. Landlord acknowledges that it has received from Tenant the sum of Thirty Thousand Dollars ($30,000) as security for the payment of rents and the performance and observance of the agreements and conditions in this lease contained on the part of Tenant to be performed and observed. In the event of any default or defaults in such payment, performance or observance Landlord may apply said sum or any part thereof towards the curing of any such default or defaults. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber said sum or any part thereof and that neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Upon the yielding up of the demised premises at the expiration or other termination of the term of this lease, if Tenant shall not then be in default or otherwise liable to 2 Landlord, the unapplied balance of said sum shall be returned to Tenant. It is understood and agreed that Landlord shall always have the right to apply said sum, or any part thereof, as aforesaid, in the event of any such default or defaults, without prejudice to any other remedy or remedies which Landlord may have, or Landlord may pursue any other such remedy or remedies in lieu of applying said sum or any part thereof. No interest shall be payable on said sum or any part thereof. If Landlord shall apply said sum or any part thereof as aforesaid, Tenant shall upon demand pay to Landlord the amount so applied by Landlord, to restore the security in its full amount. Whenever the holder of Landlord's interest in this lease, whether it be the Landlord named in this lease or any transferee of said Landlord, immediate or remote, shall transfer its interest in this lease, said holder shall turn over to its transferee said sum or the unapplied balance thereof, and thereafter such holder shall be released from any and all liability to Tenant with respect to said sum or its application or return, it being understood that Tenant shall thereafter look only to such transferee with respect to said mortgage upon property which includes the demised premises shall never be responsible to Tenant for said sum or its application or return unless said sum shall actually have been received in hand by such holder. MINIMUM RENT 5.1 During the first five years of the original term of this lease Tenant agrees to pay to Landlord a minimum rent at the rate of Three Hundred Fifty-Nine Thousand Seventy-Five Dollars ($359,075.00), per year. During the second five years of this lease Tenant agrees to pay to Landlord a minimum rent at the rate above as such amount may be adjusted pursuant to the provisions of Section 5.2 hereof. All such minimum rent shall be payable in equal monthly installments of one-twelfth thereof and shall be payable in advance upon the first day of each calendar month included within the term of this lease. Rent for any fraction of a month at the commencement or termination of the term of this lease shall be prorated. If the original term shall commence on a day other than the first day of a month, the installment of minimum rent payable for the months during which each additional period, if any, for which the original term of this lease may be extended, as aforesaid, shall occur shall be prorated on a per diem basis to reflect the change, if any, in annual rate becoming effective during that month. All rent and other payments to be made by Tenant to Landlord shall be made payable to Landlord and sent to Landlord at the place in which 3 notices to Landlord are required to be sent unless Landlord shall direct otherwise by notice to Tenant. If any installment of minimum rent or additional rent payable under this lease shall not be paid within fifteen (15) days after the due date thereof, Tenant shall pay to Landlord together with such late payment, as a late charge, in additional to all other amounts payable under this lease, an amount equal to four (4) percent of the amount not paid within such fifteen (15) day period. 5.2 The first day of the sixth year of this lease is herein referred to as an "Adjustment Date." As of each Adjustment Date the minimum rent (referred to in Section 5.1) shall be increased, but not decreased, to reflect changes in the Consumer Price Index for Urban Consumers, Seasonally Adjusted U.S. City Average, All Items (1967=100) as published by the Bureau of Labor ("the Price Index") in the same proportion that the Price Index as last reported prior to such Adjustment Date has increased above the Price Index for the month of May, 1988 ("Base Year Price Index Number"). If the Price Index shall cease to use the 1967 average of 100 as the basis of calculation, or if a substantial change is made in the terms or number of items contained in the Price Index, the Base Year Price Index Number shall be adjusted to the figure that would have been arrived at if the manner of computing the Base Year Price Index Number had not been altered. If the Price Index is not available, a reliable governmental or other non-partisan publication evaluating the information theretofore used in determining the Price Index shall be used. If the parties shall be unable to agree upon the dollar amount of the minimum rent, they shall promptly resolve such dispute by arbitration in Boston, Massachusetts, by the American Arbitration Association or its successor, and such arbitration shall be submitted, commenced, held and determined in accordance with the rules and regulations of said Arbitration Association or its successors at the time of any such submission. The expenses thereof shall be borne equally between Landlord and Tenant unless the arbiters determine that some other division shall under the circumstances be more equitable and the determination of the arbiters shall be conclusive and binding upon the parties. Until the dollar amount of the minimum rent for any period shall be determined,[??] Until the dollar amount of the minimum rent after an Adjustment Date is determined, Tenant shall pay rent at the rate provided in this Lease immediately prior to such Adjustment Date, and when rent is determined in accordance with this Section 5.2, Tenant shall pay Landlord any excess rent 4 due for the period which shall have expired since the Adjustment Date. Tenant shall thereafter pay rent at the rate determined in accordance with this Section 5.2. REAL ESTATE 6.1 Tenant shall pay to Landlord as additional rent the TAXES real estate taxes upon the demised premises for each tax year included within the term of this lease and a pro rata part of said real estate taxes for the tax years during which the term of this lease shall commence and terminate. The expression "real estate taxes" used herein shall mean all ad valorem taxes and betterment assessments (and all taxes substituted therefor at any time during the term hereof) imposed or assessed upon or against real estate by any public authority having jurisdiction, except only that if any betterments assessment is payable in installments, the real estate taxes for any tax year shall include only such installments of such betterments assessment as are payable during such tax year; provided only in the case of each respective betterments assessment that Landlord shall have elected to pay such assessment in installments over the longest period permitted by law but not otherwise. 6.2 Promptly upon receipt of any tax bill for any tax year the party receiving the same shall deliver a copy of the same to the other party hereto but failure to do so shall not constitute a default hereunder unless such failure continues for 10 days after written notice thereof. Tenant shall pay directly to the taxing authority the amount of real estate taxes payable by Tenant pursuant to this Article at least ten (10) days prior to the time that such real estate taxes shall be required to be paid to the taxing authority for said tax year without the accrual of interest or the payment of a penalty, but, if Tenant shall not have received a tax bill therefor at least twenty (20) days prior to said time for payment, Tenant shall not be required to make payment until ten (10) days after the receipt of said bill. (If real estate taxes are payable to any tax authority for any tax year in installments, the amount payable by Tenant hereunder shall be payable in similar installments. If real estate taxes are payable to different taxing authorities for any tax year at different times, an appropriate apportionment shall be made if the amount payable by Tenant for said tax year and the apportioned amount shall be payable at such times). Tenant shall provide Landlord with a copy of each such tax bill receipted by the taxing authority to indicate full payment of the amount due not more than fifteen (15) days after the due date of each installment of real estate taxes 5 payable hereunder, it being understood and agreed that if Tenant shall fail to provide a copy of any such tax bill so receipted and Tenant has not made timely payment of such taxes, Landlord shall thereafter have the right to require Tenant to make all payments of real estate taxes payable under this lease to Landlord, rather than the taxing authority, within the aforesaid time periods. If the time for payment of taxes with respect to any real estate taxes payable in whole or in part by Tenant hereunder shall have occurred prior to commencement of the term or shall occur after termination of the term, Tenant shall pay to Landlord upon commencement or termination of the term, as the case may be, the portion of such tax bill payable by Tenant pursuant to this lease. Notwithstanding the foregoing, in the event that the holder of a mortgage on the demised premises requires that real estate taxes be paid to it in escrow by Landlord, Tenant shall pay, together with each monthly payment of minimum rent, an amount equal to one-twelfth (1/12) of the amount of real estate taxes upon the demised premises and Landlord shall pay the real estate taxes directly to the taxing authority from the escrowed funds. Appropriate adjustments shall be made after receipt of the tax bill for any tax year during the term of this lease for any increase or decrease in said real estate taxes with a reconciliation to be made within 10 days after receipt of such tax bill. 6.3 The real estate taxes upon the demised premises for any tax year shall mean such amounts as shall be finally determined, after deducting abatements, refunds or rebates, if any, to be the real estate taxes payable with respect to the demised premises for said tax year. For the purposes of determining payments due from Tenant to Landlord in accordance with the provisions of this Article 6, the real estate taxes upon the demised premises for any tax year shall be deemed to be the real estate taxes assess for such year until such time as an abatement, refund or rebate shall be made for any tax year, and, if any abatement, rebate or refund shall be made for any tax year, an appropriate adjustment or refund shall be made in the amount payable from or paid by Tenant to Landlord on account real estate taxes dependent upon the amount of such abatement, rebate or refund less the cost and expense of obtaining the same. 6.4 If at least twenty (20) days prior to the last day for 6 filing application for abatement of real estate taxes for any tax year Tenant shall give notice to Landlord that it desires to file an application for abatement of real estate taxes for said tax year and, if within ten (10) days after the receipt of said notice Landlord shall not give notice to Tenant that Landlord shall file such notice by Tenant, Landlord shall give Tenant notice that it shall file such application, Landlord shall file same prior to the expiration of the time for filing of the same at its own cost and expense. If Tenant shall file an application for the abatement pursuant to the provisions of this Section, Tenant will prosecute the same to final determination with due diligence and shall not, without Landlord's consent, settle, compromise or discontinue the same except, however, Tenant may discontinue prosecution of the same at any time after giving Landlord reasonable notice thereof and an opportunity to take over prosecution of the same. If Landlord shall file an application for abatement for any tax year after having received notice from Tenant that Tenant desires to file an application for abatement for said tax year, Landlord shall prosecute the same to final determination with due diligence and shall not, without Tenant's written consent, settle, compromise or discontinue the same except, however, Landlord may discontinue the prosecution of the same at any time after giving Tenant notice thereof and an opportunity to take over the prosecution of the same. 6.5 All taxes levied on the personal property of Tenant shall be the obligation of and be paid by Tenant, whether the same shall be considered part of the realty or personalty and Tenant agrees to indemnify Landlord against and hold harmless the Landlord from any loss, damage, debt or claim resulting therefrom. REPAIRS AND 7.1 Landlord agrees to make all necessary repairs or ALTERNATIONS alternations to the property which Landlord is required to maintain, as hereinafter set forth. The property which Landlord is required to maintain is the foundation, the roof, the exterior walls (excluding glass, windows, doors, window sashes and frames or door frames) and the structural columns, members and beams of the Building. Notwithstanding the foregoing, if any of said repairs or alterations shall be made necessary by reason of repairs, installations, alterations, additions or improvements made by Tenant or anyone claiming under Tenant, by reason of the fault or negligence of Tenant or anyone claiming under Tenant, by reason of a default on the performance or observance of any 7 agreements, conditions or other provisions on the part of Tenant to be performed or observed, or by reason of any special use to which the demised premises may be put, Tenant shall make all such repairs or alterations as may be necessary. Landlord shall not be deemed to have committed a breach of any obligation to make repairs or alterations or perform any other act unless (1) it shall have made such repairs or alterations or performed such other act negligently, or (2) it shall have received notice from Tenant designating the particular repairs or alterations needed or the other act of which there has been failure of performance and shall have failed to make such repairs or alterations or performed such other act within a reasonable time after the receipt of such notice; and in the latter event Landlord's liability shall be limited to the cost of making such repairs or alterations or performing such other act. 7.2 Tenant agrees that it will during the term of this lease make all repairs and alterations to the property which Tenant is required to maintain, as hereinafter set forth, which may be necessary to maintain the same in good repair and condition or which may be required by any laws, ordinances, regulations or requirements of any public authorities having jurisdiction, subject only to the provisions of Article 9 and 10. Tenant agrees that it will upon the expiration or other termination of the term of this lease remove its property and that of all persons claiming under it and will yield up peaceably to Landlord the demised premises and all property therein other than property of Tenant or persons claiming under Tenant, broom clean and in good repair and condition, subject only to the provisions of Articles 9 and 10 and that Tenant's obligation to perform and observe this covenant shall survive the expiration or termination of the term of this lease. The property which Tenant is required to maintain is the demised premises and every part thereof including but without limitation all walls, floors and ceilings, the heating system, the air-conditioning system, including rooftop heating and air-conditioning units if the same are used, all utilities (water, gas, electricity, drainage, and septic) conduits, fixtures and equipment within the demised premises, all meters and all other fixtures and equipment within or appurtenant to the demised premises, all Tenant's signs (interior and exterior), all interior and exterior glass, windows, doors, window sashes and frames and door frames and all driveways, walkways, parking areas and landscaped areas. Tenant agrees to enter into maintenance contracts with experienced maintenance 8 contractor(s) for the performance of periodic maintenance upon the heating, ventilating and air conditioning systems of the Building and to provide Landlord with inspection reports from such contractors at least annually, the first report to be furnished not later than the first anniversary of the commencement of the original term of this lease. Tenant shall provide Landlord with copies of reinspection reports or holes. Tenant agrees to pay promptly when due all charges for labor and materials in connection with any work done by Tenant or anyone claiming under Tenant upon the demised premises so that the demised premises shall at all times be free of liens. Tenant agrees to save Landlord harmless from, and indemnify Landlord against, any and all claims for injury, loss or damage to person or property caused by or resulting from the doing of any such work. UTILITIES 8.1 Landlord agrees that as of the date of delivery of possession of the demised premises the Building shall be connected to the electric and gas lines serving the municipality wherein the demised premises are located and to the water system of said municipality. Tenant agrees to pay (or to reimburse Landlord for) all meter fees assess by such utilities and said municipality for the connection or metering of the demised premises. 8.2 Tenant agrees to pay all charges for heat, air- conditioning, water, gas, electricity and other utilities used by the demised premises. If a charge shall be made from time to time by the public authority having jurisdiction for the use of the sanitary sewer system and/or for the use of the storm sewer system, Tenant shall pay the same. Tenant agrees that it will at all times keep sufficient heat in the demised premises to prevent the pipes therein from freezing. Tenant shall also pay for any sprinkler stand-by service charge apportionable to the demised premises. FIRE OR OTHER 9.1 If the demised premises, or any part thereof, shall CASUALTY be damaged or destroyed by fire or other casualty, then Tenant shall promptly thereafter give Landlord written notice thereof and Landlord shall within a reasonable time after its receipt of such notice from Tenant, repair or restore the demised premises to substantially the same condition they were in immediately prior to the casualty. Landlord shall not be obligated to expend an amount in excess of the insurance proceeds or damages payable on account of such damage or destruction in making 9 such repair or restoration. In the event of any such damage or destruction by fire or other casualty, the insurance proceeds or damages recovered on account of any damage or destruction shall be made available for the payment of the cost of the aforesaid repair or restoration. If the insurance proceeds shall be greater than the cost of repair or restoration, the excess shall belong to Landlord. A just proportion of the minimum rent according to the nature and extent of the injury to the demised premises shall be suspended or abated until the demised premises shall be repaired or stored by Landlord as aforesaid. 9.2 Insurance against any or all of the risks, including, but without limitation, fire insurance with extended coverage in an amount at least equal to the replacement cost of the Building, insurance against loss or rental income, insurance against loss or damage from sprinklers, leakage, explosion or cracking of boilers, pipes, or both, and insurance against such other casualties as shall be required by the holder of any mortgage upon the demised premises, may be maintained by Landlord and the same may be maintained under a blanket policy covering the demised premises and other real estate of Landlord and/or its affiliated business organizations. The policies of such insurance shall be payable in case of loss to the holders of any mortgages upon the property of which the demised premises are a part as their interests may appear. Nothing in reasonable evidence that repairs or replacements were made, if any such repairs or replacements were recommended in any such inspection report, with ninety (90) days after the issuance of any such report. Notwithstanding the foregoing, Tenant shall not be under any obligation to make any repairs or alterations to the foundation, the roof, the exterior walls or structural columns, members or beams of the Building except to the extent provided in Section 7.1. Tenant specifically agrees to replace all glass damaged with glass of the same kind and quality. Tenant also agrees to paint, varnish and otherwise redecorate the Interior and exterior of the building when required to keep the Building attractive in appearance, but at least once during the first five years and thereafter on a maintenance basis. 7.3 Tenant agrees that neither it nor anyone claiming under it will make any installations, alterations, additions or improvements to or upon the demised premises, except only the installations, alterations, additions and improvements specifically described in Exhibit B-1 hereto, without the prior written 10 approval of Landlord. All installations, alterations, additions and improvements made to or upon the demised premises whether made by Landlord or Tenant or any other person (except only signs and movable trade fixtures and equipment installed in the demised premises prior to or during the term of this lease at the cost of Tenant or any person claiming under Tenant), shall be deemed part of the demised premises and upon the expiration or other termination of the term of this lease shall be surrendered with the demised premises as a part thereof without disturbance, molestation or injury unless Landlord shall give notice to Tenant within fifteen (15) days after termination of the term of this lease that it elects to have Tenant remove any of the same, in which event Tenant shall remove those installations, alterations, additions and improvements so designated within fifteen (15) days of the giving of such notice or upon termination of the term of this lease, whichever shall first occur. Said signs, movable trade fixtures and equipment shall not be deemed part of the demised premises and may be removed by Tenant at any time or times during the term of this lease or upon the termination of the term of this lease, if, and only if, Tenant shall not then be in default in the performance or observance of any of the agreements or conditions in this lease contained on the part of Tenant to be performed or observed. Movable trade fixtures and equipment shall include trade fixtures, equipment and other installations not affixed to the realty and trade fixtures, equipment and other installations affixed only by nails, screws or other similar means. Movable trade fixtures shall not include linoleum or other floor covering cemented or otherwise adhesively affixed to the floor. 7.4 Tenant agrees that it will procure all necessary permits before making any repairs, installations, alterations, additions, improvements or removals. Landlord agrees it will cooperate with Tenant in obtaining such permits. Tenant agrees that all repairs, installations, alterations, improvements and removals done by it or anyone claiming under it shall be done in a good and workmanlike manner, that the same shall be done in conformity with all laws, ordinances and regulations of all public authorities and all insurance inspection or rating bureaus having jurisdiction, that the structure of the Building will not be endangered or impaired and that Tenant will repair any and all damage caused by or resulting from any such repairs, installations, alterations, additions, improvements or removals, including, but without limitation, the filling of holes. Tenant 11 agrees to pay promptly when due all charges for labor and materials in connection with any work done by Tenant or anyone claiming under Tenant upon the demised premises so that the demised premises shall at all times be free of liens. Tenant agrees to save Landlord harmless from, and indemnify Landlord against, any and all claims for injury, loss or damage to person or property caused by or resulting from the doing of any such work. UTILITIES 8.1 Landlord agrees that as of the date of delivery of possession of the demised premises the Building shall be connected to the electric and gas lines serving the municipality wherein the demised premises are located and to the water system of said municipality. Tenant agrees to pay (or to reimburse Landlord for) all meter fees assessed by such utilities and said municipality for the connection or metering of the demised premises. 8.2 Tenant agrees to pay all charges for heat, air- conditioning, water, gas, electricity and other utilities used by the demised premises. If a charge shall be made from time to time by the public authority having jurisdiction for the use of the sanitary sewer system and/or for the use of the storm sewer system, Tenant shall pay the same. Tenant agrees that it will at all times keep sufficient heat in the demised premises to prevent the pipes therein from freezing. Tenant shall also pay for any sprinkler stand-by service charge apportionable to the demised premises. FIRE OR OTHER 9.1 If the demised premises, or any part thereof, shall CASUALTY be damaged or destroyed by fire or other casualty, then Tenant shall promptly thereafter give Landlord written notice thereof and Landlord shall within a reasonable time after its receipt of such notice from Tenant, repair, or restore the demised premises to substantially the same condition they were in immediately prior to the casualty. Landlord shall not be obligated to expend an amount in excess of the insurance proceeds or damages payable on account of such damage or destruction in making such repair or restoration. In the event of any such damage or destruction by fire or other casualty, the insurance proceeds or damages recovered on account of any damage or destruction shall be made available for the payment of the cost of the aforesaid repair or restoration. If the insurance proceeds shall be greater than the cost of repair or restoration, the excess shall belong to Landlord. A just proportion of the minimum rent 12 according to the nature and extent of the injury to the demised premises shall be suspended or abated until the demised premises shall be repaired or restored by Landlord as aforesaid. 9.2 Insurance against any or all of the risks, including, but without limitation, fire insurance with extended coverage in an amount at least equal to the replacement cost of the Building, insurance against loss or rental income, insurance against loss or damage from sprinklers, leakage, explosion or cracking of boilers, pipes, or both, and insurance against such other casualties as shall be required by the holder of any mortgage upon the demised premises, may be maintained by Landlord and the same may be maintained under a blanket policy covering the demised premises and other real estate of Landlord and/or its affiliated business organizations. The policies of such insurance shall be payable in case of loss to the holders of any mortgages upon the property of which the demised premises are a part as their interests may appear. Nothing in this lease contained shall be deemed to create in Tenant any interest in said insurance policies or the proceeds thereof or any right to participate in the adjustment of loss. Tenant agrees to pay to Landlord, as additional rent, the cost to Landlord of keeping the demised premises insured under the coverages hereinabove mentioned. Payment on account of such cost shall be paid, as part of Tenant's total rent, monthly, and at the times and in the fashion herein provided for the payment of minimum rent. For an initial period from the commencement of the term of this lease until the December 31st of the calendar year in which the term hereof shall commence, the amount so to be paid shall be one-twelfth (1/12) of the product of ten cents ($.10) and the number of square feet of floor area in the demised premises. Promptly after the end of said partial calendar year and promptly after the end of each calendar year thereafter, Landlord shall make a determination of such cost on the basis hereinabove set forth, and if the aforesaid payments theretofore made for such period by Tenant exceed such cost, Landlord shall make a suitable refund to Tenant; and if such cost is greater than such payments theretofore made on account for such period, Tenant shall make a suitable payment to Landlord. The initial monthly payment on account of such cost shall be replaced after Landlord's determination of the preceding accounting period's cost by a payment which is one-twelfth (1/12) of such immediately preceding period's cost, with adjustments as appropriate where such preceding period is less than a full twelve (12) month period. Appropriate adjustments 13 shall be made for any partial month at the commencement of the term and for any partial month or year at the end of the term. 9.3 Notwithstanding anything in this Article to the contrary, it is agreed and understood that (i) if during the second annual period preceding the expiration of the term of this lease the demised premises shall be damaged or destroyed by fire or other casualty to the extent of thirty Percent (30%) or more of their insurable value, or (ii) if during the annual period preceding the expiration of the term of this lease the demised premises shall be damaged or destroyed by fire or other casualty to the extent of twenty percent (20%) or more of their insurable value, either Landlord or Tenant may, if either shall so elect, terminate the term of this lease by notice to the other within thirty (30) days after such damage or destruction. It is further agreed that if at any time during the term of this lease the demised premises shall be substantially damaged or destroyed as aforesaid, Landlord, at its election, may terminate the term of this lease by a notice to Tenant within thirty (30) days after such damage or destruction. For purposes of this Article, the demised premises shall be deemed to have been substantially damaged or destroyed if the damage or destruction is of such a character that the same cannot reasonably be expected to be repaired or restored within thirty (30) days after the repair or restoration work would be commenced. In the event of any termination of the term of this lease pursuant to the provisions of this Section, the termination shall become effective on the twentieth (20th) day after the giving of the notice or termination, rent shall be apportioned and adjusted as of the time of termination, Landlord shall not be obligated to repair or restore any damage or destruction caused by fire or other casualty and the insurance proceeds shall belong to Landlord. EMINENT 10.1 If after the execution of this lease and prior to DOMAIN the expiration of the term of this lease the whole of the demised premises shall be taken under the power of eminent domain, then the term of this lease shall cease as of the time when Landlord shall be divested of its title in the demised premises, and rent shall be apportioned and adjusted as of the time of termination. 10.2 If only a part of the demised premises shall be taken under the power of eminent domain and if as a result thereof the floor area of the Building shall be reduced by more than thirty percent, or if more than thirty percent of the parking areas of the 14 demised premises shall be taken and not replaced by Landlord within sixty (60) days thereafter, either Landlord or Tenant may, at its election, terminate the term of this lease by giving notice of the exercise of its election to the other of them within twenty (20) days after it shall receive notice of such taking (or in the case of a taking of parking areas within twenty days after such sixty day period), and the termination shall be effective as of the time that possession of the part so taken shall be required for public use (or in the case of parking areas being taken upon the tenth day after the giving of such notice), and rent shall be apportioned and adjusted as of the time of termination. If only a part of the demised premises shall be taken under the power of eminent domain and if the term of this lease shall not continue in full force and effect and Landlord shall, within a reasonable time after possession is required for public use, repair and rebuild what may remain of the demised premises and the remainder of the Building so as to put the same into condition for use and occupancy by Tenant, and a just proportion of the minimum rent according to the nature and extent of the injury to the demised premises shall be suspended or abated until what may remain of the demised premises shall be put into such condition by Landlord, and thereafter a just proportion of the minimum rent according to the nature and extent of the part so taken shall be abated for the balance of the term of this lease. 10.3 Landlord reserves to itself, and Tenant grants and assigns to Landlord, all rights to damages accruing on account of any taking under the power of eminent domain or by reason of any act of any public or quasi-public authority for which damages are payable irrespective of the form in which recovery may be had by law. Tenant agrees to execute such instruments by assignment as may be reasonably required by Landlord in any proceeding for the recovery of such damages if requested by Landlord, and to turn over to Landlord any damages that may be recovered in such proceedings. It is agreed and understood, however, that Landlord does not reserve to itself, and Tenant does not assign to Landlord, any damages payable for movable trade fixtures installed by Tenant or anybody claiming under Tenant at its own cost and expense or for relocation expenses; provided that the same do not reduce the damages which Landlord would otherwise recover. INDEMNITY AND 11.1 Tenant agrees to save Landlord harmless from, INSURANCE and indemnify Landlord against, to the extent permitted by law, 15 any and all injury, loss or damage and any and all claims for injury, loss or damage of whatever nature (i) caused by or resulting from, or claimed to have been caused by or to have resulted from, any act, omission or negligence of Tenant or anyone claiming under Tenant (including, but without limitation, subtenants and concessionaires of Tenant and employees and contractors of Tenant or its subtenants or concessionaires), no matter where occurring, or (ii) occurring upon about the demised premises, no matter how caused. This indemnity and hold harmless agreement shall include indemnity against all costs, expenses and liabilities, incurred in connection with any such injury, loss or damage or any such claim, or any proceeding brought thereon or the defense thereof. To the maximum extent that this agreement may be made effective according to law, Tenant agrees to use and occupy the demised premises at its sole risk. Without limiting the generality of the immediately preceding sentence, if Tenant or anyone claiming under Tenant or the whole or any part of the property of Tenant or anyone claiming under Tenant shall be injured, lost or damaged by theft, fire, water or steam or in any other way or manner, whether similar or dissimilar to the foregoing, no part of said injury, loss or damage is to be borne by Landlord or its agents. Tenant agrees that Landlord shall not be liable to Tenant or anyone claiming under Tenant for any injury, loss or damage that may be caused by or result from the fault or negligence of any persons occupying adjoining premises. 11.2 Tenant will maintain general comprehensive public liability insurance, with respect to the demised premises and its appurtenances, issued by insurance companies acceptable to Landlord and authorized to do business in the Commonwealth of Massachusetts, naming Landlord and Tenant as insureds, in amounts which shall, at the beginning of the term, be not less than One Million Dollars ($1,000,000.00) with respect to injuries to any one person and not less than One Million Dollars ($1,000,000.00) with respect to injuries suffered in any one accident, and not less than One Million Dollars ($1,000,000.00) with respect to property and, from time to time during the term of this lease, such insurance coverage shall be in such higher amounts, if any, as are customarily carried in the metropolitan Boston area on property similar to the demised premises used for similar purposes or as required by the mortgagee. Tenant shall deliver to Landlord the policies of such insurance, or certificates thereof, at least fifteen (15) days prior to the commencement of 16 the term of this lease, and each renewal policy or certificate thereof, at least fifteen (15) days prior to the expiration of the policy it renews. Tenant may maintain such insurance under a blanket policy affecting other premises of Tenant and/or its affiliated business organizations. ACCESS TO 12. Landlord shall have the right to enter upon the PREMISES demised premises or any part thereof without charge at all reasonable times and in case of emergency, at any time, to inspect the same, to show the demised premises to prospective purchasers or tenants, to make or facilitate any repairs, alterations, additions or improvements to the demised premises and other portions of the Building (but nothing in this Article 12 contained shall obligate Landlord to make any repairs, alterations, additions or improvements); and Tenant shall not be entitled to any abatement or reduction of rent or damages by reason of any of the foregoing. No forcible entry shall be made by Landlord unless such entry shall be reasonably necessary to prevent serious injury, loss or damage to persons or property. Landlord shall repair any damage to property by Tenant or anyone claiming under Tenant caused by or resulting from Landlord's making any such repairs, alterations, additions or improvements except only such damage as shall result from the making of such repairs, alterations, additions or improvements which Landlord shall make as a result of the default, fault or negligence of Tenant or anyone claiming under Tenant. For the period commencing nine months prior to the expiration of the term of this lease, Landlord may maintain "For Rent" signs on the demised premises. DEFAULTS 13.1 If Tenant shall default in the payment of rent or other payments required of Tenant, and if Tenant shall fail to cure said default within seven (7) days after the giving of notice of said default by Landlord, or (2) if Tenant shall default in the performance or observance of any other agreement or condition on its part to be performed or observed and if Tenant shall fail to cure said default within fifteen days after the giving of notice of said default by Landlord, or (3) if any person shall levy upon, or take this leasehold interest or any part thereof upon execution, attachment or other process or law, or (4) if Tenant shall make an assignment of its property for the benefit of creditors, or (5) if Tenant shall be declared bankrupt or insolvent according to law, or (6) if any bankruptcy or insolvency proceedings shall be commenced by or against Tenant or (7) if a receiver, trustee or assignee shall be appointed for the whole or any part of Tenant's 17 property, then in any of said cases, Landlord lawfully may immediately, or at any time thereafter, and without any further notice or demand, enter into and upon the demised premises or any part thereof in the name of the whole, by force or otherwise, and hold the demised premises as if this lease had not been made, and expel Tenant and those claiming under it and remove its or their property (forcibly, if necessary) without being taken or deemed to be guilty of any manner of trespass (or Landlord may send written notice to Tenant of the termination of the term of this lease), and upon entry as aforesaid (or in the event that Landlord shall send to Tenant notice of termination as above provided, on the fifth (5th) day next following the date of the sending of the notice), the term of this lease shall terminate. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event Landlord terminates this lease as provided in this Article. 13.2 In case of any such termination, Tenant will indemnify Landlord each month against all loss of rent and all obligations which Landlord may incur by reason of any such termination between the time of termination and the expiration of the term of this lease; or at the election of Landlord, exercised at the time of the termination or at any time thereafter, Tenant will indemnify Landlord each month until the exercise of the election against all loss of rent and other obligations which Landlord may incur by reason of such termination during the period between the time of the termination and the exercise of the election, and upon the exercise of the election Tenant will pay to Landlord as damages such amount as at the time of the exercise of the election represents the amount by which the rental value of the demised premises for the period from the exercise of the election until the expiration of the term shall be less than the amount of rent and other payments provided herein to be paid by Tenant to Landlord during said period. In any event, Tenant shall indemnify the Landlord against all loss of rent and all obligations which Landlord may incur by reason of Tenant's default hereunder prior to such entry or termination, whichever shall first occur. It is understood and agreed that at the time of the termination or at any time thereafter Landlord may rent the demised premises, and for a term which may expire after the expiration of the term of this lease, without releasing Tenant from any liability whatsoever, that Tenant shall be liable for any expenses incurred by Landlord in connection with obtaining 18 possession of the demised premises, with removing from the demised premises property of Tenant and person claiming under it (including warehouse charges), with putting the demised premises into good condition for reletting, and with any reletting, including but without limitation, reasonable attorneys' fees and brokers' fees, and that any monies collected from any reletting shall be applied first to the foregoing expenses and then to the payment of rent and all other payments due from Tenant to Landlord. 14.1 Tenant agrees that upon the request of Landlord it will subordinate this lease and the lien hereof to the lien of any present or future mortgage or mortgages upon the demised premises of any property of which the demised premises are a part, irrespective of the time of execution or time of recording of any such mortgage or mortgages; provided that the holder of any such mortgage shall agree with Tenant that this lease and the rights of Tenant hereunder shall not be disturbed except in accordance with the terms of this lease. Tenant agrees that it will upon the request of Landlord execute, acknowledge and deliver any and all instruments deemed by Landlord necessary or desirable to give effect to or notice of such subordination. The word "mortgage" as used herein includes mortgages, deeds of trust or other similar instruments and modifications, consolidations, extensions, renewals, replacements and substitutes thereof. Whether the lien of any mortgage upon the demised premises or any property of which the demised premises are a part shall be superior or subordinate to this lease and the lien hereof, Tenant agrees that it will, upon request, attorn to the holder of such mortgage or any one claiming under such holder and their respective successors and assigns in the event of foreclosure of or similar action taken under such mortgage. 14.2 After the commencement of the term of this lease and within five (5) days after written request therefore by Landlord, Tenant agrees to execute, acknowledge and deliver to Landlord or to any mortgagee a certificate stating that Tenant has entered into occupancy of the demised premises in accordance with the provisions of this lease, that this lease is unmodified and in full force and effect, that Landlord has performed Landlord's construction work, that Tenant has no defenses, offsets or counterclaims against its obligations to pay the minimum rent and additional rent and any other charges and to perform its other covenants under this lease (or, if there has been any 19 modifications, that the same is in full force and effect as modified and stating the modifications and, if there are any defenses, offsets or counterclaims, setting them forth in reasonable detail), and the dates to which the minimum and additional rent and other charges have been paid. Any such statement delivered pursuant to this Section 14.2 may be relied upon by any prospective purchaser or mortgagee of the demised premises, or one or more of them, or any prospective assignee of any such mortgage. 14.3 After receiving notice from Landlord or from any person, firm or other entity that such person, firm or other entity holds a mortgage, as hereinbefore defined, which includes the demised premises as part of the mortgaged premises, no notice from Tenant to Landlord shall be effective unless and until a copy of the same is given by certified or registered mail to such holder, and the curing of any of Landlord's defaults by such holder shall be treated as performance by Landlord, it being understood and agreed that such holder shall be afforded a reasonable period of time after the receipt of such notice in which to effect such cure. WAIVER OF 15. Both Landlord and Tenant hereby releases the SUBROGATION other, to the extent of its insurance coverage, from any and all liability for any loss or damage caused by fire or any of the extended coverage casualties or any other casualty insured against, even if such fire or other casualty shall be brought about by the fault or negligence of the other party or its agents, provided, however, this release shall be in force and effect only with respect to loss or damage occurring during such time as releasor's policies covering such loss or damage shall contain a clause to the effect that this release shall not affect said policies or the right of releasor to recover thereunder, it being understood and agreed that the waiving party reserves any rights with respect to any excess loss or injury over the amount recovered by such insurance. Each of Landlord and Tenant agrees that its fire and other casualty insurance policies will include such a clause so long as the same is includable without extra cost, or if extra cost is chargeable therefor, so long as the other party pays such extra cost. If extra cost is chargeable therefor, each party will advise the other thereof and the amount thereof. The other party at its election, may pay the same, but shall not be obligated to do so. 20 FAILURE OF 16.1 If Tenant shall default in the performance of any PERFORMANCE agreement or condition in this lease contained on its part to AND WAIVERS be performed or observed other than an obligation to pay money, and shall not cure such default within ten (10) days after notice from Landlord specifying the default (or shall not within said period commence to cure such default and thereafter prosecute the curing of such default to completion with due diligence), Landlord may, at its option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such default for the account of Tenant and any amount paid or any contractual liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant and Tenant agrees to reimburse Landlord therefor or save Landlord harmless therefrom; provided that Landlord may cure any such default as aforesaid prior to the expiration of said waiting period but after notice to Tenant, if the curing of such default prior to the expiration of said waiting period is reasonably necessary to protect the real estate or Landlord's interest therein, or to prevent injury or damage to persons or property. All amounts so paid by Landlord, all contractual liabilities so incurred by Landlord and all necessary incidental costs and expenses in connection with the performance of any such act by Landlord shall be deemed to be additional rent under this lease and shall be payable by Tenant to Landlord immediately on demand. 16.2 Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of its rights hereunder. No waiver by either party at any time, express or implied, of any breach of any provision of this lease shall be deemed a waiver of a breach of any other provision of this lease or a consent to any subsequent breach of the same or any other provision. If any action by either party shall require the consent or approval of the other party, the other party's consent to or approval of such action on any one occasion shall not be deemed a consent to or approval of said action on any subsequent occasion or any consent to or approval of any other action on the same or any subsequent occasion. Any and all rights and remedies which either party may have under this lease or by operation of law, either at law or in equity, upon any breach, shall be distinct, separate and cumulative and shall not be deemed inconsistent with each other; and no one of them, whether exercised by said party or not, shall be deemed to be in exclusion of any other; and any two or more or all of such rights 21 and remedies may be exercised at the same time. BROKERS 17. Tenant hereby represents and warrants to Landlord that, except to the extent, if any, hereinafter set forth, it has dealt with no broker in connection with this lease and there are no brokerage commissions or other finders' fees in connection herewith. Tenant hereby agrees to hold Landlord harmless from, and indemnified against, all loss or damage (including, without limitation, the cost of defending same) arising from any claim by any broker claiming to have dealt with Tenant. HOLDING OVER If Tenant or anyone claiming under Tenant shall remain in possession of the demised premises or any part thereof after the expiration of the term of this lease without any agreement in writing between Landlord and Tenant with respect thereto, prior to acceptance of rent by Landlord, the person remaining in possession shall be deemed a tenant at sufferance and after acceptance of rent by Landlord the person remaining in possession shall be deemed a tenant at will, subject to the provisions of this lease insofar as the same may be made applicable to a tenancy at will; provided, however, that if minimum rent shall be payable during the term of this lease at different rates at different times, minimum rent during such period as such person shall continue to hold the demised premises or any part thereof shall be payable at twice the highest rate payable during the term hereof. QUIET 19. Landlord agrees that upon Tenant's paying the rent ENJOYMENT and performing and observing the agreements, conditions and other provisions on its part to be performed and observed, Tenant shall and may peaceably and quietly have, hold and enjoy the demised premises during the term of this lease without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject, however, to the terms of this lease and any instruments having a prior lien. USE 20. Tenant agrees that during the term of this lease the demised premises will be used and occupied for the following purposes and for no other purposes without the written consent of Landlord, which Landlord may withhold at Landlord's sole discretion: general business offices. ASSIGNMENT 21. Tenant agrees that it will not assign, mortgage, 22 pledge or otherwise encumber this lease or any interest therein, or sublet the whole or any part of the demised premises without obtaining on each occasion the written consent of the Landlord, which Landlord may withhold at Landlord's sole discretion. DELAYS 22. In any case where either party hereto is required to do any act, delays caused by or resulting from Act of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations or other causes beyond such party's reasonable control shall not be counted in determining the time during which such work shall be completed, whether such time be designated by a fixed date, a fixed time or "a reasonable time." In any case where work is to be paid for out of insurance proceeds or condemnation awards, due allowance shall be made, both to the party required to perform such work and to the party required to make such payment, for delays in the collection of such proceeds and awards. NOTICES 23. All notices and other communications authorized or required hereunder shall be in writing and shall be given by mailing the same by certified or registered mail, return receipt requested, postage prepaid. If given to Tenant the same shall be mailed to Tenant at One Snow Road, Marshfield, Massachusetts 02050, or to such other person at such other address as Tenant may hereafter designate by notice to Landlord; and if given to Landlord the same shall be mailed to Landlord at 366 Moraine Street, Marshfield, Massachusetts 02050, or to such other person or at such other address as Landlord may hereafter designate by notice to Tenant. DEFINITIONS 24.1 The words "Landlord" and "Tenant" and the AND INTERPRE- pronouns referring thereto, as used in this lease, shall mean, TATIONS where the context requires or admits, the persons named herein as Landlord and as Tenant, respectively, and their respective heirs, legal representatives, successors and assigns, masculine, feminine or neuter. Except as hereinafter provided otherwise, the agreements and conditions in this lease contained on the part of Landlord to be performed and observed shall be binding upon Landlord and its heirs, legal representatives, successors and assigns and shall enure to the benefit of Tenant and its heirs, legal representatives, successors and assigns; and the agreements and conditions on the part of Tenant to be performed and observed shall be binding upon Tenant and its heirs, legal 23 representatives, successors and assigns and shall enure to the benefit of Landlord and its heirs, legal representatives, successors and assigns. The word "Landlord", as used herein, means only the owner for the time being of Landlord's interest in this lease, that is, in the event of any transfer of Landlord's interest in this lease the transferor shall cease to be liable, and shall be released from all liability for the performance or observance of any agreements or conditions on the part of Landlord to be performed or observed subsequent to the time of said transfer, it being understood and agreed that from and after said transfer the transferee shall be liable for the performance and observance of said agreements and conditions. 24.2 It is agreed that if any provisions of this lease shall be determined to be void by any court of competent jurisdiction then such determination shall not affect any other provisions of this lease, all of which other provisions shall remain in full force and effect; and it is the intention of the parties hereto that if any provision of this lease is capable of two constructions, one of which would render the provision void and the other which would render the provision valid, then the provision shall have the meaning which renders it valid. 24.3 This instrument contains the entire and only agreement between the parties, and no oral statements or representations or prior written matter not contained in this instrument shall have any force or effect. This lease shall not be modified in any way except by a writing subscribed by both parties. 24.4 Wherever in this lease provision is made for the doing of any act by any person it is understood and agreed that said act shall be done by such person at its own cost and expense unless a contrary intent is expressed. 24.5 If all or any part of Landlord's interest in this lease shall be held by a trust, no trustee, shareholder or beneficiary of said trust shall be personally liable for any of the covenants, or agreements, express or implied, hereunder. Landlord's covenants and agreements shall be binding upon the trustees of said trust as trustees as aforesaid and not individually and upon the trust estate. Without limiting the generality of the foregoing, and whether or not all or any part of Landlord's interest in this lease shall be held by a trust, Tenant specifically agrees to look solely 24 to Landlord's interest in the demised premises for recovery of any judgment from Landlord; it being specifically agreed that Landlord shall never otherwise be personally liable for any such judgment. 24.6 Wherever in this lease provision is made that either party shall have the right to terminate this lease, then, unless in said provision it is expressly provided otherwise, neither party hereto shall thereafter have any claim against the other under this lease or on account of the termination thereof. 24.7 The marginal notes used as headings for the various articles of this lease are used only as a matter of convenience for reference, and are not to be considered a part of this lease or to be used in determining the intent of the parties of this lease. Whenever in this lease any portion, or part thereof, has been stricken out, whether or not any provision has been substituted therefor, this lease shall be read and construed as if the words so stricken out were never included herein and no implication shall be drawn from the words so stricken out. 24.8 This lease shall be governed by the laws of the Commonwealth of Massachusetts. TENANTS 25. Tenant agrees that during the term of this lease: COVENANTS no nuisance will be permitted on or about the demised premises; nothing will be done upon or about the demised premises which shall be unlawful, improper, noisy or offensive or contrary to any public authority or insurance inspection or rating bureau or similar organization having jurisdiction, or which may be injurious to or adversely affect the quality or tone of the demised premises or any abutting or adjacent property of the Landlord; the demised premises will not be overloaded, damaged or defaced; Tenant will not drill or make any holes in the stone or brickwork; Tenant will not permit the omission of any objectionable noise or odor from the demised premises; no placard or sign shall be placed on the exterior of the Building or elsewhere on the demised premises without the prior written consent of Landlord; Tenant will procure all licenses and permits which may be required for any use made of the demised premises; and all waste and refuse will be stored upon and removed from the demised premises in accordance with all applicable governmental codes and regulations. Tenant will not do, or suffer to be done, or keep, or suffer to be kept, or omit to 25 do anything in, upon or about the demised premises which may prevent the obtaining of any insurance on the demised premises or on any property therein, including, but without limitation, fire, extended coverage and public liability insurance, or which may make void or voidable any such insurance, or which may create any extra premiums for, or increase the rate of, any such insurance. If anything shall be done or kept or omitted to be done in, upon or about the demised premises which shall create any extra premiums for, or increase the rate of, any such insurance, Tenant will pay the increased cost of the same to Landlord upon demand. EXPANSION 26.1 Subject to all then applicable building and zoning codes and the requirements of the subdivision restrictions contained in the deed of the demised premises to Landlord, and provided Tenant shall not then be in default under this lease, Tenant shall have the right, exercisable by notice to Landlord, by January 31, 1990, to request that Landlord construct upon the demised premises an addition (the "Addition") to the Building within the Expansion Area. The Addition shall contain at least twenty-five thousand (25,000) square feet. Such notice shall be accompanied by outline plans and specifications for the construction of the Addition and information concerning the exact size and location thereof desired by Tenant. Within one hundred twenty (120) days after the receipt by Landlord of such notice from Tenant, Landlord shall obtain from the current holder of the first mortgage upon the demised premises and alternate financing sources, estimates of terms which would be granted to finance the Addition, shall prepare detailed plans and detailed specifications for the construction of the Addition, shall use its reasonable efforts to obtain two competitive bids from contractors of Landlord's choice for construction of the Addition and shall present the same to Tenant; provided, however, that Landlord shall have the right to select the contractor to be used for construction of the Addition, in Landlord's reasonable discretion. Landlord agrees to use reasonable efforts to obtain the lowest possible estimates of such financing terms. If Tenant shall be unwilling to accept the bid selected by Landlord, Landlord shall not be obliged to construct the Addition; this lease shall continue in full force and effect unmodified by the provision of this Article 26; and Tenant shall reimburse to Landlord upon being billed therefor for Landlord's reasonable out-of-pocket expenses incurred in obtaining any such bid of bids, including but without limitation the cost to Landlord of preparing said detailed plans 26 and detailed specifications in connection therewith as additional rent under this lease. Tenant shall accept or reject any such bid within thirty (30) days of its receipt thereof by written notice to Landlord. If Tenant shall be unwilling to accept such financing terms, Tenant shall have the right to abandon the Addition, in which event the provisions of the immediately preceding sentence shall apply. If Tenant shall accept such bid and give Landlord notice thereof as aforesaid, then (i) the date upon which Landlord shall substantially complete construction of the Addition (substantial completion being defined as in Section 2.1 hereof provided) or (ii) the date that Tenant shall first commence to utilize the Addition in connection with its business, whichever shall first occur, shall be known as the "effective date", and from and after the effective date the Addition shall constitute a portion of the demised premises and be subject to and have the benefit of the provisions of this lease, except as hereinafter provided. 26.2 From and after the effective date the annual rate of minimum rent payable hereunder shall be increased by an amount which shall be the Determined Percentage (hereinafter defined) of the product obtained by multiplying (a) the Financed Amount by (b) the "new annual constant" (hereinafter defined). The Determined Percentage shall be: one hundred thirty-five (135%) it being understood and agreed, however, that 135% is based upon the assumption that the entity providing such financing will adjust the annual minimum rent payable with respect to the Addition downward by an aggregate of 9% to reflect a structural reserve, management costs and a vacancy factor and will require such annual minimum rent, as so adjusted downward, to be equal to 123% or more of new annual constant and that if such entity shall require a smaller downward adjustment in such annual minimum rent and/or a lower percentage of coverage with respect to the new annual constant, the 135% amount provided for in this section shall be reduced to that percentage which shall satisfy the lower requirements of such entity. Notwithstanding the provisions of the previous sentence to the contrary, in no event shall the rent under this Lease be less on a square foot basis than $15.00 per square foot per annum, triple net. In no event shall said rent be less than that currently being paid on a per square foot basis on the current lease. The Financed Amount shall be the "total cost of constructing the Addition" (hereinafter defined). The new annual constant shall be the product obtained by multiplying the Financed Amount by that percentage which will produce the sum 27 of twelve equal monthly installments of principal and interest (at the rate per annum initially payable under such mortgage loan) --required to fully liquidate the Financed Amount if one such installment is paid each month, in arrears, over the longer of (i) the term of said loan for the Financed Amount, (ii) the amortization period utilized in such loan for the Financed Amount to compute the monthly constant payments required to be paid by the Borrower thereunder or (iii) if such loan shall initially provide for the payment of interest only, a period equal to the length of time for which no principal payments are required plus the amortization period utilized in such loan for the Financed Amount to compute the monthly constant payments required to be paid once amortization of principal commences. The loan for the Financed Amount shall be Landlord's proposed financing for the total cost of constructing the Addition. The total cost of constructing the Addition shall be the sum of the cost to Landlord of all "hard" and "soft" costs of every kind and nature, direct and indirect, incurred by Landlord in constructing the Addition, including without limitation, (i) construction work for the Addition, including but without limitation, site work and additional utilities and parking areas required therefor paid to the contractors whose bids were accepted as aforesaid, (ii) construction interest and loan commitment fees upon money borrowed to finance construction of the Addition, (iii) insurance premiums and real estate taxes with respect to the Addition for any period prior to the effective date, (iv) a reasonable development fee to Landlord or any affiliate of Landlord, (v) architect's and engineering fees, relating to the Addition, (vi) Landlord's attorneys' fees incurred in connection with obtaining permits and approvals for the Addition, the construction and architects contract for the Addition and such loan for the Financed Amount, (vii) fees for permits and approvals in connection with the Addition; (viii) other direct and indirect out-of-pocket expenses of Landlord paid by Landlord for the construction of the Addition and (ix) the Expansion Area Value as at the effective date. 26.3 It is agreed that, notwithstanding anything in the Lease to the contrary, the minimum rent payable on account of the Addition (or any phase thereof) shall never exceed fair market rent for such Addition (or phase) by more than 10%. If Landlord or Tenant dispute whether the minimum rent payable on account of the Addition (or phase) exceeds fair market rent by more than 10%, then either party may submit the matter to arbitration 28 before a panel of 3 arbitrators chosen by the American Arbitration Association, Boston office, and the decision of such arbitrators shall resolve the matter. 26.4 In connection with the construction of the Addition Landlord may use any adjoining wall as a party or petition wall, may close any opening in any adjoining wall and may demolish any part of any adjoining wall of the Building and also tie into the sewer, water and utility lines of the Building so as to integrate the Addition and the remainder of the Building. 26.5 Landlord's plans and specifications for the Addition (or any phase thereof) shall be subject to Tenant's prior approval, which approval shall not be unreasonably withheld or delayed. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as a sealed instrument as of the day and year first above written. As Trustee ) of Longwater ) Circle Trust, ) and not ) Individually. ) /s/ Charles A. Pesko, Jr. ------------------------------ Charles A. Pesko, Jr., Trustee CAP International, Inc. By: /s/ Charles A. Pesko, Jr. --------------------------- President By: /s/ Charles A. Pesko, Jr. --------------------------- Treasurer 29 June 21, 1993 Mr. Graham Cooper Chief Executive Officer BIS Strategic Decisions One Longwater Circle Norwell, Massachusetts 02061 Re: Second Five Year Term of Original Lease One Longwater Circle Norwell, Massachusetts Dear Graham: The BIS Strategic Decisions lease at One Longwater Circle entered its sixth year of a ten year term on June 1, 1993. The lease provided for a rent increased based upon the change in the CPI Index from May 1988 to May 1993. That increase was the subject of my proposal to BIS back in January to mitigate the rent increase in return for a lease extension (copy enclosed). We are still open to discussion of that proposal. In the interim, however, we must institute the rent increase as provided for in the lease. The CPI base being utilized is the May, 1988 Urban Consumer's U.S. City Average (1982-84 = 100). That base is 117.5. The May 1993 CPI Index was 144.2, giving us a 1.227 multiplier factor (144.2 / 117.5 = 1.227 factor). The current base rent of $359,075 times 1.227 equals a new rent of $440,669.06 or $36,722.42 per month. Please adjust your payment systems accordingly to pay the $36,722.42 amount beginning July 1, 1993 and remit the $6,799.50 difference due for June, 1993. We thank you for your cooperation in this matter and look forward to discussing our January proposal. Very truly yours, /s/ Ronald A. Davis Ronald A. Davis RAD/ca cc: Pam Sullivan 30 EX-10.21 25 CONTENT DISTRIBUTION AGREEMENT 24-APR-1996 EXHIBIT 10.21 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. CONTENT DISTRIBUTION AGREEMENT THIS is an AGREEMENT dated as of April 24, 1996 (the "Effective Date"), by and between DOW JONES & COMPANY, INC., a Delaware corporation with offices at U.S Highway 1 at Ridge Road, South Brunswick, New Jersey 08852 ("Dow Jones"), and GIGA INFORMATION GROUP, INC., a Massachusetts corporation with offices at One Kendall Square, Building 1400W, Cambridge, MA 02139 ("GIGA"). GIGA is developing, and will own and Operate, GIGAWeb, a subscription-based electronic information service intended for information technology professionals and further defined on Exhibit A ("GIGAWeb"). Dow Jones wants to grant rights to GIGA to distribute certain content provided by Dow Jones to GIGAWeb subscribers, subject to the terms and conditions set forth in this Agreement. Therefore, the parties hereby agree as follows: 1. Certain Definitions. When used in this Agreement, the following terms shall have the following meaning: (a) Dow Jones Proprietary Content shall mean that content listed on Exhibit B-1 (b) Dow Jones Non-Proprietary Content shall mean that content listed on Exhibit B-2. (c) Dow Jones Information shall mean, collectively, the Dow Jones Proprietary Content and the Dow Jones Non-Proprietary Content. (d) DJN/R shall mean Dow Jones News/Retrieval , Dow Jones' electronic business and financial information research service. (e) WSJIE shall mean The Wall Street Journal Interactive Edition, an electronic edition of The Wall Street Journal accessed from the World Wide Web portion of the Internet. (f) Dow Jones Services shall mean DJN/R, WSJIE, and any other Dow Jones information services that Dow Jones and GIGA mutually agree to make accessible to GIGAWeb Subscribers through the DJ Branded Area. (g) DJ Branded Area shall mean that area within the GIGAWeb service that contains browsable access to Dow Jones Proprietary Content and access to the Dow Jones Services. (h) GIGAWeb Subscriber shall mean both: (i) an individual who subscribes directly to GIGAWeb, is legally bound by the GIGAWeb Subscription Agreement (as defined below), and has access to any part of the Dow Jones Information or the Dow Jones Services via GIGAWeb (an "Individual GIGAWeb Subscriber"); and (ii) any legal entity that enters into a GIGAWeb Subscription Agreement or other legally binding written or online agreement with GIGA, to permit individuals directly employed by such legal entity, or for whom the legal entity otherwise takes direct legal responsibility for such individuals' actions in connection with the use of GIGAWeb and the Dow Jones Information or Dow Jones Services, to access any part of the Dow Jones Information or Dow Jones Services via GIGAWeb (a "Corporate GIGAWeb Subscriber"). (i) GIGAWeb Subscription Agreement shall mean a written or online agreement with GIGA permitting access to GIGAWeb, which is legally binding upon and enforceable against the parties to such agreement, and is substantially in the form set forth on Exhibit C, or as amended from time to time subject to Section 6 hereof. 2. Receipt and Distribution of Dow Jones Information by GIGA. (a) Composite Feed. Dow Jones shall make available from its South Brunswick, New Jersey facility the Dow Jones Information via a terrestrial based communications line utilizing x.25 communications protocols (the "Composite Feed"). Dow Jones shall acquire, install and maintain, at GIGA's expense, all telecommunications lines, services, and equipment necessary to: (i) receive the Composite Feed, (ii) process, code and store the Dow Jones Information on host computers owned by GIGA and located within the United States (excluding Alaska and Hawaii) (the "GIGA Host Computers"), and (iii) distribute the Dow Jones Information to GIGAWeb Subscribers as part of the GIGAWeb service. GIGA shall acquire, install and maintain, at GIGA's expense, all software and related technology necessary to receive the Composite Feed; process, code and store the Dow Jones Information on GIGA Host Computers; and distribute the Dow Jones Information. GIGA shall inform Dow Jones of the number and location of all GIGA Host Computers. GIGA shall not receive the Composite Feed other than at locations disclosed to Dow Jones. Immediately upon receipt of the Composite Feed, GIGA shall cause its computer systems to dispose of, and shall not store, all content contained on the Composite Feed not included within the definition of Dow Jones Information, including, without limitation, all content not coded with the codes set forth on Exhibit B-1. -2- (b) Distribution of Dow Jones Information. GIGA shall permit GIGAWeb Subscribers to access and receive the Dow Jones Information only as part of GIGAWeb and only by means of direct telecommunications line access to the GIGA Host Computers through and using TCP/IP connections, or connection to the GIGA Host Computer through telecommunications line and through a third party Internet access provider. (c) Content Specifications. GIGA shall not store the Dow Jones Proprietary Content on the GIGA Host Computers for more than thirty (30) days after receiving such Dow Jones Proprietary Content. GIGA shall not store the Dow Jones Non-Proprietary Content on the GIGA Host Computer for more than ninety (90) days after receiving such Dow Jones Non-Proprietary Content. GIGA shall use its best efforts to make the Dow Jones Information available within GIGAWeb within fifteen (15) minutes after receiving the Dow Jones Information via the Composite Feed. GIGA shall comply with the Dow Jones Content Specifications, as amended from time to time by Dow Jones (the "Content Specifications"). GIGA acknowledges receiving the current version of the Content Specifications, Revision 4.1 of the Dow Jones News Retrieval Service Broadcast Composite Feed Specification dated March 1, 1996. Dow Jones shall deliver any amendments to the Content Specifications to GIGA at least 15 business days prior to the effective date of any such amendment. In the event of an ambiguity or conflict between a term in this Agreement and a term in the Content Specifications, the term in this Agreement shall be deemed to be the term agreed upon by the parties and supersede the term in the Content Specifications in meaning and interpretation. (d) Metadata. Dow Jones owns certain proprietary materials used to code, organize, and permit searching and retrieval of content, referred to as "Metadata." During the Term, Dow Jones will deliver to GIGA current versions of the Metadata, which GIGA may use, subject to the terms and conditions in this Agreement, to build and create a system facilitating coding, organizing and searching ("Topic Mapping") of Dow Jones Information and third party content distributed via GIGAWeb. GIGA shall be responsible for all costs and expenses incurred in coding and organizing the Dow Jones Information and third party content using the Metadata. Dow Jones shall have the right to review and examine the Topic Mapping being used by GIGA, at Dow Jones' request and expense, but no more frequently than once each calendar quarter. Should Dow Jones exercise such right of review and examination, GIGA shall make available to Dow Jones, at no cost to Dow Jones, individuals with reasonably sufficient knowledge and understanding of the -3- Topic Mapping to explain the coding, organization and search logic being used. (e) Dow Jones Telephone Support. At no additional charge to GIGA, Dow Jones will make available to GIGA personnel a reasonable amount of time from Dow Jones personnel to provide telephone advice and assistance concerning connectivity support, GIGA's development efforts using the Content Specification, Metadata and Dow Jones toolkit, and general questions regarding the Composite Feed and Metadata (the "Telephone Support"). Attached as Exhibit E is the current list of individuals to contact for Telephone Support, and Dow Jones will update Exhibit E as necessary during the Term. GIGA shall use reasonable commercial efforts to diagnose problems using its own personnel. GIGA shall comply with the "escalation" procedure set forth on Exhibit E when contacting Dow Jones for Telephone Support. When GIGA initiates a call or sends an electronic notification to Dow Jones of an alleged problem with the Composite Feed or server, which GIGA has used reasonable efforts to diagnose and has reason to believe may be the responsibility of Dow Jones, Dow Jones will respond as promptly as possible and will use commercially reasonable efforts to respond to GIGA within one hour. GIGA shall provide Dow Jones with sufficient information to enable Dow Jones to reproduce and diagnose any alleged problems. If Dow Jones determines that the alleged problem with the Composite Feed or server is not the responsibility of Dow Jones, Dow Jones may elect to bill GIGA for any out-of-pocket expenses incurred by Dow Jones, if any. 3. Dow Jones Branded Area and Access to WSJIE and DJN/R. (a) Editorial and Design Control. Dow Jones shall have sole control over the design of and editorial content contained in the DJ Branded Area, subject to Dow Jones' substantial compliance with reasonable requests from GIGA to make the on-screen appearance of the DJ Branded Area consistent with the on-screen appearance of any similar third party branded areas included within GIGAWeb. Dow Jones and GIGA shall collaborate on the design of the screen displays for the DJ Branded Area. (b) DJN/R Access Software. GIGA shall make DJN/R front-end access software available as a download from the DJ Branded Area by clicking on an icon designed and approved by Dow Jones, located within the DJ Branded Area. GIGA shall cause such download, of DJN/R front-end access software as soon as practicable after Dow Jones delivers a "golden master" version of such DJN/R front-end access software to GIGA, but in no event later than ninety days after delivery of such "golden master." If, during the Term, Dow -4- Jones issues an update, enhancement, modification, new release or new version of such DJN/R access software, GIGA shall use reasonable commercial efforts to permit GIGAWeb Subscribers to download such new software as soon as practicable after Dow Jones delivers a "golden master" version of such update, enhancement, modification, new release or new version. Dow Jones will permit each GIGAWeb Subscriber who agrees to comply with the then-current applicable Subscription Agreement to download one copy of the DJN/R access software. In order to access DJN/R information, each user must have a password. Dow Jones shall assign to all GIGAWeb Subscribers who subscribe to DJN/R pursuant to this Agreement the access passwords. In order to help track the number of GIGAWeb Subscribers who are accessing DJN/R using access software downloaded from GIGAWeb, specific phone numbers for individuals calling Dow Jones for passwords using software downloaded via GIGAWeb will be used. Dow Jones shall bill all GIGAWeb Subscribers directly for all fees and expenses in connection with subscriptions to DJN/R pursuant to this Agreement. GIGA shall cooperate with Dow Jones to provide any information necessary to enable Dow Jones to bill such GIGAWeb Subscribers directly, such as billing names and addresses. (c) WSJIE Access Method. GIGA shall permit GIGAWeb Subscribers to access WSJIE only by means of one or more "links" from areas within GIGAWeb to WSJIE, currently located at http:// update.wsj.com. GIGA shall make WSJIE available as a separate, distinct service accessible from the DJ Branded Area by clicking on icons designed and approved by Dow Jones, to be located within the DJ Branded Area and elsewhere within GIGAWeb. (d) WSJIE Subscription and Software License. At no additional charge to GIGA other than the Base Monthly Fee, and at no additional charge to a GIGAWeb Subscriber, Dow Jones will permit each GIGAWeb Subscriber, who has not previously registered as a subscriber to WSJIE to register to subscribe to WSJIE, without payment of the then-current, applicable Annual Subscription Fee, provided that: (1) such GIGAWeb Subscriber continues to be a GIGAWeb Subscriber (i.e., once the person or entity ceases to be a GIGAWeb Subscriber, the free subscription to WSJIE ceases); (2) such GIGAWeb Subscriber accesses WSJIE through GIGAWeb as a "gateway" to WSJIE, and does not terminate his or her use of GIGAWeb and access WSJIE directly or through another third-party service; (3) such GIGAWeb Subscriber complies at all times with all generally applicable WSJIE subscription policies and procedures and the -5- WSJIE Subscription Agreement; and (4) GIGA is not in breach of a term of this Agreement. If a GIGAWeb Subscriber wants to obtain any WSJIE Extended Services or other items not included within the then-current Annual Subscription Fee for WSJIE, Dow Jones shall bill such GIGAWeb Subscriber directly at Dow Jones' then-current domestic or international rates, as the case may be. GIGA shall cooperate with Dow Jones to provide any information necessary to enable Dow Jones to bill such GIGAWeb Subscribers directly. (e) Subscriber Relations. GIGA shall promptly refer all inquiries or complaints from GIGAWeb Subscribers regarding WSJIE or DJN/R to the appropriate Dow Jones customer service representatives, which shall be provided to GIGA from time to time by Dow Jones. GIGA shall not attempt to respond to any GIGAWeb Subscriber's inquiry or complaint regarding DJN/R or WSJIE. (f) Blocked or Altered Content. GIGA acknowledges and agrees that access to certain information within WSJIE and/or DJN/R licensed by Dow Jones from third parties is subject to the continuing consent of the owner thereof and that if at any time during the Term such consent is withdrawn, Dow Jones may be required to block distribution of such content to GIGA, or may require GIGA to block a GIGAWeb Subscriber's access to such content within WSJIE or DJN/R. GIGA shall use reasonable commercial efforts to block a GIGAWeb Subscriber's access to such content within forty-eight (48) hours after receiving notice from Dow Jones. GIGA acknowledges that GIGAWeb Subscribers located in Japan and Saudi Arabia may not subscribe to DJN/R pursuant to the terms in this Agreement. 4. Grant of Rights. During the Term, and subject to the terms and conditions in this Agreement, Dow Jones grants to GIGA a limited, nonexclusive, nontransferable worldwide right to: (a) receive the Composite Feed and store the Dow Jones Information on the GIGA Host Computers in accordance with the terms in this Agreement; (b) use the Metadata to code, organize, and permit searching and clipping of Dow Jones Information and third party content appearing within GIGAWeb; (c) distribute the Dow Jones Information to GIGAWeb Subscribers; and (d) make the Dow Jones Services available to GIGAWeb Subscribers. All rights not expressly granted to GIGA in this Agreement are hereby expressly reserved by Dow Jones. -6- 5. Restrictions on Rights. (a) Nonexclusive Rights. The rights granted in this Agreement are nonexclusive, and no provision of this Agreement shall be deemed to restrict or limit Dow Jones' right to sell, deliver or otherwise provide access to the Dow Jones Information or Dow Jones Services directly or indirectly in any territory or to any customers, or to permit third parties to do the same. (b) No Advertising. GIGA shall not, and shall not permit any third party to, offer, sell, license or otherwise authorize or include any third party advertisements, promotions and promotional materials, or similar marketing materials, as part of, or appended to, or in conjunction with or proximity to, any Dow Jones Proprietary Content, Dow Jones Service, or the DJ Branded Area. (c) Blocked or Altered Dow Jones Non-Proprietary Content. GIGA acknowledges and agrees that distribution of Dow Jones Non-Proprietary Content, and access to such Dow Jones Non-Proprietary Content by GIGAWeb Subscribers via GIGAWeb, is subject to the continuing consent of the owner thereof and that if at any time during the Term such consent is withdrawn, Dow Jones may be required to block distribution of such Dow Jones Non-Proprietary Content to GIGA, or may require GIGA to block a GIGAWeb Subscriber's access to such Dow Jones Non-Proprietary Content. GIGA shall use reasonable commercial efforts to block a GIGAWeb Subscriber's access to such Dow Jones Non-Proprietary Content within forty-eight (48) hours after receiving notice from Dow Jones. (d) Dow Jones as Source of Content. GIGA shall not make available as part of GIGAWeb any portion of the Dow Jones Information that GIGA may obtain from a third party source, unless such portion of the Dow Jones Information: (i) was available to GIGAWeb Subscribers via GIGAWeb prior to the Effective Date; or (ii) is no longer included as part of the Dow Jones Information pursuant to Section 5(c). (e) [intentionally deleted] (f) Limitations on Use. Except as specifically set forth in this Agreement, GIGA shall not use, store, reproduce, manipulate, distribute, display, perform, or otherwise make available, or permit any other party (including GIGAWeb Subscribers) to use, store, reproduce, manipulate, distribute, display, perform, or otherwise make available, any Dow Jones Information or Dow Jones Service, without the prior written consent of Dow Jones. GIGA -7- shall not alter, amend, add or delete any content or other item or information in the DJ Branded Area, Dow Jones Services or the Dow Jones Information, without Dow Jones' prior written consent. (g) Limitations on Services and Means of Distribution. GIGA shall not distribute or permit access to any Dow Jones Information or Dow Jones Services other than through telecommunications lines, such as, but not limited to, through magnetic disk, optical disc or tape, CD-ROM, cable, satellite, fm sideband, radio or television broadcast, wireless digital technologies, or personal digital assistants. GIGA shall not distribute or permit access to any Dow Jones Information or Dow Jones Services through any "gateway" or any online or electronic information service other than GIGAWeb, such as, but not limited to, America Online, Global Network Navigator, Microsoft Network, Prodigy, AT&T Interchange, Europe Online, Telebase System, Inc. or CompuServe. (h) No Distribution to Anyone Other Than GIGAWeb Subscribers. GIGA shall not distribute or make available any Dow Jones Information or Dow Jones Service to any person or entity, other than a GIGAWeb Subscriber who is legally bound by the terms of the GIGAWeb Subscription Agreement and the DJ Terms and Conditions (as defined below). Notwithstanding the foregoing sentence, during the Term, GIGA may permit up to seventy-five (75) individuals employed by GIGA to access the Dow Jones Information via GIGAWeb, solely for the purposes of performing GIGA's obligations pursuant to this Agreement and to promote licensing of GIGAWeb, without payment of any additional Base Monthly Fee (as defined below) for the 75 individuals, provided such individuals agree to comply with the restrictions on redistribution of Dow Jones Information and other applicable terms and conditions in the GIGAWeb Subscription Agreement and DJ Terms and Conditions as if such individuals were GIGAWeb Subscribers. (i) Subcontracting. Without Dow Jones' prior written consent, GIGA shall not transfer, assign, or contract for a third party to perform, any of GIGA's rights or obligations pursuant to this Agreement. Dow Jones shall have the right to refuse its consent to any such transfer, assignment or contract with a third party until such transferee, assignee or third party agrees in writing to comply with all of the applicable terms and conditions in this Agreement in relation to such right or obligation. 6. Dow Jones Terms and Conditions. Notwithstanding anything in this Agreement to the contrary, GIGA shall cause each GIGAWeb Subscriber to be legally bound by the Dow Jones Terms and -8- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Conditions, a current copy of which is attached hereto as Exhibit D (the "DJ Terms and Conditions"), and shall cause each individual accessing any Dow Jones Information via GIGAWeb to be legally bound by the DJ Terms and Conditions through, at a minimum, an online agreement containing such DJ Terms and Conditions. Prior to amending or revising the GIGAWeb Subscription Agreement, GIGA shall deliver a copy of the proposed changes to Dow Jones. Dow Jones shall have the right to revise the DJ Terms and Conditions at any time in its sole discretion, and GIGA shall display or reprint, as the case may be, such revised DJ Terms and Conditions, so that each existing and new GIGAWeb Subscriber, and each existing and new individual accessing any Dow Jones Information via GIGAWeb, will be legally bound thereto. In the event of any conflict between the GIGAWeb Subscription Agreement and the DJ Terms and Conditions, the term in the DJ Terms and Conditions shall control in meaning and interpretation. 7. Proprietary Rights. (a) Ownership; Copyright and Proprietary Rights Notices. GIGA acknowledges and agrees that all ownership and proprietary rights (including, without limitation, copyright) to the Dow Jones Information and Dow Jones Services are and shall remain the property of Dow Jones or its licensors. GIGA shall give notice to GIGAWeb Subscribers of Dow Jones' or its licensors' ownership of the copyrights to the Dow Jones Information and Dow Jones Services, in the form in which such copyright or other proprietary rights notice is sent to GIGA with such Dow Jones Information and Dow Jones Services, and GIGA shall not remove or alter or fail to deliver or display any such copyright or other proprietary rights notice appearing in the Dow Jones Information or Dow Jones Services. (b) Infringement. GIGA shall promptly advise Dow Jones of any possible infringement of which GIGA becomes aware of any of Dow Jones' trademarks, copyrights, trade secrets or other proprietary rights related to the Dow Jones Information or Dow Jones Services, or any use of the Dow Jones Information or Dow Jones Services in violation of this Agreement, the GIGA Subscription Agreement or the DJ Terms and Conditions. 8. Fees. (a) Calculation of Base Monthly Fee. GIGA shall pay Dow Jones a monthly fee (the "Base Monthly Fee") equal to the greater of: (i) the ********************************** (as defined below); -9- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. and (ii) ******************************************** for each Individual GIGAWeb Subscriber and for each individual who elects to access any Dow Jones Proprietary Content pursuant to a GIGAWeb Subscription Agreement with a Corporate GIGAWeb Subscriber. (b) Definition of [*****] shall be as follows: (1) During Calendar year 1996: Calendar Month Dollar Amount per Month -------------- ----------------------- Months One and Two ******* Month Three ******* Month Four ******* Month Five and Each Additional Month in 1996 ******* Month One shall be defined as the earlier of: (i) the calendar month in which the Dow Jones Information is first available for access on GIGAWeb, or (ii) July, 1996. For example, no matter when the Dow Jones Information is first available on GIGAWeb, GIGA's obligation to pay the [*****] for Month One, 1996, shall accrue no later than July, 1996. (2) During Calendar year 1997: ******* per month. (c) DJN/R Fee. During the Term, Dow Jones shall pay GIGA a fee (the "DJN/R Fee") equal to ***************** of DJN/R Net Revenues received by Dow Jones from GIGAWeb Subscribers who subscribe to DJN/R as a result of downloading DJN/R access software from GIGAWeb and subscribe to DJN/R using a password obtained by calling the GIGA-specific telephone numbers, provided that: (1) such GIGAWeb Subscriber continues to be a GIGAWeb Subscriber (i.e. once the person or entity ceases to be a GIGAWeb Subscriber, the DJN/R Fee ceases); (2) such GIGAWeb Subscriber is not an existing DJN/R subscriber accessing DJN/R either directly or through another third party or third party service; (3) such GIGAWeb Subscriber is not located in Japan or Saudi Arabia; and (4) GIGA is not in breach of a term in this Agreement. "DJN/R Net Revenues" shall mean all amounts billed by Dow Jones to such subscriber, except for: (i) an amount reasonably accrued for anticipated bad debt, amounts credited for refunds, and other billing adjustments made by Dow Jones in the ordinary course of business; (ii) sales and other taxes or duties billed, if any; and (iii) any amounts billed to the subscriber as "Special Fees," -10- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. initial subscription fees, annual subscription fees, connect-time charges, or similar charges other than "standard component prices" and "information unit" prices for content. (d) Timing of Payments. Within thirty (30) days after the end of each calendar month during the Term, GIGA shall pay Dow Jones: (i) the [*****]; and (ii) any other amounts incurred and outstanding which GIGA owes Dow Jones pursuant to this Agreement. On or before each January 31st, GIGA shall pay Dow Jones any amount by which the Base Monthly Fee for the previous twelve calendar months exceeded the Guaranteed Minimum Monthly Payments received by Dow Jones for the previous twelve calendar months. Within thirty (30) days after the end of each calendar month during the Term, Dow Jones shall pay GIGA the DJN/R Fee for such calendar month. There shall be no right of setoff pursuant to this Agreement. (e) Subscriber Fees. GIGA shall be solely responsible for billing and collecting the fees and charges to be imposed on GIGAWeb Subscribers for access to GIGAWeb or the Dow Jones Information. Dow Jones shall be solely responsible for billing and collecting the fees and charges to be imposed on GIGAWeb Subscribers who subscribe to DJN/R pursuant to this Agreement, or who subscribe to WSJIE pursuant to this Agreement and incur additional charges. In addition, each party shall bill and collect from GIGAWeb Subscribers the respective applicable sales, use or other taxes for the services for which such party is responsible for billing, and shall remit to the appropriate government agency the taxes collected. (f) Taxes. GIGA shall pay, and shall hold Dow Jones harmless from, all taxes arising out of or in connection with or related to the amounts received by GIGA from GIGAWeb Subscribers or the rights granted to GIGA in this Agreement, and applicable income taxes in connection with GIGA's receipt of the DJN/R Fee, but excluding applicable income taxes imposed on Dow Jones in connection with Dow Jones' receipt of Base Monthly Fees. Dow Jones shall pay, and shall hold GIGA harmless from, all taxes arising out of or in connection with or related to the amounts received by Dow Jones from GIGAWeb Subscribers or the rights granted to Dow Jones in this Agreement, and applicable income taxes imposed on Dow Jones in connection with Dow Jones' receipt of Base Monthly Fees, but excluding applicable income taxes imposed on GIGA in connection with GIGA's receipt of the DJN/R Fee. -11- (g) Reports. With each monthly payment it makes to Dow Jones, GIGA shall deliver to Dow Jones a report listing the current number of GIGAWeb Subscribers, country of the principal place of business or residence of each individual accessing or receiving GIGAWeb, and such other information agreed upon by GIGA and Dow Jones to enable Dow Jones to determine the accuracy of payments being made by GIGA and amounts Dow Jones owes, if any, to licensors. With each monthly payment it makes to GIGA, Dow Jones shall deliver to GIGA a report identifying the names of those individuals subscribing to DJN/R for whom Dow Jones believes GIGA is entitled to the DJN/R Fee, and information sufficient for GIGA to determine the accuracy of payment being made to GIGA. Within fifteen (15) days after receiving such report, GIGA shall return a copy of such report to Dow Jones, indicating which individuals subscribing to DJN/R are no longer GIGAWeb Subscribers and, therefore, for whom GIGA is no longer entitled to the DJN/R Fee for such DJN/R subscriber. If Dow Jones does not receive this report from GIGA within 15 days after delivering such report, Dow Jones may delay payment of additional DJN/R Fees to GIGA until Dow Jones receives such report. Any breach of this Section shall be deemed to be a material breach of this Agreement. (h) Records. Each party shall maintain complete and accurate books and records, in accordance with generally accepted accounting practices, of all matters in connection with its obligations hereunder ("Records"). Upon at least 30 days' prior written notice to the other party, each party shall have the right itself or through its authorized representatives to inspect the Records during normal business hours, no more than once per year. All information gained by a party from such inspection will be kept in strict confidence and will be used solely for the purpose of verifying compliance with the terms hereof. In the event a discrepancy is found between payments made and payments owed, which exceeds five percent (5%), the other party shall promptly pay all additional amounts due and reimburse such party for its reasonable costs and expenses incurred in conducting such review of the Records. 9. Disclaimer of Warranties; Indemnification. (a) Disclaimer. DOW JONES PROVIDES THE DOW JONES INFORMATION AND DOW JONES SERVICES "AS IS." DOW JONES DOES NOT WARRANT THE ACCURACY, TIMELINESS, COMPLETENESS, ADEQUACY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES INFORMATION OR DOW JONES SERVICES, AND DOW JONES SHALL NOT -12- BE LIABLE TO GIGA OR TO ANY THIRD PARTY IN RESPECT OF ANY ACTUAL OR ALLEGED INACCURACY, UNTIMELINESS, INADEQUACY, UNMERCHANTABILITY OR UNFITNESS. DOW JONES HEREBY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES REGARDING ANY OF THE DOW JONES INFORMATION AND DOW JONES SERVICES, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. GIGA SHALL NOT MAKE ANY STATEMENT RESPECTING THE DOW JONES INFORMATION OR DOW JONES SERVICES THAT IS CONTRADICTORY OR INCONSISTENT WITH THE FOREGOING STATEMENT OR WITH THE DJ TERMS & CONDITIONS. (b) Indemnification By Dow Jones. Dow Jones shall indemnify and hold harmless GIGA against all liabilities, costs and expenses (including reasonable attorneys' fees) incurred by GIGA that arise out of any claim asserted by an unaffiliated third party that involves, relates to or concerns (i) any Dow Jones Information or Dow Jones Service furnished to GIGAWeb Subscribers pursuant to this Agreement (other than claims for which Dow Jones may seek indemnification from GIGA under Section 9(c)); or (ii) any claim alleging that the Dow Jones Information or Dow Jones Service infringes any patent, trade secret, copyright or other intellectual property rights of any third party; provided that GIGA, upon receipt of a notice of a claim that could result in Dow Jones indemnifying GIGA pursuant to this subsection, gives prompt written notice to Dow Jones of the existence of such claim and permits Dow Jones, if it so requests, either to conduct the defense of such claim or to participate with GIGA in the defense thereof and in any settlement negotiations relating thereto; provided, however, that Dow Jones shall not be required to pay any settlement amount that it has not approved in advance. (c) Indemnification by GIGA. GIGA shall indemnify and hold harmless Dow Jones against all liabilities, costs and expenses (including reasonable attorneys' fees) incurred by Dow Jones that arise out of any claim asserted by a third party (including, without limitation, a GIGAWeb Subscriber or licensor of Dow Jones Non-Proprietary Content) that involves, relates to or concerns (i) any distribution or delivery of the Dow Jones Information or Dow Jones Service in violation of this Agreement; (ii) any use by GIGA of any Dow Jones Information or Dow Jones Service in violation of this Agreement; or (iii) any claim alleging that GIGAWeb infringes any patent, trade secret, copyright or other intellectual property right of any third party; provided that Dow Jones, upon receipt of notice of a claim that could result in GIGA indemnifying Dow Jones pursuant to this subsection, gives prompt written notice to GIGA of the existence of such claim and permits GIGA, if it so requests, either to conduct the defense of such claim or to -13- participate with Dow Jones in the defense thereof and in any settlement negotiations relating thereto; provided, however, that GIGA shall not be required to pay any settlement amount that it has not approved in advance. 10. Confidential Information. GIGA and Dow Jones understand and agree that in the performance of this Agreement each party may have access to private or confidential information of the other party, including, but not limited to, trade secrets, marketing and business plans, and proprietary software, which is designated as confidential by the disclosing party in writing, whether by letter or by the use of a proprietary stamp or legend, prior to or at the time it is disclosed to the other party ("Confidential Information"). Both parties agree that the terms of this Agreement shall be deemed Confidential Information owned by the other party hereto. GIGA agrees that the Metadata shall be deemed Confidential Information owned by Dow Jones. In addition, information that is orally disclosed to the other party may constitute Confidential Information if within 10 days after such disclosure the disclosing party delivers to the receiving party a written document describing such Confidential Information and referencing the place and date of such oral disclosure and the names of the employees of the party to whom such disclosure was made. Each party agrees that: (i) all Confidential Information shall remain the exclusive property of the owner; (ii) it shall maintain, and shall use prudent methods to cause its employees and agents to maintain, the confidentiality and secrecy of the Confidential Information; (iii) it shall not, and shall use prudent methods to ensure that its employees and agents do not, copy, publish, disclose to others or use (other than pursuant to the terms hereof) the Confidential Information; and (iv) it shall return or destroy all copies of Confidential Information upon request of the other party. Notwithstanding the foregoing, Confidential Information shall not include any information to the extent it (i) is or becomes a part of the public domain through no act or omission on the part of the receiving party, (ii) is disclosed to third parties by the disclosing party without restriction on such third parties, (iii) is in the receiving party's possession, without actual or constructive knowledge of an obligation of confidentiality with respect thereto, at or prior to the time of disclosure under this Agreement, (iv) is disclosed to the receiving party by a third party having no obligation of confidentiality with respect thereto, (v) is independently developed by the receiving party without reference to the disclosing party's Confidential Information or (vi) is released from confidential treatment by written consent of the disclosing party. -14- 11. Term and Termination. (a) Term. The initial term of this Agreement (the "Initial Term") shall commence on the Effective Date and shall expire on December 31, 1997, unless terminated earlier pursuant to the terms set forth below. This Agreement shall automatically be extended for additional one-year periods upon the terms of Agreement then in effect at the end of the then-current term (each, a "Renewal Term") unless either party sends written notice to the other of its election not to renew at least ninety (90) days prior to the end of the Initial Term or the then-current Renewal Term, as the case may be. The "Term" of this Agreement shall mean the Initial Term and all Renewal Terms. (b) Default. If either party shall default in the performance of or compliance with any provision contained in this Agreement and such default shall not have been cured within 30 days after written notice thereof shall have been given to the appropriate party, the party giving such notice may then give further written notice to such other party terminating this Agreement, in which event this Agreement and all rights granted hereunder shall terminate on the date specified in such further notice. (c) Insolvency. In the event that either party hereto shall be adjudged insolvent or bankrupt, or upon the institution of any proceedings by it seeking relief, reorganization or arrangement under any laws relating to insolvency, or if an involuntary petition in bankruptcy is filed against such party and said petition is not discharged within 60 days after such filing, or upon any assignment for the benefit of its creditors, or upon the appointment of a receiver, liquidator or trustee of any of its assets, or upon the liquidation, dissolution or winding up of its business (an "Event of Bankruptcy"), then the party affected by any such Event of Bankruptcy shall immediately give notice thereof to the other party, and the other party at its option may terminate this Agreement and the rights granted hereunder, upon written notice. (d) Change of Control. If there occurs during the Term any change in the effective ownership or voting control of GIGA or any merger into or acquisition by any third party of GIGA, or the sale or transfer of GIGAWeb or all or substantially all of the assets comprising GIGAWeb to any third party (a "Control Event"), GIGA shall notify Dow Jones in writing of such Control Event within ten (10) days after its effectiveness, and -15- Dow Jones shall have the right, within thirty (30) days after receipt of such written notice of such Control Event, to terminate this Agreement upon at least sixty (60) days notice to GIGA. GIGA may notify Dow Jones in writing of any proposed Control Event prior to its proposed effectiveness, and Dow Jones shall within thirty (30) days after receipt of such notice, notify GIGA in writing whether Dow Jones would exercise its right to terminate this Agreement if such proposed Control Event were consummated. Dow Jones shall treat any information regarding any proposed Control Event as Confidential Information. (e) Effect of Termination. Upon the expiration or termination of this Agreement for any reason, GIGA shall immediately inhibit all access to the Dow Jones Information and Dow Jones Services through GIGAWeb and each party, at its expense, shall promptly return to the other all copies of the other party's Confidential Information. Immediately upon the expiration or termination of this Agreement for any reason, GIGA shall cease advertising and promoting the availability of the Dow Jones Information and Dow Jones Services via GIGAWeb and shall remove and discontinue all uses of Dow Jones' trade names or trademarks. Upon the expiration or termination of this Agreement for any reason, GIGA may continue to use the Metadata for up to thirty (30) days to code, organize, and permit the searching and retrieval of third party content available through GIGAWeb, while Dow Jones and GIGA negotiate an agreement for the use of the Metadata after the termination of this Agreement. If GIGA and Dow Jones are unable to reach agreement within such thirty day period, GIGA shall immediately cease all use of the Metadata (and any modifications or derivatives of the Metadata). (f) Survival of Certain Provisions. Notwithstanding the termination or expiration of this Agreement, the rights and obligations in Sections 7, 8(e), 8(f), 8(g), 8(h), 9, 10 and 11 shall survive. 12. Miscellaneous. (a) Notices. All notices, requests and other communications hereunder shall be in writing and shall be delivered in person, or sent by certified mail, return receipt requested, overnight courier service, or by facsimile to the address or facsimile number of the party set forth below, or to such other addresses or numbers as may be stipulated in writing by the parties pursuant hereto. Each notice shall be deemed delivered and received on the -16- date on which it is officially recorded as delivered by return receipt or equivalent, or by facsimile confirmation date: If to Dow Jones: Dow Jones & Company. Inc. U.S. Highway One at Ridge Road South Brunswick, New Jersey 08852 Attn.: Executive Director, Content and Distribution FAX: 609-520-4072 with a copy to: Dow Jones & Company, Inc. U.S. Highway One at Ridge Road South Brunswick, New Jersey 08852 Attn.: Legal Department FAX: 609-520-4021 If to GIGA: Giga Information Group, Inc. One Kendall Square, Building 1400W Cambridge, Massachusetts 02139 Attn: President (c) Promotional Materials. Neither party shall make, publish or distribute any public announcements, press releases, advertising, marketing or promotional materials ("Materials") regarding the execution of this Agreement or GIGAWeb or the Dow Jones Information or Dow Jones Services, that use the other party's trade names, trademarks, service marks, or logos, without the prior written consent of the other party, which consent shall not be unreasonably withheld. If within ten (10) days after delivery of samples of such Material, the receiving party has not notified the sending party of its disapproval, such Material shall be deemed approved. (d) Amendment, Assignment. This Agreement may not be amended except by written instrument executed by an authorized representative of GIGA and Dow Jones. Neither party may assign this Agreement, or sublicense, assign or delegate any right or duty hereunder, by operation of law or otherwise, without the prior written consent of the other, and any such purported assignment, delegation or transfer without such prior written consent shall be void. This Agreement shall be binding upon and shall inure to the benefit of the undersigned parties and their respective successors and permitted assigns. -17- (e) Customer Service. GIGA shall be responsible for providing all customer service to GIGAWeb Subscribers regarding GIGAWeb (excluding the Dow Jones Services). (f) Force Majeure. The time period within which a party to this Agreement is required to perform any obligation shall be delayed by an amount of time equal to the delay caused by any event, condition or occurrence beyond the reasonable control of such party, provided the delayed party provides prompt written notice of such delay to the other party hereto, and makes reasonable commercial efforts to end the cause of such delay. (g) Waiver. All waivers of a term or breach of a term hereunder must be in writing and signed by the party against whom such waiver is asserted. Failure or delay by either party to enforce compliance with any term of this Agreement or pursue any breach hereof shall not constitute a waiver of the term itself, any other term of this Agreement, or such breach. A written waiver of a breach under this Agreement shall not be a waiver of any other or subsequent breach. (h) Separability. If any provision of this Agreement or the application thereof to any person or circumstances shall to any extent be held to be invalid or unenforceable, the remainder of the Agreement, or the application of such provisions to persons or circumstances as to which it is not held to be invalid or unenforceable, shall not be affected thereby, and each provision shall be valid and be enforced to the fullest extent permitted by law. (i) Relationship of the Parties. This Agreement does not and shall not be deemed to constitute a partnership or joint venture between the parties and neither party nor any of their respective directors, officers, employees or agents shall, by virtue of the performance of their obligations under this Agreement, be deemed to be an agent or employee of the other. (j) Specific Performance. The parties hereby agree that the terms set forth in Sections 5(b), 5(e), 5(f) and 5(g) of this Agreement are material terms of this Agreement, and that, should GIGA breach any obligations set forth in Section 5(b), 5(e), 5(f) or 5(g) of this Agreement, Dow Jones shall be entitled to obtain the remedy of specific performance of such obligation, in addition to and not in lieu of all other rights and remedies available to Dow Jones pursuant to this Agreement or at law or in equity. -18- (k) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States, applicable to contracts wholly made and wholly performed in the State of New York, and without regard to the principles of conflicts of law under New York law. (l) Entire Agreement. All Exhibits shall be deemed part of this Agreement as if set forth in full in the body of this Agreement. This Agreement contains the final and entire agreement of the parties on the subject matter herein and supersedes all previous verbal and written statements, negotiations, and agreements on the subject matter herein. IN WITNESS WHEREOF, parties have executed this Agreement, through their respective authorized representatives, as of the Effective Date. GIGA DOW JONES GIGA INTERNATIONAL GROUP, INC. DOW JONES & COMPANY, INC. /s/Ken Marshall /s/Jessica Perry - ---------------------------- ---------------------------- By: Ken Marshall By: Jessica Perry Title: President Title: Assistant Director Date: May 21, 1996 Date: April 24, 1996 -19- EXHIBIT A DETAILED DESCRIPTION OF GIGAWeb SERVICE GigaWeb is Giga Information Group's web-based product portfolio for information technology (IT) professionals. GigaWeb is both a distribution mechanism and a product. The product is built around content provided to Giga by its internal resources of analysts, as well as incremental third party content. The distribution mechanism is the Internet itself, which Giga Information Group is relying on for access to its on-line content. Giga Information Group's target market is varied. It includes: IT Managers within Global 1000 type companies, Product and Executive Management within the IT vendor community, Wall Street and market analysts as well as large consulting firms. It is Giga's intent to reach broad and deep within the user and vendor communities. The content for GigaWeb is meant to serve its broad and diverse market. GigaWeb will include original Giga content in the form of Planning Assumptions and Catalyst, Questions Answers (CQA's). CQA's are the genesis of original research from Giga. CQA's often spawn the Planning Assumptions which are the major body of original research performed by Giga Information Group Analysts. In addition to CQA's and Planning Assumptions, the service includes the ability for GigaWeb members to participate in Forums. GigaWeb members can communicate with other GigaWeb members as well as Giga's research body within a forum environment. To enhance the usability of the service, GigaWeb users can submit inquiries to the Knowledge Center. The Knowledge Center is the central repository for all inquiries within Giga. The web application contains a tracking system whereas users can track the status of their inquires to the Knowledge Center. To provide users with maximum information and exposure, Giga offers the services of industry experts. ExperNet, a division of Giga Information Group, provides access to industry experts through GigaWeb. These experts are typically practitioners, rather than analysts. GigaWeb members can speak to an expert, or contract consulting services of an expert through GigaWeb. Finally, Giga offers its members the ability to attend conferences, and participate in Gigatels and Expertels. Conferences are typically industry events that Giga members and -20- non-members may participate in. Gigatels and Expertels are multi-client, audio tele-conferences, broadcasted by Giga analysts and experts about a particular topic. The topics for Gigatels and Expertels, are typically driven by a CQA or Planning Assumption. Giga has a direct sales force and a telesales group that sells its services to its constituents. Typically, Giga receives an annual subscription fee for the services it provides. ExperNet services may or may not be included with a Giga subscription. ExperNet services can be sold separately or in conjunction with Giga subscriptions. -21- EXHIBIT B-1 DOW JONES PROPRIETARY CONTENT 1. Dow Jones Online News ("DJON"), a proprietary news service containing approximately 400 to 500 news stories each business day, covering corporate America, Washington, Wall Street and foreign markets, technology, Asian business news, and European business news, containing the DJON category codes set forth on the following pages. 2. Stories appearing in the print version of The Wall Street Journal classified by Dow Jones as within the information technology industry segments and containing the codes set forth on the following pages (the "WSJ Information Technology Information"). Dow Jones reserves the right during the Term to add to, delete from, or change any aspect of the Dow Jones Proprietary Content or its coding, with at least ten (10) days prior written notice to GIGA, provided, however, that following any such change, the volume and overall content of the Dow Jones Proprietary Content will remain comparable in breadth and depth of coverage, and the categories of coding will be replaced with similar categories of coding. -22- Dow Jones Online News Giganet The following is a list of all authorized DJON category codes. These codes will be found in the "Category Code List" part of the composite feed format data (see Broadcast Composite Feed ------------------------ Specification, page 3-25) in the Product/Service Code area. In ------------- addition to these codes, there will be Company codes that can be searched. The Company Code values are the same as the company's ticker symbol (another list will be supplied on disk with all of their values). DJON Code DJON Category/Content Update Frequency --------- --------------------- ---------------- TOP BUSINESS NEWS P/DFP Top Business Headlines Throughout the day P/DHL Headline Only " P/DBZ Business Financial Summary " INDUSTRIES P/DAI Airlines Throughout the day P/DAU Autos " P/DBK Banking " P/DCH Chemicals " P/DCO Computer Hardware " P/DCS Computer Software " P/DCN Construction " P/DCP Consumer Products " P/DDE Defense & Aerospace " P/DEL Electrical Parts & Systems " P/DES Environmental Services " P/DFT Food & Tobacco " P/DHC Health Care " P/DIG Industrial Goods & Services " P/DIR Insurance " P/DIS Investment Services " P/DLE Leisure " P/DME Media " P/DGA Oil & Gas " P/DPH Pharmaceuticals " P/DRL Real Estate " P/DRE Retailing " P/DSE Semiconductors " P/DTE Telecommunications " P/DTR Transportation " P/DUT Utilities " -23- Economy P/DEC General Economic Stories " P/DWV Washington News and Views " International P/DAS Asian Update Daily P/DEU European Update " P/DAA Asian Focus Weekly P/DEE European Focus " Best of Dow Jones P/DER Careers Weekly P/DPF Personal Finance " P/DTH Health " P/DSB Small Business " P/DAV Travel " P/DWF Work & Family " Markets U.S. Markets P/DST U.S. Financial Summary Hourly P/DSS U.S. Stock Update " P/DDJ Dow Jones Averages " Dow Jones Industrial Average Dow Jones Utilities Average Dow Jones Transportation Average Dow Jones Composite Average P/DMD U.S. Stock Market Index Hourly NYSE S&P 100 & 500 NASDAQ Composite NASDAQ Computer AMEX Composite AMEX Major Markets Russell 2000 P/DBM Bonds 3x P/DDM Dollar " P/DCE Currency Prices " British Pound Canadian Dollar Japanese Yen German Mark -24- ECU French Franc Hong Kong dollar Italian Lire Dutch Guilder Mexican Peso Swiss Franc Spanish Peseta P/DGM Precious Metals 3x P/DCM Commodity Prices " CRB Index Crude Oil Cattle Hogs Wheat Soybeans Cotton Orange Juice Coffee Sugar P/DWM ADR Report Closing Comment Daily P/DRT ADR Trading (list) " P/DON Money Rates 3x Prime Rate Fed Funds Rate Discount Rate Labor Rate 3-Month T-Bill 6-Month T-Bill 1-Year Bill 2-Year Bill 5-Year Bill 10-Year Bill 30-Year Bill Most Actives P/DNY NYSE Hourly P/DNA NASDAQ " P/DEX AMEX " Market Analysis P/DHS Hot Stocks Throughout the Day P/DAC Analysts' Comments " P/DAR Analysts' Ratings " P/DSN Wall Street News and Views " -25- International Stocks P/DSU International Market Summary 6x P/DWI World Stock Index Daily P/DTO Toronto " P/DMC Mexico City " P/DLO London " P/DFR Frankfurt " P/DHK Hong Kong " P/DTK Tokyo " P/DSI International Stock Indexes 3x Toronto Mexico City London Frankfurt Paris Hong Kong Tokyo Singapore Sydney P/DAD ADR Report Closing Comment Daily P/DDR ADR Trading (list) " -26- WSJ CODE WSJ CATEGORY/CODE Technology-Specific Codes for The Domestic Wall Street Journal J/PTK Personal Technology Column J/TCH Technology Page N/ITP Information Technology and Policy N/SCN Science and Technology N/IAS Interactive and Online Services N/NET Internet The following 11 industries are part of the technology market sector: I/MDV Advanced Technology Medical Devices I/BTC Biotechnology I/CMT Communications Technology I/ITC Industrial Technology I/MTC Medical and Biological Technology I/ARO Aerospace and Defense I/CPR Computers I/DTC Diversified Technology I/OFF Office Equipment I/SEM Semiconductors I/SOF Software EXHIBIT B-2 DOW JONES NON-PROPRIETARY CONTENT 1. PR Newswire 2. Business Wire 3. Canada NewsWire EXHIBIT C GIGAWeb Subscription Agreement Contract No: ------------ Customer No: ------------ Dated: ------------ MASTERS TERMS AND CONDITIONS ---------------------------- This agreement (the "Agreement") is entered into by and between Giga Information Group, Inc., a Delaware corporation ("Giga"), and _______________ ("Customer"). From time to time the Customer may purchase or subscribe for services or materials from Giga and its subsidiaries. The services so purchased (the "Services") may be provided by Giga or by one or more third parties, and may include access to databases and on-line networks, research, administrative and inquiry support, advisory services, conferences, referral services and knowledge networking services. The materials so purchased (the "Materials") may include articles, reports, responses to inquiries (including oral, written and electronic responses), data, user documentation and other work- product. Any such purchase or subscription will be evidenced by a written instrument signed by both Customer and Giga (an "Order Form") identifying the Materials or Services to be delivered, the pricing terms and any other term specific to the transaction. In connection with any Services or Materials, Giga may license software to the Customer (the "Software"), which may include software developed or owned by Giga, or software licensed from third parties. The Materials and Services may be delivered (i) through the Internet or other on-line vehicles, including information or communications networks or services operated or maintained by Giga ("Giga Networks"), (ii) orally (over telephone or videophone, at conferences, in person or otherwise), (iii) in written form and/or (iv) through other delivery vehicles. Any such purchase, subscription or license by Customer, and the Customer's use of the Services, Materials and Software, shall be subject to the terms and conditions of this Agreement and any applicable Order Form and to such disclaimers and restrictions on use that may be published by Giga and/or its licensors from time to time. 1. Designation of Users; Additional Users. Within fifteen -------------------------------------- (15) days of delivery of an Order Form to Giga, the Customer shall advise Giga in writing or electronically of the names and business addresses of its employees whom it desires to have access to the Services or Materials purchased (the "Users"). All Users must (i) be employees of the Customer, (ii) be employed by the same division and legal entity and (iii) have their primary business location in the same Site. As used herein, the term "Site" means any one building, or group of geographically adjacent buildings, in which Customer conducts operations. Customer agrees to provide a copy of this Agreement to its Users upon their request, and to require and be responsible for their compliance with the terms hereof. Customer may designate additional Users at any time upon payment of the then applicable fee. The Customer shall be entitled to substitute new Users for Users previously identified in the event of a material change in the prior User's employment status or responsibilities, or otherwise with the prior consent of Giga (confirmed by Giga in writing or electronically). 2. Licenses. If Customer receives Software from or through -------- Giga (including by downloading), Customer's Users shall have, subject to the terms and conditions of this Agreement and payment of the applicable fees therefor, a revocable, non-transferable, non-sublicensable, non-exclusive license for the Term (as defined in Section 13) to use the Software for the sole purpose of obtaining and accessing information, and communicating with Giga and third parties, through the Services in accordance with this Agreement. If any such Software is licensed to Giga by a third party, in addition to the foregoing license, the Customer agrees to be bound by and to comply with the terms of the license to Giga. 3. Use Restrictions. ---------------- (a) General Use Restrictions. The Services, Materials ------------------------ and Software are for Customer's internal use only and may not be disclosed, disseminated or distributed to any other party. Customer agrees not to (i) reverse engineer, decompile, disassemble, translate, convert or attempt to derive the source code of the Software; (ii) circumvent any encryption or gain access to Materials for which it has not been expressly granted the appropriate rights to access by Giga and any other party specified with respect thereto; (iii) use Giga's name or trademarks (or those of its subsidiaries, licensors or third party information providers) or any excerpts from the Services or Materials in the promotion of its business, products or service without prior written consents; (iv) alter, modify or adapt the Materials or Software, including translating, decompiling or creating derivative works; (v) use any Services, or any network, system or World Wide Web site provided or maintained by Giga in a manner that jeopardizes or threatens to jeopardize the integrity thereof or interferes or threatens to interfere with its or other persons' privacy or proprietary rights or others' use of Giga's -2- services or any Giga Network; (vi) use the Services or Materials as a component or basis for a database or information product or service offered for commercial sale or distribution outside of Customer's organization; (vii) use the Services or Materials for the purpose of, or as a basis for, making investment decisions or recommendations with respect to securities of any company; or (viii) use the Services, Materials or Software in any manner which violates this Agreement or any applicable laws (including, but not limited to, any laws relating to copyrights, trademarks, trade secrets or libel). In addition, the use of any Software shall be governed by any software license agreement accompanying such Software. (b) Rules of Use. Access to and use of the Services, ------------ Materials, Giga Networks and Software are subject to any rules or use or restrictions that may be made available electronically or delivered in writing to Customer or the Users (the "Rules of Use"). Such Rules of Use may be amended from time to time by Giga without prior notice, and are incorporated herein by reference. Customer and each User shall agree to be bound by and to observe the Rules of Use. Customer shall be responsible for Users' compliance with the Rules of Use. (c) Reproduction; Access to Copies. Except as ------------------------------ permitted in the following sentence, Customer may not, without the prior written or electronic consent of Giga, copy, download, post, reproduce, modify, retransmit, rent, license, lease or distribute, or create derivative works of, any of the Services, Materials or Software in any form or by any means, in whole or in part, including but not limited to information storage and retrieval systems, recordings and retransmittals, use in any bulletin board, home page or similar arrangement or public display or any computer or communications network to which persons other than Users have access. The Customer shall, however, be permitted, in the ordinary course of its business, to make on or more written copies of any Materials for personal use only by its employees if (i) the Materials so copied represent an insubstantial portion of the Materials provided to Customer taken as a whole, (ii) such copying is not systematic and regular, (iii) such copying does not provide any person who is not a User with a substantial substitute for the rights of a User or for the purchase of or subscription to a service or product offered by Giga or one of its information providers, (iv) such copied Materials retain any and all copyright notices, trademark legends and other proprietary rights notices, (v) any such copies are kept and used only at the same Site, (vi) such Materials do not include a notice prohibiting copying, and -3- (vii) any person to whom any such copies are provided complies with, and uses them only in accordance with, the terms of this Agreement and the Rules of Use as if such person were a User. Such copies may not be further reproduced or distributed to any party in any manner or form. Reprints of Materials may be ordered from Giga at Giga's then-current rates. (d) Customer Information and Materials. Customer ---------------------------------- represents and agrees that any information, content or other materials provided or transmitted by Customer to Giga or any of its customers, licensees, licensors or third party information providers or entered or uploaded by Customer onto any Giga Network or other database, World Wide Web site, or other computer system or network established or used in connection with the Services and Materials will not (i) violate any local, state, federal or other law or regulation, (ii) contain any libelous, defamatory, disparaging, pornographic or obscene materials, (iii) contain, or introduce to any system or database of Giga or any of its customers, licensors or third party information providers, any virus or similar destructive programs, codes, routines or algorithms or other materials that will interfere with use of such databases, systems or networks or will cause any system, network or database to become erased, contaminated, inoperable or otherwise incapable or being used in the manner in which they were used prior to introduction of such materials (collectively "Viruses"), (iv) be inaccurate or misleading, (v) infringe any copyright, trademark or other proprietary right of any person or (vi) give rise to any civil liability. Subject to Section 15 hereof, Customer hereby grants Giga a worldwide, non-exclusive, perpetual, fully-paid, royalty-free right and license to use, reproduce, disclose, modify, distribute, translate, and publicly perform and display and otherwise fully exploit such materials, content and information, and to incorporate them in other works, in any form, media or technology. 4. Access to Services and Materials; Support. ----------------------------------------- (a) Hardware and Software. Customer shall be --------------------- responsible for providing all computer, telephone and other access or communications equipment, hardware and software (including any World Wide Web browser software or workgroup software) necessary to access the Services and any Giga Network, and any installation, maintenance, and performance thereof. Customer agrees that it will only use computer systems employing reasonable means to check for and prevent (i) the spread of Viruses and (ii) use or access by unauthorized persons. -4- (b) User Codes and Passwords. Giga will assign ------------------------ Customer and the Users with such password(s), user code(s), number(s) or other special identifying or system features (collectively "User Codes") as it may deem appropriate to ensure access to the Services and any Giga Network and to limit access to the Services and any Giga Network to the Users. Customer shall take appropriate steps to protect the confidentiality of such User Codes and to ensure that only Users access the Services and the Materials and any Giga Network except as expressly permitted by Section 3(c). Customer shall not provide access, without Giga's prior express approval or as expressly permitted by Section 3(c), to any Giga Network or to any Materials or Services that are delivered in electronic form to any person to whom Giga has not assigned a User Code authorizing such access. Customer shall be responsible for charges or damages incurred due to unauthorized access or use of any Services, Materials or Giga Network by any person unless (i) Giga is notified in writing that a User Code provided to Customer by Giga has been lost or obtained by an unauthorized party and (ii) such charges or damages are due to Giga's failure to cancel the User Code. (c) Support. Giga will provide telephone and on-line ------- support during its normal business hours to respond to Customer's reasonable inquiries concerning the use of any Services and Materials purchased by Customer and any Giga Network which the Users may be authorized to access. 5. Changes, Enhancements and Improvements. Giga shall have -------------------------------------- the right to make changes in the Services, the Materials, any Giga Network, and the Software, including, without limitation, scheduled hours of operation, access periods and levels, User identification procedures and types of equipment and protocols required or used in providing or accessing the Services, provided, that if Giga shall materially change the level or nature of Services to be provided to Customer (other than for breach of any of Customer's obligations hereunder), (i) Giga shall notify Customer thereof in writing or through electronic or on-line media, and (ii) such change must be generally applicable to all of Giga's customers purchasing similar Services on similar terms. 6. Payment. The purchase price or fee set forth in any ------- Order Form for any Services or Materials purchased by Customer shall be due and payable within thirty (30) days of invoice by Giga. Customer shall be solely responsible for any additional fees or charges incurred by Customer and/or Customer's Users in connection with use of Services, Materials and Software not included in such fees paid by Customer, including any fees based -5- on levels of usage of the applicable Service, and any telephone or other charges associated with connecting to a Giga Network. All invoiced amounts are payable in U.S. dollars upon receipt. Any unpaid amounts shall bear interest at the lesser of 1.5% per month or the maximum rate allowed by law. Customer understands that Giga is not obligated to provide any refunds for unused Services. 7. Audit and Inspection. Customer shall provide Giga with -------------------- such information and access to Customer's facilities and records as reasonably requested by Giga in order to verify or audit compliance with the terms of this Agreement. 8. Proprietary Rights. ------------------ (a) Customer agrees that all Services, Materials and Software are the sole and exclusive property of Giga and/or its licensors and independent third party information providers and agrees not to infringe or violate its or their copyrights and other proprietary rights therein. Ownership of all copyrights and other proprietary rights in the Materials and Software are retained by Giga and its licensors and information providers. Except as expressly provided herein, Giga does not convey and Customer does not obtain any right in the Services, Materials, Software or any data or materials utilized or provided by Giga in the performance of this Agreement. All rights not granted hereunder are expressly reserved to Giga. Without limiting the foregoing, Giga and it licensors and third party information providers retain all rights in all of their respective trademarks, trade names and service marks (collectively, "Trademarks"). Customer shall have no right to use any Trademarks. (b) Customer shall take all necessary action, whether by instruction, agreement or otherwise, to restrict, control, and limit the use of and access to the Services, Materials and Software to those uses expressly permitted hereunder and shall protect and secure the Services, Materials and Software, and all portions thereof, to prevent unauthorized copying, transfer or use. (c) Customer acknowledges that unauthorized copying, transfer or use may cause Giga and/or its licensors and third party information providers irreparable injury that cannot be adequately compensated for by means of monetary damages. It is therefore agreed that any breach hereof by Customer may be enforced by any of such persons, and may be enforced by equitable relief in addition to any other rights and remedies that may be available. -6- 9. Warranty Disclaimer. ALL SERVICES, MATERIALS AND ------------------- SOFTWARE, AND ACCESS TO ANY GIGA NETWORKS, ARE PROVIDED ON AN "AS IS," "AS AVAILABLE" BASIS. GIGA AND ITS LICENSORS AND THIRD PARTY INFORMATION PROVIDERS EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND WARRANTIES AS TO NONINFRINGEMENT, ACCURACY, COMPLETENESS OR ADEQUACY OF INFORMATION. NO COMMUNICATION OF GIGA OR ANY OF ITS EMPLOYEES, LICENSORS OR THIRD PARTY INFORMATION PROVIDERS SHALL CREATE ANY WARRANTY. THE SERVICES AND MATERIALS ARE INTENDED SOLELY AS A RESEARCH AND INFORMATION TOOL AND MAY REFLECT ONE OR A LIMITED NUMBER OF PERSPECTIVES THAT MAY NOT REPRESENT PREVAILING OPINIONS, AND ARE NOT MEANT AS SPECIFIC GUIDES TO ACTION. THE SERVICES AND MATERIALS SHOULD NOT BE RELIED ON AS A SOLE BASIS FOR DECISION- MAKING. ALL MATERIALS SPEAK AS OF THE DATE OF PUBLICATION AND GIGA DOES NOT UNDERTAKE TO ADVISE CUSTOMER OF ANY CHANGE IN THE INFORMATION OR VIEWS CONTAINED THEREIN. CUSTOMER UNDERSTANDS THAT MATERIALS AND SERVICES MAY BE PROVIDED BY, OR MAY INCLUDE OR INCORPORATE INFORMATION OR MATERIALS PROVIDED BY, THIRD PARTIES. ALTHOUGH GIGA MAY AUTHORIZE OR RECRUIT THIRD PARTIES TO PROVIDE INFORMATION, MATERIALS OR SERVICES, MAY REFER CUSTOMER OR USERS TO THIRD PARTIES AND MAY PROVIDE THIRD PARTIES MATERIALS OR SERVICES TO CUSTOMER OR USERS, GIGA DOES NOT CONTROL THE CONTENT OR QUALITY OF INFORMATION, MATERIALS AND SERVICES PRODUCED OR PROVIDED BY SUCH THIRD PARTIES. GIGA MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY, COMPLETENESS OR TIMELINESS OF MATERIALS OR INFORMATION PROVIDED BY THIRD PARTIES, OR WHETHER THEY MAINTAIN THE LEVEL OF SKILL REPRESENTED BY THEM. GIGA MAKES NO REPRESENTATIONS OR WARRANTIES AS TO, AND EXPRESSLY DISCLAIMS RESPONSIBILITY FOR, THE INFORMATION, VIEWS OR OTHER ACTIVITIES OF ANY PERSON OR ENTITY (OTHER THAN ITS EMPLOYEES WHILE ACTIVE IN THEIR OFFICIAL CAPACITIES), OR THE CONTENTS OF ANY MATERIALS OR INFORMATION PROVIDED OR INPUT BY ANY OTHER PERSON. GIGA AND ITS LICENSORS AND THIRD PARTY INFORMATION PROVIDERS DO NOT WARRANT THAT ANY MATERIALS, SERVICES, SOFTWARE OR GIGA NETWORKS WILL MEET CUSTOMER'S NEEDS OR BE FREE FROM ERRORS, OMISSIONS, DEFECTS OR VIRUSES, OR THAT THE OPERATION THEREOF WILL BE UNINTERRUPTED. -7- 10. Limitation of Liability. GIGA'S AND ITS EMPLOYEES', ----------------------- LICENSORS' AND THIRD PARTY INFORMATION PROVIDERS' TOTAL LIABILITY ARISING OUT OF THIS AGREEMENT AND THE SERVICES AND MATERIALS UNDER ALL THEORIES OF LIABILITY SHALL BE LIMITED, WITH RESPECT TO ANY PARTICULAR SERVICES OR MATERIALS, TO THE FEE PAID BY CUSTOMER TO GIGA FOR SUCH SERVICES AND/OR MATERIALS IN THE MOST RECENT ONE- YEAR PERIOD PRIOR TO THE DATE ON WHICH THE CLAIM FOR DAMAGES IS FIRST ASSERTED TO GIGA IN WRITING. NEITHER GIGA, ITS LICENSORS NOR THIRD PARTIES PROVIDING INFORMATION, ANALYSIS OR OTHER INPUT TO THE SERVICES OR MATERIALS SHALL BE LIABLE FOR CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES. IN ADDITION, GIGA SHALL NOT BE LIABLE FOR ANY DAMAGES OCCURRING BY REASON OF ANY CIRCUMSTANCES BEYOND ITS REASONABLE CONTROL. OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CUSTOMER BY SIGNING THIS AGREEMENT WAIVES ANY AND ALL CLAIMS RELATING TO THE USAGE OF THE SERVICES, MATERIALS OR GIGA NETWORKS, WHETHER SUCH CLAIMS ARE AGAINST GIGA OR ANY OF ITS LICENSORS OR THIRD PARTY INFORMATION PROVIDERS. 11. Indemnity. Customer agrees to indemnify and hold Giga --------- and its licensors harmless from any claim or loss and all liabilities, costs and expenses (including attorney's fees) arising as a result of Customer's and Users' use of the Services, Materials or Software or the materials, information or programs Customer or Users upload, enter, distribute, transmit or post in connection with the use of the Services. 12. Responsibility for Submissions by Customer and Third ---------------------------------------------------- Parties; Right of Removal. Customer acknowledges that Giga ------------------------- assumes no responsibility for the contents of materials posted, entered, uploaded or otherwise distributed by Customer or any other persons. Any opinions, advice, statements, Services, offers, or other information or Materials expressed or made available by third parties, including third party information providers, licensors, or any Giga customer or user of Services, are those of such third party and not of Giga. Giga neither endorses nor is responsible for the accuracy or reliability of any opinion, advice or statement made by anyone other than authorized Giga employee spokespersons while acting in their official capacities. It is the responsibility of customer to evaluate the accuracy, completeness or usefulness of any information, opinion, advice or other Materials or Services available through or from Giga. -8- Customer agrees that Giga has the right, in its sole discretion, but not the obligation, to (i) remove, or direct Customer to remove, any materials posted, entered, uploaded or otherwise distributed by Customer, (ii) limit, restrict or block the access to the Services, Materials, Networks and Software of Customer or any of its users not complying with the Rules of Use and (iii) review, edit or refuse to post any material or information submitted for display or posted on the Giga Network. Giga reserves the right to remove any content that it deems in its sole discretion to be unacceptable, undesirable or in violation of the Rules of Use or Section 3(d) above. 13. Term and Cancellation. The term of any Services --------------------- purchased under this Agreement (the "Term") shall initially be as set forth in the applicable Order Form for such Services. Unless the applicable Order Form under which any Services were initially purchased shall expressly state that such Services are not subject to automatic renewal, the Term shall automatically renew, unless notice of cancellation is received at least sixty (60) days prior to expiration, for subsequent twelve (12) month periods, for the same level of access to Services and Materials as was provided during the previous term, unless different Services are set forth in an updated Order Form or written notice from Customer (as provided in Section 16(h)) received by Giga at least sixty (60) days prior to termination. The fee for such Services and Materials upon any such renewal shall be Giga's then current standard rates for comparable services for a comparable duration. Such renewal will not be deemed to extend the availability of any credits for Services which by their terms have a limited duration. 14. Termination. ----------- (a) Termination by Customer. This Agreement may be ----------------------- terminated by Customer prior to its scheduled expiration as to any one or more Services or as to the entire Agreement at any time. If Customer elects to terminate this Agreement or any Service following a breach of any term of this Agreement by Giga, and Giga has failed to remedy such breach within thirty (30) days following notice thereof by Customer, Customer shall be entitled to a prorated refund of those fees previously paid to Giga with respect thereto based on the remaining period of the Term for which payment had previously been made to Giga (such refund to be reduced to the extent Customer has accrued or outstanding obligations to pay Giga arising under this Agreement or otherwise). If Customer terminates as to any Services or as to the entire Agreement for any reason other than pursuant to the immediately preceding sentence, Customer shall not be entitled to -9- any refund of or credit for fees previously paid and shall be responsible for all fees accrued prior to the time Giga receives written notice of Customer's intent to terminate. (b) Termination by Giga. This Agreement may be ------------------- terminated by Giga (a) if Customer has breached any term of this Agreement, the Rules of Use or any Order form and has failed to remedy such breach within thirty (30) days following notice thereof; (b) immediately if Customer shall have breached Section 3 hereof; or (c) if the Customer shall have failed to pay any amount due hereunder within ten (10) days following written demand. (c) Effect of Termination. Upon the cancellation, --------------------- termination or expiration of this Agreement or any Service by either party for any reason whatsoever, Customer shall return to Giga all written Materials and copies thereof, and shall destroy all electronic copies of Materials and Software, received in connection therewith. Upon the request of Giga, Customer shall certify in writing that Customer has complied with all of the provisions hereof and has not retained any such Materials or Software. In the event of termination of this Agreement in its entirety, Giga shall no longer be obligated to deliver any materials, or provide any Services purchased by Customer, whether pursuant to an Order Form or otherwise. In the event of termination of one or more, but not all, of the Services purchased by Customer, Giga shall continue to deliver and perform all non- terminated Services unless a terminated Service was a condition to Giga's performance of such other Service. (d) Survival. In addition to any payment obligations -------- which have accrued hereunder, Sections 3 and 7 through 16 shall survive the termination or expiration of this Agreement pursuant to Section 13 or this Section 14. 15. Confidential Information. Giga and Customer each agrees ------------------------ to use reasonable efforts to protect the confidentiality of any information communicated by one to the other that the communicating party desires be kept confidential ("Confidential Information"), provided that such material is clearly marked confidential (or proceded by a statement that such information is confidential, if provided in oral form, which statement must be confirmed in writing by written notice as provided in Section 16(h)). The receiving party shall not be obligated to maintain the confidentiality of any information not so marked or identified. "Confidential Information" shall not include information (a) already lawfully known to or independently developed by the receiving party without access to or use of the -10- other party's Confidential Information, (b) disclosed in published materials, (c) generally known to the public, (d) lawfully obtained from any third party, or (e) required to be disclosed by law. Notwithstanding the foregoing, no party shall have any responsibility for the confidentiality of any information posted by the other party or its employees in a forum that is accessible by persons other than the Users and Giga's employees, licensors and third party information providers. The parties obligations under this Section 15 are in addition to any other obligations under this Agreement and any Rules of Use. 16. Miscellaneous. ------------- (a) Taxes. The amounts payable under this Agreement ----- are in addition to all local, state or federal sales, use, excise or personal property or other similar taxes or duties, and any such taxes shall be assumed and paid by the Customer except those taxes based on the net income of Giga. (b) Export Restrictions. Customer acknowledges that ------------------- the Services and Materials constitute technical data, the re- export of which is subject to restrictions under the Export Administration Regulations of the U.S. Department of Commerce, the Customer agrees not to export or re-export outside the U.S. (by electronic transmission or otherwise) the Services or Materials except in compliance with these regulations. (c) Securities Industry. Customer represents that its ------------------- principal business activities, and the principal business activities of any affiliate or User covered hereunder, are outside the "investor market." As used herein, the term "investor market" shall mean an individual/entity whose principal use of the Services and/or Materials is for the purpose of making investment decisions in the securities of companies covered directly or indirectly by such material. (d) Relationship of the Parties. For all purposes of --------------------------- this Agreement each party shall be and act as an independent contractor and not as partner, joint venturer or agent of the other and shall not bind or attempt to bind the other to any contract. (e) Assignability. This Agreement may not be assigned ------------- by Customer without the written consent of Giga, which consent in the case of merger, acquisition or other transfer of substantial ownership shall not be unreasonably withheld. -11- (f) Arbitration. Any dispute hereunder shall be ----------- decided by three arbitrators in Boston, Massachusetts or San Francisco, California under the rules of the American Arbitration Association. Their decision shall be final and binding, and their award may be entered in any court having jurisdiction. Giga shall have the right to obtain injunctive relief in any court of competent jurisdiction in the event of any breach of this Agreement. Any proceeding or claim by Customer or any User with respect to any Service, Materials, Software or Giga Network must be commenced within one (1) year after such cause of action arose, or such proceeding or claim shall be barred. (g) Applicable Law. This Agreement shall be governed -------------- by and construed in accordance with the laws of the State of Massachusetts without reference to conflict of law principles. (h) Notice. All notices and approvals under this ------ Agreement shall be in writing, or by e-mail or fax with confirmation of delivery, and shall be deemed given when personally delivered, or five (5) days after being sent by prepaid certified or registered U.S. mail or upon confirmation of receipt after being sent by commercial overnight courier service, e-mail or fax, to the address of the party to be noticed as set forth on the Order Form or such other address as such party last provided to the other by written notice. All such notices and approvals delivered to Giga shall be directed to the attention of the Chief Financial Officer. (i) Entire Agreement. This Agreement, as amended or ---------------- supplemented by any Order Form and Rules of Use, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior discussions, documents and agreements, and shall not be effective until signed by both parties. No modifications may be made except in a writing signed by both parties; provided, however, that Customer and the Users -------- ------- shall be bound by any changes in the Rules of Use which are made available on-line or delivered in writing from time to time (which amended Rules of Use shall be deemed incorporated by reference herein). Any Order Form, confirmation, purchase order or other document submitted by Customer which purports to vary, or which conflicts with, this Agreement shall be of no effect unless such varying terms and conditions are expressly agreed to in writing by Giga. Notwithstanding the immediately preceding sentence, in the event of a conflict between the terms of an Order Form executed by Giga and the Customer and the terms of this Agreement, the terms of such Order Form shall govern with respect to the Services and Materials purchased thereunder, but shall not govern in any other respect. -12- (j) Waiver. The failure of either party to enforce its ------ rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. (k) Force Majeure. Except for payment obligations ------------- hereunder, nonperformance by either party shall be excused to the extent that performance is rendered impossible by strike, acts of God, governmental acts or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the control of the nonperforming party. (l) Severability. Any provision of this Agreement that ------------ is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any unenforceability in any jurisdiction shall not render unenforceable such provision in any other jurisdiction. (m) Publicity. Customer grants Giga permission to use --------- Customer's name in Giga subscriber or customer lists. Both parties agree that all other terms and conditions of this Agreement shall be treated as confidential information of the parties and shall not be disclosed without the written agreement of the other party. (n) Third Party Beneficiaries. Giga's licensors and ------------------------- information providers are intended beneficiaries of this Agreement and shall be entitled to enforce the provisions of this Agreement directly and on their own behalf as if they were a party hereto. (o) Attorney's Fees. In the event either party brings --------------- any action or proceeding to enforce any right hereunder as a result of a breach hereof by the other party, the enforcing party shall be entitled (in addition to any relief awarded in such action) to reimbursement by the other party of the costs and expenses of its attorneys. (p) Counterparts. This Agreement may be executed in ------------ counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. -13- IN WITNESS WHEREOF, Customer and Giga have executed and delivered this Agreement as of the date first written above. CUSTOMER By: ------------------------- Name: Title: GIGA INFORMATION GROUP, INC. By: ------------------------- Name: Title: -14- EXHIBIT D DJ TERMS AND CONDITIONS [none as of the Effective Date] -15- EXHIBIT E ESCALATION LIST -16- Dow Jones Online News (DJON) Escalation List First Level Support ------------------- Global Operations Help Desk (7 days X 24 hours) Coverage............ 609 520-4599 609 520-4492 Critical Problem Escalation --------------------------- Critical First Level -------------------- Management Escalation (Mon-Fri 9am - 5pm) Dan Thomas.............................. Operations Supervisor 609 520-7595 Tim McGlone............................. Production Support Supervisor 609 520-4705 Bob Levine.............................. Operations Manager 609 520-4598 Craig Conlon............................ Network Support Manager 609 520-4714 Critical - Second Level ----------------------- Management Escalation (Mon-Fri 9am - 5pm) John Delorenzo.......................... Operations Asst. Director 609 520-4437 Dan Yannarella.......................... Operations Director 609 520-4491 -17- EX-10.22 26 AGREEMENT DATED 8/1/96 (PERIPHERAL INSIGHT, INC.) EXHIBIT 10.22 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Agreement between Giga Information Group, Inc. and Peripheral Insight, Inc. Effective Date: August 1, 1996 Agreement between Giga Information Group, Inc. and Peripheral Insight This Agreement (this "Agreement") is made and entered into as of August 1, 1996 by and between Giga Information Group Inc., a Delaware corporation with offices at One Longwater Circle, Norwell, MA 02061 ("Giga"), and Peripheral Insight, Inc., a New Hampshire corporation with offices at 9 Reservoir Street, Nashua, NH 03060 ("PI"). WITNESSETH: WHEREAS, Giga develops, markets and publishes continuous information technology services to a broad range of clients in the field of information technology, including users of technology, vendors and investors; WHEREAS, PI has expertise in the segment of information services relating to computer peripherals and supplies, such as printers, fax machines, scanners, plotters, copiers, multifunction machines and related supplies (the "Peripherals and Supplies Field" or the "Field"); WHEREAS, Giga desires to retain PI as an independent contractor to provide Giga's clients with research and support services with respect to the Peripherals and Supplies Field, including deliverables including, but not limited to, written research documents, White Paper documents and market forecasts (the "Deliverables"); WHEREAS, PI desires to hire certain employees of Giga who have previously provided Giga's clients such research services in the Field, to continue such services as employees of PI; WHEREAS, Giga desires that PI serve as a "Giga Partner," one of a group of independent companies with whom Giga has entered into a strategic alliance to provide information services to Giga clients which are complementary to the services Giga provides directly; and WHEREAS, in addition to the foregoing, PI desires to serve as a Giga Partner by providing as an independent contractor to Giga the services described in this Agreement and by acting as an agent for Giga in expanding Giga's client base, all on the terms and conditions set forth in this Agreement. -2- NOW, THEREFORE, Giga and PI hereby agree as follows: 1. Services Provided by PI. Giga hereby retains PI to provide ongoing ----------------------- research and support to current Giga clients (the "Clients") with respect to the Peripheral and Supplies Field. Such services of PI shall be referred to herein as "Applicable Giga Advisory Services" or the "Services." It is understood by PI that the Clients typically have entered into renewable one-year contracts with Giga (or Giga's predecessor, BIS), and the Services to be provided by PI to the Clients have previously been provided to the Clients directly by Giga. Many of the Clients are subscribers to the Giga Advisory Services, which are a comprehensive set of continuous information technology services which cover other areas of information technology in addition to the Services to be provided under the terms of this Agreement by PI. It is intended that the Services provided to Clients by PI under the terms of this Agreement will be complementary to other services which will be provided directly by Giga or by other independent contractors which serve as Giga Partners in related fields of expertise. 1.1 PI's Status as an Independent Contractor; Employment of Former -------------------------------------------------------------- Giga Personnel. In providing Services to Clients under this Agreement, PI will - -------------- serve as an independent contractor and agrees to employ or retain as employees or subcontractors qualified personnel, including the current Giga employees listed on Exhibit A attached hereto, each of whom has formerly provided Services --------- to Clients as Giga employees. PI shall be responsible for the supervision and quality control of the Services it provides to Clients hereunder. 1.2 Description of PI Deliverables. The Services provided by PI ------------------------------ hereunder will include Deliverables including, but not limited to, written research documents, White Paper documents, market forecasts and other materials as determined to be necessary and appropriate by Giga and PI. PI further agrees to provide telephone inquiry support for Clients based on the guidelines established, from time to time, by Giga. It is also anticipated that PI shall provide teleconferences with Clients and prospective clients on a regular basis, in response to the interest and requirements of Clients. 1.3 Means of Delivery. Giga has developed an Internet delivery ----------------- channel for its services, known as GigaWeb, which will be made available to PI for use in PI's delivery of the Services to Clients. PI agrees to use GigaWeb in the delivery of the Services, in addition to other means of delivery appropriate to the needs of the Clients, such as printing and furnishing hard copies of reports and other documents. 1.4 Costs and Expenses of Providing Services. Consistent with its ---------------------------------------- role as an independent contractor, PI shall be responsible for all the costs and expenses of providing and delivering Services under this Agreement, including without limitation the following: the wages, benefits and payroll taxes for PI's employees; all compensation to PI's subcontractors; printing and other physical preparation of Deliverables; postage and other delivery costs except for the cost of GigaWeb, which shall be the responsibility of Giga; travel, entertainment and marketing expenses; legal, accounting and other administrative expenses; and all income and other taxes relating to PI's business. -3- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 1.5 Temporary United Kingdom Office Space. Giga shall provide ------------------------------------- temporary office space and telephone support to PI in Giga's Luton, U.K. facility through the earlier of (i) the remainder of 1996 or (ii) such earlier time as Giga vacates such premises in its sole discretion. 1.6 European and United States Knowledge Centers. PI shall establish -------------------------------------------- and maintain a Knowledge Center in Europe, commencing as of the Effective Date of this Agreement. The staff of the Knowledge Center shall serve as a first line of response to Clients, receiving calls for information and advice, answering administrative questions, and referring technical requests to the appropriate analysts at Giga or PI. It is anticipated that PI will staff the Knowledge Center with its own personnel as of the Effective Date, however if PI is not able to staff the Knowledge Center with its own personnel as of the Effective Date, Giga agrees for the balance of 1996 to provide Knowledge Center support to PI for PI's European operations. 1.7 Warranty of Authorship. PI represents and warrants to Giga that ---------------------- the research provided hereunder to Giga by PI and its subcontractors shall be original writing, not published elsewhere, except for quotes properly attributed to third parties, and that such research to the best of PI's knowledge shall be accurate in all respects and contain no misrepresentations. 2. Term. The Services provided by PI under the terms of this Agreement ---- shall commence on August 1, 1996 (the "Effective Date") and shall continue for the duration of this Agreement, including an initial period of 12 months (the "Initial Term"), subject to the termination provisions set forth herein. It is understood that Giga is relying on PI to provide on an ongoing basis the Services as described herein to Clients commencing on the Effective Date, and PI agrees to make every effort to satisfy such Clients and to continue and expand both its client base and the client base of Giga. At the conclusion of the Initial Term, this Agreement shall be renewed for successive one-year terms unless terminated by either party pursuant to Section 13. 3. Compensation to PI. PI understands that most Clients are parties to ------------------ contracts with Giga pursuant to the terms of which the Clients prepay Giga on an annual basis for the provision of continuous information technology services which Giga makes available to the Clients over the ensuing 12 months. The revenue received by Giga at the outset of each contract period is referred to by Giga as the "Deferred Revenue", since it is earned by Giga by providing the contracted services over the contract period. 3.1 PI Share of Deferred Revenues. For all contracts with Clients in ----------------------------- effect as of the Effective Date and for which PI provides Services hereunder, Giga shall pay to PI **** of the portion of the Deferred Revenue attributable to the provision of Services for the balance of the contract term remaining as of the Effective Date. A schedule of the existing contracts with Clients, including the amount of monthly Deferred Revenue earned thereunder, is attached as Exhibit B. - --------- -4- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 3.2 Allocation of Deferred Revenue. In the case of Clients which were ------------------------------ BIS clients prior to the acquisition of BIS by Giga in July 1995, the portion of the Deferred Revenue attributable to the provision of Services is deemed to be ***. In the case of Clients entering into contracts with Giga subsequent to July 1995, ******* of the Deferred Revenue is deemed to be attributable to the provision of Services. The allocation of Deferred Revenue for all existing contracts subject to this Agreement is set forth in Exhibit B. --------- 3.3 Timing of Payment. Giga shall pay PI the compensation provided in ----------------- this Section 3 on the first business day of each month, beginning with the Effective Date. For purposes hereof, a "business day" shall be a normal work day, Monday to Friday, other than a Federal or Massachusetts state legal holiday. 3.4 New PI Contracts with Giga Clients; Royalty to Giga. At the --------------------------------------------------- expiration of any contract with a Client that is not continuing to subscribe to the Applicable Giga Advisory Services, PI shall be free to enter into a new contract with that party to supply Services to the former Client for PI's own account and at PI's own expense (a "New Contract"). PI shall give prompt notice to Giga of all New Contracts under the New Contract, payable to Giga within 30 days of the receipt of payment to PI from the former Client. Such royalty shall be applicable to the *************** of any New Contract or, if the contract period is longer than *********************** contract periods. No royalty shall be payable to Giga with respect to a New Contract entered into by PI with a party which was not a Client during a period of at least 90 days prior to the commencement of the New Contract. 3.5 New Giga Advisory Subscriptions; Extension of Giga Contracts. ------------------------------------------------------------ Giga hereby appoints PI as Giga's agent with the authority to market to Clients and prospective clients subscriptions for Giga Advisory Services or extensions or renewals of existing subscriptions therefor. Giga will pay PI a commission for such new or renewed contract equal to *** the incremental Deferred Revenue for the first year over the previous annual amount (the "Net Annual Value Increase" or "NAVI") under any such renewed contract or the entire amount of Deferred Revenue (all of which constitutes NAVI) for a contract with a new client. This commission shall be in addition to any share of the Deferred Revenue due to PI under Section 3.1 hereof if PI is providing Services with respect to such contract. For purposes of PI's service as Giga's agent in obtaining new business, Giga and PI agree to the following terms: 3.5.1 Sales Support. In order to coordinate Giga's direct ------------- sales activities with PI's efforts as an agent for Giga, Giga's sales supervisors shall maintain close contact with PI and shall furnish PI with brochures, sales support information, rate schedules, contract forms and conditions and other information and support. PI agrees to coordinate marketing leads and opportunities with Giga. Giga will provide at its discretion incentives to its own sales personnel with respect to new and additional business initiated by PI, in order to encourage a cooperative and coordinated sales effort. -5- 3.5.2 Contract Rates and Documentation. PI agrees to use -------------------------------- Giga's prescribed forms of contracts, including its master terms and conditions, when renewing or expanding Giga Advisory Services contracts. PI shall also coordinate with Giga's supervisory sales staff the current rates to be charged for such services. 3.6 Client Invoices. New clients and renewal Clients obtained by --------------- PI for PI's own account may be invoiced directly by PI, and PI shall remit the appropriate royalty payments to Giga as provided in Section 3.4. Future contracts entered into for the provision of Giga's new Relevance Services shall be invoiced by Giga, although PI may be entitled to the receipt of a commission from Giga (as provided in Section 3.5) for its role as agent of Giga in obtaining any such contracts. 4. Nature of Relationship between Giga and PI. PI is providing Services ------------------------------------------ under this Agreement as an independent contractor and shall not be considered an employee, agent (except as expressly provided herein) or representative of Giga (nor shall PI's employees or subcontractors be considered employees of Giga). While it is intended that PI shall be identified as a "Giga Partner" (as described more specifically in Section 4.1 hereof) to indicate the close working relationship between Giga and PI, this Agreement shall not constitute a legal partnership between Giga and PI. Neither Giga nor PI shall have any share in the profits of the other or any liability for the actions of the other except as specifically provided in this Agreement. 4.1 Nature of PI's Status as a "Giga Partner". PI and certain other ----------------------------------------- independent firms working closely with Giga shall be authorized by Giga to refer to themselves as a "Giga Partner." PI agrees, during the term of this Agreement, to use the term a "Giga Partner" on its brochures, marketing materials, letterhead, reports and other Deliverables, newsletters, promotional materials and other similar materials; provided, however, that PI shall provide Giga with examples of all of its uses of the term a "Giga Partner" (or any other reference to Giga or use of the Giga name or logo) at least ten (10) business days prior to PI's initial use thereof, and Giga shall have the right to review and approve such material in writing prior to its use by PI. 4.2 Transition; Problem Resolution. It is the intent and objective ------------------------------ to ensure a smooth transition in the delivery of Services to Clients, preserving the good will of Clients and enhancing the business relationship of both Giga and PI with such Clients. To that end, Giga and PI agree to work together to resolve conflicts that may arise from time to time and to address any relevant business issues in a timely and professional manner. 5. Business Development Opportunities. Giga and PI agree to form a ---------------------------------- Planning Group (the "Planning Group") consisting of at least one senior member of PI and one from Giga to consider and coordinate business development opportunities beyond those specifically outlined in this Agreement which may be pursued by Giga and PI. The Planning Group shall communicate by teleconference on a monthly basis to ensure coordination of business development opportunities under the general guidelines outlined in this Section 5. -6- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 5.1 Independent Consulting Businesses of Giga and PI. It is understood ------------------------------------------------ that Giga and PI shall be free to operate independent consulting businesses outside the scope of the cooperative activities covered by this Agreement, provided that, in the case of PI, such consulting does not compete with the areas of expertise covered by Giga as of the Effective Date and does not focus on high technology businesses. Giga shall have the right to develop new lines of consulting services independent of PI. 5.2 New Business for Giga Consulting Originated by PI. In its capacity ------------------------------------------------- as a Giga Partner, PI shall respond in a timely manner to leads from prospects for custom consulting work within the areas of expertise of Giga Consulting, and Giga shall pay a commission to PI for originating new consulting work for Giga and shall provide opportunities for PI to participate in such work, as provided in this Section 5. It is understood that all such leads shall be forwarded by PI to Giga Consulting, which will be responsible for pursuing such leads and structuring consulting projects with the assistance of PI when and to the extent determined by Giga; provided, however, PI shall not be responsible for -------- ------- forwarding to Giga Consulting any leads and Giga shall not be responsible for structuring consulting projects for any projects that in the estimation of PI, made in good faith, will not result in a fee being paid by the client to Giga which equals or exceeds **********. 5.3 Commissions for Origination of New Consulting Business. Giga and PI ------------------------------------------------------ shall each pay the other a commission for new consulting business performed by Giga or PI and originated by the other. Such commission shall be (1) for a new contract, *** the fee paid by the client to the party performing the consulting services during the first year of any new contract and (2) for a renewed contract, the sum of (i) *** of the fee paid by the client to the party performing the consulting services for the renewal term and (ii) *** of the NAVI for any expanded business under the renewed contract. Such commission shall be payable within 30 days after the payment is received from the client. 5.4 Participation by PI in Giga Consulting Engagements. For Giga -------------------------------------------------- Consulting engagements in the U.S. and France which have been originated by PI as contemplated in this Section 5, Giga agrees to make available to PI the opportunity to participate in performing a minimum of *** of the wholesale value of the project provided that the services are within PI's areas of expertise. Giga would have the right to perform a minimum of *** of the wholesale value of the project. It is understood, however, that the *** and *** shares are averages for the typical month and typical engagement, and the parties agree to cooperate in coordinating the work in an equitable manner consistent with efficient and high quality service to clients. The wholesale value of the project for purposes of this Section 5.4 shall be *** of the price to the Client (e.g., the wholesale value of a ********** project for a Client would be *******). Outside of the U.S. and France, Giga agrees to include PI personnel in consulting projects as appropriate at agreed upon package rates. -7- 6. Taxes. PI acknowledges and agrees that it shall report as income ----- all compensation, including commissions, received from Giga pursuant to this Agreement. PI also agrees to indemnify and hold Giga harmless from any obligation to pay any withholding taxes, social security, unemployment or disability insurance or similar items in connection with any payments made to PI pursuant to this Agreement . 7. Insurance. PI represents and warrants to Giga that PI maintains --------- appropriate comprehensive liability, casualty, and workers' compensation insurance coverage for PI and all of PI's employees, representatives and agents who perform or will perform duties under this Agreement. PI agrees to provide Giga with proof of appropriate insurance coverage, if reasonably requested by Giga. 8. Audit Rights. Both parties shall have the right, upon reasonable ------------ notice, to audit the books and records of the other party as such books and records pertain to the Services to be performed under the terms of this Agreement in order to verify the terms of contracts and revenues received by the audited party. 9. Ownership and Use of Information; License to Giga. All software, ------------------------------------------------- plans, methodologies, planning or programming documentation, sketches, drawings models, samples, records, works of authorship or other creative works, ideas, knowledge or plans, whether written, oral or otherwise expressed, originated and developed by PI prior to the Effective Date of this Agreement, or furnished to Giga or any Clients by PI in the performance of its obligations under this Agreement (the "Information"), shall remain the sole property of PI, except in those cases where PI has performed specific work on Giga's behalf or on behalf of a Client under the direction of or assignment from Giga. All Information shall be disclosed as such in advance to Giga and shall be identified specifically as such in writing from PI to Giga. Giga understands and agrees that the entire rights, title and interest, including any copyrights, in any such Information originated or developed by PI as part of the performance of the Services shall be the sole property of PI; however, PI hereby grants a perpetual, royalty-free license to Giga to use, copy, modify and distribute all Information; provided, however, -------- ------- when feasible, Giga credits PI as being the owner of the Information. For any and all such Information described in this paragraph, PI agrees to provide documentation satisfactory to Giga to assure the license of the Information to Giga. Title to all materials or documentation including, but not limited to, systems specifications, furnished by one party to the other in connection with the performance of Services contemplated by this Agreement, shall remain the property of the party furnishing such materials and documentation and, whenever such materials or documentation are delivered by one party to the other, the party receiving such materials or documentation shall return the same forthwith at the owner's request. -8- 10. Confidentiality/Disclosure of Information. In order for PI to ----------------------------------------- render the Services contemplated by this Agreement, Giga or one of its Clients may need to disclose information to PI that is considered to be secret or proprietary ("Confidential Information"). PI understands and agrees that unless such Confidential Information was previously known to PI free of any obligation to keep it confidential, or unless it has subsequently been made public by Giga or one of its Clients free of any obligation to keep it confidential, then such Confidential Information shall be kept confidential by PI and shall be used only in performing the Services contemplated by this Agreement and may be used for no other purpose except upon such terms as may be agreed upon between PI and Giga in writing. PI further agrees to be bound by the terms of any Nondisclosure Agreement which PI separately executes with Giga and/or one of its Clients. PI understands and agrees that no information furnished to Giga by PI under the terms of this Agreement will be Confidential Information unless such information is identified by PI as such in advance and any limitations on the use of such information are made a part of this Agreement. 11. Assignment. This Agreement may not be assigned or transferred by ---------- either party without the prior written consent of the other. 12. Restrictions on Solicitation of Employees. PI agrees that it will ----------------------------------------- not solicit the services of or employ any employees of Giga or its Clients, and Giga agrees that it will not solicit the services of or employ any employees of PI for the period beginning with the Effective Date hereof and ending twelve (12) months after the expiration of this Agreement, unless prior express written authorization to do so is obtained from the appropriate party or authorization to do so has been expressly set forth in this Agreement. 13. Termination of Agreement; Limitations on Liability. Either Giga or -------------------------------------------------- PI may terminate this Agreement for its own convenience and without cause at any time by giving the other party written notice at least six months (180 days) prior to the effective date of the termination. Giga's liability to PI in the event of termination shall not exceed amounts due for services performed prior to the effective date of the termination. PI's liability to Giga in the event of termination shall not exceed the amounts received from Giga hereunder. In addition, if, in Giga's judgment, PI has failed to comply with its obligations under this Agreement, Giga may elect to give written notice of such failure to PI, in which case PI shall have a period of 30 days in which to resolve such failure. If such failure has not been resolved within such period to Giga's reasonable satisfaction, Giga shall be entitled to terminate this Agreement on written notice to PI of not less than 30 days. In the event of such termination, the following terms shall apply: (a) PI shall be entitled to payments under this Agreement for its services for the period through the effective date of termination as full compensation for all its Services hereunder, and Giga shall not be obligated to make any further payments to PI. -9- (b) PI shall provide Giga with all research data, analyses, and written material (including completed interview forms, research contact lists, etc.) gathered and prepared prior to the effective date of termination; (c) Giga may at its option (i) continue to research, publish and market continuous information technology services to the client base served by PI, or (ii) identify an alternative contractor to fulfill the outstanding and future client requirements. (d) Upon the effective date of termination hereunder, PI's right to act as an agent for Giga with respect to the direct sales activities conducted on behalf of Giga shall terminate. 14. Identification or Reference to the Other Party or its Related ------------------------------------------------------------- Parties. The parties hereto agree that no reference shall be made to the other - ------- party, its management, shareholders or employees, to Giga Partners, or to any clients, or to their trademarks, service marks, codes, drawings, specifications or information of a proprietary nature in any advertising or promotional efforts with respect to activities contemplated by this Agreement without the prior written authorization of the other party. The parties hereto agree to indemnify and hold the other harmless against any and all claims (including costs, expenses and reasonable attorneys' fees on account thereof) arising out of the failure to obtain such prior written authorization and to defend the other, at its request, against any such claims. Each party agrees to notify the other promptly of any such claims or demands against it for which the other party is responsible hereunder. 15. Liability/Indemnification. PI acknowledges that its relationship to ------------------------- Giga under the terms of this Agreement is exclusively that of an independent contractor and not any other relationship including, but not limited to, partner, employee or agent, except in specific cases identified for the sales of Giga Advisory Services to PI accounts. PI agrees to act in a manner consistent with this status and to make no representation to the contrary to any person. PI and Giga each agree to indemnify and hold the other harmless against any and all claims (including costs, expenses and reasonable attorney's fees on account thereof) that may be made by anyone for (i) injuries, including death, to persons or damage to property, including theft, or (ii) errors or omissions in the delivery of Services resulting from the acts or omissions of the indemnifying party, including those of its employees or agents. The indemnifying party agrees to defend the other party, at its request, against any such claims and the party seeking to be indemnified agrees to notify the indemnifying party promptly of any such claims or demands against it for which the indemnifying party is responsible hereunder. 16. Non-Waiver. No failure on behalf of either Giga or PI to strictly ---------- enforce any term, right or condition of this Agreement shall be construed as a waiver by that party of such term, right or condition. -10- 17. Severability. If any provision of this Agreement is found for any ------------ reason to be void or unenforceable, the remainder of this Agreement shall continue in full force and effect. 18. Survival of Obligations. PI's representations, warranties and ----------------------- obligations to Giga under this Agreement set forth in Sections 6, 9, 10, 12, 14 and 15 shall survive the termination, cancellation or expiration of this Agreement. 19. Choice of Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of laws thereof. 20. Force Majeure. Neither Giga nor PI will be liable to the other for ------------- failure to perform any of its duties under this Agreement due to circumstances beyond its reasonable control. The party whose performance is affected by such circumstances shall notify the other in writing as soon as practicable concerning its inability to perform its duties hereunder and shall thereafter exercise it best efforts to resume the performance of its obligations under the terms of this Agreement. 21. Headings. The headings used herein are for convenience only and are -------- not intended to affect the meaning or interpretation of this Agreement. 22. Complete Understanding. This Agreement constitutes the full and ---------------------- complete understanding and agreement of the parties hereto and supersedes any and all prior understandings and agreements, whether written or oral, with respect to the subject matter hereof. Any waiver, modification or amendment of any provision of this Agreement shall be effective only if made in writing and signed by Giga and PI. 23. Notice. Any notice or demand required or permitted herein shall be ------ hand delivered or sent by certified or registered mail addressed to the respective parties as follows: If to Giga: ---------- Barry S. Gilbert, Vice President Market Strategies Division Giga Information Group, Inc. One Longwater Circle Norwell, MA 02061 If to PI: -------- John Henry Peripheral Insight, Inc. 9 Reservoir Street Nashua, NH 03060 -11- or at such other address as the party shall subsequently specify to the other in writing. Such notice or demand shall be deemed given or made when received in the case of hand delivery, or when deposited, postage prepaid, with the U.S. Postal Service in the case of certified or registered mail. IN WITNESS of their acceptance of the terms of this Agreement, Giga and PI, by their duly authorized representatives, hereby sign and date this agreement as of the date first above written. GIGA INFORMATION GROUP, INC. PERIPHERAL INSIGHT, INC. By:/s/ Kenneth Marshall By:/s/ John Henry ------------------------- ------------------------ Title: Title: ---------------------- --------------------- Tax I.D.# ------------------ -12- Exhibit A Staffing Plan PI's organization at the outset of this Agreement will consist of John Henry, General Manager, some current Giga employees who will become PI employees or subcontractors, and additional PI personnel. The proposed personnel for inclusion include: _ Catherine Charlery - Current Giga employee to address the European fax and MFP markets as Senior Analyst. _ Matt Checkley - Current Giga employee to address the European printer market as Senior Analyst. _ Nora Seery - Current Giga employee to address the European supplies market as Senior Analyst. _ Andrew Johnson - Current Giga employee to address the US market for Fax and MFP products as Senior Analyst. _ Norman McLeod - Current Giga employee to address the US market for supplies as Senior Analyst. _ Robert Leahey - Current Giga employee to address the US market for printers and supplies as Senior Analyst. Additional employees and/or sub-contractors will be added to meet requirements with respect to Deliverables in the printer and scanner markets. It is further understood that while the Giga employees named above have expressed interest in pursuing opportunities with PI, there is no guarantee, express or implied on Giga's behalf, that any or all of the employees listed above will become PI employees. In the event that some or all of the employees indicated above decide not to become PI employees, PI will have the sole responsibility of finding qualified replacements and incur such costs associated therewith. -13- Exhibit B Deferred Revenue Schedule Page 1 through Page 2 of Exhibit B contain Confidential Materials which have been omitted and filed separately with the Securities and Exchange Commission. EX-10.23 27 AGREEMENT DATED 8/15/96 (DECISION ANALYTICS, INC.) EXHIBIT 10.23 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Agreement between Giga Information Group, Inc. and Decision Analytics, Inc. Effective Date: August 15, 1996 Agreement between Giga Information Group, Inc. and Decision Analytics, Inc. This Agreement (this "Agreement") is made and entered into as of August 15, 1996 by and between Giga Information Group, Inc., a Delaware corporation with offices at One Longwater Circle, Norwell, MA 02061 ("Giga"), and Decision Analytics, Inc., a research and consulting firm with offices at 33 Martha's Lane, Brookline, MA 02167 ("DA"). WITNESSETH: WHEREAS, Giga develops, markets and publishes continuous information technology services to a broad range of clients in the field of information technology, including users of technology, vendors and investors; WHEREAS, DA has expertise in the segment of information services relating to the provision of on-going research-oriented advanced network services, electronic messaging, as well as consumer electronics, automotive electronics and certain gallium arsenide integrated circuits ("Specialty Field") and mobile computing and mobile communications service ("Mobile Computing and Communications Field") (collectively, the "Field"). WHEREAS, Giga desires to retain DA as an independent contractor to provide Giga's clients with research-oriented deliverables, which consist of written Planning Assumptions, White Paper documents, market forecasts, and other related deliverables including, but not limited to, telephone inquiry support and teleconferences ("Deliverables") and inquiry support with respect to Giga's vendor-focused continuous information technology services in the Field; WHEREAS, DA desires to hire certain employees of Giga who have previously provided Giga's clients with such research-oriented Deliverables and inquiry support, to continue such services as employees of DA; WHEREAS, Giga seeks to establish and provide to its clients and prospective clients a new enhanced level of services including, but not limited to, Mobile Computing Business Services and Mobile Communications Business Services, collectively called "Relevance Services"; WHEREAS, DA wishes to assist Giga in the research and development necessary to establish and provide to Clients and prospective clients such Relevance Services; -2- WHEREAS, in addition to the foregoing, Giga desires that DA serve as a "Giga Partner," one of a group of independent companies with whom Giga has entered into a strategic alliance to provide information services to Giga clients which are complementary to the services Giga provides directly; and WHEREAS, DA desires to serve as a Giga Partner by providing as an independent contractor to Giga the services described in this Agreement and by acting as an agent for Giga in expanding Giga's client base, all on the terms and conditions set forth in this Agreement. NOW, THEREFORE, Giga and DA hereby agree as follows: 1. Services Provided by DA. Giga hereby retains DA to provide on-going ----------------------- research-oriented Deliverables and inquiry support to current Giga clients (the "Clients") associated with Giga's vendor-focused continuous information services in the Field. Collectively, such services of DA in the Field shall be referred to as the "Applicable Giga Advisory Services" or the "Services". It is understood by DA that the Clients typically have entered into renewable one-year contracts with Giga (or Giga's predecessor, BIS), and the Services to be provided by DA to the Clients have previously been provided directly to the Clients by Giga. Many of the Clients are subscribers to Giga Advisory Services, which are a comprehensive set of continuous information technology services which cover other areas of information technology in addition to the Applicable Giga Advisory Services to be provided under the terms of this Agreement by DA. It is intended that the Services provided to Clients by DA under the terms of this Agreement will be complementary to other services which will be provided directly by Giga or by other independent contractors which serve as Giga Partners in related fields of expertise . 1.1 DA's Status as an Independent Contractor; Employment of Former -------------------------------------------------------------- Giga Personnel; Indemnification with respect to Certain Employees. In providing - ----------------------------------------------------------------- Services to Clients under this Agreement, DA will serve as an independent contractor and agrees to employ as employees or retain as subcontractors qualified personnel. DA shall be responsible for the supervision and quality control of the Services it provides to Clients hereunder. Furthermore, DA agrees to extend an offer to employ or to retain as a subcontractor the current Giga employees listed on Exhibit A attached hereto, each of whom has formerly provided Applicable Giga Advisory Services to Clients as Giga employees or subcontractors. DA also agrees to indemnify and hold Giga harmless from any obligation to pay any withholding taxes, social security, unemployment or disability insurance or similar items in connection with any payments made to DA pursuant to this Agreement. 1.2 Description of DA Deliverables. The Services provided by DA ------------------------------ hereunder will include Deliverables including, but not limited to, written research documents, White Paper documents, market forecasts and other materials as determined to be necessary and appropriate by Giga and DA. DA further agrees to provide telephone inquiry support for Clients based on the guidelines established, from time to time, by Giga, so long as such guidelines are established in a manner that is reasonable -3- and consistent with the past practices of Giga. It is also anticipated that DA shall provide teleconferences with Clients and prospective clients on a regular basis, in response to the interest and requirements of Clients. 1.3 Means of Delivery. Giga has developed an Internet delivery ----------------- channel for its services, known as GigaWeb, which will be made available to DA for use in DA's delivery of the Services to Clients. DA agrees to use GigaWeb in the delivery of the Services, in addition to other means of delivery appropriate to the needs of the Clients, such as printing and furnishing hard copies of reports and other documents. 1.4 Costs and Expenses of Providing Services. Consistent with its ---------------------------------------- role as an independent contractor, DA shall be responsible for all the costs and expenses of providing and delivering Services under this Agreement, including without limitation the following: the wages, benefits and payroll taxes for DA's employees; all compensation to DA's subcontractors; printing and other physical preparation of Deliverables (with the exception of the printing and distribution of Planning Assumptions, which shall be the responsibility of Giga); postage and other delivery costs except for the cost of GigaWeb, which shall be the responsibility of Giga; travel, entertainment and marketing expenses; legal, accounting and other administrative expenses; and all income and other taxes relating to DA's business. 1.5 Temporary United Kingdom Office Space. Giga shall provide ------------------------------------- temporary office space and access to telephone service to DA in Giga's Luton, U.K. facility through the earlier of (i) the remainder of 1996 or (ii) such earlier time as Giga vacates such premises in its sole discretion. In connection with the provisions of this Section 1.5, Giga agrees to pay the telephone bills of DA, so long as such bills are reasonable. 1.6 Temporary Norwell, Massachusetts Office Space. Giga shall --------------------------------------------- provide temporary office space and access to telephone service for up to two (2) employees of DA in Giga's facility in Norwell, Massachusetts through the earlier of (i) February 1, 1998 or (ii) such earlier time as Giga vacates such premises in its sole discretion. In connection with the provisions of this Section 1.6, Giga agrees to pay the telephone bills of DA, so long as such bills are reasonable. 1.7 European Knowledge Center. DA shall establish and maintain a ------------------------- Knowledge Center in Europe, commencing as of the Effective Date of this Agreement. The staff of the Knowledge Center shall serve as a first line of response to Clients, receiving calls for information and advice, answering administrative questions, and referring technical requests to the appropriate analysts at Giga or DA. It is anticipated that DA will staff the Knowledge Center with its own personnel as of the Effective Date, however if DA is not able to staff the Knowledge Center with its own personnel as of the Effective Date, Giga agrees for the balance of 1996 to provide Knowledge Center support to DA for DA's European operations. -4- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 1.8 Warranty of Authorship. Each party hereto represents and ---------------------- warrants to the other that the research provided hereunder by it shall be original writing, not published elsewhere, except for quotes properly attributed to third parties, and that such research to the best of that party's knowledge shall be accurate in all respects and contain no misrepresentations; provided, -------- however, that neither of the parties hereto makes any representations or - ------- warranties with respect to research provided by it to the other party that is not represented to be research originally authored by one of the employees of the party furnishing the research. 2. Term. The Services provided by DA under the terms of this Agreement ---- shall commence on August 15, 1996 (the "Effective Date") and shall continue for the duration of this Agreement, including an initial period of 12 months (the "Initial Term"), subject to the termination provisions set forth herein. It is understood that Giga is relying on DA to provide on an ongoing basis the Services as described herein to Clients commencing on the Effective Date, and DA agrees to make every reasonable effort to satisfy such Clients and continue and expand both its client base and the client base of Giga. At the conclusion of the Initial Term, this Agreement shall be renewed for successive one-year terms unless terminated by either party pursuant to Section 14. 3. Compensation to DA. DA understands that most Clients are parties to ------------------ contracts with Giga pursuant to the terms of which the Clients prepay Giga on an annual basis for the provision of continuous information technology services which Giga makes available to the Clients over the ensuing 12 months. The revenue received by Giga at the outset of each contract period is referred to by Giga as "Deferred Revenue", since it is earned by Giga by providing the contracted services over the contract period. It has been the policy of Giga to recognize the Deferred Revenue on a pro rata basis. 3.1 DA Share of Deferred Revenues. For all contracts with Clients ----------------------------- in effect as of the Effective Date and for which DA provides Services hereunder, Giga shall pay to DA **** of the portion of the Deferred Revenue attributable to the provision of Services for the balance of the contract term remaining as of the Effective Date. A schedule of the existing contracts with Clients, including the amount of monthly Deferred Revenue projected to be earned thereunder, is attached as Exhibit B. The parties hereto acknowledge and agree the amounts set --------- forth in Exhibit B are not final and the parties shall make a good faith effort --------- within thirty (30) days after the Effective Date hereof to determine the final amounts of Deferred Revenue projected to be earned with respect to existing contracts for Clients (the "Final Amounts"). The parties agree that DA shall be entitled to the Final Amounts, subject only to any claims of any nature brought after the determination of the Final Amounts by any of the Clients set forth on Exhibit B in connection with the contracts or agreements referenced on Exhibit B - --------- --------- with respect to any services provided by Giga thereunder. Furthermore, Giga agrees to make a good faith effort to provide to DA as soon as practicable all of the available contracts set forth on Exhibit B. --------- 3.2 Allocation of Deferred Revenue. In the case of Clients which ------------------------------ were BIS clients prior to the acquisition of BIS by Giga, the portion of the Deferred Revenue attributable to the provision of Services is deemed to be **** (e.g., for a ******** contract -5- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. entered into before July 1995, the monthly revenue attributable to the provision of Services would be ********, of which DA would be entitled to ****, or ****). In the case of Clients which were not BIS clients prior to the acquisition of BIS by Giga, the portion of the Deferred Revenue attributable to Services is deemed to be *******. However, for contracts with Clients for the provision of automotive electronics, gallium arsenide integrated circuits, and consumer electronics, the portion of Deferred Revenue attributable to Services is ****. The allocation of Deferred Revenue for all existing contracts subject to this Agreement is set forth in Exhibit B. --------- 3.3 Timing of Payment. Giga shall pay DA the compensation provided ----------------- in this Section 3 on the first business day of each month in advance, beginning with the Effective Date. For purposes hereof, a "business day" shall be a normal work day, Monday to Friday, other than a Federal or Massachusetts state legal holiday. 3.4 New DA Contracts with Giga Clients; Royalty to Giga. At the --------------------------------------------------- expiration of any contract with a Client for Applicable Giga Advisory Services, DA shall have the right to pursue and enter into a new contract with that party to supply Services to the former Client for DA's own account and at DA's own expense (a "New Contract"). DA shall give prompt notice to Giga of all New Contracts and shall pay to Giga a royalty equal to **** of the dollar amount of the contract for the Services to be provided by DA under the New Contract. DA shall prepare on a monthly basis a report that sets forth all of the amounts due to Giga under this provision, and such report shall be delivered to Giga on the fifteenth day of each month for the month directly preceding it, along with all amounts due to Giga by DA as reflected in such report. Such royalty shall be applicable to the ************** of any New Contract or, if the contract period is longer than ******************** of the contract term. No royalty shall be payable to Giga with respect to a New Contract entered into by DA with a party which was not a Client during a period of at least 90 days prior to the commencement of the New Contract. 3.5 New Giga Advisory Subscriptions; Extension of Giga Contracts. ------------------------------------------------------------ Giga hereby appoints DA as Giga's agent with the authority to market to Clients and prospective clients subscriptions for Giga Advisory Services or extensions or renewals of existing subscriptions therefor; provided, however, that all -------- ------- payments received with respect to such subscriptions shall be paid directly to or forwarded promptly to Giga. Giga will pay DA a commission for such new or renewed contract equal to **** of the incremental Deferred Revenue for the first year over the previous annual amount (the "Net Annual Value Increase" or "NAVI") under any such renewed contract or the entire amount of Deferred Revenue (all of which constitutes NAVI) for a contract with a new client. Giga shall prepare on a monthly basis a report that sets forth all of the amounts due to DA under this provision, and such report shall be delivered to DA on the fifteenth day of each month for the month directly preceding it, along with all amounts due to DA by Giga as reflected in such report. This commission shall be in addition to any share of the Deferred Revenue due to DA under Section 3.1 hereof if DA is providing Services with respect to such contract. For purposes of DA's service as Giga's agent in obtaining new business, Giga and DA agree to the following terms: -6- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 3.5.1 Sales Support. In order to coordinate Giga's direct sales ------------- activities with DA's efforts as an agent for Giga, Giga's sales supervisors shall maintain close contact with DA and shall furnish DA with brochures, sales support information, rate schedules, contract forms and conditions and other information and support. DA agrees to coordinate marketing leads and opportunities with Giga. Giga will provide at its discretion incentives to its own sales personnel with respect to new and additional business initiated by DA, in order to encourage a cooperative and coordinated sales effort. 3.5.2 Contract Rates and Documentation. DA agrees to use Giga's -------------------------------- prescribed forms of contracts, including its master terms and conditions, when seeking the renewal or expansion of Giga Advisory Services contracts; provided, -------- however, that the foregoing in no way obligates Giga to accept any contract - ------- presented to it by DA for renewal. DA shall also coordinate with Giga's supervisory sales staff the current rates to be charged for such services. 3.6 Establishment and Deliver of Relevance Services by DA. If DA ----------------------------------------------------- accepts the pricing structure set forth by Giga with respect to DA's involvement in the establishment and delivery of Relevance Services, DA agrees to assist Giga with the establishment and delivery, including the marketing and sales of, Relevance Services, which DA understands are designed to provide Clients and prospective clients in marketing, business planning, strategic planning, and product management with strategic and tactical insights. Furthermore, DA understands that each Relevance Service is designed to provide basic information pertaining to (1) product and market forecasts and analyses, (2) competitive analysis and positioning, (3) technology trends and issues, and (4) business/financial analysis. To that end, DA will provide writing, editing, project management and research, of but not limited to "Management Insight" reports and "Prospectives" briefs, along with inquiry support, automated teleconferences and presentations as requested by Clients. 3.7 Compensation with Respect to the Development of Relevance --------------------------------------------------------- Services. For Clients that upgrade their accounts to include Relevance Services - -------- from any existing continuous information technology service contracts, DA will provide Giga with a royalty of **** of the dollar amount of the contract if DA is primarily responsible for the sale to the Client of the Relevance Services. If Giga is responsible for the sale, DA will receive [***] of the dollar amount of the contract that Giga executes as compensation for the Services provided by DA to the Client under the contract in relation to the design, performance, execution, and delivery of the research underlying such Services. In either case, DA is fully responsible for all expenses associated with providing the Deliverables for a given Relevance Service unless agreed to otherwise by Giga in advance of any such expenditure. Both parties shall prepare on a monthly basis a report that sets forth all of the amounts due to the other party under this provision, and such report shall be delivered to the other party on the fifteenth day of each month for the month directly preceding it, along with all amounts due by each party to the other as reflected in their respective report. -7- 3.8 Client Invoices. New clients and renewal Clients obtained by DA --------------- for DA's own account may be invoiced directly by DA, and DA shall remit the appropriate royalty payments to Giga as provided in Section 3.4. Future contracts entered into for the provision of Relevance Services shall be invoiced by Giga, although DA may be entitled to the receipt of a commission from Giga (as provided in Section 3.5) for its role as agent of Giga in obtaining any such contracts. 4. Nature of Relationship between Giga and DA. DA is providing Services ------------------------------------------ under this Agreement as an independent contractor and shall not be considered an employee, agent (except as expressly provided herein) or representative of Giga (nor shall DA's employees or subcontractors be considered employees of Giga). While it is intended that DA shall be identified as a "Giga Partner" (as described more specifically in Section 4.1 hereof) to indicate the close working relationship between Giga and DA, this Agreement shall not constitute a legal partnership between Giga and DA. Neither Giga nor DA shall have any share in the profits of the other or any liability for the actions of the other except as specifically provided in this Agreement. 4.1 Nature of DA's Status as a "Giga Partner". DA and certain other ----------------------------------------- independent firms working closely with Giga shall be authorized by Giga to refer to themselves as a "Giga Partner." DA agrees, during the term of this Agreement, to use the term "Giga Partner" on its brochures, marketing materials, letterhead, reports and other Deliverables, newsletters, promotional materials and other similar materials; provided, however, that DA shall provide Giga with -------- ------- examples of all of its uses of the term "Giga Partner" (or any other reference to Giga or use of the Giga name or logo) at least ten (10) business days prior to DA's initial use thereof, and Giga shall have the right to review and approve such material in writing prior to its use by DA. Giga agrees that its approval shall not be unreasonably withheld. The parties hereto agree that no written or printed reference shall be made to the other party, its management, shareholders or employees, or to any Clients or clients, or to their trademarks, service marks, codes, drawings, specifications or information of a proprietary nature in any advertising or promotional efforts with respect to activities contemplated by this Agreement without the prior written authorization of the other party. The parties hereto agree to indemnify and hold the other harmless against any and all claims (including costs, expenses and reasonable attorneys' fees on account thereof) arising out of the failure to obtain such prior written authorization and to defend the other, at its request, against any such claims. Each party agrees to notify the other promptly of any such claims or demands against it for which the other party is responsible hereunder. 4.2 Transition; Problem Resolution. It is the intent and objective ------------------------------ to ensure a smooth transition in the delivery of Services to Clients, preserving the good will of Clients and enhancing the business relationship of both Giga and DA with such Clients. To that end, Giga and DA agree to work together in good faith to resolve conflicts that may arise from time to time and to address any relevant business issues in a timely and professional manner. -8- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 5. Business Development Opportunities. Giga and DA agree to form a ---------------------------------- Planning Group (the "Planning Group") consisting of at least one senior member of DA and one from Giga to consider and coordinate business development opportunities beyond those specifically outlined in this Agreement which may be pursued by Giga and DA, as well as to serve as a forum for the resolution of disputes between the parties with respect to the terms of this Agreement. Both parties agree to negotiate in good faith to resolve all disputes, disagreements or controversies arising out of this Agreement; provided, however, that if the -------- ------- parties are not able to resolve an issue or issues arising out of this Agreement, the parties shall consult Jeffrey Swartz, present Senior Vice President, Marketing Operations, Events and Publications of Giga, who shall in good faith appraise the nature of the dispute, disagreement or controversy and, after consideration, if possible, lend his support in favor of either Giga or DA in an attempt to resolve the issue or issues. The Planning Group shall communicate by teleconference on a monthly basis to ensure coordination of business development opportunities and conflict resolution under the general guidelines outlined in this Section 5. 5.1 Independent Consulting Businesses of Giga and DA. It is ------------------------------------------------ understood that Giga and DA shall be free to operate independent consulting businesses outside the scope of the cooperative activities covered by this Agreement, provided that, in the case of DA, such consulting does not compete with the areas of expertise presently covered by Giga, including, but not limited to, Relevance Services, and does not focus on the computers and communication businesses. DA represents and warrants that it will execute an agreement in a form acceptable to Giga between DA and Harvey Cohen ("Cohen") that expressly binds Cohen in his capacity as a director and/or officer of DA, from offering consultation services which compete with the area of expertise covered by Giga and which focus on the computers and communication businesses. DA represents that at the time of execution of this Agreement, it has obtained Cohen's consent to become a party to such an agreement. Both parties shall have the right to develop new lines of consulting services independent of the other. 5.2 New Business for Giga Consulting Originated by DA. In its ------------------------------------------------- capacity as a Giga Partner, DA shall respond in a timely manner to leads from prospects for custom consulting work within the areas of expertise of Giga Consulting, and Giga shall pay a commission to DA for originating new consulting work for Giga and shall provide opportunities to DA to participate in such work, as provided in this Section 5. It is understood that all such leads shall be forwarded by DA to Giga Consulting, which will be responsible for pursuing such leads and structuring consulting projects. 5.3 Commissions for Origination of New Consulting Business. Giga ------------------------------------------------------ and DA shall each pay the other a commission for new consulting business performed by Giga or DA and originated by the other, so long as such consulting business is not originated in or to be performed in Germany. Such commission shall be (1) for a new contract, **** of the fee paid by the client to the party performing the consulting services during the ******** of any new contract and (2) for a renewed contract, the sum of (i) **** of the fee paid by the client to the party performing the consulting services for the renewal term and (ii) **** of the NAVI for any expanded business under the renewed contract. Such commission shall be payable within 30 days after the payment is received from the client. With respect to all new consulting business that Giga receives with -9- CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. respect to the Services, it shall include DA in the development and execution, as appropriate, of projects relating to the provision of Services. If DA is involved in any manner, including the sales or development of such new consulting business with respect to the provision of Services, DA is entitled to the receipt of a commission as set forth herein. 5.4 Participation by DA in Giga Consulting Engagements. For Giga -------------------------------------------------- Consulting engagements in the U.S. and France which have been originated by DA as contemplated in this Section 5, Giga agrees to make available to DA the opportunity to participate in performing a ******************* of the wholesale value of the project provided that the services are within DA's areas of expertise. It is understood, however, that the **** and **** shares are averages for the typical month and typical engagement, and the parties agree to cooperate in coordinating the work in an equitable manner consistent with efficient and high quality service to clients. The parties agree, with respect to the calculation of amounts due to DA, that DA shall be paid by Giga only for that work actually performed by DA with respect to such consulting engagements. The wholesale value of the project for purposes of this Section 6.4 shall be **** of the price to the Client (e.g., the wholesale value of a ******* project for a Client would be *******). Outside the U.S. and France, Giga agrees to include DA personnel in consulting projects as appropriate at agreed upon package rates. 5.5 DA Contracts in Germany. In Germany, where Giga's European ----------------------- consulting operations are based, Giga's established sales personnel shall assist in the marketing of Services to be performed by DA. Accordingly, DA shall, for the balance of 1996, pay a commission to Giga equal to **** of the dollar amount of all renewals or existing contracts by DA and **** of the dollar amount of any New Contracts. For 1997 and beyond, said commissions payable by DA to Giga shall be at the rates of **** and ****, respectively. DA shall prepare on a monthly basis a report that sets forth all of the amounts due to Giga under this provision, and such report shall be delivered to Giga on the fifteenth day of each month for the month directly preceding it, along with all amounts due to Giga by DA as reflected in such report. 6. Taxes. Each party hereto acknowledges and agrees that it shall report ----- as income all compensation, including commissions, received from the other pursuant to this Agreement. 7. Insurance. DA represents and warrants to Giga that DA maintains --------- appropriate comprehensive liability, casualty, and workers' compensation insurance coverage for DA and all of DA's employees, representatives and agents who perform or will perform duties under this Agreement. DA agrees to provide Giga with proof of appropriate insurance coverage if reasonably requested by Giga. Giga shall use its best efforts to secure and maintain appropriate comprehensive liability insurance that names as additional insured parties the Giga Partners. If Giga is unable to secure such coverage, it shall promptly notify DA. -10- 8. Audit Rights. Both parties shall have the right, upon reasonable ------------ notice, to audit the books and records of the other party as such books and records pertain to the Services to be performed under the terms of this Agreement in order to verify the terms of contracts and revenues received by the audited party. 9. Ownership and Use of Information; License to Giga. All software, ------------------------------------------------- plans, methodologies, planning or programming documentation, sketches, drawings models, samples, records, works of authorship or other creative works, ideas, knowledge or plans, whether written, oral or otherwise expressed (the "Information"), originated and developed by DA prior to the Effective Date of this Agreement, and furnished to Giga or any Clients by DA in the performance of its obligations under this Agreement, shall remain the sole property of DA, except in those cases where DA has performed specific work on behalf of Giga or on behalf of a Client under the direction of or assignment from Giga. All Information shall be disclosed as such to Giga and shall be identified specifically as such in writing from DA to Giga. DA agrees that Giga owns all Information, as well as any copyrights or other intellectual property rights, that underlie or are incorporated into the procedures or systems concerning the establishment or provision of Relevance Services or future Relevance Services, and shall be the sole property of Giga. Notwithstanding anything else in this Section 9, DA hereby grants a perpetual, royalty-free license to Giga to use, copy, modify and distribute for clients subscribing to the Services or for Giga's internal consumption all Information for the term of this Agreement with respect to the Services to be performed by DA under the terms of this Agreement. For any and all such Information described in this paragraph, DA agrees to provide documentation satisfactory to Giga to assure the license of the Information to Giga. Title to all materials or documentation including, but not limited to, systems specifications furnished by one party to the other in connection with the performance of Services contemplated by this Agreement, shall remain the property of the party furnishing such materials or documentation and, if such materials or documentation are delivered to one party by the other, the party receiving such materials and documentation shall return the same forthwith at the owner's request. 10. Confidentiality/Disclosure of Information. In order for each party to ----------------------------------------- render the Services contemplated by this Agreement, each respective party or one of its Clients or clients may need to disclose information to the other that is considered to be secret or proprietary ("Confidential Information"). Each party understands and agrees that unless such Confidential Information was previously known to it free of any obligation to keep it confidential, or unless it has subsequently been made public by the other party or one of its Clients or clients free of any obligation to keep it confidential, then such Confidential Information shall be kept confidential and shall be used only in performing the Services contemplated by this Agreement and may be used for no other purpose except upon such terms as may be agreed upon between the parties in writing. Each party further agrees that all Deliverables associated with the establishment or delivery of Relevance Services and future Relevance Services constitute Confidential -11- Information and must be treated as such. The parties hereto further agree to be bound by the terms of any Nondisclosure Agreement which the other party separately executes with the other party and/or one of its Clients or clients. 11. Assignment. This Agreement may not be assigned or transferred by ---------- either party without the prior written consent of the other. 12. Arbitration. Any dispute, disagreement or controversy at the time of ----------- the dispute, disagreement or controversy which is not settled by the Planning Group pursuant to Section 5 shall be resolved by one (1) arbitrator in accordance with the Commercial Arbitration Rules in effect at the time of the dispute, disagreement or controversy of the American Arbitration Association, including, but not limited to, the rule(s) with respect to the selection of an arbitrator. All expenses in connection with such arbitration shall be shared equally by the parties hereto; provided, however, if one party maintains that -------- ------- such arbitration was unnecessarily or unreasonably initiated, and it provides notice thereof to the other, the issue of the cost of the arbitration may in such cases also be submitted to the arbitrator for resolution. The final decision of the arbitrator shall constitute a conclusive determination of any such dispute, disagreement or controversy, and shall be binding onto the parties hereto, and shall not be contested by either party. Such decision may be used in a court of law only for the purposes of seeking enforcement of the arbitrator's award. 13. Restrictions on Solicitation of Employees. Each party hereto agrees ----------------------------------------- that it will not solicit the services of or employ any employees of the other or its Clients or clients, for the period beginning the Effective Date hereof and ending twelve (12) months after the expiration or termination of this Agreement, unless prior written authorization is obtained from the appropriate party; provided, however, that no written authorization must be obtained from Giga by - -------- ------- DA with respect to the employment of the employees listed on Exhibit A. --------- 14. Termination of Agreement; Limitations on Liability. Either Giga or DA -------------------------------------------------- may terminate this Agreement for its own convenience and without cause at any time by giving the other party written notice at least six months (180 days) prior to the effective date of the termination. Giga's liability to DA in the event of termination shall not exceed amounts due for Services performed prior to the effective date of the termination. DA's liability to Giga in the event of termination shall not exceed the amounts received from Giga hereunder. In addition, if, in Giga's reasonable judgment, DA has failed to comply with its obligations under this Agreement, Giga may elect to give written notice of such failure to DA, in which case DA shall have a period of 30 days in which to resolve such failure. If such failure has not been resolved within such period to Giga's reasonable satisfaction, Giga shall be entitled to terminate this Agreement on written notice to DA of not less than 30 days. In the event of such termination, the following terms shall apply: -12- (a) DA shall be entitled to payments under this Agreement for its services for the period through the effective date of termination as full compensation for all its Services hereunder, and Giga shall not be obligated to make any further payments to DA. (b) DA shall provide Giga with all research data, analyses, and written material (including completed interview forms, research contact lists, etc.) gathered and prepared prior to the effective date of termination; (c) Giga may at its option (i) continue to research, publish and market Services to the Giga client base served by DA, or (ii) identify an alternative contractor to fulfill the outstanding and future client requirements. (d) Upon the effective date of termination hereunder, DA's right to act as an agent for Giga with respect to the direct sales activities conducted on behalf of Giga shall terminate. 15. Liability/Indemnification. Each party hereto ------------------------- acknowledges that its relationship to the other under the terms of this Agreement is exclusively that of an independent contractor and not any other relationship including, but not limited to, partner, employee or agent, except in specific cases identified for the sales of Giga Advisory Services to DA accounts. Each party agrees to act in a manner consistent with this status and to make no representation to the contrary to any person. DA and Giga each agree to indemnify and hold the other harmless against any and all claims (including costs, expenses and reasonable attorney's fees on account thereof) that may be made by anyone for (i) injuries, including death, to persons or damage to property, including theft, or (ii) errors or omissions in the delivery of Services, including the delivery of such Services by Giga before the Effective Date or by DA after the Effective Date, resulting from the acts or omissions of the indemnifying party, including those of its employees, agents or representatives, provided however, nothing contained in this Agreement shall be -------- ------- construed to be or to constitute an employment agreement between either or both of the parties hereto and the persons set forth on Exhibit A, and, as such, with respect to liability or otherwise, --------- the persons listed on Exhibit A shall have no rights arising from --------- this Agreement. The indemnifying party agrees to defend the other party, at its request, against any such claims and the party seeking to be indemnified agrees to notify the indemnifying party promptly of any such claims or demands against it for which the indemnifying party is responsible hereunder. 16. Non-Waiver. No failure on behalf of either Giga or DA ---------- to strictly enforce any term, right or condition of this Agreement shall be construed as a waiver by that party of such term, right or condition. 17. Severability. If any provision of this Agreement is ------------ found for any reason to be void or unenforceable, the remainder of this Agreement shall continue in full force and effect. -13- 18. Survival of Obligations. DA's representations, ----------------------- warranties and obligations to Giga under this Agreement set forth in Sections 7, 10, 11, 13, 15 and 16 hereof shall survive the termination, cancellation or expiration of this Agreement. 19. Choice of Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of laws thereof. 20. Force Majeure. Neither Giga nor DA will be liable to ------------- the other for failure to perform any of its duties under this Agreement due to circumstances beyond its reasonable control. The party whose performance is affected by such circumstances shall notify the other in writing as soon as practicable concerning its inability to perform its duties hereunder and shall thereafter exercise it best efforts to resume the performance of the obligations under the terms of this Agreement. 21. Headings. The headings used herein are for convenience -------- only and are not intended to affect the meaning or interpretation of this Agreement. 22. Complete Understanding. This Agreement constitutes the ---------------------- full and complete understanding and agreement of the parties hereto and supersedes any and all prior understandings and agreements, whether written or oral, with respect to the subject matter hereof. Any waiver, modification or amendment of any provision of this Agreement shall be effective only if made in writing and signed by Giga and DA. 23. Notice. Any notice or demand required or permitted ------ herein shall be hand delivered or sent by certified or registered mail addressed to the respective parties as follows: if to Giga: ---------- Barry S. Gilbert Vice President, Market Strategies Division Giga Information Group, Inc. One Longwater Circle Norwell, MA 02061 if to Decision Analytics, Inc.: ------------------------------ Harvey Cohen Decision Analytics, Inc. 33 Martha's Lane Brookline, MA 02167 or at such other address as the party shall subsequently specify to the other in writing. Such notice or demand shall be deemed given or made when received in the case of hand delivery, or when deposited, postage prepaid, with the U.S. Postal Service in the case of certified or registered mail. -14- IN WITNESS of their acceptance of the terms of this Agreement, Giga and DA, by their duly authorized representatives, hereby sign and date this agreement as of the date first above written. GIGA INFORMATION GROUP, INC. DECISION ANALYTICS, INC. By:/s/ Barry Gilbert By:/s/ Harvey Cohen --------------------------- --------------------- Title: Title: ------------------------ ------------------ Tax I.D.# --------------- -15- Exhibit A Staffing Plan DA's organization at the outset of this Agreement will consist of Harvey Cohen, General Manager, some current Giga employees who will become DA employees or subcontractors, and additional DA personnel. The proposed personnel for inclusion include: o David Kerr - Current Giga employee to address the North American Mobile Communications Services Practice as Director. o Mark Holden - Current Giga employee to address the European Communications Services Practice as Director. o Jeff Henning - Former BIS employee and present DA consultant to serve the Mobile IT Practice as Director. o George Boomer - Current DA employee specializing in quantitative methods as Senior Consulting Partner. o Joanne Downie - Current Giga employee to address European wireline services and support PTT applications as Director of Wireline Service. o Declan Lonergan - Current Giga employee in the communications area. o Frances Northcott - Current Giga subcontractor in the communications area. o Richard Endersby - Current Giga employee to address GaAs applications in Europe. o Steve Entwistle - Current Giga employee in support of the GaAs Program. o Chris Webber - Current Giga employee and Director of the Automotive Program. o Ian Riches - Current Giga employee in support of Automotive Service. o Guy DiPiazza - Current Giga employee and Director of the Consumer Electronics Program. Additional employees and/or subcontractors will be added to meet the requirements with respect to Deliverables as future budgets allow. It is further understood that while the Giga employees named above have expressed interest in pursuing opportunities with DA, there is no guarantee, express or implied on Giga's behalf, that any or all of the employees listed above will become DA employees. In the event that some or all of the employees indicated above decide not to become DA employees, DA will have the sole responsibility of finding qualified replacements and incur such costs associated therewith. -16- Exhibit B Deferred Revenue Schedule Page 1 through Page 2 of Exhibit B contains Confidential Materials which have been omitted and filed separately with the Securities and Exchange Commission EX-11 28 CALCULATION OF SHARES EXHIBIT 11 GIGA INFORMATION GROUP, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
MARCH 17 TO (UNAUDITED) SIX MONTHS DECEMBER 31, MARCH 17 TO ENDED JUNE 30, 1995 JUNE 30, 1995 1996 ------------ ------------- -------------- Historical Loss from continuing operations.... $ (5,116) $ (733) $ (9,913) Net loss available to common stock- holders........................... $ (3,626) $ (432) $ (12,303) ========== ========== ========== Weighted average common and common equivalent shares outstanding..... 4,787,368 3,600,000 5,480,867 Cheap stock(1)..................... 8,699,420 8,699,420 8,699,420 ---------- ---------- ---------- Weighted average common and common equivalent shares outstanding..... 13,486,788 12,299,420 14,180,287 ========== ========== ========== Loss per common and common equivalent share: Loss per common and common equiva- lent share from continuing opera- tions............................. $ (0.38) $ (0.06) $ (0.70) Net loss per common and common equivalent share.................. $ (0.27) $ (0.04) $ (0.87) ========== ========== ==========
MARCH 17 TO SIX MONTHS DECEMBER 31, ENDED JUNE 30, 1995 1996 ------------ -------------- Pro forma: Loss from continuing operations $ (5,116) $ (9,913) Net loss available to common stockholders........ $ (3,626) $ (12,303) ========== ========== Weighted average common and common equivalent shares outstanding(2)........................... 6,155,789 7,660,867 Potentially dilutive instruments under SAB No. 83(1)........................................... 8,699,420 8,699,420 ---------- ---------- Pro forma weighted average common and common equivalent shares outstanding..................................... 14,855,209 16,360,287 ========== ========== Pro forma loss per common share: Pro forma loss per common and common equivalent share from continuing operations................ $ (0.34) $ (0.61) Pro forma net loss per common and common equiva- lent share...................................... $ (0.24) $ (0.75) ========== ==========
- -------- (1) In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB No. 83"), all common equivalent shares and other potentially dilutive instruments (including stock options and warrants) issued during the twelve month period prior to the initial filing date of the Company's initial public offering Registration Statement have been included in the calculation as if they were outstanding for all periods presented. (2) Pro forma weighted average common and common equivalent shares outstanding reflect the conversion of outstanding shares of redeemable Series A Preferred Stock into shares of Common Stock. EX-21 29 SUBSIDIARIES EXHIBIT 21 Subsidiaries of the Registrant
Name Jurisdiction of Organization/Incorporation ---- ------------------------------------------ Giga Information Group Investment Corporation Massachusetts Giga Information Group Ltd. England BIS Shrapnel PTY Limited Australia Giga Information Group GmbH Germany Giga Information Group Italy SRL Italy Giga Information Group S.A.R.L. France
EX-23.2 30 CONSENT OF COOPERS & LYBRAND L.L.P. CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Registration Statement of Giga Information Group, Inc. on Form S-1 to register 4,000,000 shares of Common Stock of our report dated August 31, 1996 on our audits of the consolidated financial statements of Giga Information Group, Inc. as of December 31, 1995 and June 30, 1996 and the periods March 17, 1995 to December 31, 1995 and January 30, 1996 to June 30, 1996. We also consent to the references to our firm under the captions "Selected Financial Data" and "Experts." We also consent to the inclusion in this Registration Statement of our report dated August 31, 1996 on our audit of the combined statements of operations, stockholder's equity and cash flows of BIS Strategic Decisions for the period January 1, 1995 to April 5, 1995. Coopers & Lybrand L.L.P Boston, Massachusetts September 10, 1996 EX-23.3 31 CONSENT OF ERNST & YOUNG LLP. CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Experts" and "Selected Financial Data" and the use of our report dated March 13, 1995, except with respect to the matters described in Note 12, as to which the date is September 6, 1996, with respect to the financial statements of BIS Strategic Decisions as of December 31, 1994 and for the year ended December 31, 1994, the period from December 16, 1993 to December 31, 1993 and the period from January 1, 1993 to December 15, 1993, in the Registration Statement on Form S-1 and Related Prospectus of Giga Information Group, Inc. Ernst & Young L.L.P. Boston, Massachusetts September 6, 1996 EX-23.4 32 CONSENT OF COOPERS & LYBRAND EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Registration Statement of Giga Information Group, Inc. on Form S-1 to register 4,000,000 shares of Common Stock of our report dated 27 July 1994, on our audits of the financial reporting packages of BIS Shrapnel Pty Limited as of 15 December 1993 and 31 December 1993 and the periods 1 January 1993 to 15 December 1993 and 16 December 1993 to 31 December 1993. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand Sydney, Australia 9 September 1996 EX-27 33 FINANCIAL DATA SCHEDULE
5 1,000 YEAR 6-MOS DEC-31-1995 JUN-30-1996 JAN-01-1995 JAN-01-1995 DEC-31-1995 JUN-30-1996 16,906 9,331 0 0 2,259 3,116 79 925 0 0 20,582 14,857 2,756 3,852 562 1,136 24,684 19,220 8,516 10,557 1,037 1,060 0 0 4 6 6 6 17,921 20,556 24,684 19,220 0 0 10,706 6,482 0 0 8,445 9,648 0 0 0 0 100 52 (6,209) (10,170) (1,093) (257) (5,116) (9,913) 1,490 (2,390) 0 0 0 0 (3,626) (12,303) (0.244) (0.752) (0.244) (0.752)
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