Exhibit 10.13
DB SOFTWARE SOLUTIONS, LLC
a Delaware Limited Liability Company
OPERATING AGREEMENT
September 27, 2001
ARTICLE I DEFINITIONS.......................................................................................... 2
1.1 "Accounting Period"............................................................................. 2
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1.2 "Act"........................................................................................... 2
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1.3 "Affiliate"..................................................................................... 2
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1.4 "Agreement"..................................................................................... 2
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1.5 "Appraiser"..................................................................................... 2
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1.6 "Aztec"......................................................................................... 2
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1.7 "Aztec STSL".................................................................................... 2
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1.8 "Aztec STSL Software Development Agreement"..................................................... 2
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1.9 "Bankruptcy".................................................................................... 2
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1.10 "Budget"........................................................................................ 2
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1.11 "Capital Account"............................................................................... 2
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1.12 "Capital Contribution".......................................................................... 3
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1.13 "Certificate of Formation"...................................................................... 3
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1.14 "Chief Operating Officer"....................................................................... 3
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1.15 "Code".......................................................................................... 3
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1.16 "Collateral Agreements"......................................................................... 3
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1.17 "Confidential Information"...................................................................... 3
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1.18 "Damages"....................................................................................... 4
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1.19 "Deadlock"...................................................................................... 4
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1.20 "Defaulting Member"............................................................................. 4
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1.21 "Dissolution"................................................................................... 4
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1.22 "Dissolution Event"............................................................................. 4
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1.23 "Effective Date"................................................................................ 5
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1.24 "Embarcadero"................................................................................... 5
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1.25 "Embarcadero Software Development Agreement".................................................... 5
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1.26 "Event of Default".............................................................................. 5
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1.27 "Exchange Act".................................................................................. 5
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1.28 "Fiscal Year"................................................................................... 5
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1.29 "Force Majeure"................................................................................. 5
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1.30 "Force Majeure Event"........................................................................... 5
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1.31 "Initial Contribution".......................................................................... 6
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1.32 "Intellectual Property"......................................................................... 6
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1.33 "LLC"........................................................................................... 6
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1.34 "Management Committee".......................................................................... 6
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1.35 "Member(s)"..................................................................................... 6
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1.36 "Membership Interest"........................................................................... 6
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1.37 "Net Income" or "Net Loss"...................................................................... 6
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1.38 "Percentage Interest"........................................................................... 6
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1.39 "Purpose"....................................................................................... 6
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1.40 "Person"........................................................................................ 6
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1.41 "Regulatory Allocations"........................................................................ 6
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1.42 "Right of First Refusal"........................................................................ 6
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1.43 "SEC"........................................................................................... 6
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1.44 "Secretary"..................................................................................... 6
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1.45 "Securities Act"................................................................................ 6
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1.46 "Strategic Plan"................................................................................ 7
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1.47 "Substitute Member"............................................................................. 7
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1.48 "Treasurer"..................................................................................... 7
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1.49 "Treasury Regulations".......................................................................... 7
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1.50 "Tax Matters Member"............................................................................ 7
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1.51 "Withholding Advance"........................................................................... 7
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ARTICLE II FORMATION OF THE LLC AND RELATED MATTERS............................................................ 7
2.1 Formation of the LLC............................................................................ 7
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2.2 Name and Principal Place of Business of the LLC................................................. 7
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2.3 Delaware Registered Office and Agent for Services of Process.................................... 7
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2.4 Purpose......................................................................................... 7
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2.5 Term............................................................................................ 7
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2.6 Approval of Collateral Agreements; Commitment to Perform Obligations............................ 8
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2.7 Management to Carry Out Budget and Strategic Plan............................................... 8
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2.8 Bank Accounts................................................................................... 8
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2.9 Insurance....................................................................................... 8
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2.10 Power of Attorney............................................................................... 8
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ARTICLE III MEMBERSHIP......................................................................................... 8
3.1 Members......................................................................................... 8
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3.2 Representations and Warranties.................................................................. 9
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3.3 Resignation or Withdrawal of a Member........................................................... 9
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3.4 Assignment of Membership Interest; Admission of Substitute Members............................. 10
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ARTICLE IV CONTRIBUTIONS TO CAPITAL........................................................................... 10
4.1 Initial Contribution........................................................................... 10
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4.2 Additional Contributions....................................................................... 10
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ARTICLE V ACTION BY MEMBERS................................................................................... 10
5.1 Meetings of Members............................................................................ 10
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5.2 Annual Meetings................................................................................ 11
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5.3 Special Meetings............................................................................... 11
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5.4 Quorum......................................................................................... 11
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5.5 Validity of Proxies............................................................................ 12
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5.6 Waiver of Notice............................................................................... 12
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5.7 Action Without Meeting......................................................................... 12
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5.8 Member Vote Required........................................................................... 12
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5.9 Approval By Members............................................................................ 12
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ARTICLE VI I MANAGEMENT COMMITTEE............................................................................. 13
6.1 Certain Management by Management Committee..................................................... 13
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6.2 Management Committee Number, Nominees, Vacancies............................................... 13
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6.3 Meetings of The Management Committee; Quorum and Decisions; Observer Rights.................... 14
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6.4 Action Without Meeting......................................................................... 15
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6.5 Compensation and Reimbursement of Members of the Management Committee.......................... 15
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6.6 Amendment of Certificate of Formation or Agreement............................................. 15
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ARTICLE VII LLC OFFICERS, EMPLOYEES AND CONSULTANTS........................................................... 16
7.1 Election of Officers; Required Officers; Initial Officers...................................... 16
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7.2 Term of Office; Duties......................................................................... 16
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7.3 Reporting of Officers.......................................................................... 16
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7.4 Compensation of Officers....................................................................... 16
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7.5 Duties of Chief Operating Officer.............................................................. 16
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7.6 Duties of Treasurer............................................................................ 17
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7.7 Duties of Secretary............................................................................ 17
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7.8 Certain Standards of Care...................................................................... 17
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7.9 Resignation of Officers; Removal............................................................... 18
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ARTICLE VIII ACCOUNTING AND RECORDS........................................................................... 18
8.1 Distributions.................................................................................. 18
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8.2 Allocations of Net Profit and Net Loss......................................................... 19
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8.3 Tax Allocations................................................................................ 20
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ARTICLE IX ACCOUNTING AND RECORDS............................................................................. 21
9.1 Financial Statements........................................................................... 21
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9.2 Supervision; Inspection of Books............................................................... 21
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9.3 Reliance on Records and Books of Account....................................................... 21
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9.4 Tax Returns.................................................................................... 22
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9.5 Tax Matters Member............................................................................. 22
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9.6 Annual Reports................................................................................. 22
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9.7 Other Financial and Accounting Reports......................................................... 22
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9.8 Delivery and Approval of Annual Budget and Strategic Plan...................................... 22
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9.9 Inspection..................................................................................... 23
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9.10 Confidentiality................................................................................ 23
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ARTICLE X SERVICES OF CHIEF OPERATING OFFICER................................................................. 23
10.1 Secondment of Chief Operating Officer.......................................................... 23
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10.2 Chief Operating Officer Services............................................................... 23
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10.3 Removal or Resignation of Seconded Chief Operating Officer..................................... 23
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10.4 Employment of Seconded Chief Operating Officer................................................. 23
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10.5 Indemnity...................................................................................... 24
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ARTICLE XI INDEMNIFICATION AND LIMITATION OF LIABILITY........................................................ 24
11.1 Indemnification................................................................................ 24
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11.2 Liability for Finder's or Broker's Fees........................................................ 25
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11.3 Liability in Event of Default.................................................................. 25
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11.4 Limitation of Liability........................................................................ 25
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ARTICLE XII TERMINATION; WAIVER AND OTHER REMEDIES............................................................ 26
12.1 Termination.................................................................................... 26
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12.2 Authority to Wind Up........................................................................... 27
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12.3 Winding Up and Certificate of Cancellation..................................................... 27
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12.4 Distribution of Assets......................................................................... 27
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12.5 Right of First Refusal Regarding Intellectual Property Rights of the LLC....................... 28
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ARTICLE XIII DISPUTE RESOLUTION............................................................................... 28
13.1 Negotiation between Executives................................................................. 28
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13.2 Arbitration.................................................................................... 29
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13.3 Arbitrator Decisions........................................................................... 29
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13.4 Award of Arbitrators........................................................................... 29
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13.5 Confidentiality................................................................................ 29
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13.6 Applicable Law; Disclosure..................................................................... 29
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13.7 Litigation..................................................................................... 30
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ARTICLE XIV CONFIDENTIALITY................................................................................... 30
14.1 Obligations of Confidentiality................................................................. 30
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14.2 Certain Confidential Information............................................................... 30
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14.3 Return of Confidential Information............................................................. 30
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14.4 No Other Rights................................................................................ 30
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14.5 Acknowledgment................................................................................. 30
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14.6 Disclosure Required by Law..................................................................... 31
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14.7 Exchange Act Disclosures....................................................................... 31
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14.8 Public Announcements........................................................................... 31
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14.9 Survival of Provision.......................................................................... 31
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ARTICLE XV MISCELLANEOUS...................................................................................... 31
15.1 Further Assurances............................................................................. 31
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15.2 Binding Effect................................................................................. 32
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15.3 Entire Agreement; Amendment.................................................................... 32
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15.4 Assignment..................................................................................... 32
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15.5 Notices........................................................................................ 32
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15.6 Electronic Data Interchange.................................................................... 33
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15.7 Severability................................................................................... 33
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15.8 Counting of Time............................................................................... 33
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15.9 Non-Waiver..................................................................................... 33
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15.10 Disclaimer of Agency; No Right of Members to Commit or Bind LLC................................ 33
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15.11 Certain Third Parties.......................................................................... 34
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15.12 No Exclusive Duty to LLC; No Rights to Participation or Income................................. 34
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15.13 No Grant of Rights............................................................................. 34
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15.14 Expenses....................................................................................... 34
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15.15 Captions....................................................................................... 34
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15.16 Costs and Attorneys' Fees...................................................................... 34
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15.17 Waiver Of Action For Partition................................................................. 35
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15.18 Counterparts................................................................................... 35
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15.19 Official Language.............................................................................. 35
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EXHIBITS
Exhibit A DB Software Solutions-Embarcadero Software Development Agreement
Exhibit B DB Software Solutions-Aztec Software Development Agreement
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DB SOFTWARE SOLUTIONS, LLC
OPERATING AGREEMENT
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This Operating Agreement (the "Agreement"), is entered into as of the 27th
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day of September, 2001 (the "Effective Date"), by and among Embarcadero
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Technologies, Inc. a Delaware corporation with principal offices at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Embarcadero") and Aztec
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Software, Inc., a California corporation, with principal offices at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Aztec"), as the members (the
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"Members") of DB Software Solutions, LLC, a Delaware limited liability company
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(the "LLC"), and the LLC. Terms not otherwise defined in this Agreement will
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have the meanings set forth for such terms in Article I hereof.
RECITALS
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WHEREAS, the Members have formed the LLC to develop data and database
management software which enables customers to better design, develop and
administer e-business applications and their underlying databases and such other
matters as the Members may agree in writing with each other from time to time,
as an amendment hereto; and
WHEREAS, simultaneously with their execution and delivery hereof,
Embarcadero and Aztec Software and Technology Services Limited, an Indian
company and the sole owner of the outstanding capital stock of Aztec ("Aztec
STSL") have each executed and delivered to the LLC a software development
agreement, Embarcadero executing and delivering an agreement between Embarcadero
and the LLC, which grants Embarcadero a right of first refusal to purchase any
software developed by the LLC and by which the LLC will provide certain software
development services to Embarcadero, in the form set forth at Exhibit A (the
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"Embarcadero Software Development Agreement"), and Aztec STSL executing and
delivering an agreement between Aztec STSL and the LLC by which Aztec STSL will
provide certain software development services to the LLC, in the form set forth
at Exhibit B (the "Aztec STSL Software Development Agreement"); and
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WHEREAS, in addition to the software development services described above,
the LLC may enter into and perform software development services under
agreements with third parties; and
WHEREAS, the Members and the LLC desire to enter into this Agreement, to
set forth the respective ownership interests of the Members in the LLC and the
principles by which the LLC will be operated and governed.
NOW, THEREFORE, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
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The following terms will have the meanings set forth below for purposes of
this Agreement:
1.1 "Accounting Period" means, for each Fiscal Year, the period beginning
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on January 1 and ending on December 31, provided that the first Accounting
Period will commence on the date of formation of the LLC and will end on
December 31, 2001, and provided, further, that a new Accounting Period will
commence on any date on which a Substitute Member is admitted to the LLC.
1.2 "Act" means the Limited Liability Company Act of Delaware.
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1.3 "Affiliate" means a Person who controls, is controlled by or is under
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the common control with (a) the referenced Member or (b) another Person. For
purposes of this definition the word "control" (including, with correlative
meaning, the terms "controlled by" or "is under the common control with") means
the power to direct or cause the direction of the management and policies of
such Persons, or the ownership of at least 50% of the voting stock or voting
power of such Person if it is a legal entity.
1.4 "Agreement" means this Operating Agreement as the same may be amended
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from time to time.
1.5 "Appraiser" means an independent appraiser who has no material
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relationship with either Member, and who is experienced in determining the fair
market value of data and database management software and other intellectual
property.
1.6 "Aztec" means Aztec Software, Inc., a California corporation.
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1.7 "Aztec STSL" means Aztec Software and Technology Services Limited, an
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Indian company.
1.8 "Aztec STSL Software Development Agreement" will have the meaning set
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forth for such term in the recitals above.
1.9 "Bankruptcy" means with respect to any Person that a petition has been
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filed by or against such Person as a "debtor" and the adjudication of such
Person as a bankrupt under the provisions of the bankruptcy laws of any country
have commenced, or that such Person has made an assignment for the benefit of
its creditors generally or a receiver has been appointed for substantially all
of the property and assets of such Person.
1.10 "Budget" will have the meaning set forth for such term in Section 9.8
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hereof.
1.11 "Capital Account" means, for each Member, a separate account
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maintained by the LLC in accordance with the following provisions:
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(a) Increases. The Capital Account of each Member will be increased
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by:
(i) Money and Property Contributed. The amount of money and the
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fair market value of any property contributed to the LLC by such Member (net of
any liabilities secured by such property), and
(ii) Share of Net Income Etc. Such Member's share of Net Income
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(or items thereof) and other items of LLC income and gain allocated to it
pursuant to this Agreement; and
(b) Decreases. The Capital Account of each Member will be
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decreased by:
(i) Money And Property Distributed. The amount of money and
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the fair market value of any property distributed by the LLC to such Member
pursuant to the provisions of this Agreement (net of any liabilities secured by
such property), and
(ii) Share of Net Loss. Such Member's share of Net Loss (or
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items thereof) and other items of LLC loss and deduction allocated to it
pursuant to this Agreement.
1.12 "Capital Contribution" of a Member means the contribution by such
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Member to the LLC pursuant to ARTICLE IV hereof.
1.13 "Certificate of Formation" will have the meaning set forth for such
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term in Section 2.1 hereof.
1.14 "Chief Operating Officer"will be the chief operating officer of the
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LLC as appointed pursuant to Section 7.1 hereof.
1.15 "Code" means the Internal Revenue Code of 1986, as amended.
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1.16 "Collateral Agreements" means the Embarcadero Software Development
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Agreement and the Aztec STSL Software Development Agreement.
1.17 "Confidential Information" means, with respect to a party hereto,
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information that is owned or controlled by such party, its Affiliates or
sublicensees, that is disclosed by such party to the one or both of the other
parties hereto pursuant to this Agreement, and that is identified by the
disclosing party in writing, or is acknowledged by the receiving party in
writing, to be confidential to the disclosing party or to a third party at the
time of disclosure to the receiving party if disclosed in tangible form, or
within 30 days after disclosure if disclosed orally, provided that Confidential
Information will not include any information which:
(a) Already Known Without Breach. Was already known to the receiving
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party, without breach of any obligation of confidentiality by any party hereto,
at the time of disclosure by the disclosing party;
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(b) Generally Available or In Public Domain Without Breach. Was
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generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving party by the disclosing party, or later
becomes available to the public or otherwise part of the public domain, in
either event without breach of any obligation of confidentiality by the
receiving party;
(c) Freely Disclosed By Certain Third Parties. Was disclosed to the
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receiving party, other than under an obligation of confidentiality, by a third
party who had no obligation to the disclosing party not to disclose such
information to others;
(d) Required To Be Disclosed. Is required to be disclosed pursuant to
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law, subject to the protective provisions set forth in Section 14.6 hereof; or
(e) Independently Developed. The receiving party can document was
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subsequently and independently developed by employees or others on behalf of the
receiving party without use of any Confidential Information disclosed to the
receiving party or such others by the disclosing party and without breach of any
obligation of confidentiality.
1.18 "Damages" means all costs, liabilities, obligations, damages, fines,
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penalties, deficiencies, losses and judgments, including incidental and
consequential damages and reasonable fees and costs of attorneys, accountants,
and other customary and commercially reasonable advisors, in each case after the
application of any amounts recoverable under insurance contracts or similar
arrangements and from other third parties, by the Person claiming indemnity
under this Agreement.
1.19 "Deadlock" means the inability of the Management Committee or the
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Members to resolve a dispute that materially affects the operations of the LLC,
including without limitation the failure of the Management Committee and/or the
Members to timely agree on the Budget and/or Strategic Plan for the LLC, as
provided in Section 9.8 hereunder, or the failure of the Management Committee to
agree on the appointment of the Chief Operating Officer, Treasurer or Secretary,
as provided in Section 7.1 hereof or the removal of the Chief Operating Officer,
Treasurer or Secretary, as provided for in Section 7.9 hereof.
1.20 "Defaulting Member" will have the meanings set forth for such terms in
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Section 1.25 hereof.
1.21 "Dissolution" of a Member means that such Member has terminated its
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existence, whether partnership or corporate, wound up its affairs and dissolved.
1.22 "Dissolution Event" as to a Member means:
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(a) Attachment, Etc. Attachment, execution or other judicial seizure
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of all or any substantial part of a Member's assets, such attachment, execution
or seizure being with respect to an amount not less than US$100,000, or of a
Member's interest in the LLC, or any part thereof, and in each case remaining
undismissed or undischarged for a period of 15 days after the levy thereof, if
the occurrence of such attachment, execution or other judicial seizure
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would, in the good faith judgment of the other Member, communicated in writing
to the Member subject such levy, reasonably tend to have a materially adverse
effect upon the performance by such Member subject to such levy of its
obligations under this Agreement, provided that such attachment, execution or
seizure will not constitute a Dissolution Event if such Member posts a bond
sufficient to fully satisfy the amount of such claim or judgment within 15
days after the levy thereof and the LLC's assets are thereby released from the
lien of such attachment; and/or
(b) Bankruptcy or Dissolution of Member. The Bankruptcy or Dissolution
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of a Member.
1.23 "Effective Date" will have the meaning set forth for such term in the
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recitals above.
1.24 "Embarcadero" means Embarcadero Technologies, Inc., a Delaware
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corporation.
1.25 "Embarcadero Software Development Agreement" will have the meaning set
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forth for such term in the recitals above.
1.26 "Event of Default" means with respect to a Member (the "Defaulting
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Member") if such Member fails to perform or violates any material term or
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condition of this Agreement or any Collateral Agreement to which such Member is
a party and such failure or violation continues for 30 days after such Member
has been given written notice thereof by the other Members or the Management
Committee. An Event of Default will be deemed to have occurred, with Aztec being
the Defaulting Member, if Aztec STSL fails to perform or violates any material
term or condition of the Aztec STSL Software Development Agreement and such
failure or violation continues for 30 days after Aztec or Aztec STSL has been
given written notice thereof by Embarcadero or the Management Committee.
1.27 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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1.28 "Fiscal Year" means the period from January 1 to December 31 of each
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year, or as otherwise required by law or as otherwise determined by the
Management Committee.
1.29 "Force Majeure" means, as to a Member, circumstances beyond such
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Member's reasonable control and that by the exercise of commercially reasonable
due diligence it is unable to prevent. Circumstances beyond the reasonable
control of a Member include, but are not limited to, fire, strikes,
insurrections, riots, embargoes, shortages, war time rationing or preferences,
delays in transportation, inability to obtain supplies of raw materials or
requirements or regulations of any government or any other civil or military
authority in the relevant jurisdiction.
1.30 "Force Majeure Event" means an event of Force Majeure which continues
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for at least 60 continuous days, on a week-to-week calculation.
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1.31 "Initial Contribution" has the meaning set forth for such term in
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Section 4.1 hereof.
1.32 "Intellectual Property" has the meaning set forth for such term in
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Section 12.5(a) hereof.
1.33 "LLC" means DB Software Solutions, LLC, a Delaware limited liability
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company.
1.34 "Management Committee" means the Management Committee of the LLC.
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1.35 "Member(s)" means Aztec, Embarcadero or any other Person who holds a
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membership interest in the LLC.
1.36 "Membership Interest" means the interest of a Member in the LLC.
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1.37 "Net Income" or "Net Loss" means, respectively, the net book income or
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loss of the LLC for any relevant period as calculated in accordance with U.S.
generally accepted accounting principles.
1.38 "Percentage Interest" means 50% for Embarcadero and 50% for Aztec.
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1.39 "Purpose" means the purpose of the LLC, which is to develop data and
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database management software enabling customers to better design, develop and
administer e-business applications and their underlying databases, which
customers are intended to be technology professionals responsible for e-business
applications and their underlying databases in corporations and other entities
worldwide.
1.40 "Person" means a natural person, corporation, partnership (whether
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general or limited), a limited liability company, or any trust, estate,
association, custodian, nominee or any other individual or entity in its own or
representative capacity, and in each case as to a legal entity whether formed
under the laws of the United States or of any state thereof or of any non-United
States jurisdiction.
1.41 "Regulatory Allocations" will have the meaning set forth for such term
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in Section 8.3(b)(iv) hereof.
1.42 "Right of First Refusal" will have the meaning set forth for such term
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in Section 12.5(a) hereof.
1.43 "SEC" means the Securities and Exchange Commission.
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1.44 "Secretary" will be the secretary of the LLC as described in Section
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7.7 hereof.
1.45 "Securities Act" means the Securities Act of 1933, as amended.
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1.46 "Strategic Plan" will have the meaning set forth for such term in
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Section 9.8 hereof.
1.47 "Substitute Member" means a Person who has, pursuant to this
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Agreement, been admitted to all the rights of membership in the LLC as a Member.
1.48 "Treasurer" will be the treasurer of the LLC Section 7.6 hereof.
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1.49 "Treasury Regulations" means regulations issued pursuant to the Code.
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1.50 "Tax Matters Member" means Embarcadero.
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1.51 "Withholding Advance" will have the meaning set forth for such term in
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Section 8.1(d)(ii) hereof.
ARTICLE II
FORMATION OF THE LLC AND RELATED MATTERS
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2.1 Formation of the LLC. The Members have formed the LLC pursuant to the
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Delaware Limited Liability Company Act (the "Act") by causing a certificate of
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formation (the "Certificate of Formation") for the LLC to be filed in the Office
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of the Secretary of State of Delaware, and by this Agreement intend to establish
rules and regulations governing its ownership and control.
2.2 Name and Principal Place of Business of the LLC. Unless and until
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amended in accordance with this Agreement and the Act, the name of the LLC will
be DB Software Solutions, LLC. The principal place of business of the LLC will
be located in Santa Clara, California or such other place as the Management
Committee from time to time determines.
2.3 Delaware Registered Office and Agent for Services of Process. The LLC
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will maintain a Delaware registered office and agent for service of process as
required by Section 18-104 of the Act. The Delaware registered office and agent
for service of process will be Corporation Service Company, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, or such
other place and person as the Management Committee may designate.
2.4 Purpose. The purpose of the LLC is to engage in any lawful act or
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activity for which a limited liability company may be organized under the Act,
including without limitation the entry by the LLC into and performance of
obligations under agreements as necessary to carry out the Purpose.
2.5 Term. The term of the LLC will commence upon the later to occur of (a)
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the filing of a Certificate of Formation for the LLC in the office of the
Secretary of State of Delaware or (b) the execution of this Agreement by the two
Members, and will continue in perpetuity unless terminated earlier as provided
herein.
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2.6 Approval of Collateral Agreements; Commitment to Perform Obligations.
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The Members hereby approve, on behalf of the LLC, as of the Effective Date, the
execution and delivery by the LLC of, and the LLC's performance of its
obligations under, the Collateral Agreements. The Members and the LLC hereby
agree and commit to performing their respective obligations under those of the
Collateral Agreements to which they are a party or by which they are bound and
Aztec agrees and commits to causing Aztec STSL to perform its obligations under
the Aztec STSL Software Development Agreement.
2.7 Management to Carry Out Budget and Strategic Plan. Upon approval by the
-------------------------------------------------
Management Committee of each of the LLC's Budget and Strategic Plan as provided
in Section 9.8 hereof, the LLC will implement and will conduct its affairs in
accordance with the Budget and Strategic Plan.
2.8 Bank Accounts. The LLC will maintain bank accounts in such banks as the
-------------
Management Committee may designate exclusively for the deposit and disbursement
of funds of the LLC. All funds received by the LLC will be promptly deposited in
such accounts. The signatories on such account(s) will be determined from time
to time by the Management Committee.
2.9 Insurance. The LLC will be insured on its own behalf with insurers who
---------
maintain an A.M. Best rating of "A" or better for all property, liability and
workers' compensation insurance and such other insurance as is required under
applicable mortgages, leases, agreements and other instruments and statutes, or
as determined by the Management Committee, and such insurance covering the
officers of the LLC or members of the Management Committee as the Management
Committee determines to be appropriate or necessary.
2.10 Power of Attorney. By signing this Agreement, each Member designates
-----------------
and appoints the Chief Operating Officer of the LLC, and in his or her absence,
the Secretary of the LLC, as such Member's true and lawful attorney, in such
Member's name, place and stead, to make, execute, sign and file such
instruments, documents or certificates which may from time to time be required
by the laws of the United States and the State of Delaware and any political
subdivision thereof or any other state or political subdivision in which the LLC
will do business to carry out the purposes of this Agreement, except where such
action requires the express approval of such Members hereunder. Such attorney is
not hereby granted any authority on behalf of the undersigned Members to amend
this Agreement. The Management Committee will provide to the Members copies of
all documents executed pursuant to the power of attorney contained in this
Section 2.10.
ARTICLE III
MEMBERSHIP
----------
3.1 Members. The initial Members of the LLC will be Embarcadero and Aztec.
-------
Additional Persons may be admitted to the LLC as a Member only upon the prior
written consent of both Members and upon such terms and conditions as the
Management Committee and both of
- 8 -
the Members agree, and that both Members and the LLC agree in writing with such
additional Person as an amendment hereto.
3.2 Representations and Warranties. Each Member hereby severally represents
------------------------------
and warrants to the LLC and to the other Member as follows:
(a) Authorization. Such Member is a corporation, duly organized,
-------------
validly existing, and in good standing under the law of its state of
organization, and it has full power and authority to execute and enter into this
Agreement and to perform its obligations hereunder, and all actions necessary
for the due authorization, execution, delivery and performance by such Member of
this Agreement have been duly taken;
(b) Compliance with Other Instruments. Such Member's authorization,
---------------------------------
execution, delivery, and performance of this Agreement do not conflict with any
other agreement or arrangement to which such Member is a party or by which it is
bound;
(c) Purchase Entirely for Own Account. Such Member is acquiring its
---------------------------------
Membership Interest in the LLC for such Member's own account for investment
purposes only and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof and has no contract understanding,
undertaking, agreement or arrangement of any kind with any Person to sell,
transfer or pledge to any Person such Membership Interest or any part thereof
nor does such Member have any plans to enter into any such agreement;
(d) Investment Experience. By reason of its business or financial
---------------------
experience, such Member has the capacity to protect its own interests in
connection with the transactions contemplated hereunder, is able to bear the
risks of an investment in the LLC, and at the present time could afford a
complete loss of such investment;
(e) Disclosure of Information. Such Member is aware of the LLC's
-------------------------
business affairs and financial condition and has acquired sufficient information
about the LLC to reach an informed and knowledgeable decision to acquire an
interest in the LLC; and
(f) Federal and State Securities Laws. If federal and state securities
---------------------------------
laws apply to the Membership Interests, such Member acknowledges that the
Membership Interests have not been registered under the Securities Act or any
state securities laws, inasmuch as they are being acquired in a transaction not
involving a public offering, and under such laws, may not be resold or
transferred by such Member without appropriate registration or the availability
of an exemption from such requirements. In this connection, such Member
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.3 Resignation or Withdrawal of a Member. Except as specifically provided
-------------------------------------
herein, no Member may withdraw from membership in the LLC or withdraw such
Member's interest in the capital of the LLC.
- 9 -
3.4 Assignment of Membership Interest; Admission of Substitute Members.
------------------------------------------------------------------
Neither Member may transfer, sell, encumber, mortgage, assign or otherwise
dispose of any portion of its Membership Interest except on such terms,
including any amendment hereto, as the other Member may agree in writing. Any
purported transfer, sale, encumbrance, mortgage, assignment, or disposition of a
Membership Interest in contravention of this Section 3.4 will be void and of no
effect to, on or against the LLC, any Member, any creditor of the LLC or any
claimant against the LLC. Notwithstanding any other provision of this Agreement,
no Person will be admitted as a Substitute Member and admitted to all the rights
of such Member who assigned its respective Membership Interest, without the
prior written approval of both Members. If so admitted, the Substitute Member
will have all the rights and powers of, and will be subject to all the
restrictions and liabilities of, such Member who originally assigned the
Membership Interest. The admission of a Substitute Member will not release
either Member who previously assigned its Membership Interest from any liability
of such assigning Member to the LLC that may have existed before such
substitution. Consents required hereunder may be given in advance of any
transfer by any writing signed by a Member. A Substitute Member, upon admission
to the LLC, will be a Member for all purposes thereafter.
ARTICLE IV
CONTRIBUTIONS TO CAPITAL
------------------------
4.1 Initial Contribution. Upon written demand by the Management Committee
--------------------
to each of Embarcadero and Aztec, Embarcadero will contribute to the LLC, as
Embarcadero's Initial Capital Contribution to the LLC, a total of US$1,000,000
in cash and Aztec will also contribute to the LLC, as Aztec's Initial Capital
Contribution to the LLC, a total of US$1,000,000 in cash.
4.2 Additional Contributions. No Member shall be required or permitted to
------------------------
make any additional Capital Contribution except as otherwise agreed by the
Members.
ARTICLE V
ACTION BY MEMBERS
-----------------
5.1 Meetings of Members. All meetings of Members for the election of
-------------------
members of the Management Committee will be held in Santa Clara, California, at
such place as may be fixed from time to time by the Management Committee, or at
such other place as is designated from time to time by the Management Committee
in writing in the notice to the Members of such meeting. Meetings of Members for
any other purpose may be held at such time and place, within or without the
State of Delaware, as will be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Members may participate in a meeting of
Members 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 will constitute presence in person at the
meeting.
- 10 -
5.2 Annual Meetings.
---------------
(a) Date and Time. Annual meetings of Members, commencing with the
-------------
year 2002, will be held on such date and at such time as will be designated from
time to time by the Management Committee and stated in the notice of the
meeting, at which the Members will elect the Management Committee, and transact
such other business as may properly be brought before the meeting.
(b) Notice of Annual Meetings. Written notice of the annual meeting
-------------------------
stating the place, date and hour of the meeting will be given to each Member at
such meeting not less than seven nor more than 60 days before the date of the
meeting.
5.3 Special Meetings.
----------------
(a) Call of Special Meetings. Special meetings of the Members, for any
------------------------
purpose, may be called by the Management Committee at any time and will be
called by the Management Committee at the request in writing of either Member,
in which case a copy of which request will be sent to the other Member. A
request for a meeting of the Members initiated by the Management Committee or by
either Member will state the purpose of the proposed meeting. A special meeting
of the Members for the election of Management Committee members may be called by
either Member, upon at least seven days prior written notice to the other Member
and to the Management Committee.
(b) Notice of Special Meetings. Written notice of a special meeting
--------------------------
stating the place, date and hour of the meeting, and the purpose for which the
meeting is called, will be given not less than seven nor more than 60 days
before the date of the meeting, to each Member.
(c) Business To Be Conducted At Special Meeting. Business transacted
-------------------------------------------
at any special meeting of the Members will be limited to the purposes stated in
the notice of such meeting.
5.4 Quorum.
------
(a) Quorum. The presence of both Members or their proxies at a meeting
------
of the Members will constitute a quorum at all meetings of Members for the
transaction of business except as otherwise provided by statute.
(b) Lack of Quorum; Adjournment. If, however, a quorum is not present
---------------------------
or represented at any meeting of the Members, the Members present in person, or
represented by proxy, may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. Upon resumption of an adjourned meeting, any business may be
transacted that might have been transacted before the meeting was adjourned. If
the adjournment is for more than 30 days, or if after the adjournment a new date
is fixed for the adjourned meeting, written notice of the adjourned meeting will
be given to each Member and to the Management Committee.
- 11 -
5.5 Validity of Proxies. No proxy shall be valid three years after its date
-------------------
of execution, unless such proxy expressly provides for a longer period.
5.6 Waiver of Notice. Any notice of a meeting of the Members required by
----------------
this Agreement or the Act may be waived by a Member in writing and shall be
deemed to be waived by a Member by attending any meeting of the Members without
preserving their objection to the required notice.
5.7 Action Without Meeting. Except to the extent otherwise required by the
----------------------
Act, any action which may be taken by the Members at a meeting may be taken by
unanimous written consent signed by all Members.
5.8 Member Vote Required. Except to the extent otherwise required by the
--------------------
Act or as otherwise set forth in this Agreement, any action or item requiring
the approval of the Members, the consent of the Members, the affirmative vote of
the Members or the like, will require the unanimous approval, consent, vote or
the like of both Members.
5.9 Approval By Members. The following will require approval by each Member
-------------------
in writing in addition to approval by the Management Committee:
(a) Amendment. Any amendment of the Certificate of Formation of the
---------
LLC or of this Agreement;
(b) Admission. Admission of an additional Member or a Substitute
---------
Member;
(c) Additional Capital Contributions. The call for voluntary
--------------------------------
contribution of additional Capital Contributions of a Member;
(d) Issuance of Additional Membership Interests. Issuance of
-------------------------------------------
Membership Interests to any Person not a Member;
(e) Certain Approvals as to Budget, Strategic Plan, Alteration of
-------------------------------------------------------------
Primary Purpose or Business of the LLC. Approval of (i) the Budget on an annual
--------------------------------------
basis, and any material modification to the Budget, and (ii) the Strategic Plan
and any material modification thereto, and (iii) any alteration of the Purpose
of the LLC, whether in this Agreement or any other agreement to which the LLC is
a party;
(f) Dissolution Vote. A vote to dissolve the LLC;
----------------
(g) Sale of LLC Assets. The sale, exchange or other disposition of
------------------
all, or substantially all, of the LLC's assets as part of a single transaction
or plan;
(h) Merger. The merger of the LLC with any other Person or any
------
recapitalization of the LLC, including any reincorporation of the LLC into a
jurisdiction other than Delaware; and
- 12 -
(i) Compromise or Return. A decision by the Management Committee to
--------------------
compromise the obligation of a Member to return money or property paid or
distributed unlawfully from the LLC, or of the obligation of a Member for a
Capital Contribution to the LLC as otherwise provided herein.
ARTICLE VII
MANAGEMENT COMMITTEE
--------------------
6.1 Certain Management by Management Committee. Except for situations in
------------------------------------------
which the approval of the Members is required by the Act or this Agreement, and
except to the extent managed by the officers of the LLC under the supervision of
the Management Committee, the LLC will be managed and controlled by the
Management Committee. The Management Committee may exercise all powers of the
LLC consistent with the Purpose of the LLC and may do all such lawful acts and
things to achieve the Purpose as are not by the Act, the Certificate of
Formation, or this Agreement, directed or required to be exercised or done by
the Members themselves. It is intended that the powers and authority of the
Management Committee will be substantially the same as the powers and authority
of a Board of Directors of a corporation formed under the laws of the State of
Delaware. Without limiting the foregoing, the following will require approval by
the Management Committee:
(a) Certain Agreements. Any agreement committing the LLC to an
------------------
obligation in excess of, or any single expenditure or related expenditures by
the LLC in excess of, in each case, US$25,000;
(b) Certain Liens and Encumbrances. Creation of any lien or
------------------------------
encumbrance on the assets of the LLC;
(c) Certain Related Transactions. Any transaction between the LLC and
----------------------------
a Member, or with any Affiliate of a Member;
(d) Transfer Prices and Royalties. Determination of transfer prices or
-----------------------------
royalties to be paid by or to the LLC other than as is set forth in any of the
Collateral Agreements;
(e) Collateral Agreements. Termination of or amendment to any
---------------------
Collateral Agreement; and
(f) Distributions. The making of any distribution to the Members.
-------------
6.2 Management Committee Number, Nominees, Vacancies. Unless otherwise
------------------------------------------------
agreed in writing by the Members as an amendment hereto, (a) the Management
Committee will consist of four individuals, and (b) each Member individually
will appoint two individuals, the initial Management Committee comprising of ▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇, being the individuals initially appointed by
Embarcadero, and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, being the
individuals initially appointed by Aztec. Each Member will notify the other
Members in writing, reasonably in advance of the date of election of the
Management
- 13 -
Committee as to the nominee(s) of the notifying Member. Each Member will appoint
and replace its appointed members of the Management Committee during the
existence of the LLC, and any such substitutions will be notified in writing
reasonably in advance of such substitution, by the Member who substitutes such
individual. Individuals serving on the Management Committee will hold office
until the next meeting, whether annual or special, of Members, at which the
Management Committee is elected and such duly elected member of the Management
Committee are qualified. Each Member will vote for the election to the
Management Committee of its own nominees as well as those nominated by the other
Members. Any member of the Management Committee may resign at any time by giving
written notice thereof to each Member and to the Management Committee.
6.3 Meetings of The Management Committee; Quorum and Decisions; Observer
--------------------------------------------------------------------
Rights.
------
(a) Meetings of The Management Committee. The Management Committee may
------------------------------------
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Management Committee will be held upon at
least seven days' written notice at times and places determined by the
Management Committee. Special meetings of the Management Committee may be called
by any member of the Management Committee on at least four days' prior notice to
each member of the Management Committee by mail or at least 48 hours' prior
notice to each member of the Management Committee either personally or by
telegram or facsimile transmission. Special meetings of the Management Committee
may also be called by a member of the Management Committee on receipt of the
written request of a Member. Members of the Management Committee may participate
in a meeting of the Management 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 will
constitute presence in person at the meeting. Materials to be considered at any
meeting of the Management Committee will be distributed to the Members and to
each member of the Management Committee at least seven days prior to the
meeting, and draft minutes of each such meeting will be distributed to the
Members and to each member of the Management Committee within 30 days after the
relevant meeting.
(b) Quorum and Decisions. At all meetings of the Management Committee,
--------------------
three members of the Management Committee will constitute a quorum for the
transaction of business. If a quorum is not present at any meeting of the
Management Committee, the members of the Management Committee present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present. All decisions required
by law to be made, or chosen to be made, by the Management Committee at a
meeting of the Management Committee will require the consent of a majority of
the members of the Management Committee present at such meeting; provided,
however, that at least one member of the Management Committee appointed by
Embarcadero and at least one member of the Management Committee appointed by
Aztec must consent to such action. Each member of the Management Committee shall
have one vote.
- 14 -
(c) Observer Rights. Each Member may have one or more observers
---------------
present as guests at any meeting of the Management Committee. The number of such
observers at a given meeting for a given Member will be determine in good faith
by the Management Committee. Each such attending observer will comply with such
reasonable confidentiality procedures, including exclusion during certain
portions of Management Committee meetings to be determined by the Management
Committee, and execution of such customary confidentiality agreements, as the
Management Committee may request. Upon reasonable notice and at a scheduled
meeting of the Management Committee or such other time, if any, as the
Management Committee may determine in its sole discretion, the observer may
address the Management Committee with respect to such Member's concerns
regarding significant business issues facing the LLC. The LLC will, subject to
such observer's execution of such customary confidentiality agreements as the
Management Committee requests, give to such observer copies of all notices,
minutes, consents and other material that the LLC provides to the members of the
Management Committee. The LLC's obligations under this Section 6.3(c) will
terminate upon the termination of the LLC or when there is only one Member.
(d) Waiver of Notice. Any notice of Management Committee meetings
----------------
required by this Agreement or the Act may be waived by a member of the
Management Committee in writing and shall be deemed to be waived by a member of
the Management Committee by attending any meeting of the Management Committee
without preserving their objection to the required notice.
6.4 Action Without Meeting. Any action required or permitted to be taken at
----------------------
any meeting of the Management Committee thereof may be taken without a meeting,
if each member of the Management Committee consents thereto in writing and such
writing is filed with the minutes of proceedings of the Management Committee.
6.5 Compensation and Reimbursement of Members of the Management Committee.
---------------------------------------------------------------------
The LLC will pay each member of the Management Committee such member's
reasonable travel, lodging and related expenses, if any, of attendance at each
meeting of the Management Committee, upon submission to the LLC by such member
of the Management Committee of reasonably detailed invoices therefor. Members of
the Management Committee may be paid, by the LLC, a fixed sum for attendance at
each meeting of the Management Committee or a stated salary as a member of the
Management Committee, in each case as determined by the Management Committee. No
such payment will preclude any member of the Management Committee from serving
the LLC in any other capacity and receiving compensation therefor.
6.6 Amendment of Certificate of Formation or Agreement. The Management
--------------------------------------------------
Committee will have the duty and authority to amend the Certificate of Formation
or this Agreement as and to the extent necessary to reflect any and all changes
or corrections necessary or appropriate as a result of any action taken in
accordance with the terms of this Agreement by the Members or by the Management
Committee.
- 15 -
ARTICLE VII
LLC OFFICERS, EMPLOYEES AND CONSULTANTS
---------------------------------------
7.1 Election of Officers; Required Officers; Initial Officers. The officers
---------------------------------------
of the LLC shall include a Chief Operating Officer, a Treasurer and a Secretary.
The Management Committee may create other offices and elect such other officers
as it deems appropriate. Any number of offices may be held by the same person.
The Chief Operating Officer will be a person nominated by Aztec and approved by
Embarcadero in writing and will be seconded to the LLC as described in ARTICLE X
below. The Treasurer will be a person nominated by Embarcadero and approved by
Aztec in writing. The Secretary will be a person nominated by Embarcadero and
approved by Aztec in writing. The initial Chief Operating Officer will be ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ the initial Treasurer will be ▇▇▇ ▇▇▇▇▇▇▇ and the initial
Secretary will be ▇▇▇ ▇▇▇▇▇▇▇.
7.2 Term of Office; Duties. Each officer will hold office for such term as
----------------------
will be determined from time to time by the Management Committee. The duties of
any officers other than the Chief Operating Officer, Treasurer and Secretary,
which are set forth herein, and any lawful duties of such officers beyond those
specified herein, will be established from time to time by the Management
Committee.
7.3 Reporting of Officers. The Chief Operating Officer, Treasurer,
---------------------
Secretary and any other officer of the LLC appointed by the Management Committee
will report to the Management Committee.
7.4 Compensation of Officers. The salaries and benefits, if any, of all
------------------------
officers and agents of the LLC will be fixed by the Management Committee;
provided, however, that the no salary or benefits shall be provided by the LLC
to the Chief Operating Officer, Treasurer or Secretary. The Chief Operating
Officer shall not be an employee of the LLC but shall be seconded to the LLC by
Aztec to provide services to the LLC as described in ARTICLE X hereof. The
Treasurer and Secretary shall not be employees of the LLC but shall be seconded
to the LLC by Embarcadero to provide services to the LLC and as such the salary
and all other employment benefits or obligations due the Treasurer or Secretary
shall be paid for or provided by Embarcadero, the employer of the Treasurer and
Secretary.
7.5 Duties of Chief Operating Officer. Subject to the limitations of this
---------------------------------
Section 7.5 or any action specifically reserved to the Management Committee or
Members by this Agreement, the Chief Operating Officer will have general and
active management of the day to day business and affairs of the LLC and will see
that all orders and resolutions of the Management Committee are carried into
effect. The Chief Operating Officer will have the authority to execute documents
for, contract for, negotiate on behalf of and bind, and otherwise represent, the
interests of the LLC as authorized by the Management Committee in any job
description created by, or any resolution passed by, the Management Committee,
except where required or permitted by this Agreement or by law to be otherwise
signed and executed and except where the signing and execution thereof has been
expressly delegated by the Management Committee to some other officer or agent
of the LLC. Notwithstanding the foregoing, without
- 16 -
separate Management Committee approval the Chief Operating Officer shall have
no power to carry out any action outside the then applicable Budget and the
then applicable Strategic Plan.
7.6 Duties of Treasurer. Unless the Management Committee determines
-------------------
otherwise, the powers and duties of the Treasurer will be as follows:
(a) Accounts. To supervise and control the keeping and maintaining of
--------
adequate and correct accounts of the LLC's properties and business transactions,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares, which books of account shall at all
reasonable times be open to inspection by any member of the Management
Committee, and to render to the Management Committee, whenever it may require,
accounts of all transactions as Treasurer and of the financial condition of the
LLC.
(b) Custody. To have the custody of all funds, securities, evidences
-------
of indebtedness and other valuable documents of the LLC and, at his or her
discretion, to cause any or all thereof to be deposited for the account of the
LLC with such depository as may be designated from time to time by the
Management Committee.
(c) Receiving of Moneys and Receipts. To receive or cause to be
--------------------------------
received, and to give or cause to be given, receipts and acquittances for moneys
paid in for the account of the LLC.
(d) Disbursement. To disburse, or cause to be disbursed, all funds of
------------
the LLC as may be directed by the Management Committee, taking proper vouchers
for such disbursements.
7.7 Duties of Secretary. The Secretary will attend all meetings of the
-------------------
Members and will record all the proceedings of the meetings of such Members in a
book to be kept for that purpose. The Secretary will give, or cause to be given,
on behalf of the LLC, written notice of all meetings of the Members and of the
Management Committee and of committees thereof, and will perform such other
duties as may be prescribed by the Management Committee.
7.8 Certain Standards of Care. In discharging their respective duties, the
-------------------------
Management Committee or any officer of the LLC will be fully protected in
relying in good faith upon any such records and upon such information, opinions,
reports or statements by any other person, as to matters the Management
Committee or officer reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the LLC or any other facts pertinent to the existence and amount of
assets from which distributions to Members might properly be paid. Unless fraud,
deceit or a wrongful taking is proven by a nonappealable court order, judgment,
decree or decision, neither the Management Committee nor any officer will be
liable or obligated to the Members for any mistake of fact or judgment or for
the doing of any act or the failure to do any act by the Management Committee or
such officer in conducting the business, operations and affairs of the LLC,
which may cause or result in any loss or damage to the LLC or the Members.
Neither the Management Committee nor any officer, in any way guarantee the
return of a
- 17 -
Member's capital or a profit for either Member from the operations of the LLC.
Neither the Management Committee nor any officer of the LLC will be responsible
to any Member because of a loss of investments or a loss in operations, unless
the loss is the result of fraud, deceit or a wrongful taking by the Management
Committee or any member of the Management Committee, or such officer proven as
set forth in this Section 7.8. Absent fraud upon the LLC or either or both
members, or violation of the confidentiality provisions of any employee or
consultant invention assignment and confidentiality agreement between such
individual and the LLC, and except as otherwise provided in any written
agreement between the next described individuals and either Member, and except
as to otherwise unlawful conduct, neither any member of the Membership
Committee, nor any officer of the LLC, will incur liability to the LLC or to any
of the Members as a result of engaging in any other business or venture.
7.9 Resignation of Officers; Removal. Any officer of the LLC may resign at
--------------------------------
any time by giving written notice thereof to each Member and to the Management
Committee. Any officer may be removed and replaced, with or without cause, upon
the decision of the Management Committee. In the event the Chief Operating
Officer, Treasurer or Secretary resigns or is removed, a new Chief Operating
Officer, Treasurer or Secretary, as applicable, shall be appointed pursuant to
Section 7.1.
ARTICLE VIII
ACCOUNTING AND RECORDS
----------------------
8.1 Distributions.
-------------
(a) Dissolution Event. Upon the occurrence of a Dissolution Event, if
-----------------
the LLC is not liquidated, any Member may request, subject to applicable law, an
in-kind distribution allocable to his Capital Account.
(b) Current Distributions. All cash of the LLC derived from its
---------------------
business activities (other than from the proceeds of any loan to the LLC) may be
distributed at such times and in such amounts as the Management Committee shall
determine in its sole discretion. All distributions of cash pursuant to this
Section 8.1(b) shall be distributed to the Members in proportion to their
relative Percentage Interests.
(c) Liquidating Distributions. After the payment of the debts and
-------------------------
liabilities of the LLC, as provided in Section 12.4 hereof, any property or
assets of the LLC, including proceeds from the liquidation thereof, remaining
upon the dissolution and liquidation of the LLC shall be distributed among the
Members in an amount equal to each Member's Capital Account, as adjusted to
reflect gains and losses realized in the process of liquidation. Such
distributions shall be made after allocating all items of Net Profit or Net Loss
to the Members as provided in this Agreement.
(d) Withholding.
-----------
(i) The LLC shall seek to qualify for exemptions from any
provision of the Code or any provision of state, local, or foreign tax law that
would otherwise require the
- 18 -
LLC to withhold amounts from payment or distributions to the Members. If the
LLC does not obtain any such exemption, the LLC is authorized to withhold from
any payment or distribution to any Member any amounts that are required to be
withheld pursuant to the Code or any provision of any state, local, or foreign
tax law that is binding on the LLC.
(ii) Any amount withheld with respect to any payment or
distribution to any Member shall be offset against the amount of the payment or
distribution to which the Member would otherwise be entitled. If the Code or any
provision of any state, local, or foreign tax law that is binding on the LLC
requires that the LLC remit to any taxing authority any withholding tax with
respect to, or for the account of, any Member in its capacity as a Member, the
Management Committee shall, to the extent that LLC funds are available therefor,
cause the Company to remit the full required amount of such withholding tax to
the taxing authority and shall notify such Member in writing of its obligation
to pay to the LLC such withholding tax to the extent it exceeds the amount of
any payment or distribution to which such Member would otherwise then be
entitled. Each Member shall pay to the LLC, within five business days after its
receipt of written notice from the Management Committee that withholding is
required with respect to such Member, any amounts required to be remitted by the
LLC to any taxing authority with respect to such Member that are in excess of
the amount of any payment or distribution to which such member would otherwise
be entitled. If the LLC is required to remit any withholding tax with respect
to, or for the account of, any Member prior to the LLC's receipt of any payment
required to be made by such Member pursuant to the preceding sentence, the
amount of the payment required to be made by such Member shall be treated as a
loan (the "Withholding Advance") from the LLC to the Member, which shall accrue
--------------------
interest until paid at a rate of fifteen percent per year, compounded
semi-annually.
(iii) To the extent it has not previously been paid by the Member
in cash, any Withholding Advance made to a Member and any interest accrued
thereon shall be credited against, and shall be offset by, the amount of any
later payment or distribution to which the Member would otherwise be entitled,
with any credit for accrued and unpaid interest as of the date such payment or
distribution would otherwise have been made being applied before any credit for
the amount of the Withholding Advance. Any Withholding Advance made to a Member
and any interest accrued thereon, to the extent it has not previously been paid
by the Member in cash or fully credited against payments or distributions to
which the Member would otherwise be entitled, shall be paid by the Member to the
LLC upon the earliest of (A) the dissolution of the LLC, (B) the date on which
the Member ceases to be a Member of the LLC, or (C) demand for payment by the
Management Committee.
8.2 Allocations of Net Profit and Net Loss.
--------------------------------------
(a) Allocation of Net Profit. Except as provided elsewhere in this
------------------------
Section 8.2, until the occurrence of a Dissolution Event, as of the end of each
Fiscal Year (or other period for which Net Profit or Net Loss was calculated),
Net Profit (if any) shall be allocated to the Capital Accounts of the Members in
proportion to their Percentage Interests.
- 19 -
(b) Allocation of Net Loss. Except as provided elsewhere in this
----------------------
Agreement, as of the end of each Fiscal Year (or other period for which Net
Profit or Net Loss was calculated), the Net Loss (if any) for such period shall
be allocated to the Capital Accounts of the Members in accordance with their
Percentage Interests.
(c) Disaggregation. In making allocations of Net Profit or Net Loss
--------------
pursuant to this ARTICLE VIII, the Management Committee is authorized to
separate these aggregate amounts into their components of items of gross income,
gain, loss or deduction, and allocate such components separately (i. e.,
allocate items of income and gain as Net Gain, and items of loss or deduction as
Net Loss) in order to further the intent of the provisions of the Agreement.
8.3 Tax Allocations.
---------------
(a) Items of income, deduction, gain, loss, or credit of the LLC that
are recognized for income tax purposes shall be allocated among the Members in
such manner as to reflect equitably the amounts credited to or debited against
each member's Capital Account (or which will be so credited and debited),
whether in such year, in prior years, or in subsequent years. The LLC shall
establish and maintain records that indicate the extent to which the Capital
Account of each Member, as of the last day of each Fiscal Year, includes amounts
that have and have not been reflected in the taxable income of such Member. In a
manner determined by the Management Committee to be feasible and equitable,
taxable income and gain in each Fiscal Year shall be allocated among the Members
whose Capital Accounts have been allocated the related credits, and items of
deduction, loss, and credit in each Fiscal Year shall be allocated among the
Members whose Capital Accounts have been allocated the related debits.
(b) In performing the allocations under Section 8.3(a), the following
rules shall apply unless manifestly unreasonable:
(i) Items of income and gain of the LLC shall be allocated to
the Members in a manner that complies with the gain charge-back requirements of
Treasury Regulations Section 1.704-2(f) and 1.704-2(i)(4).
(ii) If any Member unexpectedly receives any adjustments,
allocations, or distributions described in Regulations Section
1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6),
items of LLC gross income and gain shall be specially allocated to such Member
for tax purposes in an amount and manner sufficient to eliminate as quickly as
possible any deficit balance created by such adjustments, allocations, or
distributions in the Member's capital account maintained for tax purposes. Any
special allocation under this Section 8.3(b) shall be taken into account in
computing subsequent allocations of income, deduction, gain, loss, and credit so
that the net amount of allocations of income, deduction, gain, loss, and credit
shall, to the extent possible, be equal to the net amount that would have been
allocated if the unexpected adjustment, allocation, or distribution had not
occurred.
(iii) If the admission of a Member results in any compensation
income to such Member and as a result the LLC receives a deduction for tax
purposes, such deduction shall be specially allocated to such Member.
- 20 -
(iv) The LLC shall take into account the allocations in Sections
8.3(a) and 8.3(b)(i) and (ii) (the "Regulatory Allocations") in computing
---------------------
subsequent allocations pursuant to Section 8.3 so that the net amount of any
items so allocated and all other items allocated to each Member pursuant to this
Section 8.3 shall, to the extent possible, be equal to the amount that would
have been allocated to each Member had the Regulatory Allocations not been in
this Agreement.
(c) For purposes of determining the tax items allocable to any period,
such items shall be determined on a daily basis, as determined by the Management
Committee using any permissible method under Code Section 706 and the
Regulations thereunder.
(d) In accordance with Code Section 704(b) and Code Section 704(c) and
the Regulations thereunder, income, gain, loss, and deduction with respect to
any property contributed to the capital of the LLC or revalued by the LLC shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the LLC for federal
income tax purposes and its value as reflected on the books of the LLC. Any
elections or other decisions relating to such allocations shall be made by the
Management Committee in any manner that reasonably reflects the intent of this
Agreement.
ARTICLE IX
ACCOUNTING AND RECORDS
----------------------
9.1 Financial Statements. The LLC will prepare its financial statements in
--------------------
accordance with U.S. generally accepted accounting principles as from time to
time in effect and will prepare its income tax information returns using such
methods of accounting and tax year as the Tax Matters Member deems necessary or
appropriate under the Code and Treasury Regulations.
9.2 Supervision; Inspection of Books. Proper and complete books of account
--------------------------------
and records of the business of the LLC (including those books and records
identified in Section 18-305 of the Act) will be kept under the supervision of
the Management Committee at the LLC's principal office and at such other place
as designated by the Management Committee. The Management Committee will give
notice to each Member of any change in the location of the books and records.
The books and records will be open to inspection, audit and copying by any
Member, designated representative, upon reasonable notice at any time during
business hours for any purpose reasonably related to such Member's interest in
the LLC. Any information so obtained or copied will be Confidential Information.
9.3 Reliance on Records and Books of Account. Any Member or member of the
----------------------------------------
Management Committee or officer, to the extent such officer was not negligent or
fraudulent in preparation thereof, will be fully protected in relying in good
faith upon the records and books of account of the LLC and upon such
information, opinions, reports or statements presented to the LLC by its Tax
Matters Member, any of its Members, officers, employees, or by any other person,
as to matters the Tax Matters Member or Members reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care
- 21 -
by or on behalf of the LLC, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the LLC or any other facts pertinent to the existence and amount of
assets from which distributions to either or both Members from the LLC might
properly be paid.
9.4 Tax Returns. The Tax Matters Member will, as soon as practicable after
-----------
the end of each Fiscal Year, cause the LLC to file a federal income tax
information return and to transmit to each Member a schedule showing such
Member's distributive share of the LLC's income, deductions and credits, and all
other information necessary for such Members to timely file their federal income
tax returns. The Tax Matters Member similarly will cause the LLC to file, and to
provide information to such Members regarding, all appropriate state and local
income tax returns.
9.5 Tax Matters Member. Embarcadero will serve as the Tax Matters Member,
------------------
which will be the "tax matters partner" within the meaning of Code Section 6231.
The Tax Matters Member (or the other Member if it receives such notification)
will provide notice to the other Member, as provided in Code Section 6223(g) of
any administrative or judicial proceeding for the adjustment of LLC items. The
Tax Matters Member will ensure that the other Member is a notice partner as
provided in Code Section 6223(b). The Tax Matters Member may hire tax counsel
and accountants, at the expense of the LLC, in connection with any
representation of the LLC.
9.6 Annual Reports. The LLC will deliver to each Member and to each Person
--------------
(or such Member's or Person's legal representative) who was a Member during any
part of the Fiscal Year in question within 90 days after the end of each Fiscal
Year of the LLC: (a) a balance sheet for the LLC as of the close of the Fiscal
Year and a profit and loss statement for the Fiscal Year then ended, all in
reasonable detail; and (b) a report setting forth the Capital Accounts of each
Member and a description of the manner of their calculation. The annual
financial statements of the LLC will be audited and reported on as of the end of
each Fiscal Year by a firm of independent certified public accountants selected
by the Tax Matters Member, provided that the Tax Matters Member may waive the
requirement of an audit at any time and for any reason. The Treasurer will be
responsible for preparing or having prepared such reports, at the expense of the
LLC.
9.7 Other Financial and Accounting Reports. In addition to the annual
--------------------------------------
report described in Section 9.6 hereof, the LLC will prepare or cause to be
prepared and delivered to the Members such other financial and accounting
reports at such times as the Management Committee directs.
9.8 Delivery and Approval of Annual Budget and Strategic Plan. The LLC will
---------------------------------------------------------
deliver to each Member as soon as practicable after its preparation, and in any
event no later than 90 days before the close of each Fiscal Year of the LLC: (a)
an annual operating plan and budget for the LLC, prepared on a monthly basis,
for the next Fiscal Year (the "Budget"), and (b) a three year strategic plan
------
(the "Strategic Plan") for the LLC for next three Fiscal Years of the LLC. The
--------------
LLC will also promptly furnish to each Member all amendments to the Budget and
Strategic
- 22 -
Plan, if any. The Management Committee and the Members will agree upon such
Budget and Strategic Plan no later than 30 days before the end of the relevant
Fiscal Year in which they are delivered to the Members as provided in the first
sentence of this Section 9.8.
9.9 Inspection. Each Member will have the right, at its own expense, to
----------
inspect the books and records of the LLC during reasonable business hours at any
time, provided that inspections in excess of once per Fiscal Year will be at the
inspecting Member's expense for internal costs of the LLC in providing access to
such books and records.
9.10 Confidentiality. All information received pursuant to this ARTICLE IX
---------------
will be Confidential Information.
ARTICLE X
SERVICES OF CHIEF OPERATING OFFICER
-----------------------------------
10.1 Secondment of Chief Operating Officer. Aztec shall, for the term of
-------------------------------------
this Agreement, second to the LLC a suitable qualified person to act as the
Chief Operating Officer of the LLC and such person shall be appointed as Chief
Operating Officer as set forth in Section 7.1 above.
10.2 Chief Operating Officer Services. The services to be performed by the
--------------------------------
Chief Operating Officer are as set forth in Section 7.5 above and the seconded
Chief Operating Officer shall comply with the obligations imposed on the Chief
Operating Officer by this Agreement. The Chief Operating Officer shall report to
the Management Committee with the Management Committee being responsible for the
ultimate control and direction of the business of the LLC. The Management
Committee shall provide to the seconded Chief Operating Officer guidelines and
general instructions regarding his or her performance and shall provide a copy
of the applicable Budget and Strategic Plan to which the seconded Chief
Operating Officer shall be limited in performing his or her services, as more
particularly set forth in Section 7.5 above.
10.3 Removal or Resignation of Seconded Chief Operating Officer. The
----------------------------------------------------------
Management Committee may direct Aztec to replace a Chief Operating Officer, with
or without cause, and shall do so by providing Aztec written notice thereof.
Within seven (7) days of such notice or the removal or resignation of a Chief
Operating Officer, Aztec shall nominate a new Chief Operating Officer subject to
approval as provided in Section 7.1 above.
10.4 Employment of Seconded Chief Operating Officer. The Chief Operating
----------------------------------------------
Officer shall be an employee of Aztec and not an employee of the LLC. Aztec
shall continue to employ, as a seconded employee, the Chief Operating Officer,
and shall have the sole right to discipline, promote, supervise or terminate
such person's employment with Aztec. Aztec will make all payments of wages and
salaries to the Chief Operating Officer based on Aztec's salary and wage
policies in effect with respect to the Chief Operating Officer and shall include
the Chief Operating Officer in Aztec's employee benefit and stock option plans,
as in place from time to time. Aztec will make all necessary withholdings of
federal, state and local taxes from the wages and salaries paid to the Chief
Operating Officer and will be responsible for payment of all Social Security
(FICA) and unemployment (FUTA) taxes and charges for workers' compensation
- 23 -
insurance with respect to the Chief Operating Officer. Aztec shall maintain
workers' compensation insurance, as prescribed by law, for the benefit of the
Chief Operating Officer furnished hereunder, as well as comprehensive general
liability insurance of a nature and amount ordinary in the software development
industry.
10.5 Indemnity. Aztec shall hold the LLC and its agents, employees,
---------
officers and directors harmless from and against any and all claims, liabilities
and expenses arising out of Aztec's legal responsibility under the law for
workers' compensation, Social Security taxes, unemployment taxes and payroll
withholdings. Aztec shall also comply with all federal and state labor laws,
regulations and orders, including those that relate to the payment of minimum
wages, overtime and non-discrimination in employment.
ARTICLE XI
INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------
11.1 Indemnification.
---------------
(a) Indemnification by LLC of Certain Indemnitees. To the fullest
extent permitted by the Act and by law, the LLC, in accordance with this Section
11.1, will indemnify and hold harmless the Management Committee, each member of
the Management Committee, each Member and its Affiliates, and the partners,
members, stockholders, as relevant, of each Member and its Affiliates, and the
controlling persons, officers, directors or equivalents, and employees and
agents of each Member or Affiliate, as applicable, (collectively, the
"Indemnitees"), against any and all Damages arising from any and all claims,
-----------
demands, actions, suits or proceedings (civil, criminal, administrative or
investigative) in which the Indemnitee may be involved, as a party or otherwise,
by reason of the Indemnitee's management of, or involvement in, the affairs of
the LLC, or rendering of advice or consultation with respect thereto, or which
otherwise relate to the LLC, its properties, business or affairs, if such
Indemnitee acted in good faith and in a manner such Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the LLC, and, with
respect to any criminal proceeding, had no reasonable cause to believe the
conduct of such Indemnitee was unlawful. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
---- ----------
its equivalent, will not, of itself, create a presumption that such Indemnitee
did not act in good faith and in a manner which such Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the LLC or that such
Indemnitee had reasonable cause to believe that such Indemnitee's conduct was
unlawful (unless there has been a final adjudication in the proceeding that such
Indemnitee did not act in good faith and in a manner which such Indemnitee
reasonably believed to be in or not opposed to the best interests of the LLC, or
that such Indemnitee did have reasonable cause to believe that such Indemnitee's
conduct was unlawful).
(b) Certain Other Indemnification by the LLC. The LLC may also
----------------------------------------
indemnify, as an Indemnitee hereunder, any individual who was or is a party or
is threatened to be made a party to any threatened, pending, or completed action
by or in the right of the LLC to procure a judgment in its favor by reason of
the fact that such individual is or was a member of the Management Committee, or
an officer, employee, consultant or agent of the LLC, against
- 24 -
expenses actually or reasonably incurred by such individual in connection with
the defense or settlement of such action, if such individual acted in good faith
and in a manner such individual reasonably believed to be in, or not opposed to,
the best interests of the LLC, except that indemnification will be made in
respect of any claim, issue or matter as to which such individual will have been
adjudged to be liable for misconduct in the performance of the individual's duty
to the LLC only to the extent that the court in which such action or suit was
brought, or another court of appropriate jurisdiction, determines upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such individual is fairly and reasonably entitled to
indemnity for such expenses which such court will deem proper. To the extent
that such individual has been successful on the merits or otherwise in defense
of any proceedings referred to herein, or in defense of any claim, issue or
matter therein, such individual will be indemnified by the LLC against expenses
actually and reasonably incurred by such individual in connection therewith.
Notwithstanding the foregoing, no individual will be entitled to indemnification
hereunder for any conduct arising from the gross negligence or willful
misconduct of such individual or reckless disregard in the performance by such
individual of such individual's duties under this Agreement or duties to the
LLC.
(c) Payment or Advancement of Certain Expenses. Expenses (including
------------------------------------------
reasonable fees and costs of attorneys) incurred in defending any proceeding
under Sections 11.1(a) or (b) hereof may be paid by the LLC in advance of the
final disposition of such proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee or Person to repay such amount if it will ultimately be
determined that the Indemnitee or Person is not entitled to be indemnified by
the LLC as authorized hereunder.
(d) No Exclusivity. The indemnification provided by this Section 11.1
--------------
will not be deemed to be exclusive of any other rights to which any Person may
be entitled under any agreement, or as a matter of law, or otherwise, both as to
action in a Person's official capacity and to action in another capacity.
11.2 Liability for Finder's or Broker's Fees. Each Member will be
---------------------------------------
responsible for paying any finder's or broker's fee and any other Damages owed
any third party that such Member incurs or which is claimed by such third party
against the other Member and/or LLC, based directly or indirectly on the
negotiation of, or the entry by the parties hereto into, this Agreement, and
will indemnify the LLC and the other Member, and the other Indemnitees, against
any obligation to pay any such fee.
11.3 Liability in Event of Default. In the event of an Event of Default,
-----------------------------
the Defaulting Member will be liable to the LLC and to the Non-Defaulting
Member, and to such other Indemnitees as are relevant, for any and all Damages
suffered or incurred by the LLC or the Non-Defaulting Member or such other
Indemnitee(s) as a result of such Event of Default.
11.4 Limitation of Liability. Each Member's liability under this ARTICLE XI
-----------------------
will be limited as set forth in the Act and other applicable law.
Notwithstanding anything to the contrary herein contained (a) the debts,
obligations and liabilities of the LLC will be solely the debts, obligations and
liabilities of the LLC; and no Member or member of the Management Committee
- 25 -
or officer of the LLC or any other Indemnitee will be obligated personally for
any such debt, obligation or liability of the LLC solely by reason of such
Person, or such Person's related Indemnitee, being a Member or member of the
Management Committee or officer of the LLC, and the LLC will hold such Person,
or such Person's related Indemnitee, harmless from any such debt, obligation or
liability, and (b) as to any Member who has made a Capital Contribution to the
LLC, such Member will not be liable, absent fraud, for any debts or losses of
the LLC beyond the total amount of such Member's Capital Contribution.
ARTICLE XII
TERMINATION; WAIVER AND OTHER REMEDIES
--------------------------------------
12.1 Termination.
-----------
(a) Termination Upon Certain Events. The LLC will be terminated and
-------------------------------
dissolved, its assets disposed of and its affairs wound up upon the first to
occur of the following:
(i) Affirmative Vote of Members. The affirmative vote of each
---------------------------
of the Members, including any written agreement between the Members, to
terminate and dissolve the LLC; or
(ii) Dissolution of LLC By Court Order Or Authority. Any
----------------------------------------------
dissolution of the LLC ordered by a final judgment by a court of competent
jurisdiction or by a regulatory authority; or
(iii) Deadlock. Following a Deadlock that has persisted for a
--------
period exceeding 20 days, written notice of one Member to the other Members and
the Management Committee of such Member's election to terminate and dissolve the
LLC.
(iv) Event of Default. Upon an Event of Default, provided that
----------------
the non-Defaulting Members give written notice to the LLC and the Defaulting
Member of their election to have the LLC be terminated and dissolved within 15
days of the Event of Default.
(v) Certain Events. Any of the following, if and only if the
--------------
non-affected Members give written notice to the affected Member (or such
affected Member's trustee or similar third party in the event of Dissolution or
Bankruptcy of the affected Member), with a copy to the Management Committee, of
the non-affected Members' election to terminate and dissolve the LLC, which
notice, to be effective, must be given within 15 days after the non-affected
Members receive written notice from the affected Member (or its trustee or
relevant similar party) as to the occurrence of the relevant event, as provided
for in Section 12.1(b) below:
(A) Dissolution Event. The occurrence of a Dissolution
-----------------
Event as to the affected Member; or
(B) Certain Force Majeure Events. Upon written notice,
----------------------------
which may be included in the non-affected Members' written notice of election to
terminate and dissolve the LLC, by the non-affected Members to the affected
Member in the event of a Force Majeure
- 26 -
Event affecting the affected Member, with a copy to the Management Committee,
in which notice such notifying non-affected Members state that, in the good
faith judgment of such Members, such Force Majeure Event does or could have a
material adverse effect on the business or operations of the LLC and/or of such
non-affected Members.
(b) Notice of Certain Events. Upon the occurrence of a Dissolution
------------------------
Event or a Force Majeure Event as to an affected Member, the affected Member
shall give the non-affected Members and the LLC notice of such an event within
10 days of the occurrence of such event.
12.2 Authority to Wind Up. The Management Committee will have all necessary
--------------------
power and authority required to marshal the assets of the LLC, to pay its
creditors, to distribute assets and otherwise wind up the business and affairs
of the LLC. In particular, the Management Committee will have the authority to
continue to conduct the business and affairs of the LLC insofar as such
continued operation remains consistent, in the judgment of the Management
Committee, with the orderly winding up of the LLC.
12.3 Winding Up and Certificate of Cancellation. The winding up of the LLC
------------------------------------------
will be completed when all debts, liabilities and obligations of the LLC have
been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining property and assets of the LLC have been
distributed to the Members. Upon the completion of winding up of the LLC, a
Certificate of Cancellation will be filed with the Office of the Secretary of
State of Delaware.
12.4 Distribution of Assets. Upon dissolution and winding up of the LLC,
----------------------
the affairs of the LLC will be wound up and the LLC liquidated by the Management
Committee. Pursuant to such liquidation, and subject to the Right of First
Refusal, the assets of the LLC will be sold, unless the Members will consent to
a distribution in kind of the assets. If the Members do not consent to a
distribution in kind but the Management Committee determines that an immediate
sale would be financially inadvisable, it may defer sale of the LLC assets for a
reasonable time; provided, that the liquidation of the LLC will be completed
within the time required by Treasury Regulations Section 1.704-1(b)(ii)(b)(2).
If any assets are distributed in kind, then they shall be distributed on the
basis of the fair market value thereof as determined by appraisal, and shall be
deemed to have been sold at such fair market value for purposes of the
allocations under ARTICLE VIII hereof. Unless the Members otherwise agree, if
any assets are to be distributed in kind, they will be distributed to the
Members, as tenants-in-common, in undivided interests in proportion to
distributions to which such Members are entitled under this Section 12.4. The
assets of the LLC, whether cash or in kind and including any cash or property
generated through the exercise of the Right of First Refusal, will be
distributed as follows in accordance with the Act, (a) first to creditors of the
LLC in the order of priority provided by law and (b) then to the Members as
provided in Section 8.1(d) hereof. Except as specifically provided otherwise
herein, no Member will have any obligation at any time to repay or restore to
the LLC all or any part of any distribution made to it from the LLC in
accordance with this Section 12.4 or to make any additional contribution of
capital to the LLC. The LLC will terminate when all of its assets have been sold
and/or distributed and all of its affairs have been wound up.
- 27 -
12.5 Right of First Refusal Regarding Intellectual Property Rights of the
--------------------------------------------------------------------
LLC.
---
(a) Upon the dissolution and winding up of the LLC, Embarcadero shall
have a right of first refusal (the "Right of First Refusal") to purchase any or
----------------------
all intellectual property rights owned by the LLC (the "Intellectual Property")
---------------------
at the fair market value of such intellectual property.
(b) Embarcadero shall exercise its Right of First Refusal within 60
days of the occurrence of the event giving rise to the termination and
dissolution of the LLC by giving Aztec and the LLC written notice of its
exercise of such right. Such notice shall include a list of the Intellectual
Property rights for which the Right of First Refusal shall be exercised as well
as the price at which Embarcadero offers to purchase such Intellectual Property.
If Aztec does not agree that the price offered by Embarcadero represents the
fair market value of the Intellectual Property identified by Embarcadero, the
Members shall have 30 days within which to agree on the fair market value. If
the Members cannot agree on the fair market value of such Intellectual Property
the Members shall agree in writing on an Appraiser who shall determine such fair
market value. If the Members cannot agree on an Appraiser within 30 days, then:
(i) Selection of an Appraiser by Each Member. Aztec and
----------------------------------------
Embarcadero will, within 30 days after the earlier of the date upon which such
Members agree in writing that they cannot agree on such Appraiser, or such
initial 30 days have expired, select an Appraiser;
(ii) Selection by Two Appraisers of Third Appraiser. The
----------------------------------------------
Appraisers selected pursuant to Section 12.5(b)(i) hereof mutually will select a
third Appraiser; and
(iii) Agreement or Average. The three Appraisers so selected
--------------------
mutually will agree on the fair market value of the Intellectual Property
identified by Embarcadero or, absent agreement, the fair market value of such
Intellectual Property will be the average of the values calculated by each
Appraiser;
(c) The Appraiser(s) shall notify each Member in writing of the
determined fair market value of such Intellectual Property, setting forth in
such writing such bases and conclusions as such Appraiser(s) deem appropriate
and customary therefor.
(d) Fees and Costs of Appraiser. Each Member will bear the fees and
---------------------------
costs of any Appraisers that such Member selects. The fees and costs of any
Appraiser selected jointly by Aztec and Embarcadero, or the costs of a third
Appraiser selected pursuant to Section 12.5(b)(ii) hereof, will be borne
one-half (1/2) by such Member. Each Member will bear its respective internal
costs connected with such appraisal.
ARTICLE XIII
DISPUTE RESOLUTION
------------------
13.1 Negotiation between Executives. Subject to Section 13.7, the parties
------------------------------
shall attempt in good faith to resolve any dispute arising out of or relating to
this Agreement promptly
- 28 -
by negotiation between executives who have authority to settle the controversy
and who are at a higher level of management than the persons with direct
responsibility for administration of this Agreement. Either party may give the
other party written notice of any dispute not resolved in the normal course of
business. Within 15 days after delivery of the notice, the receiving party shall
submit to the other a written response. The notice and the response shall
include: (i) a statement of each party's position and a summary of arguments
supporting that position; and (ii) the name and title of the executive who will
represent that party and of any other person who will accompany the executive.
Within 15 days after delivery of the disputing party's notice, the executives of
both parties shall meet at a mutually acceptable time and place, and thereafter
as often as they reasonably deem necessary, to attempt to resolve the dispute.
All reasonable requests for information made by one party to the other will be
honored. All negotiations pursuant to this Section 13.1 are confidential and
shall be treated as compromise and settlement negotiations for purposes of
applicable rules of evidence.
13.2 Arbitration. Subject to Section 13.7, any dispute arising out of or
-----------
relating to this Agreement which has not been resolved through negotiation as
provided under Section 13.1 within 60 days of the initiation of such procedure,
shall be settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, by three independent and
impartial arbitrators, of whom each party shall appoint one arbitrator, the two
arbitrators selecting the third arbitrator. The judgment upon the award rendered
by the arbitrators may be entered by any court having jurisdiction thereof. The
place of arbitration shall be San Francisco, California.
13.3 Arbitrator Decisions. The arbitrators will decide in accordance with
--------------------
the terms of this Agreement and will take into account any appropriate trade
usages applicable to the transaction. The arbitrators will state in writing the
reasons upon which the award is based. The arbitrators may allocate the fees and
expenses of arbitration, including the reasonable fees and costs of the
attorneys for the parties among the parties as the arbitrators deem appropriate.
If no allocation of fees is made, the allocation set forth in Section 15.16
below shall apply and arbitration costs and fees shall be borne by the
non-prevailing party.
13.4 Award of Arbitrators. The award of the arbitrators will be final and
--------------------
binding upon the parties. Judgment upon the award may be entered in any court
having jurisdiction. An application may be made to any such court for judicial
acceptance of the award and an order of enforcement.
13.5 Confidentiality. The negotiations pursuant to Section 13.1 and any
---------------
arbitration proceedings pursuant to Section 13.2 and terms of any arbitration
award shall be deemed Confidential Information for the purposes of this
Agreement.
13.6 Applicable Law; Disclosure. The law of the State of California,
--------------------------
excluding that body of law known as conflict of laws, will be the applicable
substantive law for all matters except those governed and by federal law, which
will apply to such other matters.
- 29 -
13.7 Litigation. Any dispute involving the Confidential Information or
----------
intellectual property of a party for which the parties may seek judicial relief,
shall be subject to the exclusive venue of the state and federal courts within
the Northern District of California and the parties hereby consent to the venue
and jurisdiction of such courts.
ARTICLE XIV
CONFIDENTIALITY
---------------
14.1 Obligations of Confidentiality. The provisions of this ARTICLE XIV
------------------------------
will apply to all Confidential Information disclosed by one party hereto to one
or more of the other parties hereto, whether prior to or after the Effective
Date, and which is not otherwise the subject of a written nondisclosure
agreement between the relevant parties. Each party hereto (a) will hold the
other parties' Confidential Information in strict confidence, (b) will not
disclose such Confidential Information to any third party and will take all
reasonable steps to prevent such disclosure, which steps will include at least
those taken by such relevant other party to protect such other party's own
confidential information of like kind, and (c) will not use any Confidential
Information of the other party for any purpose except as is necessary to carry
out this Agreement or the Collateral Agreements. Each receiving party may
disclose the disclosing party's Confidential Information to the receiving
party's responsible employees and consultants who have a bona fide need to know,
---- ----
but only to the extent necessary to carry out the purposes of the LLC. Each
receiving party will instruct all such employees and consultants not to disclose
such Confidential Information to third parties, including other consultants,
without the prior written permission of the disclosing party.
14.2 Certain Confidential Information. The existence of this Agreement and
--------------------------------
its terms, and the existence and terms of the Collateral Agreements are
Confidential Information of each party hereto.
14.3 Return of Confidential Information. Upon the disclosing party's
----------------------------------
request, the receiving party will promptly return to the disclosing party all
tangible items containing or consisting of the disclosing party's Confidential
Information and all copies thereof.
14.4 No Other Rights. Nothing contained in this Agreement will be construed
---------------
as granting any rights to the receiving party, by license or otherwise, to any
of the disclosing party's Confidential Information except as specified in this
Agreement.
14.5 Acknowledgment. Each Member and the LLC acknowledge that the
--------------
unauthorized disclosure or use of the disclosing party's Confidential
Information would cause irreparable harm and significant injury to the
disclosing party, the degree of which may be difficult to ascertain.
Accordingly, each Member agrees that the disclosing party will have the right to
seek an immediate injunction enjoining any breach of this Agreement by the
receiving party or its employees or consultants, as well as the right to pursue
any and all other rights and remedies available at law or in equity for such
breach.
- 30 -
14.6 Disclosure Required by Law. If the receiving party (or an
--------------------------
Affiliate of the receiving party) is required, whether by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process, by any competent government authority,
including pursuant to any applicable rule of any stock exchange,
self-regulatory organization or other government agency, to disclose any
Confidential Information of the disclosing party, the receiving party will
promptly notify the disclosing party in writing, in reasonable detail, of such
request or requirement and will cooperate with the disclosing party in seeking
appropriate protective arrangements requested by the disclosing party. If, in
the absence of a protective order or the receipt of a waiver in writing by the
disclosing party of such protective order, the receiving party (or any of its
Affiliates) is in the written opinion of the receiving party's counsel
compelled to disclose the Confidential Information or else stand liable for
contempt or suffer other censure or significant penalty, the receiving party
(or its Affiliates) may disclose only so much of the Confidential Information
to the party compelling disclosure as is required by law. The receiving party
will exercise (and will cause its Affiliates to exercise) commercially
reasonable best efforts to obtain appropriate protective arrangements or other
reliable assurance that confidential treatment will be accorded to Confidential
Information of the disclosing party in the event of such required disclosure.
14.7 Exchange Act Disclosures. It is hereby acknowledged that
------------------------
Embarcadero is a publicly traded company and as such is subject to certain
reporting requirements under the Exchange Act. It is hereby agreed by the
parties that notwithstanding the provisions of this ARTICLE XIV Embarcadero may
disclose Confidential Information to the extent necessary to comply with its
Exchange Act reporting requirements.
14.8 Public Announcements. During the term of this Agreement, neither
--------------------
the LLC nor either Member will (except as may otherwise be required by law or
by the Exchange Act as described in, and subject to the provisions of, Sections
14.6 and 14.7 hereof) issue any press release or other public announcement or
disclosure, with respect to this Agreement or any of the Collateral Agreements,
or any of the transactions contemplated hereby or thereby, nor any material
development relating to any of the foregoing, without the prior approval of the
Management Committee and the written consent of both Members.
14.9 Survival of Provision. Notwithstanding any other provision of
---------------------
this Agreement, the obligations and rights of the parties pursuant to this
ARTICLE XIV shall survive the dissolution of the LLC and any termination of
this Agreement.
ARTICLE XV
MISCELLANEOUS
-------------
15.1 Further Assurances. The parties hereto will execute and deliver
------------------
any further instruments or documents and perform any additional acts that are
or may become necessary to effectuate and carry on the LLC created by this
Agreement and to carry out the purposes and intent of this Agreement.
- 31 -
15.2 Binding Effect. This Agreement will be binding on and inures to
--------------
the benefit of such Members and their respective transferees, successors,
assigns and legal representatives.
15.3 Entire Agreement; Amendment. This Agreement and the Collateral
---------------------------
Agreements set forth the agreement between the Members and between the Members
and the LLC with respect to the specific subject matter hereof, and, except as
otherwise set forth herein, supersedes and terminates all prior representations,
agreements and understandings between the Members or between the Members and the
LLC regarding the subject matter hereof. No alteration, amendment, change or
addition to this Agreement will be binding upon the Members or the LLC unless in
writing and signed by an authorized signatory of each Member, in which case such
amendment also will be binding upon the LLC.
15.4 Assignment. No Member may assign or transfer this Agreement or
----------
any of such Member's rights or obligations hereunder without the prior written
consent of the other Members.
15.5 Notices. All notices, requests, consents and other communications
-------
hereunder to any party will be deemed to be sufficient if contained in a written
instrument delivered in person, including delivery by recognized express
courier, fees prepaid, or sent by facsimile transmission or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
in each case addressed as set forth below, or to such other address as may
hereinafter be designated in writing by the recipient to the sender pursuant to
this Section 15.5. All such notices, requests, consents and other communications
will be deemed to have been received in the case of personal delivery, including
delivery by express courier, on the date of such delivery; in the case of
facsimile transmission, on the date of transmission with transmission
confirmation; and in the case of mailing, on the tenth day after deposit in the
U.S. mail or Indian mail, proper postage prepaid. All notice to the Management
Committee will be sent to each member of the Management Committee then serving,
at such address as is shown at the relevant time in the records of the LLC.
If to Embarcadero: Embarcadero Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: 1 415 393 0161
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ While & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: 1 858 450 8499
- 32 -
If to Aztec: Aztec Software, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
and ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 1 408 748 1800
With a copy to: Aztec Software and Technology Services
Limited 23, ▇▇▇ '▇' ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ and
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 011 91 80 552 1987
If to the LLC: DB Software Solutions, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Facsimile: 1 408 748 1800
15.6 Electronic Data Interchange. If the Members and/or the LLC elect
---------------------------
to facilitate their activities hereunder by electronically sending and receiving
data in agreed formats (also referred to in general usage as Electronic Data
Interchange or EDI) in substitution for conventional paper-based documents, the
terms and conditions of this Agreement will apply to such EDI activities and
communications as if such EDI communication, and as if such communication were
sent by facsimile.
15.7 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, then such provision(s) will be
enforced to the maximum extent possible under applicable law and the remainder
of such provision(s) will be excluded from this Agreement, and the balance of
this Agreement will be interpreted as if such provision(s) or portion(s) thereof
were so excluded and will continue to be enforceable in accordance with its
terms.
15.8 Counting of Time. Whenever days are to be counted under this
----------------
Agreement, the first day will not be counted and the last day will be counted,
such that if a notice is delivered on a Monday to one Member, for example, with
a five day reply period hereunder, the reply must be sent to the sending Member
(not received by such sending Member) by such recipient member no later than
11:59 a.m. local time for the sender, on the Saturday next following such
Monday.
15.9 Non-Waiver. The failure of a Member in any one or more instances
----------
to insist upon strict performance of any of the terms and conditions of this
Agreement will not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
15.10 Disclaimer of Agency; No Right of Members to Commit or Bind LLC.
---------------------------------------------------------------
This Agreement will not render either Member the legal representative or agent
of another, nor will either Member have the right or authority to assume,
create, or incur any third party liability or
- 33 -
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement or except as
may be expressly agreed in advance in writing by the Member to be bound. Except
as expressly provided herein, or except as expressly consented to in writing by
the other Member in advance of such commitment, no Member will have the right to
commit or bind the LLC.
15.11 Certain Third Parties. Except with respect to the rights of
---------------------
certain Persons to be indemnified pursuant to ARTICLE XI of this Agreement,
which Persons are intended as third party beneficiaries of their respective
rights be indemnified as set forth therein, able to enforce their respective
rights to such indemnification as if they were a party hereto, nothing in this
Agreement, express or implied, is intended to confer upon any person, other than
the parties hereto and their successors and assigns, any rights or remedies
under or by reason of this Agreement.
15.12 No Exclusive Duty to LLC; No Rights to Participation or Income.
--------------------------------------------------------------
Neither the Management Committee or any member of the Management Committee, nor
any officer of the LLC, will be required to manage the LLC as such individual's
sole and exclusive function, and such individual, and either Member, may have
other business interests and may engage in other activities in addition to those
relating to the LLC, subject to the confidentiality obligations hereof, and not
in violation of the obligations of the Members to each other under any
applicable Collateral Agreements. Neither the LLC, nor the Management Committee,
nor any member of the Management Committee, nor any officer, employee or agent
of, or consultant to, the LLC, will have any right, by virtue of this Agreement,
to share or participate in investments or activities of the LLC or of any Member
or to any income or proceeds derived therefrom.
15.13 No Grant of Rights. Except as specifically stated herein,
------------------
neither Member, nor the LLC, grants to any other party hereto and rights or
license to any intellectual property rights or other rights of the first party.
15.14 Expenses. Except as otherwise provided in this Agreement (a) all
--------
expenses incurred by a Member in connection with its obligations under this
Agreement will be borne solely by such Member, and (b) each Member will be
responsible for appointing its own employees, agents and representatives, who
will be compensated by such Member.
15.15 Captions. The captions to Sections of this Agreement have been
--------
inserted for identification and reference purposes only and will not be used to
construe or interpret this Agreement.
15.16 Costs and Attorneys' Fees. Subject to the allocation, if any, of
-------------------------
fees or expenses pursuant to Section 13.3 above, if any action, suit or other
proceeding, including arbitral proceedings, is instituted concerning or arising
out of this Agreement or any transaction contemplated hereunder, the prevailing
party will recover all of such party's reasonable fees and costs of attorneys
incurred in each such action, suit or other proceeding, including any and all
appeals or petitions therefrom.
- 34 -
15.17 Waiver Of Action For Partition. Each Member hereby irrevocably
------------------------------
waives during the term of the LLC any right that such Member may have to
maintain any action for partition with respect to the property of the LLC.
15.18 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be an original and both of which will
constitute together the same document.
15.19 Official Language. The official text of this Agreement and any
-----------------
appendices, Exhibits and Schedules hereto, will be made, written and interpreted
in English. Any notices, accounts, reports, documents, disclosures of
information or statements required by or made under this Agreement, whether
during its term or upon expiration or termination thereof, will be in English.
In the event of any dispute concerning the construction or meaning of this
Agreement, reference will be made only to this Agreement as written in English
and not to any other translation into any other language.
[signature page to follow]
- 35 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates set forth below each party's name and effective as of the Effective
Date.
EMBARCADERO TECHNOLOGIES, INC. AZTEC SOFTWARE, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
----------------------------- ----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
--------------------------- --------------------------------
Title: CFO Title: CHIEF EXECUTIVE OFFICER
-------------------------- -------------------------------
Date signed: 9/26/01 Date signed: 9/26/01
-------------------- -------------------------
DB SOFTWARE SOLUTIONS, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
---------------------------
Title: Chief Operating Officer
Date signed: 9/26/01
--------------------
EXHIBIT A
---------
DB SOFTWARE SOLUTIONS-EMBARCADERO SOFTWARE DEVELOPMENT
------------------------------------------------------
AGREEMENT
---------
[attached]
EXHIBIT B
---------
DB SOFTWARE SOLUTIONS-AZTEC SOFTWARE DEVELOPMENT AGREEMENT
----------------------------------------------------------
[attached]
SOFTWARE DEVELOPMENT AGREEMENT
------------------------------
This Software Development Agreement (the "Agreement"), is entered into
---------
as of the 27th day of September, 2001 (the "Effective Date"), by and among
--------------
Embarcadero Technologies, Inc., a Delaware corporation with principal offices at
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Embarcadero")
-----------
and DB Software Solutions, LLC, a Delaware limited liability company with
principal offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Developer").
---------
RECITALS
--------
WHEREAS, Developer was formed to develop data and database management
software which enables customers to better design, develop and administer
e-business applications and their underlying databases;
WHEREAS, Embarcadero desires that Developer provide certain software
development services; and
WHEREAS, Embarcadero desires a right of first refusal to purchase
certain other software developed by Developer;
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Appraiser" means an independent appraiser who has no material
---------
prior financial or business relationship with either party hereto or Aztec
Software, Inc. a California corporation or Aztec Software and Technology
Services Limited, an Indian company, and who is experienced in determining the
fair market value of data and database management software.
1.2 "Confidential Information" means: (i) with respect to a party
------------------------
hereto, information that is owned or controlled by such party, its affiliates
or sublicensees, that is disclosed by such party to the one or both of the
other parties hereto pursuant to this Agreement, and that is identified by the
disclosing party in writing, or is acknowledged by the receiving party in
writing, to be confidential to the disclosing party or to a third party at the
time of disclosure to the receiving party if disclosed in tangible form, or
within thirty (30) days after disclosure if disclosed orally; or (ii) the
Source Code of the Software, the Development Environment and any trade secrets
related thereto; provided, however, that Confidential Information will not
-------- -------
include any information which:
(a) Already Known Without Breach. Was already known to the
----------------------------
receiving party, without breach of any obligation of confidentiality by any
party hereto, at the time of disclosure by the disclosing party;
(b) Generally Available or in Public Domain Without Breach.
------------------------------------------------------
Was generally available to the public or otherwise part of the public domain at
the time of its disclosure to the receiving party by the disclosing party, or
later becomes available to the public or otherwise part of the public domain, in
either event without breach of any obligation of confidentiality by the
receiving party;
(c) Freely Disclosed by Disclosing Party to Others. Is
----------------------------------------------
disclosed by the disclosing party to others without an obligation of
confidentiality;
(d) Required to be Disclosed. Is required to be disclosed
------------------------
pursuant to law, subject to the protective provisions set forth in Section 9.5;
or
(e) Independently Developed. The receiving party can
-----------------------
document was subsequently and independently developed by employees or others on
behalf of the receiving party without use of any Confidential Information
disclosed to the receiving party or such others by the disclosing party and
without breach of any obligation of confidentiality.
1.3 "Deliverables" means the materials comprising the versions of the
------------
Software, and related Documentation and Development Environment, to be delivered
by Developer in connection with each Milestone, pursuant to a particular Work
Order or to be delivered in connection with the exercise of the Right of First
Refusal.
1.4 "Developed Software" means a software program developed by Developer
------------------
pursuant to a particular Work Order, in both object code and Source Code forms,
including without limitation all Enhancements thereto.
1.5 "Development Environment" means development documentation,
-----------------------
specifications, system build software, testing tools and documentation, support
tools and environment, and other materials owned by or licensed to Developer,
which are reasonably necessary to use, develop, maintain, modify or implement
Software, including Enhancements; provided, however, that "Development
-------- ------- -----------
Environment" does not include tools and materials that are commercially
-----------
available from third party vendors.
1.6 "Documentation" means user manuals, training materials, help text,
-------------
sample documents, tutorials, graphics, and other written or graphic materials
of Developer that describe the operation of Software, including Enhancements
thereof.
1.7 "Enhancements" means, with respect to software, all extensions,
------------
updates, enhancements, modifications, releases, and versions of such software
that Developer makes available hereunder.
2
1.8 "Milestone" and "Milestone Date" means each development milestone
--------- --------------
and its corresponding due date, pursuant to a particular Work Order.
1.9 "Optioned Software" has the meaning set forth in Section 3.1 and
-----------------
shall include both object code and Source Code forms, including without
limitation all Enhancements thereto.
1.10 "Right of First Refusal" has the meaning set forth in
----------------------
Section 3.1.
1.11 "Software" means Developed Software or Optioned Software, as the
--------
case may be.
1.12 "Source Code" means software code in human readable and listing
-----------
form, including without limitation fully-annotated listings of such code.
1.13 "Specifications" means the functional and other specifications
--------------
for Software.
1.14 "Subsidiaries" means, as to Embarcadero, a company or other
------------
entity in which Embarcadero owns or controls, directly or indirectly, at least
fifty percent (50%) of the shares or other interests entitled to vote for the
election of directors (or if not a corporation, the corresponding managing
authority).
1.15 "Work Order" means a work order submitted by Embarcadero for the
----------
development of software hereunder, in the format specified in Exhibit A or
---------
as the parties may otherwise agree.
ARTICLE II
----------
DEVELOPMENT, DELIVERY AND ACCEPTANCE OF DEVELOPED SOFTWARE
----------------------------------------------------------
2.1 Submission of a Work Order. From time to time during the term of
--------------------------
this Agreement, Embarcadero will have the right to submit Work Orders for the
development of Developed Software hereunder. Within fifteen (15) days of
Developer's receipt of a Work Order, Developer will propose draft
Specifications, Deliverables, Milestones and corresponding Milestone Dates
(collectively, a "Proposal") which shall include a budget for such Proposal
--------
detailing the applicable development personnel rates and estimated development
time and expenses. Embarcadero will have the right to offer modifications to a
Proposal in good faith, and Developer will negotiate such modifications to the
Proposal with Embarcadero in good faith for at least thirty (30) days; provided,
--------
however, that Embarcadero will have the right to accept any Proposal already
-------
made by Developer with respect to a Work Order during such period. Once accepted
by Embarcadero, a Proposal's Specifications, Deliverables, Milestones and
Milestone Dates will become binding upon Developer.
2.2 Development. Upon acceptance of a Proposal with respect to a
-----------
particular Work Order, Developer agrees to use commercially reasonable efforts
to complete the development the Developed Software in accordance with the
Specifications, and to deliver all Deliverables for each Milestone on or before
the corresponding Milestone Date, as agreed pursuant to Section 2.1.
3
2.3 Delivery and Acceptance.
-----------------------
(a) Upon completion of each Milestone with respect to a
particular Work Order, Developer shall deliver to Embarcadero all applicable
Deliverables for evaluation by Embarcadero pursuant to Section 2.3(b) on or
before the corresponding Milestone Date. Prior to completion of the final
Milestone for the Work Order, Developer shall deliver to Embarcadero on the last
day of each calendar month a status report of the development effort and a
complete updated version of the Source Code, Documentation and Development
Environment therefor developed as of such date. The Developed Software and
Development Environment shall be delivered in both machine-readable and Source
Code forms.
(b) Upon delivery to Embarcadero of the Deliverables
comprising the completion of each Milestone, Embarcadero shall evaluate such
Deliverables for conformity to the applicable Specifications. During such
evaluation, Embarcadero shall refer to such quality guidelines as Embarcadero
may have provided to Developer as part of the Work Order. Embarcadero shall use
all reasonable efforts to provide Developer within thirty (30) days after
receipt by Embarcadero of such Deliverables with written acceptance thereof, or
a statement of defects to be corrected. Within fifteen (15) days after
Developer's receipt of a statement of defects, Developer shall correct any such
defects and return the corrected Deliverables for retesting and reevaluation,
and Embarcadero shall use all reasonable efforts to provide to Developer within
fifteen (15) days after such redelivery a written acceptance or another
statement of defects. Until acceptance by Embarcadero, Developer shall continue
to attempt to correct the defects and provide conforming Deliverables in
accordance with the above procedure. Developer shall invoice Embarcadero for
Developed Software only upon Embarcadero's acceptance of such Developed Software
pursuant to this Section 2.3(b).
(c) Notwithstanding Sections 2.3(a) and (b), if Developer
does not deliver to Embarcadero the Deliverables meeting the applicable
Specifications within ninety (90) days after the original Milestone Date for
such Deliverables, Embarcadero shall have the right to complete or have
completed the development of the Developed Software itself and continue all of
its rights under this Agreement, without such completion being deemed an
acceptance of the Software. In the event that Embarcadero completes or has
completed development of the Developed Software Embarcadero at its option: (i)
terminate this Agreement; (ii) terminate the Work Order; or (iii) receive a
credit against such other sums otherwise payable to Developer hereunder for the
reasonable expenses that it incurs in performing such development.
2.4 Use of Subcontractors. Developer may not delegate any of its
---------------------
obligations hereunder without Embarcadero's prior written consent, which shall
not be unreasonably withheld. In any event, any delegation of obligations
hereunder by Developer will be subject to the delegated third party agreeing to
be subject to all of the provisions hereof applicable to Developer, including
without limitation, those set forth in Articles 4, 7 and 9.
4
ARTICLE III
-----------
RIGHT OF FIRST REFUSAL ON OPTIONED SOFTWARE
-------------------------------------------
3.1 Triggering of Right. At such time as Developer produces software
-------------------
programs,Embarcadero shall have a right of first refusal (the "Right of First
--------------
Refusal") to purchase all right, title and interest in and to such software
-------
programs (the "Optioned Software") at the fair market value of such Optioned
-----------------
Software; provided, however, that Optioned Software shall not include, and the
Right of First Refusal shall not extend to, Developed Software or software
programs developed by the Developer for third parties pursuant to a written
software development agreement between the Developer and such third party
whereby such third party funds the development of such software.
3.2 Procedures. Within sixty (60) days of the Developer providing
----------
reasonably adequate description and/or demonstration of the Optioned Software,
Embarcadero shall exercise its Right of First Refusal by giving Developer
written notice of its exercise of such right. Such notice shall be in the form
set forth at Exhibit B and shall include the Optioned Software for which the
---------
Right of First Refusal shall be exercised as well as the price at which
Embarcadero offers to purchase such Optioned Software. If Developer does not
approve the price offered by Embarcadero for the Optioned Software identified
by Embarcadero, the parties shall have thirty (30) days within which to agree
on a price. If the parties cannot agree on a price for such Optioned Software
the parties shall agree in writing on an Appraiser who shall determine such
fair market value of the Optioned Software. If the parties cannot agree on an
Appraiser within thirty (30) days, then:
(a) Selection of an Appraiser by Each Party. Each party will,
---------------------------------------
within thirty (30) days after the earlier of the date upon which the parties
agree in writing that they cannot agree on such Appraiser, or such initial
thirty (30) days have expired, select an Appraiser;
(b) Selection by Two Appraisers of Third Appraiser. The
----------------------------------------------
Appraisers selected pursuant to Section 3.2(a) mutually will select a third
Appraiser;
(c) Agreement or Average. The three Appraisers so selected
--------------------
mutually will agree on the fair market value of the Optioned Software
identified by Embarcadero or, absent agreement, the fair market value of such
Optioned Software will be the average of the values calculated by each
Appraiser;
(d) Appraiser Determination. The Appraiser(s) shall notify each
-----------------------
party in writing of the determined fair market value of such Optioned
Software, setting forth in such writing such bases and conclusions as such
Appraiser(s) deem appropriate and customary therefor; and
(e) Fees and Costs of Appraiser. Each party will bear the fees
---------------------------
and costs of any Appraiser that such party selects. The fees and costs of any
Appraiser selected jointly by the parties, or the costs of a third Appraiser
selected pursuant to Section 3.2(b), will be borne one-
5
half (1/2) by each party. Each party will bear its respective internal costs
connected with such appraisal.
3.3 Acceptance. Upon Embarcadero's exercise of the Right of First Refusal
----------
and agreement between the parties hereof of the fair market value of the
applicable Optioned Software as provided for in Section 3.2 above, the
developer shall deliver to Embarcadero the applicable Deliverables for
evaluation by Embarcadero. Embarcadero's acceptance of Optioned Software is
subject to such Optioned Software's conformity to the applicable
Specifications. Embarcadero shall use all reasonable efforts to provide
Developer within thirty (30) days after receipt by Embarcadero of such Optioned
Software with written acceptance thereof, or a statement of defects to be
corrected. Within fifteen (15) days after Developer's receipt of a statement of
defects, Developer shall correct any such defects and return the corrected
Optioned Software for retesting and reevaluation, and Embarcadero shall use all
reasonable efforts to provide to Developer within fifteen (15) days after such
redelivery a written acceptance or another statement of defects. Until
acceptance by Embarcadero, Developer shall continue to attempt to correct the
defects and provide conforming Deliverables in accordance with the above
procedure. If Developer fails to provide Optioned Software that conforms to the
applicable Specifications within sixty (60) days of initial delivery to
Embarcadero, Embarcadero may finally reject the Optioned Software, without
liability, and release the Optioned Software from the Right of First Refusal.
Developer shall invoice Embarcadero for the Optioned Software only upon
Embarcadero's acceptance of such Optioned Software pursuant to this Section
3.3.
ARTICLE IV
-----------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
4.1 Assignment of Software. Developer grants to Embarcadero all right,
----------------------
title and interest in and to the Software and its Enhancements and
Documentation, be it Developed Software commissioned pursuant to Article 2 or
Optioned Software purchased pursuant to Article 3. Developer shall reasonably
cooperate with Embarcadero in securing and perfecting such assignment,
including without limitation, executing an assignment of the form specified in
Exhibit C.
----------
4.2 Assignment of Other Rights. Developer grants to Embarcadero all right,
--------------------------
title and interest in and to any trade secrets, concepts, methods, processes,
discoveries, ideas or inventions (whether patentable or not) developed pursuant
to a particular Work Order. Developer shall reasonably cooperate with
Embarcadero in securing and perfecting such assignment(s), and in prosecuting
any patents that derive priority therefrom.
4.3 License of Development Environment. Developer grants Embarcadero a
----------------------------------
license to use the Development Environment developed for particular Software
and any derivative works thereof prepared by or under authority of Embarcadero,
and to distribute internally or externally, sell, lease or otherwise transfer
any of the foregoing, which license shall include the right of Embarcadero to
license, sublicense and authorize others, including without limitation
Embarcadero's Subsidiaries, dealers, distributors and agents, to do and/or
exercise any and all of such rights and licenses, including the right to
further sublicense others.
6
4.4 Ownership. Embarcadero shall retain all right, title and interest to
---------
all materials supplied to Developer pursuant to a particular Work Order, which
materials Developer shall only have the limited license to use for purposes of
effectuating such Work Order. Subject to the rights and licenses granted to
Embarcadero hereunder, Developer shall retain all right, title and interest in
the Development Environment(s).
ARTICLE V
---------
PAYMENT
-------
5.1 Compensation.
------------
(a) Developed Software. In consideration of the development of
------------------
Developed Software, Embarcadero shall pay Developer on a time-and-materials
basis, the rates for the classes of development personnel as specified in the
applicable Proposal. Developer shall maintain reasonably adequate accounting
records to substantiate the payments earned by Developer pursuant to this
Section 5.1(a).
(b) Optioned Software. The consideration for Optioned Software
-----------------
is as set forth in Section 3.2.
5.2 Payment Terms. All payments hereunder (with respect to amounts not
-------------
disputed in good faith) are on a net thirty (30) day basis, measured from the
date of invoice. Interest on late payments will accrue at a rate of one percent
(1%) per month, or the highest rate allowable under law, whichever is less.
5.3 Audit Rights. Embarcadero shall have the right to audit Developer's
------------
relevant accounting records, upon ten (10) business days advance written notice,
to verify the accuracy of payments due hereunder and for no other purpose. In
the event that an audit shows that Developer has overcharged by five percent
(5%) or more, then Developer shall bear all reasonable out-of-pocket costs
incurred by Embarcadero in performing such audit, as well as immediately
repaying Embarcadero the shortfall.
ARTICLE VI
----------
TRAINING, TECHNICAL ASSISTANCE, SUPPORT AND MAINTENANCE
-------------------------------------------------------
6.1 Training. Developer agrees to provide one (1) training class conducted
--------
by a qualified Developer employee for a reasonable number of Embarcadero
employees on the use of each Software hereunder. Such class shall be held at an
Embarcadero facility on dates reasonably agreed upon by the parties. The
training shall be at no cost to Embarcadero except for reasonable travel and
accommodation expenses for the Developer employees providing such training. In
addition, upon request of Embarcadero, Developer agrees to provide additional
training to Embarcadero, provided that Embarcadero and Developer mutually agree
at such time on an additional payment to for such training.
7
6.2 Technical Assistance. Until Embarcadero's acceptance of all
--------------------
Deliverables due hereunder (with respect to Developed Software), Developer
agrees to provide at no charge reasonable email and telephone consultation to
Embarcadero with respect to the use of the Software. Developer also agrees to
provide at no charge a reasonable amount of technical assistance with respect to
software engineering, quality assurance and preparation of revised documentation
for the incorporation of the Software with or into Embarcadero products. In the
event that Embarcadero requests Developer to perform services away from
Developer's principal offices, Embarcadero agrees to reimburse Developer for
reasonable travel and lodging expenses of any Developer employees who perform
such offsite services.
ARTICLE VII
------------
WARRANTIES AND INDEMNIFICATION
------------------------------
7.1 Warranties by Developer. Developer represents and warrants that, with
-----------------------
respect to all Deliverables provided hereunder:
(a) the Deliverables do not and shall not infringe any copyright,
trade secret rights, any patent or other proprietary rights of any third party;
(b) immediately prior to the assignments made pursuant to
Article 4, Developer is the sole and exclusive owner of the Deliverables and
rights granted to Embarcadero in this Agreement;
(c) Developer has not previously granted and shall not grant any
rights in the Deliverables to any third party that are inconsistent with the
rights granted to Embarcadero herein;
(d) Developer has full power to enter into this Agreement, to
carry out its obligations under this Agreement and to grant the rights granted
to Embarcadero; and
(e) Except as disclosed by Developer to Embarcadero in writing
at the time of delivery, all Deliverables provided by Developer to Embarcadero
hereunder, will, to the best of Developer's knowledge at the time of delivery,
conform to the applicable Specifications and, without limiting the foregoing,
the final delivery of the Software to Embarcadero shall be free of known errors.
7.2 Warranty by Embarcadero. Embarcadero warrants that it has full power to
----------------------
enter into this Agreement and to carry out its obligations under this Agreement.
7.3 Product Warranty. Developer warrants that for a period of twelve (12)
----------------
months from the date of acceptance of particular Software, the Software will
conform substantially to the Specifications therefor. Developer further warrants
that the Source Code and the Development Environment delivered hereunder to
Embarcadero are reasonably sufficient to permit a trained computer programmer
who is generally familiar with the software language and operating system to
use, understand, modify and maintain the Software.
8
7.4 Warranty Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 7,
-------------------
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND HEREUNDER, EITHER EXPRESS OR
IMPLIED, AND SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
7.5 Infringement Indemnity. Developer shall indemnify Embarcadero against
----------------------
and hold Embarcadero harmless from any liability or expense, including court
costs and reasonable fees of attorneys and other professionals, arising out of
or resulting from any breach or claimed breach of the warranties set forth
herein. In the event of any such claim, Embarcadero agrees promptly to notify
Developer of the claim and to permit Developer, at Developer's expense, to
participate in the defense thereof with counsel of Developer's choosing,
subject to Embarcadero's supervision and control.
7.6 Indemnification of Developer. Embarcadero shall indemnify Developer
----------------------------
and hold Developer harmless for any liability or expense, including court costs
and reasonable fees of attorneys and other professionals, for any third party
claims brought against Developer arising out of the use of the Software by
Embarcadero in any product of Embarcadero or its Subsidiaries, except for claims
for arising from the negligence of Developer or for which Developer is
responsible under Section 7.5. In the event of any such claim, Developer shall
promptly notify Embarcadero of the claim, authorize Embarcadero to control the
defense and settlement of such claim, and provide full information and
assistance as may be reasonably requested by Embarcadero for such defense or
settlement.
ARTICLE VIII
DISPUTE RESOLUTION
8.1 Negotiation between Executives. Subject to Section 8.7, the parties
------------------------------
shall attempt in good faith to resolve any dispute arising out of or relating to
this Agreement promptly by negotiation between executives who have authority to
settle the controversy and who are at a higher level of management than the
persons with direct responsibility for administration of this Agreement. Either
party may give the other party written notice of any dispute not resolved in the
normal course of business. Within fifteen (15) days after delivery of the
notice, the receiving party shall submit to the other a written response. The
notice and the response shall include: (i) a statement of each party's position
and a summary of arguments supporting that position; and (ii) the name and title
of the executive who will represent that party and of any other person who will
accompany the executive. Within fifteen (15) days after delivery of the
disputing party's notice, the executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the dispute. All reasonable requests for
information made by one party to the other will be honored. All negotiations
pursuant to this Section 8.1 are confidential and shall be treated as compromise
and settlement negotiations for purposes of applicable rules of evidence.
8.2 Arbitration. Subject to Section 8.7, any dispute arising out of or
-----------
relating to this Agreement which has not been resolved through negotiation as
provided under Section 8.1 within sixty (60) days of the initiation of such
procedure, shall be settled by arbitration in
9
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, by three (3) independent and impartial arbitrators, of whom each
party shall appoint one arbitrator, the two arbitrators selecting the third
arbitrator. The judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be San Francisco, California.
8.3 Arbitrator Decisions. The arbitrators will decide in accordance with
--------------------
the terms of this Agreement and will take into account any appropriate trade
usages applicable to the transaction. The arbitrators will state in writing the
reasons upon which the award is based. The arbitrators may allocate the fees and
expenses of arbitration, including the reasonable fees and costs of the
attorneys for the parties among the parties as the arbitrators deem appropriate.
If no allocation of fees is made, the allocation set forth in Section 12.9 below
shall apply and arbitration costs and fees shall be borne by the non-prevailing
party.
8.4 Award of Arbitrators. The award of the arbitrators will be final and
--------------------
binding upon the parties. Judgment upon the award may be entered in any court
having jurisdiction. An application may be made to any such court for judicial
acceptance of the award and an order of enforcement.
8.5 Confidentiality. The negotiations pursuant to Section 8.1 and any
---------------
arbitration proceedings pursuant to Section 8.2 and terms of any arbitration
award shall be deemed Confidential Information for the purposes of this
Agreement.
8.6 Applicable Law; Disclosure. The law of the State of California,
--------------------------
excluding that body of law known as conflict of laws, will be the applicable
substantive law for all matters except those governed and by federal law, which
will apply to such other matters.
8.7 Litigation. Any dispute involving the Confidential Information or
----------
intellectual property of a party for which the parties may seek judicial relief,
shall be subject to the exclusive venue of the state and federal courts within
the Northern District of California and the parties hereby consent to the venue
and jurisdiction of such courts.
ARTICLE IX
----------
CONFIDENTIALITY
---------------
9.1 Scope. The provisions of this Article 9 will apply to all Confidential
-----
Information disclosed by one party to the other party, whether prior to or after
the Effective Date, and which is not otherwise the subject of a written
nondisclosure agreement between the parties. Each party: (i) will hold the other
parties' Confidential Information in strict confidence; (ii) will not disclose
such Confidential Information to any third party and will take all reasonable
steps to prevent such disclosure, which steps will include at least those taken
by such relevant other party to protect such other party's own confidential
information of like kind; and (iii) will not use any Confidential Information of
the other party for any purpose except as is necessary to carry out this
Agreement. Each receiving party may disclose the disclosing party's Confidential
Information to the receiving party's responsible employees and consultants who
have a bona fide
10
need to know, but only to the extent necessary to carry out the purposes of this
Agreement. Each receiving party will instruct all such employees and consultants
not to disclose such Confidential Information to third parties, including other
consultants, without the prior written permission of the disclosing party.
9.2 Return of Confidential Information. Upon the disclosing party's
-----------------------------------
request, the receiving party will promptly return to the disclosing party all
tangible items containing or consisting of the disclosing party's Confidential
Information and all copies thereof.
9.3 No Other Rights. Nothing contained in this Agreement will be construed
---------------
as granting any rights to the receiving party, by license or otherwise, to any
of the disclosing party's Confidential Information except as specified in this
Agreement.
9.4 Acknowledgment. Each party acknowledges that the unauthorized
--------------
disclosure or use of the disclosing party's Confidential Information would cause
irreparable harm and significant injury to the disclosing party, the degree of
which may be difficult to ascertain. Accordingly, the parties agree that the
disclosing party will have the right to seek an immediate injunction enjoining
any breach of this Article 9 by the receiving party or its employees or
consultants, as well as the right to pursue any and all other rights and
remedies available at law or in equity for such breach.
9.5 Disclosure Required by Law. If the receiving party (or an affiliate of
--------------------------
the receiving party) is required, whether by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process, by any competent government authority, including pursuant to
any applicable rule of any stock exchange, self-regulatory organization or other
government agency, to disclose any Confidential Information of the disclosing
party, the receiving party will promptly notify the disclosing party in writing,
in reasonable detail, of such request or requirement and will cooperate with the
disclosing party in seeking appropriate protective arrangements requested by the
disclosing party. If, in the absence of a protective order or the receipt of a
waiver in writing by the disclosing party of such protective order, the
receiving party (or any of its Affiliates) is in the written opinion of the
receiving party's counsel compelled to disclose the Confidential Information or
else stand liable for contempt or suffer other censure or significant penalty,
the receiving party (or its affiliates) may disclose only so much of the
Confidential Information to the party compelling disclosure as is required by
law. The receiving party will exercise (and will cause its affiliates to
exercise) commercially reasonable best efforts to obtain appropriate protective
arrangements or other reliable assurance that confidential treatment will be
accorded to Confidential Information of the disclosing party in the event of
such required disclosure.
9.6 Exchange Act Disclosures. It is hereby acknowledged that Embarcadero is
------------------------
a publicly traded company and as such is subject to certain reporting
requirements under the Exchange Act. It is hereby agreed by the parties that
notwithstanding the provisions of this Section 9.6, Embarcadero may disclose
Confidential Information to the extent necessary to comply with its Exchange Act
reporting requirements.
11
9.7 Public Announcements. During the term of this Agreement, neither party
--------------------
hereto will (except as may otherwise be required by law or by the Exchange Act
as described in, and subject to the provisions of, Sections 9.5 and 9.6) issue
any press release or other public announcement or disclosure, with respect to
this Agreement, or any of the transactions contemplated hereby, nor any material
development relating to any of the foregoing, without the prior written consent
of the other party.
ARTICLE X
----------
TERMINATION
-----------
10.1 Term. The term of this Agreement shall be three (3) years commencing
----
on the Effective Date. The term of this Agreement shall automatically renew for
additional one (1) year terms unless one party hereto provides to the other
party written notice of its intention to terminate this Agreement within at
least thirty (30) days of the last day of the then applicable term of this
Agreement.
10.2 Termination.
-----------
(a) Either party may terminate this Agreement prior to the end
of the term of this Agreement if the other party becomes the subject of a
voluntary or involuntary petition in bankruptcy or any proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors, if that petition or proceeding is not dismissed with prejudice within
sixty (60) days after filing.
(b) Either party shall have the right to terminate this
Agreement prior to the end of the term of this Agreement if the other party
breaches any material term or condition of this Agreement and fails to cure
that breach with thirty (30) days after receiving written notice of the breach
from the other party.
10.3 Survival. The following provisions shall survive any termination of
--------
this Agreement, whether by the expiration of the term of this Agreement or the
termination of this Agreement by a party as provided for in Section 10.2 above:
Articles 1 (Definitions), 4 (Intellectual Property Rights), 7 (Warranties and
Indemnification); 8 (Dispute Resolution), 9 (Confidentiality); 11 (Limitation of
Liability) and 12 (General Provisions) and this Section 10.3.
ARTICLE XI
-----------
LIMITATION OF LIABILITY
-----------------------
EXCEPT WITH RESPECT TO LIABILITY UNDER SECTIONS 7.5 AND 7.6, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER FOR ANY BREACH HEREUNDER IN AN AGGREGATE AMOUNT IN
EXCESS OF THE AMOUNTS TO BE PAID BY EMBARCADERO TO DEVELOPER HEREUNDER. IN NO
EVENT SHALL
12
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING FROM ANY BREACH OF THIS AGREEMENT.
ARTICLE XII
------------
GENERAL PROVISIONS
------------------
12.1 Further Assurances. The parties will execute and deliver any further
------------------
instruments or documents and perform any additional acts that are or may become
necessary to effectuate and carry out the purposes and intent of this Agreement.
12.2 Binding Effect. This Agreement will be binding on and inures to the
--------------
benefit of the parties and their respective transferees, successors, assigns and
legal representatives.
12.3 Entire Agreement; Amendment. This Agreement sets forth the entire
---------------------------
agreement between the parties with respect to the specific subject matter
hereof, and, except as otherwise set forth herein, supersedes and terminates all
prior representations, agreements and understandings between the parties
regarding the subject matter hereof. No alteration, amendment, change or
addition to this Agreement will be binding upon the parties unless in writing
and signed by an authorized signatory of each party.
12.4 Assignment. Developer shall not assign this Agreement without the
----------
prior written consent of Embarcadero. Any assignment hereunder shall be subject
to the written consent of the assignee to all the terms and provisions of this
Agreement. It is understood that the rights granted to an entity that is a
Subsidiary of Embarcadero hereunder shall continue in effect in the event such
entity ceases to be a Subsidiary of Embarcadero.
12.5 Notices. All notices, requests, consents and other communications
-------
hereunder to any party will be deemed to be sufficient if contained in a written
instrument delivered in person, including delivery by recognized express
courier, fees prepaid, or sent by facsimile transmission or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
in each case addressed as set forth below, or to such other address as may
hereinafter be designated in writing by the recipient to the sender pursuant to
this Section 12.5. All such notices, requests, consents and other communications
will be deemed to have been received in the case of personal delivery, including
delivery by express courier, on the date of such delivery; in the case of
facsimile transmission, on the date of transmission with transmission
confirmation; and in the case of mailing, on the fourth (4th) day after deposit
in the U.S. mail, proper postage prepaid.
If to Embarcadero: Embarcadero Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: 1 415 393 0161
13
If to the Developer: DB Software Solutions, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Facsimile: 1 408 748 1800
12.6 Electronic Data Interchange. If the parties elect to facilitate their
---------------------------
activities hereunder by electronically sending and receiving data in agreed
formats (also referred to in general usage as Electronic Data Interchange or
EDI) in substitution for conventional paper-based documents, the terms and
conditions of this Agreement will apply to such EDI activities and
communications as if such EDI communication, and as if such communication were
sent by facsimile.
12.7 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, then such provision(s) will be enforced
to the maximum extent possible under applicable law and the remainder of such
provision(s) will be excluded from this Agreement, and the balance of this
Agreement will be interpreted as if such provision(s) or portion(s) thereof were
so excluded and will continue to be enforceable in accordance with its terms.
12.8 Counting of Time. Whenever days are to be counted under this
----------------
Agreement, the first day will not be counted and the last day will be counted,
such that if a notice is delivered on a Monday to one party, for example, with a
five (5) day reply period hereunder, the reply must be sent to the sending party
(not received by such sending party) by such recipient party no later than 11:59
a.m. local time for the sender, on the Saturday next following such Monday.
12.9 Costs and Attorneys' Fees. Subject to the allocation, if any, of fees
-------------------------
or expenses pursuant to Section 8, if any action, suit or other proceeding,
including arbitral proceedings, is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party will
recover all of such party's reasonable fees and costs of attorneys incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
12.10 Non-Waiver. The failure of a party in any one or more instances to
----------
insist upon strict performance of any of the terms and conditions of this
Agreement will not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
12.11 Disclaimer of Agency; No Right to Bind Other Party. This Agreement
--------------------------------------------------
will not render either party the legal representative or agent of another, nor
will either party have the right or authority to assume, create, or incur any
third party liability or obligation of any kind, express or implied, against or
in the name of or on behalf of another except as expressly set forth in this
Agreement or except as may be expressly agreed in advance in writing by the
party to be bound.
14
12.12 Certain Third Parties. Nothing in this Agreement, express or implied,
---------------------
is intended to confer upon any person, other than the parties and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
12.13 Captions. The captions to the Sections of this Agreement have been
--------
inserted for identification and reference purposes only and will not be used to
construe or interpret this Agreement.
12.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be an original and both of which will
constitute together the same document.
12.15 Official Language. The official text of this Agreement and any
-----------------
appendices, Exhibits and Schedules, will be made, written and interpreted in
English. Any notices, accounts, reports, documents, disclosures of information
or statements required by or made under this Agreement, whether during its term
or upon expiration or termination thereof, will be in English. In the event of
any dispute concerning the construction or meaning of this Agreement, reference
will be made only to this Agreement as written in English and not to any other
translation into any other language.
[signatures to follow]
15
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of Developer and Embarcadero, as applicable.
DB SOFTWARE SOLUTIONS, LLC EMBARCADERO TECHNOLOGIES, INC.
By: /s/ ASHOK By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------- -------------------------------
Title: COO Title: CFO
------------------------------ ------------------------------
Date: 9/26/01 Date: 9/26/01
------------------------------- -------------------------------
EXHIBIT A
---------
FORM OF WORK ORDER
------------------
1. Specification of software to be developed:
2. Software and development environment deliverables:
3. Product development timeline and milestones:
4. Estimated development costs:
5. Acceptance:
17
EXHIBIT B
---------
RIGHT OF FIRST REFUSAL EXERCISE NOTICE
--------------------------------------
[Date]
DB Software Solutions, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Re: Exercise of Right of First Refusal Pursuant to Section 3.2 of the Software
Development Agreement between DB Software Solutions, LLC and Embarcadero
Technologies, Inc. (the "Agreement")
Embarcadero Technologies, Inc. ("Embarcadero") hereby gives notice that it is
exercising its right of first refusal to purchase the software program described
below as provided for in Section 3.2 of the Agreement:
[INSERT DESCRIPTION OF OPTIONED SOFTWARE]
The price at which Embarcadero offers to purchase such Optioned Software is
US$[________]. Please respond to the price offered by this exercise notice
within five (5) days of your receipt of this letter.
Sincerely,
EMBARCADERO TECHNOLOGIES, INC.
_____________________________
By:
Title:
18
EXHIBIT C
---------
ASSIGNMENT OF COPYRIGHTS
------------------------
This Assignment of Copyrights (the "Assignment"), is entered into as of the
----------
__ day of _________, 200_ (the "Effective Date"), by and among Embarcadero
--------------
Technologies, Inc., a Delaware corporation with principal offices at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Embarcadero") and DB
-----------
Software Solutions, LLC, a Delaware limited liability
company (the "Developer").
---------
RECITALS
--------
A. Developer and Embarcadero have entered into a Software Development
Agreement dated as of September 27, 2001 (the "Agreement"), pursuant to which
---------
Embarcadero will purchase from Developer, and Developer will sell, assign and
transfer to Embarcadero the copyrights of certain software Developer created
thereunder.
B. For good and valuable consideration, the adequacy and receipt of which is
hereby acknowledged by Developer, Developer desires to give this Assignment for
the purpose of effecting such purchase, sale and assignment pursuant to the
provisions of the Agreement.
DEVELOPER AGREES AS FOLLOWS:
1. Sale of All of the Copyrights of Developer. Developer does hereby
------------------------------------------
irrevocably and unconditionally sell, convey, assign, transfer, and deliver to
Embarcadero, its successors and assigns, all of its right, title and interest in
and to all copyrights to:
[PLEASE DESCRIBE HERE OR REFER TO AN APPENDIX]
2. No Rights in Third Parties. Nothing expressed or implied in this
--------------------------
Assignment is intended to confer upon any person, other than the parties and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Assignment.
3. Successors and Assignees. This Assignment is executed pursuant
--------------------------
to the Agreement and is entitled to the benefits thereof and shall be binding
upon and inure to the benefit of Developer and Embarcadero and their respective
successors and assigns.
[signatures to follow]
19
IN WITNESS WHEREOF, Developer has caused this Assignment to be executed on
the date first above written.
DB SOFTWARE SOLUTIONS, LLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date:___________________________________
Accepted this __th day of _______, 200_.
EMBARCADERO TECHNOLOGIES, INC.
By: __________________________________
Name: __________________________________
Title: __________________________________
SOFTWARE DEVELOPMENT AGREEMENT
------------------------------
THIS Software Development Agreement (the "Agreement"), is entered into as
---------
of the 27th day of September, 2001 (the "Effective Date"), by and among DB
--------------
Software Solutions, LLC, a Delaware limited liability company ("DBSS") and Aztec
----
Software and Technology Services Limited, an Indian corporation with principal
offices at 23, 3rd `A' Cross, 18th Main, 6th Block, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ -
▇▇▇▇▇▇, ▇▇▇▇▇ ("Aztec").
-----
RECITALS
--------
WHEREAS, DBSS was formed to develop data and database management software
which enables customers to better design, develop and administer e-business
applications and their underlying databases;
WHEREAS, DBSS desires that Aztec provide certain software development
services as a subcontractor to DBSS;
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Confidential Information" means: (i) with respect to a party hereto,
------------------------
information that is owned or controlled by such party, its affiliates or
sublicensees, that is disclosed by such party to the one or both of the other
parties hereto pursuant to this Agreement, and that is identified by the
disclosing party in writing, or is acknowledged by the receiving party in
writing, to be confidential to the disclosing party or to a third party at the
time of disclosure to the receiving party if disclosed in tangible form, or
within thirty (30) days after disclosure if disclosed orally; or (ii) the Source
Code of the Software, the Development Environment and any trade secrets related
thereto; provided, however, that Confidential Information will not include any
-------- -------
information which:
(a) Already Known Without Breach. Was already known to the receiving
----------------------------
party, without breach of any obligation of confidentiality by any party hereto,
at the time of disclosure by the disclosing party;
(b) Generally Available or in Public Domain Without Breach. Was
------------------------------------------------------
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving party by the disclosing party, or later
becomes available to the public or otherwise part of the public domain, in
either event without breach of any obligation of confidentiality by the
receiving party;
(c) Freely Disclosed by Disclosing Party to Others. Is disclosed by
----------------------------------------------
the disclosing party to others without an obligation of confidentiality;
(d) Required to be Disclosed. Is required to be disclosed pursuant to
------------------------
law, subject to the protective provisions set forth in Section 8.5; or
(e) Independently Developed. The receiving party can document was
-----------------------
subsequently and independently developed by employees or others on behalf of the
receiving party without use of any Confidential Information disclosed to the
receiving party or such others by the disclosing party and without breach of any
obligation of confidentiality.
1.2 "Deliverables" means the materials comprising the versions of the
------------
Software, and related Documentation and Development Environment, to be delivered
by Aztec in connection with each Milestone, pursuant to a particular Work Order.
1.3 "Development Environment" means development documentation,
-----------------------
specifications, system build software, testing tools and documentation, support
tools and environment, and other materials owned by or licensed to Aztec, which
are reasonably necessary to use, develop, maintain, modify or implement
Software, including Enhancements; provided, however, that "Development
-------- ------- -----------
Environment" does not include tools and materials that are commercially
-----------
available from third party vendors.
1.4 "Documentation" means user manuals, training materials, help text,
-------------
sample documents, tutorials, graphics, and other written or graphic materials of
Aztec that describe the operation of Software, including Enhancements thereof.
1.5 "Enhancements" means, with respect to software, all extensions,
------------
updates, enhancements, modifications, releases, and versions of such software
that Aztec makes available hereunder.
1.6 "Milestone" and "Milestone Date" means each development milestone and
--------- --------------
its corresponding due date, pursuant to a particular Work Order.
1.7 "Software" means a software program developed by Aztec pursuant to a
--------
particular Work Order, in both object code and Source Code forms, including
without limitation all Enhancements thereto.
1.8 "Source Code" means software code in human readable and listing form,
-----------
including without limitation fully-annotated listings of such code.
1.9 "Specifications" means the functional and other specifications for
--------------
Software.
1.10 "Work Order" means a work order submitted by DBSS for the development
----------
of software hereunder, in the format specified in Exhibit A or as the parties
---------
may otherwise agree.
2
ARTICLE II
----------
DEVELOPMENT, DELIVERY AND ACCEPTANCE OF SOFTWARE
------------------------------------------------
2.1 Submission of a Work Order. From time to time during the term of this
--------------------------
Agreement, DBSS will have the right to submit Work Orders for the development of
Software hereunder. Within twelve (12) days of DBSS's receipt of a Work Order,
Aztec will propose draft Specifications, Deliverables, Milestones and
corresponding Milestone Dates (collectively, a "Proposal") which shall include a
--------
budget for such Proposal detailing the applicable development personnel rates
and estimated development time and expenses. DBSS will have the right to offer
modifications to a Proposal in good faith, and Aztec will negotiate such
modifications to the Proposal with DBSS in good faith for at least thirty (30)
days; provided, however, that DBSS will have the right to accept any Proposal
-------- -------
already made by Aztec with respect to a Work Order during such period. Once
accepted by DBSS, a Proposal's Specifications, Deliverables, Milestones and
Milestone Dates will become binding upon Aztec and DBSS.
2.2 Development. Upon acceptance of a Proposal with respect to a
-----------
particular Work Order, Aztec agrees to use commercially reasonable efforts to
complete the development the Software in accordance with the Specifications, and
to deliver all Deliverables for each Milestone on or before the corresponding
Milestone Date, as agreed pursuant to Section 2.1.
2.3 Delivery and Acceptance.
-----------------------
(a) Upon completion of each Milestone with respect to a
particular Work Order, Aztec shall deliver to DBSS all applicable Deliverables
for evaluation by DBSS pursuant to Section 2.3(b) on or before the corresponding
Milestone Date. Prior to completion of the final Milestone for the Work Order,
Aztec shall deliver to DBSS on the last day of each calendar month a status
report of the development effort and a complete updated version of the Source
Code, Documentation and Development Environment therefor developed as of such
date. The Software and Development Environment shall be delivered in both
machine-readable and Source Code forms.
(b) Upon delivery to DBSS of the Deliverables comprising the
completion of each Milestone, DBSS shall evaluate such Deliverables for
conformity to the applicable Specifications. During such evaluation, DBSS shall
refer to such quality guidelines as DBSS may have provided to Aztec as part of
the Work Order. DBSS shall use all reasonable efforts to provide DBSS within
thirty-two (32) days after receipt by DBSS of such Deliverables with written
acceptance thereof, or a statement of defects to be corrected. Within twelve
(12) days after Aztec's receipt of a statement of defects, Aztec shall correct
any such defects and return the corrected Deliverables for retesting and
reevaluation, and DBSS shall use all reasonable efforts to provide to Aztec
within eighteen (18) days after such redelivery a written acceptance or another
statement of defects. Until acceptance by DBSS, Aztec shall continue to attempt
to correct the defects and provide conforming Deliverables in accordance with
the above procedure. Aztec shall invoice DBSS for Software only upon DBSS's
acceptance of such Software pursuant to this Section 2.3(b). In the event DBSS
does not provide a statement of defects to Aztec within thirty-
3
two (32) days following receipt by DBSS of the Deliverables comprising the
completion of each Milestone, such Deliverables shall be deemed to be accepted
by DBSS.
(c) Notwithstanding Sections 2.3(a) and (b), if Aztec does not
deliver to DBSS the Deliverables meeting the applicable Specifications within
eighty-five (85) days after the original Milestone Date for such Deliverables,
DBSS shall have the right to complete or have completed the development of the
Software itself and continue all of its rights under this Agreement, without
such completion being deemed an acceptance of the Software. In the event that
DBSS completes or has completed development of the Software, DBSS at its option
shall receive a credit against such other sums otherwise payable to Aztec
hereunder for the reasonable expenses that it incurs in performing such
development.
2.4 Use of Subcontractors. Aztec may not delegate any of its obligations
---------------------
hereunder without DBSS's prior written consent, which shall not be unreasonably
withheld. In any event, any delegation of obligations hereunder by Aztec will be
subject to the delegated third party agreeing to be subject to all of the
provisions hereof applicable to Aztec, including without limitation, those set
forth in Articles 3, 6 and 8.
ARTICLE III
-----------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
3.1 Assignment of Software. Aztec grants to DBSS (or its designee) all
----------------------
right, title and interest in and to the Software and its Enhancements and
Documentation. Aztec shall reasonably cooperate with DBSS in securing and
perfecting such assignment, including without limitation, executing an
assignment of the form specified in Exhibit B.
---------
3.2 Assignment of Other Rights. Aztec grants to DBSS (or its designee) all
--------------------------
right, title and interest in and to any trade secrets, concepts, methods,
processes, discoveries, ideas or inventions (whether patentable or not)
developed pursuant to a particular Work Order. Aztec shall reasonably cooperate
with DBSS in securing and perfecting such assignment(s), and in prosecuting any
patents that derive priority therefrom.
3.3 License of Development Environment. Aztec grants DBSS a license to use
----------------------------------
the Development Environment developed for particular Software and any derivative
works thereof prepared by or under authority of Aztec, and to distribute
internally or externally, sell, lease or otherwise transfer any of the
foregoing, which license shall include the right of DBSS to license, sublicense
and authorize others, including without limitation DBSS's customers, dealers,
distributors and agents, to do and/or exercise any and all of such rights and
licenses, including the right to further sublicense others.
3.4 Ownership. As between the parties, DBSS shall retain all right,
---------
title and interest to all materials supplied to Aztec pursuant to a particular
Work Order, which materials Aztec shall only have the limited license to use
for purposes of effectuating such Work Order. Subject to the rights and
licenses granted to DBSS hereunder, Aztec shall retain all right, title and
interest in the Development Environment(s).
4
ARTICLE IV
----------
PAYMENT
-------
4.1 Software Development Compensation. In consideration of the development
---------------------------------
of Software, DBSS shall pay Aztec on a time-and-materials basis, the rates for
the classes of development personnel as specified in the applicable Proposal.
Aztec shall maintain reasonably adequate accounting records to substantiate the
payments earned by Aztec pursuant to this Section 4.1.
4.2 Payment Terms. All payments hereunder (with respect to amounts not
-------------
disputed in good faith) are on a net thirty-five (35) day basis, measured from
the date of invoice. Interest on late payments will accrue at a rate of one
percent (1%) per month, or the highest rate allowable under law, whichever is
less.
4.3 Audit Rights. DBSS shall have the right to audit Aztec's relevant
------------
accounting records, upon ten (10) business days advance written notice, to
verify the accuracy of payments due hereunder and for no other purpose. In the
event that an audit shows that Aztec has overcharged by five percent (5%) or
more, then Aztec shall bear all reasonable out-of-pocket costs incurred by DBSS
in performing such audit, as well as immediately repaying DBSS the shortfall.
ARTICLE V
---------
TRAINING, TECHNICAL ASSISTANCE, SUPPORT AND MAINTENANCE
-------------------------------------------------------
5.1 Training. Aztec agrees to provide one (1) training class conducted by
--------
a qualified Aztec employee for a reasonable number of DBSS and/or DBSS's
customers' employees on the use of each Software hereunder. Such class shall be
held at an DBSS-designated facility on dates reasonably agreed upon by the
parties. The training shall be at no cost to DBSS except for reasonable travel
and accommodation expenses for the Aztec employees providing such training. In
addition, upon request of DBSS, Aztec agrees to provide additional training to
DBSS and/or DBSS's customers, provided that DBSS and Aztec mutually agree at
such time on an additional payment to for such training.
5.2 Technical Assistance. Until DBSS's acceptance of all Deliverables due
--------------------
hereunder, Aztec agrees to provide at no charge reasonable email and telephone
consultation to Aztec and DBSS's customers with respect to the use of the
Software. Aztec also agrees to provide at no charge a reasonable amount of
technical assistance with respect to software engineering, quality assurance and
preparation of revised documentation for the incorporation of the Software with
or into DBSS or DBSS's customers' products. In the event that DBSS requests
Aztec to perform services away from Aztec's principal offices, DBSS agrees to
reimburse Aztec for reasonable travel and lodging expenses of any Aztec
employees who perform such offsite services.
5
ARTICLE VI
----------
WARRANTIES AND INDEMNIFICATION
------------------------------
6.1 Warranties by Aztec. Aztec represents and warrants that, with respect
-------------------
to all Deliverables provided hereunder:
(a) the Deliverables do not and shall not infringe any
copyright, trade secret rights, any patent or other proprietary rights of any
third party;
(b) immediately prior to the assignments made pursuant to
Article 3, Aztec is the sole and exclusive owner of the Deliverables and rights
granted to DBSS in this Agreement;
(c) Aztec has not previously granted and shall not grant any
rights in the Deliverables to any third party that are inconsistent with the
rights granted to DBSS herein;
(d) Aztec has full power to enter into this Agreement, to carry
out its obligations under this Agreement and to grant the rights granted to
DBSS; and
(e) Except as disclosed by Aztec to DBSS in writing at the time
of delivery, all Deliverables provided by Aztec to DBSS hereunder, will, to the
best of Aztec's knowledge at the time of delivery, conform to the applicable
Specifications and, without limiting the foregoing, the final delivery of the
Software to Aztec shall be free of known errors.
6.2 Warranty by DBSS. DBSS warrants that it has full power to enter into
----------------
this Agreement and to carry out its obligations under this Agreement.
6.3 Limited Product Warranty. Aztec warrants that for a period of ninety
------------------------
(90) days from the date of acceptance of particular Software, the Software will
conform substantially to the Specifications therefor. This warranty shall be
limited to repair or replacement of any portion of the Software. The warranty in
this Section 6.3 shall not extend to defects that would not have arisen but for
(a) Aztec's compliance with designs, specifications or written instructions
furnished by DBSS to Aztec, (b) modifications of the Deliverables or Software by
a party other than Aztec or at Aztec's direction after delivery of the
Deliverables or the Software by Aztec to DBSS, and (c) use by DBSS of the
Deliverable or the Software or any portion thereof in combination with any
product not furnished, recommended or approved by Aztec where the defect would
not have occurred but for such combination.
6.4 Warranty Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 6,
-------------------
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND HEREUNDER, EITHER EXPRESS OR
IMPLIED, AND SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
6.5 Infringement Indemnity. Aztec shall indemnify DBSS and DBSS's
----------------------
customers against and hold DBSS and DBSS's customers harmless from any liability
or expense, including court costs and reasonable fees of attorneys and other
professionals, arising out of or resulting from
6
any breach or claimed breach of the warranties set forth herein. In the event of
any such claim, DBSS agrees promptly to notify Aztec of the claim and to permit
DBSS, at DBSS's expense, to participate in the defense thereof with counsel of
DBSS's choosing, subject to Aztec's supervision and control.
6.6 Indemnification of Aztec. Except to the extent Aztec is required
------------------------
to indemnify DBSS pursuant to Section 6.5 above or claims arising from the
negligence of Aztec, DBSS shall indemnify Aztec and hold Aztec harmless for any
liability or expense, including court costs and reasonable fees of attorneys
and other professionals, for any third party claims brought against Aztec
arising out of claims that would not have arisen but for (a) the use of the
Software by DBSS or DBSS's customers in any product of DBSS or DBSS's
customers, (b) modification of the Deliverables or Software by a party other
than Aztec or at Aztec's direction after delivery of the Deliverables or the
Software by Aztec to DBSS, or (c) Aztec's compliance with designs,
specifications or written instructions furnished by DBSS to Aztec. In the event
of any such claim, Aztec shall promptly notify DBSS of the claim, authorize
DBSS to control the defense and settlement of such claim, and provide full
information and assistance as may be reasonably requested by DBSS for such
defense or settlement.
ARTICLE VII
DISPUTE RESOLUTION
7.1 Negotiation between Executives. Subject to Section 7.7, the
------------------------------
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between executives who have
authority to settle the controversy and who are at a higher level of management
than the persons with direct responsibility for administration of this
Agreement. Either party may give the other party written notice of any dispute
not resolved in the normal course of business. Within fifteen (15) days after
delivery of the notice, the receiving party shall submit to the other a written
response. The notice and the response shall include: (i) a statement of each
party's position and a summary of arguments supporting that position; and (ii)
the name and title of the executive who will represent that party and of any
other person who will accompany the executive. Within fifteen (15) days after
delivery of the disputing party's notice, the executives of both parties shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All reasonable
requests for information made by one party to the other will be honored. All
negotiations pursuant to this Section 7.1 are confidential and shall be treated
as compromise and settlement negotiations for purposes of applicable rules of
evidence.
7.2 Arbitration. Subject to Section 7.7, any dispute arising out of or
-----------
relating to this Agreement which has not been resolved through negotiation as
provided under Section 7.1 within sixty (60) days of the initiation of such
procedure, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, by three (3)
independent and impartial arbitrators, of whom each party shall appoint one
arbitrator, the two arbitrators selecting the third arbitrator. The judgment
upon the award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be San Francisco,
California.
7
7.3 Arbitrator Decisions. The arbitrators will decide in accordance
--------------------
with the terms of this Agreement and will take into account any appropriate
trade usages applicable to the transaction. The arbitrators will state in
writing the reasons upon which the award is based. The arbitrators may allocate
the fees and expenses of arbitration, including the reasonable fees and costs
of the attorneys for the parties among the parties as the arbitrators deem
appropriate. If no allocation of fees is made, the allocation set forth in
Section 11.9 below shall apply and arbitration costs and fees shall be borne by
the non-prevailing party.
7.4 Award of Arbitrators. The award of the arbitrators will be final
--------------------
and binding upon the parties. Judgment upon the award may be entered in any
court having jurisdiction. An application may be made to any such court for
judicial acceptance of the award and an order of enforcement.
7.5 Confidentiality. The negotiations pursuant to Section 8.1 and any
---------------
arbitration proceedings pursuant to Section 8.2 and terms of any arbitration
award shall be deemed Confidential Information for the purposes of this
Agreement.
7.6 Applicable Law; Disclosure. The law of the State of California,
--------------------------
excluding that body of law known as conflict of laws, will be the applicable
substantive law for all matters except those governed and by federal law, which
will apply to such other matters.
7.7 Litigation. Any dispute involving the Confidential Information or
----------
intellectual property of a party for which the parties may seek judicial relief,
shall be subject to the exclusive venue of the state and federal courts within
the Northern District of California and the parties hereby consent to the venue
and jurisdiction of such courts.
ARTICLE VIII
------------
CONFIDENTIALITY
---------------
8.1 Scope. The provisions of this Article 8 will apply to all
-----
Confidential Information disclosed by one party to the other party, whether
prior to or after the Effective Date, and which is not otherwise the subject of
a written nondisclosure agreement between the parties. Each party: (i) will hold
the other parties' Confidential Information in strict confidence; (ii) will not
disclose such Confidential Information to any third party and will take all
reasonable steps to prevent such disclosure, which steps will include at least
those taken by such relevant other party to protect such other party's own
confidential information of like kind; and (iii) will not use any Confidential
Information of the other party for any purpose except as is necessary to carry
out this Agreement. Each receiving party may disclose the disclosing party's
Confidential Information to the receiving party's responsible employees and
consultants who have a bona fide need to know, but only to the extent necessary
to carry out the purposes of this Agreement. Each receiving party will instruct
all such employees and consultants not to disclose such Confidential Information
to third parties, including other consultants, without the prior written
permission of the disclosing party.
8
8.2 Return of Confidential Information. Upon the disclosing party's
----------------------------------
request, the receiving party will promptly return to the disclosing party all
tangible items containing or consisting of the disclosing party's Confidential
Information and all copies thereof.
8.3 No Other Rights. Nothing contained in this Agreement will be
---------------
construed as granting any rights to the receiving party, by license or
otherwise, to any of the disclosing party's Confidential Information except as
specified in this Agreement.
8.4 Acknowledgment. Each party acknowledges that the unauthorized
--------------
disclosure or use of the disclosing party's Confidential Information would cause
irreparable harm and significant injury to the disclosing party, the degree of
which may be difficult to ascertain. Accordingly, the parties agree that the
disclosing party will have the right to seek an immediate injunction enjoining
any breach of this Article 8 by the receiving party or its employees or
consultants, as well as the right to pursue any and all other rights and
remedies available at law or in equity for such breach.
8.5 Disclosure Required by Law. If the receiving party (or an affiliate
--------------------------
of the receiving party) is required, whether by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process, by any competent government authority, including pursuant to
any applicable rule of any stock exchange, self-regulatory organization or other
government agency, to disclose any Confidential Information of the disclosing
party, the receiving party will promptly notify the disclosing party in writing,
in reasonable detail, of such request or requirement and will cooperate with the
disclosing party in seeking appropriate protective arrangements requested by the
disclosing party. If, in the absence of a protective order or the receipt of a
waiver in writing by the disclosing party of such protective order, the
receiving party (or any of its affiliates) is in the written opinion of the
receiving party's counsel compelled to disclose the Confidential Information or
else stand liable for contempt or suffer other censure or significant penalty,
the receiving party (or its affiliates) may disclose only so much of the
Confidential Information to the party compelling disclosure as is required by
law. The receiving party will exercise (and will cause its affiliates to
exercise) commercially reasonable best efforts to obtain appropriate protective
arrangements or other reliable assurance that confidential treatment will be
accorded to Confidential Information of the disclosing party in the event of
such required disclosure.
8.6 Public Announcements. During the term of this Agreement, neither
--------------------
party hereto will (except as may otherwise be required by law or by the Exchange
Act as described in, and subject to the provisions of, Section 8.5) issue any
press release or other public announcement or disclosure, with respect to this
Agreement, or any of the transactions contemplated hereby, nor any material
development relating to any of the foregoing, without the prior written consent
of the other party.
9
ARTICLE IX
----------
TERMINATION
-----------
9.1 Term. The term of this Agreement shall be three (3) years
----
commencing on the Effective Date. The term of this Agreement shall
automatically renew for additional one (1) year terms unless either party
provides the other party written notice of its intention to terminate this
Agreement within at least thirty (30) days of the last day of the then
applicable term of this Agreement; provided, however, that Aztec may not
provide such notice and terminate this Agreement in the event that certain
software development agreement between DBSS and Embarcadero Technologies, Inc.,
a Delaware corporation, of even date herewith is still in force.
9.2 Termination.
-----------
(a) Either party may terminate this Agreement prior to the
end of the term of this Agreement if the other party becomes the subject of a
voluntary or involuntary petition in bankruptcy or any proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors, if that petition or proceeding is not dismissed with prejudice within
sixty (60) days after filing.
(b) Either party shall have the right to terminate this
Agreement prior to the end of the term of this Agreement if the other party
breaches any material term or condition of this Agreement and fails to cure that
breach with thirty (30) days after receiving written notice of the breach from
the other party.
9.3 Survival. The following provisions shall survive any
--------
termination of this Agreement, whether by the expiration of the term of this
Agreement or the termination of this Agreement by a party as provided for in
Section 9.2 above: Articles 1 (Definitions), 3 (Intellectual Property Rights), 6
(Warranties and Indemnification); 7 (Dispute Resolution), 8(Confidentiality); 10
(Limitation of Liability) and 11 (General Provisions) and this Section 9.3. Any
amounts due by one party to the other party pursuant to this Agreement shall
become immediately due and payable upon the termination of this Agreement and
the obligation to make such payment shall survive the termination of this
Agreement.
ARTICLE X
---------
LIMITATION OF LIABILITY
-----------------------
EXCEPT WITH RESPECT TO LIABILITY UNDER SECTIONS 6.5 AND 6.6, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR ANY BREACH HEREUNDER IN AN AGGREGATE
AMOUNT IN EXCESS OF THE AMOUNTS TO BE PAID BY EMBARCADERO TO DEVELOPER
HEREUNDER. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM ANY BREACH OF THIS
AGREEMENT.
10
ARTICLE XI
----------
GENERAL PROVISIONS
------------------
11.1 Further Assurances. The parties will execute and deliver any
------------------
further instruments or documents and perform any additional acts that are or may
become necessary to effectuate and carry out the purposes and intent of this
Agreement.
11.2 Binding Effect. This Agreement will be binding on and inures to
--------------
the benefit of the parties and their respective transferees, successors, assigns
and legal representatives.
11.3 Entire Agreement; Amendment. This Agreement sets forth the entire
---------------------------
agreement between the parties with respect to the specific subject matter
hereof, and, except as otherwise set forth herein, supersedes and terminates all
prior representations, agreements and understandings between the parties
regarding the subject matter hereof. No alteration, amendment, change or
addition to this Agreement will be binding upon the parties unless in writing
and signed by an authorized signatory of each party.
11.4 Assignment. Aztec shall not assign this Agreement without the
----------
prior written consent of Aztec. Any assignment hereunder shall be subject to the
written consent of the assignee to all the terms and provisions of this
Agreement.
11.5 Notices. All notices, requests, consents and other communications
-------
hereunder to any party will be deemed to be sufficient if contained in a written
instrument delivered in person, including delivery by recognized express
courier, fees prepaid, or sent by facsimile transmission or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
in each case addressed as set forth below, or to such other address as may
hereinafter be designated in writing by the recipient to the sender pursuant to
this Section 11.5. All such notices, requests, consents and other communications
will be deemed to have been received in the case of personal delivery, including
delivery by express courier, on the date of such delivery; in the case of
facsimile transmission, on the date of transmission with transmission
confirmation; and in the case of mailing, on the fourth (4th) day after deposit
in the U.S. mail, proper postage prepaid.
If to DBSS: DB Software Solutions, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
Facsimile: 1 408 748 1800
If to Aztec: Aztec Software and Technology Services
Limited 23, 3rd `A' Cross, ▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇,
▇▇▇▇▇ Attention: ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ and
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 011 91 80 552 1987
11
11.6 Electronic Data Interchange. If the parties elect to facilitate
---------------------------
their activities hereunder by electronically sending and receiving data in
agreed formats (also referred to in general usage as Electronic Data Interchange
or EDI) in substitution for conventional paper-based documents, the terms and
conditions of this Agreement will apply to such EDI activities and
communications as if such EDI communication, and as if such communication were
sent by facsimile.
11.7 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, then such provision(s) will be
enforced to the maximum extent possible under applicable law and the remainder
of such provision(s) will be excluded from this Agreement, and the balance of
this Agreement will be interpreted as if such provision(s) or portion(s) thereof
were so excluded and will continue to be enforceable in accordance with its
terms.
11.8 Counting of Time. Whenever days are to be counted under this
----------------
Agreement, the first day will not be counted and the last day will be counted,
such that if a notice is delivered on a Monday to one party, for example, with a
five (5) day reply period hereunder, the reply must be sent to the sending party
(not received by such sending party) by such recipient party no later than 11:59
a.m. local time for the sender, on the Saturday next following such Monday.
11.9 Costs and Attorneys' Fees. Subject to the allocation, if any, of
-------------------------
fees or expenses pursuant to Section 7, if any action, suit or other proceeding,
including arbitral proceedings, is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party will
recover all of such party's reasonable fees and costs of attorneys incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
11.10 Non-Waiver. The failure of a party in any one or more instances to
----------
insist upon strict performance of any of the terms and conditions of this
Agreement will not be construed as a waiver or relinquishment, to any extent, of
the right to assert or rely upon any such terms or conditions on any future
occasion.
11.11 Disclaimer of Agency; No Right to Bind Other Party. This Agreement
--------------------
will not render either party the legal representative or agent of another, nor
will either party have the right or authority to assume, create, or incur any
third party liability or obligation of any kind, express or implied, against or
in the name of or on behalf of another except as expressly set forth in this
Agreement or except as may be expressly agreed in advance in writing by the
party to be bound.
11.12 Certain Third Parties. Nothing in this Agreement, express or
---------------------
implied, is intended to confer upon any person, other than the parties and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.13 Captions. The captions to the Sections of this Agreement have been
--------
inserted for identification and reference purposes only and will not be used to
construe or interpret this Agreement.
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11.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be an original and both of which will
constitute together the same document.
11.15 Official Language. The official text of this Agreement and any
-----------------
appendices, Exhibits and Schedules, will be made, written and interpreted in
English. Any notices, accounts, reports, documents, disclosures of information
or statements required by or made under this Agreement, whether during its term
or upon expiration or termination thereof, will be in English. In the event of
any dispute concerning the construction or meaning of this Agreement, reference
will be made only to this Agreement as written in English and not to any other
translation into any other language.
[signatures to follow]
13
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of DBSS and Aztec, as applicable.
DB SOFTWARE SOLUTIONS, LLC AZTEC SOFTWARE AND TECHNOLOGY
SERVICES LIMITED
By: /s/ ASHOK By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------- ------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ Name: ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------ ----------------------------------
Title: CHIEF OPERATING OFFICER Title: CHIEF FINANCIAL OFFICER
----------------------------- ---------------------------------
Date: 29/9/2001 Date: 29/9/2001
------------------------------ ----------------------------------
EXHIBIT A
---------
FORM OF WORK ORDER
------------------
1. Specification of software to be developed:
2. Software and development environment deliverables:
3. Product development timeline and milestones:
4. Estimated development costs:
5. Acceptance:
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EXHIBIT B
---------
ASSIGNMENT OF COPYRIGHTS
------------------------
This Assignment of Copyrights (the "Assignment"), is entered into as of
----------
the __ day of _________, 200_ (the "Effective Date"), by and among Aztec
--------------
Software and Technology Services Limited, an Indian corporation with principal
offices at 23, 3rd `A' Cross, ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ -
560034, India ("Aztec") and DB Software Solutions, LLC, a Delaware limited
-----
liability company ("DBSS").
----
RECITALS
--------
A. Aztec and DBSS have entered into a Software Development Agreement dated
as of September 27, 2001 (the "Agreement"), pursuant to which DBSS will purchase
---------
from Aztec, and Aztec will sell, assign and transfer to DBSS the copyrights of
certain software Aztec created thereunder.
B. For good and valuable consideration, the adequacy and receipt of which is
hereby acknowledged by Aztec, Aztec desires to give this Assignment for the
purpose of effecting such purchase, sale and assignment pursuant to the
provisions of the Agreement.
DEVELOPER AGREES AS FOLLOWS:
1. Sale of All of the Copyrights of Aztec. Aztec does hereby
--------------------------------------
irrevocably and unconditionally sell, convey, assign, transfer, and deliver to
DBSS, its successors and assigns, all of its right, title and interest in and to
all copyrights to:
[PLEASE DESCRIBE HERE OR REFER TO AN APPENDIX]
2. No Rights in Third Parties. Nothing expressed or implied in this
--------------------------
Assignment is intended to confer upon any person, other than the parties and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Assignment.
3. Successors and Assignees. This Assignment is executed pursuant
--------------------------
to the Agreement and is entitled to the benefits thereof and shall be binding
upon and inure to the benefit of DBSS and Aztec and their respective successors
and assigns.
[signatures to follow]
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IN WITNESS WHEREOF, Aztec has caused this Assignment to be executed on
the date first above written.
AZTEC SOFTWARE AND TECHNOLOGY SERVICES LIMITED
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Date:_____________________________________
Accepted this __th day of _______, 200_.
DB SOFTWARE SOLUTIONS, LLC
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
17