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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FORRESTER RESEARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 7389 04-2797789
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
1033 MASSACHUSETTS AVENUE, CAMBRIDGE, MASSACHUSETTS 02138 (617) 497-7090
(Address, including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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GEORGE F. COLONY
CHAIRMAN OF THE BOARD, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
FORRESTER RESEARCH, INC.
1033 MASSACHUSETTS AVENUE
CAMBRIDGE, MASSACHUSETTS 02138
(617) 497-7090
(Name, Address, including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
ANN L. MILNER, ESQ. PETER B. TARR, ESQ.
ROPES & GRAY HALE AND DORR
ONE INTERNATIONAL PLACE 60 STATE STREET
BOSTON, MA 02110 BOSTON, MA 02109
(617) 951-7000 (617) 526-6000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Registration
Securities to be Registered Registered(1) Share(2) Price(2) Fee
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Common Stock, $0.01 Par Value 2,300,000 shs. $15.00 $34,500,000 $11,897
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(1) Includes 300,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any. See "Underwriting."
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 26, 1996
2,000,000 SHARES
[CORPORATE LOGO]
FORRESTER RESEARCH, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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All of the 2,000,000 shares of Common Stock offered hereby are being sold
by Forrester Research, Inc. Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price per share will be between $13.00 and $15.00. For
factors to be considered in determining the initial public offering price, see
"Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "FORR".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
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Per Share................................ $ $ $
Total(3)................................. $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting estimated expenses of $950,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 300,000 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount, and proceeds to Company will be $ , $ , and
$ , respectively. See "Underwriting".
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The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. ROBERTSON, STEPHENS & COMPANY
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The date of this Prospectus is , 1996.
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[A Graphic of three intertwined elipses illustrates
Forrester Research, Inc.'s three main research
areas -- Corporate IT, New Media, and Strategic Management]
Our goal at Forrester is to give our clients confidence that they're
putting attention, time, and resources where they will have the greatest
benefit. Forrester's innovative research services, which are topically
organized around Strategic Management, Corporate IT, and New Media research
themes, add insight and perspective to a business-focused review of emerging
technology.
Forrester is about change. In particular, how new technology will change
large companies, consumers, and society - and what our clients should be doing
about it.
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Forrester Research, Inc. intends to furnish to its stockholders annual
reports containing audited financial statements and quarterly reports containing
unaudited interim financial information for the first three fiscal quarters of
each fiscal year of the Company.
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This Prospectus includes trademarks of Forrester Research, Inc. and other
companies.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. Except as otherwise noted, all information in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option,
and (ii) reflects the filing of a Restated Certificate of Incorporation
immediately prior to the completion of this offering.
THE COMPANY
Forrester Research, Inc. ("Forrester" or the "Company") is a leading
independent research firm offering products and services that help its clients
assess the effect of technology on their businesses. The Company provides
analysis and insight into a broad range of technology areas such as computing,
software, networking, the Internet, and telecommunications, and projects how
technology trends will impact businesses, consumers, and society. Forrester's
clients, which include senior management, business strategists, and information
technology ("IT") professionals within large enterprises, use Forrester's
prescriptive research to understand and benefit from current developments in
technology and as support for their development and implementation decisions.
Forrester offers its clients annual memberships to any of its 10 research
services. Each research service focuses on a particular area of technology and
explores business issues relevant to clients' decision-making. These issues
include the impact that the application of technology may have on financial
results, investment priorities, organizational effectiveness, and staffing
requirements. Forrester also provides advisory services to a limited number of
clients to help them explore in greater detail the topics covered by the core
research.
Forrester targets its products and services to both large enterprises and
technology vendors. As of June 30, 1996, Forrester's research was delivered to
more than 850 client companies. Approximately 73% of Forrester's client
companies with memberships expiring during the six-month period ended June 30,
1996 renewed one or more memberships for the Company's products and services.
The Company was incorporated in Massachusetts on July 7, 1983 and was
reincorporated in Delaware on February 21, 1996. The Company's executive offices
are located at 1033 Massachusetts Avenue, Cambridge, Massachusetts 02138, and
its telephone number is (617) 497-7090.
RISK FACTORS
For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors".
THE OFFERING
Common Stock offered by the Company.............................. 2,000,000 shares
Common Stock to be outstanding after the offering................ 8,000,000 shares(1)
Proposed Nasdaq National Market symbol........................... FORR
Use of proceeds.................................................. For working capital and
other general corporate
purposes, including pos-
sible acquisitions.
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(1) Based on the number of shares of Common Stock outstanding at September 23,
1996. Does not include 3,100,000 shares of Common Stock reserved under the
Company's stock plans, of which 728,589 shares were subject to outstanding
options at September 23, 1996.
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SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1991 1992 1993 1994 1995 1995 1996
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STATEMENT OF INCOME DATA:
Core research................... $1,637 $2,626 $4,691 $6,363 $10,150 $4,393 $ 7,774
Advisory services and other..... 1,337 2,139 2,608 3,336 4,439 1,188 2,288
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Total revenues.................. 2,974 4,765 7,299 9,699 14,589 5,581 10,062
Income from operations.......... 424 586 947 1,487 1,784 371 1,025
Net income...................... 480 654 980 1,539 2,027 523 1,191
Pro forma income tax
adjustment(1)................. 192 262 365 583 739 188 443
Pro forma net income(1)......... 288 392 615 956 1,288 335 748
Pro forma net income per common
share(2)...................... $ 0.20 $ 0.12
Pro forma weighted average
common shares
outstanding(2)................ 6,291,299 6,291,299
JUNE 30, 1996
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PRO FORMA
PRO AS
FORMA ADJUSTED
ACTUAL (3)(4) (3)(4)(5)
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BALANCE SHEET DATA:
Cash and cash equivalents and marketable securities... $ 9,506 $ 7,306 $32,396
Working capital....................................... 1,113 (1,087) 24,003
Total assets.......................................... 19,911 17,711 42,801
Total stockholders' equity............................ 3,040 440 25,530
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(1) The Company has elected to be taxed, since January 1, 1987, under subchapter
S of the Internal Revenue Code of 1986, as amended (the "Code"), whereby the
sole stockholder is liable for individual federal and state income taxes on
the Company's taxable income. Upon the completion of this offering, the
Company will terminate its S corporation election and will be subject to
corporate-level federal and state income taxes. Accordingly, the pro forma
income tax adjustments represent the income taxes that would have been
recorded if the Company had been a C corporation for the periods presented.
See Note 3 of Notes to Financial Statements.
(2) Pro forma net income per common share is computed by dividing pro forma net
income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Historical net income per
common share data are not presented because the information is not
considered meaningful. See Note 1 of Notes to Financial Statements.
(3) Pro forma to give effect to the (i) distribution of previously undistributed
S corporation earnings taxed or taxable to the Company's sole stockholder of
approximately $2,200,000 based on earnings through June 30, 1996, and (ii)
termination of the Company's S corporation election and the recognition of a
net deferred income tax liability of approximately $400,000 as of June 30,
1996, both to occur upon completion of this offering. See Notes 1 and 3 of
Notes to Financial Statements.
(4) Does not include an adjustment for the distribution to be made to the sole
stockholder of the Company upon completion of this offering in an amount
equal to the Company's undistributed S corporation earnings from July 1,
1996 through the termination of the Company's S corporation election upon
completion of this offering.
(5) Adjusted to reflect the sale of 2,000,000 shares of Common Stock at an
assumed initial public offering price of $14.00 per share (less estimated
underwriting discount and offering expenses).
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered in evaluating the Company and its
business before purchasing the Common Stock offered by this Prospectus.
NEED TO ATTRACT AND RETAIN PROFESSIONAL STAFF
The Company's future success will depend in large measure upon the
continued contributions of its senior management team, research analysts, and
experienced sales personnel. Accordingly, future operating results will be
largely dependent upon the Company's ability to retain the services of these
individuals and to attract additional qualified personnel from a limited pool of
qualified candidates. The Company experiences intense competition in hiring and
retaining professional personnel from, among others, producers of information
technology products, other research firms, management consulting firms, print
and electronic publishing companies, and financial services companies. Many of
these firms have substantially greater financial resources than the Company to
attract and compensate qualified personnel. The loss of the services of key
management and professional personnel or the inability to attract such personnel
could have a material adverse effect on the Company's business, financial
condition, and results of operations.
MANAGEMENT OF GROWTH
The Company's growth has placed significant demands on its management and
other resources. The Company's revenues increased approximately 50% to $14.6
million in 1995 from $9.7 million in 1994 and increased 80% to $10.1 million in
the six months ended June 30, 1996 from $5.6 million in the six months ended
June 30, 1995. The Company's staff increased from 61 full-time employees on
January 1, 1995 to 118 full-time employees on September 23, 1996 and further
increases are expected during the remainder of 1996. The Company's ability to
manage growth, if any, effectively will require it to continue to develop and
improve its operational, financial, and other internal systems, as well as its
business development capabilities, and to train, motivate, and manage its
employees. In addition, the Company may acquire complementary businesses,
products, or technologies, although it currently has no commitments or
agreements to do so. The Company's management has limited experience integrating
acquisitions. If the Company is unable to manage its growth effectively, such
inability could have a material adverse effect on the quality of the Company's
products and services, its ability to retain key personnel and its business,
financial condition, and results of operations.
VARIABILITY OF QUARTERLY OPERATING RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's revenues and earnings may fluctuate from quarter to quarter
based on a variety of factors including the timing and size of new and renewal
memberships from clients, the timing of revenue-generating events sponsored by
the Company, the utilization of its advisory services, the introduction and
marketing of new products and services by the Company and its competitors, the
hiring and training of new analysts and sales personnel, changes in demand for
the Company's research, and general economic conditions. As a result, the
Company's operating results in future quarters may be below the expectations of
securities analysts and investors which could have a material adverse effect on
the market price for the Company's Common Stock. In addition, the stock market
recently has experienced volatility which has affected the market price of
securities of many companies and which has sometimes been unrelated to the
operating performance of such companies. Factors such as announcements of new
services or offices or strategic alliances by the Company or its competitors, as
well as market conditions in the information technology services industry, may
have a significant impact on the market price of the Common Stock. The market
price for the Company's Common Stock may also be affected by movements in prices
of stocks in general.
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DEPENDENCE ON RENEWALS OF MEMBERSHIP-BASED RESEARCH SERVICES
The Company's success depends in part upon renewals of memberships for its
core research products. Approximately 70% and 77% of the Company's revenues in
1995 and the first six months of 1996, respectively, were derived from the
Company's membership-based core research products. A decline in renewal rates
for the Company's core research products could have a material adverse effect on
the Company's business, financial condition, and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success will depend in large part upon the continued
services of a number of key employees. The loss of key personnel, in particular
George F. Colony, the Company's founder and Chairman of the Board of Directors,
President, and Chief Executive Officer, would have a material adverse effect on
the Company's business, financial condition, and results of operations. The
Company has entered into a registration rights and non-competition agreement
with Mr. Colony which provides that if Mr. Colony's employment with the Company
is terminated he will not compete with the Company for the one-year period
following his termination. See "Business -- Employees" and "Management --
Registration Rights and Non-Competition Agreement".
RISKS ASSOCIATED WITH ANTICIPATING MARKET TRENDS
The Company's success depends in part upon its ability to anticipate
rapidly changing technologies and market trends and to adapt its core research
to meet the changing information needs of the Company's clients. The technology
sectors that the Company analyzes undergo frequent and often dramatic changes,
including the introduction of new products and obsolescence of others, shifting
strategies and market positions of major industry participants, paradigm shifts
with respect to system architectures, and changing objectives and expectations
of users of technology. The environment of rapid and continuous change presents
significant challenges to the Company's ability to provide its clients with
current and timely analysis, strategies, and advice on issues of importance to
them. Meeting these challenges requires the commitment of substantial resources,
and any failure to continue to provide insightful and timely analysis of
developments and assessment of technologies and trends in a manner that meets
market needs could have a material adverse effect on the Company's business,
financial condition, and results of operations.
NEW PRODUCTS AND SERVICES
The Company's future success will depend in part on its ability to offer
new products and services that successfully gain market acceptance by addressing
specific industry and business organization sectors, changes in client
requirements, and changes in the technology industry. The process of internally
researching, developing, launching, and gaining client acceptance of a new
product or service, or assimilating and marketing an acquired product or
service, is inherently risky and costly. There can be no assurance that the
Company's efforts to introduce new, or assimilate acquired, products or services
will be successful.
COMPETITION
The Company competes in the market for research products and services with
other independent providers of similar services. Several of the Company's
competitors have substantially greater financial, information-gathering, and
marketing resources than the Company. In addition, the Company's indirect
competitors include the internal planning and marketing staffs of the Company's
current and prospective clients, as well as other information providers such as
electronic and print publishing companies, survey-based general market research
firms, and general business consulting firms. The Company's indirect competitors
may choose to compete directly against the Company in the future. In addition,
there are relatively few barriers to entry into the Company's market and new
competitors could readily seek to compete against the Company in one or more
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market segments addressed by the Company's products and services. Increased
competition could adversely affect the Company's operating results through
pricing pressure and loss of market share. There can be no assurance that the
Company will be able to continue to compete successfully against existing or new
competitors. See "Business -- Competition".
CONCENTRATION OF CONTROL
Upon completion of this offering, Mr. Colony will beneficially own
approximately 74% of the Company's outstanding Common Stock. As a result, he
will have the ability to elect the Company's directors and to determine the
outcome of corporate actions requiring stockholder approval. This concentration
of ownership may have the effect of delaying or preventing a change in control
of the Company. See "Management" and "Description of Capital Stock".
INTERNATIONAL OPERATIONS
Revenues attributable to customers outside the United States represented
approximately 18% and 21% of the Company's total revenues for the year ended
December 31, 1995 and for the six months ended June 30, 1996, respectively. The
Company expects that international revenues will continue to account for a
substantial portion of total revenues and intends to continue to expand its
international operations. Expansion into new geographic territories requires
considerable management and financial resources and may negatively impact the
Company's near-term results of operations. The Company's international
operations are subject to numerous inherent challenges and risks, including
developing and managing relationships with international sales representative
organizations, reliance by the Company on sales entities which it does not
control, greater difficulty in maintaining direct client contact, political and
economic conditions in various jurisdictions, tariffs and other trade barriers,
longer accounts receivable collection cycles, difficulties in protecting
intellectual property rights in international jurisdictions, and potentially
adverse tax consequences. There can be no assurance that such factors will not
have a material adverse effect on the Company's business, financial condition,
and results of operations.
POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority, without action by the
Company's stockholders, to fix the rights and preferences of and to issue shares
of the Company's Preferred Stock, which may have the effect of delaying,
deterring, or preventing a change in control of the Company. The Company has
also imposed various procedural and other requirements, such as supermajority
voting requirements for specific corporate actions, that could make it more
difficult for stockholders to effect certain corporate actions. In addition, the
classification of the Board of Directors of the Company could have the effect of
delaying, deterring, or preventing a change in control of the Company. See
"Description of Capital Stock".
NO PRIOR PUBLIC MARKET
Before this offering, there was no public market for the Common Stock, and
there can be no assurance that an active trading market will develop or be
sustained. The initial public offering price will be determined by negotiation
between the Company and the representatives of the Underwriters based on several
factors, including prevailing market conditions and recent operating results of
the Company, and may not be indicative of the market price of the Common Stock
after this offering. See "Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Sales of Common Stock in the public market after this offering could
adversely affect the market price of the Common Stock. The 2,000,000 shares
offered hereby will be freely tradeable in the open market. The remaining
6,000,000 shares, all of which Mr. Colony owns, are subject to a 180-day
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lock-up agreement with the representatives of the Underwriters. Following the
expiration or earlier termination of the lock-up agreement, these shares will be
eligible for sale in the open market pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"). Upon completion of this
offering, options to purchase 157,376 shares of Common Stock will be immediately
exercisable, 106,595 of which shares are subject to 180-day lock-up agreements
with the representatives of the Underwriters. The Company intends to register an
aggregate of 200,000 shares of Common Stock reserved for issuance under its
employee stock purchase plan prior to the consummation of this offering, which
shares will not be issuable until June 1997. In addition, the Company intends to
register an additional 2,900,000 shares of Common Stock reserved for issuance
under its stock option plans 90 days after completion of this offering. See
"Management -- Stock Plans" and "Description of Capital Stock -- Shares Eligible
for Future Sale".
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future other than distributions to the Company's sole
stockholder in connection with the termination of the Company's S corporation
election upon completion of this offering. See "Termination of S Corporation
Election and S Corporation Distribution" and "Dividend Policy".
DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate
dilution of $10.81 per share in the net tangible book value per share of the
Common Stock from the assumed initial public offering price. To the extent that
outstanding options to purchase Common Stock are exercised, there will be
further dilution. See "Dilution".
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby (at an assumed initial public
offering price of $14.00 per share and net of estimated underwriting discount
and offering expenses) are estimated to be approximately $25,090,000
($28,996,000 if the Underwriters' over-allotment option is exercised in full).
The Company expects to use the net proceeds of this offering for working capital
and general corporate purposes, including possible acquisitions. The Company
currently has no commitments or agreements with respect to any specific
acquisition. Pending such uses, the Company intends to invest the net proceeds
primarily in short- and intermediate-term interest-bearing obligations of
investment grade.
TERMINATION OF S CORPORATION ELECTION
AND S CORPORATION DISTRIBUTION
The Company has operated as an S corporation since January 1, 1987. As a
result of its S corporation election, the income of the Company has been taxed,
for federal and state income tax purposes, directly to the sole stockholder of
the Company, except for certain state income taxes imposed at the corporate
level. Upon the completion of this offering, the Company will terminate its S
corporation election and will be subject to federal and state income taxes at
prevailing corporate rates. Termination of this election will result in a net
deferred tax liability being recorded as a charge to operations during the
quarter in which this offering is completed. This deferred tax liability is
approximately $400,000 as of June 30, 1996.
In addition, the Company will declare a distribution to its current
stockholder in an amount equal to the Company's undistributed S corporation
earnings. This distribution will be paid out of the Company's cash balances and
proceeds from the sale of marketable securities. See "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources". The Company and Mr. Colony also
intend to enter into a Tax Indemnification Agreement. See "Certain
Transactions".
DIVIDEND POLICY
The Company paid cash dividends of $1,750,000, $1,121,342, and $135,020 to
Mr. Colony, the sole stockholder of the Company, in the years ended December 31,
1994 and 1995 and the six months ended June 30, 1996, respectively. In addition,
the Company will make a distribution to Mr. Colony equal to the Company's
undistributed S corporation earnings through the termination of the Company's S
corporation election. This distribution is estimated to be $2,200,000 based on
earnings through June 30, 1996. This estimate does not include the amount to be
distributed for S corporation earnings from July 1, 1996 through the termination
of the Company's S corporation election upon completion of this offering. The
Company anticipates that following completion of this offering and the
distribution of S corporation earnings to the Company's sole stockholder, future
earnings, if any, will be retained for the development of its business, and the
Company does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. See "Termination of S Corporation Election and S Corporation
Distribution" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources".
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DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996
was approximately $440,000, or $0.07 per share of common stock. Pro forma net
tangible book value per share of common stock is determined by dividing the
Company's tangible net worth (tangible assets less liabilities) by the number of
shares of Common Stock outstanding after giving effect to the (i) distribution
of previously undistributed S corporation earnings taxed or taxable to the
Company's sole stockholder of approximately $2,200,000 through June 30, 1996,
and (ii) termination of the Company's S corporation election and the recognition
of a deferred income tax liability of approximately $400,000 as of June 30,
1996, both to occur upon completion of this offering, but not giving effect to
the distribution to be made to the sole stockholder upon completion of this
offering in an amount equal to the Company's undistributed S corporation
earnings from July 1, 1996 through the date of termination of the Company's S
corporation election. After giving effect to the sale of 2,000,000 shares of
Common Stock at an assumed initial public offering price of $14.00 per share
(less estimated underwriting discount and offering expenses) resulting in
estimated net proceeds of $25,090,000, the pro forma net tangible book value of
the Company as of June 30, 1996 would have been $25,530,399, or $3.19 per share.
This represents an immediate increase of $3.12 per share to the existing
stockholder and an immediate dilution of $10.81 per share to new investors. The
following table illustrates this per share dilution:
Assumed initial public offering price per share........................... $14.00
Pro forma net tangible book value per share as of June 30, 1996...... $0.07
Increase per share attributable to new investors..................... 3.12
-----
Pro forma net tangible book value per share after this offering........... 3.19
------
Dilution per share to new investors....................................... $10.81
======
The following table summarizes on a pro forma basis as of June 30, 1996 the
total consideration paid, and the average price per share paid by the existing
stockholder and new investors assuming the sale of the Common Stock offered
hereby at an assumed initial public offering price of $14.00 per share, before
deducting the estimated underwriting discount and offering expenses, and
assuming the Underwriters' over-allotment option is not exercised.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ----------
Existing stockholder(1)........... 6,000,000 75.0% $ 60,000 0.2% $ 0.01
New investors..................... 2,000,000 25.0 28,000,000 99.8 $14.00
---------- ------- ------------ ------- ----------
Total........................ 8,000,000 100.0% $ 28,060,000 100.0%
========= ======= ============ =======
- ---------------
(1) Excludes 429,956 shares of Common Stock issuable upon exercise of certain
options held by executive officers, directors, and certain employees of the
Company that were outstanding as of June 30, 1996. To the extent any
outstanding options are exercised, there will be additional dilution to new
investors. See "Management -- Stock Plans" and Note 6 of Notes to Financial
Statements.
10
12
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis, (ii) on a pro forma basis after giving effect
to (a) the distribution of previously undistributed S corporation earnings taxed
or taxable to the Company's sole stockholder of approximately $2,200,000 through
June 30, 1996, and termination of the Company's S corporation election and the
recognition of a deferred income tax liability of approximately $400,000 as of
June 30, 1996, both to occur upon completion of this offering, and (b) certain
amendments to the Company's Certificate of Incorporation increasing the number
of authorized shares of common stock to 25,000,000 and establishing a class of
Preferred Stock consisting of 500,000 shares, and (iii) on a pro forma as
adjusted basis to reflect the sale of 2,000,000 shares of common stock at an
assumed initial public offering price of $14.00 per share (less estimated
underwriting discount and offering expenses). This table should be read in
conjunction with the Company's Financial Statements and Notes thereto included
elsewhere in this Prospectus.
AS OF JUNE 30, 1996
----------------------------------------
(IN THOUSANDS)
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)
------- ------------ -------------
Stockholders' equity:
Preferred stock, $.01 par value, per share:
500,000 shares authorized; none issued.. $ -- $ -- $ --
Common stock, $.01 par value, per share:
7,000,000 shares authorized; 6,000,000
shares issued and outstanding at June
30, 1996; 25,000,000 shares authorized
and 6,000,000 shares issued and
outstanding on a pro forma basis; and
8,000,000 shares issued and
outstanding on a pro forma as adjusted
basis(2).............................. 60 60 80
Additional paid-in capital................... -- -- 25,070
Retained earnings............................ 3,021 421 421
Unrealized loss on marketable securities..... (41 ) (41) (41)
------- ------ -------------
Total stockholders' equity................... 3,040 440 25,530
------- ------ -------------
Total capitalization.................... $3,040 $440 $25,530
======= ============== ===============
- ---------------
(1) Does not include an adjustment for the distribution to be made to the sole
stockholder of the Company upon completion of this offering in an amount
equal to the Company's undistributed S corporation earnings from July 1,
1996 through the termination of the Company's S corporation election upon
completion of this offering.
(2) Excludes 429,956 shares of common stock issuable upon exercise of certain
options held by executive officers, directors, and certain employees of the
Company as of June 30, 1996.
11
13
SELECTED FINANCIAL DATA
The selected financial data presented below as of and for each of the three
years ended December 31, 1993, 1994, and 1995 have been derived from the
Company's financial statements, which have been audited by Arthur Andersen LLP,
independent accountants. The selected financial data as of and for the years
ended December 31, 1991 and 1992 and for the six-month periods ended June 30,
1995 and 1996 have been derived from the unaudited financial statements of the
Company. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and the results of operations as
at and for these periods. Operating results for the six months ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
full year or any other period. The financial information set forth below is
qualified by and should be read in conjunction with the Financial Statements of
the Company and the Notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------ ------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA:
Revenues:
Core research.................. $1,637 $2,626 $4,691 $6,363 $10,150 $4,393 $7,774
Advisory services and other.... 1,337 2,139 2,608 3,336 4,439 1,188 2,288
------ ------ ------ ------ ------- ------ ------
Total revenues................. 2,974 4,765 7,299 9,699 14,589 5,581 10,062
Operating Expenses:
Cost of services and
fulfillment.................. 1,308 1,866 2,406 3,424 5,486 2,163 3,746
Selling and marketing.......... 721 1,645 2,693 3,593 5,643 2,361 3,945
General and administrative..... 485 599 1,148 1,045 1,389 558 1,134
Depreciation and
amortization................. 36 69 105 150 287 128 212
------ ------ ------ ------ ------- ------ ------
Income from operations.... 424 586 947 1,487 1,784 371 1,025
Interest income........... 56 68 79 125 339 177 231
------ ------ ------ ------ ------- ------ ------
Income before state income tax
provision.................... 480 654 1,026 1,612 2,123 548 1,256
State income tax provision(1).. -- -- 46 73 96 25 65
------ ------ ------ ------ ------- ------ ------
Net income................ $ 480 $ 654 $ 980 $1,539 $ 2,027 $ 523 $1,191
====== ====== ====== ====== ======== ====== ======
Pro forma income tax
adjustment(1)................ 192 262 365 583 739 188 443
------ ------ ------ ------ ------- ------ ------
Pro forma net income(1)........ $ 288 $ 392 $ 615 $ 956 $ 1,288 $ 335 $ 748
====== ====== ====== ====== ======== ====== ======
Pro forma net income per common
share(2)..................... $ 0.20 $ 0.12
------- ------
Pro forma weighted average
common shares
outstanding(2)............... 6,291,299 6,291,299
JUNE 30, 1996
DECEMBER 31, -------------------
----------------------------------------------- PRO FORMA
1991 1992 1993 1994 1995 ACTUAL (3)(4)
------ ------ ------ ------ ------- ------- ---------
BALANCE SHEET DATA:
Cash and cash equivalents and
marketable securities........ $ 883 $2,385 $3,111 $4,764 $ 7,518 $ 9,506 $ 7,306
Working capital................ 160 409 901 528 991 1,113 (1,087)
Total assets................... 2,275 4,964 6,367 8,784 15,426 19,911 17,711
Stockholders' equity........... 331 696 1,331 1,120 2,047 3,040 440
12
14
- ---------------
(1) The Company has elected to be taxed, since January 1, 1987, under subchapter
S of the Code, whereby the sole stockholder is liable for federal and state
income taxes on the Company's taxable income. Upon the completion of this
offering, the Company will terminate its S corporation election and will be
subject to corporate-level federal and state income taxes. Accordingly, the
pro forma income tax adjustments represent the income taxes that would have
been recorded if the Company had been a C corporation for the periods
presented. See Note 3 of Notes to Financial Statements.
(2) Pro forma net income per common share is computed by dividing pro forma net
income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Historical net income per
common share data are not presented because the information is not
considered meaningful. See Note 1 of Notes to Financial Statements.
(3) Pro forma to give effect to the (i) distribution of previously undistributed
S corporation earnings taxed or taxable to the Company's sole stockholder of
approximately $2,200,000 through June 30, 1996, and (ii) termination of the
Company's S corporation election and the recognition of a deferred income
tax liability of approximately $400,000 as of June 30, 1996, both to occur
upon completion of this offering. See Notes 1 and 3 of Notes to Financial
Statements.
(4) Does not include an adjustment for the distribution to be made to the sole
stockholder of the Company upon completion of this offering in an amount
equal to the Company's undistributed S corporation earnings from July 1,
1996 through the termination of the Company's S corporation election upon
completion of this offering.
13
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Forrester has experienced year-to-year revenue growth every year since its
inception in 1983. Over the last five years, the Company's revenues have
increased to $14.6 million in 1995 from $3.0 million in 1991. The Company's
revenues were $10.1 million in the first six months of 1996. Forrester
attributes this growth to the Company's continuing reputation for quality
research and timely, accurate analysis of technology industry developments; the
introduction of new products and services; and the expansion of the Company's
sales and marketing organization. In addition, the Company believes the speed of
technology change and the increasingly participatory nature of technology
decisions have led to a growing market need for independent research and
analysis on the impact of technology on large enterprises, consumers, and
society.
Revenues from core research also increased over the last five years, to
$10.1 million in 1995 from $1.6 million in 1991, and increased as a percentage
of total revenues to 70% in 1995 from 55% in 1991. Revenues from core research
were $7.8 million for the first six months of 1996, or 77% of total revenues.
Forrester attributes this growth to, in addition to the factors cited above, an
increase in total Strategy Research Services offered -- from three in 1991 to
four in 1994, to six in 1995, and to a total of nine Strategy Research Services
as of June 30, 1996.
Memberships to Forrester's Strategy Research Services are renewable
contracts, typically annual and payable in advance. Accordingly, a substantial
portion of the Company's billings are initially recorded as deferred revenue and
recognized pro rata on a monthly basis over the contract period. The Company's
other revenues are derived from advisory services rendered pursuant to
Forrester's Partners Program and Strategy Review Program, and from the Forrester
Technology Management Forum (the "Forum"). The Company's advisory service
clients purchase such services in conjunction with the purchase of core research
memberships to Strategy Research Services, and the contracts for such purchases
are also generally payable in advance. Billings attributable to advisory
services are initially recorded as deferred revenues and recognized as revenue
when performed. Similarly, Forum billings are initially recorded as deferred
revenues and are recognized upon completion of the event.
The Company's operating expenses consist of cost of services and
fulfillment, selling and marketing expenses, general and administrative
expenses, and depreciation and amortization. Cost of services and fulfillment
represent the costs associated with production and delivery of the Company's
products and services, and include the costs of salaries, bonuses, and related
benefits for research personnel, and all associated editorial, travel, and
support services. Selling and marketing expenses include salaries, employee
benefits, travel expenses, promotional costs, and sales commissions, which are
deferred when paid and expensed as the related revenue is recognized. General
and administrative expenses include the costs of the finance, operations, and
corporate IT groups, and other administrative functions of the Company.
The Company has had income from operations in each of the last five years
from 1991 through 1995 and in the first six months of 1996. Income from
operations rose 321% to $1.8 million in 1995 from $424,000 in 1991. Income from
operations was $1.0 million for the six-month period ended June 30, 1996.
The Company has elected to be taxed, since January 1, 1987, under
subchapter S of the Code whereby the sole stockholder is liable for individual
federal and certain state income taxes on the Company's taxable income. As such,
the Company has not paid federal income taxes and paid reduced state income
taxes. Upon completion of this offering, the Company will terminate its S
corporation election and will be subject to corporate-level federal and state
income taxes. Termination of this election will result in a deferred income tax
liability being recorded as a charge to operations during the quarter in which
this offering is completed. This deferred tax liability is approximately
$400,000 as of June 30, 1996. The combination of the state income tax provision
and the pro forma income tax adjustment in the Company's historical financial
statements reflects the
14
16
federal and state income taxes which would have been recorded if the Company had
been treated as a C corporation during the periods presented. The Company has
calculated these amounts based upon an estimated effective tax rate for the
respective periods.
The Company believes that the "agreement value" of contracts to purchase
core research and advisory services provides a significant measure of the
Company's business volume. Forrester calculates agreement value as the
annualized fees payable under all core research and advisory services contracts
in effect at a given point in time, without regard to the remaining duration of
such contracts. Agreement value increased 74% to $17.8 million at December 31,
1995 from $10.2 million at December 31, 1994. At June 30, 1996 agreement value
was $22.4 million. The Company's experience is that a substantial portion of
client companies renew expiring contracts for an equal or higher level of total
core research and advisory service fees each year. Approximately 71% and 73% of
Forrester's client companies with memberships expiring during 1995 and the first
six months of 1996, respectively, renewed one or more memberships for the
Company's products and services, although these renewal rates are not
necessarily indicative of the rate of future retention of the Company's revenue
base. The number of client companies increased to more than 850 at June 30, 1996
from 799 at December 31, 1995, and no single client company accounted for over
4% of the Company's revenue in 1995 or over 3% of the Company's revenue in the
six months ended June 30, 1996.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
total revenues for the periods indicated:
SIX MONTHS
ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
----------------------- -------------
1993 1994 1995 1995 1996
--- --- --- --- ---
Core research.............................. 64% 66% 70% 79% 77%
Advisory services and other................ 36 34 30 21 23
--- --- --- --- ---
Total revenues............................. 100 100 100 100 100
--- --- --- --- ---
Cost of services and fulfillment........... 33 35 37 39 37
Selling and marketing...................... 37 37 39 42 39
General and administrative................. 16 10 9 10 11
Depreciation and amortization.............. 1 2 2 2 2
--- --- --- --- ---
Income from operations..................... 13 16 13 7 11
Interest income............................ 1 1 2 3 2
--- --- --- --- ---
Income before state income tax provision... 14 17 15 10 13
Provision for state income tax............. 1 1 1 1 1
--- --- --- --- ---
Net income................................. 13% 16% 14% 9% 12%
==== ==== ==== ==== ====
Pro forma income tax adjustment............ 5 6 5 3 5
--- --- --- --- ---
Pro forma net income....................... 8% 10% 9% 6% 7%
==== ==== ==== ==== ====
SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
REVENUES. Total revenues increased 80% to $10.1 million in the six months
ended June 30, 1996 from $5.6 million in the corresponding period of 1995.
Revenues from core research increased 77% to $7.8 million in the six months
ended June 30, 1996 from $4.4 million in the corresponding period in 1995. The
increases in total revenues and revenues from core research were primarily
attributable to the introduction of new Strategy Research Services and continued
expansion and increased productivity of the Company's sales force.
Advisory services and other revenues increased 93% to $2.3 million in the
six months ended June 30, 1996 from $1.2 million in the six months ended June
30, 1995. This increase was primarily attributable to demand for the Partners
and Strategy Review Programs.
15
17
Revenues attributable to customers outside the United States increased 100%
to $2.1 million in the six months ended June 30, 1996 from $1.0 million in the
six months ended June 30, 1995, and also increased as a percentage of total
revenues to 21% for the six months ended June 30, 1996 from 19% for the six
months ended June 30, 1995. The increase was due primarily to the addition of
direct international sales personnel. The Company invoices its international
clients in U.S. dollars.
Agreement value grew to $22.4 million at June 30, 1996 from $12.1 million
at June 30, 1995. No single client company accounted for more than 3% of
agreement value or 3% of revenues for the six months ended June 30, 1996.
COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
decreased as a percentage of total revenues to 37% in the six months ended June
30, 1996 from 39% in the six months ended June 30, 1995. These costs increased
73% to $3.7 million in the six months ended June 30, 1996 from $2.2 million in
the six months ended June 30, 1995. The expense increase in this period was
principally due to increased analyst staffing for new Strategy Research Services
and related compensation expense.
SELLING AND MARKETING. Selling and marketing expenses decreased as a
percentage of total revenues to 39% in the six months ended June 30, 1996 from
42% in the six months ended June 30, 1995. These expenses increased 67% to $3.9
million in the six months ended June 30, 1996 from $2.4 million in the six
months ended June 30, 1995. The increase in expense was principally due to the
addition of direct salespersons and increased sales commission expense
associated with increased revenues. The decrease as a percentage of total
revenues was principally due to increased productivity of the Company's direct
sales force.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
as a percentage of total revenues to 11% in the six months ended June 30, 1996
from 10% in the six months ended June 30, 1995. These expenses increased 103% to
$1.1 million in the six months ended June 30, 1996 from $558,000 in the six
months ended June 30, 1995. The increase in expenses was principally due to
staffing increases in operations and information technology ("IT") and higher
costs associated with the Company's new Cambridge headquarters.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 66% to $212,000 in the six months ended June 30, 1996 from $128,000 in
the six months ended June 30, 1995. The increase in this expense was principally
due to purchases of computer equipment, software, and office furnishings to
support business growth, and the Company's move to its new Cambridge
headquarters and expansion thereof.
INTEREST INCOME. Interest income increased to $231,000 in the six months
ended June 30, 1996 from $177,000 in the six months ended June 30, 1995 due to
an increase in the Company's cash balances resulting from positive cash flows
from operations.
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
REVENUES. Total revenues increased 50% to $14.6 million in 1995 from $9.7
million in 1994, and 33% from $7.3 million in 1993. Revenues from core research
increased 59% to $10.1 million in 1995 from $6.4 million in 1994, and 36% from
$4.7 million in 1993. The increases in total revenues and revenues from core
research were primarily attributable to the introduction of new Strategy
Research Services, continued expansion and increased productivity of the
Company's sales force, and growing market acceptance of the Company's products.
The Company introduced two new Strategy Research Services in 1995, one new
Strategy Research Service in 1994, and did not start any new Strategy Research
Services in 1993.
Advisory services and other revenues increased 33% to $4.4 million in 1995
from $3.3 million in 1994, and 28% from $2.6 million in 1993. The increase in
advisory services and other revenues was primarily attributable to continued
demand for the Company's advisory services. The decrease of these revenues as a
percentage of total revenues to 30% in 1995 from 34% in 1994 and 36% in 1993
reflects the results of the Company's strategy to expand sales of its core
research. See "Business -- Strategy".
16
18
Revenues attributable to sales to customers outside the United States
increased 61% to $2.6 million in 1995 from $1.6 million in 1994, and 43% from
$1.1 million in 1993. International sales represented 18%, 16%, and 15% of total
revenue for 1995, 1994, and 1993, respectively. The increase was due primarily
to the Company's creation and growth of a direct international sales force from
one employee in 1993 to eight employees at December 31, 1995.
Agreement value grew 74% to $17.8 million at December 31, 1995 from $10.2
million at December 31, 1994, and 75% from $5.8 million at December 31, 1993.
COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
increased as a percentage of total revenues to 38% in 1995 from 35% in 1994 and
33% in 1993. These costs increased 60% to $5.5 million in 1995 from $3.4 million
in 1994, and 42% from $2.4 million in 1993. These increases were principally due
to investment in new Strategy Research Services and resultant increased analyst
staffing and related compensation expense.
SELLING AND MARKETING. Selling and marketing expenses increased as a
percentage of total revenues to 39% in 1995 from 37% in 1994 and 1993. These
expenses increased 57% to $5.6 million in 1995 from $3.6 million in 1994, and
33% from $2.7 million in 1993. The increase in expenses was principally due to
the addition of direct salespersons and marketing personnel and increased sales
commissions resulting from increased revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
as a percentage of total revenues to 10% in 1995 from 11% in 1994 and 16% in
1993. These expenses increased 33% to $1.4 million in 1995 from $1.0 million in
1994, and decreased 9% from $1.1 million in 1993. The increase in expenses from
1994 to 1995 was principally due to staffing increases in operations and IT,
higher costs associated with the Company's new Cambridge headquarters, and
investment in the Company's internal IT systems.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 91% to $287,000 in 1995 from $150,000 in 1994, and 43% from $105,000
in 1993. The increase in this expense was principally due to purchases of
computer equipment, software, and office furnishings to support business growth
and the Company's move to its new Cambridge headquarters and expansion thereof.
INTEREST INCOME. Interest income increased 171% to $339,000 in 1995 from
$125,000 in 1994, and 58% from $79,000 in 1993. This increase resulted primarily
from an increase in the Company's cash balances resulting from positive cash
flows from operations.
17
19
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain quarterly financial data for each of
the six quarters in the period ended June 30, 1996, together with such data as a
percentage of total revenues. The quarterly information presented is unaudited
and, in the opinion of management, has been prepared on the same basis as the
annual audited statements and includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
information for the periods presented, when read in conjunction with the
Financial Statements of the Company and the Notes thereto included elsewhere in
this Prospectus. Operating results for any quarter are not necessarily
indicative of results for any future period.
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
STATEMENT OF INCOME DATA:
Core research.......................... $ 2,049 $2,344 $ 2,643 $3,114 $ 3,646 $4,128
Advisory services and other............ 659 529 892 2,359 1,100 1,188
--------- -------- ------------- ------------ --------- --------
Total revenues......................... 2,708 2,873 3,535 5,473 4,746 5,316
Cost of services and fulfillment....... 1,058 1,105 1,387 1,936 1,736 2,010
Selling and marketing.................. 1,106 1,255 1,369 1,913 1,841 2,104
General and administrative............. 270 288 329 502 618 516
Depreciation and amortization.......... 65 63 80 79 92 120
--------- -------- ------------- ------------ --------- --------
Income from operations............. 209 162 370 1,043 459 566
Interest income.................... 75 102 89 73 110 121
--------- -------- ------------- ------------ --------- --------
Income before state income tax
provision............................ 284 264 459 1,116 569 687
State income tax provision............. 13 12 21 50 30 35
--------- -------- ------------- ------------ --------- --------
Net income......................... $ 271 $ 252 $ 438 $1,066 $ 539 $ 652
=========== ========== =============== =============== =========== ==========
Pro forma income tax adjustment........ 97 91 162 389 200 243
--------- -------- ------------- ------------ --------- --------
Pro forma net income................... $ 174 $ 161 $ 276 $ 677 $ 339 $ 409
=========== ========== =============== =============== =========== ==========
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
PERCENTAGE OF TOTAL REVENUES:
Core research.......................... 76% 82% 75% 57% 77% 78%
Advisory services and other............ 24 18 25 43 23 22
--- --- --- --- --- ---
Total revenues......................... 100 100 100 100 100 100
Cost of services and fulfillment....... 39 38 39 35 37 37
Selling and marketing.................. 41 44 39 35 38 40
General and administrative............. 10 10 9 9 13 10
Depreciation and amortization.......... 2 2 2 1 2 2
--- --- --- --- --- ---
Income from operations............. 8 6 11 20 10 11
Interest income.................... 3 4 3 1 2 2
--- --- --- --- --- ---
Income before state income tax
provision............................ 11 10 14 21 12 13
State income tax provision............. 1 1 1 1 1 1
--- --- --- --- --- ---
Net income......................... 10% 9% 13% 20% 11% 12%
=========== ========== =============== =============== =========== ==========
Pro forma income tax adjustment........ 4 3 5 8 4 4
--- --- --- --- --- ---
Pro forma net income................... 6% 6% 8% 12% 7% 8%
=========== ========== =============== =============== =========== ==========
Revenues generally increased each quarter during the six quarters ended
June 30, 1996, reflecting the overall growth in the Company's business.
Historically, total revenues in the fourth quarter have reflected the
significant positive contribution of revenues attributable to the Forrester
Forum. As a result, the Company has typically experienced a decline in total
revenues from the quarter ended December 31 to the quarter ended March 31. In
addition, cost of services and fulfillment and sales and marketing expense
typically decrease as a percentage of revenues during
18
20
the fourth quarter. Sales and marketing expenses increased as a percentage of
revenues during the quarter ended June 30, 1995 due to additional costs related
to new collateral material printed in connection with the Company's move into
its new Cambridge offices. General and administrative expenses increased as a
percentage of revenues during the quarter ended March 31, 1996 compared to the
quarter ended December 31, 1996 due to increased hiring of operations personnel
and the increased revenues during the quarter ended December 31, 1995
attributable to the Forum. The Company's quarterly operating results have
fluctuated in the past and may continue to fluctuate in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date through funds generated
from operations. Memberships for core research, which constituted approximately
77% of the Company's revenues for the six months ended June 30, 1996, are
annually renewable and are generally payable in advance. These up-front payment
terms together with historical year-to-year revenue growth have allowed the
Company to generate positive cash flows each year since 1984, one year after its
inception in 1983. The Company generated $4.6 million in cash from operating
activities during 1995, $3.7 million during 1994, and $1.3 million during 1993.
In the six months ended June 30, 1996, the Company generated $3.1 million in
cash from operating activities.
In 1995, the Company used $5.2 million of cash in investing activities,
consisting of $752,000 for the purchase of property and equipment and $4.5
million for net purchases of marketable securities. The Company regularly
invests excess funds in short- and intermediate-term interest-bearing
obligations of investment grade. In 1995, the Company used $1.1 million in
financing activities, consisting solely of a distribution to the stockholder
primarily to pay income taxes on the Company's net income. See "Termination of S
Corporation Election and S Corporation Distribution" and "Dividend Policy"
above.
In the first six months of 1996, the Company used $3.2 million of cash in
investing activities. The primary uses were the purchase of $1.1 million of
property and equipment and the net purchase of $2.1 million of marketable
securities.
As of June 30, 1996, the Company had cash and cash equivalents of $715,000
and $8.8 million in marketable securities. This amount will be reduced by a
distribution to the sole stockholder of the Company upon completion of this
offering as described in "Termination of S Corporation Election and S
Corporation Distribution". The Company does not have a line of credit and does
not anticipate the need for one in the foreseeable future. The Company currently
has no material capital commitments and does not foresee that capital
expenditures will increase substantially during the next two years. The Company
believes that its current cash balance, marketable securities, and cash flows
from operations, together with the net proceeds from the offering, will satisfy
working capital, financing activities, and capital expenditure requirements for
at least the next two years.
In addition, the Company will declare a distribution to its current
stockholder in an amount equal to the Company's undistributed S corporation
earnings of approximately $2,200,000 through June 30, 1996. The estimated
distribution through June 30, 1996 does not include the amount to be distributed
for S corporation earnings from July 1, 1996 through termination of the
Company's S corporation election. These distributions will be paid out of the
Company's cash balances and proceeds from the sale of marketable securities.
19
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BUSINESS
Forrester is a leading independent research firm offering products and
services that help its clients assess the effect of technology on their
businesses. The Company provides analysis and insight into a broad range of
technology areas such as computing, software, networking, the Internet, and
telecommunications, and projects how technology trends will impact businesses,
consumers, and society. Forrester's clients, which include senior management,
business strategists, and information technology ("IT") professionals within
large enterprises, use Forrester's prescriptive research to understand and
benefit from current developments in technology and as support for their
development and implementation decisions.
Forrester offers its clients annual memberships to any of its 10 research
services ("Strategy Research Services"). Each Strategy Research Service focuses
on a particular area of technology and explores business issues relevant to
clients' decision-making. These issues include the impact that the application
of technology may have on financial results, investment priorities,
organizational effectiveness, and staffing requirements. Forrester also provides
advisory services to a limited number of clients to help them explore in greater
detail the topics covered by the core research.
Forrester targets its products and services to both large enterprises and
technology vendors. As of June 30, 1996, Forrester's research was delivered to
more than 850 client companies. No single client company accounted for more than
3% of the Company's revenues during the six-month period ended June 30, 1996.
Approximately 73% of Forrester's client companies with memberships expiring
during the six-month period ended June 30, 1996 renewed one or more memberships
for the Company's products and services.
INDUSTRY BACKGROUND
Businesses increasingly depend on technology for competitive advantage and
success. Technology is being used as a strategic tool to develop innovative
products, services, and distribution channels, as well as to create more
efficient internal business processes. Decisions about how to deploy networks,
software, and other systems are increasingly participatory, with
line-of-business managers, marketing executives, and corporate leaders joining
IT professionals in the technology review and decision-making process. Together,
these individuals must develop a coherent strategy that leverages innovative
systems to reach new markets, gain competitive advantage, and develop high
customer service and loyalty levels. Developing such a strategy is difficult,
however, as the rate of technology change accelerates. Increased complexity and
the proliferation of vendors and solutions have increased the challenges in
anticipating and understanding emerging technologies.
The strategic use of technology, the widening scope of decision-making, the
speed of change, and the complexity of decisions make it difficult for
organizations to efficiently generate research and analysis on their own. Costly
incremental resources -- time and expertise -- are required for successful
analysis and implementation of technology. Poor decisions can be costly and
detrimental to an organization's competitive position. Consequently, demand is
growing for external sources of expertise that provide independent,
vendor-neutral business advice on how to benefit from technology change.
Research firms that provide tactical product assessment or customized consulting
are often too narrow in their perspective to satisfy this demand. Business
leaders as well as technology users require comprehensive research that can
anticipate, assess, and interpret major trends. Forrester believes there is a
growing need for thematic, prescriptive analysis of technology that appeals to
senior management, business strategists, and IT professionals, and helps
organizations improve their strategic planning processes, leverage technology
change, and gain competitive advantage.
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THE FORRESTER SOLUTION
Forrester addresses the growing demand for thematic, prescriptive analysis
of technology by providing business-focused research to senior management,
business strategists, and IT professionals. The Company's research methodology
analyzes complex technology issues and delivers prescriptive analysis and advice
through each of its 10 Strategy Research Services. This research helps large
enterprises make informed decisions that positively affect competitive strategy
and business performance, reduce risk, and manage cost. Although Forrester's
research is user-focused, IT vendors also use Forrester's research for
marketing, product positioning, and market planning.
Forrester differentiates its products and services from those offered by
other research firms by:
ADDRESSING NEEDS OF BUSINESS EXECUTIVES. Forrester's core research
and advisory services blend analysis of technology with related business
issues to enable senior management to better use technology for competitive
advantage. Unlike narrowly focused, tactically based research that assesses
products and components, Forrester's research provides a strategic view of
the impact of technology on long-term business plans.
DELIVERING VALUABLE, STAND-ALONE WRITTEN RESEARCH. Forrester's
research distills the abundance of information, activities, and
developments in the IT industry into a concise, easy-to-read guide for
decision-making. In contrast to research that requires interactive
consulting support, Forrester's research is designed to provide valuable,
prescriptive analysis that stands on its own without requiring ongoing
analyst interaction.
TAKING A STAND ON DIFFICULT TECHNOLOGY ISSUES. Forrester's research
and analysts challenge conventional viewpoints; the Company does not expect
clients to agree with every prediction or conclusion presented. However,
the Company does believe that strong opinions and recommendations will
enable clients to more thoroughly consider the use of technology to gain
competitive advantage. Forrester, unlike many other research firms,
provides concrete, actionable business advice.
PROVIDING A BROAD VIEW OF TECHNOLOGY CHANGE. Forrester's research
approach provides an integrated, cross-disciplinary view of technologies
and their impact throughout organizations and industries. The Company's
cross-service collaboration ensures that a coherent, thematic analysis is
consistently delivered to clients. Forrester's broad perspective can be
contrasted with narrowly defined, specifically tailored technology
assessments.
FOCUSING ON EMERGING TECHNOLOGIES IN CONSUMER AND BUSINESS
MARKETS. Forrester's research methodology is designed to identify
fundamental shifts in technology before these changes appear on the
horizons of most users, vendors, and other research firms. Forrester's
interview-based research approach combines input from early adopters of new
technologies, vendors, and consumers to gauge the likelihood of a
technology's success and its potential impact on various markets.
STRATEGY
Forrester seeks to capitalize on the growing demand for technology
research, analysis, and advice. To achieve this goal, Forrester has adopted the
following strategies:
LEVERAGE CORE RESEARCH. By focusing on sales of its stand-alone core
research, the Company can deliver value to its clients and can increase its
revenues without having to provide ongoing and direct analyst support. In
addition, Forrester's current and developing electronic delivery options
make it easier to disseminate research within an organization while
providing greater ease of use, including the ability to search, customize,
and sort information according to individual preferences. Finally, the
Company intends to continue to introduce new Strategy Research Services and
to provide advisory services that build upon the analysis and
recommendations set forth in the core research to enhance sales of that
core research.
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EXPAND CLIENT BASE AND PENETRATE EXISTING ACCOUNTS. The Company
believes that its current offerings of products and services, and
anticipated new products and services, can continue to be successfully
marketed and sold to new clients companies, as well as to new organizations
within existing client companies. Forrester currently targets senior
management, business strategists, and IT professionals within Fortune 1,000
companies. The Company seeks to expand its international audience by
targeting select geographic markets. The Company also aims to increase the
number of Strategy Research Services that each client purchases through
increased marketing of new and current products and services.
IDENTIFY AND DEFINE NEW TECHNOLOGY MARKETS. Forrester seeks to
position itself ahead of other research firms by delivering strategic
research and analysis on new and emerging technologies. Forrester believes
its methodology and culture allow it to focus on areas of technology change
and enable it to expand its product and service offerings to address new
technology issues.
ATTRACT AND RETAIN HIGH-QUALITY RESEARCH PROFESSIONALS. The knowledge
and experience of Forrester's analysts are critical elements of the
Company's ability to provide high-quality products and services. The
Company seeks to attract, develop, and retain outstanding research
professionals by providing a creative corporate environment and culture, a
competitive compensation structure, training and mentoring programs for
individual development, and recognition and rewards for excellent
individual and team performance.
EXPAND AND LEVERAGE SALES FORCE. The Company is expanding its current
direct sales force and is seeking to increase the average sales volume per
sales representative. The Company believes that this increase can be
achieved as the average tenure of the Company's sales representatives
lengthens and marketing initiatives shorten the sales cycle. Initiatives
include the improvement of existing and the development of new methods for
obtaining highly qualified sales leads, targeted use of third-party
telemarketing firms, and hosting of regional marketing events around the
world.
PRODUCTS AND SERVICES
Forrester's principal products are annually renewable memberships to 10
Strategy Research Services in three main research areas: Corporate IT, New
Media, and Strategic Management. Corporate IT Research services analyze how
technology change impacts IT's infrastructure, tactics, and mission; New Media
Research services provide insight into how companies can leverage emerging
technology to deliver content and services to consumers; and Strategic
Management Research assists senior executives in understanding the long-term
implications of technology change on organizational and business strategies.
Each Strategy Research Service delivers monthly Reports and biweekly Briefs,
except the Leadership Strategies service which delivers Reports on a bimonthly
basis and Executive Takes on a biweekly basis. Additionally, Forrester provides
advisory services to select clients through the Partners Program and Strategy
Review Program. The Company holds one major event each year, the Forrester
Technology Management Forum, a two-day conference devoted to leading technology
issues.
STRATEGY RESEARCH SERVICES
The Company's Strategy Research Services provide ongoing research and
analysis on the developments, information, and activities in the technology
industry. Each service is staffed by a team of research analysts and associates
with substantial experience in the technology area covered by that service. The
services employ a consistent research methodology to analyze technology issues,
address related business issues, and offer recommendations and action plans.
While each service addresses a specific technology area, collectively they
present complementary, consistent research themes and provide comprehensive
coverage of relevant technology issues faced by the Company's clients.
Businesses are able to supplement and extend internal resources with current,
thorough, and focused analysis and recommendations. In addition, technology
vendors are able to augment and test competitive, new product, marketing, and
sales plans against Forrester's independent analysis and advice.
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The following table summarizes the coverage areas of Forrester's Strategy
Research Services:
CORPORATE IT RESEARCH SAMPLE TOPICS
COMPUTING STRATEGY SERVICE -- introduced in November 1983, analyzes the rollout - Systems and network management
and management of large-scale client/server systems, the impact of the Internet - Directories
on computing architectures, and the changing IT organization - Operating systems
- Servers, PCs, workstations
- Internet Computing
NETWORK STRATEGY SERVICE -- introduced in December 1986, analyzes high- - ATM
performance network services and guides companies to build advanced networks - Video
that support client/server applications, link mobile workers, and connect - EDI
business partners and customers - Internetworking equipment
- Networking protocols and services
- Internet/Intranet
PACKAGED APPLICATION STRATEGIES -- introduced in April 1996, analyzes the - Cost of ownership analysis
impact of emerging technologies on application strategy and helps clients - eCommerce packages
acquire, manage, and leverage packaged software applications - Suite vs. best-of-breed
- Application data warehousing
- Impact of Internet/Intranet
SOFTWARE STRATEGY SERVICE -- introduced in April 1990, analyzes and defines - Object-oriented technology
strategies for the overall software architecture needed to meet business - Internet/Intranet software
objectives, including strategic use of data, documents, and development - Document management
- Data warehousing
- Web servers
TELECOM STRATEGIES -- introduced in June 1996, analyzes the strategic use of - Wide area networking
communications technologies and helps clients use telecommunications to gain - Wireless communications
competitive advantage and cut costs - Internet access
- Deregulation
NEW MEDIA RESEARCH SAMPLE TOPICS
INTERACTIVE TECHNOLOGY STRATEGIES -- introduced in March 1996, analyzes - Multimedia development
interactive development and delivery technologies that affect consumers - CD-ROM
- Web site development tools
- Web site management
- Search engines
MEDIA & TECHNOLOGY STRATEGIES -- introduced in September 1996, analyzes - Internet advertising
electronic media business models for publishers, broadcasters, and information - On-line magazines
service providers and helps clients build technology-based media franchises - Electronic yellow pages
- Future of business information
services
MONEY & TECHNOLOGY STRATEGIES -- introduced in September 1995, analyzes - eCommerce
consumer financial services, focusing on technology's impact on how consumers - Integrated financial services
spend, save, and invest - Smart cards
- On-line retailing
- On-line banking
- Web strategies for financial firms
PEOPLE & TECHNOLOGY STRATEGIES -- introduced in May 1994, analyzes how emerging - Consumer demographics
technologies affect consumer lifestyles and behavior - On-line services and the Internet
- On-line business models
STRATEGIC MANAGEMENT RESEARCH SAMPLE TOPICS
LEADERSHIP STRATEGIES -- introduced in September 1995, analyzes how executives - Strategic planning
can maximize the business benefits of technology and guides them in making - IT cost management
effective decisions about strategic direction, investment properties, and - Best practices/benchmarking
resource management - Strategic vendor selection
- High Performance IT
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Each client that purchases a membership to a Strategy Research Service
receives the following written materials:
FORRESTER REPORTS are created monthly by the services in Corporate IT
and New Media Research, and bimonthly by the Leadership Strategies service.
These Reports deliver analysis on current technology issues in a concise
format.
FORRESTER BRIEFS AND TAKES offer timely analysis on industry events,
issues, technology, or other specific research topics. Corporate IT and New
Media clients receive 24 Briefs per year, and Leadership Strategies clients
receive 24 Executive Takes per year.
JOURNAL ENTRIES are presented at the end of every Forrester Report and
offer Forrester's inside perspective on current events in the industry.
In addition to printed reports, Strategy Research Service core
research deliverables are available in the following electronic delivery
formats:
FORRESTER INTERNET gives clients access to a full archive of
Forrester's research from 1993 to the present via the World Wide Web.
Extensive search capabilities and end user customization allow clients to
tailor document viewing to their particular needs.
FORRESTER INTRANET delivers the same research archive as Forrester
Internet, can be purchased with or without a search engine, and is
compatible with any client's Intranet environment.
FORRESTER RESEARCH FOR LOTUS NOTES USERS provides access to
Forrester's full research archive from 1993 to the present via replication
to Forrester's Lotus Notes server. Documents can be viewed and sorted by
Strategy Research Service, analyst, technology, product, company, people,
or date.
ADVISORY SERVICES AND EVENTS
Forrester provides advisory services to a limited number of clients through
its Partners Program and Strategy Review Program. These programs leverage
Forrester's research expertise to address clients' long-term planning issues and
align Forrester's core research and insight with specific business goals. As of
June 30, 1996, 61 client companies were members of the Partners Program and 178
client companies were members of the Strategy Review Program. In addition to
core research, each client purchasing a membership to the Partners Program and
Strategy Review Program receives the following deliverables, respectively:
THE PARTNERS PROGRAM provides clients with a proactive relationship
with Forrester analysts to address long-range planning, technology
decision-making, and strategic management best practices. The base program
includes a series of one-day meetings and conference calls with Forrester
analysts.
THE STRATEGY REVIEW PROGRAM gives clients access to Forrester analysts
in a series of quarterly two-hour conference calls or meetings in order to
apply the research to business strategies.
The Company also hosts the Forrester Forum each year. The Forum brings
together more than 500 senior executives for a two-day conference to network
with their peers and hear major figures from the technology industry and leaders
from other business sectors discuss the impact of technology change on business.
PRICING
The prices for Forrester's core research are a function of the number of
services purchased, the number of research recipients within the client
organization, and the delivery format (i.e., printed or electronic). The average
contract price of annual memberships sold to Forrester clients for core
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research, excluding annual memberships for core research in connection with
Forrester's Partners and Strategy Review Programs, for the year ended December
31, 1995 was approximately $10,200 and for the six months ended June 30, 1996
was approximately $11,700. The prices for Forrester's Partners and Strategy
Review Programs are also a function of the number of services purchased, the
number of research recipients within the client organization, delivery format,
and amount and type of advisory services. All Partners Program and Strategy
Review Program memberships sold include core research. The average contract
price of annual memberships sold to Forrester clients for the Partners Program
for the year ended December 31, 1995 was approximately $65,700 and for the six
months ended June 30, 1996 was approximately $86,200. The average contract price
of annual memberships sold to Forrester clients for the Strategy Review Program,
for the year ended December 31, 1995 was approximately $33,300 and for the six
months ended June 30, 1996 was approximately $32,200.
Forrester believes that the agreement value of contracts to purchase core
research and advisory services provides a significant measure of the Company's
business volume. Forrester calculates agreement value as the annualized fees
payable under all core research and advisory services contracts in effect at a
given point in time, without regard to the remaining duration of the contracts.
Agreement value at December 31, 1994 was $10.2 million and grew to $17.8 million
at December 31, 1995. At June 30, 1996, agreement value was $22.4 million.
RESEARCH AND ANALYSIS
Forrester employs a structured and consistent research methodology across
the Company's 10 Strategy Research Services. Each service is managed by a
service director who is responsible for implementing the Company's research
methodology and maintaining research quality in the service's particular
technology coverage area. Forrester's methodology enables the Company to
identify and analyze emerging technology trends, markets, and audiences, and
ensures consistent research quality and recommendations across all services. The
Company's research is thematic in approach: Forrester Reports are composed
around major technology trends, not isolated technology review and assessment.
Research themes apply throughout different research Reports, within services,
and across research services.
Forrester's research process subjects initial ideas to research, analysis,
and rigorous validation, and produces conclusions, predictions, and
recommendations. Forrester employs several different primary research methods:
confidential interviews with early adopters of new technology, technology
vendors, consumers, and users and vendors in related technology areas; regular
briefings with vendors to review current positions and future directions; and
input from clients and third parties gathered during advisory sessions.
Reports begin with cross-service discussion sessions with analysts.
Cross-service testing of an idea continues throughout the Report process at
informal and weekly research meetings. At the final stage of the research
process, senior analysts meet to test the conclusions of each Report. Also, each
Report is reviewed by an analyst outside the research service as an additional
quality check and to ensure clarity and readability by all clients -- especially
those lacking strong technology backgrounds. All research is reviewed and graded
by Forrester's senior research directors.
The knowledge and experience of Forrester's analysts are critical elements
of the Company's ability to provide high-quality research and analysis.
Forrester analysts average approximately 10 years of industry experience, with
varied backgrounds mirroring all facets of the industry -- vendor and user
marketing and development, entrepreneurs, financial services, and journalism.
The Forrester culture and compensation system foster a dedication to
high-quality research across all research services.
All members of Forrester's research staff participate in the Company's
incentive compensation bonus plan. Each employee's performance against
individual and team goals determines an eligible bonus that is funded by the
Company's overall performance against key business objectives. Individual and
team goals include on-time delivery of high-quality research, core research
bookings,
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and advisory services support to Partners and Strategy Review Program clients.
Senior analysts and research directors are eligible to receive equity awards
under the Company's stock plans.
SALES AND MARKETING
Forrester has made a substantial investment in its direct sales force to
better serve clients and address additional markets. The Company's direct sales
force, comprised of 39 sales representatives as of June 30, 1996, consists of
business development managers who are responsible for maintaining and leveraging
the current client base by renewing and selling additional Strategy Research
Services to existing clients, corporate account managers who develop new
business in assigned territories, and regional sales directors who focus on
high-level client contact and service.
Forrester sells its products and services through its headquarters in
Cambridge, Massachusetts, and a regional sales office in San Francisco.
Forrester also uses 6 local independent sales representatives to market and sell
its products and services internationally. These independent third-party
representatives cover the following territories: Australia, Brazil, France,
Japan, Spain, and South Africa.
The Company has developed and will continue to implement products and
programs to support the sales representatives in their effort to differentiate
Forrester and define the value derived from the Company's research and analysis.
These products and programs include extensive worldwide press relations, direct
mail campaigns, telemarketing, and a worldwide events program. In addition, the
Company uses its Web site as a strategic tool to increase the quality and speed
of lead development for the sales force. All Forrester sales representatives
participate in the Company's annual commission and bonus plan. Commissions are
paid monthly based upon attainment of net bookings against established quotas;
quarterly bonuses are paid for exceeding quota levels.
As of June 30, 1996, Forrester's research was delivered to over 850 client
companies, including 54 of the 1996 Fortune 100 companies and 153 of the 1996
Fortune 500 companies. No single client company accounted for over 3% of the
Company's revenues for the six months ended June 30, 1996.
COMPETITION
Forrester believes that the principal competitive factors in its industry
include quality of research and analysis, timely delivery of information, the
ability to offer products that meet the changing needs of organizations for
research and analysis, independence from vendors, and customer service and
price. The Company believes it competes favorably with respect to each of these
factors. Additionally, the Company believes that its business-focused review of
emerging technologies and high-level, easy-to-read research format distinguish
it from its competitors.
The Company competes in the market for technology research products and
services with other independent providers of similar services. Forrester's
principal direct competitor in IT research is Gartner Group, Inc., which has a
substantially longer operating history, is significantly larger, and has
considerably greater financial resources and market share than the Company.
Numerous other companies, including META Group, Inc., provide IT research and
analysis. In addition, the Company's indirect competitors include the internal
planning and marketing staffs of the Company's current and prospective clients,
as well as other information providers such as electronic and print publishing
companies, survey-based general market research firms, and general business
consulting firms. The Company's indirect competitors could choose to compete
directly against the Company in the future. In addition, there are relatively
few barriers to entry into the Company's market and new competitors could
readily seek to compete against the Company in one or more market segments
addressed by the Company's Strategy Research Services. Increased competition
could adversely affect the Company's operating results through pricing pressure
and loss of market share. There can be no assurance that the Company will be
able to continue to compete successfully against existing or new competitors.
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EMPLOYEES
Forrester's culture emphasizes certain key values -- quality, cooperation,
and creativity -- that it believes are critical to its continued growth. To
encourage achievement of the Company's key values, the Company places great
emphasis on individual excellence, and employees at all levels of the
organization are encouraged to take initiative and lead individual projects that
enhance Forrester's effectiveness. Forrester regularly recognizes and rewards
excellent performance in all areas of the Company. The Company's balanced
emphasis on individual achievement and teamwork is reflected in its compensation
structure. Each employee's performance is measured against individual and team
goals that determine an eligible bonus funded by the Company's overall
performance against key business objectives. This structure gives employees a
vested interest in the Company's overall success and performance while still
promoting individual excellence.
As of September 23, 1996, Forrester employed a total of 118 persons,
including 54 research staff, 44 sales and marketing personnel, and 20 operations
personnel. Of these employees, 117 are located at the Company's headquarters in
Cambridge, Massachusetts and one is located at another domestic facility. None
of the Company's employees is represented by a collective bargaining
arrangement, and the Company has experienced no work stoppages. The Company
believes that its relations with its employees are good.
As of September 23, 1996, there were options to purchase 728,589 shares of
the Common Stock of the Company granted to employees under the Company's 1996
Amended and Restated Equity Incentive Plan. Upon completion of this offering,
options to purchase 149,376 shares of the Company's Common Stock held by
employees of the Company will become immediately exercisable.
Forrester's continued growth depends in large part on its ability to
attract, retain, and motivate highly skilled research analysts, sales and
marketing personnel, and operations staff. Competition for highly skilled
personnel in the Company's market is intense, and many of the companies with
which Forrester directly competes for such personnel have substantially greater
financial and other resources than the Company. In addition, competition for
highly skilled personnel can be expected to become more intense as competition
in the Company's industry increases. Although the Company expects to continue to
attract sufficient numbers of highly skilled employees and to retain and
motivate its existing research analysts, sales and marketing personnel, and
operations staff for the foreseeable future, there can be no assurance that the
Company will be able to do so. The loss of any of the Company's senior
management personnel or any failure to attract, retain, and motivate a
sufficient number of qualified personnel would have a material adverse effect on
the Company's business, financial condition, and results of operations. The
Company has entered into non-competition agreements with each of its group
directors, service directors, senior analysts, and certain other employees which
provide that such persons will not compete with the Company for the one-year
period after the date of termination of employment with the Company.
FACILITIES
The Company's headquarters are located in approximately 30,000 square feet
of office space in Cambridge, Massachusetts. This facility accommodates
research, marketing, sales, IT, and operations personnel. The initial lease term
of this facility expires in January 2001. The Company has the option to extend
this lease for up to two additional terms of five years each. The Company also
leases office space in San Francisco to support its sales functions. The Company
believes that its existing facilities are adequate for its current needs and
that additional facilities are available for lease to meet future needs.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and members of and nominees to the Board of
Directors of the Company are as follows:
NAME AGE POSITION
- ---------------------------------------------- --- ---------------------------------------
George F. Colony.............................. 43 Chairman of the Board, President,
and Chief Executive Officer
William M. Bluestein, Ph.D. .................. 39 Group Director, New Media Research
Paul D. Callahan.............................. 47 Group Director, Corporate IT Research
Ruth Habbe.................................... 41 Director, Marketing
Mary A. Modahl................................ 34 Group Director, New Media Research
David H. Ramsdell(1).......................... 45 Director, Finance
Jon D. Schwartz............................... 36 Director, Worldwide Sales
Paul J. Warren................................ 34 Director, IT
Susan M. Whirty, Esq.......................... 39 Director, Operations, General Counsel,
Secretary, Treasurer
Stuart D. Woodring............................ 36 Group Director, Corporate IT Research
Robert M. Galford(2).......................... 43 Member of the Board of Directors
George R. Hornig(2)........................... 42 Member of the Board of Directors
Christopher W. Mines(2)....................... 42 Member of the Board of Directors
Michael H. Welles(2).......................... 41 Member of the Board of Directors
- ---------------
(1) Mr. Ramsdell will serve as the Company's Director, Finance commencing in
October 1996.
(2) Elected to serve as members of the Board of Directors commencing immediately
following the completion of this offering.
George F. Colony, founder of the Company, has served as President and Chief
Executive Officer since its inception in July 1983.
William M. Bluestein, Ph.D., currently serves as Group Director, New Media
Research. He was previously Director and Senior Analyst with the Company's
People & Technology Strategies from 1994 to 1995, and Director and Senior
Analyst with the Company's Computing Strategy Service from 1990 to 1993.
Paul D. Callahan currently serves as Group Director, Corporate IT Research.
He was previously with the Company's Network Strategy Service where he served as
Director from 1995 to 1996, Senior Analyst from 1993 to 1995, and Analyst from
1992 to 1993. Prior to joining the Company, Mr. Callahan was a manager with
Digital Equipment Corporation's networks business from 1987 to 1992.
Ruth Habbe has served as the Company's Director, Marketing since 1994.
Prior to joining the Company, Ms. Habbe was Vice President, Marketing at Imagery
Software, Inc. from 1992 to 1994 and Document Imaging Segment Manager at Digital
Equipment Corporation from 1990 to 1992.
Mary A. Modahl currently serves as Group Director, New Media Research. She
was previously Director and Senior Analyst with the Company's People &
Technology Strategies from 1994 to 1995, Senior Analyst with the Company's
Computing Strategy Service from 1993 to 1994, and Director of the Network
Strategy Service from 1990 to 1993.
David H. Ramsdell has agreed to become the Company's Director, Finance
beginning in October 1996. Mr. Ramsdell was Vice President, Finance at Virus
Research Institute, Inc., a developer of vaccine delivery systems, from August
1993 through September 1996. He also served as Chief Financial Officer at ISI
Systems, Inc., a data processing and software development company, from 1987 to
August 1993.
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Jon D. Schwartz currently serves as the Company's Director, Worldwide
Sales. He was previously Director of the Company's North American Sales from
1993 to 1995, and Partners Manager from 1990 to 1993.
Paul J. Warren has served as the Company's Director, IT since 1995. Before
joining the Company, Mr. Warren was Manufacturing Systems Manager for Malden
Mills, a textile manufacturer, from 1993 to 1995. He also served as a
Manufacturing Systems Analyst for Malden Mills from 1991 to 1993.
Susan M. Whirty, Esq. has served as the Company's Director, Operations and
General Counsel since March 1993 and has served as the Company's Secretary and
Treasurer since February 1996. Prior to joining the Company, Ms. Whirty was
Corporate Counsel at Cognos Corporation, a software development and application
company, from 1989 to 1993.
Stuart D. Woodring currently serves as Group Director, Corporate IT
Research. He was previously Director of the Company's Corporate IT Research
services from 1994 to 1995 and Director of the Software Strategy Service from
1990 to 1994.
Robert M. Galford has been elected to serve as a Director of the Company
commencing immediately following this offering. Mr. Galford has been a member of
the Faculty of the Executive Programs at Columbia University's Graduate School
of Business since 1994. Before joining Columbia's Executive Programs, he taught
at Boston University from 1993 to 1994. Prior to his work in executive
education, Mr. Galford was a Vice President of the MAC Group from 1986 to 1991
and its successor firm, Gemini Consulting from 1991 to 1994.
George R. Hornig has been elected to serve as a Director of the Company
commencing immediately following this offering. Mr. Hornig has been Managing
Director and Member of the Management Committee of Deutsche Morgan Grenfell, an
investment banking firm, from 1993 to the present. From 1991 to 1993, Mr. Hornig
was President and Chief Operating Officer of Dubin & Swieca Holdings, Inc., an
investment management firm. He is also Director of Unity Mutual Life Insurance
Company and SL Industries, Inc., a manufacturer and distributor of engineered
products.
Christopher W. Mines has been elected to serve as a Director of the Company
commencing immediately following this offering. Mr. Mines currently serves as a
Principal of GeoPartners Research, Inc. Prior to joining GeoPartners in 1992, he
was an analyst at Cowen & Company from 1983 to 1991 and at the Yankee Group from
1980 to 1983.
Michael H. Welles has been elected to serve as a Director of the Company
commencing immediately following this offering. Mr. Welles has been General
Manager, Next Generation Products for Lotus Development Corporation since 1994.
From 1991 to 1994, he was General Manager of Lotus' Improv development team.
BOARD OF DIRECTORS
The Company's Bylaws provide for a Board of Directors of one or more
directors, and the number of directors is currently fixed at five. Under the
terms of the Company's Certificate of Incorporation, the Board of Directors is
composed of three classes of similar size, each elected in a different year, so
that only approximately one-third of the Board of Directors is elected in any
single year. Mr. Colony is designated as a Class I director elected for a term
expiring in 1999 and until his successor is elected and qualified; Mr. Hornig
and Mr. Mines are designated Class II directors elected for a term expiring in
1998 and until their successors are elected and qualified; and Mr. Welles and
Mr. Galford are designated Class III directors elected for a term expiring in
1997 and until their successors are elected and qualified.
The Board of Directors of the Company will have an Audit Committee
consisting of two members (Messrs. Hornig and Mines), and a Compensation
Committee consisting of two members (Messrs. Galford and Welles). The purpose of
the Audit Committee is to review the results of
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operations of the Company with officers of the Company who are responsible for
accounting matters and, from time to time, with the Company's independent
auditors. The Compensation Committee recommends annual compensation arrangements
for the Company's executive officers and reviews annual compensation
arrangements for all other officers and significant employees.
DIRECTOR COMPENSATION
Members of the Board of Directors of the Company are reimbursed for their
expenses incurred in connection with attending any meeting. In addition, in
September 1996, the Board of Directors adopted and the sole stockholder approved
the 1996 Stock Option Plan for Non-Employee Directors (the "Director Option
Plan") pursuant to which each of the non-employee directors who have agreed to
serve as directors of the Company will receive, on the date that the Company
first files a registration statement under the Securities Act covering the
Common Stock, an option to purchase 6,000 shares of the Company's Common Stock
at an exercise price of $13.00. Such options will vest in three equal
installments commencing on the date of completion of the initial public offering
of the Common Stock and on the first and second anniversaries of such date. See
"Stock Plans -- 1996 Stock Option Plan for Non-Employee Directors".
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ---------------------------------------------- ---- -------- ------- ---------------
George F. Colony.............................. 1995 $135,000 $ 0 $19,129
Chairman of the Board,
President, and Chief
Executive Officer
Jon D. Schwartz............................... 1995 $177,444 $20,400 $ --
Director, Worldwide Sales
Stuart D. Woodring............................ 1995 $125,000 $43,827 $ --
Group Director, Corporate IT Research
Paul D. Callahan.............................. 1995 $120,000 $44,608 $ --
Group Director, Corporate IT Research
William M. Bluestein, Ph.D.................... 1995 $110,000 $46,476 $ --
Group Director, New Media
Research
- ---------------
(1) No named Executive Officer other than Mr. Colony received other annual
compensation in excess of the lesser of $50,000 or 10% of his salary and
bonus. Other annual compensation paid to Mr. Colony includes approximately
$7,000 for life insurance and $4,700 for health insurance and excludes
distributions to Mr. Colony based on the Company's S corporation earnings.
See "Dividend Policy".
STOCK PLANS
1996 EQUITY INCENTIVE PLAN
The Company's Amended and Restated 1996 Equity Incentive Plan (the "Equity
Incentive Plan"), which was originally approved by the Board of Directors and
the sole stockholder of the Company in February 1996 and amended and restated in
September 1996, provides for grants of incentive stock options within the
meaning of Section 422 of the Code, non-qualified stock options, and restricted
and nonrestricted shares to employees and other persons who are important to the
success of the Company. As of September 23, 1996, a total of 2,750,000 shares of
Common Stock have been reserved for issuance under the Equity Incentive Plan,
subject to adjustment for stock splits and similar events, of which 2,021,411
remain available for future grants. The exercise price of all incentive stock
options granted under the Equity Incentive Plan must be at least equal to the
fair
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market value of the shares of Common Stock on the date of grant. The exercise
price of all non-qualified options granted under the Equity Incentive Plan is
determined by the Compensation Committee of the Board of Directors. The
Compensation Committee may reduce the exercise price of any outstanding options.
With respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of stock of the Company, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date and the maximum term of the option must not exceed 5 years.
The term of all other options granted under the Equity Incentive Plan may not
exceed 10 years. Unless terminated sooner, the Equity Incentive Plan will
terminate in February 2006. The Board of Directors has authority to amend or
terminate the Equity Incentive Plan, provided no such action may impair the
rights of the holder of any outstanding options without the written consent of
such holder.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), which was approved by the Board of Directors and by the sole stockholder
of the Company in September 1996, is intended to qualify under Section 423 of
the Code. A total of 200,000 shares of Common Stock has been reserved for
issuance under the Stock Purchase Plan. Purchases under the Stock Purchase Plan
will occur at the end of each option period. The first option period will
commence on the date of this Prospectus and will end on June 30, 1997.
Thereafter, each option period will be successive six-month purchase periods.
Employees are eligible to participate if they are regularly employed by the
Company for at least 30 hours per week.
The Stock Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions that may not exceed 10% of an employee's base
compensation, including commissions, bonuses, and overtime, at a price equal to
85% of the fair market value of the Common Stock at the beginning or the end of
a purchase period, whichever is lower. Unless terminated sooner, the Stock
Purchase Plan will terminate 10 years from its effective date. The Board of
Directors has authority to amend or terminate the Stock Purchase Plan, provided
no such action may adversely affect the rights of any participant.
1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Director Option Plan was approved by the Board of Directors and by the
sole stockholder of the Company in September 1996. Pursuant to the Director
Option Plan, non-employee directors who have agreed to serve as a director of
the Company will each receive, on the date that the Company first files a
registration statement under the Securities Act covering the Common Stock, an
option to purchase 6,000 shares of the Company's Common Stock at an exercise
price of $13.00. Such options will vest in three equal installments commencing
on the date of completion of the initial public offering of the Common Stock and
on the first and second anniversaries of such date. Each non-employee director
elected thereafter shall be awarded an option to purchase 6,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock
upon his or her election as director, which will vest in three equal
installments commencing on the date of grant and on the first and second
anniversary of the date of grant. Each non-employee director will also receive
an option to purchase 4,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock each year immediately following the
Company's annual stockholders meeting, which will vest in three equal
installments on the first, second, and third anniversaries of the date of grant.
The Compensation Committee also has the authority under the Director Option Plan
to grant options to non-employee directors in such amounts and in such terms not
inconsistent with the Director Option Plan as it shall determine at the time of
grant. All such options will be granted at fair market value. Each option will
be non-transferable except upon death and will expire 10 years after the date of
grant. A total of 150,000 shares of Common Stock has been reserved for issuance
under the Director Option Plan, 126,000 of which remain available for future
grants.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Mr. Colony was responsible for compensation decisions,
although he consulted as to such decisions with an outside compensation
consultant. Following this offering the Company will have a Compensation
Committee consisting of Messrs. Galford and Welles, neither of whom is an
employee of the Company.
REGISTRATION RIGHTS AND NON-COMPETITION AGREEMENT
The Company and Mr. Colony have entered into a registration rights and
non-competition agreement (the "Registration Rights and Non-Competition
Agreement") which provides that if Mr. Colony's employment with the Company is
terminated he will not compete with the Company for the one-year period after
the date of such termination. The Registration Rights and Non-Competition
Agreement also provides Mr. Colony with certain registration rights with respect
to his Common Stock, described under "Description of Capital Stock".
CERTAIN TRANSACTIONS
The Company and Mr. Colony intend to enter into an indemnification
agreement relating to their respective income tax liabilities. Mr. Colony will
continue to be liable for personal income taxes on the Company's income for all
periods prior to the time the Company ceases to be an S corporation, while the
Company will be liable for all income taxes subsequent to the time it ceases to
be an S corporation. The agreement generally provides that the Company will
indemnify Mr. Colony for any increase in his taxes (including interest and
penalties) resulting from adjustments initiated by taxing authorities and from
payments to him under the agreement, and Mr. Colony will pay to the Company an
amount equal to any decrease in his tax liability resulting from adjustments
initiated by taxing authorities.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of September 23, 1996 by
(i) each person or entity who is known by the Company to beneficially own 5% or
more of the Company's voting capital stock, (ii) each of the executive officers
named in the Summary Compensation Table, (iii) each of the Company's directors
(including persons who have consented to be directors), and (iv) all of the
Company's directors and executive officers as a group.
NUMBER OF SHARES OF PERCENTAGE BENEFICIALLY
COMMON STOCK OWNED(1)
BENEFICIALLY -----------------------------------
NAME OF BENEFICIAL OWNER OWNED(1) BEFORE OFFERING AFTER OFFERING
- -------------------------------------------------- ------------------- --------------- --------------
George F. Colony.................................. 6,000,000 100% 74%
William M. Bluestein, Ph.D.(2).................... 14,727 * *
Paul D. Callahan(2)............................... 6,927 * *
Jon D. Schwartz(2)................................ 8,182 * *
Stuart D. Woodring(2)............................. 14,727 * *
Robert M. Galford(2).............................. 2,000 * *
George R. Hornig(2)............................... 2,000 * *
Christopher W. Mines(2)........................... 2,000 * *
Michael H. Welles(2).............................. 2,000 * *
Directors and executive officers
as a group (13 persons)(2)...................... 6,083,927 100% 75%
- ---------------
* Less than 1%.
(1) Assumes that the Underwriters' over-allotment option is not exercised.
(2) Reflects shares issuable upon exercise of options which vest upon the
completion of this offering. If options to purchase shares that are not
immediately exercisable are included, the number of shares of Common Stock
beneficially owned by Messrs. Bluestein, Callahan, Schwartz, and Woodring
would be 70,926, 45,994, 70,019, and 69,699, respectively.
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DESCRIPTION OF CAPITAL STOCK
The following summary describes the Certificate of Incorporation of the
Company, as restated in its entirety immediately prior to the consummation of
this offering.
GENERAL
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.01 per share, and 500,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). As of September 23,
1996, there were 6,000,000 shares of Common Stock outstanding, held of record by
one stockholder, and no shares of Preferred Stock outstanding.
COMMON STOCK
As of September 23, 1996, there were 6,000,000 shares of Common Stock
outstanding, all of which were held by Mr. Colony. Each holder of Common Stock
is entitled to one vote per share for the election of directors and for all
other matters to be voted on by the Company's stockholders. Subject to
preferences that may be applicable to any outstanding series of Preferred Stock,
the holders of Common Stock are entitled to share ratably in such dividends, if
any, as may be declared from time to time by the Board of Directors, from funds
legally available therefore. See "Dividend Policy". Upon liquidation or
dissolution of the Company, subject to preferences that may be applicable to any
outstanding series of Preferred Stock, the holders of Common Stock are entitled
to share ratably in all assets available for distribution to stockholders. There
are no preemptive or other subscription rights, conversion rights, or redemption
or sinking fund provisions with respect to shares of Common Stock. All of the
outstanding shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the Company may, by vote of its Board of Directors, designate the
numbers, relative rights, preferences, and limitations of one or more series of
Preferred Stock and issue the securities so designated. Such provisions may
discourage or preclude certain transactions, whether or not beneficial to
stockholders, and could discourage certain types of tactics that involve an
actual or threatened acquisition or change of control of the Company. This
provision does not prevent stockholders from obtaining injunctive or other
relief against the directors, nor does it shield directors from liability under
federal or state securities laws.
The Company has no current intention to issue any of its unissued,
authorized shares of Preferred Stock. However, the issuance of any shares of
Preferred Stock in the future could adversely affect the rights of the holders
of Common Stock.
REGISTRATION RIGHTS
The Company and Mr. Colony have entered into a Registration Rights and
Non-Competition Agreement, which provides that in the event the Company proposes
to file a registration statement under the Securities Act with respect to an
offering by the Company for its own account or the account of another person, or
both, Mr. Colony shall be entitled to include shares held by him (the
"Registrable Shares") in such a registration, subject to the right of the
managing underwriter of any such offering to exclude some or all of such
Registrable Shares from such registration if and to the extent the inclusion of
the shares would adversely affect the marketing of the shares to be sold by the
Company. The agreement also provides that, at any time following the closing of
an initial public offering of Common Stock, Mr. Colony may require the Company
to register under the Securities Act shares having a fair market value of at
least $5.0 million, except that the Company is not required to effect such
registration more than twice or at certain times described in the agreement. The
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agreement also provides that the Company will pay all expenses incurred in
connection with such registration.
DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Section 203 of the General Corporation Law of Delaware prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder", other than an "interested stockholder" who is an
"interested stockholder" at the time the corporation becomes subject to Section
203, for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales, and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, 15% or more of the corporation's voting stock. The
Certificate provides that the Company will not be subject to the provisions of
Section 203. Under Delaware law, this provision will become effective in
September 1997.
The Certificate and Bylaws provide for the division of the Board of
Directors into three classes as nearly equal in size as possible with staggered
three-year terms. See "Management". In addition, the Certificate of
Incorporation and Bylaws provide that directors may be removed only for cause by
the affirmative vote of the holders of two-thirds of the shares of capital stock
of the Company entitled to vote. Under the Certificate and Bylaws, any vacancy
on the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may only be filled by vote of a majority of the
directors then in office. The classification of the Board of Directors and the
limitations on the removal of directors and filling of vacancies could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company.
The Certificate and Bylaws also provide that any action required or
permitted to be taken by the stockholders of the Company at an annual meeting or
special meeting of stockholders may only be taken if it is properly brought
before such meeting and may not be taken by written action in lieu of a meeting.
The Certificate and Bylaws further provide that special meetings of the
stockholders may only be called by the Chairman of the Board of Directors, the
Chief Executive Officer, or, if none, the President of the Company or by the
Board of Directors. Under the Company's Bylaws, in order for any matter to be
considered "properly brought" before a meeting, a stockholder must comply with
certain requirements regarding advance notice to the Company. The foregoing
provisions could have the effect of delaying until the next stockholders'
meeting stockholder actions which are favored by the holders of a majority of
the outstanding voting securities of the Company. These provisions may also
discourage another person or entity from making a tender offer for the Common
Stock, because such person or entity, even if it acquired a majority of the
outstanding voting securities of the Company, would be able to take action as a
stockholder (such as electing new directors or approving a merger) only at a
duly called stockholders' meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's Certificate of Incorporation or Bylaws, unless
a corporation's Certificate of Incorporation or Bylaws, as the case may be,
require a greater percentage. The Company's Certificate and the Bylaws require
the affirmative vote of the holders of at least 75% of the shares of capital
stock of the Company issued and outstanding and entitled to vote to amend or
repeal any of the provisions described in the prior two paragraphs.
The Certificate contains certain provisions permitted under the General
Corporation Law of Delaware relating to the liability of directors. The
provisions eliminate a director's liability to the Company or its stockholders
for monetary damages for a breach of fiduciary duty, except in circumstances
involving certain wrongful acts, such as the breach of a director's duty of
loyalty or
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acts or omissions which involve intentional misconduct or a knowing violation of
law. The Certificate also contains provisions obligating the Company to
indemnify its officers and directors to the fullest extent permitted by the
General Corporation Law of Delaware. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston, Boston, Massachusetts.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have approximately
8,000,000 shares of Common Stock outstanding. Of these shares, the 2,000,000
shares sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares purchased
by an "affiliate" of the Company, as that term is defined in Rule 144 under the
Securities Act (an "Affiliate"). Any shares purchased in the offering by an
Affiliate of the Company may not be resold except pursuant to an effective
registration statement filed by the Company or an applicable exemption from
registration, including the exemption under Rule 144. The remaining 6,000,000
shares will be subject to a 180-day lock-up agreement. After the 180-day period,
these shares will be eligible for sale subject to compliance with Rule 144 under
the Securities Act.
In general, a person (or persons whose shares are aggregated for purposes
of such rule) effecting sales under Rule 144 is entitled to sell, within any
three-month period, a number of such securities that does not exceed the greater
of 1% of the then outstanding shares of the Company's Common Stock
(approximately 80,000 shares immediately after the offering) or the average
weekly trading volume in the Company's Common Stock on the Nasdaq National
Market or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain restrictions on the manner of sale,
notice requirements, and the availability of current public information about
the Company. The Company, Mr. Colony, who prior to the completion of this
offering is the sole stockholder of the Company, and certain executive officers
and employees of the Company who hold options to purchase 558,945 shares of
Common Stock, have agreed not to offer or sell or otherwise dispose of any
Common Stock until the expiration of 180 days following the date of this
Prospectus without the prior written consent of the Representatives of the
Underwriters. See "Underwriting".
No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of the Common Stock prevailing from time to time. The Company is unable to
estimate the number of shares that may be sold in the public market pursuant to
Rule 144, since this will depend on the market price of Common Stock, the
personal circumstances of the sellers, and other factors. Nevertheless, sales or
anticipated sales of significant amounts of the Common Stock of the Company in
the public market could adversely affect the market price of the Company's
Common Stock.
As of September 23, 1996, options to purchase a total of 728,589 shares of
Common Stock were outstanding, of which options to purchase 149,376 shares will
become exercisable upon completion of this offering. Of the total shares
issuable pursuant to such options 98,595 shares are subject to 180 day lock-up
agreements with the representatives of the Underwriters.
The Company intends to file a registration statement on Form S-8 under the
Securities Act covering 200,000 shares of Common Stock reserved for issuance
under the Stock Purchase Plan prior to the completion of this offering, although
shares will not be issuable under the plan until June 30, 1997. In addition, the
Company intends to file registration statements on Form S-8 covering 2,900,000
shares of Common Stock reserved for issuance under the Equity Incentive Plan and
the
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Director Option Plan. See "Management -- Stock Plans". Such registration
statements are expected to be filed 90 days after the date of this Prospectus
and will automatically become effective upon filing. Accordingly, shares issued
pursuant to such registration statements will, subject to Rule 144 volume
limitations applicable to Affiliates, be available for sale in the open market.
As of September 23, 1996, options to purchase 728,589 shares were granted and
outstanding and holders of options to purchase 558,945 shares are subject to the
lock-up agreements discussed above.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Ropes & Gray, Boston, Massachusetts.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Hale and Dorr, Boston, Massachusetts.
EXPERTS
The Financial Statements of the Company and the Financial Statement
Schedule included in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports thereto, and are included herein in reliance upon the
authority of such firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement, including exhibits, schedules and
reports filed therewith. Statements made in this Prospectus as to the contents
of any contract, agreement, or other document referred to above are necessarily
incomplete. With respect to each such contract, agreement, or other document
filed as an exhibit to the Registration Statement reference is hereby made to
the exhibit for a more complete description of the matter involved, and each
statement shall be deemed qualified in its entirety by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, Thirteenth Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies may be obtained at the prescribed
rates from the Public Reference Section of the Commission at its principal
office in Washington, D.C. In addition, material that the Company files
electronically with the Commission is available at the Commission's Web site,
http://www.sec.gov, which contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission.
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FORRESTER RESEARCH, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)......... F-3
Statements of Income for the years ended December 31, 1993, 1994, and 1995 and the six
months ended June 30, 1995 and 1996 (unaudited)..................................... F-4
Statements of Stockholder's Equity for the years ended December 31, 1993, 1994, and
1995 and the six months ended June 30, 1996 (unaudited)............................. F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994, and 1995 and the
six months ended June 30, 1995 and 1996 (unaudited)................................. F-6
Notes to Financial Statements......................................................... F-7
F-1
40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of
Forrester Research, Inc.:
We have audited the accompanying balance sheets of Forrester Research, Inc.
(a Delaware corporation) as of December 31, 1994 and 1995 and the related
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Forrester Research, Inc. as
of December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 23, 1996 (except with respect to the matters
discussed in Note 6, as to which the date is
September 25, 1996)
F-2
41
FORRESTER RESEARCH, INC.
BALANCE SHEETS
DECEMBER 31, PRO FORMA
------------------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
ASSETS
Current assets:
Cash and cash equivalents.................... $2,778,725 $ 997,567 $ 714,780 $23,604,780
Marketable securities........................ 1,985,355 6,520,481 8,791,543 8,791,543
Accounts receivable, net of allowance for
doubtful accounts of approximately $88,000,
$120,000, and $160,000 in 1994, 1995, and
1996, respectively......................... 2,872,238 5,882,980 7,132,036 7,132,036
Deferred commissions......................... 495,215 891,967 1,117,058 1,117,058
Prepaid expenses and other current assets.... 60,960 76,542 228,421 228,421
---------- ----------- ----------- -----------
Total current assets.................... 8,192,493 14,369,537 17,983,838 40,873,838
---------- ----------- ----------- -----------
Property and equipment, at Cost:
Machinery and equipment...................... 707,388 965,435 1,547,615 1,547,615
Furniture and fixtures....................... 191,510 288,532 395,887 395,887
Computer software............................ 35,409 206,324 238,066 238,066
Vehicles..................................... 30,098 30,098 30,098 30,098
Leasehold improvements....................... 38,580 59,262 416,259 416,259
---------- ----------- ----------- -----------
Total property and equipment............ 1,002,985 1,549,651 2,627,925 2,627,925
Less-Accumulated depreciation and
amortization............................... 411,855 493,376 700,833 700,833
---------- ----------- ----------- -----------
Property and equipment, net............. 591,130 1,056,275 1,927,092 1,927,092
---------- ----------- ----------- -----------
Total assets............................ $8,783,623 $15,425,812 $19,910,930 $42,800,930
========= ========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................. $ 41,394 $ 377,344 $ 637,407 $ 637,407
Customer deposits............................ -- 97,329 134,824 134,824
Accrued expenses............................. 525,052 1,544,815 1,734,034 1,734,034
Deferred revenue............................. 7,097,574 11,359,101 14,364,266 14,364,266
---------- ----------- ----------- -----------
Total current liabilities............... 7,664,020 13,378,589 16,870,531 16,870,531
---------- ----------- ----------- -----------
Deferred income tax liability.................... -- -- -- 400,000
Commitments (Note 4)
Stockholder's equity:
Common stock, $.01 par value
Authorized -- 7,000,000 shares
Issued and outstanding-- 6,000,000 shares
at December 31, 1994, 1995, and June 30,
1996 and 8,000,000 shares on a Pro Forma
Basis................................... 60,000 60,000 60,000 80,000
Additional paid-in capital................. -- -- -- 25,070,000
Retained earnings............................ 1,059,603 1,965,527 3,021,545 421,545
Unrealized gain (loss) on marketable
securities................................. -- 21,696 (41,146) (41,146)
---------- ----------- ----------- -----------
Total stockholder's equity.............. 1,119,603 2,047,223 3,040,399 25,530,399
---------- ----------- ----------- -----------
Total liabilities and stockholder's
equity................................ $8,783,623.. $15,425,812 $19,910,930 $42,800,930
========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
42
FORRESTER RESEARCH, INC.
STATEMENTS OF INCOME
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
Revenues:
Core research................. $4,690,572 $6,363,335 $10,149,514 $4,393,162 $7,773,834
Advisory services and other... 2,608,545 3,335,467 4,439,298 1,187,813 2,288,014
---------- ---------- ----------- ---------- ----------
Total revenues........... 7,299,117 9,698,802 14,588,812 5,580,975 10,061,848
---------- ---------- ----------- ---------- ----------
Operating expenses:
Cost of services and
fulfillment................. 2,406,311 3,423,844 5,486,346 2,162,662 3,746,335
Selling and marketing......... 2,693,442 3,592,853 5,643,196 2,361,066 3,945,317
General and administrative.... 1,147,589 1,045,340 1,388,868 558,282 1,133,374
Depreciation and
amortization................ 105,120 150,067 286,705 127,519 211,857
---------- ---------- ----------- ---------- ----------
Total operating
expenses............... 6,352,462 8,212,104 12,805,115 5,209,529 9,036,883
---------- ---------- ----------- ---------- ----------
Income from operations... 946,655 1,486,698 1,783,697 371,446 1,024,965
Interest income, Net............... 79,343 125,115 339,569 176,963 231,073
---------- ---------- ----------- ---------- ----------
Income before state
income tax provision... 1,025,998 1,611,813 2,123,266 548,407 1,256,038
State income tax provision......... 46,000 73,000 96,000 25,000 65,000
---------- ---------- ----------- ---------- ----------
Net income............... 979,998 1,538,813 2,027,266 523,407 1,191,038
Pro forma income tax adjustment
(Note 3)......................... 365,000 583,000 739,000 188,000 443,000
---------- ---------- ----------- ---------- ----------
Pro forma net income............... $ 614,998 $ 955,813 $ 1,288,266 $ 335,407 $ 748,038
========== ========== ============ ========== ==========
Pro forma net income per common
share............................ $ 0.20 $ 0.12
============ ==========
Pro forma weighted average common
shares outstanding............... 6,291,299 6,291,299
============ ==========
The accompanying notes are an integral part of these financial statements.
F-4
43
FORRESTER RESEARCH, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
COMMON STOCK UNREALIZED
---------------------- ADDITIONAL GAIN (LOSS) ON TOTAL
NUMBER PAID-IN RETAINED MARKETABLE STOCKHOLDER'S
OF SHARES $.01 PAR CAPITAL EARNINGS SECURITIES EQUITY
---------- --------- ----------- ----------- --------------- ------------
Balance, December 31, 1992............. 6,000,000 $60,000 $ -- $ 635,792 $ -- $ 695,792
Distributions...................... -- -- -- (345,000) -- (345,000)
Net income......................... -- -- -- 979,998 -- 979,998
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1993............. 6,000,000 60,000 -- 1,270,790 -- 1,330,790
Distributions...................... -- -- -- (1,750,000) -- (1,750,000)
Net income......................... -- -- -- 1,538,813 -- 1,538,813
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1994............. 6,000,000 60,000 -- 1,059,603 -- 1,119,603
Distributions...................... -- -- -- (1,121,342) -- (1,121,342)
Net income......................... -- -- -- 2,027,266 -- 2,027,266
Unrealized gain on
available-for-sale securities.... -- -- -- -- 21,696 21,696
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1995............. 6,000,000 60,000 -- 1,965,527 21,696 2,047,223
Distributions...................... -- -- -- (135,020) -- (135,020)
Net income......................... -- -- -- 1,191,038 -- 1,191,038
Unrealized loss on
available-for-sale securities.... -- -- -- -- (62,842) (62,842)
---------- ------- ----------- ----------- -------- -----------
Balance, June 30, 1996 (Unaudited)..... 6,000,000 60,000 -- 3,021,545 (41,146) 3,040,399
Pro forma adjustments (Note 1):
Proceeds from initial public
offering, less estimated
underwriting discounts and
offering expenses................ 2,000,000 20,000 25,070,000 -- -- 25,090,000
Distribution of undistributed
earnings to S corporation
stockholder...................... -- -- -- (2,200,000) -- (2,200,000)
Recognition of deferred income tax
liability upon termination of S
corporation status (Note 3)...... -- -- -- (400,000) -- (400,000)
---------- ------- ----------- ----------- -------- -----------
Pro forma balance, June 30, 1996
(Unaudited).......................... 8,000,000 $80,000 $25,070,000 $ 421,545 $ (41,146) $ 25,530,399
========== ======= =========== =========== ======== ===========
The accompanying notes are an integral part of these financial statements.
F-5
44
FORRESTER RESEARCH, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
Cash flows from operating activities:
Net income..................................... $ 979,998 $1,538,813 $2,027,266 $ 523,407 $1,191,038
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization............. 105,120 150,067 286,705 127,519 211,857
Accretion of discount on marketable
securities.............................. -- (24,935) (60,377) (30,459) (108,791)
Unrealized gain (loss) on
available-for-sale securities........... -- -- 21,696 -- (62,842)
Changes in assets and liabilities --
Accounts receivable................... (478,464) (455,965) (3,010,742) (620,445) (1,249,056)
Deferred commissions.................. (61,610) (158,244) (396,752) (148,251) (225,091)
Prepaid expenses and other current
assets.............................. (5,766) 5,113 (15,582) (113,129) (156,279)
Accounts payable...................... (15,618) 28,748 335,950 343,874 260,063
Customer deposits..................... -- -- 97,329 -- 37,495
Accrued expenses...................... (99,021) 330,913 1,019,763 419,135 189,219
Deferred revenue...................... 883,018 2,268,001 4,261,527 1,474,715 3,005,165
---------- ---------- ---------- ---------- ----------
Net cash provided by operating
activities..................... 1,307,657 3,682,511 4,566,783 1,976,366 3,092,778
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and
equipment.................................... (236,314) (304,736) (751,850) (505,958) (1,078,274)
Purchase of marketable securities.............. -- (1,960,420) (9,171,880) (1,957,270) (5,318,408)
Proceeds from sales and maturities
of marketable securities..................... -- -- 4,697,131 2,000,000 3,156,137
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities..................... (236,314) (2,265,156) (5,226,599) (463,228) (3,240,545)
---------- ---------- ---------- ---------- ----------
Cash flows used in financing activities:
Distributions to stockholder................... (345,000) (1,750,000) (1,121,342) (348,655) (135,020)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents...................................... 726,343 (332,645) (1,781,158) 1,164,483 (282,787)
Cash and cash equivalents, beginning of period..... 2,385,027 3,111,370 2,778,725 2,778,725 997,567
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of period........... $3,111,370 $2,778,725 $ 997,567 $3,943,208 $ 714,780
========= ========= ========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes... $ 42,320 $ 18,961 $ 44,893 $ 22,500 $ 80,000
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
45
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Forrester Research, Inc. (the Company) creates, publishes, and sells
technology research reports and provides advisory services and technology
conferences. The Company is incorporated under the laws of the State of Delaware
and grants credit to its customers with locations throughout the world.
The preparation of the accompanying financial statements required the use
of certain estimates by management in determining the Company's assets,
liabilities, revenues, and expenses. Actual results could differ from these
estimates.
The accompanying financial statements reflect the application of certain
significant accounting policies as described below and elsewhere in the
accompanying financial statements and notes.
Interim Financial Statements
The accompanying balance sheet as of June 30, 1996, and the statements of
income and cash flows for the six months ended June 30, 1995 and June 30, 1996,
and the statement of stockholder's equity for the six months ended June 30,
1996, are unaudited, but in the opinion of management, include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of results for these interim periods. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted, although the
Company believes that the disclosures included are adequate to make the
information presented not misleading. The results of operations for the six
months ended June 30, 1996, are not necessarily indicative of the results to be
expected for the entire fiscal year.
Pro Forma Presentation (Unaudited)
The unaudited pro forma balance sheet, as of June 30, 1996, reflects (i)
the sale of 2,000,000 shares of common stock at an assumed initial public
offering price of $14.00 per share (less estimated underwriting discounts and
offering expenses), (ii) distribution of previously undistributed S corporation
earnings taxed or taxable to the Company's sole stockholder of approximately
$2.2 million based on earnings through June 30, 1996, but does not include the
amount to be distributed for S corporation earnings from July 1, 1996 through
the termination of the Company's S corporation election upon completion of this
offering, and (iii) termination of the Company's S corporation election and the
recognition of a deferred income tax liability of approximately $400,000 as of
June 30, 1996 (see Note 3).
Upon completion of an initial public offering, the Company will no longer
be treated as an S corporation and will be subject to federal and state income
taxes at prevailing corporate rates. Accordingly, the accompanying statements of
income include a pro forma income tax adjustment reflecting the Company's income
tax expense assuming the Company had been a C corporation (see Note 3).
Revenue Recognition
The Company invoices its core research, advisory, and other services when
an order is received, at which time the gross amount is recorded as deferred
revenue. Core research is recorded as revenue ratably over the term of the
agreement as the research is delivered. Advisory and other services are
recognized during the period in which the services are performed.
F-7
46
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Deferred Commissions
Commissions incurred in acquiring new or renewal business are deferred and
amortized as the related revenue is recognized.
Pro Forma Net Income Per Common Share
Pro forma net income per common share is computed by dividing pro forma net
income by the weighted average number of shares of common stock and common stock
equivalents outstanding during the period, adjusted for the reincorporation
discussed in Note 6. Common stock equivalents consist of common stock issuable
on the exercise of outstanding options. In accordance with Securities and
Exchange Commission requirements, all common stock and common stock equivalents
issued during the twelve months preceding the proposed date of Registration
Statement relating to an initial public offering have been included in the net
income per share computation as if they were outstanding for all periods using
the Treasury Stock method. Historical net income per share data are not
presented because the information is not considered meaningful.
Depreciation
The Company provides for depreciation, computed using the straight-line
method, by charges to income in amounts that allocate the costs of these assets
over their estimated useful lives as follows:
ESTIMATED
USEFUL LIFE
--------------
Machinery and equipment.................................... 5 Years
Furniture and fixtures..................................... 7 Years
Computer software.......................................... 3 Years
Vehicles................................................... 5 Years
Leasehold improvements..................................... Life of lease
Product Development
All costs incurred in the development of new products and services are
expensed as incurred.
Concentration of Credit Risk
Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk, requires disclosure of
any significant off-balance-sheet and credit risk concentrations. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, are principally cash and cash equivalents, investments and accounts
receivable. The Company places its investments in highly rated institutions. No
single customer accounted for greater than 10% of revenues in any of the years
presented.
Financial Instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash equivalents, marketable securities, and accounts
receivable. The estimated fair value of these financial instruments approximates
their carrying value and, except for accounts receivable, is based primarily on
market quotes. The Company's cash equivalents and marketable securities are
generally obligations of the federal
F-8
47
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
government or municipal issuers. The Company, by policy, limits the amount of
credit exposure to any one financial institution.
(2) CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all short-term, highly liquid investments with
original maturities of 90 days or less to be cash equivalents.
The Company accounts for investments in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Under SFAS No.
115, securities that the Company has the positive intent and ability to hold to
maturity are reported at amortized cost and are classified as held-to-maturity.
At December 31, 1994 and 1995 and June 30, 1996, held-to-maturity securities
consisted of investments in U.S. treasury bills. These investments are
classified as current as they mature within one year. Securities purchased to be
held for indefinite periods of time and not intended at the time of purchase to
be held until maturity are classified as available-for-sale securities. At
December 31, 1995 and June 30, 1996, these securities consisted of investments
in federal and state government obligations, which were recorded at fair market
value, with any unrealized gains and losses reported as a separate component of
stockholder's equity. These investments were classified as marketable securities
at December 31, 1995 and June 30, 1996 as it is the Company's intent to hold
these securities less than one year. There were no available-for-sale securities
as of December 31, 1994. Securities that are bought and held principally for the
purpose of selling in the near term are classified as trading securities. There
were no trading securities as of December 31, 1994 and 1995 and June 30, 1996.
At December 31, 1994 and 1995 and June 30, 1996 marketable securities
consist of the following:
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
---------- ---------- ----------
U.S. treasury bills.......................... $1,985,355 $3,876,100 $2,639,127
U.S. treasury notes.......................... -- 613,456 2,136,912
Federal agency obligations................... -- 309,255 845,649
State and municipal bonds.................... -- 1,721,670 3,169,855
---------- ---------- ----------
$1,985,355 $6,520,481 $8,791,543
========== ========== ==========
The following table summarizes the maturity periods of marketable
securities as of December 31, 1995:
LESS THAN 1 1 TO 5 5 TO 10
YEAR YEARS YEARS TOTAL
------------ ---------- ---------- ----------
U.S. treasury bills............... $3,876,100 $ -- $ -- $3,876,100
U.S. treasury notes............... -- 457,314 156,142 613,456
Federal agency obligations........ -- 148,982 160,273 309,255
State and municipal bonds......... -- 585,181 1,136,489 1,721,670
------------ ---------- ---------- ----------
$3,876,100 $1,191,477 $1,452,904 $6,520,481
============ ========== ========== ==========
Gross realized gains and losses on sales of marketable securities for the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1995
and 1996, which were calculated based on specific identification, were not
material.
F-9
48
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(3) INCOME TAXES
The Company has elected to be taxed, since January 1, 1987, under
Subchapter S of the Internal Revenue Code of 1986, as amended, whereby the sole
stockholder is liable for individual federal and state income taxes on the
Company's taxable income. Payments to the stockholder to cover the tax
liabilities as a result of the Company's taxable income are recorded as
distributions in the accompanying statements of stockholder's equity.
The Company's state income tax provision for each of the fiscal years
presented consists of corporate-level state income taxes that are levied against
the Company as an S corporation.
The Company accounts for income taxes, including pro forma computations, in
accordance with SFAS No. 109, Accounting for Income Taxes. SFAS 109 prescribes
an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. Deferred state taxes as of December 31, 1994 and 1995
and June 30, 1996 were immaterial.
Upon completion of an initial public offering, the Company will terminate
its S corporation election and will be subject to federal and state income taxes
at prevailing corporate rates. Accordingly, the accompanying statements of
income for each of the three years in the period ended December 31, 1995 and the
six months ended June 30, 1995 and 1996 include a pro forma income tax
adjustment for the income taxes that would have been recorded if the Company had
been a C corporation for the periods presented.
The pro forma income tax adjustment is computed as follows:
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
Pro Forma provision for income taxes:
Current-
Federal........................ $229,000 $482,000 $592,000 $128,000 $367,000
State.......................... 71,000 149,000 183,000 39,000 113,000
-------- -------- -------- -------- --------
300,000 631,000 775,000 167,000 480,000
-------- -------- -------- -------- --------
Deferred-
Federal........................ 85,000 19,000 46,000 35,000 22,000
State.......................... 26,000 6,000 14,000 11,000 6,000
-------- -------- -------- -------- --------
111,000 25,000 60,000 46,000 28,000
-------- -------- -------- -------- --------
Total required provision for
income taxes.............. 411,000 656,000 835,000 213,000 508,000
-------- -------- -------- -------- --------
Less: Actual State income tax
provision........................... 46,000 73,000 96,000 25,000 65,000
-------- -------- -------- -------- --------
Pro forma income tax adjustment....... $365,000 $583,000 $739,000 $188,000 $443,000
========= ========= ========= ========= =========
The combined provision for income taxes and pro forma income tax adjustment
do not materially differ from the Company's combined federal and state statutory
rate of 40%.
Upon termination of the S corporation election, deferred income taxes will
be recorded for the tax effect of cumulative temporary differences between the
financial reporting and tax bases of certain assets and liabilities, primarily
deferred commissions, accrued expenses and cumulative tax depreciation in excess
of financial reporting allowances. If the S corporation election had been
terminated at June 30, 1996, these temporary differences would have resulted in
a net deferred
F-10
49
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
income tax liability of approximately $400,000. The Company will record this tax
liability as a one-time increase in the tax provision in the period in which the
S corporation election is terminated. As this is a nonrecurring charge it has
been excluded from the pro forma income tax adjustment.
(4) COMMITMENTS
The Company leases its office space under an operating lease. The Company
will also make lease payments on its previous facility through January 1997. The
excess of the payments on its old facility over anticipated sublease income has
been accrued as of December 31, 1995 and June 30, 1996.
Minimum rentals due in future years under these operating leases are
approximately as follows:
AMOUNT
----------
Year ending December 31, 1996............................... $1,002,000
1997........................................................ 1,011,000
1998........................................................ 1,001,000
1999........................................................ 1,007,000
2000........................................................ 1,012,000
Thereafter.................................................. 262,000
----------
Total minimum lease payments...................... $5,295,000
==========
Rent expense was approximately $257,000, $369,000, and $663,000 for the
years ended December 31, 1993, 1994, and 1995, respectively.
In connection with its facility leases, the Company has outstanding letters
of credit of approximately $73,000.
(5) 401(K) PLAN
The Company has a 401(k) savings and profit sharing plan covering
substantially all eligible employees. The Plan is a qualified defined
contribution plan in accordance with Section 401(k) of the Internal Revenue Code
and is funded entirely through employee contributions.
(6) STOCKHOLDER'S EQUITY
(a) Reincorporation
In February 1996, in connection with the Company's reincorporation in
Delaware, the Company increased the number of authorized shares of common stock
to 7,000,000, and each outstanding share of common stock was exchanged for 1,000
shares of common stock in the reincorporated entity. The accompanying financial
statements and notes have been retroactively adjusted to reflect this
transaction. In September 1996, the Board of Directors voted to amend the
Company's Certificate of Incorporation and Bylaws to increase the number of
authorized shares of common stock to 25,000,000.
(b) Stock Option Plans
In February 1996, the Company adopted the Forrester Research, Inc. 1996
Equity Incentive Plan, which was amended in September 1996 (the Plan). The Plan
provides for the issuance of incentive stock options (ISOs) and nonqualified
stock options (NSOs) to purchase up to 2,750,000 shares of common stock. Under
the terms of the Plan, ISOs may not be granted at less than fair market value on
the date of grant (and in no event less than par value). ISO grants to holders
of 10% of the combined voting power of all classes of Company stock must be
granted at an exercise
F-11
50
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
price of not less than 110% of the fair market value at the date of grant. The
fair market value of $5.50 per share for the options granted in February 1996
was based on an independent appraisal. Options vest ratably over three years and
expire after 10 years. Options granted under the Plan immediately vest upon
certain events, as defined.
Stock option activity since the Plan's inception to June 30, 1996 was as
follows:
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
---------- ---------------
Granted.................................... 461,311 $5.50
Canceled................................... 18,555 5.50
---------- -------
Outstanding at June 30, 1996............... 442,756 $5.50
=========== ===============
Exercisable at June 30, 1996............... -- $ --
=========== ===============
Upon consummation of the proposed offering, 149,376 ISOs will vest
immediately. Subsequent to June 30, 1996, options to purchase an additional
12,800 shares of common stock at $5.50 per share were cancelled. On July 10,
1996, the Company granted ISOs to purchase 50,464 shares of common stock at
$11.00 per share. On September 11, 1996, the Company granted ISOs to purchase
248,169 shares of common stock at $13.00 per share. Options available for future
grant under the Plan are 2,021,411.
In September 1996, the Company adopted the 1996 Stock Option Plan for
Non-Employee Directors (the Director's Plan) which provides for the issuance of
options to purchase up to 150,000 shares of common stock. The Director's Plan
provides that non-employee directors who have agreed to serve as directors of
the Company will receive, on the date that the Company first files a
registration statement under the Securities Act of 1933 covering the Common
Stock, an option to purchase 6,000 shares of the Company's common stock at an
exercise price of $13.00 per share. Such options will vest in three equal
installments commencing on the date of completion of the initial public offering
of the common stock and on the first and second anniversaries of such date. Each
non-employee director elected thereafter shall be awarded options to purchase
6,000 shares of common stock, at an exercise price equal to the fair market
value of the common stock, upon his or her election as a director, which will
vest in three equal installments commencing on the date of grant and on the
first and second anniversaries of the date of grant. Each non-employee director
will also receive an option to purchase 4,000 shares of common stock, at an
exercise price equal to the fair market value of the common stock, each year
immediately following the Company's annual stockholders meeting, which will vest
in three equal installments on the first, second and third anniversaries of the
date of grant. The Compensation Committee of the Board of Directors also has the
authority under the Director's Plan to grant options to non-employee directors
in such amounts and on such terms as set forth in the Director's Plan as it
shall determine at the time of grant.
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options or warrants to be included in the
statement of income or disclosed in the notes to financial statements. The
Company has determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board Opinion No. 25 and
elect the disclosure-only alternative under SFAS No. 123. The Company will be
required to disclose the pro forma net income or loss and per share amounts in
the notes to the financial statements using the fair-value-based method
beginning in the year ending December 31, 1996, with comparable disclosures for
the year ended December 31, 1995. The Company has not determined the impact of
these pro forma adjustments.
F-12
51
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(c) Employee Stock Purchase Plan
In September 1996, the Company adopted the 1996 Employee Stock Purchase
Plan (the Stock Purchase Plan) that provides for the issuance of up to 200,000
shares of common stock. The Stock Purchase Plan is administered by the Board of
Directors. With certain limited exceptions, all employees of the Company
employed more than 30 hours per week, including officers and directors who are
employees, are eligible to participate in the Stock Purchase Plan. The Stock
Purchase Plan consists of semiannual offerings on January 1 and July 1 of each
year. The first offering under the Stock Purchase Plan will commence on the
first day the Company's common stock is publicly traded on the Nasdaq National
Market and will end on June 30, 1997. Each subsequent offering under the Stock
Purchase Plan will be six months in length and will commence on each successive
July 1 and January 1. During each offering under the Plan, the maximum number of
shares of common stock that may be purchased by an employee is determined on the
first day of the offering period under a formula whereby an amount equal to that
percentage of the employee's regular salary that he or she has elected to have
withheld is divided by 85% of the market value of a share of common stock on the
first day of the offering period. An employee may elect to have up to a maximum
of 10% deducted from his or her regular salary for the purpose of purchasing
shares under the Stock Purchase Plan. The price at which the employee's shares
are purchased is the lower of (a) 85% of the closing price of the common stock
on the day that the offering commences, or (b) 85% of the closing price of the
common stock on the day that the offering terminates. No shares have been
purchased under the Stock Purchase Plan.
(d) Preferred Stock
In September 1996, the Board of Directors voted to amend the Company's
Certificate of Incorporation to permit the issuance of up to 500,000 shares of
$.01 par value preferred stock. The Board of Directors has full authority to
issue this stock and to fix the voting powers, preferences, rights,
qualifications, limitations or restrictions thereof, including dividend rights,
conversion rights, redemption privileges and liquidation preferences and the
number of shares constituting any series or designation of such series.
(7) NET SALES BY GEOGRAPHIC DESTINATION
Net sales by geographic destination and as a percentage of total sales are
as follows:
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- -----------
United States............... $6,180,336 $8,103,708 $12,025,529 $4,531,342 $ 7,966,400
Europe...................... 357,365 629,208 1,066,314 407,555 1,080,580
Other....................... 761,416 965,886 1,496,969 642,078 1,014,868
---------- ---------- ----------- ---------- -----------
$7,299,117 $9,698,802 $14,588,812 $5,580,975 $10,061,848
========== ========== ============ ========== ============
United States............... 85% 84% 82% 81% 79%
Europe...................... 5 6 8 7 11
Other....................... 10 10 10 12 10
---------- ---------- ----------- ---------- -----------
100% 100% 100% 100% 100%
========== ========== ============ ========== ============
F-13
52
FORRESTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) ACCRUED EXPENSES
Accrued expenses consist of the following:
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
-------- ---------- ----------
Payroll and related.................. $ 23,709 $ 802,673 $ 832,945
Other................................ 501,343 742,142 901,089
-------- ---------- ----------
$525,052 $1,544,815 $1,734,034
========= ========== ==========
F-14
53
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co. and Robertson, Stephens &
Company LLC are acting as representatives, has severally agreed to purchase from
the Company, the respective number of shares of Common Stock set forth opposite
its name below:
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------------------------------------------------- ----------------
Goldman, Sachs & Co..................................
Robertson, Stephens & Company LLC....................
----------------
Total........................................... 2,000,000
=================
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 300,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,000,000 shares of Common
Stock offered.
The Company, Mr. Colony, who prior to the completion of the offering is the
sole stockholder of the Company, and directors, certain executive officers, and
other employees of the Company who hold options to purchase 582,945 shares of
Common Stock have agreed that, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, they will not offer, sell, contract to sell, or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) which are
substantially similar to the shares of Common Stock or which are convertible
into or exchangeable for securities which are substantially similar to the
shares of Common Stock without the prior written consent of the representatives,
except for the shares of Common Stock offered in connection with this offering.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, will be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management, and the consideration of the above factors in relation to
market valuation of companies in related businesses.
U-1
54
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "FORR".
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
U-2
55
[Corporate Logo]
56
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
Risk Factors......................... 5
Use of Proceeds...................... 9
Termination of S Corporation
Election and S Corporation
Distribution....................... 9
Dividend Policy...................... 9
Dilution............................. 10
Capitalization....................... 11
Selected Financial Data.............. 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 14
Business............................. 20
Management........................... 28
Certain Transactions................. 32
Principal Stockholders............... 33
Description of Capital Stock......... 34
Shares Eligible for Future Sale...... 36
Validity of Shares................... 37
Experts.............................. 37
Additional Information............... 37
Index to Financial Statements........ F-1
Underwriting......................... U-1
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
2,000,000 SHARES
FORRESTER RESEARCH, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------------
LOGO
----------------------
GOLDMAN, SACHS & CO.
ROBERTSON, STEPHENS & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS
======================================================
57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
ITEM AMOUNT
------------------------------------------------------------------------- --------
SEC Registration Fee..................................................... $ 11,897
NASD Filing Fee.......................................................... $ 3,950
Nasdaq National Market Listing Fee....................................... $ 46,000
Blue Sky Fees and Expenses............................................... $ 15,000
Transfer Agent and Registrar Fees........................................ $ 12,500
Accounting Fees and Expenses............................................. $200,000
Legal Fees and Expenses.................................................. $275,000
Printing Expenses........................................................ $125,000
Premium for D&O Insurance................................................ $225,000
Miscellaneous............................................................ $ 35,653
--------
Total............................................................... $950,000
========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation provides that the
Registrant's Directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that the exculpation from liabilities is not permitted under the Delaware
General Corporation Law as in effect at the time such liability is determined.
The Bylaws provide that the Registrant shall indemnify its directors and
officers to the full extent permitted by the laws of the State of Delaware.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Registrant has not sold any securities which were not registered under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant has awarded to employees and directors options to purchase
752,589 shares of Common Stock, none of which have become exercisable prior to
the date hereof. The Registrant also issued 6,000,000 shares of Common Stock to
its sole stockholder in February 1996 in connection with its reincorporation
merger in Delaware. Such transaction was not a "sale" because it fit within the
exemption under Rule 145(a)(2) under the Securities Act.
II-1
58
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following is a list of exhibits filed as a part of this registration
statement.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
---- -----------------------------------------------------------------------------------
1 Form of Underwriting Agreement among the Underwriters named therein and the Com-
pany.*
3.1 Restated Certificate of Incorporation of the Company.*
3.2 Bylaws of the Company, as amended.*
4 Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.
5 Opinion of Ropes & Gray.*
10.1 Form of Registration Rights and Non-Competition Agreement.
10.2 Form of Tax Indemnification Agreement.*
10.3 1996 Amended and Restated Equity Incentive Plan.
10.4 1996 Employee Stock Purchase Plan.
10.5 1996 Director Option Plan for Non-Employee Directors.
10.6 Lease dated May 1, 1995 between Advent Realty Limited Partnership II and the
Company for the premises located at 1033 Massachusetts Avenue, Cambridge,
Massachusetts.
11 Statement Regarding Computation of Pro Forma Per Share Earnings.
23.1 Consent of Ropes & Gray (contained in its opinion filed as Exhibit 5 hereto).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included in the signature page of this Registration Statement).
99.1 Consent of Robert M. Galford.*
99.2 Consent of George R. Hornig.*
99.3 Consent of Christopher W. Mines.*
99.4 Consent of Michael H. Welles.*
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in Regulations S-X of the
Securities and Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described under "Item 14 --
Indemnification of Directors and Officers" above, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-2
59
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Company hereby undertakes to provide at the closing of this
offering to the Underwriters specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-3
60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts, on this 26th day of September, 1996.
FORRESTER RESEARCH, INC.
By: /s/ GEORGE F. COLONY
----------------------------------
Name: George F. Colony
Chairman of the Board, President,
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Forrester Research, Inc., hereby severally constitute George F.
Colony, Susan M. Whirty, and Ann L. Milner, and each of them singly, our true
and lawful attorneys with full power to them, and each of them singly, to sign
for us and in our names in the capacities indicated below, the Registration
Statement filed herewith and any and all amendments to said Registration
Statement (or any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933),
and generally to do all such things in our names and in our capacities as
officers and directors to enable Forrester Research, Inc. to comply with the
provisions of the Securities Act of 1933, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities of Forrester Research, Inc. on the dates indicated.
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ -------------------
/s/ GEORGE F. COLONY Chief Executive Officer, September 26, 1996
- ---------------------------------------- President and Director
George F. Colony (Principal Executive
Officer)
/s/ SUSAN M. WHIRTY Director, Operations, General September 26, 1996
- ---------------------------------------- Counsel, Treasurer and
Susan M. Whirty Secretary (Principal
Financial Officer and
Accounting Officer)
II-4
61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholder of
Forrester Research, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Forrester Research, Inc. included in this
registration statement and have issued our report thereon dated July 23, 1996
(except with respect to matters discussed in Note 6, as to which the date is
September 25, 1996). Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The schedule listed in Item
16(b) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects, the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 23, 1996
S-1
62
SCHEDULE II
FORRESTER RESEARCH, INC.
VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
-------------------------------------------------------
BALANCE,
BALANCE, CHARGED END
ALLOWANCE FOR BEGINNING TO COST OR DEDUCTIONS OF
DOUBTFUL ACCOUNTS OF PERIOD EXPENSE (WRITEOFFS) PERIOD
- --------------------------------------- --------- ---------- ---------- --------
Fiscal 1993............................ $ -- $158,624 $(125,290 ) $ 33,334
Fiscal 1994............................ 33,334 108,644 (53,519 ) 88,459
Fiscal 1995............................ 88,459 62,245 (30,784 ) 119,920
63
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
---- ---------------------------------------------------------------------------- ----
1 Form of Underwriting Agreement among the Underwriters named therein and the
Company.*
3.1 Restated Certificate of Incorporation of the Company.*
3.2 Bylaws of the Company, as amended.*
4 Specimen Certificate for shares of Common Stock, $.01 par value, of the
Company.
5 Opinion of Ropes & Gray.*
10.1 Form of Registration Rights and Non-Competition Agreement.
10.2 Form of Tax Indemnification Agreement.*
10.3 1996 Amended and Restated Equity Incentive Plan.
10.4 1996 Employee Stock Purchase Plan.
10.5 1996 Director Option Plan for Non-Employee Directors.
10.6 Lease dated May 1, 1995 between Advent Realty Limited Partnership II and the
Company for the premises located at 1033 Massachusetts Avenue, Cambridge,
Massachusetts.
11 Statement Regarding Computation of Pro Forma Per Share Earnings.
23.1 Consent of Ropes & Gray (contained in its opinion filed as Exhibit 5
hereto).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included in the signature page of this Registration
Statement).
99.1 Consent of Robert M. Galford.*
99.2 Consent of George R. Hornig.*
99.3 Consent of Christopher W. Mines.*
99.4 Consent of Michael H. Welles.*
- ---------------
* To be filed by amendment.
1
Exhibit 4
INCORPORATED UNDER THE LAWS OF DELAWARE
NUMBER SHARES
-0- 0
FORRESTER RESEARCH, INC.
Common Stock
$.01 Par Value
SPECIMEN
This Certifies that __________ is the owner of Zero (0) Shares of the
Capital Stock of
FORRESTER RESEARCH, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this ________ day of _______________________ A.D., 19___.
__________________________________ _____________________________________
President Treasurer
2
FORRESTER RESEARCH, INC
Common Stock
$.01 Par Value
Certificate
FOR
0
Shares
of
Capital Stock
Issued to
SPECIMEN
DATED
For Value Received, _______ hereby sell, assign and transfer unto _____________
_______________________________________________________________________ Shares
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
______________________ to transfer the said Stock on the books of the within
named Corporation with full power of substitution in the premises.
Dated__________________, 19__
in presence of
____________________________
_____________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
1
EXHIBIT 10.1
FORRESTER RESEARCH, INC.
REGISTRATION RIGHTS AND NONCOMPETITION AGREEMENT
THIS REGISTRATION RIGHTS AND NONCOMPETITION AGREEMENT (the "Agreement")
is made as of the __th day of _____, 1996, between Forrester Research, Inc.
("Forrester") and George F. Colony (the "Stockholder").
RECITALS
WHEREAS, Forrester desires that the Stockholder agree to the provisions
of Sections 2 and 3 hereof to protect the confidential information and other
goodwill of Forrester; and
WHEREAS, the Stockholder desires that Forrester grant him the
registration rights set forth in Section 1 and agree to comply with the other
provisions set forth herein;
NOW THEREFORE, in consideration of the mutual promises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Forrester and the Stockholder agree as follows:
AGREEMENT
1. REGISTRATION RIGHTS.
(a) Piggyback Registration Rights. At any time following the
closing of the initial public offering of Forrester's common
stock, $.01 par value per share (the "Common Stock"), whenever
Forrester proposes to register any of its Common Stock for its
own or others' account under the Securities Act of 1933, as
amended (the "1933 Act"), for a public offering for cash,
other than a registration relating to employee benefit plans,
Forrester will give the Stockholder prompt written notice of
its intent to do so. Upon the written request of the
Stockholder given within ten (10) days after receipt of such
notice, Forrester will use its best efforts to cause to be
included in such registration all of the Common Stock owned by
that one Stockholder which he requests be included. If
Forrester is advised in writing in good faith by any managing
underwriter of the offering that the number of shares to be
sold by persons other than Forrester is greater than the
number of such shares which can be offered without adversely
affecting the offering, Forrester may reduce pro rata the
number of shares offered for the accounts of such persons
(based upon the number of shares held by such person),
including the Stockholder, to a number deemed satisfactory by
such managing underwriter.
2
(b) Demand Registrations. At any time following six months
after the closing of the initial public offering of the Common
Stock, the Stockholder may request, in writing, that Forrester
effect the registration of a number of shares having a fair
market value at such time of no less than five million dollars
($5,000,000). If the Stockholder intends to distribute the
shares in an underwritten offering, he shall so advise
Forrester in his request. Forrester shall, as expeditiously as
possible, use its best efforts to effect the registration of
all such shares. Forrester shall not be required to effect
more than two registrations pursuant to this Section 1(b). In
addition, Forrester shall not be required to effect any
registration within six months after the effective date of any
other registration statement filed by Forrester with the
Securities and Exchange Commission (the "Commission") for a
public offering and sale of securities of the Company (other
than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or
any registration statement covering only securities proposed
to be issued in exchange for securities or assets of another
corporation).
(c) Registration Procedures. Forrester shall bear expenses
incurred in connection with the registrations under this
Agreement (including all registration, filing, qualification,
printer's and accounting fees, but excluding underwriting
commissions and discounts). In connection with each
registration pursuant to paragraph (b) of this Section 1,
Forrester shall (i) use its best efforts to prepare and file
with the Commission as soon as reasonably practicable, a
registration statement with respect to the Common Stock and
use its best efforts to cause such registration statement to
promptly become and remain effective for a period of at least
one-hundred twenty (120) days (or such shorter period during
which the Stockholder shall have sold all shares which he
requested to be registered); (ii) use its best efforts to
register and qualify the Common Stock covered by such
registration statement under applicable state securities laws
as the Stockholder shall reasonably request for the
distribution of the Forrester Stock; and (iii) take such other
actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder.
(d) Underwriting Arrangement. In connection with each
registration pursuant this Section 1 for an underwritten
public offering, Forrester and the Stockholder agree to enter
into a written agreement with the managing underwriter in such
form and containing such provisions as are customary in the
securities business for such an arrangement between such
underwriter and companies of Forrester's size and investment
stature, including indemnification and contribution
provisions.
(e) Availability of Rule 144. Forrester shall not be obligated
to register shares of Common Stock held by the Stockholder at
any time when the resale
-2-
3
provisions of Rule 144 promulgated under the 1933 Act are
available to the Stockholder without limitation as to volume.
(f) Market Standoff. In consideration of the granting to the
Stockholder of the registration rights under this Agreement,
the Stockholder agrees that he will not sell, transfer or
otherwise dispose of, including without limitation through put
or short sale arrangements, shares of Forrester Stock in the
ten (10) days prior to the effectiveness of any registration
of Forrester Stock for sale to the public and for up to ninety
(90) days following the effectiveness of such registration,
provided that all directors, executive officers and holders of
more than five percent (5%) of the outstanding Common Stock
agree to the same restrictions.
2. CONFIDENTIALITY.
(a) Nondisclosure and Nonuse of Confidential Information. The
Stockholder acknowledges that Forrester continually develops
Confidential Information, that the Stockholder may develop
Confidential Information (as defined in Section 4 below) for
Forrester, and that the Stockholder may learn of Confidential
Information during the course of the Stockholder's employment
with Forrester. The Stockholder agrees to comply with
Forrester's policies and procedures for protecting
Confidential Information and except as required by the proper
performance of the Stockholder's duties, the Stockholder
agrees never, directly or indirectly, to use or disclose any
Confidential Information without the prior written consent of
Forrester's Board of Directors or an officer of Forrester
designated by the Board of Directors. This restriction shall
continue to apply after the Stockholder's employment
terminates.
(b) Use and Return of Property and Documents. The Stockholder
agrees to protect the integrity of Confidential Information
and keep confidential (a) all documents, records, tapes, and
other media ("Documents") in which Confidential Information
may be contained, (b) all Confidential Information in
electronic form ("Electronic Information"), and (c) all other
Confidential Information not reduced to written or electronic
form. The Stockholder will not copy any Documents or
Electronic Information except as required by the nature of the
Stockholder's duties. The Stockholder will not remove any
Documents or copies from Forrester's premises, or transmit any
Electronic Information outside of Forrester's internal
electronic network, unless authorized by Forrester's Board of
Directors or an officer of Forrester designated by the Board
of Directors. The Stockholder will return to Forrester
immediately after the Stockholder's employment terminates all
Documents and copies thereof, all Electronic Information (in
whatever form), and any other property of Forrester then in
the Stockholder's possession or control.
-3-
4
(c) Assignments of Rights. The Stockholder agrees to disclose
promptly and fully all Intellectual Property (as defined in
paragraph (a) of Section 4 to Forrester. The Stockholder
hereby assigns and agrees to assign to Forrester (or as
otherwise directed by Forrester) the Stockholder's full right,
title, and interest to all Intellectual Property. The
Stockholder agrees to execute any and all applications for
domestic and foreign patents, copyrights, or other proprietary
rights and do such other acts (including, among others, the
execution and delivery of instruments of further assurance or
confirmation) requested by Forrester to assign the
Intellectual Property to Forrester and to permit Forrester to
enforce any patents, copyrights, or other proprietary rights
in the Intellectual Property. The Stockholder will not charge
Forrester for the Stockholder's time spent in complying with
these obligations. All copyrightable works that the
Stockholder creates shall be considered "works made for hire."
3. NONCOMPETITION, ETC.
(a) Non-Recruitment. For a period of one (1) year after the
Stockholder's employment with Forrester terminates, the
Stockholder agrees that he will not, and will not assist
anyone else to (i) hire or attempt to hire any employee of
Forrester, (ii) encourage any employee of Forrester to
discontinue employment or any former employee to become
employed in any business directly or indirectly competitive
with Forrester's business, or (iii) encourage any independent
contractor or supplier of Forrester to discontinue its
relationship or violate any agreement with Forrester.
(b) Restricted Activities. The Stockholder agrees that some
restrictions on the Stockholder's activities during and after
the Stockholder's employment are necessary to protect the
goodwill, Confidential Information, and other legitimate
interests of Forrester. While the Stockholder is employed by
Forrester, the Stockholder agrees not to undertake any
planning for any outside business competitive with Forrester.
During the Stockholder's employment and for a period of one
(1) year after the Stockholder's employment terminates, (the
"Restriction Period"), the Stockholder will not compete,
directly or indirectly, with Forrester in the Territory
described below, whether as an employee, consultant, agent,
partner, owner, investor, or otherwise. Specifically, but
without limiting the foregoing, the Stockholder agrees not to
engage in any manner in any activity that is directly or
indirectly competitive or potentially competitive with the
business of Forrester as conducted or under consideration at
any time during the Stockholder's employment. The Stockholder
further agrees that during the Restriction Period, the
Stockholder will not accept employment or a consulting
position with any person who is, or at any time within one (1)
year prior to termination of the Stockholder's employment was,
-4-
5
a customer of Forrester if such employment or consulting
position involves the rendering of services by the Stockholder
that are similar to any Products (as defined in paragraph (a)
of Section 4) of the type offered by Forrester to such
customer. For purposes of this provision, the business of
Forrester shall include all Products offered by Forrester in
any manner or under development, and the Stockholder's
undertaking shall encompass all items, products, and services
that may be used in substitution for Products. The foregoing
restrictions shall not prevent the Stockholder from owning one
percent (1%) or less of the equity securities of any publicly
traded company. The Stockholder acknowledges that Forrester's
business is global in scope and therefore that the "Territory"
referred to above shall include the entire world.
(c) Notification Requirement. Until six (6) months after the
Restriction Period set forth in Section 3(b), the Stockholder
agrees to notify Forrester in writing of any change in the
Stockholder's address and of each new job or other business
activity in which the Stockholder plans to engage, at least
thirty (30) days prior to beginning such job or activity. Such
notice shall state the name and address of any new employer
and the nature of the Stockholder's position.
4. MISCELLANEOUS.
(a) Definitions. For the purposes of this Agreement, the
following definitions shall apply:
Forrester as used in Sections 2, 3 and 4 means
Forrester Research, Inc., a Delaware corporation, and
all subsidiaries and other companies owned or
controlled by it.
Products shall mean all products and product
packaging (written, electronic, consultative, event,
or otherwise) which are researched, developed,
planned, published, sold, licensed, or otherwise
distributed or put into use by Forrester, including,
without limitation, all research published or planned
by Forrester, all research groups created or planned
by Forrester, and all services and events provided or
planned by Forrester, during the term of the
Stockholder's employment.
Intellectual Property means inventions, discoveries,
developments, improvements, methods, processes,
compositions, works, concepts, and ideas (whether or
not patentable or copyrightable or constituting trade
secrets) conceived, made, created, developed, or
reduced to practice by the Stockholder (whether alone
or with others, and whether or not during normal
business hours or on or off Forrester premises)
during the
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Stockholder's employment that relate to either the
Products or any prospective activity of Forrester
known to the Stockholder as a result of the
Stockholder's employment.
Confidential Information shall mean any and all
information of Forrester that is not generally known
by others with whom Forrester does or plans to
compete or do business. The Confidential Information
includes, without limitation, such information,
whether written, electronic, or oral, relating to (i)
the development, research, and sales and marketing
activities of Forrester; (ii) the Products; (iii) the
financial information of Forrester, including without
limitation actual and forecasted bookings, revenues,
expenses, profit and prices; (iv) the strategic plans
of Forrester; (v) the identity and special needs of
the customers and prospective customers of Forrester;
and (vi) people and organizations with whom Forrester
has business relationships and (vii) those
relationships. Confidential Information includes
information in electronic form, including, without
limitation, information on Forrester's electronic
network and files, and other information that is not
reduced to writing. Confidential Information also
includes such information that Forrester may receive
or has received belonging to customers or others who
do business with Forrester and, except to the extent
disclosed by Forrester on a nonconfidential basis,
the Intellectual Property.
(b) Successors and Assigns. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation
of law) and shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and permitted
assigns, any successor of Forrester by reorganization, merger,
consolidation, or liquidation, any assigns of substantially
all of the business or assets of Forrester or of any division
or line of business of Forrester with which the Stockholder is
at any time associated, and the heirs, devisees and legal
representatives of the Stockholder.
(c) Entire Agreement and Amendments. This Agreement
constitutes the entire agreement and understanding between the
Stockholder and Forrester and supersedes any prior or
contemporaneous agreement or understanding relating to the
subject matter of this Agreement. This Agreement may be
modified or amended only by a written instrument executed by
the Stockholder and Forrester (acting through its officers,
duly authorized by its Board of Directors).
(d) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same
instrument.
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(e) Notices. All notices or communications required or
permitted hereunder shall be in writing and may be given (i)
by depositing the same in United States mail, addressed to the
party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by a reputable
overnight courier service, (iii) by facsimile (immediately
confirmed by telephone) or (iv) by delivering the same in
person to an officer or agent of such party. Notices shall be
deemed to have been given (a) if sent by United States mail,
on the fourth day following mailing, (b) if sent by overnight
courier, on the day following delivery by the sending party to
the courier service and (c) if sent by facsimile, on the day
the facsimile is confirmed as having been received. Notices
shall be addressed as follows:
If to Forrester Research, Inc.
1033 Massachusetts Avenue
Cambridge, Massachusetts 02138
Attention: General Counsel
Telephone: 617-497-7090
Telecopy: 617-491-2863
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: Ann L. Milner, Esq.
Telephone: 617-951-7000
Telecopy: 617-951-7050
If to the Stockholder:
George F. Colony
Forrester Research, Inc.
1033 Massachusetts Avenue
Cambridge, MA 02138
(f) Governing Law and Consent to Jurisdiction. This Agreement
shall take effect as an instrument under seal and shall be
governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts. In the event of any alleged
breach of this Agreement, the Stockholder hereby consents and
submits to the jurisdiction of the federal and state courts in
and of (i) The Commonwealth of Massachusetts and (ii) the
states in which any subsequent employer may be incorporated or
have its principal office. The Stockholder
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will accept service of process by registered or certified mail
or the equivalent directed to the Stockholder's last known
address on the books of Forrester or by whatever other means
are permitted by such court.
(g) Remedies. The Stockholder acknowledges that, were the
Stockholder to breach the provisions of this Agreement, the
harm to Forrester would be irreparable. The Stockholder
therefore agrees that, in addition to damages and attorneys'
fees, Forrester shall be entitled to obtain (and the
Stockholder will not contest) preliminary and permanent
injunctive relief against any such breach, without having to
post a bond.
(h) Interpretation. If any provision in this Agreement should,
for any reason, be held invalid or unenforceable in any
respect, it shall not affect any other provisions and shall be
construed by limiting it so as to be enforceable to the
maximum extent compatible with applicable law.
(i) Waiver of Breach. The waiver by Forrester of a breach of
any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FORRESTER RESEARCH, INC.
By:
-----------------------------
Title:
----------------------------
George F. Colony
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EXHIBIT 10.3
Amended and Restated
as of September 11,1996
AMENDED AND RESTATED FORRESTER RESEARCH, INC.
1996 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Forrester Research, Inc. 1996 Equity Incentive
Plan (the "Plan") is to secure for Forrester Research, Inc. (the "Company") the
benefits of the additional incentive inherent in the ownership of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), by officers,
directors, and selected key employees of the Company or its subsidiaries and
other persons who are important to the success and growth of the business of the
Company, and to help the Company and its subsidiaries secure and retain the
services of such key persons. Options granted under the Plan will be either
"incentive stock options," intended to qualify as such under the provisions of
section 422A of the Internal Revenue Code of 1986, as from time to time amended
(the "Code"), or "non-qualified stock options." For purposes of the Plan, the
term "subsidiary" shall mean "subsidiary corporation," as such term is defined
in section 424(f) of the Code.
2. The Committee.
2.1. Administration. The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board").
Any member of the Committee may be removed at any time, either with or without
cause, by resolution adopted by the Board; and any vacancy on the Committee,
whether due to action of the Board or due to any other cause, shall be filled by
resolution adopted by the Board.
2.2. Procedures. The Committee shall adopt such rules and regulations
as it shall deem appropriate concerning the holding of its meetings and the
administration of the Plan.
2.3. Interpretation. The Committee shall have full power and authority
to interpret the provisions of the Plan, and its decisions shall be final and
binding on all interested parties.
3. Shares Subject to Awards.
3.1. Number of Shares. Subject to the provisions of Paragraph 13 hereof
(relating to adjustments upon changes in capitalization), the aggregate number
of shares of Common Stock which may be issued under options exercised under the
Plan or otherwise awarded under the Plan shall not exceed 2,750,000. If, and to
the extent, that options granted under the Plan terminate, expire, or are
canceled without having been exercised, or shares of restricted stock are
forfeited, new awards may be granted under the Plan with respect to the shares
of Common Stock covered by such terminated, expired, canceled, or forfeited
awards; provided that the granting and terms of such new awards shall in all
respects comply with the provisions of the Plan.
2
3.2. Character of Shares. Shares of Common Stock delivered under the
Plan may be authorized and unissued Common Stock, issued Common Stock held in
the Company's treasury, or both.
3.3. Reservation of Shares. There shall be reserved at all times for
award under the Plan an aggregate number of shares of Common Stock (authorized
and unissued Common Stock, issued Common Stock held in the Company's treasury,
or both) equal to the maximum number of shares which may be purchased pursuant
to options granted or that may be granted under the Plan, less the number of
shares which have been awarded as Restricted Stock and purchased pursuant to
stock options granted under the Plan.
4. Grant of Awards. The Committee shall determine, within the limitations of the
Plan, the persons to whom awards are to be granted, the number of shares covered
by such awards, and, in the case of options, the option price, and shall
designate options at the time of grant as either "incentive stock options" or
"non-qualified options." In determining the persons to whom awards shall be
granted and the number of shares to be covered by each such grant, the Committee
shall take into consideration such person's present and potential contribution
to the success of the Company and subsidiaries as the case may be, and such
other factors as the Committee may deem proper and relevant. Each award granted
under the Plan shall be evidenced by a written agreement between the Company and
the grantee thereof in such form, not inconsistent with the provisions of the
Plan, or with section 422A of the Code for incentive stock options, as the
Committee shall provide.
5. Eligibility.
5.1. Persons Eligible. Incentive stock options may be granted under the
Plan to any key employee or any officer of the Company or any of its
subsidiaries, and non-qualified options and restricted stock awards may be
granted under the Plan to any key employee or any officer or director of, or
consultant or advisor to, the Company or any of its subsidiaries.
5.2. Ten Percent Stockholders. No incentive stock option may be granted
under the Plan to any person who owns, directly or indirectly (within the
meaning of sections 422A(b)(6) and 425(d) of the Code), at the time the stock
option is granted, stock possessing more than 10% of the total combined voting
power or value of all classes of stock of the Company or any of its
subsidiaries, unless the option price is at least 110% of the "Fair Market
Value" (as defined below) of the shares subject to the option determined on the
date of the grant, and the option by its terms is not exercisable after the
expiration of five years from the date such option is granted.
5.3. Participants. An individual receiving any award under the Plan is
hereinafter referred to as a "participant." Any reference herein to the
employment of a participant by the Company shall include his or her employment
by the Company or any of its subsidiaries and may, in the Committee's
discretion, include continued services as a director or consultant.
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6. Option Price. Subject to Paragraphs 5 and 13 herein, the option price of each
share of Common Stock purchasable under any stock option granted under the Plan
shall be not less than the par value of such share of Common Stock at the time
the option is granted. The option price of an option issued in a transaction
described in section 424(a) of the Code shall be an amount which conforms to the
requirements of that section and the regulations thereunder.
The "Fair Market Value" of a share of Common Stock as of a specified
date shall mean the average of the high and low sale prices of a share of Common
Stock on the principal securities exchange or market on which such shares are
traded on the day immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which such shares are
traded if no shares were traded on such immediately preceding day; or if sale
prices for the shares are not publicly quoted, Fair Market Value shall be deemed
to be the average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined.
If the shares are not publicly traded, Fair Market Value shall be
determined by the Committee in its sole discretion. In no case shall Fair Market
Value be less than the par value of a share of Common Stock.
7. Expiration and Termination of the Plan. Awards may be granted under the Plan
at any time and from time to time on or prior to the tenth anniversary of the
effective date of the Plan as set forth in Paragraph 15 herein (the "Expiration
Date"), on which date the Plan will expire except as to awards then outstanding
under the Plan. Such outstanding awards shall remain in effect until they have
been exercised, terminated, or have expired. The Plan may be terminated,
modified, or amended by the Board at any time on or prior to the Expiration
Date, except with respect to any awards then outstanding under the Plan.
8. Exercisability and Duration of Options.
8.1. Determination of the Committee; Acceleration. Each option granted
under the Plan shall vest and shall be exercisable at such time or times, or
upon the occurrence of such event or events, and in such amounts, as the
Committee may provide. Subsequent to the grant of an option which is not
immediately vested or exercisable in full, the Committee, at any time before
complete termination of such option, may accelerate the time or times at which
such option may vest or may be exercised in whole or in part.
8.2. Automatic Termination of Options. Unless the Committee determines
otherwise, either at the time of grant or thereafter, any portion of an option
that has not vested on the date a participant's employment with the Company or
its subsidiaries terminates shall automatically be canceled. Unless the
Committee determines otherwise, either at the time of grant or thereafter, the
unexercised portion of any option granted under the Plan shall
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automatically and without notice terminate and become null and void at the time
of the earliest to occur of the following:
(a) The expiration of 10 years from the date on which such option was
granted, except as otherwise provided in Paragraph 5.2 hereof;
(b) The expiration of three months from the date of termination of the
participant's employment by the Company or any of its subsidiaries, as the case
may be (other than a termination described in subparagraph (c), (d), or (e)
below); provided that if the participant shall die during such three-month
period, the time of termination of the unexercised portion of any such option
shall be determined under the provisions of subparagraph (d) below;
(c) The expiration of one year from the date of termination of the
participant's employment, due to permanent and total disability within the
meaning of section 22(e)(3) of the Code (other than a termination described in
subparagraph (e) below);
(d) The expiration of six months following the issuance of letters
testamentary or letters of administration to the executor or administrator of a
deceased participant if the participant's death occurs either during his
employment or during the three-month period following the date of termination of
such employment (other than a termination described in subparagraph (e) below),
but in no event later than one year after the participant's death; or
(e) The termination of the participant's employment by the Company or
any of its subsidiaries, as the case may be, if such termination constitutes or
is attributable to a breach by the participant of an employment agreement with
the Company or any of its subsidaires, as the case may be, or if the participant
is discharged for cause. The Committee shall have the right to determine whether
the participant has been discharged for breach or for cause and the date of such
discharge, and such determination of the Committee shall be final and
conclusive.
9. Exercise of Option.
9.1. Exercise. Options granted under the Plan shall be exercised by the
participant (or by his or her executors or administrators, as provided in
Paragraph 10 hereof) as to all or part of the shares covered thereby, by the
giving of written notice of exercise to the Company, specifying the number of
shares to be purchased, accompanied by payment of the full purchase price for
the shares being purchased. Payment of such purchase price shall be made (a) by
check payable to the Company, or (b) if so permitted by the Committee (i)
through the delivery of shares of Common Stock (which, in the case of Common
Stock acquired from the Company, shall have been held for at least six months
prior to delivery) having a Fair Market Value on the last business day preceding
the date of exercise equal to the purchase price or (ii) by delivery of a
promissory note of the participant to the Company, such note to be payable on
such terms as are specified by the Committee or (iii) at such time as the Common
Stock is registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), by
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delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or (iv) by
any combination of the permissible forms of payment. Such notice of exercise,
accompanied by such payment, shall be delivered to the Company at its principal
business office or such other office as the Committee may from time to time
direct, and shall be in such form, containing such further provisions consistent
with the provisions of the Plan, as the Committee may from time to time
prescribe. No participant or other person exercising an option shall have any of
the rights of a stockholder of the Company with respect to shares subject to an
option granted under the Plan until certificates for such hares shall have been
issued following the exercise of such option as the case may be. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date of such issuance. In no event may any option granted hereunder
be exercised for a fraction of a share.
9.2. Tax Withholding.
(a) Payment. The Company shall notify a participant of any income tax
withholding requirements arising as a result of the exercise of a stock option
or the vesting of restricted stock. The Company shall have the right to require
the participant to pay such withholding taxes. At the election of the
participant, payment of such withholding taxes may be made in either of the
following two ways:
(i) Cash. Such payment may be made in cash, through
withholding from the participant's salary or otherwise; or
(ii) Common Stock. Subject to the approval of the Committee,
such payment may be made in whole or in part, in shares of Common
Stock.
(b) Payment in Shares of Common Stock. Payment of withholding taxes in
shares of Common Stock may be made in any of the following two ways, at the
election of the participant subject to the approval of the Committee, or by a
combination of any of such ways:
(i) Surrender of Options. A participant may have shares
withheld from shares otherwise issuable to him in connection with the
exercise of a stock option; or
(ii) Tender Back of Shares. A participant may tender shares to
the Company from shares owned by such participant and acquired other
than in connection with the award that gave rise to tax withholding.
(c) Valuation. Shares so withheld, delivered, or tendered shall be
valued at their Fair Market Value on the date on which the amount of tax to be
withheld is determined (the "Tax Date"). The tax withholding obligations that
may be paid by such withholding of shares otherwise issuable in connection with
a stock option, or the delivery of shares held by such participant for less than
six months, may not exceed the minimum withholding requirements
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imposed by law. The tax withholding obligations that may be paid by the tender
back of shares held by the participant for six months or longer may exceed the
participant's tax obligations associated with the transaction, including any
related FICA obligations, determined based upon the participant's maximum
marginal tax rate.
(d) Election. A participant's election to have withheld shares of
Common Stock that are otherwise issuable or to tender back shares, shall be in
writing, shall be irrevocable, and shall be delivered to the Company prior to
the Tax Date. Such election shall be subject to the approval of the Committee.
9.3. Restrictions on Delivery of Shares. Each award under the Plan is
subject to the conditions that if at any time the Committee, in its discretion,
shall determine that the listing, registration, or qualification of the shares
covered by such award upon any securities exchange or under any state or federal
law is necessary or desirable as a condition of or in connection with the
granting of such award or the purchase or delivery of shares thereunder, the
delivery of any or all such shares may be withheld unless and until such
listing, registration or qualification shall have been effected. The Committee
may require, as a condition to the issuance of any shares, that the participant
represent, in writing, that the shares received are being acquired for
investment and not with a view to distribution and agree that the shares will
not be disposed of except pursuant to an effective registration statement,
unless the Company shall have received an opinion of counsel satisfactory to the
Company that such disposition is exempt from such requirement under the
Securities Act of 1933. The Company may endorse on certificates representing
shares issued, such legends referring to the foregoing representations or any
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate.
10. Non-Transferability of Options. Unless the Committee otherwise determines,
no option granted under the Plan or any right evidenced thereby shall be
transferable by the participant other than by will or by the laws of descent and
distribution, and an option may be exercised, during the lifetime of a
participant, only by such participant. In the event of a participant's death
during his or her employment by the Company or any of its subsidiaries as the
case may be, or during the three-month period following the date of termination
of such employment, his or her option shall thereafter be exercisable, during
the period specified in Paragraph 8.2(d) hereof, by his or her executors or
administrators.
11. Right to Terminate Employment. Nothing in the Plan, or in any award made
under the Plan, shall confer upon any participant the right to continue in the
employment of the Company, or any of its subsidiaries, as the case may be, or
affect the right of the Company, or any of its subsidiaries, as the case may be,
to terminate such participant's employment at any time, subject, however, to the
provisions of any agreement of employment between such participant and the
Company, or any of its subsidiaries, as the case may be.
12. Restricted and Unrestricted Stock.
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12.1. Nature of Restricted Stock Award. A Restricted Stock Award
entitles the recipient to acquire, for a purchase price to be specified by the
Committee but in no event less than par value, shares of Common Stock subject to
the restrictions described in Paragraph 12.4 below ("Restricted Stock").
12.2. Acceptance of Award. A participant who is granted a Restricted
Stock Award will have no rights with respect to such Restricted Stock Award
unless the participant accepts the Restricted Stock Award by written instrument
delivered or mailed to the Company accompanied by payment in full of the
specified purchase price, if any, of the shares covered by the Restricted Stock
Award. Payment may be by certified or bank check or other instrument acceptable
to the Committee.
12.3. Rights as a Stockholder. A participant who receives a Restricted
Stock Award will have all the rights of a stockholder with respect to the Common
Stock, including voting and dividend rights, subject to the restrictions
described in Paragraph 12.4 below and any other conditions imposed by the
Committee at the time of grant. Unless the Committee otherwise determines,
certificates evidencing shares of Restricted Stock will remain in the possession
of the Company until such shares are free of all restrictions under the Plan.
12.4. Restrictions. Except as otherwise specifically provided by the
Committee, Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise encumbered or disposed of, and if the participant ceases to be an
employee of the Company or any of its subsidiaries for any reason, must be
offered to the Company for purchase for the amount of cash paid for the
Restricted Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify. Upon lapse of all restrictions, Restricted Stock will
cease to be restricted for purposes of the Plan. The Committee may at any time
accelerate the time at which the restrictions on all or any part of the shares
will lapse.
12.5. Notice of Election. Any participant making an election under
section 83(b) of the Code with respect to Restricted Stock must provide a copy
thereof to the Company within 10 days of the filing of such election with the
Internal Revenue Service.
12.6. Unrestricted Stock. The Committee may, in its sole discretion,
approve the sale to any participant of shares of Common Stock free of
restrictions under the Plan for a price which is not less than the par value of
the Common Stock.
13. Recapitalizations, Reorganizations, and the Like.
13.1. Adjustment Upon Changes in Capitalization, etc.. In the event of
any stock split, stock dividend, reclassification, or recapitalization which
changes the character or amount of the Company's outstanding Common Stock while
any portion of any option theretofore granted under the Plan is outstanding but
unexercised, the Committee shall make
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such adjustments in the character and number of shares subject to such options
and in the option price, as shall be equitable and appropriate in order to make
the option, as nearly as may be practicable, equivalent to such option
immediately prior to such change; provided, however, that no such adjustment
shall give any participant any additional benefits under his or her option;
provided further, that with respect to any outstanding incentive stock option,
if any such adjustment is made by reason of a transaction described in section
242(a) of the Code, it shall be made so as to conform to the requirements of
that section and the regulations thereunder. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of the option.
Any fractional shares or other securities which may be payable upon exercise of
the option shall be payable in cash in an amount equal to such fraction
multiplied by the then Fair Market Value of such fractional shares at the date
of exercise.
If any transaction (other than a change specified in the preceding
paragraph) described in section 424(a) of the Code affects the Company's Common
Stock subject to any unexercised option theretofore granted under the Plan
(hereinafter for purpose of this Paragraph 13.1 referred to as the "old
option"), the Board or any surviving or acquiring corporation may take such
action as it deems appropriate, and in conformity with the requirements of that
section and the regulations thereunder, to substitute a new option for the old
option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option, or to assume the old option.
If any such change or transaction shall occur, the number and kind of
shares for which awards may thereafter be granted under the Plan shall also be
adjusted to give effect thereto.
13.2. Mergers, etc. In the event of a consolidation or merger in which
the Company is not the surviving corporation or which results in the acquisition
of substantially all of the Company's outstanding Common Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all the Company's assets,
all outstanding awards shall become automatically terminated, provided that at
least 20 days prior to the effective date of any such merger, consolidation or
sale of assets, all outstanding awards shall become automatically exercisable,
and all the restrictions on any Restricted Stock Award, shall be canceled
immediately prior to consummation of such merger, consolidation or sale of
assets unless the Committee shall have arranged, subject to consummation of the
merger, consolidation or sale of assets, to have the surviving or acquiring
corporation or an affiliate of that corporation grant to participants
replacement awards, which awards in the case of incentive options shall satisfy,
in the determination of the Committee, the requirements of section 424(a) of the
Code.
The Committee may grant awards under the Plan in substitution for
awards held by directors, employees, consultants, or advisers of another
corporation who concurrently become directors, employees, consultants, or
advisers of the Company or a subsidiary of the Company as the result of a merger
or consolidation of that corporation with the Company or a subsidiary of the
Company, or as the result of the acquisition by the Company or a subsidiary of
the
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Company, or as the result of the acquisition by the Company or a subsidiary of
the Company of property or stock of that corporation. The Company may direct
that substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
14. Amendments. The Committee may at any time or times amend the Plan or any
outstanding award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will adversely affect the rights of any participant under any
outstanding award without such participant's consent.
15. Effective Date of Plan. The Plan shall become effect upon the date of
approval of the Plan by the Company's stockholder(s), but awards may be made
prior to such date subject to stockholder approval.
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EHXIBIT 10.4
FORRESTER RESEARCH, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF PLAN
The Forrester Research, Inc. 1996 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method by which eligible employees of Forrester
Research, Inc. ("Forrester ") and of such of Forrester 's subsidiaries as
Forrester's Board of Directors (the "Board of Directors") may from time to time
designate (such subsidiaries, together with Forrester, being hereinafter
referred to as the "Company") may use voluntary, systematic payroll deductions
to purchase shares of the Common Stock of Forrester (the "Stock") and thereby
acquire an interest in the future of the Company. For purposes of the Plan, a
"subsidiary" is any corporation in which Forrester owns, directly or indirectly,
stock possessing 50% or more of the total combined voting power of all classes
of stock.
SECTION 2. OPTIONS TO PURCHASE STOCK
Under the Plan, there is available an aggregate of not more than
200,000 shares of Stock (subject to adjustment as provided in Section 15) for
sale pursuant to the exercise of options ("Options") granted under the Plan to
employees of the Company ("Employees") who meet the eligibility requirements set
forth in Section 3 hereof ("Eligible Employees"). The Stock to be delivered upon
exercise of Options under the Plan may be either shares of authorized but
unissued Stock or previously issued shares acquired by the Company and held in
treasury, as the Board of Directors may determine.
SECTION 3. ELIGIBLE EMPLOYEES
Except as otherwise provided below, each Employee who both (a) has
completed six months or more of continuous service in the employ of the Company
and (b) is employed by the Company on a regular basis (and not a temporary
basis) for the Company for at least 30 hours per week will be eligible to
participate in the Plan.
(a) Any Employee who immediately after the grant of an Option to him or
her would (in accordance with the provisions of Sections 423 and 424(d) of the
International Revenue Code of 1986, as amended (the "Code")) own stock
possessing 5% or more of the total combined voting power or value of all classes
of stock of the employer corporation or of its
2
parent or subsidiary corporations, as defined in Section 424 of the Code, will
not be eligible to receive an Option to purchase stock pursuant to the Plan.
(b) No Employee will be granted an Option under the Plan which would
permit his or her rights to purchase shares of stock under all employee stock
purchase plans of Forrester and parent and subsidiary corporations to accrue at
a rate which exceeds $25,000 in fair market value of such stock (determined at
the time the option is granted) for each calendar year during which any such
Option granted to such Employee is outstanding at any time, as provided in
Sections 423 and 424(d) of the Code.
(c) For purposes of determining eligibility hereunder, the Board of
Directors, acting by and through the Director, Operations or any other
authorized officer, may grant past service credit to Employees of the Company in
a uniform and non-discriminatory manner for periods of continuous service
provided with respect to any company acquired (whether by asset or stock
purchase) of the Company.
SECTION 4. METHOD OF PARTICIPATION
The first stock option period (the "Initial Option Period") for which
Options may be granted hereunder shall commence on the date of the prospectus
used in connection with Forrester's initial public offering and end on June 30,
1997. The Initial Option Period and each subsequent six-month period following
the end of the Initial Option Period shall be referred to as an "Option Period".
Each person who will be an Eligible Employee on the first day of any Option
Period may elect to participate in the Plan by executing and delivering, at
least 15 days prior to such day, a payroll deduction authorization in accordance
with Section 5. Such Eligible Employee will thereby become a participant
("Participant") on the first day of such Option Period and will remain a
Participant until his or her participation is terminated as provided in the
Plan.
SECTION 5. PAYROLL DEDUCTION
The payroll deduction authorization will request withholding at a rate
(in whole percentages) of not less than 2% nor more than 10% from the
Participant's Compensation by means of substantially equal payroll deductions
over the Option Period. In no event shall more than $10,000 be withheld with
respect to any Participant for any Option Period. For purposes of the Plan,
"Compensation" will mean all compensation paid to the Participant by the Company
and currently includible in his or her income, including bonuses, commissions
and other amounts includible in the definition of compensation provided in the
Treasury Regulations promulgated under Section 415 of the Code, plus any amount
that would be so included but for the fact that it was contributed to a
qualified plan pursuant to an elective deferral under Section 401(k) of the
Code, but not including payments under stock option plans and other employee
benefit plans or any other amounts excluded from the definition of
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compensation provided in the Treasury Regulations under Section 415 of the Code.
A Participant may reduce the withholding rate of his or her payroll deduction
authorization by one or more whole percentage points (but not to below 2%) at
any time during an Option Period by delivering written notice to the Company,
such reduction to take effect prospectively as soon as practicable, as
determined by the Board of Directors acting by and through the Director
Operations or any other authorized officer, following receipt of such notice by
the Company]. A Participant may increase or reduce the withholding rate of his
or her payroll deduction authorization for a future Option Period by written
notice delivered to the Company at least 15 days prior to the first day of the
Option Period as to which the change is to be effective. All amounts withheld in
accordance with a Participant's payroll deduction authorization will be credited
to a withholding account for such Participant.
SECTION 6. GRANT OF OPTIONS
Each person who is a Participant on the first day of an Option Period
will as of such day be granted an Option for such Period. Such Option will be
for the number of whole shares (not in excess of the share maximum as
hereinafter defined) of Stock to be determined by dividing (i) the balance in
the Participant's withholding account on the last day of the Option Period, by
(ii) the purchase price per share of the Stock determined under Section 7. For
purposes of the preceding sentence, the share maximum with respect to any Option
for any Option Period shall be the largest number of shares which, when
multiplied by the fair market value of a share of Stock at the beginning of the
Option Period, produces a dollar amount of $12,500 or less. The number of shares
of Stock receivable by each Participant upon exercise of his or her Option for
an Option Period will be reduced, on a substantially proportionate basis, in the
event that the number of shares then available under the Plan is otherwise
insufficient.
SECTION 7. PURCHASE PRICE
The purchase price of Stock issued pursuant to the exercise of an
Option will be 85% of the fair market value of the Stock at (a) the time of
grant of the Option or (b) the time at which the Option is deemed exercised,
whichever is less. Fair market value on any given day will mean the Closing
Price of the Stock on such day or, if there was no Closing Price on such day,
the latest day prior thereto on which there was a Closing Price. The "Closing
Price" of the Stock on any business day will be the last sale price as reported
on the principal market on which the Stock is traded or, if no last sale is
reported, then the fair market value as determined by the Board of Directors. A
good faith determination by the Board of Directors as to fair market value shall
be final and binding.
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SECTION 8. EXERCISE OF OPTIONS
Each Employee who is a Participant in the Plan on the last day of an
Option Period will be deemed to have exercised on the last day of the Option
Period the Option granted to him or her for that Option Period. Upon such
exercise, the balance of the Participant's withholding account will be applied
to the purchase of the number of whole shares of Stock determined under Section
6 and as soon as practicable thereafter certificates for said shares will be
issued and delivered to the Participant. In the event that the balance of the
Participant's withholding account following an Option Period is in excess of the
total purchase price of the shares so issued, the balance of the account shall
be returned to the Participant; provided, however, that if the balance left in
the account consists solely of an amount equal to the value of a fractional
share it will be retained in the withholding account and carried over to the
next Option Period. The entire balance of the Participant's withholding account
following the final Option Period shall be returned to the Participant. No
fractional shares will be issued hereunder.
Notwithstanding anything herein to the contrary, Forrester's obligation
to issue and deliver shares of Stock under the Plan is subject to the approval
required of any governmental authority in connection with the authorization,
issuance, sale or transfer of said shares, to any requirements of any national
securities exchange applicable thereto, and to compliance by the Company with
other applicable legal requirements in effect from time to time, including
without limitation any applicable tax withholding requirements.
SECTION 9. INTEREST
No interest will be payable on withholding accounts.
SECTION 10. CANCELLATION AND WITHDRAWAL
A Participant who holds an Option under the Plan may at any time prior
to exercise thereof under Section 8 cancel such Option as to all (but not less
than all) the Shares subject or to be subject to such Option by written notice
delivered to the Company. Upon such cancellation, the Participant's withholding
account balance will be returned to him or her.
A Participant may terminate a payroll deduction authorization as of any
date by written notice delivered to the Company and will thereby cease to be a
Participant as of such date. Any Participant who voluntarily terminates a
payroll deduction authorization prior to the last business day of an Option
Period will be deemed to have cancelled the related Option.
Any Participant who cancels an Option or terminates a payroll deduction
authorization may at any time thereafter again become a Participant in
accordance with Section 4.
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SECTION 11. TERMINATION OF EMPLOYMENT
Subject to Section 12, any person will cease to be a Participant upon
termination of employment with the Company for any reason, and any Option held
by such Participant under the Plan will be deemed cancelled. The Company will
return the balance of the withholding account to the Participant, who will have
no further rights under the Plan.
SECTION 12. DEATH OF PARTICIPANT
A Participant may file a written designation of beneficiary specifying
who is to receive any Stock and/or cash credited to the Participant under the
Plan in the event of the Participant's death, which designation will also
provide for the Participant's election to either (i) cancel the Participant's
Option upon his or her death, as provided in Section 10 or (ii) apply as of the
last day of the Option Period the balance of the deceased Participant's
withholding account at the time of death to the exercise of the related Option,
pursuant to Section 8 of the Plan. In the absence of a valid election otherwise,
a Participant's death will be deemed to effect a cancellation of the Option. A
designation of beneficiary and election may be changed by the Participant at any
time, by written notice. In the event of the death of a Participant and receipt
by the Company of proof of the identity and existence at the Participant's death
of a beneficiary validly designated by him or her under the Plan, the Company
will deliver to such beneficiary such Stock and/or cash to which the beneficiary
is entitled under the Plan. In the event of the death of a Participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such Participant's death, the Company will deliver such Stock and/or
cash to the executor or administrator of the estate of the Participant, if the
Company is able to identify such executor or administrator. If the Company is
unable to identify such administrator or executor, the Company, in its
discretion, may deliver such stock and/or cash to the spouse or to any one or
more dependents of a Participant as the Company may determine. No beneficiary
will, prior to the death of the Participant by whom he has been designated,
acquire any interest in any Stock or cash credited to the Participant under the
Plan.
SECTION 13. PARTICIPANT'S RIGHTS NOT TRANSFERABLE
All Participants will have the same rights and privileges under the
Plan. All rights and privileges under any Option may be exercisable during a
Participant's lifetime only by the Participant, and may not be sold, pledged,
assigned, or transferred in any manner. In the event any Participant violates
the terms of this Section , any Option held by him or her may be terminated by
the Company and upon return to the Participant of the balance of his or her
withholding account, all his or her rights under the Plan will terminate.
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SECTION 14. EMPLOYMENT RIGHTS
Nothing contained in the provisions of the Plan will be construed to
give to any Employee the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any Employee at any time.
SECTION 15. CHANGE IN CAPITALIZATION
In the event of any change in the outstanding Stock of Forrester by
reason of a stock dividend, split-up, recapitalization, merger, consolidation,
reorganization, or other capital change, after the effective date of this Plan,
the aggregate number of shares available under the Plan, the number of shares
under Options granted but not exercised, and the Option price will be
appropriately adjusted.
SECTION 16. ADMINISTRATION OF PLAN
The Plan will be administered by the Board of Directors, which will
have the right to determine any questions which may arise regarding the
interpretation and application of the provisions of the Plan and to make,
administer, and interpret such rules and regulations as it will deem necessary
or advisable. The Board of Director's determinations hereunder shall be final
and binding.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
Forrester reserves the right at any time or times to amend the Plan to
any extent and in any manner it may deem advisable by vote of the Board of
Directors; provided, however, that any amendment relating to the aggregate
number of shares which may be issued under the Plan (other than an adjustment
provided for in Section 15) or to the Employees (or class of Employees) eligible
to receive Options under the Plan will have no force or effect unless it is
approved by the shareholders within twelve months before or after its adoption.
The Plan shall terminate automatically following the end of the first
Option Period beginning in 2006; provided, however, that the Board of Directors
in its discretion may extend the Plan for one or more Option Periods. The Plan
may be earlier suspended or terminated by the Board of Directors, but no such
suspension or termination will adversely affect the rights and privileges of
holders of outstanding Options. The Plan will terminate in any case when all or
substantially all the Stock reserved for the purposes of the Plan has been
purchased.
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SECTION 18. APPROVAL OF SHAREHOLDERS
The Plan is subject to the approval of the shareholders of Forrester,
which approval must be secured within twelve months before or after the date the
Plan is adopted by the Board of Directors, and any Option granted hereunder
prior to such approval is conditioned on such approval being obtained prior to
the exercise thereof.
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EXHIBIT 10.5
FORRESTER RESEARCH, INC.
1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1996 Stock Option Plan for Non-Employee Directors
(the "Plan") is to advance the interests of Forrester Research, Inc. (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant contributions
to the success of the Company and to reward directors for such contributions
through the awarding of options ("Options") to purchase shares of the Company's
common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant Options in
accordance with the Plan to such directors as are eligible to receive Options;
(b) to prescribe the form or forms of instruments evidencing Options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
shall bind all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is
approved by the Board of Directors of the Company, subject to approval by the
shareholders of the Company. No Option shall be granted under the Plan after the
completion of ten years from the date on which the Plan was adopted by the
Board, but Options previously granted may extend beyond that date.
2
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of Options granted under the Plan shall be 150,000. If any Option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such Option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, after the effective date of the Plan, the number and kind of shares of
stock or securities of the Company subject to Options then outstanding or
subsequently granted under the Plan, the maximum number of shares or securities
that may be delivered under the Plan, the exercise price, and other relevant
provisions shall be appropriately adjusted by the Committee, whose determination
shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive Options under the Plan ("Eligible
Directors") shall be those directors who are not employees of the Company or of
any subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Formula Options.
On the date that the Company first files a registration statement under
the Securities Act of 1933 covering shares of Stock, each person who has agreed
to serve as a director and who, upon commencing such service, would be an
Eligible Director shall be awarded on such date an Option covering 6,000 shares
of Stock. Each Eligible Director elected for the first time thereafter shall
also be awarded on the date of his or her first election an Option covering
6,000 shares of Stock. In addition, immediately
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following the annual meeting of shareholders, each Eligible Director shall be
awarded an Option covering 4,000 shares of Stock. The Options awarded under this
paragraph (a) are referred to as "Formula Options."
(b) Discretionary Options. The Committee shall also have the authority
under this Plan to award Options to purchase Stock to Eligible Directors in such
amounts and on such terms not inconsistent with this Plan as it shall determine
at the time of the award. The Options awarded under this paragraph (b) are
referred to herein as "Discretionary Options."
(c) Exercise Price. The exercise price of each Formula Option shall be
(i) in the case of Options granted prior to the Company's initial public
offering, the low end of the estimated price range reflected in the registration
statement and (ii) 100% of the fair market value per share of the Stock at the
time the Option is granted. The exercise price of each Discretionary Options
shall be set by the Committee. In no event, however, shall the Option price be
less, in the case of an original issue of authorized stock, than par value per
share. For purposes of this paragraph, the fair market value of a share of Stock
will be the mean between the high and low sale prices as reported on the
principal market on which the Stock is traded or, if no sales are reported, the
fair market value as determined in good faith by the Committee.
(d) Duration of Options. The latest date on which an Option may be
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the Option was granted.
(e) Exercise of Options.
(1) Each Formula Option shall become exercisable as to one third
of the shares covered thereby on each anniversary of the date
of the grant; provided, however, that the initial Formula
Option for 6,000 shares shall become exercisable as to one
third of the shares on the date of the award (or on the date
of Company's initial public offering in the case of such
options granted prior to the Company's initial public
offering) and as to one third of the shares on each of the
next two anniversaries of that date. Each Discretionary Option
shall become exercisable at such time or times as the
Committee shall determine.
(2) Any exercise of an Option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (i) any documentation required by the Committee
and (ii) payment in full for the number of shares for which
the Option is exercised.
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(3) If an Option is exercised by the executor or administrator of
a deceased director, or by the person or persons to whom the
Option has been transferred by the director's will or the
applicable laws of descent and distribution, the Company shall
be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the Option.
(f) Payment for and Delivery of Stock. Stock purchased under the Plan
shall be paid for as follows: (i) in cash or by check (acceptable to the Company
in accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (ii) if so permitted by the terms
of the Option, (A) through the delivery of shares of Stock (which, in the case
of shares of Stock acquired from the Company, have been outstanding for at least
six months) having a fair market value on the last business day preceding the
date of exercise equal to the purchase price or (B) by having the Company hold
back from the shares transferred upon exercise Stock having a fair market value
on the last business day preceding the date of exercise equal to the purchase
price or (C) by delivery of a promissory note of the Option holder to the
Company, such note to be payable on such terms as are specified or (D) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or (E) by any
combination of the permissible forms of payment; provided, that if the Stock
delivered upon exercise of the Option is an original issue of authorized Stock,
at least so much of the exercise price as represents the par value of such Stock
shall be paid other than with a personal check or promissory note of the Option
holder.
An Option holder shall not have the rights of a shareholder with regard
to awards under the Plan except as to Stock actually received by him or her
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certifi cates evidencing such Stock bear an appropriate legend restricting
transfer.
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(g) Nontransferability of Options. Except as the Committee shall
otherwise provide, no Option may be transferred other than by will or by the
laws of descent and distribution, and during a director's lifetime an Option may
be exercised only by him or her.
(h) Death. Except as the Committee shall otherwise provided, upon the
death of any director granted Options under this Plan, all Options not then
exercisable shall terminate. All Options held by the director that are
exercisable immediately prior to death may be exercised by his or her executor
or administrator, or by the person or persons to whom the Option is transferred
by will or the applicable laws of descent and distribution, at any time within
one year after the director's death (subject, however, to the limitations of
Section 6(d) regarding the maximum exercise period for such Option). After
completion of that one-year period, such Options shall terminate to the extent
not previously exercised.
(i) Other Termination of Status of Director. Except as the Committee
shall otherwise provided, if a director's service with the Company terminates
for any reason other than death, all Options held by the director that are not
then exercisable shall terminate. Options that are exercisable on the date of
termination shall continue to be exercisable for a period of three months
(subject to Section 6(d)). After completion of that three-month period, such
Options shall terminate to the extent not previously exercised, expired or
terminated.
(j) Mergers, etc. In the event of a consolidation or merger in which
the Company is not the surviving corporation (other than a consolidation or
merger in which the holders of Stock of the Company acquire a majority of the
voting stock of the surviving corporation) or which results in the acquisition
of substantially all the Company's outstanding Stock by a single person or
entity or by a group of persons and/or entities acting in concert, or in the
event of a sale or transfer of substantially all of the Company's assets or a
dissolution or liquidation of the Company, all Options hereunder will terminate;
provided, that 20 days prior to the effective date of any such merger,
consolidation, sale, dissolution, or liquidation, all Options outstanding
hereunder that are not otherwise exercisable shall become immediately
exercisable. Notwithstanding the foregoing, in the event that a transaction
covered by this Section 6(j) is a merger or consolidation intended to qualify as
a pooling of interests for accounting purposes, then the acquiring or surviving
corporation shall assume, or otherwise provide replacement options for, all
Options outstanding under this Plan, with such adjustments to the number of
shares covered by such Option and the exercise price thereof as may be necessary
to reflect the exchange ratio provided for in the merger or consolidation. Such
substitute options shall otherwise be on terms and conditions substantially
equivalent to those set forth in this Plan, shall be immediately exercisable
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6
and, except as to Eligible Directors who become directors of the acquiring or
surviving corporation, shall terminate on the 180th day following the
consummation of the merger or consolidation. Options held by Eligible Directors
who become directors of the acquiring or surviving corporation shall be
governed, mutatis mutandis, by the provisions of this Plan and the agreement
evidencing the Option surrendered in substitution.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT,
TERMINATION AND EFFECTIVENESS
Neither adoption of the Plan nor the grant of Options to a director
shall affect the Company's right to grant to such director Options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.
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Exhibit 10.6
1033 Massachusetts Avenue
Cambridge, Massachusetts
LEASE DATED MAY 1, 1995
ARTICLE 1
---------
REFERENCE DATA
--------------
1.1 SUBJECTS REFERRED TO
--------------------
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Article.
LANDLORD: Advent Realty Limited Partnership II, a Delaware limited partnership
LANDLORD'S ORIGINAL ADDRESS: 45 Milk Street, Boston,
Massachusetts
TENANT: Forrester Research, Inc., a Massachusetts corporation
TENANT'S ORIGINAL ADDRESS: One Brattle Square, Cambridge,
Massachusetts
TERM COMMENCEMENT DATE: See Section 2.4
TERM EXPIRATION DATE: Five years and seven months following the Term
Commencement Date; provided however if the Term Expiration Date as stated above
shall fall on other than the last day of a calendar month, then the Term
Expiration Date shall be deemed to be the last day of such calendar month.
ANNUAL BASIC RENT:
Months 1-6: $293,019.65 ($17.05 x 13,223) + ($9.10 x 7,425)
Months 7-24: $352,048.40 ($17.05 x 20,648)
Months 25-48: $362,785.36 ($17.57 x 20,648)
Months 49-67: $371,457.52 ($17.99 x 20,648)
TENANT ELECTRICITY COST PER SQUARE FOOT: $1.00
BASE OPERATING EXPENSES PER RENTABLE SQUARE FOOT: Landlord's Operating Expenses
per Rentable Square Foot for 1995
LAND: The land bounded by Massachusetts Avenue and Ellery Street in Cambridge,
Massachusetts shown as Lot 14 and 15 on a plan
2
entitled "Plan of Dana Estate" recorded with the Middlesex South District
Registry of Deeds in Plan Book 16A as Plan 16, known as and number 1033
Massachusetts Avenue, Cambridge.
BUILDING: The entire office building on the Land.
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 85,741
PREMISES: The space in the Building described on Exhibit A.
RENTABLE FLOOR AREA OF THE PREMISES: 20,648 Square Feet
PERMITTED USES: General office uses consistent with a first-class office
building, Landlord warranting that the Premises may lawfully be used for general
office purposes.
SECURITY DEPOSIT: $29,000 (subject to Article X below)
PARKING: Twenty (20) spaces
PUBLIC LIABILITY INSURANCE: $1,000,000
LANDLORD'S MANAGING AGENT: Graystone Corporation
ADDRESS OF LANDLORD'S
MANAGING AGENT: 1100 Massachusetts Avenue Cambridge,
Massachusetts 02138
BROKER: Fallon Hines & O'Connor and Hammond Ingram Rettig & Beaty
TENANT'S AUTHORIZED REPRESENTATIVE: George F. Colony
TENANT'S FINISH
REPRESENTATIVE: Susan Whirty
LANDLORD'S AUTHORIZED
REPRESENTATIVE: Thomas H. Dupree or Frederick Dupree
LANDLORD'S FINISH
WORK REPRESENTATIVE: John Kiger
2
3
ARTICLE II
----------
PREMISES, TERM, RENT, OPERATING
-------------------------------
EXPENSES AND TAXES
------------------
2.1 Premises and Exclusions.
-----------------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises. The Premises generally exclude common areas and facilities of the
Building and Land. The Premises specifically exclude, without limitation,
exterior faces of exterior walls, the common stairways and stairwells, Building
entranceways and entrance lobbies elevators and elevator wells, mechanical rooms
and areas, fan rooms, electric and telephone closets, Building superintendent's
or supervisor's office, janitor closets, freight elevator vestibules, Building
storage areas, and pipes, ducts, conduits, wires and appurtenant fixtures
serving other parts of the Building (exclusively or in common) and other common
areas and facilities. If the Premises include less than the entire rentable area
of any floor, then the Premises also exclude the common corridors, elevator
lobby and toilets located on such floor.
This Lease is subject to all easements, restrictions, agreements, and
encumbrances of record to the extent in force and applicable, none of which will
materially and adversely affect Tenant's rights under this Lease and there are
no existing mortgages or groundleases relating to the Premises, Building or Land
except only for the groundlease referred to in the form of Non-Disturbance
Agreement hereto attached as Exhibit B.
2.2 APPURTENANT RIGHTS
------------------
Tenant shall have, as appurtenant to the Premises, rights to use the common
areas described in Section 2.1 in common with Landlord and other Building
tenants (subject to reasonable rules of general application promulgated from
time to time by Landlord, existing rules and regulations are set forth in
Exhibit C hereto attached) . Tenant shall be sent notice of changes in the rules
and regulations. Tenant shall also have the right to use the common corridors,
elevator lobby and common toilets on any floor on which the Premises are located
if the Premises include less than the entire rentable area of such floor.
2.3 RESERVATIONS
------------
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use and upon reasonable prior notice to Tenant
(except in the case of an emergency): (a) to install, use, maintain, repair,
replace and relocate for
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service to the Premises and other parts of the Building, or either, pipes,
ducts, conduits, wires and appurtenant fixtures, wherever located in the
Premises or Building; and (b) to alter or relocate any other common facility.
Installations, replacements and relocations referred to in clause (a) above
shall be located as far as practicable in the central core area of the Building,
above ceiling surfaces, below floor surfaces or within perimeter walls of the
Premises.
2.4 TERM
----
The Term shall begin at 12:01 a.m. on the earlier to occur of the following
(a) or (b), and shall end at 12:00 midnight on the Term Expiration Date set
forth in Section 1.1.
(a) The date Tenant enters into possession of all or any portion of the
Premises for the conduct of its business. (The event described in the prior
sentence shall not be deemed to occur by virtue of the installation, testing and
initial operation of computers or other equipment or the installation or
placement of other property of Tenant in the Premises provided the Premises or
significant portions thereof are not generally in use.), or
(b) Substantial completion of the Landlord's Work, as defined in Section
3.2.
Landlord and Tenant shall, at the request of either after the beginning of
the Term, execute an acknowledgment, in recordable form, specifying the Term
Commencement Date and Term Expiration Date.
2.5 ANNUAL FIXED RENT
-----------------
Tenant covenants and agrees to pay Annual Fixed Rent to Landlord in advance
in equal monthly installments on the first day of each calendar month during the
Term. All payments shall be due without billing or demand and without deduction,
set-off or counterclaim. Tenant shall make payment for any portion of a month at
the beginning or end of the Term. All payments shall be payable to Landlord at
its Address, as specified in Section 1.1 or to such other entities at such other
places as Landlord may from time to time designate. Annual Fixed Rent shall be
the sum of Annual Basic Rent plus any Tenant Electricity Cost at the rates
specified in Section 1.1 (if either or both of Annual Basic Rent or Tenant
Electricity Cost is expressed as a rate per square foot, such figure(s) shall be
multiplied by the Rentable Floor Area of the Premises).
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2.6 ADDITIONAL RENT - TAXES AND OPERATING EXPENSES
----------------------------------------------
2.6.1 ADDITIONAL RENT - GENERAL COVENANT. Tenant covenants and agrees to
pay to Landlord, as additional rent, an amount equal to the product of (a) the
Rentable Floor Area of the Premises and (b) the excess (if any) of Landlord's
Operating Expenses per rentable square foot allocable, to Tenant over Base
Operating Expenses Per Rentable Square Foot (as specified in Section 1.1).
Except as provided in the next sentence, Landlord's Operating Expenses per
square foot allocable to Tenant for any period shall be the total amount of
Landlord's Expenses for such period (actual or extrapolated as described herein)
divided by 100% of the Total Rentable Floor Area of the Building provided that
if less than 95% of the Total Rentable Floor Area of the Building is occupied
at any time during such period, Landlord may extrapolate components of
Landlord's Operating Expenses as though the Total Rentable Floor Area of the
Building had been occupied at all times during such period. No payments with
respect to Landlord's Operating Expenses are due with respect to the period
prior to January 1, 1996, and, for purposes of calculating Tenant's obligation
with respect to escalations in Landlord's Operating Expenses, Base Operating
Expenses per Rentable Square Foot shall be not less than $9.50.
If Landlord furnishes electricity, cleaning and janitorial services or any
other item of the type described herein as a Landlord's Operating Expense to
only a portion of the rentable areas of the Building (any such item is
hereinafter referred as a "restricted item"), Landlord's Operating Expenses per
rentable square foot allocable to Tenant for any period shall be the sum of the
following amounts (x) and (y):
(x) For each restricted item included in Landlord's Operating Expenses and
furnished to the Premises, the cost of such item for the period divided by
the total Rentable Floor Area of all premises to which the item is then
furnished.
(y) For all other items included in Landlord's Operating Expenses, the
amount per square foot thereof allocable to Tenant in accordance with the
second sentence of this Section 2.6.1. Landlord represents that occupants
of retail space in the Building pay for their own electricity and cleaning
services, and the costs thereof shall not be included in Landlord's
Operating Expenses.
Appropriate adjustments shall be made for any portion of a year at the beginning
or end of the Term or for any year during which changes occur in the percentage
of occupancy of the Building or in the Rentable Floor Area to which Landlord
furnishes restricted items.
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2.6.2 PAYMENT. Additional rent for Landlord's Operating Expenses under this
Section 2.6 shall be paid in monthly installments on the first day of each
calendar month in amounts reasonably estimated by Landlord for the then
current year, and pro-rata for the portion of a month. Upon reasonable notice to
Tenant, Landlord may from time to time revise such estimates based on available
information relating to Landlord's Operating Expenses. Within 90 days after the
end of each calendar year, Landlord will provide Tenant with an accounting,
certified by a representative of Landlord, of Landlord's Operating Expenses and
other data necessary to calculate additional rent hereunder prepared by Landlord
in accordance herewith and otherwise in accordance with generally accepted
accounting principles. Upon issuance thereof, there shall be adjustments between
Landlord and Tenant for the calendar year covered by such accounting to the end
that Landlord shall have received the exact amount of additional rent due
hereunder. Any overpayments by Tenant hereunder shall be credited against the
next payments of additional rent due under this Section 2.6.2, subject to the
last sentence of this Section 2.6.2. Any underpayments by Tenant shall be due
and payable within 30 days following receipt by Tenant of such accounting by
Landlord. With respect to the calendar year in which the Term ends, the
adjustments shall be pro rated for the portion of the year included in the Term,
but shall take place nevertheless at the times provided in the preceding
sentences; and any overpayments by Tenant in such year shall be promptly
refunded upon such adjustment, less outstanding amounts due Landlord under this
Lease at such time. Tenant shall have the right to audit Landlord's books and
records concerning Landlord's Operating Expenses (at Tenant's expense but
without charge by Landlord), provided Tenant exercises such right by written
notice to Landlord within sixty (60) days following receipt of Landlord's
certification statement, and Tenant shall conduct such audit within 180 days
after Tenant's receipt thereof, time being of the essence. Landlord's annual
statement shall be conclusive, final and binding if Tenant does not raise any
objection thereto within the 180 day period set forth above. Any such audit
shall be performed during usual business hours at the office of Landlord's
Managing Agent. Tenant shall have the right to audit each certification only
once.
2.6.3 "LANDLORD'S OPERATING EXPENSES" - DEFINITION. "Landlord's Operating
Expenses" means all reasonable and customary costs of Landlord in owning or
leasing (as the case may be), servicing, operating, managing, maintaining, and
repairing the Building and Land, and providing services to tenants, including,
without limitation, the costs of the following: (i) supplies, materials and
equipment purchased or rented and total wage and salary costs paid to and on
account of all persons engaged in the operating, maintenance, security, cleaning
and repair of the Building and Land, including employment taxes and so-called
"fringe benefits" (such personnel expenses to be
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limited to expenses reasonably allocable to the Building unless such personnel
are employed solely with respect to the Building; (ii) building services
furnished to tenants of the Building at Landlord's expense (including the types
of services furnished to Tenant pursuant to Section 4.1 hereof) and maintenance
of and services provided to or on behalf of the Building performed by Landlord's
employees or by other persons under contract with Landlord or Landlord's
Managing Agent; (iii) utilities consumed and expenses incurred in the operation
and maintenance of the Building and Land including, without limitation, oil,
gas, electricity (including electricity serving Tenant in the Premises and other
tenants in their premises), water, sewer and snow removal; (iv) insurance; (v)
management fees plus an imputed cost of any space in the Building occupied
without charge by the Landlord's managing agent (Landlord's management fees
shall be computed on the basis of an amount not to exceed 6% of gross rents
throughout the Term, including the calculation for Base Operating Expenses), and
(vi) "Landlord's Taxes" as defined below. If Landlord, in its sole discretion,
installs a new or replacement capital item in the Building or on the Land for
the purpose of reducing or conserving the use of energy in the Building,
reducing Landlord's Operating Expenses, or to comply with applicable laws, rules
or regulations enacted or promulgated after the date of this Lease, the amount
of such expenditure or the cost of such item shall be amortized over the useful
life of such item in accordance with generally accepted accounting principles,
with interest at the so-called base rate from time to time announced by the Bank
of Boston at its head office in Boston, Massachusetts, and the amount included
in Landlord's Operating Expenses for any calendar year shall be limited to the
annual amortized charge (including interest), provided that in the case of a
capital item for the purpose of reducing or conserving energy or reducing
Operating Expenses, said annual charge shall not exceed the annual savings
resulting from such capital item. Landlord's Operating Expenses shall not
include any costs or expenses incurred by Landlord in the construction and
development of the Building; payments of principal, interest or other charges on
mortgages and ground rent; and salaries of executives or principals of Landlord
(except as the same may be reflected in the management fee for the Building or
attributable to actual Building operations). The cost of all of Landlord's
services provided by Landlord or its affiliates (i.e. not provided by
arms-length third parties) shall not exceed the commercially competitive rates
for such services to similar first-class buildings in Cambridge.
Notwithstanding the foregoing, Landlord's Operating Expenses shall not include
(i) costs billed to and paid by specific tenants as opposed to tenants
generally, (ii) the cost of repairs or replacements resulting from casualty
losses or eminent domain takings; (iii) depreciation or amortization of the
Building or any part thereof, except as specifically set forth above; (iv)
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replacement or contingency reserves, except as specifically set forth above;
(v) ground lease rents or payments of any debt or equity obligations; (vi)
legal and other professional fees relating to leasing, financing or other
services not related to the normal operation, maintenance, cleaning, repair and
protection of the Building; (vii) brokerage fees and commissions; (viii)
promotion, advertising or public relations expenses; and (ix) services provided
for a particular tenant, and not tenants in general. Operating Expenses shall be
reduced by the net amount of any proceeds, awards, payments, guarantees, credits
or reimbursements which Landlord actually receives and which are applicable to
Operating Expenses less the cost incurred in recovering such amount. Operating
Expenses shall not include payment to affiliates of Landlord to the extent such
payments exceed customary charges for the goods or services provided by such
affiliate.
"Landlord's Taxes" means all taxes, assessments and similar charges
assessed or imposed by any governmental authority upon the Building and Land
(and upon personal property situated thereon or therein and used in the
operation and maintenance of the Building and Land), reduced by any net amounts
received as an abatement or reduction of taxes. If any such abatement or
reduction of taxes has the effect of reducing Landlord's Operating Expenses
which make up Base Operating Expenses Per Rentable Square Foot, then payments
of additional rent under Sections 2.6.1 and 2.6.3 hereof shall be recalculated
reflecting the corrected Base Operating Expenses per Square Foot, and any
overpayments or underpayments will be dealt with in accordance with
Section 2.6.2. The amount of special taxes or special assessments included in
Landlord's Taxes for any year shall be limited to the amount of the installment
(plus any interest, other than penalty interest, payable thereon) of such
special tax or special assessment required to be paid during or with respect to
the year in question. Landlord's Taxes include expenses, including reasonable
fees of attorneys, appraisers and other consultants, incurred in connection
with any efforts to obtain abatements or reductions or to assure maintenance of
Landlord's Taxes for any year wholly or partially included in the Term, whether
or not successful and whether or not such efforts involved filing of actual
abatement applications or initiation of formal proceedings. Landlord's Taxes
exclude income taxes of general application and all estate, succession,
inheritance and transfer taxes, as well as any interest, penalties and costs
attributable to delayed payment of Landlord's Taxes where such delay is not the
result of any actions by or omissions of Tenant. If at any time during the Term
the present system of ad valorem taxation of real property shall be changed so
that, in lieu of the whole or any part of the ad valorem tax on real property
there shall be assessed on Landlord a capital levy or other tax on the gross
rents or other measures of building operations, or a governmental income,
franchise, excise or similar tax,
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assessment, levy, charge of fee (distinct from any such tax now in effect in the
jurisdiction in which the Building is located measured by or based, in whole or
in part, upon gross rents or other measures of building operations or benefits
of or governmental services furnished to the Building or Land, then any and all
of such taxes, assessments, levies, charges and fees, to the extent so measured
or based, shall be included within the term Landlord's Taxes, but only to the
extent that the same would be payable if the Building and Land were the only
property of Landlord.
Except as herein specifically provided, Landlord shall have the sole and
exclusive right to attempt to obtain an abatement or other reduction or review
of Landlord's Taxes (an "Appeal"). Subject to the terms and conditions hereof,
Tenant shall have right to pursue an Appeal during such time as Tenant occupies
more than fifty percent (50%) of the Total Rentable Floor Area of the Building.
If Tenant occupies more than fifty percent (50%' of the Total Rentable Floor
Area of the Building, and Tenant desires to pursue an Appeal, it shall so notify
Landlord in writing on or before thirty (30) days prior to the last day for
filing said Appeal. Landlord shall notify Tenant within fifteen (15) days after
receiving said notice if Landlord desires to pursue said Appeal in lieu of
Tenant. If Landlord notifies Tenant that Landlord does not intend to pursue said
Appeal or if Landlord fails to respond to Tenant within said fifteen (15)
period, Tenant shall be free to pursue said Appeal. Tenant shall so consult with
Landlord prior to filing an Appeal and give due consideration to Landlord's
opinion if Landlord does not in good faith believe an Appeal should be pursued.
If Tenant does file an Appeal, Tenant shall prosecute the same to final
determination with due diligence and shall not, without the written consent of
Landlord (which shall not be unreasonably withheld or delayed), settle,
compromise or discontinue the Appeal. If Tenant pursues an Appeal over the good
faith objection of Landlord, and as a result of the prosecution of said Appeal,
the Landlord's Taxes for any tax year shall be increased over the tax year for
which the Appeal was sought (a "Tax Increase"), then Tenant shall save Landlord
harmless and indemnified against such Tax Increase, it being the intention of
the parties hereto that the prosecution of an Appeal by Tenant over the good
faith objection of Landlord shall be "at risk" for Tenant. Tenant shall bear the
entire cost and expense of any Appeal undertaken by Tenant, but, such cost and
expense, including reasonable attorney's fees, shall be reimbursed to Tenant
from any amount received as a result of such Appeal.
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ARTICLE III
------------
CONSTRUCTION OF BUILDING; FINISH WORK
--------------------------------------
3.1 CONSTRUCTION OF BUILDING
-----------------------------
Landlord has constructed the Building on the Land.
3.2 LANDLORD'S WORK. Landlord shall, at its cost except as otherwise
provided below, cause the completion of certain work in the Premises in
accordance with "Tenant's Plans" as set forth on Exhibit D hereto (the
"Landlord's Work"). Landlord shall use diligent efforts to substantially
complete Landlord's Work by June 30, 1995, as such date shall be extended as a
result of any "Tenant Delay" (as hereinafter defined) or any delays which
result from fire, casualty or other causes beyond Landlord's reasonable control.
If Landlord fails to substantially complete Landlord's Work and deliver the
Premises to Tenant, and Tenant is unable to use and occupy the Premises for the
reasonable conduct of its business, on or before August 31, 1995, as such date
shall be extended as a result of any Tenant Delay, Tenant shall have the right
to terminate this Lease by giving Landlord written notice thereof within ten
(10) business days following such date. For the purposes hereof, a "Tenant
Delay" shall mean any delay to Landlord's Work caused by Tenant or any of its
agents, employees or contractors, including without limitation, (i) delays
caused by material changes, alterations or additions to Tenant's Plans by Tenant
or other material change orders or modifications requested by Tenant during the
progress of Landlord's Work, (ii) delays caused by the failure of Tenant's
Plans to comply with applicable laws, or (iii) delays caused by Tenant's
interference with Landlord's Work. Landlord and Tenant acknowledge that,
depending upon the nature of the Tenant Delay, it may have a more or less
significant effect on the construction schedule, but Tenant shall be
responsible and liable for any Tenant Delay hereunder only to the extent that
such Tenant Delay actually delays the progress of Landlord's Work. If the
substantial completion of Landlord's Work shall be delayed due to any Tenant
Delay, the rent payable hereunder shall be calculated as though the Term
Commencement Date were deemed to have occurred on the date Landlord's Work
would have been substantially complete but for such Tenant Delay. Landlord
shall use good faith efforts to promptly notify Tenant of any event which
Landlord deems to constitute a Tenant Delay, but Landlord shall not be
liable for any failure to so notify Tenant.
Landlord shall perform and complete the Landlord's Work in a good and
workmanlike manner using first-class materials and in compliance with applicable
construction laws. The Landlord's Work shall be deemed "substantially complete"
when the same is complete in accordance with Exhibit D and the provisions
hereof,
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as certified by Landlord's general contractor and Tenant's space
planner/architect, except only for a so-called "punch-list" signed by Landlord's
Finish Work Representative and Tenant's Finish Representative containing items
which would customarily be considered punch-list items, the delayed completion
of which will not substantially interfere with Tenant's use of the Premises as
contemplated hereby, and all building operating systems are fully operational.
Landlord will obtain and deliver to Tenant, as soon as practicable after
substantial completion of Landlord's Work, a Certificate of Occupancy from the
Cambridge Department of Inspectional Services, subject only to Tenant's
completion of any work in the Premises other than Landlord's Work which must be
completed before a Certificate of Occupancy will be issued.
Tenant shall ensure that Tenant's Plans and any specifications prepared by
Tenant or Tenant's architect conform with all building codes and other legal
requirements applicable thereto. Landlord hereby approves Tenant's Plans for the
purposes of this Lease, provided such approval shall create no responsibility or
liability on the part of Landlord for their completeness, design sufficiency, or
compliance with all laws, rules and regulations of governmental agencies or
authorities. Landlord has informed Tenant of certain respects in which the
Building may not currently comply with the requirements of the Americans With
Disabilities Act (42 USC Sec. 12101 et seq.) ("ADA"). However, Landlord will
ensure that the common areas and facilities of the Building comply with the ADA
in accordance with a reasonable schedule consistent with the requirements of
ADA. Landlord further agrees to ensure that the Premises comply with applicable
fire, safety and similar codes which relate to the use of the Premises for
general office purposes. Tenant shall ensure that Tenant's Plans include all
installations and fixtures required under, and shall thereafter ensure that the
Premises comply with, the ADA and applicable fire, safety and similar codes with
respect to any special requirements of Tenant (not typically contemplated by the
phrase "general office purposes") or its agents, employees or invitees or as a
result of any act or omission by Tenant or its agents, employees or invitees.
The Premises are leased to Tenant in "as-is" condition, subject to the
completion of Landlord's Work in accordance with the provisions hereof and
delivery of the Premises free and clear of tenants and occupants. Landlord
represents that the present condition of the common areas and building operating
systems is consistent with that of a first-class office building in Cambridge,
Massachusetts, and to the best of Landlord's knowledge (without undertaking any
environmental investigation for the purposes of making this representation), the
Premises contain no "hazardous substance/material or oil" as defined in Article
XIV
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below which would adversely effect Tenant's use of the Premises. Landlord will
not knowingly permit any hazardous substance/material or oil which would
adversely effect Tenant's use of the Premises to be used in the Building by
any other tenant, except "accepted materials" as defined in Article XIV.
Landlord shall remedy any substantial defect of materials or workmanship
in Landlord's Work of which Tenant gives notices to Landlord within six (6)
months after the date that Landlord's Work is substantially complete and shall,
to the extent legally possible, assign to Tenant the benefit of all warranties
and guarantees from manufacturers, vendors, suppliers, and subcontractors whose
products or services are incorporated into Landlord's Work and, to the extent
not possible, exercise its diligent efforts to enforce the same.
Tenant shall reimburse Landlord, within thirty (30) days after the later
(i) substantial completion of the Landlord's Work and (ii) receipt from Landlord
of an itemized invoice showing all costs and expenses associated with the
completion of Landlord's Work, in an amount equal to the amount by which any and
all such costs, together with the cost of any change orders requested by Tenant
or any costs resulting from any Tenant Delays, exceed $134,212.00 (the
"Buildout Allowance"). If the cost of completing Landlord's Work shall be less
than the Buildout Allowance, Tenant may use the unexpended portion thereof, if
any, only as herein provided. Landlord and Tenant acknowledge that the estimated
cost of Landlord's Work based on Tenant's Plans (without specifications) is
approximately $98,000. Tenant shall not be required to pay any fees of
Landlord's architects or construction personnel with respect to preparation of
specifications or construction drawings.
Landlord shall allow Tenant and its employees, agents and contractors to
enter the Premises as soon as reasonably practicable during the progress of
Landlord's Work and prior to the substantial completion thereof to permit Tenant
to perform Tenant's Work if, as long as, and provided that, Tenant does not
interfere in any way with the progress and completion of Landlord's Work.
Landlord shall inform Tenant's Finish Representative from time to time
regarding the status of performance of the Landlord's Work, and shall provide at
least seven (7) days notice of the date (as such date may be advanced or
delayed) on which Landlord's Work is scheduled to be substantially completed.
The substantial completion of Landlord's Work shall not be deemed to have
occurred until Tenant has received such notice.
Landlord shall reimburse Tenant for Tenant's reasonable documented costs of
moving its business to the Premises and preparing the Tenant's Plans, in the
aggregate amount up to but
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not exceeding $41,296.00 ("Moving/Plans Allowance"), within thirty (30) days
following Landlord's receipt of Tenant's billing therefor which shall include
reasonable substantiating documentation, such as copies of bills and invoices
and the like. If Landlord fails to make such reimbursement, Tenant may deduct
from the rents payable hereunder any portion of the requested reimbursement
amount (but not exceeding $41,296, less any sums reimbursed by Landlord) which
was not theretofore contested in good faith by Landlord by notice to Tenant.
If prior to that date which is twenty (20) months before the expiration of
the Term then in effect, Tenant gives notice to Landlord requesting that
Landlord construct leasehold improvements in the Premises (consistent with the
leasehold improvements constructed pursuant to Landlord's Work), Landlord agrees
to construct such improvements upon submission by Tenant, at Tenant's cost and
expense, of plans and specifications reasonably acceptable to Landlord. Landlord
agrees to obtain at least three bids for construction of such improvements
following procedures similar to those which were acceptable to Tenant for the
purposes of completion of the Landlord's Work. The provisions of this Section
3.2 shall apply to such construction, which shall also be deemed "Landlord's
Work" for the purposes of Section 3.2, except that:
(a) the completion date for the Landlord's Work shall be mutually
agreed by Landlord and Tenant;
(b) Tenant shall reimburse Landlord, within thirty (30) days after the
later of (i) substantial completion of the Landlord's Work and (ii) receipt
from Landlord of an itemized invoice showing all costs associated with
completion of the Landlord's Work, the amount of such costs minus the
unexpended portion of the Buildout Allowance (if any);
(c) there shall be no termination right for untimely completion of the
Landlord's Work; and
(d) there shall be no Moving/Plans Allowance with respect to the
Landlord's Work.
ARTICLE IV
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LANDLORD'S COVENANTS
--------------------
4.1 LANDLORD'S COVENANTS
--------------------
4.1.1 BUILDING SERVICES. Landlord shall furnish services, utilities,
facilities and supplies set forth in this Section 4.1.1. Tenant may obtain
additional services, utilities, facilities and supplies from time to time upon
reasonable advance
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request or Landlord may furnish the same without request if Landlord reasonably
determines that Tenant's use or occupancy of the Premises necessitates the same,
and, in either case, the cost of the same (including related expenses such as
costs for meter installation and maintenance) at reasonable rates from time to
time established by Landlord shall constitute a restricted item allocable to
the Premises under Section 2.6.1. All building services contemplated by this
Section 4.1.1. shall be comparable to those provided in first-class office
buildings in Cambridge.
4.1.1.1 WATER CHARGES. Landlord shall furnish hot and cold water for
ordinary office cleaning, toilet, lavatory and drinking purposes. If Tenant
requires, uses or consumes water for any other purpose, Landlord may either
assess on Tenant reasonable charges for additional water, or install a water
meter to measure Tenant's consumption. (The cost of installation and maintenance
of any such meter shall be borne by Tenant.) If Tenant's water consumption is
measured by a separate meter, Tenant shall pay for all water so consumed
together with the sewer charges based on said meter charges as and when bills
are rendered. All piping and other equipment and facilities for use of water
outside the Building core will be installed and maintained by Landlord at
Tenant's cost and expense. Water usage in connection with coffee stations, two
small employee kitchen areas and for employee showers in the Premises shall not
be assessed as additional expense but shall be treated as a Landlord Operating
Expense.
4.1.1.2 ELEVATOR, HEAT, ELECTRICITY AND CLEANING. Landlord, at its expense,
shall: (i) provide at lease the existing elevator facilities on Mondays through
Fridays excepting legal holidays from 8:00 a.m. to 6:00 p.m. (such hours on such
days being referred to as "business days") and have at least one elevator in
operation available for Tenant's non-exclusive use at all other times; (ii)
furnish heat to the Premises during the normal heating season on business days;
(iii) furnish electricity to the Premises sufficient for normal office uses but
excluding special uses such as main-frame computers and other machinery with
high electrical consumption (Landlord will furnish electricity for such special
uses provided Tenant pays extra costs associated therewith); and (iv) cause the
office areas of the Premises to be kept reasonably clean, the same to be
maintained and kept in good order by Tenant. Cleaning standards for the Building
are set forth in Exhibit C hereto attached.
4.1.1.3 AIR-CONDITIONING. Landlord shall, through the Building
air-conditioning system, furnish to and distribute in the Premises
air-conditioning as normal seasonal changes may require on business days when
air-conditioning may reasonably be required for the comfortable occupancy of the
Premises by Tenant. If Tenant requires additional air-conditioning for business
machines, meeting rooms or other purposes, or because of occupancy or unusual
electrical loads, any additional air-
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conditioning units, chillers, condensers, compressors, ducts, piping and other
equipment will be installed and maintained by Landlord at Tenant's sole cost and
expense, but only to the extent that the same are compatible with the Building
and its mechanical systems.
4.1.1.4. ENERGY CONSERVATION. Tenant agrees to cooperate with Landlord and
to abide by all Building regulations which Landlord may, from time to time,
prescribe for the proper functioning and protection of the heating and
air-conditioning systems and in order to maximize the effect thereof and to
conserve heat and air-conditioning. Notwithstanding anything to the contrary in
this Section 4.1.1 or otherwise in this Lease, Landlord may institute such
policies, programs and measures as may be in Landlord's judgment necessary,
required or expedient for the conservation or preservation of energy or energy
services, (provided that the same are not inconsistent with policies, programs
and measures generally applied in other first-class office buildings in
Cambridge) or as may be necessary to comply with applicable codes, rules,
regulations or standards; provided, however, that nothing in this Section
4.1.1.4 shall allow Landlord to (i) reduce or limit the quality or quantity of
services to be provided by Landlord hereunder, or (ii) increase Landlord's
Operating Expenses above the level that would have existed in the absence of
such energy conservation measures.
4.1.2 REPAIRS. Except as otherwise provided in this Lease, and except for
repairs to items referred to below necessitated Tenant's act or neglect (which
shall be Tenant's repair obligation under Section 5.2, unless caused by a
casualty loss covered by Landlord's insurance), Landlord shall make such
repairs, in a good and workmanlike manner and using first-class materials, to
the roof, exterior walls, floor slabs, windows in the Premises, common areas and
facilities as may be necessary to keep them in good condition consistent with a
first-class office building.
4.1.3 OFFICE IDENTIFICATION. Landlord shall provide and install at Tenant's
expense, if requested, letters or numerals on entry doors to the Premises to
identify Tenant's official name and Building address; all such letters and
numerals shall be in the Building standard graphics and no others shall be used
or permitted on the exterior of the Premises, except that Landlord shall
provide and install at Tenant's expense, if requested, appropriate outside
signage identifying Tenant at the entrance to the Building and Tenant may
install signage in the elevator lobbies on any floor occupied by Tenant. The
design, location and installation of such signage shall be subject to Landlord's
reasonable approval, which such approval shall not be unreasonably withheld or
delayed, or, in accordance with Exhibit E. Tenant will be listed in the lobby
directory, consistent with listing for other tenants of the building.
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4.1.4 QUIET ENJOYMENT. Landlord covenants that Tenant, on paying the rent
and performing the tenant obligations in this Lease, shall peacefully and
quietly have, hold and enjoy the Premises, subject to all of the terms and
provisions hereof.
4.2. INTERRUPTION
------------
Except as otherwise provided herein, Landlord shall not be liable to Tenant
for any compensation or reduction of rent by reason of inconvenience or
annoyance or for loss of business arising from the necessity of Landlord or
its agents entering the Premises for any of the purposes authorized in this
Lease or for repairing the Premises or from repairs by Landlord of any portion
of the Building however the necessity may occur. Except as otherwise provided
herein, in case Landlord is prevented or delayed in making any repairs,
alterations or improvements, or furnishing any services or performing any other
covenant or duty to be performed on Landlord's part, by reason of any cause
reasonably beyond Landlord's control, Landlord shall not be liable to Tenant
therefor, nor, except as otherwise provided in Section 6.1, shall Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor shall the
beginning of the Term be delayed under Section 2.4(b) (once substantial
completion has occurred), nor shall the same give rise to a claim in Tenant's
favor that such failure constitutes actual or constructive, total or partial,
eviction from the Premises. Landlord shall use reasonable efforts to avoid or
minimize interference with Tenant's use and occupancy of the Premises. In no
event shall Landlord be liable for indirect or consequential damages.
Landlord reserves the right to stop any service or utility system, when
necessary by reason of accident or emergency, or until necessary repairs have
been completed; provided, however, that in each instance of stoppage, Landlord
shall exercise reasonable diligence to eliminate the cause thereof. Except in
case of emergency repairs Landlord will give Tenant reasonable advance notice of
any contemplated stoppage and will use reasonable efforts to avoid unnecessary
inconvenience to Tenant by reason thereof.
Notwithstanding anything contained herein to the contrary, in the event of
interruption of any utility service required to be provided by the Landlord,
where the interruption is not the result of any act or omission or default of
this Lease by Tenant or its agents, employees or contractors, and the
restoration of such service is within the Landlord's reasonable control,
Tenant shall be entitled to an equitable abatement of Annual Fixed Rent and all
other charges payable hereunder, according to the nature and extent of the
interference with Tenant's use and occupancy, commencing on the thirtieth
(30th) day following any such interruption.
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ARTICLE V
---------
TENANT'S COVENANTS
------------------
5.1 RENT, UTILITIES
---------------
Tenant covenants and agrees to pay when due all Annual Basic Rent and
additional rent and all charges for utilities and services rendered to the
Premises and for all other matters for which Tenant is responsible hereunder.
5.2 MAINTENANCE AND REPAIR
----------------------
Except for damage by fire or casualty and reasonable wear, damage caused by
the act or neglect of Landlord and other repairs for which Landlord is
responsible under this Lease, Tenant shall at all times keep the Premises clean
and in as good repair, order and condition as the same are at the beginning of
the Term or may be put in thereafter.
5.3 USE, WASTE AND NUISANCE
-----------------------
Throughout the Term, Tenant shall use the Premises for the Permitted Uses
only. Tenant shall not injure, overload, deface or commit waste in the Premises
or any part of the Building or anywhere on the Land, nor permit the occurrence
of any nuisance therein or the emission therefrom of any objectionable noise or
odor, nor use or permit any use of the Premises, Building or Land which is
improper, offensive, contrary to law or ordinance or which is liable to
invalidate or increase the premium for any insurance on the Building or its
contents or which is liable to render necessary any alterations or additions in
the Building, nor obstruct in any manner any portion of the Building or the
Land. If Tenant's use of the Premises results in an increase in the premium for
any insurance on the Building or its contents, Landlord shall notify Tenant of
such increase and Tenant shall pay same as additional rent. Tenant may not
without Landlord's consent install in the Premises any water fountains,
water-connected coffee makers, water-connected refrigerators, sinks or cooking
equipment provided that Landlord's consent will not be unreasonably withheld
with respect to items designed for the convenience of Tenant's employees and
further provided that Landlord determines that special venting or other matters
are not required in connection therewith.
5.4 RULES AND REGULATIONS
---------------------
Tenant shall conform to all reasonable rules and regulations of general
applicability now or hereafter promulgated by Landlord for the care and use of
the Premises, the Building and the Land. Existing rules and regulations are
hereto attached as Exhibit C.
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5.5 SAFETY APPLIANCES
-----------------
Tenant shall keep the Premises equipped with all safety appliances and
permits which, as a result of Tenant's particular activities, are required by
law or ordinance or any order or regulation of any public authority, shall keep
the Premises equipped at all times with adequate fire extinguishers and other
such equipment reasonably required by Landlord; and, upon notice by Landlord,
shall make all repairs, alterations, replacements or additions so required as a
result of Tenant's particular activities or the special requirements of Tenant,
its agents, employees or invitees other than general office use. The Landlord
shall be responsible for any such items to the extent they relate to the use of
the Premises for general office purposes.
5.6. INDEMNIFICATION AND INSURANCE
-----------------------------
Subject to the provisions of Section 8.12 below, Tenant shall save
Landlord, its partners, officers, directors, agents employees, mortgagees and
ground lessors (collectively the "Indemnitees") harmless and indemnified (and
shall defend the Indemnitees with counsel reasonably approved by the Indemnitee
against any claim or loss arising out of any injury, loss or damage to any
person or property while on or in the Premises is not due to negligence or
willful misconduct of the Indemnities and to any person or property anywhere in
the Building or on the Land occasioned by any act, omission, neglect or default
of Tenants or of employees, agents, independent contractors or invitees of
Tenant (collectively, the "Indemnified Obligations"). In addition to the
foregoing, Landlord may make all repairs and replacements to the Building
resulting from acts or omissions Tenant's employees, agents, independent
contractors or invitee (including damage and breakage occurring when Tenant's
property is being moved into or out of the Building) and Landlord may recover
all costs and expenses thereof from Tenant as additional rent. Tenant shall
maintain in a responsible company or companies approved by Landlord, liability
insurance in form satisfactory to Landlord (Landlord's approval as to Tenant's
insurer and the form of policy not to be withheld unreasonably or delayed),
insuring the Landlord, its ground lessor and (if requested) its mortgagee
(collectively, "Landlord Insureds"), Tenant as their respective interests may
appear, against all claims, demands or actions for injury, death, and property
damage in connection with the Indemnified Obligations in amounts not less than
those specified in Section 1.1 (as such amounts may, from time to time, be
reasonably increased by Landlord on a basis consistent with other first class
office buildings in Cambridge. Such insurance shall provide that it will not be
subject to cancellation, termination, or change except after at least 30 days'
prior written notice to Landlord Insureds (ten (10) days prior written notice
in case of cancellation due to nonpayment
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insurance premium). The policy or policies, or a duly executed certificate or
certificates for the same, together with satisfactory evidence of the payment of
the premium thereon, shall be deposited with the Landlord Insureds at the
beginning of the Term and, upon renewals of such policies, not less than 30 days
prior to the expiration of the term of such coverage. If Tenant fails to comply
with any of the foregoing requirements, Landlord may, after written, telephone
or facsimile notice to Tenant, obtain such insurance on behalf of Tenant and
may keep the same in effect, and Tenant shall pay Landlord, as additional rent,
the premium cost thereof upon demand.
5.7 TENANT'S PROPERTY
-----------------
All furnishings, fixtures, equipment, effects and property of every kind,
nature and description of Tenant and of all persons claiming through Tenant
which from time to time may be on the Premises or elsewhere in the Building or
in transit thereto or therefrom shall be at the sole risk and hazard of Tenant,
and if the whole or any part thereof shall be destroyed or damaged by fire,
water or otherwise, or by the leakage or bursting of water pipes, steam pipes,
or other pipes, by theft or from any other cause, no part of said loss or damage
is to be charged to or be borne by the Indemnities, except that the Indemnities
shall in no event be indemnified or held harmless or exonerated from any
liability to Tenant or to any other person, for any injury, loss, damage or
liability to the extent such indemnity, hold harmless or exoneration is
prohibited by law or to the extent the loss or liability is due to the
negligence or willful act of the Indemnities, their agents or employees.
5.8 ENTRY FOR REPAIRS AND INSPECTIONS
---------------------------------
Tenant shall permit Landlord and its agents to enter and examine the
Premises at reasonable times and, if Landlord shall so elect, to make any
repairs or replacements Landlord may deem necessary, to remove at Tenant's
expense, any alterations, additions, signs, curtains, blinds, shades, awnings,
aerial flagpoles, or the like not consented to in writing, (Landlord agreeing to
use reasonable efforts to avoid or minimize interference with Tenant's use and
occupancy of the Premises) and to show the Premises to prospective tenants
during the nine (9) months preceding expiration of the Term and to prospective
purchasers and mortgagees at all reasonable times. Except in the case of
emergencies and for purposes of cleaning, entry by Landlord shall be made only
after such notice as is reasonable under the circumstances.
5.9 EXPENSES AND ATTORNEYS' FEES
----------------------------
Tenant shall pay as additional rent Landlord's expenses, including
reasonable attorneys' fees, incurred in successfully
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enforcing any obligations of Tenant under this Lease with which Tenant has
failed to comply. Landlord shall reimburse Tenant for Tenant's expenses,
including reasonable attorneys fees, incurred in successfully enforcing any
obligations of Landlord under this Lease with which Landlord has failed to
comply.
5.10 ASSIGNMENT, SUBLETTING
----------------------
Tenant shall not assign this Lease, or sublet or license the Premises or
any portion thereof or permit the occupancy of all or any portion of the
Premises by anybody other than Tenant (all or any of the foregoing actions are
referred to as "assignments," and all of the occupants of the Premises resulting
from any such assignment are referred to as "assignees") without obtaining, on
each occasion, the prior consent of the Landlord, which shall not be
unreasonably withheld or delayed. If Landlord has space in the Building which
Landlord is then marketing for occupancy to a party other than Tenant, Tenant
shall not offer to make or enter into negotiations with respect to any
assignment to any of the following (each, a "Restricted Party"):(i) a tenant in
the Building or (ii) any party with whom Landlord or any affiliate of Landlord
is then negotiating with respect to other space in the Building. Upon written
notice from Tenant identifying a Restricted Party with whom Tenant wishes to
negotiate an assignment and the nature of the proposed assignment ("Tenant's
Restricted Party Notice"), Landlord will promptly notify Tenant as to whether
Landlord is negotiating or intends to negotiate with such party. If (i)
Landlord fails to so notify Tenant within ten (10) business days of Landlord's
receipt of Tenant's Restricted Party Notice, or (ii) Landlord notifies Tenant
that it is not negotiating or does not intend to negotiate with such Restricted
Party, Tenant shall be free to negotiate with such Restricted Party, but only
with respect to the then proposed assignment by Tenant.
Landlord shall respond to Tenant's request for consent to an assignment
within ten (10) business days following Landlord's receipt thereof. Landlord's
response shall state whether Landlord requires additional information as
hereinafter provided and, if so, Landlord shall respond to Tenant's request
within five (5) business days after receipt of such additional information.
Landlord's withholding of consent shall be deemed reasonable if (i) the proposed
assignee has a business reputation or business activities which are inconsistent
with a first class office building or, (ii) except in the case of an assignment
whereby the named Tenant, Forrester Research, Inc., or a Permitted Assignee will
remain in occupancy of at least 50% of the Premises, the proposed assignee has
an uncreditworthy financial condition or its history do not provide Landlord
with reasonable assurance of the full and prompt payment and performance of the
Tenant's obligations hereunder,
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notwithstanding that the original Tenant is required to remain primarily liable
therefor hereunder.
An assignment shall include, without limitation, any transfer of Tenant's
interest in this Lease by operation of law, merger or consolidation of Tenant
into any other entity, the corporate reorganization of Tenant as a business
entity (except a reorganization due to bankruptcy or insolvency), the sale of
substantially all Tenant's assets, or the transfer or sale of a controlling
interest in Tenant, whether by sale of its capital stock or otherwise (a
"Corporate Event").
Landlord's consent shall not be required with respect to an assignment to
any entity controlling, controlled by or under common control with Tenant (and
provided Tenant and such affiliated entity remain affiliated) or pursuant to a
Corporate Event, PROVIDED THAT Tenant or the surviving or succeeding entity
holding Tenant's interest in this lease shall (a) engage in activities
consistent with a first class office building, and (b) either (i) at the time of
such assignment have a net worth equal to or greater than the net worth of the
Tenant named herein, Forrester Research, Inc., as of the date of this Lease, or
(ii) have a "cash flow" equal to or greater than one hundred fifty percent
(150%) of the Annual Basic Rent and other recurring charges due hereunder (a
"Permitted Assignment" and any assignee or sublessee pursuant thereto, being a
"Permitted Assignee"). For the purposes hereof, "cash flow" shall be determined
pursuant to the following formula: Net Income Before Taxes + Amortization +
Depreciation + Rent. Tenant shall give Landlord not less than ten (l0) business
days prior written notice of any proposed Permitted Assignment
Tenant's request for consent to an assignment and Tenant's notice to
Landlord of a proposed Permitted Assignment shall include a copy of the proposed
instrument of assignment, if available, and a statement of the proposed
assignment in detail reasonably satisfactory to Landlord, together with
reasonably detailed financial, business and other information about the proposed
assignee and, in the case of a Permitted Assignment, the relationship of the
proposed assignee to Tenant.
Except in the case of a Permitted Assignment, if Tenant proposes to (x)
assign this Lease or (y) sublet any portion of the Premises for the balance of
the Term of this Lease (not including unexercised extension periods under this
Lease), Landlord shall have the option (but not the obligation) to terminate the
Lease (but only with respect to the portion of the Premises which Tenant
proposes to sublet in the case of a proposed subletting) effective upon the date
of the proposed assignment and continuing for the proposed term thereof by
giving Tenant notice of such termination within ten (10) business days after
Landlord's receipt of Tenant's request; provided however
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that if Landlord gives such termination notice, Tenant shall have the right, by
written notice to Landlord within five (5) business days thereafter, to rescind
such termination by notifying Landlord that Tenant will not consummate such
proposed assignment or subletting, whereupon such termination shall be null and
void and of no further force or effect. If Landlord exercises its right to
terminate this Lease with respect to a portion of the Premises (and Tenant does
not rescind such termination as hereinabove provided), Landlord will have the
right to demise such space and provide access thereto for the purpose of
leasing such space.
If Tenant does make an assignment or sublease other than pursuant to a
Premitted Assignment, Tenant shall pay to Landlord, as additional rent, fifty
percent (50%) of the amount by which the aggregate rent and other charges
payable to Tenant under and in connection with such assignment or subletting
(including without limitation any amounts paid for leasehold improvements)
exceed the rent and other charges paid hereunder, provided Tenant shall first be
permitted to recover the reasonable costs incurred in connection such assignment
or subletting.
Tenant shall pay to Landlord, as additional rent, Landlord's reasonable
legal fees and other expenses incurred in connection with any proposed
assignment, including fees for review of documents and investigations of
proposed assignees.
Notwithstanding any such assignment, the original Tenant named herein shall
remain directly and primarily obligated under this Lease.
If an assignment occurs hereunder, the assignee shall be deemed to have
agreed directly with Landlord to be liable, jointly and severally with Tenant,
to the extent of the obligations undertaken by or attributable to such assignee,
for the performance of all Tenant's agreements under this Lease (including
payment of rent). Every sublease and other assignment document shall contain the
following language, modified only as necessary to identify properly the
instruments and parties:
"If Prime Landlord is entitled to terminate the Prime Lease pursuant to
Section 7.1 thereof due to a default on the part of Prime Tenant, Prime
Landlord may at its election, collect rent and other charges directly from
the subtenant (or assignee) and such subtenant (or assignee) shall be
directly liable to Prime Landlord for performance of all obligations under
the sublease (or assignment) as the same incorporates the terms of the
Prime Lease."
The net amount of any rent collected from an assignee shall be applied to the
rent and other charges hereunder, but no such assignment or collection shall be
deemed a waiver of the
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provisions of Section 5.10, or the acceptance of the assignee, as a tenant,
or a release of Tenant from direct and primary liability for the further
performance of Tenant's covenants hereunder. The consent by Landlord to a
particular assignment shall not relieve Tenant from the requirement of obtaining
the consent of Landlord to any further assignment.
5.11 ALTERATIONS, ADDITIONAL HEAVY EQUIPMENT, ETC.
---------------------------------------------
Tenant shall not make any alterations or additions in or to the Premises,
nor erect or paint any sign or other identification on any window or Premises
entry door without obtaining Landlord's prior consent which consent shall not be
unreasonably withheld or delayed. Tenant will not bring into or install in the
Premises any safes, or bulky or heavy furnishings, equipment, or machines
without the prior approval of Landlord as to methods of transportation and
installation (Landlord may prohibit installation if the weight of any such item
will exceed 100 pounds per square foot on the ground floor or 50 pounds per
square foot on upper floors, or if Landlord decides that the same will cause
vibration or noise to be transmitted to the Building structure or to areas
outside the Premises), nor shall Tenant move any furniture, furnishings,
equipment or machines into or out of the Building except by prior arrangement
with and approval of Landlord, which approval shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, Tenant shall have the right
to make interior non-structural alterations, subject to Landlord's prior written
approval, which approval shall not be unreasonably withheld or delayed.
5.12 SURRENDER AND LIEN FOR RENT
---------------------------
At the expiration of the Term or earlier termination of this Lease, Tenant
shall peaceably give up and surrender the Premises without the requirement of
any notice, including all work performed by Tenant (such work to be in
conformity with the provisions hereof) and all replacements thereof, including
carpeting, any water or electricity meters, and all fixtures and work (including
partitions) in anyway bolted or otherwise attached to the Premises (which shall
become the property of Landlord) except such non-building standard equipment,
fixtures, work and the like (other than any of the same installed by Landlord)
as Landlord shall direct Tenant to remove, the Premises and improvements to be
in good order, repair and condition, damage by fire, casualty and reasonable
wear excepted. Tenant shall, at the time of termination, remove the goods,
effects and fixtures which Tenant is directed or permitted to remove in
accordance with the provisions of this Section making any repairs to the
Premises and other areas necessitated by such removal and leaving the Premises
clean and tenantable. Should Tenant fail to remove any of such goods, effects,
and fixtures, Landlord may have them removed forcibly, if necessary, and store
any of
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Tenant's property in a public warehouse at the risk of Tenant; the expense of
such removal, storage and reasonable repairs necessitated by such removal shall
be borne by Tenant or reimbursed by Tenant to Landlord.
Notwithstanding anything contained herein to the contrary, Tenant shall not
be required to remove any items which were installed by Landlord or Tenant with
the approval of Landlord and which are (i) comparable in nature to any existing
improvements in the Premises or Building, including items installed as part of
the Landlord's Work, and (ii) reasonably related to the use of the Premises for
general office purposes.
5.13 PAYMENT FOR TENANT WORK
-----------------------
Tenant shall pay from time to time the entire cost of any work undertaken
by Tenant in the Premises, including equipment, furnishings and fixtures, so
that the Premises shall always be free of liens for labor or materials. Tenant
shall obtain all permits or licenses for such work. Tenant shall also indemnify
and save the Indemnities harmless from all injury, loss, claims, liens or damage
to any person or property occasioned by or arising from such work. If any
mechanic's lien (which term shall include all similar liens relating to the
furnishing of labor and materials) is filed against the Premises or the Building
or any part thereof which is claimed to be attributable to Tenant, its agents,
employees or contractors, Tenant shall promptly discharge the same by payment
thereof or filing any necessary bond. Tenant may dispute in good faith payments
due with respect to any work contemplated by this Section, as long as Tenant
provides Landlord with adequate security therefore by bonding off the lien or
otherwise.
5.14 PERSONAL PROPERTY TAXES
-----------------------
Tenant shall pay promptly when due all taxes (and charges in lieu thereof)
imposed upon personal property in the Premises, no matter to whom assessed
(including without limitation fixtures, equipment and any improvements which are
in excess of Building Standard).
ARTICLE VI
----------
CASUALTY AND TAKING
-------------------
6.1 DAMAGE BY FIRE OR CASUALTY
--------------------------
Landlord shall at all times maintain insurance covering the Building and
the leasehold improvements within the Premises to the extent they are
customarily insured as part of the Building on an all-risk basis with an
extended coverage endorsement, in an amount not less than full replacement
cost of the Building. if
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the Premises or any part thereof shall be damaged by fire or other insured
casualty, then, subject to the following paragraphs of this Section 6.1,
Landlord shall proceed with diligence, subject to the then applicable statutes,
building codes, zoning ordinances and regulations of any governmental
authority, and at the expense of Landlord (but only to the extent of insurance
proceeds made available to Landlord by any mortgagee of the Building) to repair
or cause to be repaired such damage, provided, however, in respect of such
alterations, decorations, additions and improvements, originally made or
installed by Tenant at Tenant's expense, as shall have been damaged by such
fire or other casualty and which (in the judgment of Landlord) can more
effectively be repaired as an integral part of the work on the Premises, than
the repairs to such Tenant's alterations, decorations, additions and
improvements shall be performed by Landlord but at Tenant's expense, unless
such items were install by Landlord or its contractors. All repairs to and
replacements of property which Tenant is entitled to remove shall be made by
and at the expense of Tenant, unless such items were installed by Landlord or
its contractors. If the Premises or any part thereof shall have been rendered
unfit for use and occupation hereunder (or access thereto unavailable, without
reasonable substitute access having been made available) by reason of such
damage the Fixed Rent and all other charges payable by Tenant hereunder, or a
just and proportionate part thereof, according to the nature and extent to
which the Premises shall have been so rendered unfit or access made
unavailable, shall be suspended or abated until the Premises (except as to the
property which is to be repaired by or at the expense of Tenant) shall have
been restored as nearly as practicable to the condition in which they were
immediately prior to such fire or other casualty. Landlord shall not be liable
for delays in the making of any such repairs which are due to government
regulation, casualties and strikes, unavailability of labor and materials, and
other causes beyond the reasonable control of Landlord, nor shall Landlord be
liable for any inconvenience or annoyance to Tenant or injury to the business
of Tenant resulting from delays in repairing such damage.
If (i) the Premises are so damaged by fire or other casualty (whether or
not insured) at any time during the last eighteen (18) months of the Term that
the time to repair such damage is reasonably estimated to exceed the lesser of
(a) six (6) months or (b) the remaining balance of the Term (ii) if at any time
the Building (whether or not including any portion of the Premises) is so
damaged by fire or other casualty (whether or not insured) that reconstruction
or demolition of 50% or more of the floor area of the Building shall in
Landlord's judgment be required, or (iii) if at any time damage to the Building
in excess of $100,000 occurs by fire or other insured casualty and any
mortgagee or ground lessor shall refuse to permit insurance proceeds to be
utilized for the repair or replacement of such
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property and Landlord determines not to repair such damage, then and in any of
such events, this Lease and the term hereof may be terminated at the election of
Landlord by a notice from Landlord to Tenant within sixty (60) days, or such
longer period as is required to complete arrangements with any mortgagee or
ground lessor regarding such situation, following such fire or other casualty,
the effective termination date which shall be not less than thirty (30) days
after the day on which such termination notice is received by Tenant (provided
that in the case of a termination by Landlord pursuant to subsection (i) above,
Tenant may void such termination by exercising any then exercisable extension
option within twenty (20) days following receipt of Landlord's termination
notice). In the event of any termination, this Lease and the Term hereof shall
expire as of such effective termination date as though that were the date
originally stipulated in Section 1.1. for the end of the Term and the Fixed Rent
shall be apportioned as of such date.
Notwithstanding the foregoing, Tenant shall have the right to terminate
this Lease following a fire or other insured casualty: (i) if the Premises or
the common areas or operating systems of the Building that Tenant has the right
to use cannot reasonably be expected to be substantially complete for Tenant's
use (or access thereto made available, as the case may be) within nine (9)
months; or (ii) if the Premises or the common areas or operating systems of the
Building that Tenant has the right to use are not substantially completed to
its condition before such fire or other casualty within nine (9) months after
such fire or other casualty. Tenant may exercise such termination right, if at
all, by giving written notice to Landlord within thirty (30) days following the
accrual of such right, which notice shall specify a termination date not more
than sixty (60) days nor less than thirty (30) days after the day on which such
termination notice is received, and the termination shall be effective as of
such date (provided the Premises are not substantially restored or access made
available prior thereto). Failure of Tenant to exercise said election within
said period shall constitute Tenant's agreement to accept delivery of the
Premises under this Lease, provided Landlord thereafter pursues reconstruction
or restoration diligently to completion, subject to delays beyond Landlord's
reasonable control.
6.2 CONDEMNATION - EMINENT DOMAIN
-----------------------------
In case during the Term all or any substantial part of the Premises or the
Building are taken by eminent domain or Landlord receives compensable damage by
reason of anything lawfully done in pursuance of public or other authority, this
Lease shall automatically terminate. The effective date of termination shall not
be less than 15 nor more than 30 days after the effective date of the taking or
other such exercise of authority. If by mutual agreement of the parties hereto
the Lease is not
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terminated pursuant to the foregoing provisions, this Lease shall remain in full
force and effect following any such taking, subject, however, to the following
provisions. If in any such case the Premises are rendered unfit for use and
occupation and this Lease is not terminated, Landlord shall use due diligence to
put the Premises, or what may remain thereof (excluding any items installed or
paid for by Tenant which Tenant may be required to remove pursuant to Section
5.12), into proper condition for use and occupation and a just proportion of the
Fixed Rent and additional rent according to the nature and extent of the injury
shall be abated until the Premises or such remainder shall have been put by
Landlord in such condition; and in case of a taking which permanently reduces
the area of the Premises, a just proportion of the Fixed Rent and additional
rent shall be abated for the remainder of the Term.
6.3 EMINENT DOMAIN AWARD
--------------------
Except for Tenant's relocation expenses (specifically so designated),
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building and Land and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, hereby irrevocably designating and
appointing Landlord as its attorney-in-fact to execute and deliver in Tenant's
name and behalf all such further assignments thereof. Notwithstanding the
foregoing, Tenant shall be entitled no any taking award specifically allocable
to trade fixtures installed by or at the expense of Tenant, provided that such
award does not reduce the award to which Landlord is otherwise entitled
hereunder.
6.4 TEMPORARY TAKING
----------------
In the event of any taking of the Premises or any part thereof for
temporary use, Annual Fixed Rent and additional rent according to the nature and
extent of the injury to the Premises shall be abated during the period of such
temporary taking. Notwithstanding the foregoing, in the event that any such
temporary taking is for a period of nine (9) months or more, then Tenant shall
have the right, by written notice to Landlord given within 21 days following
notice of such taking, to terminate this Lease.
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ARTICLE VII
----------
DEFAULT
-------
7.1 TERMINATION FOR DEFAULT OR INSOLVENCY
-------------------------------------
This Lease is upon the condition that (1) if Tenant shall fail to perform
or observe any of Tenant's covenants, and if such failure shall continue, in the
case of rent or payments of any sum due Landlord hereunder, for more than ten
(10) days, after delivery of notice thereof to Tenant (as the word "delivery")
or "delivered" is defined in Section 8.4 below) or in any other case, after
notice, for more than thirty (30) days (provided that if correction of any such
matter reasonably requires longer than 30 days and Tenant so notifies Landlord
within 20 days together with an estimate of time required for such cure, Tenant
shall be allowed such longer period, but only if such delay does not increase
the risk of damage to person or property), or (2) if three or more notices
under clause (1) hereof are given in any twelve month period (excluding notices
given in error, i.e. no default existed), or (3) if the leasehold hereby
created shall be taken on execution, or by other process of law, or if any
assignment shall be made of Tenant's property for the benefit of creditors, or
(4) if a receiver, guardian, conservator, trustee in bankruptcy or similar
officer shall be appointed by a court of competent jurisdiction to take charge
of all or any part of Tenant's property and such appointment is not discharged
within 90 days thereafter or if a petition including, without limitation, a
petition for reorganization or arrangement is filed by Tenant under any
bankruptcy law or is filed against Tenant and, in the case of a filing against
Tenant only, the same shall not be dismissed within 90 days from the date upon
which it is filed, then, and in any of said cases, Landlord may, immediately or
at any time thereafter, elect to terminate this Lease by notice of termination
to Tenant at the Premises and to recover possession of the Premises under and
by virtue of the provisions of the laws of the Commonwealth of Massachusetts.
Upon termination of this Lease, Landlord shall be entitled to recover
possession of the Premises from Tenant and those claiming through or under the
Tenant. Such termination of this Lease and repossession of the Premises shall
be without prejudice to any remedies which Landlord might otherwise have for
arrears of rent or for a prior breach of the provisions of this Lease.
7.2 REIMBURSEMENT OF LANDLORD'S EXPENSES
------------------------------------
In the case of termination of this Lease pursuant to Section 7.1, Tenant
shall reimburse Landlord for all reasonable costs incurred in collecting amounts
due from Tenant under this Lease including attorneys' fees, costs of litigation
and the like); all reasonable expenses incurred by Landlord in attempting to
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relet the Premises or parts thereof (including advertisements, brokerage
commissions, Tenant's allowances, costs of preparing space, and the like);
and to the extent they are direct and proximate reasonable expenses to which
a Landlord may be entitled under applicable Massachusetts law for breach of
this Lease, all Landlord's other reasonable expenditures necessitated by the
termination. The reimbursement from Tenant shall be due and payable
immediately from time to time upon notice from Landlord that an expense has
been incurred, without regard to whether the expense was incurred before or
after the termination.
7.3 DAMAGES
-------
Landlord may elect by written notice to Tenant within 4 months following
such termination to be indemnified for loss of rent by a lump sum payment
representing the amount of rent which would have been paid in accordance with
this Lease for the remainder of the Term minus the aggregate fair market rent
payable for the Premises for the remainder of the Term (if less than the rent
payable hereunder), estimated as of the date of the termination, and taking into
account reasonable projections of vacancy and time required to lease, discounted
to present value at then base rate of interest charged by the First National
Bank of Boston (or its successor) at an interest rate consistent with then
present value discounting under first-class office leases. (For the purposes of
calculating the rent which would have been paid hereunder for the lump sum
payment calculation described herein, the last full year's additional rent under
Section 2.6 is to be deemed constant for each year thereafter.) Should the
parties be unable to agree on a fair market rent, the matter shall be submitted,
upon the demand of either party, to the Boston, Massachusetts office of the
American Arbitration Association, with a request for arbitration in accordance
with the rules of the Association by a single arbitrator who shall be an MAI
appraiser with at least ten years experience as an appraiser of suburban
commercial real estate in the Greater Boston Area. The parties agree that a
decision of the arbitrator shall be conclusive and binding upon them. Should
Landlord fail to make the election provided for in this Section 7.3, Tenant
shall indemnify Landlord for the loss of rent by a payment at the end of each
month which would have been included in the Term, representing the difference
between the rent which would have been paid in accordance with this Lease
(Annual Fixed Rent under Section 2.5, and additional rent which would have been
payable under Section 2.6 to be ascertained monthly) and the rent actually
derived from the Premises by Landlord for such month (the amount of rent deemed
derived shall be the actual amount less any portion thereof attributable to
Landlord's reletting expenses described in Section 7.2 which have not been
reimbursed by Tenant thereunder). In no event shall Tenant be liable for
indirect or consequential damages.
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7.4 MITIGATION
----------
Any obligation imposed by law upon Landlord to relet the Premises shall be
subject to the reasonable requirements of Landlord to develop the Building in a
harmonious manner with an appropriate mix of terms and floor areas, etc.
7.5 CLAIMS IN BANKRUPTCY
--------------------
Nothing herein shall limit or prejudice the right of Landlord to prove and
obtain in a proceeding for bankruptcy insolvency, arrangement or reorganization,
by reason of the termination, an amount equal to the maximum allowed by a statue
of law in effect at the time when, and governing the proceedings in which, the
damages are to be proved, whether or not the amount is greater to, equal to, or
less than the amount of the loss or damage which Landlord has suffered.
7.6 LATE CHARGE
-----------
If any payment of Fixed Rent, additional rent, or other payment due from
Tenant to Landlord is not paid when due, then Landlord may, at its option,
without notice and in addition to all other remedies hereunder, impose a late
charge on Tenant equal to the corporate rate of the First National Bank of
Boston (or its successor) from time to time in effect plus four percent (4%) for
each month and part thereof during which said delinquency continues. Such late
charge shall constitute additional rent hereunder payable upon demand.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1 MEASUREMENT OF FLOOR AREA
-------------------------
The Rentable Floor Areas of the Premises and Building shall be conclusive
as stated in Section 1.1. In calculating any other floor areas, Landlord shall
employ a method consistent with the original method of calculation.
8.2 HOLDOVER
--------
If Tenant continues in occupancy of the Premises after the expiration or
earlier termination of the Term, such occupancy shall be deemed a tenancy of
sufferance, terminable at Landlord's election without notice to Tenant or anyone
claiming under Tenant, whether or not Landlord receives any payments for use and
occupancy of the Premises during such tenancy. Tenant's liability for use and
occupancy during any such holdover shall be the fair rental value of the
Premises, but not less than 1.5 times the monthly installment of Annual Fixed
Rent and additional
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rent due hereunder for the last month of the Term (the "Holdover Rent"), and
otherwise subject to all the covenants and conditions (including obligations to
pay additional rent under Section 2.6 of this Lease.)
8.3 ESTOPPEL CERTIFICATES
---------------------
At the request of either party, from time to time, Landlord and Tenant
agree to execute and deliver to the other a certificate which acknowledges
tenancy and possession of the Premises and recites such other facts concerning
any provision of the Lease or payments made under the Lease which a mortgagee or
lender or a purchaser or prospective purchaser of the Building or any interest
therein or any other party may reasonably request.
8.4 NOTICE
------
Any notice approval and other like communication hereunder from Landlord to
Tenant or from Tenant to Landlord shall be given in writing and shall be deemed
duly given and delivered as set forth in the last sentence of this Section.
Communications to Tenant shall be addressed to Tenant, Attention: President at
the Original Address of Tenant set forth in Section 1.1 prior to the Term
Commencement Date and thereafter at the Premises and to Tenant's attorney,
Joseph M. Eagan, Esq., Ropes & Gray, One International Place, Boston, MA 02110.
Communications to Landlord shall be addressed to the Address of Landlord's
Managing Agent set forth in Section 1.1, except communications regarding Finish
Work which shall be addressed to Landlord's Finish Work Representative at the
address set forth in Section 1.1. Either party may from time to time designate
other addresses within the continental United States by notice to the other.
Notices shall be deemed delivered and given on the earliest of (i) the date
of receipt, or (ii) the date of delivery if hand delivered, or (iii) two (2)
days after mailing if sent by Federal Express or some other overnight courier,
or (iv) three (3) days after mailing if sent by prepaid certified mail, return
receipt requested.
8.5 RIGHT TO CURE
-------------
Without thereby affecting any other right or remedy of Landlord hereunder
Landlord may, at its option, cure for Tenant's account any default by Tenant
hereunder which remains uncured after the expiration of any applicable notice
and cure period. If Tenant shall fail to reimburse Landlord for the reasonable
costs and expenses incurred by Landlord in effectuating such cure within thirty
(30) days after receipt by Tenant of an invoice from Landlord, Landlord may add
such amounts to the next monthly installment of Annual Basic Rent due from
Tenant; provided, however, that Landlord may not thus add any amounts being
disputed by Tenant in good faith.
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Without thereby affecting any other right or remedy of Tenant hereunder,
Tenant may, at its option, cure for Landlord's account any default by Landlord
hereunder which remains uncured after thirty (30) days written notice of default
from Tenant to Landlord (or such longer period as may be reasonably required to
effect the cure thereof, as long as such cure is commenced within said thirty
(30) days period and thereafter diligently pursued to completion). If Landlord
shall fail to reimburse Tenant for the reasonable costs and expenses incurred by
Tenant in effectuating such cure within thirty (30) days after receipt by
Landlord of an invoice from Tenant, Tenant may sue Landlord to recover such
costs. In no event shall Tenant deduct such amounts from the Annual Basic
Rent or other charges due from Tenant hereunder.
8.6 SUCCESSORS AND ASSIGNS
----------------------
This Lease and the covenants and conditions herein contained shall inure to
the benefit of and be binding upon Landlord, its successors and assigns, and
shall be binding upon Tenant, its successors and assigns, and shall inure to the
benefit of Tenant and only such assignees of Tenant as are permitted hereunder.
The term "Landlord" means the original Landlord named herein, its successors and
assigns. The term "Tenant" means the original Tenant named herein and its
permitted successors and assigns.
8.7 BROKERAGE
---------
Each party warrants that it has had no dealings with any broker or agent in
connection with this Lease except for any broker designated in Section 1.1, and
covenants to pay, hold harmless and indemnify the other party from and against
any and all costs, expense or liability for any compensation, commissions and
charges claimed by any broker or agent other than any such broker with respect
to this Lease or the negotiation thereof arising from a breach of the foregoing
warranty. Landlord shall be responsible for payment of any brokerage commission
to the Broker designated in Section 1.1.
8.8 WAIVER
------
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon strict performance of, any covenant or condition of this Lease,
or, with respect to such failure of Landlord, any of the rules and Regulations
referred to in Section 5.4, whether heretofore or hereafter adopted by Landlord,
shall not be deemed a waiver of such violation nor prevent a subsequent act,
which would have originally constituted a violation, from having all the force
and effect of an original violation, nor shall the failure of Landlord to
enforce any of said Rules and Regulations against any other tenant of the
Building be deemed a waiver of any such Rules or Regulations. The receipt by
Landlord of Fixed Rent or additional rent with
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knowledge of the breach of any covenant of this Lease shall not be deemed waiver
of such breach. No provision of this Lease shall be deemed to have been waived
by Landlord, or by Tenant, unless such waiver be in writing signed by the
party to be charged. No consent or waiver, express or implied, by Landlord or
Tenant to or of any breach of any agreement or duty shall be construed as a
waiver or consent to or of any other breach of the same or any other agreement
or duty.
8.9 ACCORD AND SATISFACTION
-----------------------
No acceptance by Landlord of a lesser sum than the Fixed Rent and
additional rent then due shall be deemed to be other than an account of the
earliest installment of such rent due, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such
installments or pursue any other remedy provided in this Lease. The delivery of
keys to any employee of Landlord or to Landlord's agent or any employee thereof
shall not operate as a termination of this Lease or a surrender of the
Premises.
8.10 REMEDIES CUMULATIVE
-------------------
The specific remedies to which Landlord may resort under the Terms of
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled in case of
any breach or threatened breach by Tenant of any provisions of this Lease. In
addition to the other remedies provided in this Lease, Landlord shall be
entitled to seek the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of this
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
8.11 PARTIAL INVALIDITY
------------------
If any term of this Lease, or the application thereof to any person or
circumstance, shall to any extent be invalid or unenforceable, the remainder of
this Lease, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
8.12 WAIVERS OF SUBROGATION
----------------------
Landlord and Tenant each hereby release the other from any liability for
any loss or damage to the Premises, the Building, the Land and any property
therein whether or not caused by the
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negligence or other fault of Landlord, Tenant or their respective agents,
employees, subtenants, licensees, invitees or assignee, and any casualty
insurance maintained by Landlord and Tenant with respect to such losses shall
include a clause or endorsement denying to the insurer rights of subrogation
against the other party to the extent waived herein; provided, however, that
this release (i) shall apply notwithstanding the indemnities set forth in
Section 5.6 and (ii) shall be in effect only to the extent and so long as the
applicable insurance policies provide that this release and the inclusion of a
waiver of subrogation clause in such policies shall not affect the right of the
insureds to recover thereunder.
8.13 ENTIRE AGREEMENT
----------------
Reference is made to a certain side letter agreement between Landlord
and Tenant of even date herewith (the "Side Letter"). This Lease, together
with the Side Letter, contains all of the agreements between Landlord and
Tenant with respect to the Premises and supersedes all prior dealings between
them with respect thereto.
8.14 NO AGREEMENT UNTIL SIGNED
-------------------------
The submission of this Lease or a summary of some or all of its provisions
for examination does not constitute a reservation of or option for the
Premises or an offer to lease and no legal obligations shall arise with respect
to the Premises or other matters herein until this Lease is executed and
delivered by Landlord and Tenant.
8.17 NOTICE OF LEASE
---------------
Landlord and Tenant agree not to record this Lease. Both parties will, at
the request of either, execute, acknowledge and deliver a Notice of Lease in
recordable form. Such notice shall contain only the information required by law
for recording.
8.18 TENANT AS BUSINESS ENTITY
-------------------------
If either Landlord or Tenant is a business entity, then the person or
persons executing this Lease on behalf of either such party warrant and
represent that (a) either Landlord or Tenant is duly organized and validly
existing under the laws of the jurisdiction in which such entity was organized;
and (b) either Landlord or Tenant has duly executed and delivered this Lease.
8.19 MISCELLANEOUS PROVISIONS
------------------------
This Lease may be executed in counterparts and shall constitute the
agreement of Landlord and Tenant whether or not their signatures appear in a
single copy hereof. This Lease
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shall be construed as a sealed instrument in accordance with the laws of the
Commonwealth of Massachusetts. The titles are for convenience only and shall
not be considered a part of the Lease. The enumeration of specific examples of
or inclusions in a general provision shall not be construed as a limitation of
the general provision. Nothing herein shall be construed as creating the
relationship between Landlord and Tenant of principal and agent, or of partners
or joint venturers or any relationship, other than landlord and tenant. This
lease and all consents, notices, approvals and all other documents relating
hereto may be reproduced by any party by photographic, microfilm, microfiche or
other reproduction process and the originals thereof may be destroyed; and each
party agrees that any reproductions shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not
the original is in existence and whether or not reproduction was made in the
regular course of business) and that any further reproduction of such
reproduction shall likewise be admissible in evidence.
Reference in this Lease to the act or neglect of a party shall include the
act or neglect of those for whom Landlord or Tenant, as the case may be, is
legally responsible.
ARTICLE IX
----------
LANDLORD'S LIABILITY AND ASSIGNMENT FOR FINANCING
-------------------------------------------------
9.1 LANDLORD'S AND TENANT'S LIABILITY
---------------------------------
Tenant agrees from time to time to look only to Landlord's interest in the
Building for satisfaction of any claim against Landlord hereunder and not to any
other property or assets of Landlord. If Landlord from time to time transfers
its interest in the Building (or part thereof which includes the Premises),
then from and after each such transfer Tenant shall look solely to the
interests in the Building of each of Landlord's transferees for the performance
of all of the obligations of Landlord hereunder. The obligations of Landlord
shall not be binding on any partners (or trustees or beneficiaries) of Landlord
or of any successor, individually, but only upon Landlord's or such successor's
assets described above. Neither Landlord not Tenant shall be liable for any
special, indirect or consequential damages by virtue of a default under this
Lease.
9.2 ASSIGNMENT OF RENTS
-------------------
If, at any time and from time to time, Landlord assigns this Lease or the
rents payable hereunder to the holder of any mortgage on the Premises or the
Building, or to any other party for the purpose of securing financing (the
holder of any such mortgage and any other such financing party are referred to
herein as the "Financing Party"), whether such assignment is
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conditional in nature or otherwise, the following provisions shall apply.
(i) Such assignment to the Financing Party shall not be deemed an
assumption by the Financing Party of any obligations of Landlord hereunder
unless such Financing Party shall, by written notice to Tenant, specifically
otherwise elect;
(ii) Except as provided in (i) above, the Financing Party shall be treated
as having assumed Landlord's obligations hereunder (subject to Section 9.1)
only upon foreclosure of its mortgage (or voluntary conveyance by deed in lieu
thereof) and/or the taking of possession of the premises and, with respect to
obligations regarding return of any security deposit, only upon receipt of the
funds constituting such security deposit;
(iii) Subject to Section 9.1, the Financing Party shall be responsible for
only such breaches under the Lease by Landlord which occur during the period of
ownership or possession by the Financing Party after such foreclosure (or
voluntary conveyance by deed in lieu thereof) and/or taking of possession, as
aforesaid;
(iv) In the event Tenant alleges that Landlord is in default under any of
Landlord's obligations under this Lease, Tenant agrees to give the holder of
any mortgage, by registered mail, a copy of any notice of default which is
served upon the Landlord, provided that prior to such notice, Tenant has been
notified, in writing (whether by way of notice of an assignment of lease,
request to execute an estoppel letter, or otherwise) of the name and address of
any such holder. Tenant further agrees that if Landlord shall have failed to
cure such default within the time provided by law or such additional time as
may be provided in such notice to Landlord, such holder shall have thirty (30)
days after the last date on which Landlord could have cured such default within
which such holder will be permitted to cure such default. If such default
cannot be cured within such thirty day period, then such holder shall have such
additional time as may be necessary to cure such default, if within such thirty
day period such holder has commenced and is diligently pursuing the remedies
necessary to effect such cure (including, but not limited to, commencement of
foreclosure proceedings, if necessary, to effect such cure), in which event
Tenant shall have no right with respect to such default while such remedies are
being diligently pursued by such holder.
In furtherance of the foregoing, Tenant hereby agrees to enter into such
agreements or instruments as may, from time time, reasonably be requested in
confirmation of the foregoing.
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ARTICLE X
---------
SECURITY DEPOSIT
----------------
(a) On the execution of this Lease, Tenant shall furnish to Landlord a
security deposit for the performance of the obligations of Tenant hereunder in
the amount specified therefor in Section 1.1. The form of such security deposit
shall, at Tenant's election, be in the form of a cash deposit or a Letter of
Credit in the form of Exhibit F hereto attached.
(b) With respect to a cash security deposit, such deposit may be mingled
with other funds of Landlord's and no fiduciary relationship shall be created
with respect to such deposit. If Tenant shall fail to perform any of its
obligations under this Lease, Landlord may, but need not, apply the security
deposit to the extent necessary to cure the default, and Tenant shall be
obliged to reinstate such security deposit to the original amount thereof upon
demand. Within thirty (30) days after the expiration or sooner termination of
the Term the security deposit, to the extent not applied, shall be returned to
the Tenant, without interest.
(c) In the event that the security deposit is in the form of a Letter of
Credit, the following provisions shall apply:
Tenant shall maintain the required Letter of Credit in full force and
effect, renewing the Letter of Credit as often as is necessary with the same
bank or financial institution (or a similar bank or financial institution
reasonably acceptable to Landlord in its sole discretion) and upon the same
terms and conditions, not less than thirty (30) days prior to the purported
expiration date of the Letter of Credit. In the event that Tenant fails to
timely renew the Letter of Credit as aforesaid, Landlord shall be entitled to
draw against the entire amount of the Letter of Credit, in which event the
provisions applicable to the cash security deposit shall apply. The Letter of
Credit shall be assignable by Landlord to any party holding the lessor interest
in this Lease, and upon such assignment Landlord shall be relieved from all
liability to Tenant therefor.
Upon the occurrence of any default by Tenant under this lease (and
following any applicable notice or cure period) or in the event that Landlord
terminates this Lease in accordance with the terms hereof following a default
by Tenant, Landlord shall have the right to draw the entire amount of the
Letter of Credit. If Landlord elects to make a partial draw upon the Letter of
Credit, Tenant shall promptly restore the Letter of Credit to its original
amount. Landlord's election to make a partial draw upon the Letter of Credit
shall in no event prejudice or waive Landlord's right to terminate this Lease
if permitted under applicable provisions of this Lease, nor shall such election
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prejudice or waive any other remedy of Landlord reserved under the terms of this
Lease, including the right to draw the entire amount of the Letter of Credit, if
applicable. The Letter of Credit shall be available for payment against the
presentation of a sight draft by the Landlord together with a certificate from
Landlord that Tenant is in default of its obligations hereunder and that
Landlord is entitled, by the terms of this Lease, to draw upon the Letter of
Credit.
ARTICLE XI
----------
SUBORDINATION
-------------
This Lease shall be subject and subordinate to any mortgages or ground
leases that may now or hereafter be placed upon the Building and/or the Land
and to any and all advances to be made under such mortgages or ground leases
and to the interest thereon, and all renewals extensions and consolidations
thereof; provided that Tenant receives a non-disturbance agreement, in a form
reasonably acceptable to Tenant, providing that in the event of foreclosure or
other enforcement of rights under such mortgage or groundlease, such holder or
lessor shall recognize Tenant's rights under this lease and shall not disturb
Tenant's occupancy of the Premises under this Lease, except as expressly
provided in this Lease; provided that any mortgagee or ground lessor may elect
to have this Lease a prior lien to its mortgage or ground lease and in the
event of such election and upon notification by such mortgagee or ground lessor
to Tenant to that effect, this Lease shall be deemed prior in lien to said
mortgage or groundlease. Tenant also agrees this Lease shall survive any merger
of the estates of ground lessor and ground lessee under any ground lease.
ARTICLE XII
-----------
PARKING
-------
Throughout the Term, Tenant shall have the right to use the number of
parking spaces associated with the Building set forth in Section 1.1. Tenant
shall pay additional rent for each space at the monthly rate of ninety dollars
($90) per month per space; thereafter (but in no event earlier than one year
from the Term Commencement Date) Tenant shall pay additional rent for each
space at the monthly rate reasonably determined by Landlord to be the fair
market rent for such parking facilities from time to time provided that such
rate shall not be less less than ninety (90) dollars per month per space. In no
event shall Tenant be charge more per space than that paid by any other tenant
in the Building. Payments of additional rent hereunder shall be made at the
places and times and subject to the conditions specified for payments of Annual
Fixed Rent in Section 2.5.
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ARTICLE XIII
------------
OPTION TO EXTEND
----------------
Tenant shall have the option to extend the Term of this Lease for two
additional periods of five (5) years each upon the terms and conditions set
forth in this Lease, as amended from time to time, including without limitation
any amendments in connection with additional space leased under Rider Section 3.
Annual Basic Rent during each such additional five-year period shall be equal to
95% of the Fair Market Rent (defined below); provided, however, that if such
Fair Market Rent shall be less than or equal to the Annual Basic Rent payable by
Tenant at the end of the original term (with respect to the first extension
period) or at the end of the first extension period (with respect to the second
extension period), the Annual Basic Rent during the applicable five-year period
shall be equal to 100% of Fair Market Rent. For the purposes of this Lease,
"Fair Market Rent" shall mean the fair rental value for space of equivalent size
and character in Cambridge, Massachusetts in the vicinity of the Premises under
a five-year lease, in the case of an extension period under this Article XIII,
or such other time period as may be specified for the space for which the Fair
Market Rent is being determined. Tenant shall exercise such option with respect
to each additional period by giving written notice to Landlord no earlier than
one (1) year prior to the first day of the purported extension period (time
being of the essence)
Should the parties be unable to agree on the Fair Market Rent within thirty
(30) days following Landlord's receipt of Tenant's extension notice, then the
Fair Market Rent shall be determined as follows:
(1) Landlord and Tenant shall, within ten (10) days after the expiration of
said thirty (30) day period, each notify the other of the name and address
of their designated appraiser. Such two appraisers shall, within twenty
(20) days after Landlord and Tenant have so notified each other, make their
determination of the Fair Market Rent in writing and give notice thereof to
each other and to Landlord and Tenant. Such two appraisers shall have
twenty (20) days after the receipt of notice of each other's determinations
to confer with each other and to attempt to reach agreement as to the
determination of the Fair Market Rent. If the two appraisers shall fail to
concur as to such determination within said twenty (20) day period, then
they shall give notice thereof to Landlord and Tenant and shall immediately
designate a third appraiser. If the two appraisers shall fail to agree upon
the designation of such third appraiser within five (5) days after said
twenty (20) day period, then they or either of them shall give notice of
such failure agree to Landlord and Tenant and, if Landlord and Tenant
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fail to agree upon the selection of such third appraiser within five (5)
days after the appraisers appointed by the parties give notice as
aforesaid, then either party on behalf of both may apply to the American
Arbitration Association or any successor thereto, or on its failure,
refusal or inability to act, to a court of competent jurisdiction, for the
designation of such third appraiser.
(2) All appraisers shall be real estate appraisers or consultants who shall
have had at least fifteen (15) years' continuous experience in the business
of appraising real estate in the Boston area.
(3) The third appraiser shall conduct such investigations as he or she may
deem appropriate and shall, within ten (10) days after the date of his or
her designation, make an independent determination of the Fair Market Rent.
(4) If none of the determinations of the appraisers varies from the mean of
the determinations of the other appraisers by more than ten percent (10%),
the mean of the determinations of the three appraisers shall be the Fair
Market Rent. If, on the other hand, the determination of any single
appraiser varies from the mean of the determinations of the other two
appraisers by more than ten percent (10%), the mean of the determinations
of the two appraisers whose determinations are closest shall be the Fair
Market Rent.
(5) The determination of the appraisers, as provided above, shall be
conclusive upon Landlord and Tenant, and shall have the same force and
effect as a judgment made in a court of competent jurisdiction.
(6) Each party shall pay fees, costs and expenses of the appraiser selected
by it and its own counsel fees, and one-half (1/2) of all other expenses
and fees of any such appraisal.
Tenant's rights under this Article XIII shall be personal to Forrester
Research, Inc. and to any Permitted Assignee.
Tenant shall have no right to exercise any such option, and any exercise of
any such option shall be rendered voidable at Landlord's election, if at the
time Tenant exercises any such option Landlord is entitled to terminate the
Lease pursuant to Section 7.1 due to a default on the part of Tenant or
Forrester Research, Inc. has then subleased more than fifty percent (50%) of the
rentable floor area of the Premises (other than to a Permitted Assignee).
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ARTICLE XIV
-----------
HAZARDOUS SUBSTANCES
--------------------
14.1 HAZARDOUS SUBSTANCES.
Tenant shall not cause or permit the release of any hazardous
substance/material or oil (other than the Excepted Materials as hereinafter
defined) into the septic, sewage or other waste disposal system serving the
Premises, the Building or the Land, nor cause or permit the use, generation,
release, disposal or storage of any hazardous substance/material or oil (except
only the use and storage of reasonable quantities of cleaning fluids, office
supplies and other materials used in Tenant's ordinary course of business and
consistent with use of the Premises for the Permitted Uses which may be deemed
hazardous by law, provided the same are used and stored in compliance with any
and all federal, state, and local laws, ordinances and regulations governing the
same (the "Excepted Materials")). In addition, Tenant shall not cause or permit
the transportation of any hazardous substance/material or oil (other than
Excepted Materials) to or from the Premises, the Building or the Land without
the prior written consent of Landlord, and then only in compliance with any and
all federal, state and local laws, ordinances and regulations governing such
transportation. The phrase "hazardous substance/ material or oil" as used in
this Section shall include all "hazardous substances" as defined and used in 42
USC [Section]9601, ET SEQ., as the same may be amended from time to time, or as
defined in any other federal, state or local laws, ordinances and regulations
applicable to the Premises, the Building or the Land. Tenant shall forthwith
give Landlord notice of the accidental or other introduction of any such
hazardous substance/material or oil (other than Excepted Materials), or the
release or threat of release from the Premises, the Building or the Land of any
such hazardous substance/material or oil (other than Excepted Materials).
ARTICLE XV
----------
15.1 Tenant shall have the right to enter the Premises prior to the first
day of the Term for purposes of installation, testing and initial operation of
Tenant's computers and other equipment and the installation or placement of
other property in the Premises and for any work specifically permitted by this
Lease. Tenant's entry shall be upon all the terms and conditions of this lease
except for the payment of Annual Fixed Rent and Additional Rent and shall not
materially affect any work being performed on the Premises by Landlord.
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ARTICLE XVI
-----------
16.1 The side letter attached hereto as Exhibit 3 is herein incorporated
by reference.
ARTICLE XVII
------------
THIRD FLOOR EXPANSION AREA. On the "Third Floor Delivery Date," Landlord
shall deliver to Tenant and Tenant hereby agrees to thereupon lease from
Landlord, as an addition to the Premises upon the terms and conditions then in
effect under this Lease and for the balance of the Term hereof, including any
extensions of the Term, the remaining rentable floor area on the third floor of
the Building as shown on Exhibit H attached hereto (the "Third Floor Expansion
Area"). The "Third Floor Delivery Date" shall be July 1, 1997, provided Landlord
may, by written notice to Tenant on or before January 1, 1997, postpone the
Third Floor Delivery Date to a later date specified in such notice, but not
later than September 1, 1997.
The Third Floor Expansion Area shall be delivered to Tenant, as-is, in the
same condition as existing on the date of this Lease, reasonable wear and tear
excepted, and free of tenants and occupants, provided that, Tenant may, upon
written notice to Landlord within six (6) months prior to the Third Floor
Delivery Date, request Landlord to construct leasehold improvements in the Third
Floor Expansion Area, consistent with the leasehold improvements then existing
in the Premises ("Tenant's Improvement Request") . In the event that Tenant
timely gives Landlord Tenant's Improvement Request, the following provisions
shall govern:
(a) Tenant shall, at Tenant's cost and expense, create plans and
specifications for the proposed leasehold improvements, consistent with Tenant's
obligations with respect to Landlord's Work, and such plans and specifications
shall be subject the Landlord's reasonable review and approval;
(b) Landlord agrees to obtain at least three bids for the
construction of such improvements following procedures similar to those which
were used for the completion of Landlord's Work under Section 3.2;
(c) The provisions of said Section 3.2 shall apply to such
construction, which shall be deemed "Landlord's Work", for the purposes thereof,
and the Third Floor Expansion Area shall be deemed delivered to Tenant and added
to the Premises, and rent shall commence with respect thereto, upon the date
when such improvements are substantially complete (as such term is defined in
Section 3.2 hereof), EXCEPT THAT:
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(1) Landlord and Tenant shall mutually agree on a planning
and construction schedule for the substantial completion of the
proposed leasehold improvements by the designated delivery date;
(2) Tenant shall reimburse Landlord, within thirty (30) days
after the later (i) substantial completion of the Landlord's Work and
(ii) receipt from Landlord of an itemized invoice showing all costs
and expenses associated with the completion of Landlord's Work, in an
amount equal to the amount by which any and all such costs, together
with the cost of any change orders requested by Tenant or any costs
resulting from any Tenant Delays, exceed (a) the product of 5,798
multiplied by the per square foot buildout rate for the Third Floor
Expansion Area, determined by multiplying $6.50 by a fraction, the
numerator of which is the number of months remaining in the term as of
the delivery date for the Third Floor Expansion Area and the
denominator of which is 67 (5,798 x [$6.50 x n/67]), plus (b) the
unexpended portion of the Buildout Allowance, if any;
(3) There shall be no Moving/Plans Allowance with respect to
the Third Floor Expansion Area; and
(4) Tenant shall have no termination right for the untimely
completion of Landlord's Work; and
(d) Landlord and Tenant shall execute an amendment of this Lease for
the purpose of incorporating the Third Floor Expansion Space into the
Premises and by which the Rentable Floor Area of the Premises shall be
increased to 26,446 square feet and the Annual Basic Rent shall be
appropriately increased by multiplying 5,798 by the square foot rental
rates set forth in Section 1.1 hereof.
Notwithstanding anything herein to the contrary, Landlord shall have
no obligation to deliver the Third Floor Expansion Area to Tenant, and
Tenant shall have no right to lease such space, if, upon the earlier of
delivery or Landlord's receipt of Tenant's Improvement Request, (i) this
lease is not then in full force and effect or Landlord is then entitled to
terminate this Lease pursuant to Section 7.1 due to a default on the part
of Tenant, or (ii) fifty percent (50%) or more of the Premises is sublet to
any entity which would not qualify as a Permitted Assignee, or (iii) the
tenant's interest in this Lease is held by any party other than the Tenant
named herein, Forrester Research, Inc., or a Permitted Assignee.
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ARTICLE XVIII
-------------
18.1. TENANT'S OPTION TO LEASE ADDITIONAL SPACE.
------------------------------------------
Provided that Landlord is not then entitled to terminate this Lease
pursuant to Section 7.1 due to a default on the part of Tenant, Tenant shall
have and may exercise the following rights and options during the Term and any
extension thereof, subject to and in accordance with the terms and conditions
hereof. The rights set forth in this Section 18.1 may be exercised only by the
Tenant named herein, Forrester Research, Inc., and any Permitted Assignee, and
provided that at the time any such right is exercised no more than fifty percent
(50%) of the Premises is sublet to any entity which would not qualify as a
Permitted Assignee. Landlord shall have no obligation to make any leasehold
improvements to any additional space leased pursuant to this Article XVIII (any
Upper Floor Expansion Area or any Offer Space), provided, however, if not less
than eighteen (18) months remain in the Term of this Lease (as it may be
extended pursuant to the terms hereof) at the time such space is delivered to
Tenant, then any remaining balance of the Buildout Allowance (having not been
applied to any Landlord's Work pursuant to Section 3.2 or the Third Floor
Expansion Area pursuant to Article XVII) may be applied towards the cost of
leasehold improvements to any such space.
18.1.1. Upper Floor Expansion Options.
------------------------------
Tenant shall have the option (collectively, the Upper Floor Expansion
Options") to lease (i) the entire rentable floor area of the 4th floor of the
Building or (ii) the entire rentable floor area of the 5th and 6th floors of
the Building together, such floors being shown on Exhibit I attached hereto, and
such right to be exercised in each case for the applicable floor or floors, in
its or their entirety, or not at all (each applicable area, an "Upper Floor
Expansion Area"). Landlord hereby represents and Tenant acknowledges that the
4th floor of the Building is presently leased for a term expiring June 30, 2001
and the 5th and 6th floors of the Building are presently leased for a term
expiring June 30, 2001. Tenant further acknowledges that the fulfillment of
Tenant's Upper Floor Expansion Options as set forth herein is subject to the
termination of the existing leases for the 4th floor and the 5th and 6th floors,
respectively, allowing Landlord to terminate such Leases upon six (6) months'
notice to such tenants. Landlord shall not be liable to Tenant for failing to
deliver any Upper Floor Expansion Area as a result of either existing tenant's
failure to vacate or vacate timely, provided Landlord shall use diligent efforts
to terminate such leases and remove such tenants, as appropriate, upon the
exercise of Tenant's Upper Floor Expansion Options as set forth
44
45
herein, which diligent efforts shall include prosecuting legal actions to evict,
if necessary. Landlord shall not to terminate the present lease with respect to
the Upper Floor Expansion Area on the 4th floor effective earlier than December
31, 1998, except due to the exercise of Landlord's rights following a material
uncured default, including a monetary or bankruptcy default, on the part of the
tenant thereunder. Landlord represents that to the best of Landlord's knowledge
neither tenant is currently in default of its lease. Landlord shall be otherwise
free to deal with the Upper Floor Expansion Areas and the tenants thereof as
Landlord shall elect (subject to Tenant's Right of First Offer as set forth in
Section 17.1.2 hereof). Upon the expiration or earlier termination of the
present leases of the Upper Floor Expansion Areas, Tenant shall have no further
option to lease such space pursuant to the terms hereof, but such space shall be
subject to Tenant's Right of First Offer as set forth in Section 17.1.2 hereof.
Tenant may lease any Upper Floor Expansion Area by notice to Landlord
identifying the area or areas (either the 4th floor or the 5th and 6th floors
together, or all three floors) to be leased by Tenant and the time period (not
less than (5) five years) for which such floor or floors will be leased
("Tenant's Upper Floor Expansion Notice"). If not previously exercised as herein
provided, Tenant's right to give such notice with respect to any Upper Floor
Expansion Area shall expire upon the earlier of (i) thirty (30) days after
Landlord's notice to Tenant of the termination or proposed termination of the
occupancy rights of the existing tenant or tenants (if earlier than the stated
expiration dates of said leases), or (ii) on January 1, 2001. Upon the
expiration of the Upper Floor Expansion Options, Tenant shall have no further
option to lease such space pursuant to the terms hereof, but such space shall
be subject to Tenant's Right of First Offer as set forth in Section 17.1.2
hereof.
Landlord shall deliver any Upper Floor Expansion Area to Tenant on the date
which is six (6) months after Landlord's receipt of Tenant's Upper Floor
Expansion Notice, as-is, in the same condition as existing on the date of said
Notice, reasonable wear and tear excepted, and free of tenants and occupants.
Any Upper Floor Expansion Area leased by Tenant shall be added to the Premises
upon all of the terms, covenants and conditions of this Lease, except that, the
Term with respect to the Upper Floor Expansion Area shall be the term specified
in Tenant's Upper Floor Expansion Notice and the Annual Basic Rent and other
charges payable with respect to said space shall be the Fair Market Rent as
defined in this Lease determined as of the date of date of delivery (for the
term specified in Tenant's Upper Floor Expansion Notice and for the space in its
as-is condition) .
Tenant may notify Landlord in writing that Tenant desires to lease the
fifth floor of the Building, but not the sixth floor,
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46
or vice versa, as an Upper Floor Expansion Area, and Landlord shall thereafter
use reasonable efforts to locate a tenant for the floor which Tenant does not
desire to lease the "Other Floor", upon terms and conditions acceptable to
Landlord given the then current market conditions. Such notice shall not be
binding on Landlord or Tenant unless such notice states that Tenant shall be
irrevocably bound by the terms of this paragraph. If Landlord is able to lease
the Other Floor to a suitable tenant (the "Other Floor Lease"), Tenant shall
then lease the floor Tenant desires (the 5th or 6th, as the case may be) (the
"Desired Floor"), pursuant to the terms hereof, as an Upper Floor Expansion
Area, provided that Tenant shall indemnify Landlord for, and the Annual Basic
Rent otherwise payable for the Desired Floor shall be increased to reflect ,any
loss incurred by Landlord as a result of replacing the tenancy for the Other
Floor, including without limitation, (i) the amount, if any, by which the rent
and other charges receivable for the Other Floor under the existing lease exceed
the rent and other charges received under the Other Floor Lease, (ii) any
broker's commission or other transaction fees incurred by Landlord in connection
with the Other Floor Lease, including reasonable legal fees, and (iii) any lost
rent or other charges attributable to time that the Other Floor is not occupied
and generating rent as a result of the transition from the current tenant to the
replacement tenant.
18.1.2. Right of First Offer.
---------------------
If at any time during the Term of this Lease (as it may be extended
pursuant to the terms hereof), there is space in the Building which Landlord
wishes to lease ("Offer Space"), as indicated by (i) a bona fide third party
offer for the Offer Space (which is acceptable to Landlord), or (ii) a Landlord
response to a request for proposal to lease space in the Building, or (iii)
Landlord otherwise proposes to lease space in the Building upon certain terms,
Landlord shall offer to lease to Tenant ("Landlord's Proposal") the Offer Space
upon the terms and conditions set forth in this Lease, except that (i) the
Annual Basic Rent and other charges payable by Tenant therefor shall be the Fair
Market Rent for such Offer Space for the term set forth in Landlord's Proposal,
and (ii) the term and expiration date for the Offer Space shall be as set forth
in Landlord's Proposal. Landlord's Proposal shall include, as applicable, a copy
of either (i) the bona fide third party offer for the Offer Space (ii)
Landlord's response to a request for proposal or (iii) such other specific
leasing proposal of the Landlord. Tenant shall have the right to accept the
Landlord's Proposal and lease such Offer Space only by written notice to
Landlord within ten (10) business days after Tenant receives Landlord's
Proposal, time being of the essence, which acceptance shall constitute a
binding agreement between the parties to lease the Offer Space upon such terms
and conditions. Failure to timely give such notice shall
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47
be deemed a rejection of the Landlord's Offer, whereupon Landlord shall be
then be free to market and lease such Offer Space subject to the remaining
provisions of this Section 18.1.2.
If Tenant does not wish to accept the Landlord's Proposal, Tenant may give
written notice ("Tenant's Different Requirements Notice") to Landlord within
said ten (10) business day period that Tenant would have accepted Landlord's
Proposal for (i) less than all of the Offer Space, (ii) the Offer plus
additional space in the Building, (iii) an earlier term expiration date, and/or
(iv) a later term expiration date. If Tenant timely gives such notice, Landlord
shall be free to market and lease such Offer Space, provided that Landlord shall
submit a new Landlord's Proposal for the Offer Space to Tenant if the Tenant's
Different Requirements Notice indicated that:
(a) Tenant desired to lease less than all of the Offer Space and Landlord
wishes to lease less than all of the Offer Space to a third party;
(b) Tenant desired to lease the Offer Space plus additional space, and
Landlord wishes to lease the Offer Space plus additional space to a third party;
(c) Tenant desired an earlier term expiration date, and Landlord wishes to
lease the Offer Space to a third party for a term shorter than the term set
forth in Landlord's Proposal; or
(d) Tenant desired a later term expiration date, and Landlord wishes to
lease the Offer Space to a third party for a term longer than the term set forth
in Landlord's Proposal.
All of the provisions of this Section 18.1.2 shall apply to such new
Landlord's Proposal.
If Tenant has not timely accepted a Landlord's Proposal and Landlord has
not entered into a binding agreement with a third party with respect to the
Offer Space named therein within four (4) months after delivery to Tenant of
Landlord's Proposal, Landlord shall submit a new Landlord's Proposal to Tenant
before leasing such Offer Space to any third party.
If Tenant validly accepts Landlord's Proposal ( as modified by the terms
hereof), this Lease shall be amended appropriately to give effect thereto and
the Offer Space shall be added to and become a part of the Premises. Landlord
shall deliver the Offer Space to Tenant within thirty (30) days following
Tenant's acceptance of Landlord's Proposal.
Landlord shall not be required to deliver any Landlord's Proposal, and
Tenant shall have no right with respect to any Offer Space, if less than twelve
(12) months remain in the Term of this Lease (as it may be extended pursuant to
the terms hereof).
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Executed to take effect as a sealed instrument.
LANDLORD:
ADVENT REALTY LIMITED PARTNERSHIP II
By: Advent Realty GP II Limited
Partnership, its General Partner
By: Advent Realty, Inc.,
Its General Partner
By: /s/ Arthur I. Segel
-----------------------------
Arthur I. Segel, President
TENANT:
FORRESTER RESEARCH, INC.
By: /s/ George F. Colony
---------------------------------------
George F. Colony, President
48
1
EXHIBIT 11
FORRESTER RESEARCH, INC.
STATEMENT REGARDING COMPUTATION OF PRO FORMA PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------ ----------
1995 1996
------------ ----------
Computation of income per common share:
Pro forma net income........................................ 1,288,266 748,038
========== ==========
Shares:
Weighted average shares outstanding......................... 6,000,000 6,000,000
========== ==========
Add:
Shares issuable from assumed exercise of options as
determined by the application of the treasury stock
method.................................................... 291,299 291,299
========== ==========
Pro forma weighted average common and common equivalent shares
outstanding.................................................... 6,291,299 6,291,299
========== ==========
Pro forma net income per common share............................ $0.20 $0.12
========== ==========
1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 25, 1996
5
1
U.S. DOLLARS
YEAR
DEC-31-1995
JAN-01-1995
DEC-31-1995
1
997,567
6,520,481
5,882,980
120,000
0
14,369,537
1,549,651
493,376
15,425,812
13,378,589
0
60,000
0
0
1,987,223
15,425,812
10,149,514
14,588,812
0
12,805,115
0
62,245
0
2,123,266
96,000
1,783,697
0
0
0
2,027,266
.20
.20
5
1
U.S. DOLLARS
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
1
714,780
8,791,543
7,132,036
160,000
0
17,983,838
2,627,925
700,833
19,910,930
16,870,531
0
60,000
0
0
2,980,399
19,910,930
7,773,834
10,061,848
0
9,036,883
0
40,000
0
1,256,038
65,000
1,024,965
0
0
0
1,191,038
.12
.12
