<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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JDA SOFTWARE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 86-0787377
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
11811 NORTH TATUM BLVD., SUITE 2000
PHOENIX, AZ 85028
(602) 404-5500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
JAMES D. ARMSTRONG
CHIEF EXECUTIVE OFFICER
FREDERICK M. PAKIS
PRESIDENT
JDA SOFTWARE GROUP, INC.
11811 NORTH TATUM BLVD., SUITE 2000
PHOENIX, AZ 85028
(602) 404-5500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
PAUL E. HURDLOW, ESQ. ROBERT M. MATTSON, JR., ESQ.
JEFFREY T. BAGLIO, ESQ. TAMARA POWELL TATE, ESQ.
DAVID R. YOUNG, ESQ. KRISTINA M. JODIS, ESQ.
GRAY CARY WARE & FREIDENRICH MORRISON & FOERSTER LLP
A PROFESSIONAL CORPORATION 19900 MACARTHUR BLVD., STE. 1200
4365 EXECUTIVE DRIVE, SUITE 1600 IRVINE, CA 92612
SAN DIEGO, CA 92121 (714) 251-7500
(619) 677-1400
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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. [ ]
<TABLE>
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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(3)
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.......... 2,817,500 $34.125 $96,147,188 $29,136
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</TABLE>
(1) Includes 367,500 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purposes of computing the registration fee.
(3) Computed pursuant to Rule 457(c) based upon the average high and low sale
prices reported on the Nasdaq National Market for October 31, 1996.
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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<PAGE> 2
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 NOVEMBER 6, 1996
2,450,000 SHARES
JDA SOFTWARE GROUP, INC.
COMMON STOCK
Of the 2,450,000 shares of Common Stock offered hereby, 750,000 shares are
being sold by the Company and 1,700,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "JDAS." On November 4, 1996, the last reported sale price of the
Common Stock on the Nasdaq National Market was $34.00 per share. See "Price
Range of Common Stock."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
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.
<TABLE>
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Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
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<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
Total(3)............................. $ $ $ $
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</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $350,000.
(3) The Company and certain of the Selling Stockholders have granted the
Underwriters a 30-day option to purchase up to 367,500 additional shares of
Common Stock solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the Price to Public will total $ ,
the Underwriting Discount will total $ , the Proceeds to the
Company will total $ and the Proceeds to Selling Stockholders will
total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
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 delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
------------------------
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
PIPER JAFFRAY INC.
November , 1996
<PAGE> 3
<TABLE>
<S> <C> <C>
[COMPUSA LOGO] [BED BATH & BEYOND LOGO]
[WILLIAMS-SONOMA GRANDE
CUISINE LOGO]
[SUNGLASS HUT LOGO] [WILSONS LOGO]
[JDA SOFTWARE GROUP INC. LOGO]
Comprehensive Solutions for the World's Leading Retailers
[INCREDIBLE UNIVERSE LOGO] [HMV GROUP LIMITED LOGO]
[WEST MARINE LOGO] [SEIYU LOGO] [WOOLWORTHS LOGO]
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
The Company has filed domestic and foreign trademark applications for the
symbols JDA, Distributed Store System, DSS, Merchandise Management System, MMS,
Open Database Merchandising System, ODBMS, Win/Distributed Store System and
WinDSS. This Prospectus also includes trade names and trademarks of companies
other than JDA. The above trademarks are the trademarks and properties of their
respective owners.
<PAGE> 4
JDA Software Group
Integrated Enterprise-Wide Software Solutions for Retailers
[Flowchart depicting information flow from corporate headquarters, distribution
center and in-store.]
[Photograph of office building, photograph of forklift operating and photograph
of customer and store clerk.]
[Computer screen shots of the Company's ODBMS, WinDSS, DSS and MMS products.]
[Text attached to computer screen shots: Open DataBase Merchandising System -
ODBMS comprehensive retail enterprise solutions for open, client/server
environment. In limited beta release.
- Enterprise Database
- Data Warehouse
- Inventory Control and Reporting
- Price and Cost Management
- Store Data Interchange
- Purchase Order Management and Merchandise Receiving
- Automated Replenishment
- Retail Stock Ledger
- Warehouse/Distribution Center
WinDSS
Point-of-sale, back office, transaction processing and customer analyzer
applications for Windows in-store systems. In limited beta release.
Distributed Store System - DSS
Point-of-sale, back office, and customer analyzer applications for
traditional in-store systems.
Merchandise Management System - MMS
Comprehensive Retail Enterprise Solution for IBM AS/400 Environments
- Enterprise Database
- Data Warehouse
- Inventory Control and Reporting
- Price and Cost Management
- Store Data Interchange
- Purchase Order Management and Merchandise Receiving
- Automated Replenishment
- Retail Stock Ledger
- Warehouse/Distribution Center
- Accounts Payable
- General Ledger]
Automating the Mission Critical Business Information Requirements of
the Retailing Enterprise
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
THE COMPANY
JDA is a leading international provider of comprehensive enterprise-wide
software solutions that address the mission-critical business information
requirements of retailing organizations. The Company offers two enterprise
product lines: Merchandise Management System ("MMS") for the IBM AS/400 platform
and Open Database Management System ("ODBMS") for open, client/server
environments. MMS is a feature-rich solution that integrates and distributes
data throughout the retailing enterprise and enables management to make more
informed and timely decisions, respond rapidly to changes in the competitive
environment, monitor store-level activity and achieve operational efficiencies.
ODBMS, currently in limited beta installations and recently released for general
commercial availability, is designed as an open (multi-platform), client/server
solution that incorporates the basic functionality of MMS with enhanced
adaptability and scalability. The Company's in-store products, Distributed Store
System ("DSS") and Windows-based WinDSS, currently in limited beta
installations, can be licensed independently or as part of an integrated
enterprise-wide system. These in-store systems capture data at the point of sale
and leverage valuable enterprise-wide information by bringing it to the store
level, the primary point of consumer contact.
JDA's products have been licensed to over 215 customers, with the Company's
consulting services group performing the substantial majority of the
implementations. The Company's consulting services group provides system
planning, design and implementation services to tailor the Company's solutions
to each retailer's unique specifications and to ensure timely and successful
implementation. The Company's solutions have been deployed by a broad range of
retail enterprises worldwide including hard and soft line retailers, warehouse
stores, superstores and grocery stores. The Company's customers include many of
the world's leading specialty retailers such as Bed, Bath and Beyond, CompUSA,
Incredible Universe, Kingfisher Group, Lenscrafters, Melville Corporation,
Natural Wonders, Office Depot, Staples, Starbucks, Sunglass Hut, West Marine
Products and Williams-Sonoma. Revenues from customers outside the U.S. comprised
39% and 43% of total revenues in 1995 and in the first nine months of 1996,
respectively.
Retailers are recognizing the strategic imperative of employing technology
to cut costs, reduce inefficiencies and enhance sales in an environment
dominated by intensifying competition and value conscious consumers. As a
result, they are increasingly demanding highly functional, easy to use and
scalable software applications that can be economically and rapidly adapted for
changes in their mission-critical business functions. The Company's strategy is
to strengthen its position as a leading supplier of comprehensive software
solutions for the retailing marketplace worldwide. Key elements of the Company's
strategy are to: leverage its retail application knowledge base; offer a broad
line of modular, enterprise-wide solutions; extend its solutions to emerging
technology platforms; grow its industry-specific consulting services; leverage
its presence in international markets; and expand revenues and distribution
through strategic relationships.
The Company's principal executive offices are located at 11811 North Tatum
Blvd., Suite 2000, Phoenix, AZ 85028, and the telephone number at that address
is (602) 404-5500. Unless the context otherwise requires, the "Company" or "JDA"
refers to JDA Software Group, Inc. and its consolidated subsidiaries.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 750,000 shares
Common Stock offered by the Selling
Stockholders............................... 1,700,000 shares
Common Stock to be outstanding after the
offering................................... 13,115,237 shares(1)
Use of proceeds.............................. General corporate purposes, including product
development and working capital.
Nasdaq National Market symbol................ JDAS
</TABLE>
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(1) Excludes 1,236,242 shares of Common Stock issuable upon the exercise of
outstanding options at September 30, 1996 at a weighted average exercise
price of $6.98 per share, 532,708 of which were exercisable as of that
date. As a result of a Redemption Agreement with certain of the Company's
founders, exercise of up to 931,242 of these options outstanding under the
Company's 1995 Stock Option Plan will not be dilutive. See
"Capitalization," "Management -- Benefit Plans," "Certain Transactions" and
Note 8 of Notes to Consolidated Financial Statements. Also excludes 504,000
unissued shares that are the subject of a pending arbitration claim. See
"Risk Factors -- Pending Arbitrations" and "Business -- Legal Proceedings."
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
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1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues................... $9,649 $15,974 $20,321 $23,829 $30,084 $20,812 $32,354
Gross profit..................... 6,051 10,354 13,236 16,902 20,144 13,506 20,935
Tax related compensation to
S Corporation stockholders(1).. 1,720 6,900 7,422 0 0 0 0
Income (loss) from operations.... 2,285 (1,262) (401) 9,222 7,504 4,927 8,172
Net income (loss)(1)............. $2,165 $ (951) $(1,438) $ 8,501 $ 5,573 $ 3,829 $ 5,074
PRO FORMA STATEMENTS OF
OPERATIONS DATA:
Pro forma net income(2).......... $ 4,401 $ 2,874 --
Pro forma net income per share... $ 0.42 $ 0.27 $ 0.43
Shares used in per share
calculation(3)................. 10,952 10,952 11,884
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
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ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $23,128 $ 47,003
Total assets.......................................................... 37,047 60,922
Long-term liabilities................................................. 224 224
Stockholders' equity.................................................. 28,582 52,457
</TABLE>
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(1) Prior to March 30, 1995, certain predecessor companies of the Company
elected S Corporation status. The Company's historical statements of
operations data, therefore, do not include a provision for U.S. federal
income taxes for periods prior to March 30, 1995. In addition, in 1991,
1992 and 1993, these same companies charged to expense compensation paid to
their founding stockholders in lieu of S Corporation dividends, in order to
reduce state income tax liability. See "Reorganization and Prior S
Corporation Status" and Note 1 of Notes to Consolidated Financial
Statements. Pro forma net income excluding tax related compensation and
including U.S. federal income tax provisions at statutory rates was $2,464,
$3,424, $4,313 and $5,564 for 1991 through 1994, respectively.
(2) Includes U.S. federal income tax provision at statutory tax rates.
(3) Pro forma net income per share includes common and equivalent shares
outstanding and the estimated number of shares that would be needed to be
issued to repay certain stockholder notes issued in the Reorganization and
to redeem the Series B Redeemable Preferred Stock. Pro forma net income has
been adjusted for the interest applicable to such notes. See Notes 1 and 2
of Notes to Consolidated Financial Statements.
(4) Adjusted to reflect the sale of 750,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $34.00 per share
and the application of the net proceeds therefrom. See "Use of Proceeds."
Except as otherwise noted, information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."
5
<PAGE> 8
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended. Discussion containing
such forward-looking statements may be found in the material set forth under
"Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as within the Prospectus generally. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the risk factors set forth below and the matters set forth in this
Prospectus generally. The Company cautions the reader, however, that this list
of factors may not be exhaustive. The following risk factors should be
considered carefully in addition to the other information contained in this
Prospectus before purchasing the Common Stock offered hereby:
Fluctuations in Quarterly Operating Results. The Company's quarterly
operating results have varied and are expected to continue to vary in the
future. These fluctuations may be caused by many factors, including, among
others: the size and timing of individual orders; competitive pricing pressures;
customer order deferrals in anticipation of new products; variation of
consulting, maintenance and other services as a percentage of total revenues;
timing of introduction or enhancement of products by the Company or its
competitors; market acceptance of new products; technological changes in
platforms supporting the Company's products; changes in networking or
communication technology; changes in the Company's operating expenses; personnel
changes; foreign currency exchange rates; fluctuations in the level of warranty
claims; and general industry and economic conditions.
The Company's business has experienced and is expected to continue to
experience some degree of seasonality due in large part to its retail customers'
buying cycles, with license revenues typically higher in the fourth quarter and
consulting revenues typically higher in the first quarter. Further, software
license gross margin is significantly greater than consulting, maintenance and
other services gross margin. As a result, overall gross margin has fluctuated
significantly based on revenue mix, and the Company expects this trend to
continue.
Historically, a significant portion of the Company's quarterly revenues
have been derived from relatively large licenses to a limited number of
customers, and the Company currently anticipates that this trend will continue.
Any significant cancellation or deferral of customer orders could have a
material adverse effect on the Company's operating results in any particular
quarter.
The Company's expense levels are based, in part, on its expectations as to
future revenues and to a large extent are fixed. Licenses of the Company's
products are typically accompanied by a significant amount of systems
implementation consulting. The Company's consulting resources must be managed to
meet future sales, and additional consulting personnel must be hired and trained
in advance of anticipated license revenues. The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall
and, accordingly, any significant shortfall of demand in relation to the
Company's expectations or any material delay of customer orders would have an
almost immediate adverse effect on the Company's operating results.
As a result of the foregoing and other factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Fluctuations in operating results may also result in volatility in the price of
the shares of the Company's Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview,"
"Business -- Products" and "-- Professional Services."
Dependence on Retail Industry. The Company has derived substantially all
of its revenues to date from the license of software products and related
services to the retail industry, and its future growth is critically dependent
on increased sales to the retail industry. The success of the Company's
customers is intrinsically linked to economic conditions in the retail industry,
which in turn are subject to intense competitive pressures and are affected by
overall economic conditions. In addition, the Company believes the license of
its products is relatively discretionary and generally involves a significant
commitment of capital, because the Company's products are often accompanied by
large scale hardware purchases or commitments. As a result, although the Company
believes its products can assist retailers in a competitive environment, demand
for the Company's
6
<PAGE> 9
products and services could be disproportionately affected by instability or
downturns in the retail industry which may cause customers to exit the industry
or delay, cancel or reduce any planned expenditures for information management
systems and software products. The Company also believes that the retail
industry is experiencing a period of increased consolidation, which has in the
past and may in the future affect the demand for the Company's products. Recent
results in the overall retail industry have been disappointing, and the Company
anticipates that existing or prospective customers may be experiencing or may in
the future experience severe financial hardship. There can be no assurance that
the Company will be able to continue its revenue growth or sustain its
profitability on a quarterly or annual basis or that its results of operations
will not be adversely affected by continuing or future downturns in the retail
industry. Any resulting decline in demand for the Company's products and
services would have a material adverse effect on the Company's business, results
of operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- Industry
Background" and "-- Company Strategy."
Management of Growth. The growth in the size and complexity of the
Company's business and expansion of its product lines and its customer base have
placed and are expected to continue to place a significant strain on the
Company's management and operations. The Company anticipates that continued
growth, if any, will require it to recruit and hire a substantial number of new
employees, including consulting and product development personnel, both
domestically and abroad. In particular, the Company's ability to undertake new
projects and increase license revenues is substantially dependent on the
availability of the Company's consulting personnel to assist in the licensing
and implementation of the Company's solutions. The Company will not be able to
continue to increase its business at historical rates without adding significant
numbers of trained consulting personnel. Accordingly, the Company is currently
attempting to significantly increase consulting capacity in anticipation of
future revenues. In their first year of employment by the Company, new
consulting personnel typically spend between 2 to 10 weeks in training, during
which period they do not generally generate revenues. To the extent anticipated
revenues fail to materialize following the hiring and training of new personnel,
the Company's operating results would be adversely affected. There can be no
assurance that qualified personnel will be located, retained or trained in a
timely manner. In the event the Company is unable to increase sufficiently its
consulting capacity, the Company may be required to forego licensing
opportunities or become increasingly dependent on systems integrators and
professional consulting firms to provide implementation services for its
products. The Company's ability to compete effectively and to manage future
growth, if any, also will depend on its ability to continue to implement and
improve operational, financial and management information systems on a timely
basis and to expand, train, motivate and manage its work force. Accordingly, the
Company's future operating results will depend on the ability of its management
and other key employees to continue to implement and improve its systems for
operations, financial control and information management, to recruit, train and
manage its employee base, in particular its direct sales force and consulting
services organization, and to deal effectively with third-party systems
integrators and consultants. There can be no assurance that the Company will be
able to manage or continue to manage its recent or any future growth, and any
failure to do so would have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Company Strategy"
and "-- Professional Services."
Ability to Attract and Retain Technical Personnel. The Company is heavily
dependent upon its ability to attract, retain and motivate skilled technical and
managerial personnel, especially highly skilled engineers involved in ongoing
product development and consulting personnel who assist in the license and
implementation of the Company's solutions. In particular, the Company's ability
to install, maintain and enhance its enterprise products is substantially
dependent upon its ability to locate, hire and train qualified software
engineers. The market for such individuals is intensely competitive,
particularly in foreign markets. In this regard the Company, as part of its
strategy, plans to significantly increase the number of consulting personnel in
connection with the roll-out of its ODBMS and WinDSS products and to support
continued development and implementation of its MMS product line. Given the
critical role of the Company's product development and consulting staffs, the
inability to recruit successfully or the loss of a significant part of its
product development or consulting staffs would have a material adverse effect on
the Company. The software industry is characterized by a high level of employee
mobility and aggressive recruiting of skilled personnel. There can be no
assurance that the Company will be able to retain its current personnel, or that
it will be able to attract,
7
<PAGE> 10
assimilate or retain other highly qualified technical and managerial personnel
in the future. The inability to attract, hire or retain the necessary technical
and managerial personnel could have a material adverse effect upon the Company's
business, operating results and financial condition. See
"Business -- Professional Services," "-- Employees" and "Management."
Uncertain Market for ODBMS, WinDSS. The Company has recently released
ODBMS in limited commercial installations and WinDSS in limited beta
installations. Both products are open, client/server solutions. The retail
industry has only recently begun limited adoption of open, client/server
information systems. The Company believes that retailers in general may be
relatively cautious in adopting new technologies. In addition, many retailers do
not have the personnel or staff required to implement, operate and maintain an
open, client/server system, and the difficulties associated with implementing
new technology may slow or prevent adoption of the Company's new products.
Because the market for these products is new and evolving, it is difficult to
assess or predict with any assurance the growth rate, if any, and size of this
market. There also can be no assurance that the market for ODBMS or WinDSS will
develop, or that either of these products or related services will be adopted or
utilized. If the market fails to develop, develops more slowly than expected or
becomes saturated with competitors, or if the Company's products do not achieve
market acceptance, the Company's business, operating results and financial
condition will be materially adversely affected.
The Company is directing a significant amount of its product development
expenditures to the ongoing development of ODBMS and WinDSS and a significant
amount of its sales and marketing resources to the full commercial introduction
of ODBMS and WinDSS. A significant effort is still required to develop and
release additional application modules for these products. The Company has
limited experience in developing and marketing products for open system
applications, and ODBMS and WinDSS have not yet been fully implemented in
customers' environments. As a result, there can be no assurance that ODBMS and
WinDSS will not require substantial software enhancements or modifications to
satisfy performance requirements of customers or to fix design defects or
previously undetected errors. It is common for complex software programs such as
ODBMS and WinDSS to contain undetected errors when first released, which are
discovered only after the product has been used over time with different
computer systems and in varying applications and environments. While the Company
is not aware of any significant technical problems with these products, there
can be no assurance that errors will not be discovered, or if discovered, that
they will be successfully corrected on a timely basis, if at all. The Company's
future business growth is substantially dependent on the continued development,
introduction and market acceptance of ODBMS and WinDSS. Should the Company fail
to release a fully commercial version of WinDSS, if customers experience
significant problems with implementation of ODBMS and WinDSS or are otherwise
dissatisfied with the functionality or performance of ODBMS or WinDSS, or if
either of these products fails to achieve market acceptance for any reason, the
Company's business, operating results and financial condition will be materially
adversely affected. See "Business -- Products" and "-- Product Development and
JDA Technology."
Product Concentration. The Company has derived substantially all of its
revenues from the license of a limited number of information management software
applications for the retail industry and consulting and maintenance services
related to such applications. Software licenses and related consulting,
maintenance and other services revenues from the Company's MMS product line
represented over 90% of the Company's revenues in each of the three most recent
fiscal years, and 86% for the nine months ended September 30, 1996. The Company
expects that revenues related to this product will continue to account for a
substantial but reduced percentage of total revenues as market acceptance of the
Company's newer products increases. The life cycle of the MMS product line is
difficult to estimate due in large measure to the potential effect of new
products, applications and product enhancements, including those introduced by
the Company, changes in the retail industry and future competition. The Company
expects that revenues attributable to its MMS and ODBMS enterprise products will
comprise the substantial majority of software license revenues for the
forseeable future. Any decline in MMS revenues, to the extent not offset by
increases in revenues from other products, would have a material adverse effect
on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview," "Business -- Products" and "-- Professional Services."
8
<PAGE> 11
International Operations. In 1993, 1994, 1995 and the nine months ended
September 30, 1996, international revenues, which include revenues from
international subsidiaries and export sales, comprised approximately 31%, 28%,
39% and 43%, respectively, of the Company's revenues. The Company expects that
international revenues will continue to account for a significant percentage of
the Company's revenues for the foreseeable future, and the Company intends to
continue expansion of its international infrastructure. Although the Company
maintains operations in the U.K., Singapore, Canada, Chile, Mexico and Germany,
and is currently investing significant resources in its international
operations, there can be no assurance that the Company will be successful in
expanding its international operations. The Company anticipates that continued
growth of its international operations will require the Company to recruit and
hire a number of new consulting, sales and marketing and support personnel in
the countries in which the Company has established or will establish operations.
In addition, the Company has only limited experience in developing localized
versions of its products and in marketing and distributing its products
internationally. International rollout of the Company's products requires
significant investment by the Company in advance of anticipated future revenues.
The opening of new offices by the Company typically results in initial
recruiting and training expenses and reduced labor efficiencies associated with
the introduction of products to a new market. In particular, successful
introduction of the Company's product into new markets requires the Company to
locate and hire qualified local sales and consulting personnel and train them in
the operation of the Company's products. There can be no assurance that the
countries in which the Company operates will have a sufficient pool of qualified
personnel for the Company to hire from, or that the Company will be successful
at hiring, training or retaining such personnel. In addition, there can be no
assurance that the Company will be able to successfully localize, market, sell
and deliver its products internationally. The inability of the Company to
successfully expand its international operations in a timely manner could
materially adversely affect the Company's business, operating results and
financial condition.
There are a number of other risks inherent in the Company's international
business activities, including unexpected changes in regulatory requirements,
tariffs and other trade barriers, costs and risks of localizing products for
foreign countries, longer accounts receivable payment cycles, potentially
adverse tax consequences, currency fluctuations, repatriation of earnings and
the burdens of complying with a wide variety of foreign laws. In addition,
consulting, maintenance and other services in support of international licenses
typically have lower gross margins than those achieved domestically due to lower
prevailing billing rates in certain of the Company's international markets.
Therefore, planned growth in the Company's continued operations may result in
further declines in gross margin on consulting, maintenance and other services.
To the extent the Company's international operations expand, the Company expects
that an increasing portion of its international license and consulting,
maintenance and other services revenues will be denominated in foreign
currencies, subjecting the Company to fluctuations in foreign currency exchange
rates. The Company does not currently engage in foreign currency hedging
transactions. However, as the Company continues to expand its international
operations, exposures to gains and losses on foreign currency transactions may
increase. The Company may choose to limit such exposure by entering into forward
foreign exchange contracts or engaging in similar hedging strategies. There can
be no assurance that any currency exchange strategy would be successful in
avoiding exchange-related losses. In addition, revenues of the Company earned in
various countries where the Company does business may be subject to taxation by
more than one jurisdiction, thereby adversely affecting the Company's earnings.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Company Strategy" and "-- Sales and Marketing."
Competition. The market for retail information systems software is
intensely competitive. The Company believes the principal competitive factors in
such market are product quality, reliability, performance and price, vendor and
product reputation, financial stability, features and functions, ease of use and
quality of support. A number of companies offer competitive products addressing
certain of the Company's target markets. In the enterprise systems market, the
Company competes with in-house systems developed by the Company's targeted
customers and with third-party developers such as Intrepid, Island Pacific,
Radius PLC, Retek (which agreed in October 1996 to be acquired by HNC Software,
Inc.), STS Systems and Richter Management Services, among others. In addition,
the Company believes that new market entrants may attempt to develop fully
integrated enterprise-level systems targeting the retail industry. In
particular, SAP Aktiengesellschaft announced in August 1996 its intention to
release an integrated client/server enterprise
9
<PAGE> 12
system competitive with the Company's products. In the in-store systems market,
which is more fragmented than the enterprise market, the Company competes with
major systems manufacturers such as AT&T/NCR, IBM and ICL, as well as software
companies such as Applied Intelligence Group, CRS Business Computers, Inc., Post
Software International, STS Systems, GERS Retail Systems and Gateway Data
Sciences Corporation, among others. In the market for consulting services, the
Company competes with major systems integrators such as Andersen Consulting,
Deloitte & Touche LLP, Ernst & Young LLP and Price Waterhouse's Management
Horizons Division, as well as independent consulting firms such as the ISSC
Division of IBM. Many of the Company's existing competitors, as well as a number
of potential new competitors, have significantly greater financial, technical
and marketing resources than the Company. There can be no assurance that the
Company will be able to compete successfully against its current or future
competitors or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition. See
"Business -- Competition."
Technological Change; Market Acceptance of Evolving Standards. The
computer software industry is subject to rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
the Company's position in its existing market or other markets that it may enter
could be eroded rapidly by technological advancements not embraced by the
Company. The life cycles of the Company's products are difficult to estimate.
The products must keep pace with technological developments, conform to evolving
industry standards and address increasingly sophisticated customer needs. In
particular, the Company believes that it must continue to respond quickly to
users' needs for broad functionality and multi-platform support and to advances
in hardware and operating systems. Introduction of new products embodying new
technologies and the emergence of new industry standards could render the
Company's products obsolete and unmarketable. There can be no assurance that the
Company will not experience future difficulties that could delay or prevent the
successful development, introduction and marketing of new products, or that new
products and product enhancements will meet the requirements of the marketplace
and achieve market acceptance. If the Company is unable to develop and introduce
products in a timely manner in response to changing market conditions or
customer requirements, the Company's business, operating results and financial
condition would be materially adversely affected.
In addition, the Company strives to achieve compatibility between the
Company's products and retailing systems platforms the Company believes are or
will become popular and widely adopted. The Company invests substantial
resources in development efforts aimed at achieving such compatibility. Any
failure by the Company to anticipate or respond adequately to technology or
market developments could result in a loss of competitiveness or revenue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview," "Business -- Products," "-- Professional Services" and
"-- Product Development and JDA Technology."
Dependence on Key Personnel. The Company's performance is substantially
dependent on the performance of its executive officers and key employees. In
particular, the services of James D. Armstrong, the Company's Chief Executive
Officer, and Frederick M. Pakis, the Company's President, would be difficult to
replace. The Company does not have in place "key person" life insurance policies
on any of its employees. The loss of the services of any of its executive
officers or other key employees could have a material adverse effect on the
business, operating results and financial condition of the Company. See
"Management."
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology, including its
software source code. The Company relies on a combination of trade secret,
nondisclosure and copyright law, which may afford only limited protection. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. The Company presently has no patents or
patent applications pending. There can be no assurance that others will not
develop technologies that are similar or superior to the Company's technology.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties, including customers who receive listings of the source code for the
Company's products pursuant to the terms of their license agreements with the
Company, may attempt to reverse engineer or copy aspects of the Company's
products or to obtain and use information
10
<PAGE> 13
that the Company regards as proprietary. As a result, there can be no assurance
that unauthorized use of the Company's technology may not occur.
Certain technology used by the Company's products is licensed from third
parties, generally on a non-exclusive basis. The termination of any such
licenses, or the failure of the third-party licensors to adequately maintain or
update their products, could result in delay in the Company's ability to ship
certain of its products while it seeks to implement technology offered by
alternative sources, and any required replacement licenses could prove costly.
While it may be necessary or desirable in the future to obtain other licenses
relating to one or more of the Company's products or relating to current or
future technologies, there can be no assurance that the Company will be able to
do so on commercially reasonable terms or at all.
In the future the Company may receive notices claiming that it is
infringing the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims or
legal proceedings by third parties with respect to current or future products.
In addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Any such claim could be time
consuming, result in costly litigation, cause product shipment delays or force
the Company to enter into royalty or license agreements rather than dispute the
merits of such claims and could have a material adverse effect on the Company's
business, operating results and financial condition. See
"Business -- Proprietary Rights."
Product Defects; Product Liability; Risk of Integration Difficulties. The
Company's software products are highly complex and sophisticated and could, from
time to time, contain design defects or software errors that could be difficult
to detect and correct. In addition, implementation of the Company's products
generally involves a significant amount of customer-specific customization, and
may involve integration with systems developed by third parties. Despite
extensive testing, the Company from time to time has discovered defects or
errors in its products or custom modifications only after its systems have been
used by many customers. The Company has also experienced delays in shipment of
products during the period required to correct such errors. In addition, the
Company or its customers may from time to time experience difficulties relating
to the integration of the Company's products with other hardware or software in
the customer's environment that are unrelated to defects in the Company's
products. There can be no assurance that such defects, errors or difficulties
will not cause future delays in product introductions and shipments, result in
increased costs and diversion of development resources, require design
modifications or impair customer satisfaction with the Company's products. Since
the Company's products may be used by its customers to perform mission-critical
functions, design defects, software errors, misuse of the Company's products,
incorrect data from external sources or other potential problems within or out
of the Company's control that may arise from the use of the Company's products
could result in financial or other damages to the Company's customers. The
Company does not maintain product liability insurance. Although the Company's
license agreements with its customers typically contain provisions designed to
limit the Company's exposure to potential claims as well as any liabilities
arising from such claims, such provisions may not effectively protect the
Company against such claims and the liability and costs associated therewith.
Accordingly, any such claim could have a material adverse effect upon the
Company's business, operating results and financial condition. The Company
provides warranties for its products for a period of time (usually 6 or 12
months) after the software is installed and, if applicable, accepted by the
licensee. The Company's license agreements generally do not permit product
returns by the customer, and product returns and warranty expense for 1993,
1994, 1995 and the nine months ended September 30, 1996 represented less than
two percent of total revenues during each of such periods. However, no assurance
can be given that product returns will not increase as a percentage of total
revenues in future periods. See "Business -- Product Development and JDA
Technology."
Pending Arbitrations. In February 1996, a dispute arose with one of the
Company's customers. The Company initiated arbitration proceedings against the
customer in an effort to collect approximately $100,000 in remaining amounts due
pursuant to its contract with the customer. The customer counterclaimed for a
full refund of the approximately $985,000 previously paid to the Company, and
the Company is vigorously defending such counterclaim. The arbitration
proceedings remain ongoing, and the parties are engaged in settlement
negotiations. Although management believes, based upon information currently
available, that a settlement can be reached upon terms acceptable to the
Company, there can be no assurance that such will be
11
<PAGE> 14
the case or that any settlement can be reached in this matter. The Company does
not believe that the ultimate outcome of this proceeding will have a material
adverse effect on the Company.
In May 1996, Niederhoffer and Niederhoffer, Inc. ("Niederhoffer") filed a
demand for arbitration asserting a claim against JDA Software Services, Inc., a
wholly owned subsidiary of the Company. Niederhoffer's claims are based upon an
agreement between it and JDA Software Services, Inc. dated April 6, 1990 (the
"Finder's Agreement"). Niederhoffer alleges entitlement to a finder's fee in
connection with the purchase of convertible preferred stock in the Company in
March 1995 by six investment funds advised by TA Associates, Inc. and its
affiliates ("TA Investment"), and a claim for Common Stock arising from the
related establishment of the Company and reorganization of the Company's wholly
owned subsidiaries pursuant to which Company Common Stock was issued to such
subsidiaries' stockholders (the "Reorganization"). In the arbitration,
Niederhoffer claims damages of approximately $770,000 and asserts a right to
504,000 shares of the Company's Common Stock.
The Company is contesting both the applicability of the Finder's Agreement
to the TA Investment and the related Reorganization and the measurement of the
damages as claimed by Niederhoffer. The arbitration is expected to be concluded
in December 1996, with the arbitrators' decision rendered following conclusion
of the arbitration.
The Company and its counsel believe that the Company has meritorious
defenses to Niederhoffer's claims, and the Company intends to vigorously defend
its position in the arbitration. However, since the results of arbitration
proceedings are inherently unpredictable, no assurance can be given with respect
to the arbitration's outcome or the total expense or possible damages, if any,
that may be incurred in the arbitration proceedings or as a result of a
settlement or an arbitration award. In the event the arbitration panel concludes
that the TA Investment and related Reorganization fell within the scope of the
Finder's Agreement, and further agrees with Niederhoffer's assessment of
damages, the Company could be required to make cash payments as well as issue to
Niederhoffer up to 504,000 shares of the Company's Common Stock or make an
additional cash payment to Niederhoffer based upon the arbitrators'
determination of the value of such shares. The Company believes that an
arbitrators' decision to award up to 504,000 shares of Common Stock to
Niederhoffer based upon a determination that such shares are issuable as a
result of the TA Investment would be treated as a charge to additional paid-in
capital. Such charge would reduce additional paid-in capital by the amount of
any cash paid plus the value of the Common Stock issued, valued as of the date
of the TA Investment. However, any cash awarded in lieu of shares in excess of
the value of such shares at the date of the TA Investment would be recorded as
litigation expense and could have an immediate and material adverse effect on
the Company's operating results. In addition, any cash awarded to Niederhoffer
would reduce the Company's available liquidity. Any shares of Common Stock
awarded to Niederhoffer would have a dilutive effect on the Company's earnings
per share.
Possible Volatility. Since the Company's initial public offering in March
1996, the price of the Company's Common Stock has experienced large
fluctuations. Future announcements concerning the Company or its competitors,
quarterly variations in operating results, announcements of technological
innovations, the introduction of new products or changes in product pricing
policies by the Company or its competitors, proprietary rights or other
litigation (including without limitation the arbitration proceedings described
in "-- Pending Arbitrations"), changes in earnings estimates by analysts or
other factors could cause the market price of the Common Stock to fluctuate
substantially. In addition, stock prices for many technology companies fluctuate
widely for reasons which may be unrelated to operating results. These
fluctuations, as well as general economic, market and political conditions such
as recessions or military conflicts, may materially and adversely affect the
market price of the Company's Common Stock. See "Price Range of Common Stock."
Control by Existing Stockholders; Anti-takeover Effects. The Company's
executive officers, directors and their affiliates will beneficially own
approximately 54.9%, and Messrs. Armstrong and Pakis will collectively
beneficially own 37.0%, of the outstanding shares of the Company's Common Stock
immediately following this offering, assuming no exercise of the Underwriters'
over-allotment option. As a result, these
12
<PAGE> 15
stockholders may be able to elect a majority of the Company's directors, and
will continue to have significant influence over the affairs of the Company.
Such concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which will prohibit the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of the Company. Further, the Company's Board of
Directors has the authority to issue up to 2,000,000 shares of Preferred Stock
and to fix the rights, preferences, privileges and restrictions of those shares,
including voting rights, without any further vote or action by the stockholders.
The rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of the Preferred Stock that may
be issued in the future. The ability of the Board of Directors to issue shares
of Preferred Stock without further stockholder approval, as well as certain
other provisions of the Company's Certificate of Incorporation and Bylaws and of
Delaware law, could have the effect of delaying, deferring or preventing a
change in control of the Company. See "Principal and Selling Stockholders" and
"Description of Capital Stock."
Broad Discretion over Use of Proceeds. Because all the net proceeds to the
Company of this offering are allocated to general corporate purposes, including
product development and working capital, the Company's management will have
broad discretion over the application of these funds. There can be no assurance
that management will make such application effectively or in a manner that will
not result in a material adverse effect on the Company or its results of
operations. See "Use of Proceeds."
Shares Eligible for Future Sale; Registration Rights. Upon completion of
this offering, the Company will have outstanding an aggregate of 13,115,237
shares of Common Stock. Immediately upon the effectiveness of this offering, the
2,450,000 shares offered hereby and approximately 3,713,928 additional shares
already outstanding will be freely tradeable. Sale of substantial amounts of
Common Stock in the public market following the offering made hereby could have
an adverse effect on the price of the Common Stock. Of the remaining 6,932,824
shares currently issued and outstanding, 6,875,395 shares are subject to lock-up
agreements that will expire 180 days from the effective date of this offering
and 190,201 shares are subject to lock-up agreements that will expire 90 days
from the effective date of this offering. Of the 6,875,395 shares subject to
180-day lock-up agreements, 981,242 shares are subject to redemption by the
Company in connection with its 1995 Stock Option Plan. See
"Management -- Benefit Plans." The remaining 5,894,153 shares become eligible
for sale following expiration of such 180-day lock-up agreements, subject to the
limitations of Rule 144. Montgomery Securities may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements.
As of the effective date of the Registration Statement, the holders of
2,030,000 shares will be entitled to certain demand registration rights with
respect to such shares. In addition, in connection with a pending claim in
arbitration, registration rights are being sought and could be awarded with
respect to 504,000 unissued shares of Common Stock. See "Risk Factors -- Pending
Arbitrations" and "Business -- Legal Proceedings." If such holders, by
exercising their demand registration rights, cause a large number of shares to
be registered and sold in the public market, such sales could have an adverse
effect on the market price for the Company's Common Stock. If the Company were
required to include in a Company-initiated registration shares held by such
holders pursuant to the exercise of their piggyback registration rights, such
sale might have an adverse effect on the Company's ability to raise needed
capital in the capital markets at a time and price favorable to the Company. See
"Shares Eligible for Future Sale" and "Description of Capital Stock."
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 750,000 shares of
Common Stock offered by the Company hereby, at an assumed public offering price
of $34.00 per share, are estimated to be approximately $23,875,000 ($26,842,600
if the Underwriters' over-allotment option is exercised in full) after deducting
the estimated underwriting discount and offering expenses payable by the
Company. The Company will not receive any proceeds from the sale of the shares
of Common Stock offered by the Selling Stockholders.
The Company expects the net proceeds to be used for general corporate
purposes including product development and working capital. Pending such uses,
the proceeds will be invested in short-term, investment-grade, interest-bearing
securities. A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. While from time to time the Company evaluates potential
acquisitions of such businesses, products or technologies, there are no present
understandings, commitments or agreements with respect to any acquisition of
other businesses, products or technologies.
REORGANIZATION AND PRIOR S CORPORATION STATUS
Prior to March 30, 1995, the business currently conducted by the Company
was conducted by five affiliated companies: JDA Software Services, Inc., a
Delaware corporation ("JDA Services"); JDA International Ltd., a U.K.
corporation ("JDA International"); JDA Software, Inc., an Arizona corporation
("JDA Software"); JDA Worldwide, Inc., an Arizona corporation ("JDA Worldwide");
and JDA Asia Pte Ltd., a Singapore corporation ("JDA Asia") (together, the
"Predecessor Companies"). Effective March 30, 1995 (the "Effective Date"), the
Predecessor Companies were consolidated under the Company in a holding company
structure (the "Reorganization") in connection with an investment in the Company
by six investment funds advised by TA Associates, Inc. and its affiliates (such
funds defined as "TA Associates"). See "Principal and Selling Stockholders" and
Note 1 of Notes to Consolidated Financial Statements.
From January 1991 to the Effective Date, certain of the Predecessor
Companies elected to be treated as S Corporations under Subchapter S of the
Internal Revenue Code and comparable state tax laws. As a result, until the
Effective Date the earnings of the Predecessor Companies were attributable, with
certain exceptions, for federal and certain state income tax purposes to their
existing stockholders rather than to the companies.
Dividends of approximately $2.7 million, $3.2 million and $3.9 million were
paid to the S Corporations' stockholders in 1993, 1994 and 1995, respectively.
In addition to these stockholder dividends, the S Corporations paid tax related
compensation to their stockholders of $7.4 million in 1993. Further, on the
Effective Date such stockholders received as part of the Reorganization
distributions of cash and notes aggregating approximately $20 million, which
notes were subsequently repaid from the proceeds of the Company's initial public
offering in March 1996. Tax related dividends and tax related compensation paid
to S Corporation stockholders were discontinued as of the Effective Date. See
"Certain Transactions."
DIVIDEND POLICY
The Company anticipates that all earnings subsequent to the closing of this
offering, if any, will be retained to finance the growth and development of the
business and, therefore, the Company does not anticipate paying cash dividends
on its Common Stock in the foreseeable future. In the past certain of the
Predecessor Companies paid dividends to their S Corporation stockholders. See
"Reorganization and Prior S Corporation Status."
14
<PAGE> 17
PRICE RANGE OF COMMON STOCK
The Company effected its initial public offering on March 15, 1996 at a
price of $13.00 per share. The Company's Common Stock is quoted on the Nasdaq
National Market under the symbol "JDAS." The following table sets forth, for the
periods indicated, the high and low sale prices per share of the Common Stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
CALENDAR 1996 HIGH LOW
- ------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
1st Quarter (from March 15, 1996).............................................. $13 1/4 $11 1/4
2nd Quarter.................................................................... $26 $11 7/8
3rd Quarter.................................................................... $29 $14 1/4
4th Quarter (through November 4, 1996)......................................... $39 3/8 $27
</TABLE>
On November 4, 1996, the last reported sales price of the Common Stock on
the Nasdaq National Market was $34.00 per share. As of September 30, 1996, there
were approximately 99 shareholders of record of the Common Stock.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, and as adjusted to give effect to the receipt and
application by the Company of the estimated net proceeds from the sale of
750,000 shares of Common Stock offered hereby at an assumed offering price of
$34.00 per share after deducting the estimated underwriting discount and
offering expenses payable by the Company. The table should be read in
conjunction with the Consolidated Financial Statements of the Company and
related Notes thereto included elsewhere in this Prospectus. See "Use of
Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations, less current portion......................... $ 116 $ 116
Stockholders' equity:
Common stock, $.01 par value; 18,000,000 shares authorized; 12,365,237
outstanding(1)..................................................... 124 131
Additional paid-in capital............................................ 41,369 65,237
-------- --------
Retained earnings (deficit)........................................... (12,955) (12,955)
-------- --------
Foreign currency translation adjustment............................... 44 44
-------- --------
Total stockholders' equity.................................... 28,582 52,457
-------- --------
Total capitalization.......................................... $ 28,698 $ 52,573
======== ========
</TABLE>
- ---------------
(1) Excludes (i) 1,236,242 shares of Common Stock issuable upon the exercise of
stock options outstanding as of September 30, 1996, at a weighted average
exercise price of $6.98 per share, the issuance of 931,242 of which will
not cause further dilution, (ii) 50,000 shares of Common Stock reserved for
issuance under the 1995 Stock Option Plan, (iii) 945,000 remaining shares
of Common Stock reserved for issuance under the 1996 Employee Stock Option
Plan, (iv) 150,000 shares of Common Stock reserved for issuance under the
1996 Outside Directors Stock Option Plan and (v) 161,555 remaining shares
of Common Stock reserved for issuance under the 1996 Employee Stock
Purchase Plan. Also excludes 504,000 unissued shares that are the subject
of a pending arbitration claim. See "Risk Factors -- Pending Arbitrations,"
"Business -- Legal Proceedings," "Management -- Benefit Plans," "Certain
Transactions" and Note 8 of Notes to Consolidated Financial Statements.
16
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the five years
ended December 31, 1995 and as of December 31, 1991, 1992, 1993, 1994 and 1995
were derived from the audited Consolidated Financial Statements of the Company.
The financial statements of the Company for the three years ended December 31,
1995 and as of December 31, 1994 and 1995 were audited by Deloitte & Touche LLP,
independent certified public accountants, and are included elsewhere in this
Prospectus. The selected consolidated financial data as of September 30, 1996
and for the nine months ended September 30, 1995 and 1996 have been derived from
the unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus. The unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results of operations for the periods presented.
The data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Software licenses........................ $4,136 $ 8,119 $ 9,620 $12,221 $15,253 $ 9,499 $16,153
Consulting, maintenance and other
services............................... 5,513 7,855 10,701 11,608 14,831 11,313 16,201
------ ------- ------- ------- ------- ------- -------
Total revenues.................... 9,649 15,974 20,321 23,829 30,084 20,812 32,354
Cost of revenues:
Software licenses........................ 0 0 305 57 159 148 266
Consulting, maintenance and other
services............................... 3,598 5,620 6,780 6,870 9,781 7,158 11,153
------ ------- ------- ------- ------- ------- -------
Total cost of revenues............ 3,598 5,620 7,085 6,927 9,940 7,306 11,419
------ ------- ------- ------- ------- ------- -------
Gross profit............................... 6,051 10,354 13,236 16,902 20,144 13,506 20,935
------ ------- ------- ------- ------- ------- -------
Operating expenses:
Product development...................... 343 953 1,345 1,923 3,512 2,384 4,593
Sales and marketing...................... 638 1,420 2,404 3,228 5,199 3,588 4,783
General and administrative............... 1,065 2,343 2,466 2,529 3,929 2,607 3,387
Tax related compensation to S Corporation
stockholders(1)........................ 1,720 6,900 7,422 0 0 0 0
------ ------- ------- ------- ------- ------- -------
Total operating expenses.......... 3,766 11,616 13,637 7,680 12,640 8,579 12,763
------ ------- ------- ------- ------- ------- -------
Income (loss) from operations.............. 2,285 (1,262) (401) 9,222 7,504 4,927 8,172
Other income (expense) -- net.............. 106 143 (172) (221) (434) (311) 277
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.......... 2,391 (1,119) (573) 9,001 7,070 4,616 8,449
Provision for income taxes(1).............. 226 (168) 865 500 1,497 787 3,375
------ ------- ------- ------- ------- ------- -------
Net income (loss)(1)....................... $2,165 $ (951) $(1,438) $ 8,501 $ 5,573 $ 3,829 $ 5,074
====== ======= ======= ======= ======= ======= =======
PRO FORMA STATEMENTS OF OPERATIONS DATA(2):
Pro forma net income....................... $ 4,401 $ 2,874
======= =======
Pro forma net income per share............. $ 0.42 $ 0.27 $ 0.43
======= ======= =======
Shares used in per share calculation(3).... 10,952 10,952 11,884
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
DECEMBER 31, --------------------
--------------------------------------------- AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED
------ ------ ------ ------- -------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................... $1,687 $1,096 $2,088 $ 7,232 $ 607 $23,128 $ 47,003
Total assets.............................. 3,636 4,853 6,854 11,557 28,095 37,047 60,922
Long-term liabilities..................... 0 75 2,513 2,607 309 224 224
Redeemable convertible preferred stock.... 0 0 0 0 15,000 0 0
Stockholders' equity (deficit)............ 2,588 2,210 864 6,228 (12,292) 28,582 52,457
</TABLE>
- ---------------
(1) Prior to March 30, 1995, certain Predecessor Companies elected S Corporation
status. The Company's historical statements of operations data, therefore,
do not include a provision for U.S. federal income taxes for periods prior
to March 30, 1995. In addition, through 1993, these same companies charged
to expense compensation paid to their founding stockholders in lieu of S
Corporation dividends, in order to reduce state income tax liability. See
"Reorganization and Prior S Corporation Status" and Note 1 of Notes to
Consolidated Financial Statements.
(2) Pro forma net income includes a pro forma provision for income taxes at
statutory rates. Pro forma net income excluding the tax related compensation
and including U.S. federal income tax provisions at statutory rates was
$2,464, $3,424, $4,313 and $5,564 for 1991 through 1994, respectively.
(3) Pro forma net income per share includes common and equivalent shares
outstanding and the estimated number of shares that would be needed to be
issued to repay certain stockholder notes issued in the Reorganization and
to redeem the Series B Preferred Stock. Pro forma net income has been
adjusted for the interest applicable to such notes. See Notes 1 and 2 of
Notes to Consolidated Financial Statements.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
JDA is an international provider of comprehensive enterprise-wide software
solutions that address the mission-critical business information requirements of
retailing organizations. Prior to the Company's formation in connection with the
Reorganization in March 1995, the Company's operations were conducted by the
Predecessor Companies, the first of which was formed in November 1985. Certain
of these Predecessor Companies operated as S Corporations for tax purposes prior
to the Reorganization. Thus, for periods prior to the Reorganization, the
Company's historical statements of operations do not include a provision for
U.S. federal income taxes and reflect certain tax strategies. See
"Reorganization and Prior S Corporation Status" and Note 1 of Notes to
Consolidated Financial Statements.
In 1986 the Company introduced MMS, its first enterprise retail information
solution, based on the IBM AS/400 platform. The Company's development efforts
through 1993 were focused exclusively on enhancements, revisions and upgrades to
MMS, which is currently in its fourth generation release. In 1994, the Company
acquired DSS, an in-store system, from JDA Software Services Ltd. ("JDA
Canada"), a then-unaffiliated Canadian company. Since 1994 the Company has
significantly increased its product development expenditures to develop products
for emerging, open platforms. The Company began limited beta installations of
ODBMS, an open, client/server enterprise system, and WinDSS, a Windows-based
in-store system, in 1995 and 1996, respectively. The commercial general
availability of ODBMS was announced in September 1996. On August 15, 1996 the
Company acquired JDA Canada in exchange for 143,926 shares of the Company's
newly issued Common Stock. The acquisition was accounted for as a purchase, and
the Company recorded $1.67 million in goodwill which it is amortizing over 15
years.
The Company has historically derived substantially all of its revenues from
software licenses and consulting, maintenance and other services relating to
MMS. The Company expects that revenues related to MMS, which accounted for 93%,
95%, 91% and 86% of total revenues in 1993, 1994, 1995 and the nine months ended
September 30, 1996, respectively, will represent a smaller portion of the
Company's total revenues as market acceptance of the Company's newer products,
particularly ODBMS and WinDSS, increases. Revenues from MMS have grown in recent
periods primarily as a result of the Company's increased international presence.
The Company expects that revenues attributable to the license of MMS and ODBMS
enterprise systems will continue to comprise the substantial majority of
software licenses revenues for the foreseeable future.
Consulting, maintenance and other services revenues are derived from a
range of services, including system design and implementation and, to a lesser
extent, software maintenance and support, and training. Historically, the level
of consulting, maintenance and other services revenues has approximated on an
annual basis the level of software license revenues. Consulting, maintenance and
other services revenues were 53% of total revenues in 1993, 49% of total
revenues in each of 1994 and 1995, and 50% of total revenues for the nine months
ended September 30, 1996. Gross margin on consulting, maintenance and other
services has historically been significantly lower than gross margin on software
licenses and the Company expects this relationship to continue. Consulting,
maintenance and other services in support of international licenses typically
have lower gross margins than those achieved domestically due to generally lower
prevailing billing rates in certain of the Company's international markets.
Therefore, planned growth in the Company's international operations may result
in further declines in gross margin on consulting, maintenance and other
services.
The Company is pursuing a strategy of addressing international markets by
developing localized versions of its products and establishing international
subsidiaries with direct sales and consulting capabilities. International
revenues, which include revenues from international subsidiaries and export
sales, comprised 31%, 28%, 39% and 43%, respectively, of total revenues in each
of 1993, 1994, 1995 and the nine months ended September 30, 1996. The Company
has operations in the U.K., Singapore, Canada, Chile, Mexico and Germany and
plans to continue to expand its international infrastructure. The Company
anticipates that
19
<PAGE> 22
international revenues will continue to increase as a percentage of total
revenues. However, there can be no assurance that the Company's international
expansion will be successful. In addition, the opening of new offices by the
Company typically results in initial recruiting and training expenses and
reduced labor efficiencies associated with the introduction of products to a new
customer base. Other risks inherent in the Company's international business
activities include changes in regulatory requirements, tariffs and other trade
barriers, costs and risks of localizing products, longer accounts receivable
payment cycles, potentially adverse tax consequences, currency fluctuations,
repatriation of earnings and burdens of complying with a wide variety of local
laws.
To the extent the Company's international operations expand, the Company
expects that an increasing portion of its international license and consulting,
maintenance and other services revenues will be denominated in foreign
currencies, subjecting the Company to fluctuations in foreign currency exchange
rates. Historically, the Company has conducted a substantial majority of its
business in currencies which have been relatively stable, and exposure to
fluctuations in such currencies has been considered minimal. Accordingly, the
Company does not currently engage in foreign currency hedging transactions.
However, as the Company continues to expand its international operations,
exposures to gains and losses on foreign currency transactions may increase. The
Company may choose to limit such exposure by entering into forward foreign
exchange contracts or engaging in similar hedging strategies. There can be no
assurance that any currency exchange strategy would be successful in avoiding
exchange-related losses.
The Company's revenues are derived primarily from non-refundable license
fees for its software products and from fees for services complementary to its
products, including software consulting, maintenance and training. The Company
recognizes revenues in accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position No. 91-1, Software Revenue
Recognition. Accordingly, software license revenue is recognized upon the
shipment of a product to the customer if collection is probable and the
Company's remaining obligations under the license agreement are insignificant.
License revenues for licenses with remaining significant obligations are
deferred until the Company's related obligations become insignificant.
Consulting, maintenance and other services are performed and billed under
separate agreements related to the implementation of the Company's software
products, and such revenues generally are recorded when the services are
performed. Maintenance revenues from ongoing customer support and product
upgrades are billed on a monthly basis and are recorded as revenue in the
applicable month.
20
<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth certain selected financial information
expressed as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................ 47.3% 51.3% 50.7% 45.6% 49.9%
Consulting, maintenance and other
services.............................. 52.7 48.7 49.3 54.4 50.1
--- --- --- --- ---
Total revenues................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses........................ 1.4 0.2 0.4 0.7 0.8
Consulting, maintenance and other
services.............................. 33.5 28.9 32.6 34.4 34.5
--- --- --- --- ---
Total cost of revenues........... 34.9 29.1 33.0 35.1 35.3
--- --- --- --- ---
Gross profit............................... 65.1 70.9 67.0 64.9 64.7
Operating expenses:
Product development...................... 6.6 8.1 11.7 11.5 14.2
Sales and marketing...................... 11.8 13.4 17.3 17.2 14.8
General and administrative............... 12.1 10.7 13.1 12.5 10.4
Tax related compensation to S Corporation
stockholders.......................... 36.6 0.0 0.0 0.0 0.0
--- --- --- --- ---
Total operating expenses......... 67.1 32.2 42.1 41.2 39.4
--- --- --- --- ---
Income (loss) from operations.............. (2.0) 38.7 24.9 23.7 25.3
Other income (expense) -- net.............. (0.8) (0.9) (1.4) (1.5) 0.8
--- --- --- --- ---
Income (loss) before income taxes.......... (2.8) 37.8 23.5 22.2 26.1
Provision for income taxes................. 4.3 2.1 5.0 3.8 10.4
--- --- --- --- ---
Net income (loss).......................... (7.1)% 35.7% 18.5% 18.4% 15.7%
=== === === === ===
Pro Forma Statements of Operations Data:
Historical net income (loss)............... 18.5% 18.4%
Pro forma adjustment to adjust income tax
provision................................ (3.9) (4.6)
--- ---
Pro forma net income....................... 14.6% 13.8%
=== ===
</TABLE>
Nine Months Ended September 30, 1995 and 1996
Revenues
Total revenues increased by 55% from $20.8 million for the first nine
months ended September 30, 1995 to $32.4 million in the comparable period of
1996. The increase is primarily due to increases in software licenses resulting
from expanded sales and marketing efforts both domestically and internationally,
combined with increases in consulting, maintenance and other services from
associated implementations. International revenues comprised 39% and 43% of
total revenues in the first nine months of 1995 and 1996, respectively.
Software Licenses. Software license revenues increased by 70% from $9.5
million for the nine months ended September 30, 1995 to $16.2 million in the
comparable period in 1996. The increase resulted from expanded sales and
marketing efforts in both domestic and international markets, and was comprised
of increases in software license revenues of 59% domestically and 81%
internationally.
Consulting, Maintenance and Other Services. Consulting, maintenance and
other services revenues increased by 43% from $11.3 million for the nine months
ended September 30, 1995 to $16.2 million in the comparable period in 1996. The
increase was primarily attributable to increased software license revenues and
associated implementations both domestically and internationally.
21
<PAGE> 24
Cost of Revenues
Cost of Software Licenses. Cost of software licenses consists primarily of
royalties payable for licensing of third-party software incorporated in the
Company's products and commissions payable to third parties on sales of the
Company's products. Cost of software licenses increased by 81% from $148,000 in
the nine months ended September 30, 1995 to $266,000 in the comparable period in
1996, representing less than 2% of software license revenues in both years. The
increase was primarily attributable to increased software license revenues.
Cost of Consulting, Maintenance and Other Services. Cost of consulting,
maintenance and other services consists primarily of consultant salaries and
other personnel related expenses incurred in system implementation projects and
software support services. These costs increased by 56% from $7.2 million in the
nine months ended September 30, 1995 to $11.2 million in the comparable period
in 1996. These costs represented 63% and 69%, respectively, of consulting,
maintenance and other services revenues, for the nine months ended September 30,
1995 and 1996. The increase in the comparable period in 1996 was primarily due
to expenditures associated with the Company's domestic and international growth
and expansion. The Company anticipates that the costs of consulting, maintenance
and other services will increase during 1997 both in absolute dollars and as a
percentage of revenues due to the substantial increase in the number of
consulting personnel the Company anticipates during that period. In their first
year of employment by the Company, new consulting personnel typically spend
between 2 and 10 weeks in training, during which period they do not generally
generate revenues.
Operating Expenses
Product Development. Product development expenses increased by 93% from
$2.4 million for the nine months ended September 30, 1995 to $4.6 million in the
comparable period in 1996, representing 11% and 14% of total revenues,
respectively. The increase in product development expenses was primarily a
result of an increase in the number of product development personnel from 40 as
of September 30, 1995 to 82 as of September 30, 1996. Significant product
development efforts in 1996 included the continued development of ODBMS and
WinDSS and continued enhancements to MMS. The Company believes that a continued
commitment to product development will be required for the Company to remain
competitive. Accordingly, the Company intends to continue to allocate
substantial resources to product development and product development expenses
are expected to increase in absolute dollars in future periods. However, such
expenses may fluctuate as a percentage of total revenues. Product development
costs subsequent to the achievement of technological feasibility have not been
significant during the period and, accordingly, all such costs have been
expensed as incurred.
Sales and Marketing. Sales and marketing expenses increased by 33% from
$3.6 million for the nine months ended September 30, 1995 to $4.8 million for
the comparable period in 1996, representing 17% and 15% of total revenues,
respectively. The dollar increase was due to the addition of sales and marketing
personnel and related expenses to implement the Company's strategy to increase
its presence in international and domestic markets.
General and Administrative. General and administrative expenses increased
by 30% from $2.6 million for the nine months ended September 30, 1995 to $3.4
million for the comparable period in 1996, representing 13% and 10% of total
revenues, respectively. The dollar increase was primarily due to increased
staffing and associated expenses necessary to support the Company's increased
scale of operations. The Company anticipates that general and administrative
expenses may continue to increase in absolute dollars, but may fluctuate as a
percent of total revenues, as the Company expands its operations.
Provision for Income Taxes. Substantially all U.S. federal income through
March 30, 1995 was attributed to the stockholders of the Predecessor Companies,
reflecting the prior S Corporation status of certain Predecessor Companies.
Accordingly, the Company's tax provisions do not include U.S. federal income
taxes through that date. Pro forma income tax provisions have been presented for
the nine months ended September 30, 1995 in order to indicate the tax provision
that would have been recorded had all income been taxable to the Company. The
income tax provisions include tax provisions for U.S. federal income taxes and
reflect effective tax rates of 38% (pro forma) for the nine months ended
September 30, 1995 and 40% for
22
<PAGE> 25
the comparable period in 1996. Such tax rates approximate statutory federal,
state and foreign tax rates after a reduction for U.S. research and development
expense tax credits.
Years Ended December 31, 1993, 1994 and 1995
Revenues
Total revenues were $20.3 million, $23.8 million and $30.1 million in 1993,
1994 and 1995, respectively, representing increases of 17% from 1993 to 1994 and
26% from 1994 to 1995. International revenues comprised 31%, 28% and 39% of
total revenues in each of 1993, 1994 and 1995, respectively. The increase in
international revenues as a percentage of total revenues from 1994 to 1995 was
primarily attributable to increased revenues in Latin America, Southeast Asia
and the U.K. resulting from the Company's expanded sales and marketing efforts
in those markets.
Software Licenses. Software license revenues were $9.6 million, $12.2
million and $15.3 million in 1993, 1994 and 1995, respectively, representing
increases of 27% from 1993 to 1994 and 25% from 1994 to 1995. The increase in
1994 was primarily attributable to the Company's expanded sales and marketing
efforts in the U.S., Latin America and Asia, including the establishment of the
Company's Singapore subsidiary. The increase in 1995 was primarily attributable
to an increase in international revenues resulting from expanded sales and
marketing efforts by the Company during that period, partially offset by a
decline in domestic MMS license revenues due in part to competitive pricing
pressures.
Consulting, Maintenance and Other Services. Consulting, maintenance and
other services revenues were $10.7 million, $11.6 million and $14.8 million in
1993, 1994 and 1995, respectively, representing increases of 8% from 1993 to
1994 and 28% from 1994 to 1995. The increases in both 1994 and 1995 were
primarily attributable to increased international license revenues and
associated implementations.
Cost of Revenues
Cost of Software Licenses. Cost of software licenses was $305,000, $57,000
and $159,000 in 1993, 1994 and 1995, respectively, representing 3%, 1% and 1% of
software license revenues in these periods.
Cost of Consulting, Maintenance and Other Services. These costs were $6.8
million, $6.9 million and $9.8 million, representing 63%, 59% and 66%,
respectively, of consulting, maintenance and other services revenues in 1993,
1994 and 1995. The decrease in these costs as a percentage of consulting,
maintenance and other services revenues from 1993 to 1994 was primarily due to
more efficient utilization of consulting personnel and the increase from 1994 to
1995 was primarily due to expenditures associated with the Company's
international expansion.
Operating Expenses
Product Development. Product development expenses increased by 43% from
$1.3 million in 1993 to $1.9 million in 1994 and by 83% to $3.5 million in 1995,
representing 7%, 8% and 12%, respectively, of total revenues in these periods.
The increase in product development expenses in 1994 was primarily a result of
an increase in the number of product development personnel from 11 as of
December 31, 1993 to 21 at December 31, 1994. Significant product development
efforts in 1994 included enhancements to MMS for international markets,
modifications to MMS to take advantage of client/server enhancements to the IBM
AS/400 platform and initial development of ODBMS. Increased product development
expenses in 1995 were primarily a result of continued expansion in the number of
product development personnel to 48 at December 31, 1995. Significant product
development efforts in 1995 included the continued development and initial beta
release of ODBMS, continued enhancements to MMS and initial development of
WinDSS. Product development costs subsequent to the achievement of technological
feasibility have not been significant during these periods and, accordingly, all
such costs have been expensed as incurred.
Sales and Marketing. Sales and marketing expenses increased 34% from $2.4
million in 1993 to $3.2 million in 1994 and by 61% to $5.2 million in 1995,
representing 12%, 13% and 17%, respectively, of total revenues in these periods.
The increase in sales and marketing expenses in 1994 was primarily due to the
23
<PAGE> 26
addition of sales and marketing personnel to implement the Company's strategy to
increase its presence in international markets. Increased sales and marketing
expenses in 1995 were due to continued additions to sales and marketing
personnel and related expenses.
General and Administrative. General and administrative expenses were $2.5
million in each of 1993 and 1994, and increased by 55% to $3.9 million in 1995,
representing 12%, 11% and 13%, respectively, of total revenues. The increase in
1994 was primarily due to the addition of administrative personnel required to
support the Company's growth. The increase in 1995 reflects the continued
addition of personnel, increased legal and accounting expenses and increased bad
debt allowance.
Provision for Income Taxes. Substantially all U.S. federal taxable income
through March 30, 1995 was attributed to Predecessor Companies' stockholders,
reflecting the prior S Corporation status of certain Predecessor Companies.
Accordingly, the Company's tax provisions do not include U.S. federal income
taxes through that date. The pro forma income tax provisions reflected in Notes
1 and 9 of Notes to Consolidated Financial Statements include tax provisions for
U.S. federal income taxes and reflect effective tax rates of 37%, 38% and 38%
for the years 1993, 1994 and 1995, respectively. Such tax rates approximate
statutory federal, state and foreign tax rates after a reduction for U.S.
research and development expense tax credits.
Pro Forma Statements of Operations Data
Prior to the Reorganization, certain Predecessor Companies elected S
Corporation status under Subchapter S of the Internal Revenue Code through March
30, 1995. In 1993 such Predecessor Companies paid tax related compensation of
$7.4 million to their founding stockholders in lieu of S Corporation dividends
so that such amounts could be charged to expense and deducted for state income
tax purposes. Accordingly, the Company's statements of operations for 1993, 1994
and the first quarter of 1995 do not contain provisions for U.S. federal income
taxes and for 1993 contain tax related compensation expense of $7.4 million. As
a result, the historical statements of operations for 1993, 1994, 1995 and the
nine months ended September 30, 1995 are not directly comparable, and such
periods will not be comparable to future periods.
In order to facilitate an understanding and a comparison of the Company's
results of operations for the periods discussed below, pro forma statements of
operations have been included to eliminate the tax related compensation paid to
the Predecessor Companies' stockholders and include U.S. federal tax provision
for all periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
--------------------------- SEPTEMBER 30,
1993 1994 1995 1995
------- ------- ------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRO FORMA STATEMENTS OF OPERATIONS DATA:
Total revenues.................................... $20,321 $23,829 $30,084 $20,812
Gross profit...................................... 13,236 16,902 20,144 13,506
Operating expenses:
Product development............................. 1,345 1,923 3,512 2,384
Sales and marketing............................. 2,404 3,228 5,199 3,588
General and administrative ..................... 2,466 2,529 3,929 2,607
Income from operations............................ 7,021 9,222 7,504 4,927
Income before income taxes........................ 6,849 9,001 7,070 4,616
Provision for income taxes........................ 2,536 3,437 2,669 1,742
Pro forma net income.............................. $ 4,313 $ 5,564 $ 4,401 $ 2,874
Pro forma net income per share.................... $ 0.42 $ 0.27
Shares used in per share calculation.............. 10,952 10,952
</TABLE>
24
<PAGE> 27
SELECTED QUARTERLY OPERATING RESULTS
The following tables present unaudited quarterly financial information for
the seven quarters ended September 30, 1996 as well as the percentage of the
Company's total revenues represented by each item. Management believes this
information, including the pro forma information, is consistent with the audited
Consolidated Financial Statements appearing elsewhere in the Prospectus. In
management's opinion, the information presented below includes all necessary
adjustments (consisting only of normal recurring adjustments) to present fairly
the unaudited quarterly results when read in conjunction with the audited
Consolidated Financial Statements of the Company and the Notes thereto appearing
elsewhere in this Prospectus. These operating results are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1995 1995 1995 1995 1996 1996 1996
--------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses................... $2,714 $2,628 $4,156 $5,755 $5,013 $5,042 $ 6,098
Consulting, maintenance and other
services.......................... 3,289 3,974 4,050 3,518 4,391 5,394 6,416
------ ------ ------ ------ ------ ------ -------
Total revenues................ 6,003 6,602 8,206 9,273 9,404 10,436 12,514
Cost of revenues:
Software licenses................... 14 70 63 12 25 220 21
Consulting, maintenance and other
services.......................... 2,059 2,385 2,714 2,624 2,958 3,563 4,633
------ ------ ------ ------ ------ ------ -------
Total cost of revenues........ 2,073 2,455 2,777 2,636 2,983 3,783 4,654
------ ------ ------ ------ ------ ------ -------
Gross profit......................... 3,930 4,147 5,429 6,637 6,421 6,653 7,860
Operating expenses:
Product development................. 636 733 1,015 1,128 1,220 1,645 1,728
Sales and marketing................. 1,012 1,136 1,440 1,611 1,628 1,525 1,630
General and administrative.......... 780 756 1,071 1,322 1,140 1,055 1,191
------ ------ ------ ------ ------ ------ -------
Total operating expenses...... 2,428 2,625 3,526 4,061 3,988 4,225 4,549
------ ------ ------ ------ ------ ------ -------
Income from operations............... 1,502 1,522 1,903 2,576 2,433 2,428 3,311
Other income (expense) -- net........ (57) (135) (119) (123) (65) 169 173
------ ------ ------ ------ ------ ------ -------
Income before income taxes........... 1,445 1,387 1,784 2,453 2,368 2,597 3,484
Provision for income taxes........... 18 351 418 710 941 1,038 1,396
------ ------ ------ ------ ------ ------ -------
Net income........................... $1,427 $1,036 $1,366 $1,743 $1,427 $1,559 $ 2,088
====== ====== ====== ====== ====== ====== =======
Pro Forma Statements of Operations
Data:
Income before income taxes.......... 1,445 1,388 1,784 2,453
Provision for income taxes.......... 545 524 674 926
------ ------ ------ ------
Pro forma net income................ $ 900 $ 864 $1,110 $1,527
====== ====== ====== ======
Pro forma net income per share...... $ 0.08 $ 0.08 $ 0.11 $ 0.15 $ 0.13 $ 0.13 $ 0.17
====== ====== ====== ====== ====== ====== =======
Shares used in per share
calculation....................... 10,952 10,952 10,952 10,952 11,182 12,183 12,283
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses................... 45% 40% 51% 62% 53% 48% 49%
Consulting, maintenance and other
services.......................... 55 60 49 38 47 52 51
--- --- --- --- --- --- ---
Total revenues................ 100 100 100 100 100 100 100
Cost of revenues:
Software licenses................... 0 1 1 0 0 2 0
Consulting, maintenance and other
services.......................... 35 36 33 28 32 34 37
--- --- --- --- --- --- ---
Total cost of revenues........ 35 37 34 28 32 36 37
--- --- --- --- --- --- ---
Gross profit......................... 65 63 66 72 68 64 63
Operating expenses:
Product development................. 10 11 12 12 13 16 14
Sales and marketing................. 17 17 18 18 17 15 13
General and administrative.......... 13 12 13 14 12 10 9
--- --- --- --- --- --- ---
Total operating expenses...... 40 40 43 44 42 41 36
--- --- --- --- --- --- ---
Income from operations............... 25 23 23 28 26 23 27
Other income (expense) -- net........ (1) (2) (1) (1) (1) 2 1
--- --- --- --- --- --- ---
Income before income taxes........... 24 21 22 27 25 25 28
Provision for income taxes........... 0 5 5 8 10 10 11
--- --- --- --- --- --- ---
Net income........................... 24% 16% 17% 19% 15% 15% 17%
=== === === === === === ===
Pro Forma Statements of Operations
Data:
Income before income taxes.......... 24 21 22 27
Provision for income taxes.......... 9 8 8 11
--- --- --- ---
Pro forma net income................ 15% 13% 14% 16%
=== === === ===
</TABLE>
25
<PAGE> 28
The Company's business has experienced and is expected to continue to
experience some degree of seasonality due in large part to its retail customers'
buying cycles. In 1994 and 1995, the Company experienced increased license
revenues in the fourth quarters, reflecting customers' budget cycles.
Consulting, maintenance and other services were lower in the fourth quarter and
higher in the succeeding first quarter, reflecting retailers' desire to minimize
disruption during the holiday season as well as increased post-holiday demand
for implementation services associated with the higher level of software
licenses in the preceding fourth quarter. In addition, sales and marketing
expenses may vary as a percentage of total revenues due to several factors,
including start-up costs associated with the establishment of international
operations and sales commission schedules associated with performance targets.
For example, sales and marketing expenses as a percentage of total revenues
increased in the quarter ended December 1994 due to start-up costs associated
with the establishment of operations in Asia and sales commission bonuses
associated with the achievement of annual performance targets.
The Company's quarterly operating results have varied and are expected to
continue to vary in the future. These fluctuations may be caused by many
factors, including, among others: the size and timing of individual orders;
competitive pricing pressures; customer order deferrals in anticipation of new
products; variation of consulting, maintenance and other services as a
percentage of total revenues; timing of introduction or enhancement of products
by the Company or its competitors; market acceptance of new products;
technological changes in platforms supporting the Company's products; changes in
networking or communication technology; changes in the Company's operating
expenses; personnel changes; currency exchange rates; fluctuations in the level
of warranty claims; and general industry and economic conditions.
A significant portion of the Company's historical revenues has been derived
from relatively large licenses to a limited number of customers, and the Company
currently anticipates that this trend will continue. Accordingly, any
significant cancellation or deferral of customer orders could have a material
adverse effect on the Company's operating results in any particular quarter.
License revenues are also difficult to forecast because the market for the
Company's next generation open systems products is uncertain and evolving. The
Company's expense levels are based, in part, on its expectations as to future
revenues and to a large extent are fixed. In particular, the Company is required
to increase consulting services capacity, including hiring additional consulting
personnel, in advance of anticipated license revenues. Therefore, the Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall and, accordingly, any significant shortfall of
demand in relation to the Company's expectations or any material delay of
customer orders would have an almost immediate adverse effect on the Company's
operating results.
The Company's ability to undertake new projects and increase license
revenues is substantially dependent on the availability of the Company's
consulting personnel to assist in the license and implementation of the
Company's solutions. Growth in the Company's international operations is
particularly dependent upon the ability of the Company to locate, hire and train
qualified foreign personnel. The Company believes that supporting
greater-than-anticipated growth in product licensing would require the Company
to rapidly hire skilled additional personnel for the Company's consulting
services group, and there can be no assurance that qualified personnel could be
located or retained in a timely manner.
As a result of the foregoing and other factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Fluctuations in operating results may also result in volatility in the price of
the shares of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through cash generated from operations and, to a lesser extent, borrowings under
its bank lines of credit. As of September 30, 1996, the Company had $14.4
million in cash and cash equivalents and $5.2 million available under its bank
lines of credit.
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<PAGE> 29
The Company's operating activities provided cash in 1993 of $1.2 million
after the payment of $5.0 million of tax related compensation to the Predecessor
Companies' stockholders. The Company's operating activities provided cash of
$7.4 million, $5.5 million and $2.9 million in 1994, 1995 and the nine months
ended September 30, 1996, respectively. Cash from operating activities arose
principally from the Company's profitable operations and was utilized for
working capital purposes, principally increases in accounts receivable.
Cash used in investing activities in 1993, 1994 and 1995 was $405,000,
$705,000 and $16.1 million, respectively, and cash of $12.7 million was provided
by investing activities in the nine months ended September 30, 1996. Such
investing activities principally consisted of purchases of property and
equipment and, in 1995, the acquisition of $14.6 million of restricted
short-term investments used for the repayment of stockholder notes and the
redemption of such investments in 1996. See Note 1 of Notes to Consolidated
Financial Statements.
Cash used in financing activities was $722,000 and $4.0 million in 1993 and
1994, respectively, cash of $8.2 million was provided by financing activities in
1995, and cash of $1.7 million was used in financing activities in the nine
months ended September 30, 1996. Such financing activities in 1993 and 1994
consisted of repayment of borrowings under the bank line of credit and dividends
to and capital contributions by the stockholders. Financing activities in 1995
consisted of borrowings under the bank line of credit, dividends and other
distributions made to the Predecessor Companies' stockholders and the sale of
Series A Preferred Stock to the Company's stockholders as described in Note 1 of
Notes to Consolidated Financial Statements. Financing activities in the nine
months ended September 30, 1996 consisted of the issuance of 3,105,000 shares
for the account of the Company in its initial public offering on March 15, and
the repayment of shareholder notes therefrom.
Borrowings under the Company's secured line of credit with Bank of America
Arizona bear interest based upon the bank's publicly announced reference rate.
At September 30, 1996 the Bank of America credit line bore interest at 8.25% and
no borrowings were outstanding under the line of credit. This line of credit
expires July 1, 1998 and the Company intends to seek renewal at that time. See
Note 3 of Notes to Consolidated Financial Statements. JDA Canada has a
cdn$200,000 secured line of credit with the Hongkong Bank of Canada. This line
of credit bears interest at the bank's prime rate plus 1%, and expires on
February 28, 1997. At September 30, 1996, no borrowings were outstanding under
this line of credit.
Capital expenditures were approximately $405,000, $705,000, $1.4 million
and $2.1 million in fiscal years 1993, 1994, 1995 and the nine months ended
September 30, 1996, respectively. These expenditures were for property and
equipment, primarily computer hardware and furniture and fixtures. Within the
next nine to twelve months, the Company anticipates acquiring the building
currently utilized in the U.K. and making necessary capital expenditures to
support growth.
The Company believes that the net proceeds from this offering, its bank
lines of credit and funds generated from operations will provide adequate
liquidity to meet the Company's planned capital and operating requirements for
at least the twelve month period following this offering. Thereafter, if the
Company's spending plans change, the Company may find it necessary to seek to
obtain additional sources of financing to support its capital needs, but there
can be no assurance that such financing will be available on commercially
reasonable terms, if at all.
27
<PAGE> 30
BUSINESS
JDA is a leading international provider of comprehensive enterprise-wide
software solutions that address the mission-critical business information
requirements of retailing organizations. The Company offers two enterprise
product lines: MMS for the IBM AS/400 platform and ODBMS for open, client/server
environments. MMS is a feature-rich solution that integrates and distributes
data throughout the retailing enterprise and enables management to make more
informed and timely decisions, respond rapidly to changes in the competitive
environment, monitor store-level activity and achieve operational efficiencies.
ODBMS, currently in limited beta installations and recently released for general
commercial availability, is designed as an open (multi-platform), client/server
solution that incorporates the basic functionality of MMS with enhanced
adaptability and scalability. The Company's in-store products, DSS and
Windows-based next generation WinDSS, currently in limited beta installations,
can be licensed independently or as part of an integrated enterprise-wide
system. These in-store systems capture data at the point of sale and leverage
valuable enterprise-wide information by bringing it to the store level, the
primary point of consumer contact. The Company's consulting services group
provides system planning, design and implementation services to tailor the
Company's solutions to each retailer's unique specifications and to ensure
timely and successful implementation.
The Company's products and services are marketed and sold in the United
States through the Company's direct sales force and a network of value-added
implementors, systems integrators and consultants. International revenues, which
comprised 39% of Company revenues in 1995 and 43% in the first nine months of
1996, are facilitated by an international direct sales force employed by the
Company's subsidiaries and through a network of sales agents and distributors,
including IBM. The Company's solutions have been deployed by a broad range of
retail enterprises worldwide, including hard and soft lines retailers, warehouse
stores, superstores and grocery stores. The Company's customers include many of
the world's leading specialty retailers such as Bed, Bath and Beyond, CompUSA,
Incredible Universe, Kingfisher Group, Lenscrafters, Melville Corporation,
Natural Wonders, Office Depot, Staples, Starbucks, Sunglass Hut, West Marine
Products and Williams-Sonoma.
INDUSTRY BACKGROUND
The retailing industry has experienced rapid change during the 1990s,
driven primarily by changing consumer preferences, intensifying competition and
increased globalization. Economic uncertainty has caused a shift in consumer
purchase patterns, with today's consumer choosing value -- in the form of lower
prices, convenience and personalized service -- over brand and retailer loyalty.
The result for many retailers has been less traffic in their stores, more
markdowns and slimmer profits. Within this new competitive environment, a number
of successful retail formats and concepts have emerged that are more reactive,
cost-driven and responsive to consumers' demand for increased value. The "big
box" or "category killer" format employed by, for example, Staples and Sunglass
Hut, focus on offering a wide assortment of competitively priced products within
a single product category. These new retail formats are setting the standard for
lower prices and improved customer service and have enjoyed broad market
acceptance. As a result, these formats have expanded to many categories formerly
dominated by traditional department stores, such as home furnishings, apparel,
toys and sporting goods, while traditional retailing formats are experiencing
consolidation and shakeout. Many successful retailers are producing efficiencies
and reducing operating costs by managing inventories precisely, decentralizing
the decision making process while centralizing purchasing and other
administrative functions, deploying state of the art information technology and
pursuing aggressive roll-out strategies to achieve economies of scale. In
addition, a number of these retailers are seeking to apply their concepts
outside their domestic markets, certain of which markets are enjoying consumer
expenditure growth rates significantly exceeding those of the U.S.
To respond to today's competitive challenges, retailers must accelerate the
rate at which they identify and respond to changing business conditions and
consumer requirements. An organization's agility and ultimate success are
dependent upon its ability to rapidly and cost-effectively collect, organize,
analyze and disseminate data throughout the enterprise to make effective
business decisions. Such analyses provide a basis for critical product,
marketing, inventory, pricing and human resource decisions. In addition,
inventory management has become more complicated as retailers seek to reduce
costs and improve margins while replenishing inventory
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<PAGE> 31
on a just-in-time basis. Accordingly, retailers are demanding more sophisticated
purchasing, inventory management and merchandising tools that enable them to
distribute goods efficiently. Retailers also are increasingly restructuring
existing operations so that consumers effectively interact with the entire
enterprise whenever they are in contact with any single store within the
enterprise. This requires that store level personnel and corporate decision
makers within an enterprise be empowered with a common base of readily available
sales and inventory information and that in-store personnel have the ability to
respond to consumers' immediate needs. To meet their increasing requirements for
information, retailers seek information systems that are adept at handling large
volumes of transactions, possess a high degree of reliability, accommodate peak
load and seasonal requirements and are able to rapidly capture, analyze and
distribute data throughout geographically dispersed parts of the enterprise.
Moreover, global retailers require applications that support the specialized
requirements of international business, including local language support,
multiple currencies, import/export costing and foreign tax and regulatory
requirements.
At the headquarters, or enterprise, level retailers typically have utilized
expensive mainframes and mid-range computers in highly centralized environments
running customized, platform-specific legacy software developed internally or
licensed from third-party suppliers. At the store level, retailers have utilized
proprietary point-of-sale systems offered by large hardware manufacturers such
as AT&T/NCR, IBM and ICL or one of many commercially available DOS-based
systems. Enterprise legacy applications typically require large MIS departments
to implement and support, generally are difficult and expensive to scale with
growth and have limited interoperability with a variety of information resources
and systems available in the market today. As a result, many retailers have not
been able to effectively distribute information throughout the retail
enterprise. Furthermore, retailers have historically been cautious in adopting
new technologies due to the real-time, transaction-intensive nature of retailing
and the economic consequences of disruptions to their point of sale operations.
Despite their reservations, today's retailers are recognizing the strategic
imperative of employing technology to cut costs, reduce inefficiencies and
enhance sales in an environment dominated by intensifying competition and value
conscious consumers. As a result, they are increasingly demanding highly
functional, easy to use and scalable software applications that can be
economically and rapidly adapted for changes in their mission-critical business
functions. Recent advances in technology, including the improved hardware
price/performance available on platforms such as the IBM AS/400 and the
introduction of sophisticated relational databases such as DB/400, have improved
the capabilities of the information systems available to retailers. In addition,
a number of retailers are increasingly considering new platforms that
incorporate open, client/server technology and adaptable, business process
driven applications. The Company believes that the adoption of new information
technologies by retailers will accelerate as competitive pressures increasingly
necessitate the ability to change business practices quickly and to empower
employees with the information and tools to respond to consumer requirements.
JDA SOLUTION
JDA provides a suite of comprehensive enterprise-wide software solutions
that address the mission-critical business information requirements of retailing
organizations. Each of the Company's enterprise systems, MMS and ODBMS, is
designed to serve as the primary merchandise information system for domestic and
international retailers and to address their specific information management
needs and operational considerations. The Company's in-store systems, DSS and
WinDSS, are designed to capture data at the point of sale and leverage valuable
enterprise-wide information by bringing it to the store level, the primary point
of consumer contact. These products can be licensed independently or as part of
an integrated enterprise-wide solution.
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<PAGE> 32
The following chart depicts the typical information flow in retail
enterprises supported by the Company's products:
[FLOW CHART DEPICTING INFORMATION FLOW IN RETAILING ENTERPRISES SUPPORTED BY
THE COMPANY'S PRODUCTS. THE FOLLOWING "INFORMATION CENTERS" ARE DEPICTED: (A)
VENDORS; (B) CORPORATE; (C) DISTRIBUTION CENTER; AND (D) STORE. CERTAIN OF THE
MODULES OF THE COMPANY'S PRODUCTS ARE DEPICTED IN RELATION TO THE INFORMATION
CENTERS, DEMONSTRATING THE TYPICAL INFORMATION FLOW BETWEEN SUCH INFORMATION
CENTERS PROVIDED BY THE COMPANY'S PRODUCTS.]
The Company's solutions provide the following benefits to retailers:
- Enhance decision making capabilities. By leveraging valuable
enterprise-wide information throughout the retailing organization, the
Company's solutions enable personnel to make more informed and timely
decisions, to quickly adapt their products and operations to changes in
competition and consumer preferences, and to maximize operational
efficiencies. The Company's products are designed to filter and distill
the information that is most meaningful and relevant to the retailer from
large volumes of transaction and work flow data.
- Provide fully integrated adaptable solutions. JDA offers fully
integrated adaptable solutions that enable retailers to respond to
consumer demand at the point of sale and channel that crucial information
back throughout their organizations and supply chains. These solutions
link store level point-of-sale information with the centralized
merchandising and financial functions that ultimately drive replenishment
communications with suppliers and vendors. JDA's integrated enterprise and
in-store systems operate a range of applications and function seamlessly
within their respective databases, promoting speed, data integrity and
ease of modifications. The Company's new products, ODBMS and WinDSS, are
designed to be tailored by customers to meet their specialized and
evolving business requirements with minimal or no re-programming.
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<PAGE> 33
- Streamline inventory planning and distribution logistics. The Company's
enterprise-wide solutions are designed to help retailers achieve operating
efficiencies by automating key functions such as the management of
inventory, distribution and merchandising by providing decision makers
with access to critical supply chain data. JDA provides retailers with
tools for vendor analysis, monitoring stock status, sales capture and
analysis, merchandise allocation and replenishment, purchase order
management, distribution center management and other important activities
that enable retailers to improve inventory gross margin return on
investment through increased inventory turnover, reduced inventory
investment, and more efficient management of ordering and distribution.
- Promote responsiveness to consumer needs. The Company's solutions help
retailers better understand and fulfill consumer needs. With the Company's
enterprise systems, retailers can explore "what if" merchandising plans,
track and analyze performance, and adjust quickly to market changes and
consumer purchase patterns, all to ensure that the appropriate pricing and
merchandise mix is available to the consumer at the store. The Company's
in-store products automate store operations and gather, analyze and
provide information at the level closest to the consumer. These products
enable store level personnel to track the preferences of consumers and
provide a higher level of personalized service.
The Company believes its focus on retail industry requirements and trends
has yielded significant applications depth and breadth relative to less
established and non-retail focused competitors. Further, this history of
responsiveness to industry requirements and trends has led to the development of
software solutions that are interoperable with a wide variety of in-store
systems and has also prompted development of open, client/server solutions for
retailers. JDA's products have been licensed by over 215 customers, with the
Company's consulting services group performing the substantial majority of the
implementations. This experience has created a significant industry-specific
knowledge base that the Company leverages in its product development and
implementation efforts to facilitate product reliability and rapid deployment,
generate customer satisfaction and create opportunities for future reputational
sales.
COMPANY STRATEGY
The Company's objective is to strengthen its position as a leading supplier
of comprehensive software solutions for the retailing marketplace worldwide. To
achieve this objective, the Company is pursuing the following strategies:
Leverage Retail Application Knowledge Base. The Company intends to
continue to leverage its retail industry knowledge base to provide
comprehensive integrated solutions to retailers. The Company believes its
in-depth understanding of retailers' requirements accumulated from its
ten-year history, four generations of its MMS product line and over 200
implementations differentiates it from competitors and provides a
significant advantage in securing new customers. The Company further
augments its knowledge through on-going customer consulting engagements and
interaction with its user group.
Offer a Broad Line of Modular, Enterprise-Wide Solutions. The
Company's strategy is to offer enterprise-wide solutions addressing a broad
scope of operations within the retail enterprise. The Company sells its
products as modules, enabling customers to select and incrementally
implement the specific functionality that they require. The modularity of
the Company's solutions offers enhanced reliability and protects the
customers' investment because of the ease of integrating individual modules
with all other modules, including previous releases, minimizing disruption
to a customer's operations.
Extend Solutions to Emerging Technology Platforms. The Company's
early recognition of the benefits of client/server solutions in other
industries, together with its understanding of the potential benefits of
those solutions in the retail industry, led the Company in 1994 to begin
extending its set of solutions to open, client/server platforms. The
Company's design strategy is to create adaptable products that can be
tailored by its customers to meet their specialized and evolving business
requirements, with minimal or no re-programming. The Company believes its
ODBMS product line will enable the Company to address an emerging market of
retail enterprises seeking the scalability and adaptability of open,
client/server solutions, particularly those larger, transaction intensive
retailers such as grocery and convenience stores. Additionally, the Company
believes that the enhanced functionality of its WinDSS
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<PAGE> 34
product currently in limited beta release and the broad appeal of Windows
platforms will position the Company to successfully market next generation
in-store systems to customers who seek an industry standard operating
system.
Grow Industry-Specific Consulting Services. The Company plans to
substantially increase its consulting services personnel to support its
anticipated growth. The Company's strategy is to attract and retain
experienced consulting personnel who use their retail industry knowledge
and the modular architecture of the Company's products to provide customers
with solutions tailored to their specific enterprise and in-store
requirements. The Company believes that its consulting, implementation and
support services distinguish it from its competitors and facilitate its
customers' early success with its products, strengthen the relationship
with the customer and generate valuable feedback for the Company. In
addition, interaction between the Company's consulting and product
development groups provides a high level of information exchange, thus
facilitating efficiencies in implementation and product development.
Leverage Presence in International Markets. The Company's
international revenues were 28%, 39% and 43% of total revenues in 1994 and
1995 and the nine months ended September 30, 1996 respectively. The
Company's strategy is to expand its international presence by developing
localized versions of its products and investing directly in strategic
markets through establishment of international subsidiaries with local
direct sales and consulting personnel. The Company has established
operations in the U.K., Singapore, Canada, Chile, Mexico and Germany and
plans to continue to expand its worldwide infrastructure in order to
provide localized products and implementation services. The Company
believes its established international presence and localized product
offerings position the Company to benefit from the globalization of
successful retail concepts and favorable international industry dynamics,
including, in certain markets, growth rates exceeding U.S. growth rates.
Expand Sales and Distribution through Strategic Relationships. JDA
has established relationships with leading systems integrators to provide
implementation services for its products and intends to expand the number
of such relationships. In pursuit of its strategy to strengthen its
presence in Europe, the Company recently established a joint marketing
relationship with Siemens Nixdorf. In addition, the Company has established
informal working relationships with leading retail systems consulting
groups of Andersen Consulting, Ernst & Young LLP, Price Waterhouse's
Management Horizons Division and similar major systems integrators. In
addition, in selected international markets the Company relies upon a
network of sales agents and distributors, including IBM, to license, and in
some cases implement, its software solutions. These relationships provide
important product endorsements and valuable feedback as well as sales
referrals.
PRODUCTS
The Company offers enterprise and in-store software products designed to
automate and integrate the flow of information throughout the retail
organization. The Company's products are intended to improve retailers'
financial performance, enhance consumer service and free management from
operational details to enable increased focus on strategic issues and enhancing
consumer satisfaction. JDA's product lines offer solutions for a wide range of
multi-store retail enterprises, including hard and soft lines retailers, food
and drug, convenience and grocery stores. Certain of the Company's product
modules have been translated into Spanish, German and French.
Enterprise Products
The Company's enterprise products automate the full scope of retail
operations from the planning and purchasing functions through the distribution
and final sale of goods, and provide management with sophisticated tools for
enhanced business planning and analysis. The Company's enterprise products can
be integrated with in-store products designed by the Company or by third
parties. The Company offers two enterprise product lines: MMS for the IBM AS/400
platform and ODBMS for open, client/server environments. These products are
comprised of modules that are selected by the customer and can be
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<PAGE> 35
configured to fit the customer's unique requirements. A typical installation of
the Company's enterprise products would include the following seven core
modules: Enterprise Database/Master Files, Merchandise Performance Analysis,
Inventory Control and Reporting, Price and Cost Management, Store Data
Interchange, Purchase Order Management and Merchandise Receiving, and Automated
Replenishment. Customers may add supplementary modules such as Distribution
Center Management and major accounting modules. The Company believes these
modules embody functionality critically important to retailers, and enable the
Company to provide the most advanced and comprehensive solutions available in
its market.
The following table describes the primary features and development status
of the Company's enterprise systems:
<TABLE>
<CAPTION>
MODULE DESCRIPTION MMS ODBMS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Defines the underlying Commercially Commercially
Database/Master Files organization, products and released available
business relationships
- ---------------------------------------------------------------------------------------------------
Merchandise Performance Executive-level analysis and Commercially Commercially
Analysis decision support tools released available
- ---------------------------------------------------------------------------------------------------
Inventory Control and Perpetual inventory tracking Commercially Commercially
Reporting and analytical reporting released available
- ---------------------------------------------------------------------------------------------------
Price and Cost Central management of Commercially Commercially
Management permanent and promotional released available
pricing strategies
- ---------------------------------------------------------------------------------------------------
Store Data Interchange Common interface structure to Commercially Commercially
communicate data to and from released available
in-store systems
- ---------------------------------------------------------------------------------------------------
Purchase Order Creation, tracking and Commercially Commercially
Management and analysis of product purchase released available
Merchandise Receiving orders and online entry of
receipts at stores or
warehouses
- ---------------------------------------------------------------------------------------------------
Automated Replenishment Algorithms to automatically Commercially Commercially
calculate suggested order released available
quantities
- ---------------------------------------------------------------------------------------------------
Retail Stock Ledger Analysis and calculation of Commercially In beta release
gross margin and inventory released
using the retail method of
accounting
- ---------------------------------------------------------------------------------------------------
Warehouse/Distribution Operational data and inventory Commercially Under development
Center Management management of a warehouse released
distribution center including
resource scheduling, slot
location definition,
receiving, putaway, picking
and shipping
- ---------------------------------------------------------------------------------------------------
Accounts Payable Invoice capture, management Commercially Not planned
and analysis and automatic released
interface to General Ledger
- ---------------------------------------------------------------------------------------------------
General Ledger Retail specific capture, audit Commercially Not planned
and reporting released
</TABLE>
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<PAGE> 36
In addition to the above modules, the Company recently announced the
commercial availability of its Retail IDEAS data warehousing application, which
was jointly developed by the Company and Silvon Software, Inc. Retail IDEAS
incorporates a number of components of data warehousing into a packaged offering
to provide retailers with enhanced ability to capture, store, manage and view
business information on a timely basis. Retail IDEAS provides retailers with
increased access to more current enterprise information to assist them in
analyzing important areas such as sales and inventory, merchandise categories
and items, open and suggested orders, and promotional and pricing events.
Currently, Retail IDEAS is commercially available for use with the Company's MMS
product.
ODBMS is designed to offer an enterprise solution capable of supporting the
information requirements of international, multi-format retail organizations.
ODBMS offers the core functionality of MMS with enhanced adaptability and
scalability enabled by its open, client/server architecture. ODBMS also offers
certain additional functions relative to MMS, including embedded support for
multiple languages and currencies, user-specific nomenclature, and user-defined
data structures and hierarchies. Retailers seeking to move to ODBMS are able to
ease their organizational transition by incrementally implementing selected
ODBMS modules at their own pace. ODBMS is designed to be interoperable with MMS
and other enterprise systems.
The Company's strategy in designing ODBMS is to incorporate industry
knowledge gained from over 200 MMS implementations with current generation tool
sets and object oriented software design methodologies. ODBMS offers a broad
inventory of common business objects that encapsulate rules, data structures and
processes of mission-critical retailing functions. ODBMS can be configured by
the retailer to adapt to changing strategies and prevailing competitive
conditions. For example, the ODBMS Price and Cost Management module performs
product price analysis based upon key data such as gross margin, sales velocity
and competitive prices, and recommends and automates price changes based on the
retailer's specifically defined pricing strategies. Thus, an international
retailer can centrally establish a product margin objective and apply it to
local market rules, including currency conversions, applicable taxation and
rounding algorithms, to determine final pricing at each location. A change in
pricing strategy based, for example, on intensified competition or promotional
events can be implemented by the retailer with minimal or no re-programming.
ODBMS is currently installed in Petro-Canada convenience stores and is
scheduled to be fully operational at Wilsons' specialty clothing stores in the
first quarter of 1997.
In addition to MMS and ODBMS, the Company currently offers Sirus, a version
of the Company's enterprise product with modules specifically modified for use
by soft lines retailers. Sirus is currently available for use on the IBM AS/400
platform.
License fees for the Company's enterprise systems vary depending upon the
modules selected and the size and complexity of the retail operation, and
generally range from $200,000 for smaller customers to in excess of $1.0 million
for large, multi-site or multi-country licenses.
In-Store Products
The Company offers two in-store product lines: DSS for traditional in-store
platforms and WinDSS, which is in limited beta release, for the Windows
environment. The Company's in-store products are designed to enable a retailer
to capture and analyze in-store operations information and transmit such
information to enterprise-level systems for corporate analysis. These products
also allow store level personnel to access valuable enterprise-wide information
to enable more informed decisions at the closest point of consumer contact.
WinDSS provides the functionality of DSS with the flexibility and ease of use of
Windows platforms. As with the Company's enterprise products, DSS and WinDSS are
comprised of modules that are selected by the customer and can be configured to
fit the customer's unique requirements.
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<PAGE> 37
The following table describes the primary features and development status
of the Company's in-store products:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
MODULES DESCRIPTION DSS WINDSS
- ------------------------------------------------------------------------------------------------
Back Office Cash balancing, perpetual inventory Commercially In beta release
management, purchasing, released
receiving, reporting, time and
attendance, and product transfers
- ------------------------------------------------------------------------------------------------
Transaction Store schedule, query by example, Not planned In beta release
Processor daily/hourly sales graphs and
transaction logging
- ------------------------------------------------------------------------------------------------
Customer Analyzer Customer purchase history, Commercially In beta release
extensive customer information, released
extensive reporting and multiple
profile information
- ------------------------------------------------------------------------------------------------
Point of Sale Credit authorization, foreign Commercially In beta release
tenders, layaway, multiple released
discounting, multiple tenders,
payment processing, promotional
events and UPC scanning
- ------------------------------------------------------------------------------------------------
</TABLE>
DSS can be licensed independently and utilized with a customer's existing
enterprise system, or it can work in concert with the Company's MMS enterprise
system, to provide the retailer the ability to manage information through the
full range of retail operations. A typical installation of DSS enables the
retailer to perform a number of individual store level functions and support
back office, store inventory and point-of-sale operations. For example, store
managers can use DSS to measure the results of a store promotional event. In
addition, DSS enables retailers to track the preferences of consumers and
provide a higher level of personalized service.
WinDSS is designed to incorporate the core store level functionality of DSS
with the graphical user interface and multi-tasking and other enhanced
capabilities of the Windows NT, Windows 95 and Windows 3.1 platforms. WinDSS
incorporates an object-oriented software design that is capable of dynamically
linking and arranging retail business processes to adapt to a retailer's
specialized and evolving requirements.
For example, a retailer can exploit WinDSS's multi-tasking capabilities by
configuring its point-of-sale systems to simultaneously run credit
authorizations, process transactions and update store inventory records. In
contrast, to reflect a more service-oriented work flow, the customer service
desk in the same store can be configured to provide ready access to consumer
personal information and purchase histories. Business information process flows
can be adapted to reflect changing store strategies during special promotions or
periods of peak consumer traffic.
WinDSS is currently in limited beta release. The Company licensed and
installed the WinDSS product with SunTV, an electronics specialty retailer, in
the first quarter of 1996. The Company recently completed initial beta
installations of the WinDSS product with West Marine Products, a retailer and
wholesaler of boating equipment and apparel, and Auto Palace, an auto parts
specialty retailer.
License fees for the Company's in-store products vary depending upon a
variety of factors, including the modules selected and size and complexity of
the retail operation, and generally range from $75,000 to $500,000.
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PROFESSIONAL SERVICES
Consulting
The Company's consulting services provide retailers with expertise and
assistance in planning, design and implementation of the Company's retail
information solutions. To ensure a successful product implementation,
consultants assist customers with the initial installation of a system, the
conversion of the customer's historical data and ongoing training and education.
With the help of the Company's consultants, the retailer can more easily enhance
its existing systems and manage upgrades and conversions. The Company believes
that its consulting services facilitate a customer's early success with its
products, strengthen the relationship with the customer, and add to the
Company's industry-specific knowledge base for use in future implementation and
product development efforts.
Although the Company's consulting services are optional, the Company has
found that substantially all of its customers utilize its consulting services to
some degree in connection with the implementation and on-going support of the
Company's software products. The duration of consulting engagements has
typically been between six months and one year for enterprise systems and
between three and six months for in-store systems. The Company does not yet have
sufficient experience implementing its ODBMS and WinDSS products to determine
the degree of consulting services generally required in connection with these
products. However, given the complexity of platforms on which these products
operate and the increased ability of the customer to configure these new
products to its work flows and processes, the Company believes their
implementation will require increased levels of consulting services.
Accordingly, the Company plans to substantially increase its consulting services
personnel to support anticipated growth in product implementations. To the
extent anticipated revenues fail to materialize following the hiring and
training of such personnel, the Company's operating results would be adversely
affected. In August 1996, the Company acquired JDA Canada which resulted in the
addition of over 30 consultants trained in the implementation of the Company's
products.
The Company's consulting services group consists of business consultants,
systems analysts and technical personnel devoted to assisting retailers in all
phases of systems development, including systems planning and design,
customer-specific configuring of application modules, and on-site implementation
or conversion from existing systems. Managers in the Company's consulting
organization typically have extensive retail industry experience, and consulting
personnel undergo extensive training in both retail operations and the Company's
products. In order to enhance and improve this training process, the Company
plans to establish JDA University, an in-house training program designed to
offer standardized instruction for its consultants, customers and certain
third-party integrators. The Company may increasingly utilize third-party
consultants, such as those from major systems integrators, to assist in certain
large scale implementations and for extensive business process re-engineering
projects. As of September 30, 1996, the Company had 182 employees providing
consulting services. Consulting services are billed on a time and materials
basis.
Maintenance
The Company also offers comprehensive maintenance support, which has
historically been purchased by the majority of its customers. The Company offers
remote accessibility to the customer's system in order to perform quick
diagnostics and provide on-line assistance. In addition, the Company provides
assistance through its telephone help line. The annual maintenance option is
typically priced at 12% of the software license fee and entitles the customer to
product upgrades and telephone support. As of September 30, 1996 the Company had
11 employees providing maintenance services. Of the 41 new customers who first
licensed the Company's systems in 1995, over 70% purchased the maintenance
option. Of those customers who licensed the Company's systems and purchased the
maintenance option in 1994, over 90% renewed the maintenance option in 1995.
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<PAGE> 39
CUSTOMERS
As of September 30, 1996, the Company's products had been licensed to more
than 215 retail enterprises addressing a wide variety of retail markets. No
customer accounted for 10% or more of total revenues in 1993, 1994, 1995 or the
first nine months of 1996. The following is a partial list of the Company's
customers that have purchased at least $100,000 of the Company's products and
services as of September 30, 1996. The number of stores operated by the
Company's targeted customers generally ranges from 50 to over 500, with annual
sales generally ranging from $100 million to, in certain cases, over $1 billion.
The Company believes that its recently released products, including ODBMS and
WinDSS, will enable the Company to market to retailers outside of its historical
customer base.
APPAREL & DEPARTMENT STORES
American Retail Group
Bradley Specialty Retailing
Calvin Klein Jeanswear Co.
CHANEL, Inc.
Designs, Inc.
Mohamed Mahmoud (Egypt)
Mothercare (UK)
Seiyu (Singapore)
Stride Rite
The Limited
CATALOG SHOWROOM
Argos (UK)
Brand Names Sales
L. Luria & Son
CRAFTS & TOYS
Early Learning Centres (UK)
Old America Stores
Rag Shop
FOOD, DRUG & COSMETICS
Cosmetic Centers
Cosmetics Plus
Delray Farms, Inc.
Duane Reade
Food Pantry
Fred W. Albrecht Grocery Co.
Genuardi Super Markets
Hickory Farms
Perfumania
Petro-Canada (Canada)
Starbucks
Superdrug (Kingfisher) (UK)
FURNITURE, APPLIANCES &
COMPUTERS
ABC Carpet & Home
The Bombay Company
Comet (Kingfisher) (UK)
CompUSA
Grupo Elektra (Mexico)
Grupo K-2 (Mexico)
Heilig-Meyers
Incredible Universe
Inter'Tan (Tandy) (UK)
Sun TV
GENERAL MERCHANDISE
Globus Office World (UK)
Gramex
Office Depot
Penn-Daniels
Pet Food Warehouse
Pic 'N Save
Staples
Woolworth (Kingfisher) (UK)
HOME IMPROVEMENT
B&Q (Kingfisher) (UK)
Color Tile
Eagle Hardware & Garden
Handy Andy
Quality Stores
TSC Stores
HOUSEWARES
Bed, Bath & Beyond
Kitchens, Etc.
Lenox, Inc.
Linens 'n Things (Melville)
Royal Doulton
Strouds
Westpoint Stevens
Williams-Sonoma
JEWELRY
Helzberg Diamonds
Henry Silverman's Factory Jewelers
Jan Bell
Little Switzerland
Rogers, Ltd.
MUSIC, BOOKS & SOFTWARE
Books-A-Million
Eason (Ireland)
Electronics Boutique
Family Bookstores
HMV LTD (UK)
Virgin Retail
Yamaha Music (Singapore)
OPTICAL AND CAMERA
Cole Vision
Lenscrafters
National Vision Associates
New West Eyeworks
Sunglass Hut
Wolf Camera
OTHER
American Greetings
Bentley's Luggage
Factory Card Outlet
Franklin Mint Gallery
Home Shopping Club
MGM Grand Hotel, Inc.
Monte Carlo Resort
Natural Wonders
Planet Hollywood
Universal Studios
Western Auto (Sears Roebuck)
SPORTING GOODS
Bass Pro Shops
Bicycle Exchange
Gander Mountain
Recreational Equipment, Inc.
SportMart
West Marine Products
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<PAGE> 40
SALES AND MARKETING
The Company's worldwide sales effort is conducted primarily through a
direct sales force located in Phoenix, Arizona and through operations in the
U.K., Singapore, Canada, Chile, Mexico and Germany. The Company also maintains a
network of value-added implementors, third-party systems integrators and
consultants who incorporate the Company's products as part of overall systems
solutions. Internationally, in addition to its direct sales force, the Company
relies upon a network of sales agents and distributors, including IBM in
Venezuela, Mexico, Scandinavia and the Middle East. The Company has recently
established a joint marketing relationship with Siemens Nixdorf. Less formal
working relationships with system integrators, other major hardware vendors and
the retail systems consulting groups of major accounting firms are also key
components of the Company's sales and marketing strategy. The Company believes
these relationships provide important product endorsements and valuable feedback
as well as sales referrals.
While the sales cycle varies substantially from customer to customer, it
typically requires six to nine months from generation of the sales lead to
execution of a license agreement. Because of the complexity and technical nature
of the Company's systems, consulting and product development employees
participate directly in the sales cycle and educate prospective customers on the
advantages of using the Company's solutions.
The Company's marketing activities are directed at increasing market
awareness of the Company's products and services and identifying prospective
customers. The execution of major agreements with customers are accompanied by
press announcements and public relations activities. The Company combines
attendance at key trade shows with a limited amount of focused advertising and
direct mail campaigns to generate prospects. In addition to these activities,
the Company's marketing personnel provide extensive support to the sales
organization, including responding to requests for proposals, conducting product
demonstrations and determining hardware specifications. The marketing
organization is also responsible for internal product training, corporate
communications, and development of sales tools and marketing materials. As of
September 30, 1996, the Company's sales and marketing organization consisted of
7 sales and 12 marketing personnel in the United States and 9 sales and 7
marketing personnel in the rest of the world.
PRODUCT DEVELOPMENT AND JDA TECHNOLOGY
The Company's current product development efforts are directed towards new
products addressing emerging requirements for highly adaptable applications
utilizing the advantages of client/server technologies across multiple
platforms. A key element of the Company's product development strategy is to
design into its products broad, enterprise-wide retailing functionality that is
applicable to the majority of retailers' needs. At the same time, the Company's
objective is to design products that are easily tailored to the specific work
flows and business processes of the individual retailer and are readily adapted
to changing conditions, reducing the amount of software modification required.
In pursuit of its strategy, the Company continues to develop ODBMS, an
enterprise system designed to operate in an open, client/server environment, and
WinDSS, a next generation Windows-based system for in-store and point-of-sale
applications. ODBMS is currently being implemented at two beta sites and
recently was released for general commercial availability, and WinDSS is
currently being implemented at three beta sites and is scheduled to be released
for general commercial availability in the first quarter of 1997. In addition,
the Company continues to devote substantial development resources to modify its
MMS product line to take advantage of recent client/server enhancements to the
IBM AS/400 platform.
Advanced Retail Architecture. The Company has established its Advanced
Retail Architecture ("ARA"), based on the principles of open systems and
client/server technologies, for developing new products and modules. This
architecture was adopted to protect the Company's investment in product
development, as well as its customers' software investment, from changes in
underlying technology and front-end interfaces. Products designed to ARA
specifications can support multiple platforms and accommodate platform changes
or new platforms generally without modification to the JDA application.
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<PAGE> 41
The following schematic illustrates the platform-independent nature of the
ARA framework across major systems levels:
[Schematic chart depicting the following:
ADVANCED RETAIL ARCHITECTURE
-----------------------------------------------------------
MS- Character OS/2
Windows OSF/Motif Mode Macintosh Presentation Presentation
Manager Level
-----------------------------------------------------------
----------------------------------------------------------- Application
JDA RETAIL APPLICATION SOFTWARE Deployment Level
-----------------------------------------------------------
-----------------------------------------------------------
Novell TCP/1P LAN Manager DECnet Network Level
-----------------------------------------------------------
-----------------------------------------------------------
Database
ORACLE INFORMIX DB/2 SYBASE Management
Level
-----------------------------------------------------------
-----------------------------------------------------------
Operating
UNIX Windows NT OS/2 OS/400 System Level]
-----------------------------------------------------------
Although the Company's initial products were developed prior to the
establishment of ARA, the Company's ODBMS and WinDSS products were designed from
inception within the ARA framework. The Company intends to apply ARA to the
development of new products and enhancement of existing products to the extent
feasible. However, the Company's ability to take advantage of the full scope of
ARA design objectives is limited by the proprietary nature of the IBM AS/400 and
DOS-based platforms upon which MMS and DSS operate. In addition, WinDSS is
designed to operate only with Windows presentation level platforms.
The Company's software design philosophy is to design software with a work
flow orientation, incorporating user-defined environments that can be easily
adapted by the retailer to address its specialized and evolving business
requirements.
Work Flow Orientation. Retailers are increasingly reorganizing their
operations from static, discrete tasks into dynamic business processes, or work
flows. These work flows may include multiple transactions among multiple
individuals in multiple locations and in varying sequences. For example, the
generation of a purchase order may be initiated from many decision
makers -- from merchandise manager to distribution manager to store level
personnel -- with different information requirements and controls at various
points and locations within the retail enterprise. By reflecting and
accommodating key business information work flows, the Company's products
facilitate coordination of individuals and functions within the enterprise.
Furthermore, the Company's products can be adapted as work flows change and as
exceptions to standard work flows arise.
User-Defined Environments. The Company's products are embedded with a
broad inventory of pre-defined business objects that model mission-critical
retailing functions. These business objects encapsulate the general rules, data
structures and hierarchies, and processes required to accomplish each function
and can be configured by retailers to develop information views that are
tailored to their specific operations. For example, a music store retailer may
configure a business object relating to stock replenishment by defining two
different classes of merchandise -- fashion items and staples -- requiring
different replenishment algorithms and frequencies. Specifically, current
compact disc releases would require high frequency replenishment using a
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<PAGE> 42
weighted average sales method that reflects daily sales trends, while blank
cassette tapes would require a low frequency, fixed replenishment. These
user-defined environments represent an advance over conventional software
architectures that require programming intervention to accommodate even the most
simple changes to business processes.
As of September 30, 1996, there were 82 employees on the Company's product
development staff. The Company's product development expenditures in 1993, 1994,
1995 and the nine months ended September 30, 1996 were $1.3 million, $1.9
million, $3.5 million and $4.6 million and represented 7%, 8%, 12% and 14% of
revenues, respectively. The Company expects that it will continue to commit
substantial resources to product development in the future.
Both WinDSS and certain modules of ODBMS remain under development, and
neither has been fully implemented by customers in a retail environment. There
can be no assurance that these products will not require substantial software
enhancements or modifications to satisfy performance requirements of customers
or to fix design defects or previously undetected errors. In addition, there can
be no assurance that modules or features under development or planned for
development will be completed in a timely fashion or without unanticipated
excess development expense. Should the Company fail to successfully complete the
planned development of either ODBMS or WinDSS, or fail to timely effect any
required modifications, the Company's business, operating results and financial
condition will be materially adversely affected.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. There can
be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found, resulting in loss of, or delay
in, market acceptance, sales, diversion of development resources, injury to the
Company's reputation, or increased service and warranty costs, any of which
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Risk Factors -- Product Defects; Product
Liability; Risk of Integration Difficulties."
The computer software industry is subject to rapid technological change,
changing customer requirements, frequent new product introductions and evolving
industry standards that may render existing products and services obsolete. As a
result, the Company's position in its existing markets or other markets that it
may enter could be eroded rapidly by technology advancements not embraced by the
Company. The life cycles of the Company's products are difficult to estimate.
The products must keep pace with technological developments, conform to evolving
industry standards and address increasingly sophisticated customer needs. There
can be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products or that new products or product enhancements will meet the requirements
of the marketplace and achieve market acceptance. If the Company is unable to
develop and introduce products in a timely manner in response to changing market
conditions or customer requirements, the Company's business, operating results
and financial condition will be materially adversely affected.
COMPETITION
The market for retail information systems is intensely competitive. The
Company believes the principal competitive factors in such market are product
quality, reliability, performance and price, vendor and product reputation,
financial stability, features and functions, ease of use and quality of support.
A number of companies offer competitive products addressing certain of the
Company's target markets. In the enterprise systems market, the Company competes
with in-house systems developed by the Company's targeted customers and with
third-party developers such as Intrepid, Island Pacific, Radius PLC, Retek
(which agreed in October 1996 to be acquired by HNC Software, Inc.), STS Systems
and Richter Management Services, among others. In addition, the Company believes
that new market entrants may attempt to develop fully integrated enterprise
level systems targeting the retail industry. In particular, SAP
Aktiengesellschaft announced in August 1996 its intention to release an
integrated client/server enterprise system competitive with the Company's
products. In the in-store systems market, which is more fragmented than the
enterprise market, the Company competes with major hardware original equipment
manufacturers such as AT&T/NCR, IBM, and ICL, as well as software companies such
as Applied Intelligence Group, CRS Business Computers, Post Software
International, STS Systems, GERS Retail Systems and Gateway Data
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<PAGE> 43
Sciences Corporation, among others. In the market for consulting services, the
Company competes with major systems integrators such as Andersen Consulting,
Price Waterhouse's Management Horizons Division, Deloitte & Touche LLP and Ernst
& Young LLP, as well as independent consulting firms such as the ISSC Division
of IBM. Many of the Company's existing competitors, as well as a number of
potential new competitors, have significantly greater financial, technical and
marketing resources than the Company. There can be no assurance that the Company
will be able to compete successfully against its current or future competitors
or that competition will not have a material adverse effect on the Company's
business, operating results and financial condition.
LEGAL PROCEEDINGS
In February 1996, a dispute arose with one of the Company's customers. The
Company initiated arbitration proceedings against the customer in an effort to
collect approximately $100,000 in remaining amounts due pursuant to its contract
with the customer. The customer counterclaimed for a full refund of the
approximately $985,000 previously paid to the Company, and the Company is
vigorously defending such counterclaim. The arbitration proceedings remain
ongoing, and the parties are engaged in settlement negotiations. Although
management believes, based upon information currently available, that a
settlement can be reached upon terms acceptable to the Company, there can be no
assurance that such will be the case or that any settlement can be reached in
this matter. The Company does not believe that the ultimate outcome of this
proceeding will have a material adverse effect on the Company.
In May 1996, Niederhoffer and Niederhoffer, Inc. ("Niederhoffer") filed a
demand for arbitration asserting a claim against JDA Software Services, Inc., a
wholly owned subsidiary of the Company. Niederhoffer's claims are based upon an
agreement between it and JDA Software Services, Inc. dated April 6, 1990 (the
"Finder's Agreement"). Niederhoffer alleges entitlement to a finder's fee in
connection with the purchase of convertible preferred stock in the Company in
March 1995 by six investment funds advised by TA Associates, Inc. and its
affiliates ("TA Investment"), and a claim for Common Stock arising from the
related establishment of the Company and reorganization of the Company's wholly
owned subsidiaries pursuant to which Company Common Stock was issued to such
subsidiaries' stockholders (the "Reorganization"). In the arbitration,
Niederhoffer claims damages of approximately $770,000 and asserts a right to
504,000 shares of the Company's Common Stock.
The Company is contesting both the applicability of the Finder's Agreement
to the TA Investment and the related Reorganization and the measurement of the
damages as claimed by Niederhoffer. The arbitration is expected to be concluded
in December 1996, with the arbitrators' decision rendered following conclusion
of the arbitration.
The Company and its counsel believe that the Company has meritorious
defenses to Niederhoffer's claims, and the Company intends to vigorously defend
its position in the arbitration. However, since the results of arbitration
proceedings are inherently unpredictable, no assurance can be given with respect
to the arbitration's outcome or the total expense or possible damages, if any,
that may be incurred in the arbitration proceedings or as a result of a
settlement or an arbitration award. In the event the arbitration panel concludes
that the TA Investment and related Reorganization fell within the scope of the
Finder's Agreement, and further agrees with Niederhoffer's assessment of
damages, the Company could be required to make cash payments as well as issue to
Niederhoffer up to 504,000 shares of the Company's Common Stock or make an
additional cash payment to Niederhoffer based upon the arbitrators'
determination of the value of such Shares. The Company believes that an
arbitrator's decision to award up to 504,000 shares of Common Stock to
Niederhoffer based upon a determination that such shares are issuable as a
result of the TA Investment would be treated as a charge to additional paid-in
capital. Such charge would reduce additional paid-in capital by the amount of
any cash paid plus the value of the Common Stock issued, valued as of the date
of the TA Investment. However, any cash awarded in lieu of shares in excess of
the value of such shares at the date of the TA Investment would be recorded as
litigation expense and could have an immediate and material adverse effect on
the Company's operating results. In addition, any cash awarded to Niederhoffer
would reduce the Company's available liquidity. Any shares of Common Stock
awarded to Niederhoffer would have a dilutive effect on the Company's earnings
per share.
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<PAGE> 44
PROPRIETARY RIGHTS
The Company's success and ability to compete is dependent in part upon its
proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure and copyright law, which may afford only limited protection. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. Although the Company relies on the limited
protection afforded by such intellectual property laws, it also believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable maintenance are also essential to establishing and maintaining a
technology leadership position. The Company presently has no patents or patent
applications pending. The source code for the Company's proprietary software is
protected both as a trade secret and as a copyrighted work. The Company
generally enters into confidentiality or license agreements with its employees,
consultants and customers, and generally controls access to and distribution of
its software, documentation and other proprietary information. The terms of the
Company's license agreements with its customers often require the Company to
provide the customer with a listing of the product source code. Although the
license agreements place restrictions on the use by the customer of the
Company's source code and do not permit the re-sale, sublicense or other
transfer of such source code, there can be no assurance that unauthorized use of
the Company's technology will not occur.
Despite the measures taken by the Company to protect its proprietary
rights, unauthorized parties may attempt to reverse engineer or copy aspects of
the Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult. In addition, litigation may be necessary in the future to enforce the
Company's intellectual property rights, to protect the Company's trade secrets,
to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.
Certain technology used by the Company's products is licensed from third
parties, generally on a non-exclusive basis. These licenses generally require
the Company to pay royalties and fulfill confidentiality obligations. The
Company believes that there are alternative resources for each of the material
components of technology licensed by the Company from third parties. However,
the termination of any such licenses, or the failure of the third-party
licensors to adequately maintain or update their products, could result in delay
in the Company's ability to ship certain of its products while it seeks to
implement technology offered by alternative sources. Any required replacement
licenses could prove costly. Also, any such delay, to the extent it becomes
extended or occurs at or near the end of a fiscal quarter, could result in a
material adverse effect on the Company's results of operations. While it may be
necessary or desirable in the future to obtain other licenses relating to one or
more of the Company's products or relating to current or future technologies,
there can be no assurance that the Company will be able to do so on commercially
reasonable terms or at all.
In the future the Company may receive notices claiming that it is
infringing the proprietary rights of third parties and there can be no assurance
that the Company will not become the subject of infringement claims or legal
proceedings by third parties with respect to current or future products. In
addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Any such claim could be time
consuming, result in costly litigation, cause product shipment delays or force
the Company to enter into royalty or license agreements rather than dispute the
merits of such claims. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities to
third parties, require the expenditure of significant resources to develop
non-infringing technology, require disputed rights to be licensed from others or
require the Company to cease the marketing or use of certain products, any of
which could have a material adverse effect on the Company's business, operating
results and financial condition. To the extent the Company desires or is
required to obtain licenses to patents or proprietary rights of others, there
can be no assurance that any such licenses will be made available on terms
acceptable to the Company, if at all. As the number of software products in the
industry increases and the functionality of these products further overlaps, the
Company believes the software developers may become increasingly subject to
infringement claims. Any
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<PAGE> 45
such claims against the Company, with or without merit, as well as claims
initiated by the Company against third parties, can be time consuming and
expensive to defend, prosecute or resolve.
EMPLOYEES
As of September 30, 1996, the Company employed 345 employees, including 182
in consulting services, 82 in product development, 35 in sales and marketing, 35
in administration, and 11 in maintenance and other services. Of these employees,
219 were located in the United States, 41 in the United Kingdom, 49 in Canada,
24 in Singapore, 2 in Germany and 10 in Latin America. None of the Company's
employees is represented by a collective bargaining agreement, nor has the
Company experienced any work stoppage. The Company considers its relations with
its employees to be good.
The Company's future operating results depend in significant part upon the
continued service of its key technical and senior management personnel. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified technical and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will retain
its key managerial or technical personnel or attract such personnel in the
future. The Company has at times experienced and continues to experience
difficulty recruiting qualified personnel and there can be no assurance that the
Company will not experience such difficulties in the future. The Company, either
directly or through personnel search firms, actively recruits qualified product
development, consulting and sales and marketing personnel. If the Company is
unable to hire and retain qualified personnel in the future, such inability
could have a material adverse effect on the Company's business, operating
results and financial condition.
FACILITIES
The Company's principal facility occupies approximately 42,000 square feet
in Phoenix, Arizona, the lease for which expires on March 31, 1999. The Company
also leases office space in the United States in Scottsdale, Arizona; Stamford,
Connecticut; Atlanta, Georgia; and abroad in London, Calgary, Toronto,
Singapore, Frankfurt, Santiago and Mexico City. The Company believes that its
existing facilities are adequate for its current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------------------- --- -------------------------------------------
<S> <C> <C>
James D. Armstrong...................... 45 Chief Executive Officer and Director
Frederick M. Pakis...................... 43 President and Director
Thomas M. Proud......................... 51 Vice President and Chief Financial Officer
James L. Smith.......................... 41 Executive Vice President
Brent W. Lippman........................ 39 Senior Vice President, Sales and Marketing
Kenneth J. Desmarchais.................. 37 Vice President, Technology
J. Timothy Davis........................ 45 Vice President, U.S. Consulting Services
Kurt R. Jaggers(1)...................... 38 Director
Crawford L. Cole(1)..................... 38 Director
</TABLE>
- ---------------
(1) Member of the Compensation and Audit Committees.
Mr. Armstrong co-founded the Company with Mr. Pakis in 1985 and has since
served as the Chief Executive Officer and a director. In 1978, Mr. Armstrong
founded JDA Canada and served as its President until 1987. From September 1985
to December 1987, Mr. Armstrong served on the board of directors of Mark's Work
Wearhouse, a publicly held Canadian specialty retailing company. Mr. Armstrong
attended Ryerson Polytechnic Institute in Toronto, Ontario.
Mr. Pakis co-founded the Company with Mr. Armstrong in 1985 and has since
served as President and a director. From April 1981 to December 1985, Mr. Pakis
was a Manager -- Retail Consulting with Touche Ross & Co. From April 1976 to
March 1981, Mr. Pakis served as Director of Corporate Planning for The Sherwin
Williams Company, a home improvement specialty store company. Mr. Pakis attended
the United States Military Academy at West Point, received a B.S. in Operations
Research from Case Western Reserve University and an M.B.A. from the London
School of Business, where he studied as a Sloan Fellow.
Mr. Proud joined the Company in November 1995 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. Proud served as Chief
Financial Officer for Syntellect, Inc., a publicly held interactive voice
response company, from June 1994 to November 1995. From July 1993 to May 1994,
Mr. Proud served as Chief Financial Officer of Axxess Technologies, Inc., a
privately held manufacturing company. From March 1987 to June 1993, Mr. Proud
served as Chief Financial Officer for Dataphaz, which was acquired by
Computerland Corporation in April 1991. Prior to that, Mr. Proud was employed
for eleven years by Price Waterhouse. Mr. Proud received a B.A. in Accounting
from Thiel College and an M.S. in Accounting from Kent State University and is a
certified public accountant.
Mr. Smith joined the Company in September 1986 as a project manager. Mr.
Smith was promoted to Director of Systems Development in January 1988, to Vice
President, Operations in September 1989 and to Executive Vice President of the
Company in January 1993. Prior to joining the Company, Mr. Smith was a
consultant with the Management Information Consulting Division of Arthur
Andersen. Mr. Smith received a B.S. in Mathematics from Cleveland State
University and an M.B.A. from Ohio State University.
Mr. Lippman joined the Company in October 1990 as Director of Marketing. In
October 1991 Mr. Lippman was promoted to Vice President of the Company and in
October 1996, Mr. Lippman was promoted to Senior Vice President of the Company.
Prior to joining the Company, Mr. Lippman served as Sales Manager with Sterling
Software, Inc., a publicly held software company, from 1984 to September 1990,
and was a Senior Systems Consultant for Wang Laboratories from 1983 to 1984. Mr.
Lippman received a B.S. in Operations Research and an M.B.A. from Case Western
Reserve University.
Mr. Desmarchais joined JDA Canada in November 1985 and joined the Company
in February 1988 as a project manager. Mr. Desmarchais was promoted to Manager,
New Product Development in June 1990 and to Director of Technology in December
1992. Mr. Desmarchais was promoted to Vice President, Technology in
44
<PAGE> 47
March 1995. Prior to 1985, Mr. Desmarchais was employed for five years as an
Advisory Systems Engineer with IBM Canada. Mr. Desmarchais received a B.S. in
Computer Science from Ryerson Polytechnic Institute in Toronto, Ontario.
Mr. Davis joined the Company in September 1996 as Vice President, U.S.
Consulting Services. From July 1990 to August 1996, Mr. Davis was Vice President
and Senior Manager with Price Waterhouse's Management Horizons Division. From
April 1983 to July 1990, Mr. Davis was with Coopers & Lybrand where he held the
positions of Senior Consultant, Supervising Consultant and Managing Associate.
From May 1980 to August 1982, Mr. Davis was Director, Financial Systems Planning
and Analysis for Zale Corporation, a publicly held retail jewelry corporation.
Mr. Davis received a B.S. in Business and Public Administration from the
University of Texas.
Mr. Jaggers has served as a director of the Company since March 1995. Mr.
Jaggers joined TA Associates, an equity investment firm, in August 1990 and has
been a Principal there since January 1993. Mr. Jaggers also serves on the Board
of Directors of Network Appliance, Inc., a network file server company. Mr.
Jaggers received a B.S. and an M.S. in electrical engineering and an M.B.A. from
Stanford University.
Mr. Cole has served as a director of the Company since January 1996. Mr.
Cole is the Chief Executive Officer and President of West Marine, Inc., a
publicly held retailer and wholesaler of boating equipment and apparel, and has
served in those positions since April 1995. Mr. Cole has been a director of West
Marine, Inc. since July 1990. Mr. Cole also held the position of President of
West Marine, Inc. from July 1990 to August 1993, before resigning his position
to live abroad. Prior to West Marine, Inc., Mr. Cole held a variety of positions
with Northern Automotive from July 1987 to May 1990, including Senior Vice
President, Store Operations. Prior to that, for three years Mr. Cole was with
Garr Consulting Group, a retail consulting firm, where his last position was
Vice President, Retail Consulting. Mr. Cole received a B.S.M.E. degree from the
University of Virginia and an M.B.A. from the University of Georgia.
Mr. Jaggers was elected to the Board of Directors in March 1995 pursuant to
the Exchange Agreement between the Company and TA Associates. See "Certain
Transactions." The Board of Directors is divided into three classes, with each
class serving a staggered three-year term. At each annual meeting of
stockholders, the successors to the class of directors whose term expires at
that time are elected and qualified, so that the term of one class of directors
expires at each such annual meeting. The terms of office of the Company's
current directors expire as follows: Mr. Cole, 1997; Mr. Jaggers, 1998; and
Messrs. Armstrong and Pakis, 1999. See "Description of Capital
Stock -- Anti-takeover Effects of Delaware Law and Charter Documents." Officers
are elected by and serve at the discretion of the Board of Directors. There are
no family relationships among the directors or officers of the Company.
45
<PAGE> 48
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation paid
by the Company during the fiscal year ended December 31, 1995 to the Company's
chief executive officer and each of the Company's four other most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1995
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- -------------------------------------------- -------- -------- ------------------- ------------
<S> <C> <C> <C> <C>
James D. Armstrong.......................... $360,000 $100,000 0 $ 8,949(1)
Chief Executive Officer
Frederick M. Pakis.......................... 360,000 100,000 0 8,019(2)
President
Geoffrey J. Finlay(3)....................... 141,675 310,000 235,000 51,422(4)
Managing Director, JDA International
James L. Smith.............................. 150,000 175,000 235,000 5,769(5)
Executive Vice President
Brent W. Lippman............................ 125,000 200,000 235,000 1,109(6)
Senior Vice President
</TABLE>
- ---------------
(1) Includes $1,109 of Company contributions under its 401(k) Plan and $7,840
for premiums paid for life insurance coverage.
(2) Includes $1,109 of Company contributions under its 401(k) Plan and $6,910
for premiums paid for life insurance coverage.
(3) Mr. Finlay served as the Managing Director of JDA International until
October 1996.
(4) Includes $24,287 paid by the Company into an individual retirement account
and $27,135 paid for vehicle expenses.
(5) Includes $1,109 of Company contributions under its 401(k) Plan and $4,660
for premiums paid for life insurance coverage.
(6) Includes $1,109 of Company contributions under its 401(k) Plan.
46
<PAGE> 49
The following table provides information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended December
31, 1995 to the persons named in the Summary Compensation Table. Also shown
below is the potential realizable value over the option term (the period from
the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts and assumed rates
of appreciation do not represent the Company's estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on future
performance of the Common Stock.
OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED 1995 SHARE(1) DATE 5% 10%
- ---------------------------------- ---------- --------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James D. Armstrong................ 0 0 -- -- 0 0
Frederick M. Pakis................ 0 0 -- -- 0 0
Geoffrey J. Finlay................ 200,000 15.4 $3.50 3/29/05 $440,226 $1,115,620
35,000 2.7 5.25 11/14/05 115,559 292,850
James L. Smith.................... 200,000 15.4 3.50 3/29/05 440,226 1,115,620
35,000 2.7 5.25 11/14/05 115,559 292,850
Brent W. Lippman.................. 200,000 15.4 3.50 3/29/05 440,226 1,115,620
35,000 2.7 5.25 11/14/05 115,559 292,850
</TABLE>
- ---------------
(1) All options were granted at an exercise price equal to the fair market value
of the Company's Common Stock as determined by the Board of Directors of
the Company on the date of grant. The Company's Common Stock was not
publicly traded at the time of the option grants to the officers.
(2) The 5% and 10% assumed compounded annual rates of stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price appreciation over the ten-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the persons named in the Summary Compensation Table.
OPTION EXERCISES AND FISCAL 1995 YEAR-END VALUES
The following table provides the specified information concerning
unexercised options held as of December 31, 1995 by the persons named in the
Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AT
SHARES 12/31/95 12/31/95(2)
ACQUIRED VALUE ------------------ ---------------------
NAME ON EXERCISE REALIZED(1) VESTED UNVESTED VESTED UNVESTED
-------------------------- ----------- ----------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
James D. Armstrong........ 0 0 0 0 0 0
Frederick M. Pakis........ 0 0 0 0 0 0
Geoffrey J. Finlay........ 0 0 170,000 65,000 $1,037,000 $335,250
James L. Smith............ 114,287 $85,715 28,571 92,142 174,283 500,816
Brent W. Lippman.......... 42,859 32,144 99,999 92,142 609,994 500,816
</TABLE>
- ---------------
(1) "Value Realized" represents fair market value of the underlying securities
on the exercise date minus the aggregate exercise price of such options.
For purposes of this calculation, a fair market value of $4.25 per share
was used, the fair market value of the securities as determined by the
Board of Directors on September 30, 1995.
(2) Calculated on the basis of the fair market value of the underlying
securities as of December 31, 1995 of $9.60 per share, as determined by the
Company's board of directors, minus the aggregate exercise price.
47
<PAGE> 50
No compensation intended to serve as incentive for performance to occur
over a period longer than one fiscal year was paid pursuant to a long-term
incentive plan during the last fiscal year to any of the persons named in the
Summary Compensation Table. The Company does not have any defined benefit or
actuarial plan with any of the persons named in the Summary Compensation Table
under which benefits are determined primarily by final compensation or average
final compensation and years of service.
BENEFIT PLANS
1995 Stock Option Plan. The Board of Directors has reserved a total of
1,350,000 shares of Common Stock for issuance under the Company's 1995 Stock
Option Plan (the "Option Plan"). At September 30, 1996, 368,758 shares of Common
Stock had been issued upon exercise of options, 931,242 shares were subject to
outstanding options at a weighted average exercise price of $4.02 and 50,000
shares remained available for future grant under the Option Plan. Options may be
granted to employees (including officers) whom the Board of Directors has
determined will contribute substantially to the progress of the Company or are
key employees. Both incentive stock options and non-incentive stock options may
be granted under the Option Plan. The exercise price of an incentive stock
option and a non-incentive stock option must be no less than the fair market
value at the time of grant. Options granted under the Option Plan are subject to
individual vesting schedules, but must be exercised within ten years of the date
of grant. On March 30, 1995, the Company entered into a Redemption Agreement
with Messrs. Armstrong and Pakis whereby each individual agreed to have his
stock in the Company redeemed by the Company if options to purchase up to an
aggregate of 1,350,000 shares of the Company's Common Stock are exercised by any
of the option holders who acquire options under the Company's 1995 Stock Option
Plan. See "Certain Transactions."
1996 Stock Option Plan. The Board of Directors has reserved a total of
1,250,000 shares of Common Stock for issuance under the Company's 1996 Stock
Option Plan (the "1996 Option Plan"). At September 30, 1996, 305,000 shares were
subject to outstanding options at a weighted average exercise price of $16.00,
and 945,000 shares remained available for future grant under the 1996 Option
Plan. Options may be granted to employees (including officers), consultants,
advisors and directors who are also employees, although only employees and
directors and officers who are also employees may receive "incentive stock
options" intended to qualify for certain tax treatment. The exercise price of
non-qualified stock options must equal at least 85% of the fair market value of
the Common Stock on the date of grant, and in the case of incentive stock
options must be no less than the fair market value on the date of the grant.
Options granted under the Option Plan generally vest over four years and must be
exercised within ten years.
1996 Outside Directors Stock Option Plan. A total of 150,000 shares of
Common Stock have been reserved for issuance under the Company's 1996 Outside
Directors Stock Option Plan (the "Directors Plan"). As of September 30, 1996, no
options have been granted under the Directors Plan. The Directors Plan provides
for the automatic granting of non-qualified stock options to directors of the
Company who are not employees of the Company ("Outside Directors"). Under the
Directors Plan, each new Outside Director elected after March 15, 1996 will
automatically be granted an option to purchase 12,500 shares of Common Stock on
the date of his or her election. In addition, each serving Outside Director will
thereafter automatically be granted an option to purchase 4,000 shares of Common
Stock at each annual meeting of stockholders after their election provided that
the Outside Director continues to serve in such capacity. The exercise price of
the options in all cases will be equal to the fair market value of the Common
Stock on the date of grant. Options granted under the Directors Plan generally
vest over three years and must be exercised within ten years.
1996 Employee Stock Purchase Plan. A total of 200,000 shares of the
Company's Common Stock have been reserved for issuance under the Company's 1996
Employee Stock Purchase Plan (the "Purchase Plan"), at September 30, 1996,
38,445 shares had been issued. The Purchase Plan permits eligible employees to
purchase Common Stock at a discount through payroll deductions, during
concurrent 24-month offering periods. Each offering period will be divided into
four consecutive six-month purchase periods. The price at which stock is
purchased under the Purchase Plan is equal to 85% of the fair market value of
the Common Stock on the first day of the offering period or the last day of the
purchase period, whichever is lower. The initial offering period commenced on
March 15, 1996. On August 9, 1996, the Purchase Plan was amended to
48
<PAGE> 51
provide for a new offering period commencing on August 15, 1996, and the Company
provided for the participation in the Purchase Plan by the employees of JDA
Canada.
401(k) Profit Sharing Plan. The Company has adopted a tax-qualified
employee savings and profit sharing plan (the "401(k) Plan") covering
substantially all of the Company's employees located in the United States,
including officers, after one month of service. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the lesser of
20% of eligible compensation or the annual limit prescribed by law ($9,240 in
1995 and $9,500 in 1996) and have the amount of such reduction contributed to
the 401(k) Plan. The 401(k) Plan permits, but does not require, additional cash
contributions to the 401(k) Plan by the Company. The Company made approximately
$57,000 of contributions to the 401(k) Plan in 1995, and no contributions in
1994 and 1993. Such Company contributions allocated to a participant do not vest
the first year of service and thereafter vest at the rate of 20% percent per
year of service. The trustee under the 401(k) Plan, at the direction of each
participant, invests the assets of the 401(k) Plan in designated investment
options. The 401(k) Plan is intended to qualify under section 401(a) and (k) of
the Internal Revenue Code so that contributions to the 401(k) Plan, and income
earned on the contributions, are not taxable to employees until distributed
following termination of employment, and so that the contributions are currently
deductible by the Company for income tax purposes.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash for services provided as a
director. On January 12, 1996, the Company granted options to purchase 30,000
shares of Common Stock under the 1996 Option Plan at an exercise price of $9.60
per share to each of its current outside directors, Kurt R. Jaggers and Crawford
L. Cole, which options vested one-third on March 31, 1996 and fully vest over
the next two years. See "Certain Transactions." Under the Directors Plan,
directors who are not employees of the Company will receive yearly grants of
options to purchase Common Stock. See "-- Benefit Plans -- 1996 Outside
Directors Stock Option Plan." The Company does not pay additional amounts for
committee participation or special assignments of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the fiscal year completed December 31, 1995, the Board of Directors
of the Company, of which James D. Armstrong, Chief Executive Officer of the
Company, and Frederick M. Pakis, President of the Company, were and are members,
fulfilled all functions of the Compensation Committee with regard to
compensation of executive officers of the Company. In January 1996, Mr. Cole and
Mr. Jaggers, the Company's outside directors, were appointed to the Company's
Audit and Compensation Committees for the fiscal year ending December 31, 1996.
No other directors were at any time during the year ended December 31, 1995
an officer or employee of the Company, and there are no Compensation Committee
interlocks between the Company and other entities involving the Company's
executive officers and board members who serve as executive officers of such
entities.
On March 30, 1995, the Company entered into employment agreements with Mr.
Armstrong, Mr. Pakis and Mr. Smith. Under the terms of the agreements, as
amended, in 1995 Mr. Armstrong received an annual base salary of $360,000, Mr.
Pakis received an annual base salary of $360,000 and Mr. Smith received an
annual base salary of $150,000, each subject to annual review and adjustment by
the Board of Directors. Also under the agreements, Messrs. Armstrong, Pakis and
Smith each receive a bonus to be determined by the Compensation Committee of the
Board of Directors. Effective January 1, 1996, Messrs. Armstrong's and Pakis'
annual base salaries have been reduced to $175,000, Mr. Smith's annual base
salary has been increased to $165,000, and each may receive a bonus in 1996
targeted to be $100,000. The agreements have terms of two years and renew
automatically for not less than a one year period.
On November 13, 1995, the Company entered into an employment agreement with
Thomas M. Proud, the Company's Vice President and Chief Financial Officer. Under
the agreement, Mr. Proud receives an annual base salary of $150,000 and may
receive a bonus in 1996 targeted to be $50,000. In addition, Mr. Proud
49
<PAGE> 52
was granted options to purchase 60,000 shares of the Company's Common Stock at
an exercise price of $5.25 per share.
On January 12, 1996, the Company granted to each of Mr. Jaggers and Mr.
Cole options to purchase 30,000 shares of Common Stock at $9.60 per share that
vest over two years. See "-- Compensation of Directors."
The Company has entered into indemnification agreements with its directors
and certain executive officers, as well as with TA Associates. The Company
intends to enter into indemnification agreements with its remaining executive
officers. Such agreements require the Company to indemnify such individuals to
the fullest extent permitted by Delaware law. See "Limitation of Liability and
Indemnification."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Certificate of Incorporation which provide
that directors of the Company shall not be personally liable for monetary
damages to the Company or its stockholders for a breach of fiduciary duty as a
director, except for liability as a result of (i) a breach of the director's
duty of loyalty to the Company or its stockholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) an act related to the unlawful stock repurchase or payment of a
dividend under Section 174 of Delaware General Corporation Law; and (iv)
transactions from which the director derived an improper personal benefit. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, by bylaws, agreements or
otherwise, to the full extent permitted under Delaware law. The Company has
entered into separate indemnification agreements with its directors, certain
executive officers and TA Associates which may, in some cases, be broader than
the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers, directors and TA Associates against
certain liabilities that may arise by reason of their status or service as
directors, officers or control persons (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified,
and to obtain directors' and officers' insurance if available on reasonable
terms.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted.
CERTAIN TRANSACTIONS
Prior to March 30, 1995, the Company's business was conducted through five
affiliated companies, the stock of four of which was owned by Messrs. James D.
Armstrong (either directly or through JDA Investments Ltd., a Canadian
corporation wholly owned by Mr. Armstrong), Frederick M. Pakis and James L.
Smith, and the fifth of which was a wholly-owned subsidiary. The four principal
affiliated companies were JDA Services, JDA Software, JDA Worldwide and JDA
International.
On March 14, 1995, the Company was formed and subsequently, on March 30,
1995, JDA Services, JDA Software, JDA Worldwide, JDA International, Messrs.
Armstrong, Pakis and Smith, JDA Investments Ltd. and TA Associates entered into
a Series A Preferred Stock and Common Stock Exchange Agreement (the "Exchange
Agreement"). Pursuant to the Exchange Agreement: (1) Messrs. Armstrong, Pakis
and Smith and JDA Investments Ltd. each exchanged all of the outstanding shares
of stock of JDA Services, JDA Software, JDA Worldwide and JDA International
owned by them for an aggregate of 7,200,000 shares of Common Stock of the
Company, Promissory Notes executed by the Company in the aggregate amounts of
$15,285,197, and cash in the aggregate amount of $1,000,000; and (2) TA
Associates exchanged $15,000,000 in cash for an aggregate of 2,800,000 shares of
Series A Preferred Stock of the Company. As a result of the Exchange Agreement,
Mr. Armstrong received 3,510,000 shares of Common Stock of the Company,
50
<PAGE> 53
Promissory Notes in the aggregate amount of $6,964,034 and cash in the amount of
$487,500; JDA Investments Ltd. received a Promissory Note in the amount of
$487,500; Mr. Pakis received 3,510,000 shares of Common Stock of the Company,
Promissory Notes in the aggregate amount of $7,451,534 and cash in the amount of
$487,500; and Mr. Smith received 180,000 shares of Common Stock of the Company,
Promissory Notes in the aggregate amount of $382,130 and cash in the amount of
$25,000. As a result of the Exchange Agreement, JDA Services, JDA Software, JDA
Worldwide and JDA International became wholly-owned subsidiaries of the Company.
Of the Promissory Notes described above, Promissory Notes in the principal
amounts of $6,337,500, $487,500, $6,825,000, and $350,000 payable to Mr.
Armstrong, JDA Investments Ltd. and Messrs. Pakis and Smith, respectively, each
bore interest at the rate of 6.32297% per annum and, according to their terms,
were paid in full by the Company on January 11, 1996. The remaining Promissory
Notes in the principal amounts of $626,534, $626,534 and $32,130 payable to
Messrs. Armstrong, Pakis and Smith, respectively, each bore interest at the rate
of 8% per annum, and provided for annual payment of accrued interest and were
paid in full in March 1996.
Kurt R. Jaggers, a director of the Company, is a Principal of TA
Associates, Inc. Pursuant to the terms of the Exchange Agreement, TA Associates
is entitled to registration rights with respect to the Common Stock of the
Company issued upon conversion of the Company's Series A Preferred Stock. See
"Description of Capital Stock -- Registration Rights."
Also as part of the Exchange Agreement, the Company guaranteed six
Promissory Notes payable by its newly acquired subsidiaries, JDA Software and
JDA Worldwide, to Messrs. Armstrong and Pakis. These Promissory Notes
represented distributions to Messrs. Armstrong and Pakis from JDA Software and
JDA Worldwide when these two corporations were S Corporations prior to the
Exchange Agreement. Two of these Promissory Notes were each in the principal
amount of $449,495, bore interest at 8% per annum and, according to their terms,
were paid in full by JDA Software and JDA Worldwide to Messrs. Armstrong and
Pakis on January 13, 1996. The other four Promissory Notes were payable by JDA
Software and JDA Worldwide to Messrs. Armstrong and Pakis in the principal
amounts of $1,718,002 and $241,365 each, bore interest at the rate of 8% per
annum, provided for monthly payments of principal and interest and were paid in
full upon the closing in March 1996.
On March 30, 1995, the Company entered into a Redemption Agreement with
Messrs. Armstrong and Pakis whereby each individual agreed to have his stock in
the Company redeemed by the Company upon the exercise of up to an aggregate of
1,350,000 shares of the Company's Common Stock by the option holders under the
Option Plan. See "Management -- Benefit Plans." The Redemption Agreement
requires the Company to redeem from Messrs. Armstrong and Pakis, pro rata, a
number of shares of Common Stock of the Company equal to the number of shares as
to which applicable options are exercised. As to the first 850,000 options
exercised under the Option Plan, the redemption price is equal to the exercise
price of the option (as set forth in the applicable option agreements), and as
to the remaining 500,000 options exercised under the Option Plan, the redemption
price is $.01 per share. As a result of the Redemption Agreement, existing
stockholders of the Company will not be diluted by the exercise of stock options
under the Option Plan, and only the ownership percentages of Messrs. Armstrong
and Pakis are diluted by the stock options exercised under the Option Plan. As
of September 30, 1996, Messrs. Armstrong and Pakis had sold 368,758 shares of
Common Stock to the Company for an aggregate of $1,333,915 pursuant to the
Redemption Agreement to cover exercises of options.
Prior to June 1, 1995, the Company leased its principal facilities in
Scottsdale, Arizona from Pakis-Armstrong Venture, an Arizona general
partnership, the general partners of which are Mr. Armstrong and Mr. Pakis. The
Company leased these facilities, totalling approximately 9,600 square feet, from
July 1, 1990 to May 31, 1995. The base rent at the time of the termination of
these leases was $120,000 per year, plus the annual cost of the real property
taxes, insurance and ordinary maintenance of the facilities. All amounts paid by
the Company to Pakis-Armstrong Venture were evenly distributed to Messrs.
Armstrong and Pakis.
Effective January 1, 1996, the Company entered into a lease with
Pakis-Armstrong Venture for approximately 5,400 square feet of office space in
Scottsdale, Arizona, at a base rent of $67,500 per year. The
51
<PAGE> 54
Company is also required to pay all real property taxes, insurance and ordinary
maintenance on the premises and to name Pakis-Armstrong Venture as an additional
insured on an insurance policy for general liability. The term of the lease
commences on January 1, 1996, and terminates on December 31, 1997, unless
otherwise extended by the parties. The Company intends to use this facility
primarily for training purposes. The Company understands that all amounts to be
paid by the Company to Pakis-Armstrong Venture for the lease described in this
paragraph will be evenly distributed to Messrs. Armstrong and Pakis. The Company
believes that the terms of the lease agreement with Pakis-Armstrong Venture are
at least as favorable as those that would have been obtained for a similar lease
of a comparable property from unaffiliated third parties.
In the first nine months of 1996, the Company granted Messrs. Smith and
Lippman options to purchase 20,000 shares of Common Stock at an exercise price
of $18.44 per share, Messrs. Proud and Desmarchais options to purchase 15,000
shares of Common Stock at an exercise price of $18.44 per share, and Mr. Davis
options to purchase 15,000 shares of Common Stock at $19.00 per share. The
exercise prices of such options were set at the fair market value of the Common
Stock on the date of grant, as determined by the Compensation Committee of the
Board of Directors. Such options vest ratably over a five-year period.
On April 26, 1996, the Company entered into its standard form Software
License Agreement with West Marine Products, Inc., for the license of the
Company's WinDSS product. Crawford Cole, the President of West Marine Products,
Inc. is a director of the Company. The Software License Agreement provides for a
license fee of approximately $400,000 be paid to the Company over time.
The Company entered into an employment agreement, effective January 1,
1996, with Geoffrey J. Finlay, who as of such date was the Managing Director of
JDA International. Mr. Finlay receives an annual base salary of $188,000 and may
receive a bonus in 1996 of approximately $37,000. In October 1996, the Company
and Mr. Finlay entered into an agreement pursuant to which Mr. Finlay will
continue as an employee of the Company at his then current salary through
January 2, 1997 and pursuant to which Mr. Finlay has agreed to not compete with
the Company for a period of one year, in exchange for a payment of approximately
$60,000.
The lease for the Company's principal facility in Phoenix, Arizona is
individually guaranteed by Messrs. Armstrong and Pakis. See
"Business -- Facilities."
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<PAGE> 55
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1996, and as
adjusted to reflect the sale of the shares offered hereby, assuming no exercise
of the Underwriters' over-allotment option, (i) by each person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
by each of the Company's executive officers named in the Summary Compensation
Table and by each of the Company's directors, (iii) by all executive officers
and directors as a group, and (iv) by the Selling Stockholders. Except pursuant
to applicable community property laws or as indicated in the footnotes to this
table, each stockholder identified in the table possesses sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by such stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING SHARES OFFERING
------------------- BEING -------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
TA Associates Group(1)......................... 2,435,435 19.7% 485,965 1,949,470 14.9%
435 Tasso St., Suite 200
Palo Alto, CA 94301
OFFICERS AND DIRECTORS
James D. Armstrong(2)(13)...................... 2,919,412 23.6 504,833 2,414,579 18.4
Frederick M. Pakis(3)(13)...................... 2,957,233 23.9 521,583 2,435,650 18.6
Geoffrey J. Finlay(4)(13)...................... 163,160 1.3 0 163,160 1.2
James L. Smith(5)(13).......................... 339,429 2.7 70,000 269,429 2.0
Brent W. Lippman(6)(13)........................ 179,213 1.4 30,000 149,213 1.1
Kenneth J. Desmarchais(7)(13).................. 124,558 1.0 18,000 106,558 *
Thomas M. Proud(8)(13)......................... 20,000 * 20,000 0 *
Kurt R. Jaggers(9)(13)......................... 32,771 * 4,544 28,227 *
Crawford L. Cole(10)(13)....................... 45,000 * 0 45,000 *
All executive officers and directors as a group
(10 persons)................................. 6,780,776 52.6 1,168,960 5,611,816 41.2
OTHER SELLING STOCKHOLDERS
Chestnut Capital International III L.P.(11).... 94,565 * 18,869 75,696 *
Other Selling Stockholders(12)................. 30,750 * 30,750 0 *
</TABLE>
- ---------------
* Represents less than one percent.
(1) Includes 1,265,067 shares held by Advent VII L.P., 750,637 shares held by
Advent Atlantic and Pacific II Limited Partnership, 126,507 shares held by
Advent New York L.P., 270,453 shares held by Advent Industrial II L.P. and
22,771 shares held by TA Venture Investors L.P. Advent VII L.P., Advent
Atlantic and Pacific II Limited Partnership, Advent Industrial II L.P.,
Advent New York L.P. and TA Venture Investors, L.P. are part of an
affiliated group of investment partnerships referred to, collectively, as
the TA Associates Group. The general partner of Advent VII L.P. is TA
Associates VI, L.P. The general partner of Advent Atlantic and Pacific II
Limited Partnership is TA Associates AAP II Partners, L.P. The general
partner of each of TA Associates VII, L.P., TA Associates VI L.P. and TA
Associates AAP II Partners, L.P. is TA Associates, Inc. In such capacity,
TA Associates, Inc. exercises sole voting and investment power with respect
to all of the shares held of record by the named investment partnerships,
with the exception of those shares held by TA Venture Investors, L.P.;
individually no stockholder, director or officer of TA Associates, Inc. is
deemed to have or share such voting or investment power. Principals and
employees of TA Associates, Inc. (including Mr. Jaggers, a director of the
Company) comprise the general partners of TA Venture Investors, L.P. In
such capacity, Mr. Jaggers may be deemed to share voting and investment
power with respect to the 22,771 shares held of record by TA Venture
Investors, L.P. Mr. Jaggers disclaims beneficial ownership of such shares,
53
<PAGE> 56
except to the extent of the 3,329 shares as to which he holds a pecuniary
interest. In the event the Underwriters exercise the over-allotment option,
the five investment funds comprising TA Associates Group will sell an
aggregate of up to 88,441 additional shares in this offering on a pro rata
basis.
(2) Mr. Armstrong is the Chief Executive Officer of the Company. Includes
81,784 shares held by a trust for the benefit of Mr. Armstrong's children.
Mr. Armstrong disclaims beneficial ownership of such shares. Of the 504,833
shares attributed to Mr. Armstrong in the "Shares Offered" column herein,
463,049 shares are being offered by Mr. Armstrong and 41,784 shares are
being offered by the trust for the benefit of Mr. Armstrong's children. The
2,414,579 shares attributed to Mr. Armstrong in the "Shares Beneficially
Owned After the Offering" column herein do not reflect the redemption of
10,000 shares of Common Stock which will occur prior to the effective date
of this offering in connection with the exercise of stock options and the
sale of shares in the offering by Mr. Proud. In the event the Underwriters
exercise the over-allotment option, Mr. Armstrong will sell up to an
additional 91,875 shares in this offering.
(3) Mr. Pakis is the President of the Company. Includes 60,713 shares held by a
trust for the benefit of Mr. Pakis' children. Mr. Pakis disclaims
beneficial ownership of such shares. Of the 521,583 shares attributed to
Mr. Pakis in the "Shares Offered" column herein, 490,870 shares are being
offered by Mr. Pakis and 30,713 shares are being offered by the trust for
the benefit of Mr. Pakis' children. The 2,435,650 shares attributed to Mr.
Pakis in the "Shares Beneficially Owned After the Offering" column herein
do not reflect the redemption of 10,000 shares of Common Stock which will
occur prior to the effective date with the exercise of stock options and
the sale of shares in the offering by Mr. Proud. In the event the
Underwriters exercise the over-allotment option, Mr. Pakis will sell up to
an additional 91,875 shares in this offering.
(4) Mr. Finlay served as the Managing Director of JDA International until
October 1996. Includes 162,000 shares subject to options exercisable within
60 days of the date of this offering.
(5) Mr. Smith is the Executive Vice President of the Company. Includes 97,713
shares subject to options exercisable within 60 days of the date of this
offering.
(6) Mr. Lippman is the Senior Vice President, Sales and Marketing, of the
Company. Includes 135,570 shares subject to options exercisable within 60
days of the date of this offering.
(7) Mr. Desmarchais is the Vice President, Technology, of the Company. Includes
102,500 shares subject to options exercisable within 60 days of the date of
this offering.
(8) Mr. Proud is a Vice President and the Chief Financial Officer of the
Company. Includes 20,000 subject to options exercisable within 60 days of
the date of this offering. Excludes 55,000 shares subject to periodic
vesting following expiration of such 60-day period.
(9) Mr. Jaggers is a director of the Company. Includes 22,771 shares held by TA
Venture Investors, L.P., all of which are included in the 2,435,435 shares
described in footnote (1) above. Mr. Jaggers disclaims beneficial ownership
to such shares, except to the extent of the 3,329 shares as to which he
holds a pecuniary interest. Does not include any shares beneficially owned
by Advent VII L.P., Advent Atlantic and Pacific II Limited Partnership,
Advent Industrial II L.P. or Advent New York L.P., of which Mr. Jaggers
disclaims beneficial ownership. Includes 10,000 shares subject to options
exercisable within 60 days of the date of this offering.
(10) Mr. Cole is a director of the Company. Includes 10,000 shares subject to
options exercisable within 60 days of the date of this offering.
(11) Messrs. Jonathan J. Fleming, Michael F. Schiavo, Peter A. Schober and John
G. Turner are the general partners of MVP Capital Limited Partnership which
has voting and investment power to act for Chestnut Capital International
III L.P. In the event the Underwriters exercise the over-allotment option,
Chestnut Capital International II L.P. will sell an additional 3,434 shares
in this offering.
(12) Includes 17 individuals who are each selling 1,000 shares and 11
individuals who are each selling 1,250 shares.
(13) The individual's address is c/o the Company, 11811 North Tatum Boulevard,
Suite 2000, Phoenix, Arizona 85028.
54
<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 18,000,000 shares
of Common Stock, par value $.01 per share, and 2,000,000 shares of preferred
stock, par value $1.00 per share. The following summary of certain provisions of
the Common Stock and the preferred stock of the Company does not purport to be
complete and is subject to, and qualified in its entirety by, the Second
Restated Certificate of Incorporation and Bylaws of the Company that are
included as exhibits to the Registration Statement of which this Prospectus
forms a part and the provisions of applicable law.
COMMON STOCK
As of September 30, 1996, there were 12,365,237 shares of Common Stock
outstanding and held of record by approximately 99 stockholders. In addition, as
of such date 1,236,242 shares were subject to outstanding options, and 504,000
unissued shares were subject to a pending claim in arbitration. See "Risk
Factors -- Pending Arbitrations" and "Business -- Legal Proceedings." The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the holders of Common Stock. Subject to
preferences applicable to any outstanding preferred stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any preferred stock. Holders of
Common Stock have no preemptive or subscription rights, and there are no
redemption or conversion rights with respect to such shares. All outstanding
shares of Common Stock are fully paid and non- assessable, and the shares of
Common Stock to be issued upon completion of the offering will be fully paid and
non-assessable.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the dividend rate, voting rights and other rights, preferences and
restrictions of each series, any or all of which may be greater than the rights
of the Common Stock. It is not possible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders of the
Common Stock until the Board of Directors determines the specific rights of the
holders of such preferred stock. However, the effects might include, among other
things, restricting dividends on the Common Stock, diluting the voting power of
the Common Stock, impairing the liquidation rights of the Common Stock and
delaying or preventing a change in control of the Company without further action
by the stockholders. The Company has no present plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
Following the sale of the shares of Common Stock offered hereby, the
holders of approximately 2,030,000 shares of Common Stock will have certain
rights to register those shares under the Securities Act of 1933, as amended
(the "Securities Act") pursuant to the Exchange Agreement. See "Certain
Transactions." Subject to certain limitations, the holders of at least 20% of
such shares then outstanding may require, on up to two occasions, that the
Company use its best efforts to register such shares for public resale. If the
Company registers any of its Common Stock either for its own account or for the
account of other security holders, the holders of such registration rights are
entitled to include their shares of Common Stock in the registration, subject to
the ability of the underwriters to limit the number of shares included in the
offering. The holders of at least 20% of such shares may also require the
Company to register all or a portion of their registrable securities on Form S-3
when use of such form becomes available to the Company, provided, among other
limitations, that the proposed aggregate selling price is at least $500,000. All
fees, costs and expenses of such registrations (other than underwriting
discounts and commissions) will be borne by the Company. In connection with a
pending claim in arbitration, registration rights similar to those described
above are being sought and could be awarded with respect to 504,000 unissued
shares of the Company's Common Stock. See "Risk Factors -- Pending Arbitrations"
and "Business -- Legal Proceedings."
55
<PAGE> 58
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CHARTER DOCUMENTS
The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, Section 203 of the Delaware Law prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's outstanding
voting stock) from engaging in a "business combination" (as defined) with a
Delaware corporation for three years following the date such person became an
interested stockholder, subject to certain exceptions such as the approval of
the board of directors and of the holders of at least two-thirds of the
outstanding shares of voting stock not owned by the interested stockholder. The
existence of this provision would be expected to have an anti-takeover effect,
including attempts that might result in a premium over the market price for the
shares of Common Stock held by stockholders.
The Company's Certificate of Incorporation provides that the Board of
Directors is divided into three classes of directors with each class serving a
staggered three-year term. The classification system of electing directors may
tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of the Company and may maintain the incumbency of
the Board of Directors, as it generally makes it more difficult for stockholders
to replace a majority of the directors. The Company's Certificate of
Incorporation also eliminates the right of stockholders to act without a meeting
and does not provide for cumulative voting in the election of directors. These
and other provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of the Company. The amendment of any
of these provisions would require approval by holders of 66 2/3% or more of the
outstanding Common Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.P.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock.
As of September 30, 1996 and giving effect to this offering, the Company
will have outstanding an aggregate of 13,115,237 shares of Common Stock. Of
these shares, the 2,450,000 shares sold in the offering and approximately
3,713,928 shares already outstanding will be freely tradeable without
restriction or further registration under the Securities Act, except for any
shares purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act (subject to certain limitations and restrictions
described below). The remaining 6,932,824 shares of Common Stock held by
existing stockholders were issued and sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act. Such
outstanding shares will be subject to the lock-up agreements as described below
on the date of this Prospectus. Of those 6,932,824 shares of Common Stock,
6,875,395 shares will be subject to lock-up agreements until the date 180 days
from the effective date of this offering. In addition, 190,201 shares will be
subject to lock-up agreements until the date 90 days from the effective date of
this offering. However, 981,242 of these 6,875,395 shares may be redeemed by the
Company and become treasury stock pursuant to the Redemption Agreement between
the Company and Mr. Armstrong and Mr. Pakis as the result of the exercise of
stock options issued under the Option Plan. See "Management -- Benefit
Plans -- 1995 Stock Option Plan" and "Certain Transactions." Upon expiration of
the lock-up agreements 180 days after the date of this Prospectus, the 5,894,153
shares of Common Stock not subject to redemption by the Company will be eligible
for sale, subject to the limitations of Rule 144. In addition, existing
registration rights or registration rights the Company may be required to grant
could increase the number of shares available for sale in the public markets.
See "Description of Capital Stock -- Registration Rights."
As of September 30, 1996, there were a total of 931,242 shares of Common
Stock subject to outstanding options under the Option Plan, 512,708 of which
were vested and exercisable, and 305,000 shares of Common Stock subject to
outstanding options under the 1996 Option Plan, 20,000 of which were vested and
exercisable. All options held by officers and directors of the Company are
subject to 180 day lock-up agreements described
56
<PAGE> 59
below. On June 13, 1996, the Company filed registration statements on Form S-8
under the Securities Act to register all of the shares of Common Stock issued or
reserved for future issuance under the Option Plan, the 1996 Option Plan, the
Directors Plan and the Purchase Plan. Therefore, shares purchased upon exercise
of options granted pursuant to the Option Plan, the 1996 Option Plan or the
Directors Plan or purchased under the Purchase Plan generally are available for
resale in the public market.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years (including the holding period of any prior owner except an affiliate) is
entitled to sell in "broker's transactions" or to market makers, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (approximately 131,152 shares
immediately after this offering) or (ii) generally, the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the required
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
generally subject to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for a least three years, is
entitled to sell such shares without having to comply with the manner of sale,
public information, volume limitation or notice filing provisions of Rule 144.
Under Rule 701 under the Securities Act, persons who purchase shares upon
exercise of options granted prior to the effective date of this offering are
entitled to sell such shares 90 days after the effective date of this offering
in reliance on Rule 144, without having to comply with the holding period and
notice filing requirements of Rule 144 and, in the case of non-affiliates,
without having to comply with the public information, volume limitation or
notice filing provisions of Rule 144.
Certain Selling Stockholders have agreed that they will not, subject to
certain limited exceptions, directly or indirectly, offer, sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for any such shares for a period of 180 days after
the effective date of the offering without the prior written consent of
Montgomery Securities. The remaining Selling Stockholders and the remaining
executive officers and director of the Company have agreed that they will not,
subject to certain limited exceptions, directly or indirectly, offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for any such shares for a period of 90 days
after the effective date of the offering without the prior written consent of
Montgomery Securities.
57
<PAGE> 60
UNDERWRITING
Montgomery Securities, Hambrecht & Quist LLC and Piper Jaffray Inc. (the
"Underwriters") have severally agreed, subject to the terms and conditions set
forth in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities.............................................................
Hambrecht & Quist LLC.............................................................
Piper Jaffray Inc. ...............................................................
---------
Total................................................................... 2,450,000
=========
</TABLE>
The Underwriters have advised the Company that they initially propose to
offer the Common Stock to the public on the terms set forth on the cover page of
this Prospectus. The Underwriters may allow to selected dealers a concession of
not more than $ per share, and the Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part. The
Underwriters may offer the shares of Common Stock through a selling group.
In connection with this offering, the Underwriters and selling group
members, if any, may engage in passive market making transactions in the Common
Stock on the Nasdaq National Market immediately prior to the commencement of
sales in this offering in accordance with Rule 10b-6A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Passive market making
consists of displaying bids on the Nasdaq National Market limited by the prices
of independent market makers and effecting purchases limited by such prices and
in response to order flow. Net purchases by a passive market maker on each day
are limited in amount to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified prior period
and must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
The Company and certain of the Selling Stockholders have granted an option
to the Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 367,500 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 2,450,000 shares to be purchased by the Underwriters. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
Certain of the Selling Stockholders have agreed not to sell or offer to
sell or otherwise dispose of the shares of Common Stock currently held by them,
any options or warrants to purchase any shares of Common Stock or any securities
convertible into or exchangeable for any shares of Common Stock for a period of
180 days after the date of this Prospectus, without the prior written consent of
Montgomery Securities. The remaining Selling Stockholders and the remaining
executive officers and director of the Company have agreed not to sell or offer
or otherwise dispose of Common Stock or any securities convertible into or
exchangeable for any shares of Common Stock for a period of 90 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, the Company has agreed that for a period of 180
days after the date of this Prospectus it will not, without the
58
<PAGE> 61
consent of Montgomery Securities, issue, offer, sell, grant options to purchase
or otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities except for shares of Common Stock offered
hereby and shares issued pursuant to the Company's option plans or stock
purchase plan.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
The validity of the securities offered hereby has been and general
corporate legal matters will be passed upon for the Company by Gray Cary Ware &
Freidenrich, A Professional Corporation, San Diego, California. Morrison &
Foerster LLP, Irvine, California is acting as counsel for the Underwriters in
connection with certain legal matters relating to the sale of the Common Stock
offered hereby.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995 and the
related financial statement schedule included in this Prospectus and the
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such reports given
upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549; on the Internet at http://www.sec.gov;
and at the following regional offices: Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661; and New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048. The Common Stock of
the Company is quoted on the Nasdaq National Market. Reports, proxy statements
and other information concerning the Company may also be inspected at the
National Association of Securities Dealers, Inc., 1735 K. Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto, which may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the Public Reference
Section of the Commission.
59
<PAGE> 62
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)............................. F-5
Combined Statements of Cash Flows..................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
JDA Software Group, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of JDA
Software Group, Inc. and subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity (deficit)
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, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of JDA Software
Group, Inc. and subsidiaries as of December 31, 1994 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Phoenix, Arizona
January 20, 1996
F-2
<PAGE> 64
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1994 1995 1996
----------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 2,912,876 $ 498,302 $14,411,323
Restricted investments (Note 1)............................... -- 14,649,072 --
Accounts receivable -- net of allowance for doubtful accounts
of $112,700, $350,700 and $809,000 (Note 3)................. 6,709,352 9,835,371 15,923,795
Receivables from related parties.............................. 81,414 -- --
Prepaid expenses and other current assets..................... 249,982 276,884 574,907
Deferred tax asset (Note 9)................................... -- 425,300 460,000
----------- ------------ ------------
Total current assets................................... 9,953,624 25,684,929 31,370,025
----------- ------------ ------------
GOODWILL -- net of accumulated amortization of $10,600.......... -- -- 1,666,907
------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Notes 3 and 5):
Computer and office equipment................................. 2,957,663 4,253,125 6,534,870
Leasehold improvements........................................ 317,795 179,698 219,667
----------- ------------ ------------
3,275,458 4,432,823 6,754,537
Less accumulated depreciation and amortization................ 1,671,828 2,022,773 2,744,328
----------- ------------ ------------
Equipment and leasehold improvements -- net................. 1,603,630 2,410,050 4,010,209
----------- ------------ ------------
TOTAL.................................................. $11,557,254 $ 28,094,979 $37,047,141
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit (Note 3).................................. $ -- $ 575,000 $ --
Notes payable to stockholders (Notes 1 and 10)................ -- 19,180,496 --
Interest payable to stockholders.............................. -- 732,301 --
Accounts payable.............................................. 486,754 881,028 614,968
Accrued and other liabilities (Note 4)........................ 1,704,717 2,589,309 5,087,695
Corporate taxes payable....................................... 378,500 300,100 663,080
Deferred revenue.............................................. 95,758 767,066 1,815,903
Current portion of capital lease obligations (Note 5)......... 56,132 52,651 60,000
----------- ------------ ------------
Total current liabilities.............................. 2,721,861 25,077,951 8,241,646
CAPITAL LEASE OBLIGATIONS, less current portion (Note 5)........ 193,953 200,709 115,831
DEFERRED TAX LIABILITY (Note 9)................................. 108,000 108,000
NOTES PAYABLE TO STOCKHOLDERS (Notes 1 and 10).................. 2,413,000 -- --
----------- ------------ ------------
Total liabilities...................................... 5,328,814 25,386,660 8,465,477
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 5)
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK (Notes 1 and
7)............................................................ -- 15,000,000 --
SERIES B REDEEMABLE PREFERRED STOCK (Notes 1 and 7)............. -- -- --
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 1, 7 and 8):
Common stock in 1996, $.01 par value -- authorized, 18,000,000
shares; issued and outstanding, 7,200,000 and 12,365,237
shares...................................................... 5,583 72,000 123,652
Additional paid-in capital.................................... 5,254,000 5,652,748 41,369,368
Retained earnings (deficit)................................... 952,920 (18,029,225) (12,955,025)
Foreign currency translation adjustment (Note 6).............. 15,937 12,796 43,669
----------- ------------ ------------
Total stockholders' equity (deficit)................... 6,228,440 (12,291,681) 28,581,664
----------- ------------ ------------
TOTAL.................................................. $11,557,254 $ 28,094,979 $37,047,141
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 65
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Software licenses............. $ 9,620,396 $12,220,624 $15,253,102 $ 9,498,378 $16,152,577
Consulting, maintenance and
other services............. 10,700,706 11,608,381 14,831,149 11,313,155 16,201,645
----------- ----------- ----------- ----------- -----------
Total revenues........ 20,321,102 23,829,005 30,084,251 20,811,533 32,354,222
COST OF REVENUES:
Software licenses............. 304,751 56,850 159,237 147,200 266,020
Consulting, maintenance and
other services............. 6,780,536 6,870,499 9,781,454 7,157,990 11,153,340
----------- ----------- ----------- ----------- -----------
Total cost of
revenues............ 7,085,287 6,927,349 9,940,691 7,305,190 11,419,360
----------- ----------- ----------- ----------- -----------
GROSS PROFIT.................... 13,235,815 16,901,656 20,143,560 13,506,343 20,934,862
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Product development........... 1,345,124 1,922,791 3,511,737 2,383,729 4,592,757
Sales and marketing........... 2,404,414 3,227,763 5,198,982 3,588,548 4,783,163
General and administrative
(Notes 5, 8 and 10)........ 2,466,067 2,528,852 3,929,404 2,607,069 3,386,570
Tax related compensation to
S Corporation
stockholders (Note 1)...... 7,422,035 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 13,637,640 7,679,406 12,640,123 8,579,346 12,762,490
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS... (401,825) 9,222,250 7,503,437 4,926,997 8,172,372
OTHER INCOME (EXPENSE) --
Net (Note 10)................. (171,658) (221,152) (433,609) (311,115) 277,133
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES......................... (573,483) 9,001,098 7,069,828 4,615,882 8,449,505
PROVISION FOR INCOME TAXES
(Note 9)...................... 865,000 500,000 1,497,000 786,758 3,375,305
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)............... $(1,438,483) $ 8,501,098 $ 5,572,828 $ 3,829,124 $ 5,074,200
=========== =========== =========== =========== ===========
PRO FORMA (Note 1):
Historical net income (loss).. $ 5,572,828 $ 3,829,124
Pro forma adjustment to adjust
income tax provision
(Note 9)................... (1,172,000) (955,000)
----------- -----------
Pro forma net income.......... $ 4,400,828 $ 2,874,124
=========== ===========
PRO FORMA NET INCOME PER
SHARE......................... $ 0.42 $ 0.27 $ 0.43
=========== =========== ===========
SHARES USED IN PER SHARE
CALCULATION................... 10,952,000 10,952,000 11,884,215
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 66
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
THREE YEARS ENDED DECEMBER 31, 1995 AND NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY
--------------------- PAID-IN EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENTS TOTAL
---------- -------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993.............. 4,495 $ 4,495 $ 2,323,986 $ (218,772) $ 99,975 $ 2,209,684
Stockholder contribution (Note 1)... 2,625,000 2,625,000
Dividends........................... (2,733,029) (2,733,029)
Issuance of common stock............ 26 26 179,974 180,000
Acquisition of minority interest and
other............................. 1,062 1,062 125,040 126,102
Unrealized foreign currency
translation adjustment (Note 6)... (104,890) (104,890)
Net loss............................ (1,438,483) (1,438,483)
--------- ------- ---------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1993............ 5,583 5,583 5,254,000 (4,390,284) (4,915) 864,384
Dividends........................... (3,157,894) (3,157,894)
Unrealized foreign currency
translation adjustment (Note 6)... 20,852 20,852
Net income.......................... 8,501,098 8,501,098
--------- ------- ---------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1994............ 5,583 5,583 5,254,000 952,920 15,937 6,228,440
Dividends........................... (3,897,425) (3,897,425)
Reorganization and issuance of
preferred stock (Note 1).......... 7,194,417 66,417 (274,340) (19,984,460) (20,192,383)
Stock options exercised (Note 8).... 673,088 (673,088)
Unrealized foreign currency
translation adjustment (Note 6)... (3,141) (3,141)
Net income.......................... 5,572,828 5,572,828
--------- ------- ---------- ------------ ---------- ------------
BALANCE, DECEMBER 31, 1995............ 7,200,000 72,000 5,652,748 (18,029,225) 12,796 (12,291,681)
Issuance of common stock:
IPO (Notes 1 and 11).............. 2,182,866 21,829 25,279,461 25,301,290
Conversion of preferred stock
(Note 11)....................... 2,800,000 28,000 7,472,000 7,500,000
Employee stock purchase plan...... 38,445 384 424,433 424,817
Acquisition of JDA Canada (Note
11)............................. 143,926 1,439 2,540,726 2,542,165
Foreign currency translation
adjustment........................ 30,873 30,873
Net income.......................... 5,074,200 5,074,200
--------- ------- ---------- ------------ ---------- ------------
BALANCE, SEPTEMBER 30, 1996
(unaudited)......................... 12,365,237 $123,652 $41,369,368 $(12,955,025) $ 43,669 $ 28,581,664
========= ======= ========== ============ ========== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 67
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEARS ENDED DECEMBER 31 30,
--------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................... $(1,438,483) $ 8,501,098 $ 5,572,828 $ 3,829,124 $ 5,074,200
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 465,777 525,611 637,205 242,178 802,290
Allowance for doubtful accounts....................... (73,500) 110,160 238,000 195,007 349,144
Deferred income taxes................................. (317,300) (90,285) 269,146
Tax related compensation (Note 1)..................... 2,413,000 --
Other................................................. (104,890) 42,901 70,478
Changes in assets and liabilities, net of effects from
purchase of JDA Canada:
Accounts receivable................................... (2,092,794) (1,812,378) (3,364,019) (1,525,086) (5,787,689)
Receivables from related parties...................... 32,141 53,766 81,414 182,656
Prepaid expenses and other current assets............. 349,545 (43,138) (26,902) (735,602) (35,980)
Accounts payable...................................... (269,220) 155,733 394,274 (6,940) (325,629)
Accrued and other liabilities......................... 1,970,063 (200,831) 806,192 1,096,732 2,193,059
Deferred revenue...................................... (9,484) 34,188 671,308 146,952 1,048,837
Interest payable to stockholders...................... -- -- 732,301 (732,301)
----------- ----------- ----------- ------------ ------------
Net cash provided by operating activities......... 1,242,155 7,367,110 5,495,779 3,334,736 2,855,077
----------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES:
Purchase of investments................................. -- -- (14,649,072) (14,432,395)
Redemption of investments............................... 14,649,072
Cash acquired from purchase of TDA Canada............... 214,210
Purchase of equipment and leasehold improvements........ (404,615) (704,966) (1,421,542) (820,272) (2,154,023)
----------- ----------- ----------- ------------ ------------
Net cash (used in) provided by investing
activities...................................... (404,615) (704,966) (16,070,614) (15,252,667) 12,709,259
----------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Initial public offering transactions:
Issuance of common stock.............................. 25,301,290
Redemption of Series B preferred stock................ (7,500,000)
Payments on notes to stockholders..................... (4,880,832)
Stockholder transactions:
Issuance of redeemable preferred stock -- net......... -- -- 14,792,077 14,792,077
Reorganization distribution........................... -- -- (2,294,539) (2,295,433)
Dividends............................................. (2,733,029) (3,157,894) (3,897,425) (3,897,425)
Payments on notes payable to stockholders............. (57,081) -- (922,456) (354,000) (14,299,664)
Cash capital contribution from S Corporation
stockholders........................................ 2,625,000 -- --
Issuance of common stock.............................. 181,102 -- --
Net borrowings (payments) on bank line of credit........ (850,000) (650,000) 575,000 1,130,000 (575,000)
Issuance of common stock -- employee stock purchase
plan.................................................. 424,817
Capital lease payments and other........................ 111,519 (157,244) (92,396) (2,860) (121,926)
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities...................................... (722,489) (3,965,138) 8,160,261 9,372,359 (1,651,315)
----------- ----------- ----------- ------------ ------------
NET (DECREASE) INCREASE IN CASH........................... 115,051 2,697,006 (2,414,574) (2,545,572) 13,913,021
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.............. 100,819 215,870 2,912,876 2,912,876 498,302
----------- ----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR.................... $ 215,870 $ 2,912,876 $ 498,302 367,304 14,411,323
=========== =========== =========== ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest.............................................. $ 262,277 $ 261,160 $ 367,210 $ 40,179 $ 1,301,959
=========== =========== =========== ============ ============
Income taxes.......................................... -- $ 867,220 $ 1,827,899 $ 14,880 $ 2,877,766
=========== =========== =========== ============ ============
Tax related compensation paid with a note payable....... $ 2,413,000 -- -- -- --
=========== =========== =========== ============ ============
Assets under capital lease.............................. $ 161,755 $ 157,640 $ 95,702 -- --
=========== =========== =========== ============ ============
Net issuance of common stock against additional paid-in
capital (Note 1)...................................... -- -- $ 66,417 -- --
=========== =========== =========== ============ ============
Distributions to stockholders paid with a note payable
(Note 1).............................................. -- -- $17,689,921 -- --
=========== =========== =========== ============ ============
Conversion of Series A preferred stock.................. -- -- -- -- $ 7,500,000
=========== =========== =========== ============ ============
Acquisition of JDA Canada:
Common stock issued..................................... -- -- -- -- $ 2,542,165
Fair value of assets acquired, other than cash.......... -- -- -- -- (1,149,750)
Liabilities assumed..................................... -- -- -- -- 499,302
Goodwill................................................ -- -- -- -- (1,677,507)
=========== =========== =========== ============
------------
Cash acquired........................................... $ 214,210
=========== =========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 68
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1995
1. REORGANIZATION
Prior to March 1995, JDA Software Services, Inc., JDA International
Limited, JDA Software, Inc., JDA Worldwide, Inc. and JDA Asia Pte Ltd. ("the
Predecessor Companies") issued combined financial statements because such
companies operated under the common control and management of the Company's two
principal stockholders, Mr. James Armstrong and Mr. Frederick Pakis ("Armstrong
and Pakis"). At that time, the common stockholders of the Predecessor Companies
agreed to enter into a transaction to be effective March 30, 1995 (the
"Reorganization") under which the Predecessor Companies were consolidated under
a common holding company, the holding company issued $15,000,000 of redeemable
convertible preferred stock and the stockholders of the Predecessor Companies
received the proceeds from the issuance of the preferred stock as well as any
undistributed equity of the Predecessor Companies. Accordingly, JDA Software
Group, Inc. ("JDA" or the "Company") was formed in March 1995 and on March 30,
1995, JDA and the stockholders of the Predecessor Companies entered into
simultaneous transactions under which (1) the Predecessor Companies were
contributed into JDA, the Predecessor Company stockholders received 7,200,000
shares of common stock representing all of JDA's then outstanding common stock,
$2,294,539 of cash, $14,000,000 of notes due January 11, 1996, $898,990 of notes
due through January 13, 1996 and $2,790,931 of notes due through 2000 (together
the "Notes"); and (2) JDA issued $15,000,000 of its Series A Redeemable
Convertible Preferred Stock (the "Preferred Stock") (Note 7) for $15,000,000
cash. The transaction has been accounted for as a combination of companies under
common control in a manner similar to a pooling of interests, the issuance of
$15,000,000 of Preferred Stock and the distribution of cash and the Notes as a
dividend. Additional paid-in capital has been charged for $66,417 to reflect the
new par value of common stock outstanding and $207,923 for expenses applicable
to the Reorganization.
$14,000,000 of the Notes were issued to the common stockholders and the
proceeds from the issuance of the Preferred Stock were invested in restricted
short-term investments which were used for the payment of the Notes.
Accordingly, at December 31, 1995, the assets and liabilities of JDA include
short-term notes payable of $14,000,000 and restricted investments of
$14,649,072. Such investments were held to their January 11, 1996 maturity date
when the $14,000,000 of Notes were repaid. The remaining stockholder notes
provide an acceleration clause whereby the holder may demand payment from the
Company upon the closing of an initial public offering ("IPO") of at least
$15,000,000. The Company intends to repay the notes upon the closing of an IPO
and therefore, the notes have been classified as a current liability.
Prior to the Reorganization, JDA pursued a tax strategy designed to
maximize private company stockholder value. Under this strategy:
a. Certain of the Predecessor Companies, which earned substantially
all of the Company's U.S. taxable income, elected S Corporation status
under Subchapter S of the Internal Revenue Code. This election resulted in
substantially all U.S. federal taxable income being taxed to the
stockholders rather than to the Predecessor Companies; and,
b. For the years 1991, 1992 and 1993, these Predecessor Companies paid
annual tax related compensation to the stockholders that was charged to
expense in order to minimize income taxes in those tax jurisdictions that
did not recognize S Corporations. This compensation was in lieu of S
Corporation dividends to the stockholders, and in 1993, $2,625,000 of such
payments were contributed to the capital of the Company.
The tax related compensation was terminated after 1993 and the S
Corporation status was terminated at the date of the Reorganization. The
historical financial statements include tax related compensation expense of
$7,422,035 for 1993. For 1993, 1994 and the first three months of 1995, the
historical financial statements do not include a provision for U.S. federal
income taxes.
F-7
<PAGE> 69
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma financial statement information has been included to present the
1995 income statement data as if U.S. federal income had been taxable to JDA
rather than the stockholders; and to eliminate the tax provision at March 31,
1995 which established deferred taxes applicable to the Predecessor Companies
which were taxed as S Corporations.
The Company is preparing for an IPO of its common stock which, upon
completion, will result in the conversion of all outstanding shares of Preferred
Stock into 2,800,000 shares of common stock and $7,500,000 of Series B Preferred
Stock (Note 7), which Series B Preferred Stock will be redeemed from the
proceeds from the offering. The accompanying pro forma balance sheet information
gives effect to the conversion of all outstanding shares of Preferred Stock into
common stock and Series B Preferred Stock at the closing of the offering. The
provisions of the Series B Preferred Stock require that the stock be redeemed
within two days after receipt of the proceeds from the offering.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS -- JDA is a leading international provider of
comprehensive enterprise-wide solutions that address mission-critical business
information requirements of retail organizations. The Company's products and
services are marketed and sold on credit terms in the United States through the
Company's direct sales force and a network of value-added implementors, systems
integrators and consultants. Sales to customers outside the U.S. are facilitated
by an overseas direct sales force employed by the Company's subsidiaries and
through a network of sales agents and distributors. The Company's solutions have
been deployed by a broad range of retail enterprises worldwide.
A summary of significant accounting policies is as follows:
a. Principles of Consolidation -- The consolidated financial
statements include the accounts of JDA and its wholly-owned subsidiaries.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
b. Revenue -- JDA derives its revenues from software licenses and
consulting, maintenance and other services. The Company records revenues
from software licenses as completed products are shipped if collection of
the related receivable is probable and the Company's remaining obligation
with respect to the contract is insignificant. Allowances for product
returns are estimated based on previous experience and are recorded as a
reduction of revenue at the time sales are recognized. Consulting services
are billed on an hourly basis and revenues are recorded as the work is
performed. Maintenance revenues are recorded as revenue in the applicable
month.
c. Cash and Cash Equivalents -- All highly liquid investments with an
original maturity of three months or less are recorded as cash equivalents.
d. Equipment and Leasehold Improvements are stated at cost.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the related assets, generally three to
seven years, or the life of the lease, whichever is shorter.
e. Product Development Costs -- Development costs incurred in the
research and development of new software products are expensed as incurred
until technological feasibility has been established. JDA considers
technological feasibility to be established when all planning, designing,
coding and testing has been completed according to design specifications.
After technological feasibility is established, any additional costs would
be capitalized in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed. Historically product development has
been substantially completed concurrently with the establishment of
technological feasibility and, accordingly, no costs have been capitalized.
F-8
<PAGE> 70
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
f. Deferred Revenue represents advance customer billings on
maintenance, software license receivables due after 12 months and
consulting projects which will be recognized as revenue as the work is
performed.
g. Income Taxes through March 30, 1995 have been provided on income
taxable to the Predecessor Companies in accordance with SFAS No. 109,
Accounting for Income Taxes. Through that date, substantially all income
subject to U.S. federal income tax was attributable to certain Predecessor
Companies which had elected S Corporation status under the Internal Revenue
Code. Accordingly, historical tax provisions through that date do not
include provisions for U.S. federal income taxes. Subsequent to March 30,
1995, taxes have been provided on all income in accordance with SFAS No.
109.
At March 31, 1995, deferred income taxes were established for those
Predecessor Companies that had been treated as S Corporations. Such income
taxes aggregating $260,000 have been included in the historical income tax
provision at that date.
h. Pro Forma Net Income Per Share has been calculated for 1995 based
upon the number of shares of common and equivalent shares outstanding
subsequent to the Reorganization including the common shares that will be
issued upon the conversion of the Preferred Stock, plus the estimated
number of shares that will be necessary to repay certain stockholder notes
arising from the Reorganization and the redemption of Series B Preferred
Stock. Outstanding options have not been considered because, as described
in Note 8, no dilution will result from the exercise of such options.
i. Foreign Currency -- Foreign currency assets and liabilities are
generally translated into U.S. dollars using the exchange rates in effect
at the statement of financial position date. Results of operations are
generally translated using the average exchange rates throughout the
period. The effects of exchange rate fluctuations on translation of assets
and liabilities are reported as a separate component of equity.
j. New Accounting Pronouncements -- In October 1995, the Financial
Accounting Standards Board issued SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" and SFAS No. 123 "Accounting for Stock Based Compensation." Management
believes the impact of SFAS No. 121 will not have a significant impact on
the Company's financial statements. With respect to SFAS No. 123, the
Company has determined that it will not change to the fair value method and
will continue to use Accounting Principles Board Opinion No. 25 for
measurement and recognition of employee stock based transactions. (Note 8)
k. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
l. Product Concentration -- The Company has to date derived
substantially all of its revenues from the license and related consulting
services of a limited number of information management software
applications for the retail industry.
m. Reclassifications -- Certain reclassifications were made to the
1993 and 1994 financial statements to conform with the 1995 presentation.
F-9
<PAGE> 71
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LINE OF CREDIT
The Company has a $2,500,000 line of credit, bearing interest at the bank's
reference rate plus .25% (8.75% at December 31, 1995), collateralized by
accounts receivable and equipment. $1,925,000 of this line of credit was
available to the Company at December 31, 1995. The line of credit is guaranteed
by Armstrong and Pakis and matures on July 1, 1996. Under the terms of the line
of credit, the Company is required to maintain certain tangible net worth and
profitability requirements. JDA is in compliance with the agreement at December
31, 1995.
4. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities at December 31 consist of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Accrued compensation and benefits............................. $ 534,171 $ 753,723
Sales returns allowance....................................... -- 300,000
Value added tax............................................... 532,881 244,144
Accrued vacation.............................................. 107,500 238,774
Customer deposits............................................. 183,568 215,193
Other accrued expenses........................................ 346,597 837,475
---------- ----------
Total............................................... $1,704,717 $2,589,309
========== ==========
</TABLE>
A sales returns allowance was established in 1995 following changes in
software license contract terms and the introduction of new products.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office space and certain equipment under capital and
operating leases, including leases with stockholders (Note 10). The leases
expire at various dates and include renewal options. Armstrong and Pakis
guarantee certain of these leases. Capital leases included in equipment and
leasehold improvements total approximately $279,000 and $192,000 (net of
accumulated amortization of approximately $198,000 and $71,000) as of December
31, 1994 and 1995, respectively.
Future minimum lease payments for such leases for the years ending December
31 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
-------- ----------
<S> <C> <C>
1996........................................................... $ 67,000 $1,153,000
1997........................................................... 67,000 931,000
1998........................................................... 53,600 749,000
1999........................................................... 38,800 344,000
2000........................................................... 15,400 198,000
Thereafter..................................................... 52,000 2,600,000
-------- ----------
Total................................................ 293,800 $5,975,000
==========
Less amounts representing interest............................. (40,440)
--------
Net present value of future minimum lease payments............. 253,360
Less current portion........................................... (52,651)
--------
$200,709
========
</TABLE>
F-10
<PAGE> 72
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense incurred under the operating leases for the three years ended
December 31, 1995 was approximately $224,000, $289,000 and $707,000,
respectively.
6. INTERNATIONAL OPERATIONS
For the three years ended December 31, amounts included in the consolidated
financial statements applicable to international operations, principally those
in the United Kingdom and Europe, were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
United States................................. $14,058,785 $17,691,505 $20,827,569
United Kingdom and Europe..................... 6,262,317 5,662,800 8,113,328
Asia.......................................... -- 474,700 1,143,354
----------- ----------- -----------
Total revenues........................ $20,321,102 $23,829,005 $30,084,251
=========== =========== ===========
INCOME (LOSS) FROM OPERATIONS:
United States................................. $(3,061,689) $ 7,142,093 $ 4,817,466
United Kingdom and Europe..................... 2,659,864 2,016,107 2,173,226
Asia.......................................... -- 64,050 512,745
----------- ----------- -----------
Total income (loss) from operations... $ (401,825) $ 9,222,250 $ 7,503,437
=========== =========== ===========
ASSETS:
United States................................. $ 3,620,120 $ 9,145,065 $25,489,895
United Kingdom and Europe..................... 3,233,592 2,062,155 2,033,366
Asia.......................................... -- 350,034 571,718
----------- ----------- -----------
Total assets.......................... $ 6,853,712 $11,557,254 $28,094,979
=========== =========== ===========
</TABLE>
In 1995, United States revenue includes export sales to Latin America
totaling approximately $2,435,000.
Transaction gains and losses recorded in income in 1993, 1994 and 1995 were
immaterial.
Translation adjustments recorded as a separate component of equity were:
<TABLE>
<CAPTION>
1993 1994 1995
--------- -------- -------
<S> <C> <C> <C>
Balance, beginning of year............................. $ 99,975 $ (4,915) $15,937
Unrealized gain (loss)................................. (104,890) 20,852 (3,141)
--------- -------- -------
Balance, end of year................................... $ (4,915) $ 15,937 $12,796
========= ======== =======
</TABLE>
7. REDEEMABLE PREFERRED STOCK
As explained in Note 1, the Preferred Stock was issued March 30, 1995 in
connection with the Reorganization. Dividends are payable on the Preferred Stock
only to the extent that dividends are declared payable on the common stock. In
the event of an IPO as contemplated in Note 1 or at the option of the holder,
the Preferred Stock is convertible into (1) 2,800,000 shares of common stock or
28% of total then outstanding shares of common stock, subject to certain
anti-dilutive adjustments; and (2) 1,250,004 shares of Series B Redeemable
Preferred Stock aggregating $7,500,000. The Series B Redeemable Preferred Stock
is required to be redeemed by JDA no more than two days after the closing of a
JDA IPO. The Preferred Stock may be redeemed by JDA for $15,000,000 until 2001
and after six years must be redeemed for $15,000,000 if requested by the holder.
F-11
<PAGE> 73
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFIT PLANS
JDA has adopted three stock option plans. The Board of Directors has
reserved a total of 1,350,000 shares of common stock for issuance under the
Company's 1995 Stock Option Plan (the "1995 Option Plan"). Both incentive stock
options and nonstatutory stock options may be granted under the 1995 Option
Plan. The exercise price of an incentive stock option and a nonstatutory stock
option must be no less than the fair market value at the date of grant. Options
granted under the 1995 Option Plan are subject to individual vesting schedules,
but must be exercised within ten years of the date of grant.
In connection with the issuance of the Preferred Stock (Note 1), two of the
common stockholders, Armstrong and Pakis, have agreed that upon (1) the exercise
of the first 850,000 employee stock options, they will sell an equivalent number
of their common shares to JDA at the specific option exercise price; and (2)
upon the exercise of the next 500,000 options, they will sell an equivalent
number of their common shares to JDA at $.01 per share. Accordingly, shares
outstanding of the Company will not increase upon the exercise of the first
1,350,000 stock options.
At December 31, 1995, 50,000 options were available for additional grants
under the 1995 Option Plan.
The Board of Directors has also reserved a total of 1,250,000 shares of
common stock for issuance under the Company's 1996 Employee Stock Option Plan
(the "1996 Option Plan") and a total of 150,000 shares of common stock have been
reserved for issuance under the Company's 1996 Outside Directors Stock Option
Plan (the "Directors Plan"). At December 31, 1995, no options had been issued
under the 1996 Option Plan. Options may be granted to employees, consultants,
advisors and directors who are also employees, although only directors and
officers who are also employees may receive incentive stock options intended to
qualify for certain tax treatment. The exercise price of nonqualified stock
options must equal at least 85% of the fair market value of the common stock on
the date of grant, and in the case of incentive stock options must be no less
than the fair market value. Options granted under the option plans generally
vest over four years and must be exercised within ten years. No options have
been granted under the Directors Plan. The Directors Plan provides for the
automatic granting of nonqualified stock options to directors of the Company who
are not employees of the Company ("Outside Directors").
The following is a summary of changes in outstanding options related to the
1995 Option Plan:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- --------------
<S> <C> <C>
Outstanding at December 31, 1994.......................... -- --
Granted................................................. 1,310,000 $3.50 to $5.25
Cancelled or expired.................................... (10,000) $4.25
Exercised............................................... (192,862) $3.50
---------
Outstanding at December 31, 1995.......................... 1,107,138 $3.50 to $5.25
========
Exercisable at December 31, 1995.......................... 544,320
========
</TABLE>
The options granted during 1995 include 190,000 options issued at $5.25
which were compensatory, although such compensation was considered immaterial.
The 192,862 options exercised in 1995 resulted in a charge to retained earnings
and a credit to additional paid-in capital of $673,088 representing the
acquisition of shares from Armstrong and Pakis, the cancellation of such shares
and the reissuance of the shares to the option holders. Amounts paid to
Armstrong and Pakis were equal to amounts received from the option holders upon
exercise of their options.
JDA has a defined contribution plan under Section 401(k) of the Internal
Revenue Code. Employees of JDA are eligible to participate in the plan after
reaching age 21. Voluntary salary reductions may be elected by each
participating employee and contributed to the plan. JDA may contribute an amount
equal to 100% of the
F-12
<PAGE> 74
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employee's contribution up to 20% of the employee's annual wages. Employees are
immediately vested for their own contributions and they are 100% vested in the
Company's matching contributions after six years of service. The Company made
approximately $57,000 of contributions to the plan in 1995, and no contributions
in 1994 and 1993.
In addition, a total of 200,000 shares of common stock have been reserved
for issuance under the Company's 1996 Employee Stock Purchase Plan (the
"Purchase Plan"). At December 31, 1995, no shares had been issued. The Purchase
Plan permits eligible employees to purchase common stock at a discount through
payroll deductions. The purchase price of the stock will be equal to 85% of the
fair market value.
9. INCOME TAXES
As explained in Note 1, all U.S. federal taxable income was taxed to the
Company's stockholders through March 31, 1995. Accordingly, the tax provision
does not include provisions for U.S. federal income taxes through that date. Pro
forma income tax provisions have been presented for 1995 in order to indicate
the tax provision that would have been recorded had all income been taxable to
JDA. The following presents income tax provisions for the three years ended
December 31, 1995:
<TABLE>
<CAPTION>
1995
------------------
1993 1994 ACTUAL PRO FORMA
----- ---- ------ ---------
(IN
THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal............................................. $1,354 $2,410
State............................................... $ 71 $ 62 320 362
Foreign............................................. 794 438 140 140
---- ---- ------ ------
Total current............................... 865 500 1,814 2,912
---- ---- ------ ------
Deferred:
Federal............................................. (299) (236)
State............................................... (53) (42)
Foreign............................................. 35 35
------ ------
Total deferred.............................. (317) (243)
------ ------
Total provisions............................ $865 $500 $1,497 $2,669
==== ==== ====== ======
</TABLE>
JDA's effective tax rate differs from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
1995
------
1993 1994 ACTUAL PRO FORMA
----- ------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal statutory rate.............................. $(195) $3,060 $2,404 $2,404
Research and development credit..................... (30) (30)
Record deferred income taxes........................ (260)
Foreign and state income taxes...................... 793 62 274 384
S Corporation benefit............................... 267 (2,622) (802)
Other............................................... (89) (89)
----- ------ ------ ------
Total............................................. $ 865 $ 500 $1,497 $2,669
===== ====== ====== ======
</TABLE>
F-13
<PAGE> 75
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's net deferred tax asset (liability)
as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
-------- -----------
<S> <C> <C>
Deferred tax asset:
Accrued compensation......................................... $ 95,500
Sales returns allowance...................................... 120,000
Allowance for doubtful accounts.............................. 120,000
Other........................................................ 124,800
--------
460,300
Deferred tax liability:
Tax over book depreciation................................... $(108,000)
Other........................................................ (35,000)
--------
$425,300 $(108,000)
======== =========
</TABLE>
No deferred taxes were recorded at December 31, 1994 due to the S
Corporation status of the Predecessor Companies which earned substantially all
of the Company's U.S. taxable income.
10. RELATED PARTIES
Transactions with stockholders for the three years ended December 31, 1995
consist principally of the leasing of office space to JDA, the receipt by
Armstrong and Pakis of dividends and other tax related compensation arising from
the former S corporation status of certain of the Predecessor Companies,
interest to Armstrong and Pakis and the receipt by Armstrong and Pakis of Notes
and cash arising from the Reorganization discussed in Note 1.
The following summarizes such transactions:
a. Notes issued to stockholders consist of $14,000,000 of notes due on
January 11, 1996 with interest at 6.3%, $898,990 of notes with interest at
8% due January 13, 1996 and $5,203,931 of notes with interest at 8% due
through 2000. A portion of the 1993 tax related compensation expense
($2,413,000) was paid with a note payable which has been consolidated with
the $5,203,931 notes issued in connection with the Reorganization. The
$14,000,000 notes were repaid on January 11, 1996 and the $898,990 notes
were paid January 13, 1996; the notes with a face value of $5,203,931
provide for an acceleration clause whereby the holder may demand payment
upon the Company's closing of an IPO of at least $15,000,000. (Note 1). At
December 31, 1995, the remaining balance of such notes was $4,880,832.
b. Interest expenses applicable to stockholder notes aggregated
$182,200, $241,300 and $1,046,300 in the three years ended December 31,
1995.
c. Office lease payments to stockholders aggregated $120,000, $120,000
and $50,000 for the three years ended December 31, 1995.
11. UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include all
of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring
F-14
<PAGE> 76
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
nature. Operating results for the nine months ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
COMPLETION OF INITIAL PUBLIC OFFERING
On March 15, 1996, the Company successfully completed its initial public
offering of common stock. The Company sold 2,182,866 shares of common stock in
the initial public offering for $25,301,290 net of issuance costs of $1,089,560.
In March 1996, subsequent to the initial public offering, all outstanding
shares of the Series A Redeemable Convertible Preferred Stock were converted
into (1) 2,800,000 shares of common stock and (2) 1,250,004 shares of Series B
Redeemable Preferred Stock. The Series B Redeemable Preferred Stock was then
redeemed for $7,500,000 in cash.
ACQUISITION OF JDA SOFTWARE SERVICES LTD
On August 15, 1996, the Company acquired JDA Software Services Ltd. ("JDA
Canada") for 143,926 shares of common stock. JDA Canada was previously an
affiliated company, but has been independently owned since 1987. The acquisition
was accounted for as a purchase resulting in goodwill of $1,677,507, which will
be amortized over 15 years. Unaudited pro-forma operating results for the year
ended December 31, 1995, and the nine months ended September 30, 1996, assuming
that the acquisition had occurred at the beginning of the applicable year are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Revenues................................................... $33,273,314 $35,026,070
=========== ===========
Net income................................................. $ 4,318,633 $ 5,099,379
=========== ===========
Net income per share....................................... $ 0.39 $ 0.43
=========== ===========
</TABLE>
NET INCOME PER SHARE
Income per common and common equivalent share for the nine months ended
September 30, 1996 is computed on the weighted average number of common shares
outstanding during the period and includes the effect of shares issuable upon
exercise of stock options utilizing the treasury stock method when the effect of
such issuance is dilutive.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
to be Disposed Of". The adoption of SFAS No. 121 had no effect on these interim
unaudited condensed consolidated financial statements.
COMMON STOCK OFFERING
The Company is preparing for a common stock offering of an aggregate of
2,450,000 shares of which 750,000 will be sold by the Company and 1,700,000
shares will be sold by selling stockholders.
RELATED PARTIES
In March 1996, with the proceeds of the IPO, the Company repaid notes of
$4,880,832 held by stockholders.
F-15
<PAGE> 77
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LITIGATION
In February 1996, a dispute arose with one of the Company's customers. The
Company initiated arbitration proceedings against the customer in an effort to
collect approximately $100,000 in remaining amounts due pursuant to its contract
with the customer. The customer counterclaimed for a full refund of the
approximately $985,000 previously paid to the Company, and the Company is
vigorously defending such counterclaim. The arbitration proceedings remain
ongoing, and the parties are engaged in settlement negotiations. Although
management believes, based upon information currently available, that a
settlement can be reached upon terms acceptable to the Company, there can be no
assurance that such will be the case or that any settlement can be reached in
this matter. The Company does not believe that the ultimate outcome of this
proceeding will have a material adverse effect on the Company.
In May 1996, Niederhoffer and Niederhoffer, Inc. ("Niederhoffer") filed a
demand for arbitration asserting a claim against JDA Software Services, Inc., a
wholly owned subsidiary of the Company. Niederhoffer's claims are based upon an
agreement between it and JDA Software Services, Inc. dated April 6, 1990 (the
"Finder's Agreement"). Niederhoffer alleges entitlement to a finder's fee in
connection with the purchase of convertible preferred stock in the Company in
March 1995 by six investment funds advised by TA Associates, Inc. and its
affiliates ("TA Investment"), and a claim for Common Stock arising from the
related establishment of the Company and reorganization of the Company's wholly
owned subsidiaries pursuant to which Company Common Stock was issued to such
subsidiaries' stockholders (the "Reorganization"). In the arbitration,
Niederhoffer claims damages of approximately $770,000 and asserts a right to
504,000 shares of the Company's Common Stock.
The Company is contesting both the applicability of the Finder's Agreement
to the TA Investment and the related Reorganization and the measurement of the
damages as claimed by Niederhoffer. The arbitration is expected to be concluded
in December 1996, with the arbitrators' decision rendered following conclusion
of the arbitration.
The Company and its counsel believe that the Company has meritorious
defenses to Niederhoffer's claims, and the Company intends to vigorously defend
its position in the arbitration. However, since the results of arbitration
proceedings are inherently unpredictable, no assurance can be given with respect
to the arbitration's outcome or the total expense or possible damages, if any,
that may be incurred in the arbitration proceedings or as a result of a
settlement or an arbitration award. In the event the arbitration panel concludes
that the TA Investment and related Reorganization fell within the scope of the
Finder's Agreement, and further agrees with Niederhoffer's assessment of
damages, the Company could be required to make cash payments as well as issue to
Niederhoffer up to 504,000 shares of the Company's Common Stock or make an
additional cash payment to Niederhoffer based upon the arbitrators'
determination of the value of such shares. The Company believes that an
arbitrators' decision to award up to 504,000 shares of Common Stock to
Niederhoffer based upon a determination that such shares were issuable as a
result of the TA Investment would be treated as a charge to additional paid-in
capital. Such charge would reduce additional paid-in capital by the amount of
any cash paid plus the value of the Common Stock issued, valued as of the date
of the TA Investment. However, any cash awarded in lieu of shares in excess of
the value of such shares at the date of the TA Investment would be recorded as
litigation expense and could have an immediate and material adverse effect on
the Company's operating results. In addition, any cash awarded to Niederhoffer
would reduce the Company's available liquidity. Any shares of Common Stock
awarded to Niederhoffer would have a dilutive effect on the Company's earnings
per share.
F-16
<PAGE> 78
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS
The following is a summary of changes in outstanding options related to:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------------
<S> <C> <C>
The 1995 Option Plan:
Outstanding at December 31, 1995............... 1,107,138 $3.50 to $5.25
Exercised.................................... (175,896) $3.50 to $4.25
---------
Outstanding at September 30, 1996.............. 931,242 $3.50 to $5.25
========
Exercisable at September 30, 1996.............. 512,708 $3.50 to $5.25
========
The 1996 Option Plan:
Outstanding at December 31, 1995............... 0
Granted...................................... 305,000 $9.60 to $19.75
Cancelled or expired......................... 0
Exercised.................................... (0)
---------
Outstanding at September 30, 1996.............. 305,000 $9.60 to $19.75
========
Exercisable at September 30, 1996.............. 20,000 $9.60
========
</TABLE>
LINE OF CREDIT
The Company's $2,500,000 line of credit was increased to $5,000,000 on June
17, 1996 and bears interest at the bank's reference rate. The line of credit is
no longer guaranteed by Armstrong and Pakis and matures July 1, 1998.
* * * * * *
F-17
<PAGE> 79
=======================================================
No dealer, sales representative or other person has been authorized to give
any information or to make any representations in connection with this offering
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
by the Company, the Selling Stockholders or any of the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the shares of Common Stock to which it relates or
an offer to, or a solicitation of, any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company or that
information contained herein is correct as of any time subsequent to the date
hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 14
Reorganization and Prior S Corporation
Status............................... 14
Dividend Policy........................ 14
Price Range of Common Stock............ 15
Capitalization......................... 16
Selected Consolidated Financial Data... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 28
Management............................. 44
Certain Transactions................... 50
Principal and Selling Stockholders..... 53
Description of Capital Stock........... 55
Shares Eligible for Future Sale........ 56
Underwriting........................... 58
Legal Matters.......................... 59
Experts................................ 59
Available Information.................. 59
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
=======================================================
=======================================================
2,450,000 SHARES
JDA SOFTWARE GROUP, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
PIPER JAFFRAY INC.
November , 1996
=======================================================
<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. The Company is paying all of the expenses
incurred on behalf of the Selling Stockholders (other than underwriting
discounts and commissions). All amounts shown are estimates except for the
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.................................................................. 29,136
NASD filing fee................................................................... 10,115
Nasdaq National Market fee........................................................ 16,838
Blue sky qualification fees and expenses.......................................... 10,000
Printing and engraving expenses................................................... 100,000
Legal fees and expenses........................................................... 100,000
Accounting fees and expenses...................................................... 45,000
Transfer agent and registrar fees................................................. 8,000
Fee for Custodian for Selling Stockholders........................................ 3,000
Miscellaneous..................................................................... 27,911
Total................................................................... $350,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Second Restated Certificate
of Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant has entered into separate indemnification agreements with its
directors, certain of its executive officers and TA Associates that require the
Registrant, among other things, to indemnify them against certain liabilities
which may arise by reason of their status or service (other than liabilities
arising from willful misconduct of a culpable nature) and to maintain directors'
and officers' liability insurance, if available on reasonable terms.
These indemnification provisions and the indemnification agreements entered
into between the Registrant and its directors, certain of its executive officers
and TA Associates, may be sufficiently broad to permit indemnification of the
Registrant's officers, directors and TA Associates for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 1, 1993, the Registrant has sold and issued the following
unregistered securities:
(a) Issuances of Shares of Common and Preferred Stock.
On March 30, 1995, the registrant issued a total of 2,800,000 shares
of Series A Preferred Stock to TA Associates at a price of $5.35715 per
share.
On March 30, 1995, the Registrant also issued 7,200,000 shares of
Common Stock to three current officers of the Company and one corporation
wholly-owned by one of the officers in exchange for stock in certain
Subsidiaries of the Registrant, Promissory Notes executed by the Company in
favor of the officers
II-1
<PAGE> 81
in the aggregate amount of $15,285,197 and cash in the amount of $1
million. See "Certain Transactions."
On August 15, 1996, the Company issued an aggregate of 143,926 shares
of Common Stock to the shareholders of JDA Software Services Ltd., a
Canadian corporation, in exchange for all of the outstanding capital stock
of JDA Software Services Ltd. The issuance of Common Stock in connection
with the acquisition of JDA Software Services Ltd. was exempt from the
registration requirements of the Securities Act pursuant to Regulation S
promulgated thereunder.
(b) Option Issuances to, and Exercises by, Employees and
Directors. From March 30, 1995 to June 13, 1996, the Registrant issued
options to purchase a total of 1,420,000 shares of Common Stock at exercise
prices ranging from $3.50 to $13.00 per share to 36 employees and two
Outside Directors. No consideration was paid to the Registrant by any
recipient of any of the foregoing options for the grant of any such
options. From March 30, 1995 to June 13, 1996, the Registrant issued a
total of 211,075 shares of Common Stock to 24 employees upon exercise of
stock options at an exercise price of $3.50 per share.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
Unless otherwise provided above, the issuances described in Items 15(a)
were deemed to be exempt from registration under the Securities Act in reliance
on Section 4(2) of the Securities Act as transactions by an issuer not involving
a public offering. In addition, the issuances described in Item 15(b) were
deemed exempt from registration under the Securities Act in reliance on Rule 701
promulgated thereunder as transactions pursuant to compensatory benefit plans
and contracts relating to compensation. The recipients of securities in each
such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about the Registrant or had access, through
employment or other relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------------------------------------------------------------------------
<C> <C> <S>
(1)1.1 -- Form of Underwriting Agreement.
3.1* -- Second Restated Certificate of Incorporation of the Company.
3.2* -- Bylaws.
4.1* -- Specimen Common Stock certificate.
4.2* -- Stock Redemption Agreement among the Company, James D. Armstrong and
Frederick M. Pakis dated March 30, 1995.
4.3* -- Stockholders' Agreement among the Company, James D. Armstrong, Frederick M.
Pakis, James L. Smith and the purchasers of the Series A Preferred Stock
dated March 30, 1995.
(1)5.1 -- Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
10.1* -- Form of Indemnification Agreement.
10.2* -- 1995 Stock Option Plan, as amended, and form of agreement thereunder.
10.3* -- 1996 Stock Option Plan and forms of agreements thereunder.
10.4 -- 1996 Employee Stock Purchase Plan, as amended, and form of agreement
thereunder.
10.5* -- 1996 Outside Directors Stock Option Plan and forms of agreements thereunder.
10.6* -- Employment Agreement between James D. Armstrong and JDA Software, Inc. dated
March 30, 1995, as amended.
10.7* -- Employment Agreement between Frederick M. Pakis and JDA Software, Inc. dated
March 30, 1995, as amended.
10.8* -- Employment Agreement between James L. Smith and JDA Software, Inc. dated
March 30, 1995, as amended.
</TABLE>
II-2
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------------------------------------------------------------------------
<C> <C> <S>
10.9* -- Employment Agreement between Thomas M. Proud and JDA Software, Inc. dated
November 13, 1995.
10.10 -- Lease Agreement between The Manufacturers Life Insurance Company and JDA
Software Canada Ltd. (formerly known as JDA Software Services Ltd.) dated
December 6, 1995 (North York, Ontario).
10.11* -- Series A Preferred Stock and Common Stock Exchange Agreement among the
Company, James D. Armstrong, Frederick M. Pakis, James L. Smith and the
purchasers named therein dated March 30, 1995.
10.12* -- Assignment and Assumption Agreement regarding Master Lease between Pacific
Atlantic Systems Leasing, Inc. and JDA Software, Inc. and Consent of
Paradise Partners Limited Partnership to Assignment, dated March 17, 1995
(Phoenix, Arizona).
10.13* -- Lease Agreement between Pakis-Armstrong Venture and JDA Software, Inc. dated
January 1, 1996 (Scottsdale, Arizona).
10.14* -- Lease Agreement between Holly Pond Associates Limited Partnership and JDA
Software, Inc. dated June 16, 1993 (Stamford, Connecticut).
10.15* -- Lease Agreement between Woodhill Associates and JDA Software, Inc. dated
July 10, 1992 and First Lease Amendment between Metropolitan Life Insurance
Company, successor in interest to Woodhill Associates, and JDA Software,
Inc. dated May 16, 1995 (Norcross, Georgia).
10.16* -- Lease Agreement between The Port of Singapore Authority and JDA Asia Pte
Ltd. dated September 12, 1995 (Singapore).
10.17* -- Lease Agreements between Skanda Developments Limited and JDA Software
Services Ltd. (predecessor to JDA International Ltd.) dated June 25, 1991
(England).
10.18* -- Lease Agreement between BBS Business -- und Buroservice in Niederrad GmbH
and JDA Software GmbH dated July 4, 1995 (Germany).
10.19*+ -- License Agreement between Uniface Corporation and JDA Software, Inc. dated
February 9, 1994.
10.20*+ -- Standard Value-Added Reseller Agreement between Uniface Corporation and JDA
Software, Inc. dated February 9, 1994.
10.21*** -- Acquisition and Exchange Agreement among the Company and the Shareholders of
JDA Software Services Ltd. dated August 15, 1996.
10.22* -- Promissory Notes of the Company payable to James D. Armstrong, Frederick M.
Pakis and James L. Smith dated March 30, 1995.
10.23* -- Promissory Notes of JDA Software, Inc. payable to James D. Armstrong and
Frederick M. Pakis, guaranteed by the Company, dated March 29, 1995.
10.24* -- Promissory Notes of JDA Worldwide, Inc. payable to James D. Armstrong and
Frederick M. Pakis, guaranteed by the Company, dated March 29, 1995.
10.25* -- JDA Software, Inc. 401(k) Profit Sharing Plan, adopted as amended effective
January 1, 1995.
10.26 -- Business Loan Agreement between Bank of America Arizona and JDA Software,
Inc. dated June 17, 1996.
10.27** -- Second Amendment to Employment Agreement between James D. Armstrong and JDA
Software, Inc. dated April 23, 1996.
10.28** -- Second Amendment to Employment Agreement between Frederick M. Pakis and JDA
Software, Inc. dated April 23, 1996.
10.29** -- Second Amendment to Employment Agreement between James L. Smith and JDA
Software, Inc. dated April 23, 1996.
10.30 -- Lease Agreement between Oxford Development Group, Inc. and JDA Software
Canada Ltd. (formerly known as JDA Software Services Ltd.) dated July 11,
1994 (Calgary, Alberta).
</TABLE>
II-3
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S> <C>
11.1 -- Statement regarding computation of earnings per share.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Auditors.
(1)23.2 -- Consent of Counsel (included in Exhibit 5.1).
24.1 -- Power of Attorney (see page II-5).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement Form S-1
(No. 333-748), declared effective on March 14, 1996.
** Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1996, as filed on August 14, 1996.
*** Incorporated by reference to the Company's Current Report on Form 8-K dated
August 15, 1996, as filed on August 30, 1996.
+ Confidential treatment has been granted as to part of this exhibit.
(1) To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule II -- Valuation and Qualifying Accounts and Reserves
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 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 Act and will be governed by the final adjudication of
such issue.
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; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Phoenix,
County of Maricopa, State of Arizona, on the 6th day of November 1996.
JDA SOFTWARE GROUP, INC.
By: /s/ JAMES D. ARMSTRONG
------------------------------------
James D. Armstrong
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James D. Armstrong and Frederick
M. Pakis, and each of them acting individually, as his attorney-in-fact, each
will full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<C> <S> <C>
/s/ JAMES D. ARMSTRONG Chief Executive Officer and November 6, 1996
- --------------------------------------------- Director (Principal
James D. Armstrong Executive Officer)
/s/ FREDERICK M. PAKIS President and Director November 6, 1996
- --------------------------------------------- (Principal Executive
Frederick M. Pakis Officer)
/s/ THOMAS M. PROUD Vice President and Chief November 6, 1996
- --------------------------------------------- Financial Officer
Thomas M. Proud (Principal Financial and
Accounting Officer)
/s/ KURT R. JAGGERS Director November 6, 1996
- ---------------------------------------------
Kurt R. Jaggers
/s/ CRAWFORD L. COLE Director November 6, 1996
- ---------------------------------------------
Crawford L. Cole
</TABLE>
II-5
<PAGE> 85
JDA SOFTWARE GROUP, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
1995 AND 1994
<TABLE>
<CAPTION>
ADDITIONS CHARGED
BALANCE AT CHARGED TO TO
BEGINNING OF COSTS AND OTHER BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ------------ ---------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER
30:
1996 (UNAUDITED)
Allowance for Doubtful Accounts...... $350,700 $435,000 $110,130 $(86,830) $ 809,000
Sales Returns Allowance.............. 300,000 150,000 -- -- 450,000
-------- -------- -------- -------- ----------
Total...................... $650,700 $585,000 $110,130 $(86,830) $1,259,000
======== ======== ======== ======== ==========
FOR THE YEARS ENDED DECEMBER 31:
1995
Allowance for Doubtful Accounts...... $112,700 $327,453 -- $(89,453)(1) $ 350,700
Sales Returns Allowance.............. -- 300,000 -- -- 300,000
-------- -------- ------- -------- ----------
Total...................... $112,700 $627,453 -- $(89,453) $ 650,700
======== ======== ======= ======== ==========
1994
Allowance for Doubtful Accounts...... $ 2,500 $110,200 -- -- $ 112,700
======== ======== ======= ======== ==========
1993
Allowance for Doubtful Accounts...... $ 76,000 -- -- $(73,500)(1) $ 2,500
======== ======== ======= ======== ==========
</TABLE>
- ---------------
(1) Represents accounts receivable which were written off.
II-6
<PAGE> 86
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(1)1.1 -- Form of Underwriting Agreement.
3.1* -- Second Restated Certificate of Incorporation of the Company.
3.2* -- Bylaws.
4.1* -- Specimen Common Stock certificate.
4.2* -- Stock Redemption Agreement among the Company, James D. Armstrong
and Frederick M. Pakis dated March 30, 1995.
4.3* -- Stockholders' Agreement among the Company, James D. Armstrong,
Frederick M. Pakis, James L. Smith and the purchasers of the
Series A Preferred Stock dated March 30, 1995.
(1)5.1 -- Opinion of Gray Cary Ware & Freidenrich, A Professional
Corporation.
10.1* -- Form of Indemnification Agreement.
10.2* -- 1995 Stock Option Plan, as amended, and form of agreement
thereunder.
10.3* -- 1996 Stock Option Plan and forms of agreements thereunder.
10.4 -- 1996 Employee Stock Purchase Plan, as amended, and form of
agreement thereunder.
10.5* -- 1996 Outside Directors Stock Option Plan and forms of agreements
thereunder.
10.6* -- Employment Agreement between James D. Armstrong and JDA
Software, Inc. dated March 30, 1995, as amended.
10.7* -- Employment Agreement between Frederick M. Pakis and JDA
Software, Inc. dated March 30, 1995, as amended.
10.8* -- Employment Agreement between James L. Smith and JDA Software,
Inc. dated March 30, 1995, as amended.
10.9* -- Employment Agreement between Thomas M. Proud and JDA Software,
Inc. dated November 13, 1995.
10.10 -- Lease Agreement between The Manufacturers Life Insurance Company
and JDA Software Canada Ltd. (formerly known as JDA Software
Services Ltd.) dated December 6, 1995 (North York, Ontario).
10.11* -- Series A Preferred Stock and Common Stock Exchange Agreement
among the Company, James D. Armstrong, Frederick M. Pakis, James
L. Smith and the purchasers named therein dated March 30, 1995.
10.12* -- Assignment and Assumption Agreement regarding Master Lease
between Pacific Atlantic Systems Leasing, Inc. and JDA Software,
Inc. and Consent of Paradise Partners Limited Partnership to
Assignment, dated March 17, 1995 (Phoenix, Arizona).
10.13* -- Lease Agreement between Pakis-Armstrong Venture and JDA
Software, Inc. dated January 1, 1996 (Scottsdale, Arizona).
10.14* -- Lease Agreement between Holly Pond Associates Limited
Partnership and JDA Software, Inc. dated June 16, 1993
(Stamford, Connecticut).
10.15* -- Lease Agreement between Woodhill Associates and JDA Software,
Inc. dated July 10, 1992 and First Lease Amendment between
Metropolitan Life Insurance Company, successor in interest to
Woodhill Associates, and JDA Software, Inc. dated May 16, 1995
(Norcross, Georgia).
10.16* -- Lease Agreement between The Port of Singapore Authority and JDA
Asia Pte Ltd. dated September 12, 1995 (Singapore).
10.17* -- Lease Agreements between Skanda Developments Limited and JDA
Software Services Ltd. (predecessor to JDA International Ltd.)
dated June 25, 1991 (England).
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- ----------------------- ------------
<S> <C> <C> <C>
10.18* -- Lease Agreement between BBS Business -- und Buroservice in
Niederrad GmbH and JDA Software GmbH dated July 4, 1995
(Germany).
10.19*+ -- License Agreement between Uniface Corporation and JDA Software,
Inc. dated February 9, 1994.
10.20*+ -- Standard Value-Added Reseller Agreement between Uniface
Corporation and JDA Software, Inc. dated February 9, 1994.
10.21*** -- Acquisition and Exchange Agreement among the Company and the
Shareholders of JDA Software Services Ltd. dated August 15,
1996.
10.22* -- Promissory Notes of the Company payable to James D. Armstrong,
Frederick M. Pakis and James L. Smith dated March 30, 1995.
10.23* -- Promissory Notes of JDA Software, Inc. payable to James D.
Armstrong and Frederick M. Pakis, guaranteed by the Company,
dated March 29, 1995.
10.24* -- Promissory Notes of JDA Worldwide, Inc. payable to James D.
Armstrong and Frederick M. Pakis, guaranteed by the Company,
dated March 29, 1995.
10.25* -- JDA Software, Inc. 401(k) Profit Sharing Plan, adopted as
amended effective January 1, 1995.
10.26 -- Business Loan Agreement between Bank of America Arizona and JDA
Software, Inc. dated June 17, 1996.
10.27** -- Second Amendment to Employment Agreement between James D.
Armstrong and JDA Software, Inc. dated April 23, 1996.
10.28** -- Second Amendment to Employment Agreement between Frederick M.
Pakis and JDA Software, Inc. dated April 23, 1996.
10.29** -- Second Amendment to Employment Agreement between James L. Smith
and JDA Software, Inc. dated April 23, 1996.
10.30 -- Lease Agreement between Oxford Development Group, Inc. and JDA
Software Canada Ltd. (formerly known as JDA Software Services
Ltd.) dated July 11, 1994 (Calgary, Alberta).
11.1 -- Statement regarding computation of earnings per share.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Auditors.
(1)23.2 -- Consent of Counsel (included in Exhibit 5.1).
24.1 -- Power of Attorney (see page II-5).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement Form S-1
(No. 333-748), declared effective on March 14, 1996.
** Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1996, as filed on August 14, 1996.
*** Incorporated by reference to the Company's Current Report on Form 8-K dated
August 15, 1996, as filed on August 30, 1996.
+ Confidential treatment has been granted as to part of this exhibit.
(1) To be filed by amendment.
<PAGE> 1
Exhibit 10.4
JDA SOFTWARE GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AUGUST 9, 1996)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The JDA Software Group, Inc. 1996 Employee
Stock Purchase Plan (the "PLAN") is hereby established effective as of the
effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan to provide Eligible
Employees of the Participating Company Group with an opportunity to acquire a
proprietary interest in the Company through the purchase of Stock. The Company
intends that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan
but defined for purposes of Section 423 of the Code shall have the same
definition herein. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
1
<PAGE> 2
(d) "COMPANY" means JDA Software Group, Inc., a
Delaware corporation, or any successor corporation thereto.
(e) "COMPENSATION" means, with respect to an Offering
Period under the Plan, all amounts paid in cash in the forms of base salary,
commissions, overtime, bonuses, annual awards, other incentive payments, shift
premiums, and all other compensation paid in cash during such Offering Period
before deduction for any contributions to any plan maintained by a Participating
Company and described in Section 401(k) or Section 125 of the Code. Compensation
shall not include reimbursements of expenses, allowances, long-term disability,
workers' compensation or any amount deemed received without the actual transfer
of cash or any amounts directly or indirectly paid pursuant to the Plan or any
other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets
the requirements set forth in Section 5 for eligibility to participate in the
Plan.
(g) "EMPLOYEE" means any person treated as an
employee (including an officer or a director who is also treated as an employee)
in the records of a Participating Company and for purposes of Section 423 of the
Code; provided, however, that neither service as a director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so reported instead) as reported on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System, the NASDAQ National
Market System or such other national or regional securities exchange or market
system constituting the primary market for the Stock. If the relevant date does
not fall on a day on which the Stock is trading on NASDAQ, the NASDAQ National
Market System or other national or regional securities exchange or market
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Board, in its sole
discretion. If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.
Notwithstanding the foregoing, the Fair Market Value per share of Stock on the
Effective Date shall be deemed to be the public offering price set forth in the
final prospectus filed with the Securities and Exchange Commission in connection
with the initial public offering of the Stock.
(j) "OFFERING" means an offering of Stock as provided
in Section 6.
2
<PAGE> 3
(k) "OFFERING DATE" means, for any Offering Period,
the first day of such Offering Period.
(l) "OFFERING PERIOD" means a period determined in
accordance with Section 6.1.
(m) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(n) "PARTICIPANT" means an Eligible Employee
participating in the Plan.
(o) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation which the Board determines should
be included in the Plan. The Board shall have the sole and absolute discretion
to determine from time to time what Parent Corporations or Subsidiary
Corporations shall be Participating Companies.
(p) "PARTICIPATING COMPANY GROUP" means, at any point
in time, the Company and all other corporations collectively which are then
Participating Companies.
(q) "PURCHASE DATE" means, for any Purchase Period,
the last day of such Purchase Period.
(r) "PURCHASE PERIOD" means a period determined in
accordance with Section 6.2.
(s) "PURCHASE PRICE" means the price at which a share
of Stock may be purchased pursuant to the Plan, as determined in accordance with
Section 9.
(t) "PURCHASE RIGHT" means an option pursuant to the
Plan to purchase such shares of Stock as provided in Section 8 which may or may
not be exercised at the end of an Offering Period. Such option arises from the
right of a Participant to withdraw such Participant's accumulated payroll
deductions (if any) and terminate participation in the Plan or any Offering
therein at any time during a Purchase Period.
(u) "STOCK" means the common stock, par value $0.01,
of the Company, as adjusted from time to time in accordance with Section 4.2.
(v) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision
3
<PAGE> 4
of the Plan. Except when otherwise indicated by the context, the singular shall
include the plural, the plural shall include the singular, and use of the term
"or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION. The Plan shall be administered by the Board,
including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Purchase Right shall be determined by the
Board and shall be final and binding upon all persons having an interest in the
Plan or such Purchase Right. Subject to the provisions of the Plan, the Board
shall determine all of the relevant terms and conditions of Purchase Rights
granted pursuant to the Plan; provided, however, that all Participants granted
Purchase Rights pursuant to the Plan shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two hundred thousand (200,000) and shall
consist of authorized but unissued or reacquired shares of the Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan, to the Per Offering
Share Limit set forth in Section 8.1 and to each Purchase Right and in the
Purchase Price.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Any Employee of a
Participating Company is eligible to participate in the Plan except the
following:
(a) Employees who are customarily employed by the
Participating Company Group for twenty (20) hours or less per week;
(b) Employees who are customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year; and
4
<PAGE> 5
(c) Employees who own or hold options to purchase or
who, as a result of participation in the Plan, would own or hold options to
purchase, stock of the Company or of any Parent Corporation or Subsidiary
Corporation possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of such corporation within the meaning of
Section 423(b)(3) of the Code.
5.2 LEASED EMPLOYEES EXCLUDED. Notwithstanding anything herein
to the contrary, any individual performing services for a Participating Company
solely through a leasing agency or employment agency shall not be deemed an
"Employee" of such Participating Company.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by sequential Offerings of approximately twenty-four
(24) months duration (an "OFFERING PERIOD"); provided, however that the first
Offering Period shall commence on the Effective Date and end on January 31, 1998
(the "INITIAL OFFERING PERIOD"). Subsequent Offerings shall commence on the
first days of February and August of each year and end on the last days of the
second January and July, respectively, occurring thereafter. An additional
Offering Period shall commence upon the date of the consummation of the
Company's acquisition of all of the outstanding shares of capital stock of JDA
Software Services Ltd., a Canadian federal corporation ("JDA CANADA"), pursuant
to the Acquisition and Exchange Agreement dated as of August 15, 1996 to be
entered into by and between the Company and the shareholders of JDA Canada (the
"ADDITIONAL OFFERING PERIOD"). The Additional Offering Period shall end on
January 31, 1997, which shall be the Purchase Date for the Additional Offering
Period. Notwithstanding the foregoing, the Board may establish a different term
for one or more Offerings or different commencing or ending dates for such
Offerings; provided, however, that no Offering may exceed a term of twenty-seven
(27) months. An Employee who becomes an Eligible Employee after an Offering
Period has commenced shall not be eligible to participate in such Offering but
may participate in any subsequent Offering provided such Employee is still an
Eligible Employee as of the commencement of any such subsequent Offering.
Eligible Employees may not participate in more than one Offering at a time. In
the event the first or last day of an Offering Period is not a business day, the
Company shall specify the business day that will be deemed the first or last
day, as the case may be, of the Offering Period.
6.2 PURCHASE PERIODS. Each Offering Period (other than the
Additional Offering Period) shall consist of four (4) consecutive purchase
periods of approximately six (6) months duration (individually, a "PURCHASE
PERIOD"). The Purchase Period commencing on the Offering Date of the Initial
Offering Period shall end on July 31, 1996. A Purchase Period commencing on the
first day of February shall end on the last day of the next following July. A
Purchase Period commencing on the first day of August shall end on the last day
of the next
5
<PAGE> 6
following January. Notwithstanding the foregoing, the Board may establish a
different term for one or more Purchase Periods or different commencing or
ending dates for such Purchase Periods. In the event the first or last day of a
Purchase Period is not a business day, the Company shall specify the business
day that will be deemed the first or last day, as the case may be, of the
Purchase Period.
6.3 GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL.
Notwithstanding any other provision of the Plan to the contrary, any Purchase
Right granted pursuant to the Plan shall be subject to (a) obtaining all
necessary governmental approvals or qualifications of the sale or issuance of
the Purchase Rights or the shares of Stock and (b) obtaining stockholder
approval of the Plan. Notwithstanding the foregoing, stockholder approval shall
not be necessary in order to grant any Purchase Right granted in the Plan's
Initial Offering Period; provided, however, that the exercise of any such
Purchase Right shall be subject to obtaining stockholder approval of the Plan.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements of Section 5 and delivering to the Company's payroll office or
other office designated by the Company not later than the close of business for
such office on the last business day before such Offering Date (the
"SUBSCRIPTION DATE") a subscription agreement indicating the Employee's election
to participate in the Plan and authorizing payroll deductions. An Eligible
Employee who does not deliver a subscription agreement to the Company's payroll
or other designated office on or before the Subscription Date shall not
participate in the Plan for that Offering Period or for any subsequent Offering
Period unless such Employee subsequently enrolls in the Plan by filing a
subscription agreement with the Company by the Subscription Date for such
subsequent Offering Period. The Company may, from time to time, change the
Subscription Date as deemed advisable by the Company in its sole discretion for
proper administration of the Plan.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as such Participant (a) ceases to be an Eligible Employee, (b)
withdraws from the Plan pursuant to Section 13.2 or (c) terminates employment as
provided in Section 14. If a Participant automatically may participate in a
subsequent Offering Period pursuant to this Section 7.2, then the Participant is
not required to file any additional subscription agreement for such subsequent
Offering Period in order to continue participation in the Plan. However, a
Participant may file a subscription agreement with respect to a subsequent
Offering Period if the Participant desires to change any of the Participant's
elections contained in the Participant's then effective subscription agreement.
6
<PAGE> 7
8. RIGHT TO PURCHASE SHARES.
8.1 PURCHASE RIGHT. Except as set forth below, during an
Offering Period each Participant in such Offering Period shall have a Purchase
Right consisting of the right to purchase that number of whole shares of Stock
arrived at by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value
of a share of Stock on the Offering Date of such Offering Period; provided,
however, that such number shall not exceed five thousand (5,000) shares (the
"PER OFFERING SHARE LIMIT"). Shares of Stock may only be purchased through a
Participant's payroll deductions pursuant to Section 10.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
foregoing, if the Board shall establish an Offering Period of less than
twenty-three and one-half (23 1/2) months or more than twenty-four and one-half
(24 1/2) months in duration, (a) the dollar amount in Section 8.1 shall be
determined by multiplying $2,083.33 by the number of months in the Offering
Period and rounding to the nearest whole dollar, and (b) the Per Offering Share
Limit shall be determined by multiplying 208.33 shares by the number of months
in the Offering Period and rounding to the nearest whole share. For purposes of
the preceding sentence, fractional months shall be rounded to the nearest whole
month.
9. PURCHASE PRICE. The Purchase Price at which each share of Stock may
be acquired in a given Offering Period pursuant to the exercise of all or any
portion of a Purchase Right granted under the Plan shall be set by the Board;
provided, however, that the Purchase Price shall not be less than eighty-five
percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on
the Offering Date of the Offering Period, or (b) the Fair Market Value of a
share of Stock on the Purchase Date of the Offering Period. Unless otherwise
provided by the Board prior to the commencement of an Offering Period, the
Purchase Price for that Offering Period shall be eighty-five percent (85%) of
the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date
of the Offering Period, or (b) the Fair Market Value of a share of Stock on the
Purchase Date of the Offering Period.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of
Stock which are acquired pursuant to the exercise of all or any portion of a
Purchase Right for an Offering Period may be paid for only by means of payroll
deductions from the Participant's Compensation accumulated during the Offering
Period. Except as set forth below, the amount of Compensation to be deducted
from a Participant's Compensation during each pay period shall be determined by
the Participant's subscription agreement.
10.1 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided in the Plan.
7
<PAGE> 8
10.2 LIMITATIONS ON PAYROLL DEDUCTIONS. The amount of payroll
deductions with respect to the Plan for any Participant during any pay period
shall be in one percent (1%) increments not to exceed ten percent (10%) of the
Participant's Compensation for such pay period. Notwithstanding the foregoing,
the Board may change the limits on payroll deductions effective as of a future
Offering Date, as determined by the Board. Amounts deducted from Compensation
shall be reduced by any amounts contributed by the Participant and applied to
the purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under Section 423 of the Code.
10.3 ELECTION TO DECREASE OR STOP PAYROLL DEDUCTIONS. During
an Offering Period, a Participant may elect to decrease the amount deducted or
stop deductions from his or her Compensation by filing an amended subscription
agreement with the Company on or before the "Change Notice Date." The "CHANGE
NOTICE DATE" shall initially be the seventh (7th) day prior to the end of the
first pay period for which such election is to be effective; however, the
Company may change such Change Notice Date from time to time. A Participant may
not elect to increase the amount deducted from the Participant's Compensation
during an Offering Period.
10.4 PARTICIPANT ACCOUNTS. Individual Plan accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with the
general funds of the Company. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.
10.5 NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
10.6 COMPANY ESTABLISHED PROCEDURES. The Company may, from
time to time, establish or change (a) a minimum required payroll deduction
amount for participation in an Offering, (a) limitations on the frequency or
number of changes in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, (d) payroll deduction in excess of or less than the amount designated
by a Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (e) the date(s) and manner by which the
Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan, or (vi) such other limitations or procedures as
deemed advisable by the Company in the Company's sole discretion which are
consistent with the Plan and in accordance with the requirements of Section 423
of the Code.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering or
whose participation in the Offering has not terminated on or before such
Purchase
8
<PAGE> 9
Date shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock arrived at by dividing the
total amount of the Participant's accumulated payroll deductions for the
Purchase Period by the Purchase Price; provided, however, in no event shall the
number of shares purchased by the Participant during an Offering Period exceed
the number of shares subject to the Participant's Purchase Right. No shares of
Stock shall be purchased on a Purchase Date on behalf of a Participant whose
participation in the Offering or the Plan has terminated on or before such
Purchase Date.
11.2 RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's Plan account shall be refunded to the Participant as soon as
practicable after the Purchase Date. In the event the cash to be returned to a
Participant pursuant to the preceding sentence is an amount less than the amount
necessary to purchase a whole share of Stock, the Company may establish
procedures whereby such cash is maintained in the Participant's Plan account and
applied toward the purchase of shares of Stock in the subsequent Purchase Period
or Offering Period.
11.3 TAX WITHHOLDING. At the time a Participant's Purchase
Right is exercised, in whole or in part, or at the time a Participant disposes
of some or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provision for the foreign, federal, state and
local tax withholding obligations of the Participating Company Group, if any,
which arise upon exercise of the Purchase Right or upon such disposition of
shares, respectively. The Participating Company Group may, but shall not be
obligated to, withhold from the Participant's compensation the amount necessary
to meet such withholding obligations.
11.4 EXPIRATION OF PURCHASE RIGHT. Any portion of a
Participant's Purchase Right remaining unexercised after the end of the Offering
Period to which such Purchase Right relates shall expire immediately upon the
end of such Offering Period.
12. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
12.1 FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase shares of
Stock under the Plan (or any other employee stock purchase plan which is
intended to meet the requirements of Section 423 of the Code sponsored by the
Company or a Parent Corporation or Subsidiary Corporation at a rate which
exceeds $25,000 in Fair Market Value, which Fair Market Value is determined for
shares purchased during a given Offering Period as of the Offering Date for such
Offering Period (or such other limit as may be imposed by the Code), for each
calendar year in which the Participant participates in the Plan (or any other
employee stock purchase plan described in this sentence).
9
<PAGE> 10
12.2 PRO RATA ALLOCATION. In the event the number of shares of
Stock which might be purchased by all Participants in the Plan exceeds the
number of shares of Stock available in the Plan, the Company shall make a pro
rata allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Company shall determine to be equitable.
12.3 RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall
have no rights as a stockholder by virtue of the Participant's participation in
the Plan until the date of the issuance of a stock certificate for the shares of
Stock being purchased pursuant to the exercise of the Participant's Purchase
Right. No adjustment shall be made for cash dividends or distributions or other
rights for which the record date is prior to the date such stock certificate is
issued. Nothing herein shall confer upon a Participant any right to continue in
the employ of the Participating Company Group or interfere in any way with any
right of the Participating Company Group to terminate the Participant's
employment at any time.
13. WITHDRAWAL.
13.1 WITHDRAWAL FROM AN OFFERING. A Participant may withdraw
from an Offering by signing and delivering to the Company's payroll or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Such withdrawal may be elected at any time prior to
the end of an Offering Period; provided, however, if a Participant withdraws
after the Purchase Date for a Purchase Period of an Offering, the withdrawal
shall not affect shares of Stock acquired by the Participant in such Purchase
Period. Unless otherwise indicated, withdrawal from an Offering shall not result
in a withdrawal from the Plan or any succeeding Offering therein. By withdrawing
from an Offering effective as of the close of a given Purchase Date, a
Participant may have shares of Stock purchased on such Purchase Date and
immediately commence participation in the new Offering commencing immediately
after such Purchase Date. A Participant is prohibited from again participating
in an Offering at any time following withdrawal from such Offering. The Company
may impose, from time to time, a requirement that the notice of withdrawal be on
file with the Company's payroll office or other designated office for a
reasonable period prior to the effectiveness of the Participant's withdrawal
from an Offering.
13.2 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from
the Plan by signing and delivering to the Company's payroll office or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Withdrawals made after a Purchase Date shall not
affect shares of Stock acquired by the Participant on such Purchase Date. In the
event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the requirements of Sections 5 and 7.1. The Company may impose, from
time to time, a requirement that the notice of withdrawal be on file with the
Company's payroll
10
<PAGE> 11
office or other designated office for a reasonable period prior to the
effectiveness of the Participant's withdrawal from the Plan.
13.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
withdrawal from an Offering or the Plan pursuant to Sections 13.1 or 13.2,
respectively, the Participant's accumulated payroll deductions which have not
been applied toward the purchase of shares of Stock shall be returned as soon as
practicable after the withdrawal, without the payment of any interest, to the
Participant, and the Participant's interest in the Offering or the Plan, as
applicable, shall terminate. Such accumulated payroll deductions may not be
applied to any other Offering under the Plan.
13.4 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market
Value of a share of Stock on a Purchase Date of an Offering (other than the
final Purchase Date of such Offering) is less than the Fair Market Value of a
share of Stock on the Offering Date for such Offering, then every Participant
shall automatically (a) be withdrawn from such Offering at the close of such
Purchase Date and after the acquisition of shares of Stock for such Purchase
Period and (b) be enrolled in the Offering commencing on the first business day
subsequent to such Purchase Period. A Participant may elect not to be
automatically withdrawn from an Offering Period pursuant to this Section 13.4 by
delivering to the Company not later than the close of business on the last day
before the Purchase Date a written notice indicating such election.
13.5 WAIVER OF WITHDRAWAL RIGHT. The Company may, from time to
time, establish a procedure pursuant to which a Participant may elect, at least
six (6) months prior to a Purchase Date, to have all payroll deductions
accumulated in his or her Plan account as of such Purchase Date applied to
purchase shares of Stock under the Plan, and (a) to waive his or her right to
withdraw from the Offering or the Plan and (b) to waive his or her right to
increase, decrease, or cease payroll deductions under the Plan from his or her
Compensation during the Purchase Period ending on such Purchase Date. Such
election shall be made in writing on a form provided by the Company for such
purpose and must be delivered to the Company not later than the close of
business on the day preceding the date which is six (6) months before the
Purchase Date for which such election is to first be effective.
14. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Termination of a
Participant's employment with a Participating Company for any reason, including
retirement, disability or death or the failure of a Participant to remain an
Eligible Employee, shall terminate the Participant's participation in the Plan
immediately. In such event, the payroll deductions credited to the Participant's
Plan account since the last Purchase Date shall, as soon as practicable, be
returned to the Participant or, in the case of the Participant's death, to the
Participant's legal representative, and all of the Participant's rights under
the Plan shall terminate. Interest shall not be paid on sums returned to a
Participant pursuant to this Section 14. A Participant whose participation has
been so terminated may again become eligible
11
<PAGE> 12
to participate in the Plan by again satisfying the requirements of Sections 5
and 7.1.
15. TRANSFER OF CONTROL.
15.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company a party; (iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
15.2 EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations under
the Plan or substitute substantially equivalent Purchase Rights for stock of the
Acquiring Corporation. If the Acquiring Corporation elects not to assume or
substitute for the outstanding Purchase Rights, the Board may, in its sole
discretion and notwithstanding any other provision herein to the contrary,
adjust the Purchase Date of the then current Purchase Period to a date on or
before the date of the Transfer of Control, but shall not adjust the number of
shares of Stock subject to any Purchase Right. All Purchase Rights which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding
12
<PAGE> 13
the foregoing, if the corporation the stock of which is subject to the
outstanding Purchase Rights immediately prior to an Ownership Change Event
described in Section 15.1(a)(i) constituting a Transfer of Control is the
surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are
members of an affiliated group within the meaning of section 1504(a) of the Code
without regard to the provisions of section 1504(b) of the Code, the outstanding
Purchase Rights shall not terminate unless the Board otherwise provides in its
sole discretion.
16. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be
transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. The Company, in its absolute discretion, may impose
such restrictions on the transferability of the shares purchasable upon the
exercise of a Purchase Right as it deems appropriate and any such restriction
shall be set forth in the respective subscription agreement and may be referred
to on the certificates evidencing such shares.
17. REPORTS. Each Participant who exercised all or part of his or her
Purchase Right for a Purchase Period shall receive, as soon as practicable after
the Purchase Date of such Purchase Period, a report of such Participant's Plan
account setting forth the total payroll deductions accumulated, the number of
shares of Stock purchased, the Purchase Price for such shares, the date of
purchase and the remaining cash balance to be refunded or retained in the
Participant's Plan account pursuant to Section 11.2, if any. Each Participant
shall be provided information concerning the Company equivalent to that
information generally made available to the Company's common stockholders.
18. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under the
Plan shall be subject to compliance with all applicable requirements of foreign,
federal or state law with respect to such securities. A Purchase Right may not
be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable foreign, federal or state securities laws or other
law or regulations. In addition, no Purchase Right may be exercised unless (a) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be
13
<PAGE> 14
necessary or appropriate, to evidence compliance with any applicable law or
regulation, and to make any representation or warranty with respect thereto as
may be requested by the Company.
19. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration of
the Plan on some or all of the certificates representing shares of Stock issued
under the Plan. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this Section. Unless otherwise specified by the
Company, legends placed on such certificates may include but shall not be
limited to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE , 19 . THE REGISTERED
HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
20. NOTIFICATION OF SALE OF SHARES. The Company may require the
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (and not in the name of any
nominee) until the lapse of the time periods with respect to such Purchase Right
referred to in the preceding sentence. The Company may direct that the
certificates evidencing shares acquired by exercise of a Purchase Right refer to
such requirement to give prompt notice of disposition.
21. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend or terminate the Plan, except that (a) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under the
Plan, and (b) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the shares
of Stock under applicable foreign, federal or state securities laws). In
addition, an amendment to the Plan must be approved by the stockholders of the
Company within twelve (12) months of the adoption of such amendment if such
amendment
14
<PAGE> 15
would authorize the sale of more shares than are authorized for issuance under
the Plan or would change the definition of the corporations that may be
designated by the Board as Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing JDA Software Group, Inc. 1996 Employee Stock Purchase Plan
was duly adopted by the Board on January 12, 1996 and amended by the Board as of
August 9, 1996.
/s/ THOMAS M. PROUD
----------------------------------------
Thomas M. Proud, Secretary
15
<PAGE> 16
JDA SOFTWARE GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
/ / Original Application
/ / Change in Percentage of Payroll Deductions
I hereby elect to participate in the 1996 Employee Stock Purchase Plan
(the "PLAN") of JDA Software Group, Inc. (the "COMPANY") and subscribe to
purchase shares of the Company's common stock as determined in accordance with
the terms of the Plan.
I hereby authorize payroll deductions in the amount of percent (in 1%
increments not to exceed 10%) of my "COMPENSATION" (as defined in the Plan) from
each paycheck throughout the "OFFERING PERIOD" (as defined in the Plan) in
accordance with the terms of the Plan. I understand that these payroll
deductions will be accumulated for the purchase of shares of common stock of the
Company at the applicable purchase price determined in accordance with the Plan.
I further understand that, except as otherwise set forth in the Plan, shares
will be purchased for me automatically on the last day of each Purchase Period
unless I withdraw from the Plan or from the Offering by giving written notice to
the Company or unless I terminate employment.
I further understand that I will automatically participate in each
subsequent Offering which commences immediately after the last day of an
Offering in which I am participating under the Plan until such time as I file
with the Company a notice of withdrawal from the Plan on such form as may be
established from time to time by the Company or I terminate employment.
Shares purchased for me under the Plan should be issued in the name set
forth below. (I understand that shares may be issued either in my name alone or
together with my spouse as community property or in joint tenancy.)
NAME: ___________________________________________________________
ADDRESS: ___________________________________________________________
___________________________________________________________
MY SOCIAL SECURITY NUMBER: _________________________________________
I hereby authorize withholding from my compensation in order to satisfy
the foreign, federal, state and local tax withholding obligations, if any, which
may arise upon my purchase of shares under the Plan and/or upon my disposition
of shares I acquired under the Plan. I hereby agree that until I dispose of the
shares, unless otherwise permitted by the Company, I will hold all shares I
acquire under the Plan in the name entered above (and not in the name of any
nominee) for at least two (2) years from the first day of the Offering Period in
which, and at least one (1) year from the Purchase Date on which, I acquired
such shares. I further agree that I will promptly notify the Chief Financial
Officer of the Company in writing of any transfer of such shares prior to the
end of the periods referred to in the preceding sentence.
I am familiar with the provisions of the Plan and hereby agree to
participate in the Plan subject to all of the provisions thereof. I understand
that the Board of Directors of the Company reserves the right to amend the Plan
and my right to purchase stock under the Plan as may be necessary to qualify the
Plan as an employee stock purchase plan as defined in section 423 of the
Internal Revenue Code of 1986, as amended, or to obtain qualification or
registration of the Company's common stock to be issued out of the Plan under
applicable foreign, federal and state securities laws. I understand that the
effectiveness of this subscription agreement is dependent upon my eligibility to
participate in the Plan.
Date: ________________________ Signature:_________________________________
Name Printed:______________________________
<PAGE> 17
JDA SOFTWARE GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the current offering (the "CURRENT
OFFERING") of the common stock of JDA Software Group, Inc. (the "COMPANY") under
the Company's 1996 Employee Stock Purchase Plan (the "PLAN").
MAKE ONE ELECTION UNDER SECTION A AND ONE ELECTION UNDER SECTION B:
A. Current Offering. As to my participation in the current purchase period
(the "Current Purchase Period") of the Current Offering under the Plan,
I elect as follows (check one):
______ 1. I elect to terminate my participation in the Current Purchase
Period immediately.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to
purchase shares under the Plan shall not be used to purchase
shares on the last day of the Current Purchase Period.
Instead, I request that all such amounts be paid to me as soon
as practicable. I understand that this election immediately
terminates my interest in the Current Offering.
______ 2. I elect to terminate my participation in the Current Offering
following my purchase of shares on the last day of the Current
Purchase Period.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to
purchase shares under the Plan shall be used to purchase
shares on the last day of the Current Purchase Period. I
understand that this election will terminate my interest in
the Current Offering immediately following such purchase. I
request that any cash balance remaining in my account under
the Plan after my purchase of shares be returned to me as soon
as practicable.
I understand that if no election is made as to participation in the
Current Offering under the Plan, I will be deemed to have elected to participate
in the Current Offering.
B. Future Offerings. As to my participation in future offerings of common
stock under the Plan, I elect as follows (check one):
______ 1. I elect to participate in future offerings under the Plan.
I understand that by making this election I will participate
in the next offering under the Plan commencing subsequent to
the Current Offering, and in each subsequent offering
commencing immediately after the last day of an offering in
which I participate, until such time as I elect to withdraw
from the Plan or from any such subsequent offering.
______ 2. I elect not to participate in future offerings under the Plan.
I understand that by making this election I terminate my
interest in the Plan and that no further payroll deductions
will be made unless I elect in accordance with the Plan to
become a participant in another offering under the Plan.
I understand that if no election is made as to participation in future
offerings under the Plan, I will be deemed to have elected to participate in
such future offerings.
Date:________________________
Signature:______________________________
Name Printed:___________________________
<PAGE> 1
EXHIBIT 10.10
================================================================================
LEASE AGREEMENT
================================================================================
TENANT JDA SOFTWARE SERVICE LTD.
================================================================================
Property: LANSING SQUARE, PHASE II
Building: 2 LANSING SQUARE, SUITE 904
Location: CITY OF NORTH YORK, PROVINCE OF ONTARIO
MANULIFE REAL ESTATE [LOGO]
The Manufacturers Life Insurance Company
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. LEASED PREMISES............................................. 1
2. TERM
(a) Term.................................................... 1
(b) Delay in Occupancy...................................... 1
(c) Overholding............................................. 2
3. RENT
(a) Basic Rent.............................................. 2
(b) Additional Rent......................................... 2
(i) Taxes.............................................. 2
(ii) Operating Costs.................................... 2
(c) Payment - Additional Rent............................... 2
(d) Accrual of Rent......................................... 3
(e) Recovery of Rent........................................ 3
(f) Limitations............................................. 3
4. SECURITY DEPOSIT............................................ 3
5. GENERAL COVENANTS
(a) Landlord's Covenant..................................... 3
(b) Tenant's Covenant....................................... 3
6. USE AND OCCUPANCY
(a) Use..................................................... 3
(b) Waste, Nuisance, etc.................................... 4
(c) Insurance Risks......................................... 4
(d) Compliance with Law..................................... 4
(e) Environmental Compliance................................ 4
(f) Rules and Regulations................................... 4
7. ASSIGNMENT AND SUB-LETTING
(a) No Assignment Without Consent........................... 4
(b) Assignment or Sub-letting Procedures.................... 4
(c) Assumption of Obligations............................... 5
(d) Tenant's Continuing Obligations......................... 5
8. REPAIR AND DAMAGE
(a) Landlord's Repairs to Building and Property............. 5
(b) Landlord's Repairs to the Leased Premises............... 5
(c) Tenant's Repairs........................................ 5
(d) Indemnification......................................... 5
(e) Damage and Destruction................................. 5
9. INSURANCE AND LIABILITY
(a) Landlord's Insurance.................................... 6
(b) Tenant's Insurance...................................... 6
(c) Limitation of Landlord's Liability...................... 7
(d) Indemnity of Landlord................................... 7
(e) Definition of "Insured Damage".......................... 7
10. EVENTS OF DEFAULT AND REMEDIES
(a) Events of Default and Remedies.......................... 8
(b) Payment of Rent, etc. on Termination.................... 9
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ADDITIONAL PROVISIONS
11. Relocation of Leased Premises............................... 9
12. Subordination and Attornment................................ 9
13. Certificates................................................ 9
14. Inspection of and Access to the Leased Premises............. 10
15. Delay....................................................... 10
16. Waiver...................................................... 10
17. Sale, Demolition and Renovation............................. 10
18. Public Taking............................................... 10
19. Registration of Lease....................................... 11
20. Lease Entire Agreement...................................... 11
21. Notices..................................................... 11
22. Interpretation.............................................. 11
23. Extent of Lease Obligations................................. 11
24. Use and Occupancy Prior to Term............................. 12
25. Schedules................................................... 12
</TABLE>
<TABLE>
<CAPTION>
DEFINITIONS OF PRINCIPAL TERMS PARAGRAPH PAGE
<S> <C> <C>
Additional Rent............................. 3(b) 2
Additional Services......................... 4(a) D-1
Basic Rent.................................. 3(a) 2
Building.................................... 1 1
Debts, Liabilities & Obligations............ 4 3
Fiscal Period............................... 3(c) 2
Insured Damage.............................. 9(e) 7
Landlord.................................... 1,10
Landlord's Taxes............................ 2(a) C-1
Leased Premises............................. 1 1
Leasehold Improvements...................... 1 F-1
Landlord's Work............................. 5(b) F-2
Operating Costs............................. 5 D-2
Property.................................... 1 1
Public Taking............................... 18 10
Rent........................................ 3(d) 3
Taxes....................................... 2(b) C-1
Tenant...................................... 1
Tenant's Proportionate Share................ 2(d) C-1
Tenant's Proportionate Share................ 7 D-2
Tenant's Taxes.............................. 2(c) C-1
Term........................................ 2(a) 1
</TABLE>
(ii)
<PAGE> 4
THIS AGREEMENT made this 6th day of December, 1995
BETWEEN:
THE MANUFACTURERS LIFE INSURANCE COMPANY,
a body corporate, having its head office in Toronto, Canada,
and having a local office at 55 Bloor Street West - Suite 200
in the City of Toronto, Province of Ontario
(hereinafter called the "Landlord")
OF THE FIRST PART,
----and----
JDA SOFTWARE SERVICES LTD.
having an office at
210, 7220 Fisher Street SE
in the City
of Calgary, Province of Alberta
(hereinafter called the "Tenant")
OF THE SECOND PART,
In consideration of the rents, covenants and agreements hereinafter
contained, the Landlord and Tenant hereby agree as follows:
1. LEASED PREMISES
Leased Premises
The Landlord does demise and lease to the Tenant the premises (the
"Leased Premises") located in a building (the "Building") having a municipal
address of 2 Lansing Square
in the City of North York, Province of Ontario
and known as Lansing Square
(the Leased Premises, the Building, together with the lands described in
Schedule "A" attached hereto and present and future improvements, additions and
changes thereto being herein called the "Property"), the Leased Premises
consisting of approximately three thousand, three hundred and sixty-nine
(3,369) square feet on the ninth (9th) floor as outlined in red on the plan or
plans marked Schedule(s) "B" attached hereto, excluding the exterior surfaces
of the exterior walls of the Leased Premises.
2. TERM
Term
(a) TO HAVE AND TO HOLD the Leased Premises for and during the term of six (6)
years (the "Term") to be computed from the 1st day of February, 1996, and to be
fully complete and ended on the 31st day of January, 2002 unless otherwise
terminated.
Delay in Occupancy
(b) If the Leased Premises or any part thereof are not ready for occupancy on
the date of commencement of the Term, no part of the "Rent" (as hereinafter
defined) or only a proportionate part thereof, in the event that the Tenant
shall occupy a part of the Leased Premises, shall be payable for the period
prior to the date when the entire Leased Premises are ready for occupancy and
the full Rent shall accrue only after such last mentioned date. The Tenant
agrees to accept any such abatement of Rent in full settlement of all claims
which the Tenant might otherwise have by reason of the Leased Premises not
being ready for occupancy on the date of commencement of the Term, provided
that when the Landlord has completed construction of such part of the Leased
Premises as it is obliged hereunder to construct, the Tenant shall not be
entitled to any abatement of Rent for any delay in occupancy due to the
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<PAGE> 5
Tenant's failure or delay to provide plans or to complete any special
installations or other work required for its purposes or due to any other
reason, nor shall the Tenant be entitled to any abatement of Rent for any delay
in occupancy if the Landlord has been unable to complete construction of the
Leased Premises by reason of such failure or delay by the Tenant. A
certificate of the Landlord as to the date the Leased Premises were ready for
occupancy and such construction as the Landlord is obliged to complete is
substantially completed, or as to the date upon which the same would have been
ready for occupancy and completed respectively but for the failure or delay of
the Tenant, shall be conclusive and binding on the Tenant and Rent in full
shall accrue and become payable from the date set out in the said certificate.
Notwithstanding any delay in occupancy, the expiry date of this Lease shall
remain unchanged.
Overholding
(c) If at the expiration of the Term or sooner termination hereof, the
Tenant shall remain in possession without any further written agreement or in
circumstances where a tenancy would thereby be created by implication of law or
otherwise, a tenancy from year to year shall not be created by implication of
law or otherwise, but the Tenant shall be deemed to be a monthly tenant only,
at 1.5 times "Basic Rent" (as hereinafter defined) payable monthly in advance
plus "Additional Rent" (as hereinafter defined) and otherwise upon and subject
to the same terms and conditions as herein contained, excepting provisions for
renewal (if any) and leasehold improvement allowance (if any), contained
herein, and nothing, including the acceptance of any Rent by the Landlord, for
periods other than monthly periods, shall extend this Lease to the contrary
except an agreement in writing between the Landlord and the Tenant and the
Tenant hereby authorizes the Landlord to apply any moneys received from the
Tenant in payment of such monthly Rent.
3. RENT
Basic Rent
(a) The Tenant shall without deduction or right of offset pay to the
Landlord yearly and every year during the Term as rental (herein called "Basic
Rent"), the sum of SIXTEEN THOUSAND EIGHT HUNDRED FORTY-EIGHT Dollars
($16,848.00) of lawful money of the jurisdiction in which the Leased Premises
are located, in equal monthly installments of ONE THOUSAND FOUR HUNDRED AND
FOUR Dollars ($1,404.00) each in advance on the first day of each month during
the Term, the first payment to be made on the first day of February 1996. The
Basic Rent in this paragraph is subject to adjustment in accordance with the
provisions of Schedule "K-1" attached hereto.
Additional Rent
(b) The Tenant shall, without deduction or right of offset pay to the
Landlord yearly and every year during the Term as additional rental (herein
called "Additional Rent")
(i) the amounts of any Taxes payable by the Tenant to the Landlord pursuant
to the provisions of Schedule "C" attached hereto; and
(ii) the amounts required to be paid to the Landlord pursuant to the
provisions of Schedule "D" attached hereto.
Payment - Additional Rent
(c) Additional Rent shall be paid and adjusted with reference to a fiscal
period of twelve (12) calendar months ("Fiscal Period"), which shall be a
calendar year unless the Landlord shall from time to time have selected a
Fiscal Period which is not a calendar year by written notice to the Tenant.
The Landlord shall advise the Tenant in writing of its estimate of the
Additional Rent to be payable by the Tenant during the Fiscal Period (or broken
portion of the Fiscal Period, as the case may be, if applicable at the
commencement or end of the Term or because of a change in Fiscal Period) which
commenced upon the commencement date of the Term and for each succeeding Fiscal
Period or broken portion thereof which commences during the Term. Such
estimate shall in every case be a reasonable estimate and, if requested by the
Tenant, shall be accompanied by reasonable particulars of the manner in which
it was calculated. The Additional Rent payable by the Tenant shall be paid in
equal monthly instalments in advance at the same time as payment of Basic Rent
is due hereunder based on the Landlord's estimate as aforesaid. From time to
time, the Landlord may re-estimate, on a reasonable basis, the amount of
Additional Rent for any Fiscal Period or broken portion thereof, in which case
the Landlord shall advise the Tenant in writing of such re-estimate and fix new
equal monthly instalments for the remaining balance of such Fiscal Period or
broken portion thereof. After the end of each such Fiscal Period or broken
portion thereof the Landlord shall submit to the Tenant a statement of the
actual Additional Rent payable in respect of such Fiscal Period or broken
portion thereof and a calculation of the amounts by which the Additional Rent
payable by the Tenant exceeds or is less than (as the case may be) the
aggregate instalments paid by the Tenant on account of Additional Rent for such
Fiscal Period.
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LANDLORD TENANT
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<PAGE> 6
Within thirty (30) days after the submission of such statement either
the Tenant shall pay to the Landlord any amount by which the amount found
payable by the Tenant with respect to such Fiscal Period or broken portion
thereof exceeds the aggregate of the monthly payments made by it on account
thereof during such Fiscal Period or broken portion thereof, or the Landlord
shall pay to the Tenant any amount by which the amount found payable as
aforesaid is less than the aggregate of such monthly payments.
Accrual of Rent
(d) Basic Rent and Additional Rent (herein collectively called "Rent")
shall be considered as accruing from day to day, and Rent for an irregular
period of less than one year or less than one calendar month shall be
apportioned and adjusted by the Landlord for the Fiscal Periods of the Landlord
in which the tenancy created hereby commences and expires. Where the
calculation of Additional Rent for a period cannot be made until after the
termination of this Lease, the obligation of the Tenant to pay Additional Rent
shall survive the termination hereof and Additional Rent for such period shall
be payable by the Tenant upon demand by the Landlord. If the Term commences or
expires on any day other than the first or the last day of a month, Rent for
such fraction of a month shall be apportioned and adjusted as foresaid and paid
by the Tenant on the commencement date of the Term.
Recovery of Rent
(e) Rent and any other amounts required to be paid by the Tenant to the
Landlord under this Lease shall be deemed to be and be treated as rent and
payable and recoverable as rent, and the Landlord shall have all rights against
the Tenant for default in any payment of rent and other amounts as in the case
of arrears in rent.
Limitations
(f) The information set out in statements, documents or other writings
setting out the amount of Additional Rent submitted to the Tenant under or
pursuant to this Lease shall be binding on the Tenant and deemed to be accepted
by it and shall not be subject to amendment for any reason unless the Tenant
gives written notice to the Landlord within sixty (60) days of the Landlord's
submission of such statement, document, or writing identifying the statement,
document, or writing and setting out in reasonable detail the reason why such
statement, document or writing should not be binding on the Tenant.
4. SECURITY DEPOSIT
Security Deposit
The Tenant shall pay to the Landlord on execution of this Lease by the
Tenant the sum of TEN THOUSAND ONE HUNDRED FIFTY-THREE Dollars and SIXTY Cents
Dollars ($10,153.60) as a deposit to the Landlord for the first two(2) months
gross rent including G.S.T.
5. GENERAL COVENANTS
Landlord's Covenant
(a) The Landlord covenants with the Tenant:
(i) for quiet enjoyment; and
(ii) To observe and perform all the covenants and obligations of the
Landlord herein.
Tenant's Covenant
(a) The Tenant covenants with the Landlord:
(i) to pay Rent; and
(ii) To observe and perform all the covenants and obligations of the
Tenant herein.
6. USE AND OCCUPANCY
Use
The Tenant covenants with the Landlord:
(a) not to use the Leased Premises for any purpose other than an office for
the conduct of the Tenant's business which is the general offices of a software
and systems development company, in keeping with the first-class nature of
other uses in the Building;
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LANDLORD TENANT
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<PAGE> 7
WASTE NUISANCE, ETC
(b) not to commit, or permit, any waste, injury or damage to the Property
including the Leasehold Improvements and any trade fixtures therein, any
loading of the floors thereof in excess of the maximum degree of loading as
determined by the Landlord acting reasonably, any nuisance therein or any use
or manner of use causing annoyance to other tenants and occupants of the
Property or to the Landlord;
INSURANCE RISKS
(c) not to do, omit or permit to be done or omitted to be done upon the
Property anything which would cause to be increased the Landlord's cost of
insurance or the costs of insurance of another tenant of the Property against
perils as to which the Landlord or such other tenant has insured or which shall
cause any policy of insurance on the Property to be subject to cancellation;
COMPLIANCE WITH LAW
(d) to comply at its own expense with all governmental laws, regulations
and requirements pertaining to the occupation and use of the Leased Premises,
the condition of the Leasehold Improvements, trade fixtures, furniture and
equipment installed by or on behalf of the Tenant therein and the making by the
Tenant of any repairs, changes or improvements therein;
ENVIRONMENTAL COMPLIANCE
(e) (i) to conduct and maintain its business and operations at the
Leased Premises so as to comply in all respects with common law and with all
present and future applicable federal, provincial/state, local, municipal,
governmental or quasi-governmental laws, by-laws, rules, regulations, licenses,
orders, guidelines, directives, permits, decisions or requirements concerning
occupational or public health and safety or the environment and any order,
injunction, judgment, declaration, notice or demand issued thereunder,
("Environmental Laws").
(ii) not to permit or suffer any substance which is hazardous or is
prohibited, restricted, regulated or controlled under any Environmental Law to
be present at, on or in the Leased Premises, unless it has received the prior
written consent of the Landlord which consent may be arbitrarily withheld.
RULES AND REGULATIONS
(f) to observe and perform, and to cause its employees, invites and others
over whom the Tenant can reasonably be expected to exercise control to observe
and perform, the Rules and Regulations contained in Schedule "E" hereto, and
such further and other reasonable rules and regulations and amendments and
additions therein as may hereafter be made by the landlord and notified in
writing to the Tenant, except that no change or addition may be made that is
inconsistent with this Lease unless as may be required by governmental
regulation or unless the Tenant consents thereto. The imposition of such Rules
and Regulations shall not create or imply any obligation of the Landlord to
enforce them or create any liability of the Landlord for their non-enforcement
or otherwise.
7. ASSIGNMENT AND SUB-LETTING
NO ASSIGNMENT AND SUB-LETTING
(a) The Tenant covenants that it will not assign this Lease or sub-let the
Leased Premises in whole or in part without the prior written consent of the
Landlord, which consent the Landlord covenants not to withhold unreasonably
(i) as to any assignee or sub-lessee who is in a satisfactory financial
condition, agrees to use the Leased Premises for those purposes permitted
hereunder, i.e. general office use in keeping with the first class nature of
other uses in the Building; but not limited to software companies and is
otherwise satisfactory to the Landlord, acting reasonably, and (ii) as to any
portion of the Leased Premises which, in the Landlord's sole judgement, is a
proper and rational division of the Leased Premises, subject to the Landlord's
right of termination arising under this paragraph. Without limitation, the
Tenant shall for the purpose of this paragraph be considered to assign or
sub-let in any case where it permits the Leased Premises or any portion thereof
to be, or the Leased Premises or any portion thereof are, occupied by persons
other than the Tenant, its employees and others engaged in carrying on the
business of the Tenant, whether pursuant to assignment, sub-letting, license or
other right, or where any of the foregoing occurs by operation of law.
ASSIGNMENT OR SUB-LETTING PROCEDURES
(b) The Tenant shall not assign this Lease or sub-let the whole or any part
of the Leased Premises unless:
(i) it shall have received or procured a bona fide written offer to
take an assignment or sub-lease which is not inconsistent with this Lease, and
the acceptance of which would not breach any provision of this Lease if this
paragraph is complied with and which the Tenant has determined to accept
subject to this paragraph being complied with, and
(ii) it shall have first requested and obtained the consent in writing
of the Landlord thereto.
Any request for consent shall be in writing and accompanied by a copy of the
offer certified by the Tenant to be true, and complete, and the Tenant shall
furnish to the Landlord all information available to the Tenant and requested by
the Landlord as to the responsibility, financial standing and business of the
proposed assignee or sub-tenant. Notwithstanding the provisions of sub-paragraph
(a), within twenty (20) days after the receipt by the Landlord of such request
for consent and of all information which the Landlord shall have requested
hereunder, the Landlord shall have the right upon written notice of termination
submitted to the Tenant, if the request is to assign this Lease or sub-let the
whole of the Leased Premises, to cancel and terminate this Lease, or if the
request is to sub-let the whole of the Leased Premises only, to cancel and
terminate this Lease with respect to such part, in each case as of a termination
date to be stipulated in the notice of
4
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LANDLORD TENANT
[ILLEGIBLE] [ILLEGIBLE]
<PAGE> 8
termination which shall be not less than sixty (60) days or more than ninety
(90) days following the giving of such notice. In such event the Tenant shall
surrender the whole or part, as the case may be, of the Leased Premises in
accordance with such notice of termination and Basic Rent and Additional Rent
shall be apportioned and paid to the date of surrender and, if a part only of
the Leased Premises is surrendered, Basic Rent and Additional Rent shall after
the date of surrender abate proportionately. If such consent shall be given the
Tenant shall assign or sub-let, as the case may be, only upon the terms set out
in the offer submitted to the Landlord as aforesaid and not otherwise.
ASSUMPTION OF OBLIGATIONS
(c) No assignment or sub-letting of this Lease shall be effective unless the
assignee or sub-lessee shall execute an assumption agreement on the Landlord's
form, assuming all the obligations of the Tenant hereunder, and shall pay to
the Landlord its reasonable fee for processing the assignment or sub-letting.
TENANT'S CONTINUING OBLIGATIONS
(d) The Tenant agrees that any consent to an assignment or sub-letting of this
Lease or Leased Premises, shall not thereby release the Tenant of its
obligations hereunder.
8. REPAIR & DAMAGE
LANDLORD'S REPAIRS TO BUILDING & PROPERTY
(a) The Landlord covenants with the Tenant to keep in a good and reasonable
state of repair and decoration:
(i) those portions of the Property consisting of the entrance, lobbies,
stairways, corridors, landscaped areas, parking areas, and other
facilities from time to time provided for use in common by the Tenant
and other tenants of the Building or Property, and the exterior
portions (including foundations and roofs) of all buildings and
structures from time to time forming part of the Property and
affecting its general appearance;
(ii) the Building (other than the Leased Premises and premises of other
tenants) including the systems for interior climate control, the
elevators and escalators (if any), entrances, lobbies, stairways,
corridors and washrooms from time to time provided for use in common
by the Tenant and other tenants of the Building or Property and the
systems provided for use in common by the Tenant and other tenants of
the Building or Property and the systems provided for bringing
utilities to the Leased Premises.
LANDLORD'S REPAIRS TO THE LEASED PREMISES
(b) The Landlord covenants with the Tenant to repair, so far as reasonably
feasible, and as expeditiously as reasonably feasible, defects in standard
demising walls or in structural elements, exterior walls of the Building,
suspended ceiling, electrical and mechanical installations standard to the
Building installed by the Landlord in the Leased Premises (if and to the extent
that such defects are sufficient to impair the Tenant's use of the Leased
Premises while using them in a manner consistent with this Lease) and "Insured
Damage" (as herein defined). The Landlord shall in no event be required to make
repairs to Leasehold Improvements made by the Tenant, or by the Landlord on
behalf of the Tenant or another tenant or to make repairs to wear and tear
within the Leased Premises.
TENANT'S REPAIRS
(c) The Tenant covenants with the Landlord to repair, maintain and keep at the
Tenant's own cost, except insofar as the obligation to repair rests upon the
Landlord pursuant to this paragraph, the Leased Premises, including Leasehold
Improvements in good and substantial repair, reasonable wear and tear excepted,
provided that this obligation shall not extend to structural elements or to
exterior glass or to repairs which the Landlord would be required to make under
this paragraph but for the exclusion therefrom of defects not sufficient to
impair the Tenant's use of the Leased Premises while using them in a manner
consistent with this Lease. The Landlord may enter the Leased Premises during
the Tenant's business hours upon not less than two (2) business days prior
notice with the exception of emergencies times and view the condition thereof
and the Tenant covenants with the Landlord to repair, maintain and keep the
Leased Premises in good and substantial repair according to notice in writing,
reasonable wear and tear excepted. If the Tenant shall fail to repair as
aforesaid after reasonable notice to do so, the Landlord may effect the repairs
and the Tenant shall pay the reasonable cost thereof to the Landlord on
demand. The Tenant covenants with the Landlord that the Tenant will at the
expiration of the Term or sooner termination thereof peaceably surrender the
Leased Premises and appurtenances in good and substantial repair and condition,
reasonable wear and tear excepted.
INDEMNIFICATION
(d) If any part of the Property becomes out of repair, damaged or destroyed
through the negligence of, or misuse by, the Tenant or its employees, agents,
invitees or others under its control, the Tenant shall pay, to the extent such
damage does not constitute Insured Damage the Landlord on demand the expense of
repairs or replacements, including the Landlord's reasonable administration
charge thereof, necessitated by such negligence or misuse.
DAMAGE AND DESTRUCTION
(e) It is agreed between the Landlord and the Tenant that:
(i) In the event of damage to the Property or to any part thereof, if the
damage is such that the Leased Premises or any substantial part
thereof is rendered not reasonably capable of use and occupancy by the
Tenant for the purposes of its business for any period of time in
excess of ten (10) days, then
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LANDLORD TENANT
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<PAGE> 9
(e) (i) (1) unless the damage was caused by the fault or
negligence of the Tenant or its employees, agents,
invitees or others under its control, from the
date of occurrence of the damage and until the
Leased Premises are again reasonably capable for
use and occupancy as aforesaid, the Rent payable
pursuant to this Lease shall abate from time to
time in proportion to the part or parts of the
Leased Premises not reasonably capable of such use
and occupancy, and
(2) unless this Lease is terminated as hereinafter
provided, the Landlord or the Tenant as the case
may be (according to the nature of the damage and
their respective obligations to repair as provided
in sub-paragraphs (a), (b) and (c) of this
paragraph) shall repair such damage with all
reasonable diligence, but to the extent that any
part of the Leased Premises is not reasonably
capable of such use and occupancy by reason of
damage which the Tenant is obligated to repair
hereunder, any abatement of Rent to which the
Tenant would otherwise be entitled hereunder shall
not extend later than the time by which, in the
reasonable opinion of the Landlord, repairs by the
Tenant ought to have been completed with
reasonable diligence; and
(ii) if the Leased Premises are substantially damaged or
destroyed by any cause and if in the reasonable opinion
of the Landlord given in writing within thirty (30) days
of the occurrence the damage cannot reasonably be
repaired within one hundred and eighty (180) days after
the occurrence thereof, than the Lease shall terminate,
in which event neither the Landlord nor the Tenant shall
be bound to repair as provided in sub-paragraphs (a), (b)
and (c) of this paragraph, and the Tenant shall instead
deliver up possession of the Leased Premises to the
Landlord with reasonable expedition and Rent shall be
apportioned and paid to the date of the occurrence; and
(iii) if premises whether of the Tenant or other tenants of the
Property comprising in the aggregate half or more of the
total number of square feet of rentable office area in
the Property or half or more of the total number of
square feet of rentable office area in the Building (as
determined by the Landlord) or portions of the Property
which affect access or services essential thereto, are
substantially damaged or destroyed by any cause and if in
the reasonable opinion of the Landlord the damage cannot
reasonably be repaired within one hundred and eighty
(180) days after the occurrence thereof, then the
Landlord may, by written notice to the Tenant given
with-in thirty (30) days after the occurrence of such
damage or destruction, terminate this Lease, in which
event neither the Landlord nor the Tenant shall be bound
to repair as provided in sub-paragraphs (a) (b) and (c)
of this paragraph, and the Tenant shall instead deliver
up possession of the Leased Premises to the Landlord with
reasonable expedition but in any event within sixty (60)
days after delivery of such notice of termination, and
Rent shall be apportioned and paid to the date upon which
possession is so delivered up (but subject to any
abatement to which the Tenant may be entitled under
sub-paragraph (e) (i) of this paragraph).
9. INSURANCE AND LIABILITY
LANDLORD'S INSURANCE
(a) The Landlord shall take out and keep in force during the Term
insurance with respect to the Property except for the "Leasehold
Improvements" (as hereinafter defined) in the Leased Premises. The
insurance to be maintained by the Landlord shall be in respect of
perils and to amounts and on terms and conditions which from time to
time are insurable at a reasonable premium and which are normally
insured by reasonable prudent owners of properties similar to the
Property, all as from time to time determined at reasonable intervals
by insurance advisors selected by the Landlord, and whose opinion shall
be conclusive. Unless and until the insurance advisors shall state that
any such perils are not customarily insured against by owners of
properties similar to the Property, the perils to be insured against by
the Landlord shall include, without limitation, public liability,
boilers and machinery, fire and extended perils and may include at the
option of the Landlord losses suffered by the Landlord in its capacity
as Landlord through business interruption. The insurance to be
maintained by the Landlord shall contain a waiver by the insurer of any
rights of subrogation or indemnity or any other claim over which the
insurer might otherwise be entitled against the Tenant or the agents or
employees of the Tenant.
TENANT'S INSURANCE
(b) The Tenant shall take out and keep in force during the Term:
(i) comprehensive general public liability insurance all on an
occurrence basis with respect to the business carried on in
or from the Leased Premises and the Tenant's use and
occupancy of the Leased Premises and of any other part of
the Property, with coverage for any one occurrence or claim
of not less than One Million Dollars ($1,000,000) or such
other amount as the Landlord may reasonably require upon not
less than one (1) month notice at any time during the Term,
which insurance shall include the Landlord as a named
insured and shall protect the Landlord in respect of claims
by the Tenant as if the Landlord were separately insured;
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(b) (ii) insurance in respect of fire and such other perils as are
from time to time in the usual extended coverage
endorsement covering the Leasehold Improvements, trade
fixtures, and the furniture and equipment in the Leased
Premises for not less than 80% of the full replacement
cost thereof, and which insurance shall include the
Landlord as a named insured as the Landlord's interest
may appear; and
(iii) insurance against such other perils and in such amounts
as the Landlord may from time to time reasonably require
upon not less than ninety (90) days' written notice, such
requirement to be made on the basis that the required
insurance is customary at the time for prudent tenants of
properties similar to the Property.
All insurance required to be maintained by the Tenant shall be on terms
and with insurers satisfactory to the Landlord. Each policy shall
contain a waiver by the insurer of any rights of subrogation or
indemnity or any other claim over to which the insurer might otherwise
be entitled against the Landlord or the agents or employees of the
Landlord, and shall also contain an undertaking by the insurer that no
material change adverse to the Landlord or the Tenant will be made, and
the policy will not lapse or be cancelled, except after not less than
thirty (30) days' written notice to the Landlord of the intended change,
lapse or cancellation. The Tenant shall furnish to the Landlord, if and
whenever requested by it, certificates or other evidences acceptable to
the Landlord as to the insurance from time to time effected by the
Tenant and its renewal or continuation in force, together with evidence
as to the method of determination of full replacement cost of the
Tenant's Leasehold Improvements, trade fixtures, furniture and
equipment, and if the Landlord reasonably concludes that the full
replacement cost has been underestimated, the Tenant shall forthwith
arrange for any consequent increase in coverage required under
sub-paragraph (b). If the Tenant shall fail to take out, renew and keep
in force such insurance, or if the evidences submitted to the Landlord
are unacceptable to the Landlord (or no such evidences are submitted
within a reasonable period after request therefor by the Landlord), then
the Landlord may give to the Tenant written notice requiring compliance
with this sub-paragraph and specifying the respects in which the Tenant
is not then in compliance with this sub-paragraph. If the Tenant does
not within forty-eight (48) hours provide appropriate evidence of
compliance with this sub-paragraph, the Landlord may (but shall not be
obligated to) obtain some or all of the additional coverage or other
insurance which the Tenant shall have failed to obtain, without
prejudice to any other rights of the Landlord under this Lease or
otherwise, and the Tenant shall pay all premiums and other reasonable
expenses incurred by the Landlord to the Landlord on demand.
LIMITATION OF LANDLORD'S LIABILITY
(c) The Tenant agrees that the Landlord shall not be liable for any
bodily injury or death of, or loss or damage to any property belonging
to, the Tenant or its employees, invitees or licensees or any other
person in, on or about the Property unless resulting from the actual
wilful misconduct or gross negligence of the Landlord or its own
employees. In no event shall the Landlord be liable for any damage
which is caused by steam, water, rain or snow or other thing which may
leak into, issue or flow from any part of the Property or from the
pipes or plumbing works, including the sprinkler system (if any)
therein or from any other place or for any damage caused by or
attributable to the condition or arrangement of any electric or other
wiring or of sprinkler heads (if any) or for any damage caused by
anything done or omitted by any other tenant.
INDEMNITY OF LANDLORD
(d) Except with respect to claims or liabilities in respect of any
damage which is Insured Damage or resulting from negligence of the
Landlord or others for whom the Landlord is responsible, the Tenant
agrees to indemnify and save harmless the Landlord in respect of:
(i) all claims for bodily injury or death, property damage or
other loss or damage arising from the conduct of any work or
any act or omission of the Tenant or any assignee,
sub-tenant, agent, employee, contractor, invitee or licensee
of the Tenant, and in respect of all costs, expenses and
liabilities incurred by the Landlord in connection with or
arising out of all such claims, including the expenses of
any action or proceeding pertaining thereto; and
(ii) any loss, cost, (including, without limitation, lawyers' fees
and disbursements), expense or damage suffered by the
Landlord arising from any breach by the Tenant of any of its
covenants and obligations under this Lease.
DEFINITION OF "INSURED DAMAGE"
(e) For purposes of this Lease, "Insured Damage" means that part of
any damage occurring to the Property of which the entire cost of repair
(or the entire cost of repair other than a deductible amount properly
collectable by the Landlord as part of the Additional Rent) is actually
recovered by the Landlord under a policy or policies of insurance from
time to time effected by the Landlord pursuant to sub-paragraph (a)
Where an applicable policy of insurance contains an exclusion for
damages recoverable from a third party, claims as to which the
exclusion applies shall be considered to constitute Insured Damage only
if the Landlord successfully recovers from the third party.
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10. EVENTS OF DEFAULT AND REMEDIES
Event of Default and Remedies
(a) In the event of the happening of any one of the following events:
(i) the Tenant shall have failed to pay an installment of
Basic Rent or of Additional Rent or any other amount
payable hereunder when due, and such failure shall be
continuing for a period of more than ten (10) days after
the date such installment or amount was due:
(ii) there shall be a default of or with any condition,
covenant, agreement or other obligation on the part of the
Tenant to be kept, observed or performed hereunder (other
than a condition, covenant, agreement, or other obligation to
pay Basic Rent, Additional Rent or any other amount of money)
and such default shall be continuing for a period of more than
fifteen (15) days after written notice by the Landlord to the
Tenant specifying the default and the Tenant having failed to
commence rectification of such default within fifteen (15) days
and requiring that it discontinue;
(iii) if any policy of insurance upon the Property or any part thereof
from time to time effected by the Landlord shall be cancelled or
about to be cancelled by the insurer by reason of the use or
occupation of the Leased Premises by the Tenant or any assignee,
sub-tenant or licensee of the Tenant or anyone permitted by the
Tenant to be upon the Leased Premises and the Tenant after
receipt of notice in writing from the Landlord shall have failed
to take such immediate steps in respect of such use or occupation
as shall enable the Landlord to reinstate or avoid cancellation
(as the case may be) of such policy of insurance,
(iv) the Leased Premises shall, without the prior written consent of
the Landlord, be used by any other persons than the Tenant or its
permitted assigns or sub-tenants or for any purpose other than
that for which they were leased or occupied or by any persons
whose occupancy is prohibited by this Lease,
(v) the Leased Premises shall be vacated or abandoned, or remain
unoccupied without the prior written consent of the Landlord for
fifteen (15) consecutive days or more while capable of being
occupied,
(vi) the balance of the Term of this Lease or any of the goods and
chattels of the Tenant located in the Leased Premises, shall at
any time be seized in execution or attachment, or
(vii) the Tenant shall make any assignment for the benefit of creditors
or become bankrupt or insolvent or take the benefit of any
statute for bankrupt or insolvent debtors or, if a corporation,
shall take any steps or suffer any order to be made for its
winding-up or other termination of its corporate existence; or a
trustee, receiver or receiver-manager or agent or other like
person shall be appointed of any of the assets of the Tenant,
the Landlord shall have the following rights and remedies all of which are
cumulative and not alternative and not to the exclusion of any other or
additional rights and remedies in law or equity available to the Landlord by
statute or otherwise;
(A) to remedy or attempt to remedy any default of the Tenant, and in
so doing to make any payments due or alleged to be due by the
Tenant to third parties and to enter upon the Leased Premises to
do any work or other things therein, and in such event all
reasonable expenses of the Landlord in remedying or attempting to
remedy such default shall be payable by the Tenant to the
Landlord on demand;
(B) with respect to unpaid overdue Rent, to the payment by the Tenant
of the Rent and of interest (which said interest shall be deemed
included herein in the term "Rent") thereon at a rate equal to
the lesser of three percent (3%) above the prime commercial loan
rate charged to borrowers having the highest credit rating from
time to time by the Landlord's principal bank from the date upon
which the same was due until actual payment thereof and the
maximum amount allowed under the laws of the jurisdiction in
which the Building is located;
(C) to terminate this Lease forthwith by leaving upon the Leased
Premises or by affixing to an entrance door to the Leased
Premises notice terminating the Lease and to immediately
thereafter cease to furnish any services hereunder and enter into
and upon the Leased Premises or any part thereof in the name of
the whole and the same to have again, re-possess and enjoy as of
its former estate, anything in this Lease contained to the
contrary notwithstanding; and
(D) to enter the Leased Premises as agent of the Tenant and as such
agent to re-let them and to receive the rent therefor and as the
agent of the Tenant to take possession of any furniture or other
property thereon and upon giving ten (10) days' written notice
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<PAGE> 12
to the Tenant to store the same at the expense and risk of the Tenant or to
sell or otherwise dispose of the same at public or private sale without further
notice and to apply the proceeds thereof and any rent derived from re-letting
the Leased Premises upon account of the Rent due and to become due under this
Lease and the Tenant shall be liable to the Landlord for the deficiency if any.
Payment of Rent, etc. on Termination
(b) Upon the giving by the Landlord of a notice in writing terminating this
Lease under sub-paragraphs (a)(C) of this paragraph, this Lease and the term
shall terminate, Rent and any other payments for which the Tenant is liable
under this Lease shall be computed, apportioned and paid in full to the date of
such termination forthwith, and there shall immediately become due and payable
forthwith in one lump sum as liquidated damages and not a penalty the aggregate
of Basic Rent and Additional Rent (as estimated by the Landlord acting
reasonably), for a period of one year, being the estimated time required for
re-leasing the Leased Premises or, if less than one year remains of the Term,
the aggregate of basic Rent and Additional Rent (as estimated by the Landlord
acting reasonably) for the unexpired portion of the Term. Upon termination of
this Lease and the Term, the Tenant shall immediately deliver up possession of
the Leased Premises to the Landlord, and the Landlord may forthwith re-enter
and take possession of them.
(c) The Tenant shall pay to the Landlord on demand all costs and expenses,
including lawyers' fees, incurred by the Landlord in enforcing any of the
obligations of the Tenant under this Lease.
ADDITIONAL PROVISIONS
Subordination and Attornment
12. This Lease and all rights of the Tenant hereunder are subject and
subordinate to all under-lying leases and charges, or mortgages now or
hereafter existing (including charges, and mortgages by way of debenture, note,
bond, deeds of trust and mortgage and all instruments supplemental thereto)
which may now or hereafter affect the Property or any part thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof
provided the lessor, chargee, mortgagee or trustee agrees to accept this Lease
if not in default; and in recognition of the foregoing the Tenant agrees that
it will, whenever requested, attorn to such lessor, chargee, mortgagee as a
tenant upon all the terms of this Lease. The Tenant agrees to execute promptly
whenever requested by the Landlord or by the holder of any such lease, charge,
or mortgage an instrument of subordination or attornment, as the case may be,
as may be required of it.
Certificates
13. The Tenant agrees that it shall promptly whenever requested by the
Landlord from time to time execute and deliver to the Landlord, and if required
by the Landlord, to any lessor, chargee, or mortgagee (including any trustee)
or other person designated by the Landlord, an acknowledgment in writing as to
the then status of this Lease, including as to whether it is in full force and
effect, is modified or unmodified, confirming the Basic Rent and Additional
Rent payable hereunder and the State of the accounts between Landlord and the
Tenant, the existence or non-existence of defaults, and any other matters
pertaining to this Lease as to which the Landlord shall request an
acknowledgment.
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INSPECTION OF AND ACCESS TO THE LEASED PREMISES
14. The Landlord shall be permitted during the Tenant's business hours upon
not less than two (2) business days prior written notice except in emergencies
to enter and to have its authorized agents, employees and contractors enter the
Leased Premises for the purposes of inspection, window cleaning, maintenance,
providing janitor service, making repairs, alterations or improvements to the
Leased Premises or the Property, or to have access to utilities and services
(including all ducts and access panels (if any), which the Tenant agrees not to
obstruct) and the Tenant shall provide free and unhampered access for the
purpose, and shall not be entitled to compensation for any inconvenience,
nuisance or discomfort caused thereby. The Landlord and its authorized agents
and employees shall be permitted entry to the Leased Premises for the purpose
of exhibiting them to prospective tenants. The Landlord in exercising its
rights under this paragraph shall do so to the extent reasonably necessary so
as to minimize interference with the Tenant's use and enjoyment of the
Leased Premises provided that in an emergency the Landlord or persons
authorized by it may enter the Leased Premises without regard to minimizing
interference.
DELAY
15. Except as herein otherwise expressly provided, if and whenever and to
the extent that either the Landlord of the Tenant shall be prevented, delayed
or restricted in the fulfillment of any obligation hereunder in respect of the
supply or provision of any service or utility, the making of any repair, the
doing of any work or any other thing (other than the payment of moneys required
to be paid by the Tenant to the Landlord hereunder) by reason of:
(a) strikes or work stoppages;
(b) being unable to obtain any material, service, utility or labour
required to fulfill such obligation;
(c) any statute, law or regulation of, or inability to obtain any
permission from any government authority having lawful jurisdiction
preventing, delaying or restricting such fulfillment; or
(d) other unavoidable occurrence,
the time for fulfillment of such obligation shall be extended during the period
in which such circumstance operates to prevent, delay or restrict the
fulfillment thereof, and the other party to this Lease shall not be entitled to
compensation for any inconvenience, nuisance or discomfort thereby occasioned;
provided that nevertheless the Landlord will use its best efforts to maintain
services essential to the use and enjoyment of the Leased Premises and provided
further that if the Landlord shall be prevented, delayed or restricted in the
fulfillment of any such obligation hereunder by reason of any of the
circumstances set out in sub-paragraph (c) of this paragraph 15 and to fulfill
such obligation could not, in the reasonable opinion of the Landlord, be
completed without substantial additions to or renovations of the Property, the
Landlord may on sixty (60) days' written notice to the Tenant terminate this
Lease.
WAIVER
16. If either the Landlord or the Tenant shall overlook, excuse, condone or
suffer any default, breach, non-observance, improper compliance or
non-compliance by the other of any obligation hereunder, this shall not operate
as a waiver of such obligation in respect of any continuing or subsequent
default, breach, or non-observance, and no such waiver shall be implied but
shall only be effective if expressed in writing.
SALE, DEMOLITION AND RENOVATION
17. (a) The term "Landlord" as used in this Lease, means only the owner
for the time being of the Property, so that in the event of any
sale or sales or transfer or transfers of the Property, or the
making of any lease or leases thereof, or the sale or sales or
the transfer or transfers or the assignment or assignments of
any such lease or leases, previous landlords shall be and
hereby are relieved of all covenants and obligations of
Landlord hereunder. It shall be deemed and construed without
further agreement between the parties, or their successors in
interest, or between the parties and the transferee or
acquiror, at any such sale, transfer or assignment, or lessee
on the making of any such lease, that the transferee, acquiror
or lessee has assumed and agreed to carry out any and all of
the covenants and obligations of Landlord hereunder to
Landlord's exoneration, and Tenant shall thereafter be bound to
and shall attorn to such transferee, acquiror or lessee, as the
case may be, as Landlord under this Lease;
(b) Notwithstanding anything contained in this Lease to the
contrary, in the event the Landlord intends to demolish or to
renovate substantially all the Building, then the Landlord,
upon giving the Tenant two (2) years written notice, shall have
the right to terminate this Lease and this Lease shall
thereupon expire on the expiration of two (2) years from the
date of the giving of such notice without compensation of any
kind to the Tenant.
PUBLIC TAKING
18. The Landlord and Tenant shall co-operate, each with the other, in
respect of any Public Taking of the Leased Premises or any part thereof so that
the Tenant may receive the maximum award to which it is entitled in law for
relocation costs and business interruption and so that the Landlord may
receive the maximum award for all other compensation arising from or relating to
such Public Taking (including all compensation for the value of the Tenant's
leasehold interest subject to the Public Taking) which shall be the property of
the Landlord, and the Tenant's rights
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to such compensation are hereby assigned to the Landlord. If the whole or any
part of the Leased Premises is Publicly Taken, as between the parties hereto,
their respective rights and obligations under this Lease shall continue until
the day on which the Public Taking authority takes possession thereof. If the
whole or any part of the Leased Premises is Publicly Taken, the Landlord shall
have the option, to be exercised by written notice to the Tenant, to terminate
this Lease and such termination shall be effective on the day the Public Taking
authority takes possession of the whole or the portion of the Property Publicly
Taken. Rent and all other payments shall be adjusted as of the date of such
termination and the Tenant shall, on the date of such Public Taking, vacate the
Leased Premises and surrender the same to the Landlord, with the Landlord
having the right to re-enter and re-possess the Leased Premises discharged of
this Lease and to remove all persons therefrom. In this paragraph, the words
"Public Taking" shall include expropriation and condemnation and shall include
a sale by the Landlord to an authority with powers of expropriation,
condemnation or taking, in lieu of or under threat of expropriation or taking
and "Publicly Taken" shall have a corresponding meaning.
REGISTRATION OF LEASE
19. The Tenant agrees with the Landlord not to register this Lease in any
recording office and to register notice of this Lease only in such form as the
Landlord shall have approved and upon payment of the Landlord's reasonable fee
for same and all applicable transfer or recording taxes or charges. The Tenant
shall remove and discharge at Tenant's expense registration of such a notice or
caveat at the expiry or earlier termination of the Term, and in the event of
Tenant's failure to so remove or discharge such notice or caveat after ten (10)
days' written notice by Landlord to Tenant, the Landlord may in the name and on
behalf of the Tenant execute a discharge of such a notice or caveat in order to
remove and discharge such notice of caveat and for the purpose thereof the
Tenant hereby irrevocably constitutes and appoints any officer of the Landlord
the true and lawful attorney of the Tenant.
LEASE ENTIRE AGREEMENT
20. The Tenant acknowledges that there are no covenants, representations,
warranties, agreements or conditions express or implied, collateral or
otherwise forming part of or in any way affecting or relating to this Lease
save as expressly set out in this Lease and Schedules attached hereto and that
this Lease and such Schedules constitute the entire agreement between the
Landlord and the Tenant and may not be modified except as herein explicitly
provided or except by agreement in writing executed by the Landlord and the
Tenant.
NOTICES
21. Any notice, advice, document or writing required or contemplated by any
provision hereof shall be given in writing and if to the Landlord, either
delivered personally to an officer of the Landlord or mailed by prepaid mail
addressed to the Landlord at the said local office address of the Landlord
shown above, and if to the Tenant, either delivered personally to the Tenant
(or to an officer of the Tenant, if a corporation) or mailed by prepaid mail
addressed to the Tenant at the Leased Premises, with a copy to the President of
the Tenant at address of the Tenant shown in the description of the Tenant
above. Every such notice, advice, document or writing shall be deemed to have
been given when delivered personally, or if mailed as aforesaid, upon the fifth
day after being mailed. The Landlord may from time to time by notice in
writing to the Tenant designate another address as the address to which notices
are to be mailed to it, or specify with greater particularity the address and
persons to which such notices are to be mailed and may require that copies of
notices be sent to an agent designated by it. The Tenant may, if an address of
the Tenant is shown in the description of the Tenant above, from time to time
by notice in writing to the Landlord, designate another address as the address
to which notices are to mailed to it, or specify with greater particularity the
address to which such notices are to be mailed.
INTERPRETATION
22. In this Agreement "herein," "hereof", "hereby", "hereunder," "hereto",
"hereinafter" and similar expressions refer to this Lease and not to any
particular paragraph, clause or other portion thereof, unless there is
something in the subject matter or context inconsistent therewith; and the
parties agree that all of the provisions of this Lease are to be construed as
covenants and agreements as though words importing such covenants and
agreements were used in each separate paragraph hereof, and that should any
provision or provisions of this Lease be illegal or not enforceable it or they
shall be considered separate and severable from the Lease and its remaining
provisions shall remain in force and be binding upon the parties hereto as
though the said provision or provisions had never been included, and further
that the captions appearing for the provisions of this Lease have been inserted
as a matter of convenience and for reference only and in no way define, limit
or enlarge the scope or meaning of this Lease or of any provisions hereof.
EXTENT OF LEASE OBLIGATIONS
23. This Agreement and everything herein contained shall enure to the
benefit of and be binding upon the respective heirs, executors, administrators,
successors, assigns and other legal representatives, as the case may be, of
each and every of the parties hereto, subject to the granting of consent by the
Landlord to any assignment or sublease, and every reference herein to any party
hereto shall include the heirs, executors, administrators, successors, assigns
and other legal representatives of such party, and where there is more than one
tenant or there is a male or female party the provisions hereof shall be read
with all grammatical changes thereby rendered necessary and all covenants shall
be deemed joint and several.
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<PAGE> 15
USE AND OCCUPANCY PRIOR TO TERM
24. If the Tenant shall for any reason use or occupy the Leased Premises in
any way prior to the commencement of the Term without there being an existing
lease between the Landlord and Tenant under which the Tenant has occupied the
Leased Premises, then during such period use or occupancy the Tenant shall be a
Tenant of the Landlord and shall be subject to the same covenants and
agreements in this Lease mutatis mutandis.
SCHEDULES
25. The provisions of the following Schedules attached hereto shall form part
of this Lease as if the same were embodied herein.
Schedule "A" - Legal Description of Property
Schedule "B" - Outline of Leased Premises
Schedule "C" - Taxes payable by Landlord and Tenant
Schedule "D" - Services and Costs
Schedule "E" - Rules and Regulations
Schedule "F" - Leasehold Improvements
Schedule "G" - Not Applicable
Schedule "H" - Option to Renew
Schedule "I" - Not Applicable
Schedule "J" - Not Applicable
Schedule "K" - Occupancy Prior to Commencement of Term
Schedule "K-1"- Increase in Basic Rental
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
I/We have the authority to bind the corporation.
Landlord:
THE MANUFACTURERS LIFE
INSURANCE COMPANY
by Signature: /s/ ANTHONY J. MANGIONE
-------------------------
Title: ANTHONY J. MANGIONE
/s/ S. ROGERS DIRECTOR, TORONTO REAL ESTATE
- ---------------------------------
Witness as to signing by Landlord
Tenant:
JDA SOFTWARE SERVICES LTD.
by Signature: /s/ D. MARLIN
-------------------------
Title: President
/s/ SUE FURANNA
- ---------------------------------
Witness as to signing by
Tenant or officer(s) of Tenant
by Signature: /s/ RITA MCDONALD
------------------------
Title: Financial Manager
12
<PAGE> 16
SCHEDULE "A"
(Legal Description of Lands)
That part of Lot 14 in Concession 4 East of Yonge Street in the City of North
York located at the southwest corner of Sheppard Avenue East and Victoria Park
Avenue, more particularly described in the Office of Land Titles at Toronto as
Parcel 13-8 in the Register for Section Y-16.
Property Name : LANSING SQUARE
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SCHEDULE "B"
(Plan of Leased Premises outlined in red)
2 LANSING SQUARE
TYPICAL FLOOR
Suite 904
Approximately 3,369 rentable square feet
BUILDING NAME: LANSING SQUARE
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SCHEDULE "B-1"
[KIRSH & ASSOCIATES LTD. LETTERHEAD]
[MAP OF OFFICE BUILDING]
JDA SOFTWARE SERVICES LTD.
2 LANSING SQUARE
9TH FLOOR
FEASIBILITY PLAN NO. 2
3,369 S.F. RENTABLE
NOVEMBER 24, 1995
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SCHEDULE "C"
TAXES PAYABLE BY LANDLORD AND TENANT
TENANT'S TAXES
1. (a) The Tenant covenants to pay all Tenant's Taxes, as and when the
same become due and payable. Where any Tenant's Taxes are payable
by the Landlord to the relevant taxing authorities, the Tenant
covenants to pay the amount thereof to the Landlord.
(b) The Tenant covenants to pay the Landlord the Tenant's
Proportionate Share of the amount of the Landlord's Taxes in each
Fiscal Period.
(c) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the costs and expenses (including legal and
other professional fees and interest and penalties on deferred
payments) incurred in good faith by the Landlord in contesting,
resisting or appealing any of the Taxes.
LANDLORD'S TAXES
(d) The Landlord covenants to pay all Landlord's Taxes subject to the
payments on account of Landlord's Taxes required to be made by the
Tenant elsewhere in this Lease. The Landlord may appeal any
official assessment or the amount of any Taxes or other taxes
based on such assessment and relating to the Property. In
connection with any such appeal, the Landlord may defer payment of
any Taxes or other taxes, as the case may be, payable by it to the
extent permitted by law, and the Tenant shall co-operate with the
Landlord and provide the Landlord with all relevant information
reasonably required by the Landlord in connection with any such
appeal.
SEPARATE ALLOCATION
(e) In the event that the Landlord is unable to obtain from the taxing
authorities any separate allocation of Landlord's Taxes, Tenant's
Taxes or assessment as required by the Landlord to make
calculations of Additional Rent under this Lease, such allocation
shall be made by the Landlord acting reasonably and shall be
conclusive.
INFORMATION
(f) Whenever requested by the Landlord, the Tenant shall deliver to it
receipts for payment of all the Tenant's Taxes and furnish such
other information in connection therewith as the Landlord may
reasonably require.
TAX ADJUSTMENT
(g) If the Building has not been taxed as a completed and fully
occupied building for any Fiscal Period, the Landlord's Taxes will
be determined by the Landlord as if the Building had been taxed as
a completed and fully occupied building for any such Fiscal
Period.
DEFINITION
2. In this lease:
(a) "Landlord's Taxes" shall mean the aggregate of all Taxes
attributable to the Property, the Rent or the Landlord in respect
thereof and including, any amounts imposed, assessed, levied or
charged in substitution for or in lieu of any such Taxes, but
excluding such taxes as capital gains taxes, corporate income,
profit or excess profit taxes to the extent such taxes are not
levied in lieu of any of the foregoing against the Property or the
Landlord in respect thereof;
(b) "Taxes" shall mean all taxes, rates, duties, levies, fees, charges,
local improvement rates, capital taxes (shall be calculated as if
the Property were the only asset of the landlord and shall exclude
any additional capital taxes payable as a result of the
refinancing) rental taxes and assessments whatsoever including
fees, rents, and levies for air rights and encroachments on or
over municipal property imposed, assessed, levied or charged by
any school, municipal, regional, state, provincial, federal,
parliamentary or other body, corporation, authority, agency or
commission provided that "Taxes" shall not include any special
utility, levies, fees or charges imposed, assessed, levied or
charged which are directly associated with the initial
construction of the Property;
(c) "Tenant's Taxes" shall mean the aggregate of:
(i) all Taxes (whether imposed upon the Landlord or the Tenant)
attributable to the personal property, trade fixtures,
business, income, occupancy or sales of the Tenant or any
other occupant of the Leased Premises, and to any Leasehold
Improvements or fixtures installed by or on behalf of the
Tenant within the Leased Premises, and to the use by the
Tenant of any of the Property; and
(ii) the amount by which Taxes (whether imposed upon the Landlord
or the Tenant) are increased above the Taxes which would have
otherwise been payable as a result of the Leased Premises or
the Tenant or any other occupant of the Leased Premises being
taxed or assessed in support of separate schools; and
(d) "Tenant's Proportionate Share" shall mean zero decimal eight three
-------------------------------- percent (0.83%) subject to
adjustment, as determined solely by the common Landlord and
notified to the Tenant in writing for physical increases or
decreases in the total rentable area of the Property provided that
total rentable area of the Property and the rentable area of the
Leased Premises shall exclude areas designated (whether or not
rented) for parking and for storage.
C-1
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SCHEDULE "D"
SERVICES AND COSTS
INTERIOR CLIMATE CONTROL
1. The Landlord convenants with the Tenant:
(a) To maintain in the Leased Premises conditions of reasonable
temperature and comfort in accordance with good standards
applicable to normal occupancy of premises for office purposes
subject to governmental regulations during hours to be determined
by the Landlord (but to be at least the hours from 8:00 a.m.
to 6:00 p.m. from Monday to Friday inclusive with the exception
of holidays, Saturdays and Sundays), such conditions to be
maintained by means of a system for heating and cooling,
filtering and circulating air; the Landlord shall have no
responsibility for any inadequacy of performance of the said
system if the occupancy of the Leased Premises or the electrical
power or other energy consumed on the Leased Premises for all
purposes exceeds reasonable amounts as determined by the Landlord
or the Tenant installs partitions or other installations in
locations which interfere with the proper operation of the system
of interior climate control or if the window covering on exterior
windows is not kept fully closed.
JANITOR SERVICE
(b) To provide janitor and cleaning services to the Leased Premises
and to common areas of the Building consisting of reasonable
service in accordance with the standards of similar office
buildings:
ELEVATORS, LOBBIES, ETC.
(c) To keep available the following facilities for use by the Tenant
and its employees and invitees in commmon with other persons
entitled thereto:
(i) passanger and freight elevator service to each floor upon
which the Leased Premises are located provided such service
is installed in the Building and provided that the Landlord
may prescribe the hours during which and the procedures
under which freight elevator service shall be available and
may limit the number of elevators providing service outside
normal business hours;
(ii) common entrances, lobbies, stairways and corridors giving
access to the Building and the Leased Premises, including
such other areas from time to time which may be provided
by the Landlord for common use and enjoyment within the
Property:
(iii) the washrooms as the Landlord may assign from time to time
which are standard to the Building, provided that the
Landlord and the Tenant acknowledge that where an entire
floor is leased to the Tenant or some other tenant the
Tenant or such other tenant, as the case may be, may exlcude
others from the washrooms thereon.
ELECTRICITY
2. (a) The Landlord covenants with the Tenant to furnish electricy to
the Leased Premises (except Leased Premises which have separate
meters) for normal office use for lighting and for office
equipment capable of operating from the circuits available to the
Leased Premises and standard to the Building during hours to be
determined by the Landlord (but to be at least the hours from
8:00 a.m. to 6:00 p.m. from Monday to Friday inclusive with the
exception of holidays, Saturdays and Sundays) and during such
other hours that the Tenant elects at its sole cost and expense
subject to governmental regulations;
(b) The amount of electricity consumed on the Leased Premises in
excess of electricity required by the Tenant for normal office
use shall be as determined by the Landlord acting reasonably or
by a metering device installed by the Tenant at the Tenant's
expense. The Tenant shall pay the Landlord for any such excess
electricity on demand.
3. The Landlord shall maintain and keep in repair the facilities required
for the provision of the interior climate control, elevator (if installed in
the Building), and other services referred to in sub-paragraph (a) and (c) of
paragraph 1 and sub-paragraph (a) of paragraph 2 of this Schedule in accordance
with the standards of office buildings similar to the Building but reserves the
right to stop the use of any of these facilities and the supply of the
corresponding services when necessary by reason of accident or breakdown or
during the making of repairs, alterations or improvements, in the reasonable
judgment of the Landlord necessary or desirable to be made, until the repairs,
alterations or improvements shall have been completed to the satisfaction of
the Landlord.
ADDITIONAL SERVICES
4. (a) The Landlord may (but shall not be obliged) on request of the
Tenant supply services or materials to the Leased Premises and
the Property which are not provided for under this Lease and
which are used by the Tenant (the "Additional Services")
including, without limitation,
(i) replacement of tubes and ballasts;
(ii) carpet shampooing;
(iii) drapery cleaning;
(iv) locksmithing;
(v) removal of bulk garbage;
(vi) picture hanging; and
(vii) special security arrangement.
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(b) When Additional Services are supplied or furnished by the
Landlord, accounts therefor shall be rendered by the Landlord
and shall be payable by the Tenant to the Landlord on demand.
In the event the Landlord shall elect not to supply or furnish
Additional Services, only persons with prior written approval
by the Landlord (which approval shall not be unreasonably
withheld) shall be permitted by the Landlord or the Tenant to
supply or furnish Additional Services to the Tenant and the
supplying and furnishing shall be subject to the reasonable
rules fixed by the Landlord with which the Tenant undertakes to
cause compliance and to comply.
OPERATING CHARGES PAYABLE
5. (a) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the amount of the Operating Costs in
each Fiscal Period;
(b) Subject to the other terms and conditions of this Lease, the
Landlord shall not be responsible during the Term for any
costs, charges, expenses and outlays of any nature whatsoever
arising from or relating to the Leased Premises and the Tenant
shall pay all charges, impositions, costs and expenses of every
nature and kind relating to the Leased Premises and the amounts
included as Additional Rent whether or not specifically
provided for herein and the Tenant covenants with the Landlord
accordingly;
(c) In this Lease "Operating Costs" shall include all costs without
duplication incurred or which will be incurred by the Landlord
in the maintenance, operation, administration and management of
the Property including without limitation:
(i) cost of heating, ventilating and air-conditioning;
(ii) cost of water and sewer charges;
(iii) cost of electricity, fuel or other forms of energy
which are not separately metered and recovered or paid
by tenants;
(iv) costs of insurance carried by the Landlord pursuant to
paragraph 9(a) of this Lease and cost of any
deductible amount paid by the Landlord in connection
with each claim made by the Landlord under such
insurance;
(v) cost of building office expenses, including telephone,
rent, stationery and supplies;
(vi) costs of all elevator and escalator (if installed in
the Building) maintenance and operation;
(vii) costs of on site operating staff, management staff and
other administrative personnel, including salaries,
wages, and fringe benefits;
(viii) cost of providing security;
(ix) cost of providing janitorial services, window cleaning,
garbage and snow removal and pest control;
(x) cost of supplies and materials;
(xi) cost of decoration of common areas;
(xii) cost of landscaping;
(xiii) cost of maintenance and operation of the parking area;
(xiv) cost of consulting, and professional fees including
expenses;
(xv) cost of repairs, replacements, additions and
modifications unless otherwise included under Operating
Costs under subparagraph (xvi), and cost of repair and;
(xvi) costs in respect of each Major Expenditure (as
hereinafter defined) as amortized over the period of
the Landlord's reasonable estimate of the economic life
of the Major Expenditure, but not to exceed fifteen
(15) years, using equal monthly installments of
principal and interest at ten percent (10%) per annum
compounded semi-annually. For the purpose hereof
"Major Expenditure" shall mean any expenditure
incurred during or subsequent to the Fiscal Period in
which the Term commences for replacement of machinery,
equipment, building elements, systems or facilities
forming a part of or used in connection with the
Property or for modifications, upgrades or additions to
the Property or facilities used in connection
therewith, provided that, in each case, such
expenditure was more than ten percent (10%) of the
total Operating Costs for the immediately preceding
Fiscal Period.
(d) In this Lease there shall be excluded from Operating Costs the
following:
(i) interest on debt and capital retirement of debt;
(ii) such of the Operating Costs as are recovered from
insurance proceeds: and
(iii) costs as determined by the Landlord of acquiring
tenants for the Property.
6. In calculating Operating Costs for any Fiscal Period, if less than one
hundred percent (100%) of Building is occupied by tenants, then the amount of
such Operating Costs shall be deemed for the purposes of this Schedule to be
increased to an amount equal to the like Operating Costs which normally would
be expected by the Landlord to have been incurred had such occupancy been one
hundred percent (100%) during such entire period.
7. In this Lease, "Tenant's Proportionate Share" shall mean zero decimal
eight three percent (0.83%) subject to adjustment as determined solely by the
Landlord and notified to the Tenant in writing for physical increases or
decreases in the total rentable area of the Property provided that total
rentable area of the Property and the rentable area of the Leased Premises
shall exclude areas designated (whether or not rented) for parking and for
storage.
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LANDLORD TENANT
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SCHEDULE "E"
RULES AND REGULATIONS
1. The sidewalks, entry passages, elevators (if installed in the Building)
and common stairways shall not be obstructed by the Tenant or used for any other
purpose than for ingress and egress to and from the Leased Premises. The
Tenant will not place or allow to be placed in the Building corridors or public
stairways any waste paper, dust, garbage, refuse or anything whatever.
2. The washroom plumbing fixtures and other water apparatus shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown therein.
The expense of any damage resulting by misuse by the Tenant shall be borne by
the Tenant.
3. The Tenant shall permit window cleaners to clean the windows of the
Leased Premises during normal business hours.
4. No birds or animals shall be kept in or about the Property nor shall
the Tenant operate or permit to be operated any musical or sound-producing
instruments or device or make or permit any improper noise inside or outside
the Leased Premises which may be heard outside such Leased Premises.
5. No one shall use the Leased Premises for residential purposes, or for
the storage of personal effects or articles other than those required for
business purpose.
6. All persons entering and leaving the Building at any time other than
during normal business hours shall register in the books which may be kept by
the Landlord at or near the night entrance and the Landlord will have the right
to prevent any person from entering or leaving the Building or the Property
unless provided with a key to the premises to which such person seeks entrance
and a pass in a form to be approved by the Landlord. Any persons found in the
Building at such times without such keys and passes will be subject to the
surveillance of the employees and agents of the Landlord.
7. No dangerous or explosive materials shall be kept or permitted to be
kept in the Leased Premises.
8. The Tenant shall not permit any cooking in the Leased Premises. The
Tenant shall not install or permit the installation or use of any machine
dispensing goods for sale in the Leased Premises without the prior written
approval of the Landlord. Only persons authorized by the Landlord shall be
permitted to deliver or to use the elevators (if installed in the Building) for
the purpose of delivering food or beverages to the Leased Premises.
9. The Tenant shall not bring in or take out, position, construct, install
or move any safe, business machine or other heavy office equipment without
first obtaining the prior written consent of the Landlord. In giving such
consent, the Landlord shall have the right in its sole discretion, to prescribe
the weight permitted and the position thereof, and the use and design of
planks, skids or platforms to distribute the weight thereof. All damage done
to the Building by moving or using any such heavy equipment or other office
equipment or furniture shall be repaired at the expense of the Tenant. The
moving of all heavy equipment or other office equipment or furniture shall
occur only at times consented to by the Landlord and the persons employed to
move the same in and out of the Building must be acceptable to the Landlord.
Safes and other heavy office equipment will be moved through the halls and
corridors only upon steel bearing plates. No freight or bulky matter of any
description will be received into the Building or carried in the elevators (if
installed in the Building) except during hours approved by the Landlord.
10. The Tenant shall give the Landlord prompt notice of any accident to or
any defect in the plumbing, heating, air-conditioning, ventilating, mechanical
or electrical apparatus or any other part of the Building.
11. The parking of automobiles shall be subject to the charges and the
reasonable regulations of the Landlord. The Landlord shall not be responsible
for damage to or theft of any car, its accessories or contents whether the same
be the result of negligence or otherwise unless through the gross negligence of
the Landlord.
12. The tenant shall no mark, drill into or in any way deface the walls,
ceilings, partitions, floors or other parts of the Leased Premises and the
Building.
13. Except with the prior written consent of the Landlord, no tenant shall
use or engage any person or persons other than the janitor or janitorial
contractor of the Landlord for the purpose of any cleaning of the Leased
Premises.
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The Landlord acting reasonably will allow the Tenant's approved, qualified
tradesmen to install electrical and communications wiring.
14. If the Tenant desires any electrical or communications wiring, the
Landlord reserves the right to direct qualified persons as to where and how the
wires are to be introduced, and without such directions no borings or cutting
for wires shall take place. No other wires or pipes of any kind shall be
introduced without the prior written consent of the Landlord.
15. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the Leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord. Additional keys may be
obtained from the Landlord at the cost of the Tenant.
16. The Tenant shall be entitle to have its name shown upon the directory
board of the Building and at one of the entrance doors to the Leased Premises,
all at the Tenant's expense, but the Landlord shall in its sole discretion
design the style of such identification and allocate the space on the directory
board for the Tenant.
17. The Tenant shall keep the sun drapes (if any) in a closed position at all
times. The Tenant shall not interfere with or obstruct any perimeter heating,
air-conditioning or ventilating units.
18. The Tenant shall not conduct, and shall not permit any, canvassing in the
Building.
19. The Tenant shall take care of the rugs and drapes (if any) in the Leased
Premises and shall arrange for the carrying-out of regular spot cleaning and
shampooing of carpets and dry cleaning of drapes in a manner acceptable to the
Landlord.
20. The Tenant shall permit the periodic closing of lanes, driveways and
passages for the purpose of preserving the Landlord's rights over such lanes,
driveways and passages.
21. The Tenant shall not place or permit to be placed any sign, advertisement,
notice or other display on any part of the exterior of the Leased Premises or
elsewhere if such sign, advertisement, notice or other display is visible from
outside the Leased Premises without the prior written consent of the Landlord
which may be arbitrarily withheld. The Tenant, upon request of the Landlord,
shall immediately remove any sign, advertisement, notice or other display which
the Tenant has placed or permitted to be placed which, in the opinion of the
Landlord, is objectionable, and if the Tenant shall fail to do so, the Landlord
may remove the same at the expense of the Tenant.
22. The Landlord shall have the right to make such other and further
reasonable rules and regulations and to alter the same as in its judgment may
from time to time be needful for the safety, care, cleanliness and appearance
of the Leased Premises and the Building and for the preservation of good order
therein, and the same shall be kept and observed by the tenants, their
employees and servants. The Landlord also has the right to suspend or cancel
any or all of these rules and regulations herein set out.
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SCHEDULE "F"
Leasehold Improvements
DEFINITION OF LEASEHOLD IMPROVEMENTS
1. For purposes of this Lease, the term "Leasehold Improvements" includes,
without limitation, all fixtures, improvements, installations, alterations and
additions from time to time made, erected or installed by or on behalf of the
Tenant, or any previous occupant of the Leased Premises, in the Leased
Premises and by or on behalf of other tenants in other premises in the Building
(including the Landlord if an occupant of the Building), including all
partitions, doors and hardware however affixed, and all mechanical, electrical
and utility installations and all carpeting and drapes with the exception only
of furniture and equipment not of the nature of fixtures. Leasehold
Improvements do not include the Tenant's computer and other trade or business
equipment.
INSTALLATION OF IMPROVEMENTS AND FIXTURES
2. The Landlord shall include in the Leased Premises the "Landlord's Work" (as
hereinafter defined). The Tenant shall not make, erect, install or alter any
Leasehold Improvements in the Leased Premises without having requested and
obtained the Landlord's prior written approval. The Landlord's approval shall
not, if given, under any circumstances be construed as a consent to the
Landlord having its estate charged with the cost of work. The Landlord shall not
unreasonably withhold its approval to any such request, but failure to comply
with the Landlord's reasonable requirements from time to time for the Building
shall be considered sufficient reason for refusal. In making, erecting,
installing or altering any Leasehold Improvements the Tenant shall not, without
the prior written approval of the Landlord, alter or interfere with any
installations which have been made by the Landlord or others and in no event
shall alter or interfere with the window coverings (if any) or other light
control devices (if any) installed in the Building. The Tenant's request for
any approval hereunder shall be in writing and accompanied by an adequate
description of the comtemplated work and, where appropriate, working drawings
and specifications thereof. If the Tenant requires from the Landlord drawings
or specifications of the Building in connection with Leasehold Improvements,
the Tenant shall pay the cost thereof to the Landlord on demand. Any reasonable
costs and expenses incurred by the Landlord in connection with the Tenant's
Leasehold Improvements shall be paid by the Tenant to the Landlord on demand.
All work to be performed in the Leased Premises shall be performed by competent
contractors and sub-contractors of whom the Landlord shall have approved in
writing prior to commencement of any work, such approval not to be unreasonably
withheld (except that the Landlord may require that the Landlord's contractors
and sub-contractors be engaged for any mechanical or electrical work) and by
workmen who have labour union affiliations that are compatible with those
affiliations (if any) of workmen employed by the Landlord and its contractors
and sub-contractors. All such work including the delivery, storage and removal
of materials shall be subject to reasonable supervision of the Landlord, shall
be performed in accordance with any reasonable conditions or regulations
imposed by the Landlord including, without limitation, payment on demand of a
reasonable fee of the Landlord for such supervision, and shall be completed in
good and workmanlike manner in accordance with the description of the work
approved by the Landlord and in accordance with all laws, regulations and
by-laws of all requlatory authorities. Copies of required building permits or
authorizations shall be obtained by the Tenant at its expense and copies
thereof shall be provided to the Landlord. No locks shall be installed on the
entrance doors or in any doors in the Leased Premises that are not keyed to the
Building master key system.
LIENS AND ENCUMBRANCES ON IMPROVEMENTS AND FIXTURES
3. In connection with the making, erection, installation or alteration of
Leasehold Improvements and all other work or installations made by or for the
Tenant in the Leased Premises the Tenant shall comply with all the provisions
of the mechanics' lien and other similar statutes from time to time applicable
thereto (including any proviso requiring or enabling the retention by way of
holdback of portions of any sums payable) and, except as to any such holdback,
shall prompltly pay all accounts relating thereto. The Tenant will not create
any mortgage, conditional sale agreement or other encumbrance in respect of its
Leasehold Improvements or, without the written consent of the Landlord, with
respect to its trade fixtures nor shall the Tenant take any action as a
consequence of which any such mortgage, conditional sale agreement or other
encumbrance would attach to the Property or any part thereof. If and whenever
any mechanics' or other lien for work, labour, services or materials supplied
to or for the Tenant or for the cost of which the Tenant may be in any way
liable or claims therefor shall arise or be filed or any such mortgage,
conditional sale agreement or other encumbrance shall attach, the Tenant shall
within twenty (20) days after submission by the Landlord of notice thereof
procure the discharge thereof, including any certificate of action registered
in respect of any lien, by payment or giving security or in such other manner as
may be required or permitted by law, and failing which the Landlord may avail
itself of any of its remedies hereunder for default of the Tenant and may make
any payments or take any steps or proceedings required to procure the discharge
of any such liens or
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encumbrances, and shall be entitled to be repaid by the Tenant on demand
for any such payments and to be paid on demand by the Tenant for all
costs and expenses in connection with steps or proceedings taken by the
Landlord and the Landlord's right to reimbursement and to payment shall
not be affected or impaired if the Tenant shall then or subsequently
establish or claim that any lien or encumbrances so discharged was
without merit or excessive or subject to any abatement, set-off or
defence. The Tenant agrees to indemnify the Landlord from all claims,
costs and expenses which may be incurred by the Landlord in any
proceedings brought by any person against the Landlord alone or with
another or others for or in respect of work, labour, services or
materials supplied to or for the Tenant.
REMOVAL OF IMPROVEMENTS AND FIXTURES
4. All Leasehold Improvements in or upon the Leased Premises shall
immediately upon their placement be and become the Landlord's property
without compensation therefor to the Tenant. Except to the extent
otherwise expressly agreed by the Landlord in writing, furniture or
equipment shall be removed by the Tenant from the Leased Premises
either during or at the expiration or sooner termination of the Term
except that :
(a) the Tenant shall, prior to the end of the Term, remove such of
the trade fixtures in the Leased Premises as the Landlord shall
require to be removed;and
(b) the Tenant may, at the times appointed by the Landlord and
subject to availability of elevators (if installed in the
Building), remove its furniture and equipment at the end of the
Term, and also during the Term in the usual and normal course
of its business where such furniture or equipment has become
excess for the Tenant's purposes or the Tenant is substituting
therefor new furniture and equipment.
The Tenant shall, in the case of every removal, make good at the
expense of the Tenant any damage caused to the Property by the
installation and removal. In the event of the Non-removal by the end of
the Term, or sooner termination of this Lease, of such trade fixtures
required by the Landlord of the Tenant to be removed, the Landlord
shall have the option, in addition to its other remedies under this
Lease to declare to the Tenant that such trade fixtures are the
property of the Landlord and the Landlord upon such a declaration may
dispose of such trade fixtures and retain any proceeds of disposition
as security for the Debts, Liabilities and Obligations and the Tenant
shall be liable to the Landlord for any expenses incurred by the
Landlord.
5. For the purpose of this Lease,
(a) the term "Tenant's Work" shall mean all work required to be
done to complete the Leased Premises for occupancy by the
Tenant excluding the "Landlord's Work" (as hereinafter
defined).
(b) the term "Landlord's Work" shall mean:
See Schedule "F-3" attached.
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6. (a) In addition to the Landlord's Work, the Landlord agrees to
finish and construct in the Leased Premises in accordance with
a Space Study prepared by Kirsh and Associates hereto attached
as schedule "B-1". All materials and finishing shall be in
accordance with the specifications hereto attached as Schedule
"B-3". Any changes or additions to the space study require
written authorization executed by the Tenant or the Tenant's
authorized representative and approval by the Landlord. Any
approval by the Landlord does not constitute approval of any
municipality or other authority having jurisdiction. Any delay
resulting from any change to the space study shall be deemed a
delay caused by the Tenant. In the event a change or addition
in the space study results in an increased cost to construct
space, the Tenant shall reimburse the Landlord, on demand, the
cost for such change or addition.
(b) It is understood and agreed that the Landlord shall not be
liable for any delay which may be the result of strikes,
shortages, delay in the availability or the unavailability of
materials, permits, labour or any other factors beyond the
reasonable control of the Landlord.
(c) Following receipt of a Lease fully executed by both parties,
Landlord shall cause to be prepared Working Drawings for the
Leased Premises as shown in the space study. These Drawings
will include specifications for telephone, electrical,
plumbing, special air conditioning and sound attenuation, and
Tenant shall at the same time provide finish specifications for
inclusion in the Working Drawings. Those items may include wall
covering, floor finishes and millwork.
(d) Upon completion of the Working Drawings, Landlord shall
immediately make application to the appropriate regulatory
authorities for the required permits and approvals. Any delay
in receiving permits or approval shall not be considered a
delay caused by the Landlord.
(e) Within five (5) days after Tenant's receipt of the Working
Drawings, Tenant or Tenant's authorized representative shall
approve and sign one (1) copy of the Working Drawings and
return this signed copy to the Landlord. Upon receipt of a
signed copy of the Working Drawings and the required permits
and approval from the City of Toronto, Landlord will commence
construction.
(f) Should Tenant fail to meet the time period outlined above, or
should Tenant be responsible for any delay in the completion of
the work, it is understood that the Landlord may, at Landlord's
option, charge rent in full for those days of delay which
Landlord can reasonably demonstrate delayed the date on which
the term would otherwise have commenced.
(g) Landlord and Tenant hereby agree that Landlord shall construct
Tenant's Work, based on the attached Space Plan and
Specification Sheet.
Any and all amounts in excess of the value allowed for the cost
of constructing the Tenant's work (based on Tenant changes)
shall be paid by the Tenant within thirty (30) days from
Landlord's written notice.
(h) It is understood and agreed Landlord will not be responsible
for the timely installation of materials specified by the
Tenant, delivery of which may be delayed.
(i) Any costs and expenses incurred by the Landlord for consulting
services provided to it in connection with the construction of
Tenant's Work will be included in the cost of Tenant's Work
except in such cases where the Tenant institutes changes which
require additional financial outlays.
(j) Tenant's Work shall be designed in accordance with the
Landlord's Tenant's Work Building Standards and specifications
established for this Building from time to time and as changed
from time to time.
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SCHEDULE "H"
OPTION TO RENEW
---------------
(a) The Landlord covenants with the Tenant that if the Tenant duly and
regularly pays the Rent and any and all amounts required to be paid pursuant to
this Lease and performs each and every covenant, proviso and agreement on the
part of the Tenant to be paid, rendered, observed and performed herein, the
Landlord will at the expiration of the then expiring term on written notice by
the Tenant to the Landlord given by the Tenant not more than nine (9) months
prior to the expiration of the then expiring term and received by the Landlord
not less than six (6) months prior to the expiration of the then expiring term
grant to the Tenant a first renewal of lease of the Leased Premises (the "First
Renewal Term") on the same terms and conditions as contained in this Lease
then, at the commencement of the First Renewal Term, being used by the Landlord
for the Building save and except the right of further renewal, Landlord's Work
(if any), Basic Rent, tenant improvement allowance (if any) and Basic Rent Free
Period (if any).
(b) The Basic Rent for the First Renewal Term shall be determined by
negotiations between the parties hereto, and it is agreed that during such
negotiations in respect of Basic Rent, they will be guided by fair market
rental levels for similar premises in similar buildings in the Consumers Road
area of North York prevailing at the beginning of the First Renewal Term. If
the parties hereto are unable to agree in writing as to the Basic Rent for the
First Renewal Term prior to ninety(90) days ----- before the expiry of the
Term, the Basic Rent shall, on notice begin given by either party to the other,
be submitted to and be determined by arbitration as provided herein.
(c) Where arbitration is called for under the terms of this Schedule, the
Landlord and Tenant agree to submit such matters to arbitration in the following
manner:
(i) The Landlord and Tenant shall each appoint one arbitrator and both
such arbitrators shall be appointed within fifteen (15) days of
the date of the notice of such appointment being given by one
party to the other;
(ii) The two arbitrators so appointed shall, within fifteen (15) days
of the date of the appointment of the last appointed arbitrator
agree upon and appoint a third arbitrator;
(iii) The three arbitrators shall, within thirty (30) days of the
appointment of the third arbitrator, reach a decision and
notify the Landlord and Tenant thereof;
(iv) The decision of the majority of the three arbitrators shall be
binding upon the Landlord and Tenant;
(v) In the event of the Landlord or the Tenant failing to appoint an
arbitrator within the time limited in (i) above, the arbitrator
appointed by one of them shall reach a decision, notify the
Landlord and Tenant thereof and his decision shall be binding
upon the Landlord and Tenant;
(vi) In the event of the two arbitrators failing to agree upon and
appoint a third arbitrator, both arbitrators shall be dismissed
and the matter to be decided shall forthwith be submitted to
arbitration under the provisions of the arbitrations act of the
jurisdiction in which the Building is located or any similar act
then in force in such jurisdiction and any statutory modification
or re-enactment thereof:
(vii) The cost of arbitration shall be paid by the Tenant and the
Landlord equally.
(d) The Tenant agrees to execute the Landlord's standard lease amendment
then, at the commencement of the First Renewal Term, being used by the Landlord
for the Building to give effect to this First Option to Renew if excercised by
the Tenant. The Tenant shall execute such agreement prior to the commencement
date of the First Renewal Term.
(e) Notwithstanding the above, in the event the Tenant does not exercise the
First Option to Renew in accordance with Schedule "H" then this First Option to
Renew is null and void.
<PAGE> 28
SCHEDULE "K"
OCCUPANCY PRIOR TO COMMENCEMENT OF TERM
Upon execution of the Lease; payment of Deposit and completion of Landlord's
Work
The tenant may enter the Leased Premises prior to commencement of the Term for
the sole purpose of installing Leasehold Improvements (the "Improvement
Period"), Landlord and Tenant mutually acknowledge and agree that the
Improvement Period precedes and is not part of Basic Rent Free Period, if any,
provided for in this Lease.
Tenant's occupancy of the Leased Premises during the Improvement Period shall
be upon and subject to the following conditions:
1. During the Improvement Period the Tenant, its servants, agents, employees,
contractors, subcontractors, officers and directors shall be subject to and
bound by all of the terms and conditions of this Lease including without
limiting the generality of the foregoing insurance and idemnification subject
only to the following:
(a) During Improvement Period the Tenant shall not be obligated to pay
Rent.
<PAGE> 29
SCHEDULE "K-1"
INCREASE IN BASIC RENTAL
Commencing on the 1st day of February, 1999 and continuing until the 31st day
of January, 2002 the Basic Rent shall be increased to
- ---------------------TWENTY THOUSAND TWO HUNDRED AND TWENTY---------------------
dollars ($20,220.00) per annum of lawful money of the jurisdiction in which the
Leased Premises are located payable in equal monthly installments of ONE
THOUSAND SIX HUNDRED EIGHTY-FIVE dollars ($1,685.00) each in advance on the
first day of each month during the term, the first payment to be made on the
1st day of February, 1999.
<PAGE> 1
EXHIBIT 10.26
[BANK OF AMERICA LOGO] Business Loan Agreement
- --------------------------------------------------------------------------------
This Agreement dated as of June 17, 1996 is between Bank of America Arizona
(the "Bank") and JDA Software, Inc. (the "Borrower").
1. AMOUNT AND TERMS.
1.1 LINE OF CREDIT AMOUNT. During the availability period described below,
the Bank will provide a line of credit to the Borrower. The amount of the line
of credit (the "Commitment") is Five Million and No/100 Dollars
($5,000,000.00).
This is a revolving line of credit with a within line facility for letters of
credit. During the availability period, the Borrower may repay principal
amounts and reborrow them.
Each advance must be for at least Ten Thousand and No/100 Dollars ($10,000.00),
or for the amount of the remaining available line of credit, if less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit plus the outstanding amounts of any letters of credit, including
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Commitment.
1.2 AVAILABILITY. The line of credit is available between the date of this
Agreement and July 1, 1998 (the "Expiration Date") unless the Borrower is in
default.
1.3 INTEREST RATE.
Unless the Borrower elects an optional interest rate as described below, the
interest rate is the Reference Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by Bank of America National Trust and Savings Association ("BofA California")
in San Francisco, California, as its Reference Rate. The Reference Rate is set
by BofA California based on various factors, including its costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customer at, above, or below the Reference Rate. Any change in the Reference
Rate will take effect at the opening of business on the day specified in the
public announcement of a change in the Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on July 1, 1996 and on the 1st day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and any
unpaid interest or other charges outstanding under this line of credit no later
than the Expiration Date. (c) The Borrower may prepay the loan in full or in
part at any time.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the
Reference Rate, the Borrower may elect to have all or portions of the line of
credit (during the availability period) bear interest at the rate(s) described
below during an interest period agreed to by the Bank and the Borrower. Each
interest rate is a rate per year. Interest will be paid on the last day of
each interest period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another fixed interest rate
for the portion.
1.6 FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Fixed Rate,
subject to the following requirements.
(a) The "Fixed Rate" means the fixed interest rate the Bank and the
Borrower agree will apply to the portion during the applicable interest period.
<PAGE> 2
(b) The interest period during which the Fixed Rate will be in effect will
be no shorter than 30 days and no longer than 60 days. (c) Each Fixed Rate
portion will be for an amount not less than Five Hundred Thousand Dollars
($500,000).
(c) The Borrower may not elect a Fixed Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be repaid
before the last day of the applicable interest period. (e) Any portion of the
principal balance of the line of credit already bearing interest at the Fixed
Rate will not be converted to a different rate during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid, and a prepayment fee equal to the amount (if
any) by which: (i) the additional interest which would have been payable on
the amount prepaid had it not been paid until the last day of the interest
period, exceeds (ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the certificate of deposit
market for a period starting on the date on which it was prepaid and ending on
the last day of the interest period for such portion.
1.7 LETTERS OF CREDIT. This line of credit may be used for financing
standby letters of credit with a maximum maturity of one year but not to extend
more than one year beyond the Expiration Date.
The amount of letters of credit outstanding at any one time (including amounts
drawn on letters of credit and not yet reimbursed) may not exceed One Million
and No/100 Dollars ($1,000,000.00).
The Borrower agrees: (a) any sum drawn under a letter of credit may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere in
this Agreement. (b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of credit. (c) the
issuance of any letter of credit and any amendment to a letter of credit is
subject to the Bank's written approval and must be in form and content
satisfactory to the Bank and in favor of a beneficiary acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for Standby Letter of
Credit. (e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit for the
Borrower. (f) to allow the Bank to automatically charge its checking account
for applicable fees, discounts, and other charges.
2. FEES AND EXPENSES.
2.1 FEES.
(a) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any
difference between the Commitment and the amount of credit it actually
uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be calculated at 0.125% per year.
This fee is due on September 30, 1996 and on the last day of each
quarter thereafter.
2.2 REIMBURSEMENT COST. (a) The Borrower agrees to reimburse the Bank for
any expenses it incurs in the preparation of this Agreement and any agreement
or instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel. (b) The Borrower agrees to reimburse the Bank for the
cost of periodic audits and appraisals of the real or personal property
collateral securing this Agreement, at such intervals as the Bank may
reasonably require. The audits and appraisals may be performed by employees of
the Bank or by independent appraisers.
3. COLLATERAL
3.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the borrower now owns or will
own in the future as listed below. The collateral is further defined in
security agreement(s) executed by the Borrower. In addition, all personal
property collateral securing this Agreement shall also secure all other present
and future obligations of the Borrower to the Bank (excluding any consumer
credit covered by the federal Truth in Lending law, unless the Borrower has
otherwise agreed in writing). All personal property collateral securing any
other present or future obligations of the Borrower to the Bank shall also
secure this Agreement.
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<PAGE> 3
(a) Machinery and equipment.
(b) Receivables.
(c) Patents, trademarks and other general intangibles.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 TELEPHONE AND TELEFAX AUTHORIZATION. (a) The Bank may honor telephone
or telefax instructions for advances or repayments or for the designation of
optional interest rates or the issuance of letters of credit given by any one
of the individual signer(s) of this Agreement or a person or persons authorized
in writing by any one of the signer(s) of this Agreement. (b) Advances will be
deposited in and repayments will be withdrawn from the Borrower's account
number 054-810607, or such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower. (c) The Borrower indemnifies and excuses
the Bank (including its officers, employees, and agents) from all liability,
loss, and costs in connection with any act resulting from telephone
instructions it reasonably believes are made by any individual authorized by
the Borrower to give such instructions. This indemnity and excuse will survive
this Agreement's termination.
4.2 DIRECT DEBIT (PRE-BILLING). The Borrower agrees that the Bank will
debit the Borrower's account number 054-810607, or such other of the Borrower's
account with the Bank as designated in writing by the Borrower (the "Designated
Account") on the date each payment of principal and interest and any fees from
the Borrower becomes due (the "Due Date"). Approximately 7 days prior to each
Due Date, the Bank will mail to the Borrower a statement of the amounts that
will be due on that Due Date (the "Billed Amount"). The Bank will debit the
Designated Account for the Billed Amount, regardless of the actual amount due
on that date (the "Accrued Amount"). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be
added or subtracted from the amount due on the next due date. Regardless of any
such discrepancy, interest will continue to accrue based on the actual amount
of principal outstanding without compounding. The Bank will not pay the Borrower
interest on any overpayment. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this Agreement, the
debit will be reversed.
4.3 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency. The costs and losses will be allocated to
the loan in a manner determined by the Bank, using any reasonable method. The
costs include the following: (a) any reserve or deposit requirements; and (b)
any capital requirements relating to the Bank's assets and commitments for
credit.
4.4 INTEREST CALCULATION. All interest and fees, if any, will be computed
on the basis of a 360 day year and the actual number of days elapsed. This
results in more interest or a higher fee than if a 365-day year is used.
4.5 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Reference Rate plus 1.00 percentage
points. This may result in compounding of interest.
4.6 DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 1.50 percentage points
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.
5. CONDITIONS The Bank must receive the following items, in form and
content acceptable to the Bank, before it is required to extend any credit to
the Borrower under this Agreement.
5.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance
by the Borrower (and any guarantors) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
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<PAGE> 4
5.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
5.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
5.4 INSURANCE. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
5.5 GUARANTIES. Guaranties signed by JDA Software Group, Inc., JDA
International, Ltd., and JDA Worldwide, Inc. on the Bank's standard form in an
amount as may be acceptable, from time to time, to the Bank.
6. REPRESENTATIONS AND WARRANTIES When the Borrower signs this
Agreement, and until the Bank is repaid in full, the Borrower makes the
following representations and warranties. Each request for an extension of
credit constitutes a renewed representation. (a) The Borrower is a corporation
duly formed and existing under the laws of the state where organized. (b) This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower's or Guarantor's powers, have been duly authorized, and do not
conflict with any of its organizational papers. (c) This Agreement, and each
other agreement or document executed and delivered to the Bank in connection
with this Agreement, is a legal, valid and binding agreement of the Borrower,
enforceable against the Borrower in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will
be similarly legal, valid, binding and enforceable. (d) In each state in which
the Borrower does business, it is properly licensed, in good standing, and,
where required, in compliance with fictitious name statutes. (e) This Agreement
does not conflict with any law, agreement, or obligation by which the Borrower
is bound. (f) All financial and other information that has been or will be
supplied to the Bank is: (i) sufficiently complete to give the Bank accurate
knowledge of the Borrower's (and any guarantor's) financial condition. (ii) in
form and content required by the Bank. (iii) in compliance with all government
regulations that apply. (g) There is no lawsuit, tax claim or other dispute
pending or threatened against the Borrower, which, if lost, would impair the
Borrower's financial condition or ability to repay the loan, except as have
been disclosed in writing to the Bank prior to the date of this Agreement. (h)
All collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects or any liens or interests of
others, except those which have been approved by the Bank in writing. (i) The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights and
fictitious name rights necessary to enable it to conduct the business in which
it is now engaged. (j) There is no event which is, or with notice or lapse of
time or both would be, a default under this Agreement. (k) The Borrower's place
of business (or, if the Borrower has more than one place of business, its
chief executive office) is located at the address listed under the Borrower's
signature on this Agreement.
7. COVENANTS The Borrower agrees, so long as credit is available under
this Agreement and until the Bank is repaid in full:
7.1 USE OF PROCEEDS. To use the proceeds of the credit only for working
capital and the issuance of standby letters of credit.
7.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
financial statements together with Borrower or CPA prepared consolidating
schedules. These financial statements must be audited (with an unqualified
opinion) by a Certified Public Accountant ("CPA") acceptable to the Bank. The
statements shall be prepared on a consolidated basis.
(b) Copies of the Borrower's Form 10-Q Quarterly Report, with consolidating
schedules, within 50 days of each quarter end.
(c) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
projection of income statement.
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<PAGE> 5
7.3 CURRENT RATIO. To maintain on a consolidated basis a ratio of current
assets to current liabilities of at least 1.75:1.0, tested annually.
7.4 TANGIBLE NET WORTH. To maintain on a consolidated basis tangible net
worth equal to at least Twenty Million and No/100 Dollars ($20,000,000.00),
tested annually. "Tangible net worth" means the gross book value of the
Borrower's assets (excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and expense,
deferred research and development costs, deferred marketing expenses, and other
like intangibles) plus debt subordinated to the Bank in a manner acceptable to
the Bank (using the Bank's standard form) less total liabilities, including but
not limited to accrued and deferred income taxes, and any reserves against
assets.
7.5 NET LOSS. Not to incur a net loss in any two consecutive quarters or
on a fiscal year end basis.
7.6 OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or lease obligations (other than those to the Bank), or become liable for
the debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit. (b)
Endorsing negotiable instruments received in the usual course of business. (c)
Obtaining surety bonds in the usual course of business. (d) Debts and lines of
credit in existence on the date of this Agreement disclosed in writing to the
Bank in the Borrower's financial statement dated March 31, 1995. (f) Additional
debts for business purposes which do not exceed a total principal amount of One
Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00)
outstanding at any one time.
7.7 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except: (a) Deeds of trust and security agreements in favor of the Bank. (b)
Liens for taxes not yet due.
7.8 CHANGE OF OWNERSHIP. Not to cause, permit, or suffer any change,
direct or indirect, in the Borrower's capital ownership in excess of 10%.
7.9 OUT OF DEBT PERIOD. To repay any advances in full, and not to draw any
additional advances on its revolving line of credit, for a period of at least
30 consecutive days in each calendar year.
7.10 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Hundred Thousand and No/100 Dollars ($200,000.00)
against the Borrower (or any guarantor). (b) any substantial dispute between
the Borrower (or any guarantor) and any government authority. (c) any failure
to comply with this Agreement. (d) any material adverse change in the
Borrower's (or any guarantor's) financial condition or operations. (e) any
change in the Borrower's name, legal structure, place of business, or chief
executive office if the Borrower has more than one place of business.
7.11 BOOKS AND RECORDS. To maintain adequate books and records.
7.12 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
7.13 COMPLIANCE WITH LAWS. To comply with the laws, (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.
7.14 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
7.15 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
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7.16 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect
its security interests and liens.
7.17 COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.
7.18 INSURANCE. (a) INSURANCE COVERING COLLATERAL. To maintain all risk
property damage insurance policies covering the tangible property comprising
the collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to the
Bank and must include a lender's loss payable endorsement in favor of the Bank
in a form acceptable to the Bank. (b) GENERAL BUSINESS INSURANCE. To maintain
insurance satisfactory to the Bank as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. (c) EVIDENCE OF INSURANCE. Upon the
request of the Bank, to deliver to the Bank a copy of each insurance policy or,
if permitted by the Bank, a certificate of insurance listing all insurance in
force.
7.19 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent: (a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; or (d) sell or otherwise dispose of any assets for less than
fair market value or enter into any sale and leaseback agreement covering any
of its fixed or capital assets.
8. DEFAULT. If any of the following events occur, the Bank may do one or
more of the following: declare the Borrower in default, stop making any
additional credit available to the Borrower, and require the Borrower to repay
its entire debt immediately and without prior notice. If an event of default
occurs under the paragraph entitled "Bankruptcy" below with respect to the
Borrower, the entire debt outstanding under this Agreement will automatically
be due immediately.
8.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due.
8.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for the extensions of credit under
this Agreement.
8.3 FALSE INFORMATION. The Borrower (or any guarantor) has given the Bank
false or misleading information or representations.
8.4 BANKRUPTCY. The Borrower (or any guarantor or general partner of the
Borrower) files a bankruptcy petition, a bankruptcy petition is filed against
the Borrower (or any guarantor or general partner of the Borrower), or the
Borrower (or any guarantor or general partner of the Borrower) makes a general
assignment for the benefit of creditors.
8.5 RECEIVERS. A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated.
8.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of One Million and
No/100 Dollars ($1,000,000.00) or more in excess of any insurance coverage.
8.7 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) or
more in excess of any insurance coverage.
8.8 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.
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8.9 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's (or any guarantor's) financial condition, properties or prospects,
or ability to repay the extensions of credit under this Agreement.
8.10 CROSS-DEFAULT. Any default occurs under any agreement in connection
with any credit the Borrower (or any guarantor) has obtained from anyone else
or which the Borrower (or any guarantor) has guaranteed in the amount of Two
Hundred Thousand and No/100 ($200,000.00) or more in the aggregate.
8.11 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination
agreement, security agreement, deed of trust, or other document required by
this Agreement is violated or no longer in effect.
8.12 OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet
the conditions of, or fails to perform any obligation under any other agreement
the Borrower (or guarantor) has with the Bank or any affiliate of the Bank.
8.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all covenants will be made under generally
accepted accounting principles, consistently applied.
9.2 ARIZONA LAW. This Agreement is governed by Arizona law.
9.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent.
9.4 ARBITRATION. (a) Unless expressly prohibited by law, any controversy
or claim between or among the parties, including but not limited to those
arising out of or relating to this Agreement or any agreements or instruments
relating hereto or delivered in connection herewith and any claim based on or
arising from an alleged tort, shall at the request of any party be determined
by arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial
relief. (b) No provision of this paragraph shall limit the right of any party
to this Agreement to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration. At the Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the deed
of trust or by judicial foreclosure of the deed of trust or mortgage.
9.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default,
it may enforce a later default. Any consent or waiver under this Agreement
must be in writing.
9.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.
9.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with
the enforcement or preservation of any rights or remedies under this Agreement
and any other documents executed in connection with this Agreement, and
including any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the
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prevailing party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration proceeding, as
determined by the court or arbitrator. As used in this paragraph, "attorneys'
fees" includes the allocated costs of in-house counsel.
9.8 One Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively: (a) represent the sum of the
understandings and agreements between the Bank and the Borrower concerning this
credit; and (b) replace any prior oral or written agreements between the Bank
and the Borrower concerning this credit; and (c) are intended by the Bank and
the Borrower as the final, complete and exclusive statement of the terms agreed
to by them. In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
9.9 Usury Laws. This paragraph covers the transactions described in this
Agreement and any other agreements with the Bank or its affiliates executed in
connection with this Agreement, to the extent they are subject to the Arizona
usury laws (the "Transactions"). The Borrower understands and believes that the
Transactions comply with the Arizona usury laws. However, if any interest or
other charges paid or payable in connection with the Transactions are ever
determined to exceed the maximum amount permitted by law, the Borrower agrees
that:
(a) the amount of interest or other charges payable by the Borrower pursuant
to the Transactions shall be reduced to the maximum amount permitted
by law; and
(b) any excess amount previously collected from the Borrower in connection with
the Transactions which exceeded the maximum amount permitted by law will be
credited against the then outstanding principal balance. If the outstanding
principal balance has been repaid in full, the excess amount paid will be
refunded to the Borrower.
All fees, charges, goods, things in action or any other sums or things of
value, other than interest at the interest rate described in this Agreement,
paid or payable by the Borrower (collectively the "Additional Sums"), that may
be deemed to be interest with respect to the Transactions, shall, for the
purpose of any laws of the State of Arizona that may limit the maximum amount
of interest to be charged with respect to the Transactions, be payable by
Borrower as, and shall be deemed to be, additional interest. For such purposes
only, the agreed upon and "contracted for rate of interest" of the Transactions
shall be deemed to be increased by the rate of interest resulting from the
Additional Sums.
9.10 Counterparts. This Agreement may be executed in an many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
9.11 Prior Agreement Superseded. This Agreement supersedes the Business Loan
Agreement entered into as of August 1, 1994, between the Bank and the Borrower,
as such agreement has been amended from time to time prior to the date hereof,
and any credit outstanding thereunder shall be deemed to be outstanding under
this Agreement.
8
<PAGE> 9
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA ARIZONA JDA SOFTWARE, INC.
/s/ Larry D. Glandon /s/ James D. Armstrong
- ------------------------------ -------------------------------
By: Larry D. Glandon, By: James D. Armstrong, CEO
Vice President
/s/ Thomas M. Proud
-------------------------------
By: Thomas M. Proud,
CFO/Secretary
Address where notices to the Address where notices to
Bank are to be sent: Borrower are to be sent:
Commercial Lending, #8211 11811 North Tatum Boulevard,
101 North First Avenue Suite 2000
Phoenix, Arizona 85003 Phoenix, Arizona 85028
9
<PAGE> 1
EXHIBIT 10.30
OXFORD
<PAGE> 2
OXFORD
SUBURBAN GROUP
JDA SOFTWARE SERVICES LTD.
LEASE
<PAGE> 3
OFFICE
1
LEASE
By this Agreement dated the 11th day of July, 1994
OXFORD DEVELOPMENT GROUP, INC. AND PENRICH PROPERTIES LTD.
COLLECTIVELY REFERRED TO as LANDLORD
upon and in consideration of the covenants, terms, and conditions contained in
this LEASE and which are implied, hereby demises and leases to
JDA SOFTWARE SERVICES LTD.
, as TENANT those PREMISES (#210, 7220
Fisher Street S.E.) outlined in red on Schedule 1 attached, in the BUILDING
known as 7220 Fisher Street S.E. constructed in LAND described in Schedule 2,
Part 3.
- agreed to contain a Rentable Area of 7,516 sq.ft. more or less
(698.18 square meters) on the main floor of said BUILDING.
- for a TERM of Five 5 Years
- from a COMMENCEMENT DATE of August 1, 1994
- and expiring on July 31, 1999
- for an ANNUAL RENT OF See Schedule 3
with review and adjustment (if any) at the commencement of the
N/A year(S.) of the TERM
- and other payments in accordance with the LEASE:
Use of Premises The Premises shall only be used and occupied as an
office for Tenant's business.
The following appendices are attached to and form part of the Lease:
Schedule 1 - Plan of Premises
Schedule 2 - Project Supplement with definitions
Schedule 3 - Supplementary Terms - 3.1 Annual Rent
3.2 Advance Annual Rent
3.3 Tenant's Work
3.4 Tenant Allowance
3.5 Parking
<PAGE> 4
2
ARTICLE 1
GRANT OF LEASE
DEMISE 1.01 Landlord leases the Premises to Tenant, and Tenant leases
the Premises from Landlord, to have and to hold during the Term,
subject to the provisions hereof.
COVENANTS 1.02 Landlord covenants to keep, observe and perform all of the
terms and conditions to be kept, observed and performed by
Landlord under this Lease. Tenant covenants to pay the Rent
when due, and to keep, observe and perform all of the terms and
conditions to be kept, observed and performed by Tenant under
this Lease.
QUIET 1.03 Landlord shall warrant and defend Tenant in the quiet
ENJOYMENT enjoyment and possession of the Premises during the Term,
subject to the provisions of this Lease.
USE OF 1.04 During Norman Business Hours, Tenant, its employees,
COMMON AREAS customers, invitees and others requiring communication with
Tenant in connection with the operation of its business shall
have the use in common with others entitled thereto of the
Common Areas, provided that the Common Areas shall at all times
be subject to the exclusive control of Landlord.
USE OF 1.05 The Premises shall be used and occupied for the use and
PREMISES purpose identified on page 1 of this Lease, or for such other
purpose as Landlord may specifically authorize in writing.
CONSENT 1.06 Unless otherwise provided, whenever consent or approval of
Landlord or Tenant is required under the provisions of this
Lease, such consent or approval shall not be unreasonably
withheld or delayed.
COMPLIANCE 1.07 Tenant shall at all times, use and occupy the Premises in
WITH LAWS accordance and compliance with all laws, by-laws, regulations,
directions and orders of every governmental authority having
jurisdiction and with all requirements of the insurers of the
Project and their advisory organizations, and Tenant's insurers,
and shall not commit, suffer or permit any act or omission which
shall breach any thereof. If any such governmental authorities
or insurers or insurers' advisory organizations require changes,
Tenant shall make same at its own expense, but subject to such
approvals of Landlord as are required pursuant to the provisions
of this Lease.
NUISANCE 1.08 Tenant shall not cause or maintain any nuisance in or
about the Premises, and shall keep the Premises free of debris,
rodents, vermin and anything of a dangerous, noxious or
offensive nature, or which could create a fire hazard (through
undue load on electrical circuits or otherwise) or cause undue
vibration, heat or noise.
ABANDONMENT 1.09 Tenant shall not vacate or abandon the Premises at any
time during the Term.
ARTICLE 2
RENT
PAYMENT 2.01 (a) Tenant acknowledges and agrees that the Annual Rent
OF RENT shall be completely net to Landlord, and Tenant
shall, to the complete indemnification of Landlord,
pay Tenant's Proportionate Share of Operating Costs
for the Building, and Other Charges.
(c) All amounts payable by Tenant to Landlord under this
Lease (without limitation including Tenant's
Proportionate Share of Operating Costs for the
Building, and Other Charges) shall constitute and be
deemed to be Rent and shall be payable and
recoverable as Rent, and shall be payable, when due,
in legal tender of Canada, without deduction or
rights of set-off, and without demand or, where so
specified, upon notice or invoice, at such place as
Landlord from time to time may designate, and
Landlord shall have all rights against Tenant for
default in any payment as in the case of arrears of
Annual Rent, Tenant's obligation to pay Rent shall
survive the expiration or earlier termination of this
Lease, until fully discharged.
(d) Tenant shall make payments required under this Lease
within the period of time specified, or if a time
period is not specified, within a reasonable period
of time,
<PAGE> 5
3
EARLY 2.02 If Tenant begins to conduct business in any portion of the
OCCUPANCY Premises before the Commencement Date, Tenant shall pay to
Landlord on the Commencement Date a rental in respect of the
portion so used for the period from the date Tenant begins to
conduct business therein to the Commencement Date, which rental
shall be that proportion of Annual Rent for the first year of
the Term which the number of days in such period bears to 365,
and which the area of the portion so used bears to the area of
the Premises. The provisions of this Lease shall be applicable
during such period, without limitation including that Tenant
shall, mutatis mutandis proportionately contribute to Operating
Costs for the Building during such period.
DELAYED 2.03 If Landlord is delayed in giving possession of the
OCCUPANCY Premises to Tenant, then, unless such delay is principally
caused by or attributable to Tenant, its servants, agents or
contractors, Tenant shall take possession of the Premises on the
date when Landlord delivers such possession, and this Lease
shall commence on the first day of the month next following and
shall thenceforth ensue until the date of expiration aforesaid.
This Lease shall not be void or voidable nor shall Landlord be
liable to Tenant for any loss or damage resulting from any delay
in delivering such possession to Tenant, but no Rent shall be
payable by Tenant for the period prior to such deferred
commencement date except pursuant to Section 2.02. If the delay
is principally caused by or attributable to Tenant, its
servants, agents or contractors, then Tenant shall pay Rent
pursuant to the provisions of this Lease from the Commencement
Date without reduction, abatement or deferral.
PAYMENT OF 2.04 Annual Rent shall be paid by Tenant to Landlord in equal
ANNUAL RENT monthly installments payable in advance on the first day of each
calendar month, with the first installment to be paid on the
Commencement Date.
PAYMENT OF 2.05 (a) Tenant shall pay its Proportionate Share of Operating
OPERATING COSTS Costs for the Building as next provided.
(b) On or about the Commencement Date, and the beginning
of each Fiscal Year thereafter, Landlord shall
compute and deliver to Tenant a bona fide estimate of
Tenant's Proportionate Share of Operating Costs for
the Building for the appropriate period and, without
further notice, Tenant shall pay to Landlord equal
monthly installments of such estimate of Tenant's
Proportionate Share of Operating Costs for the
Building simultaneously with installments of Annual
Rent during such period.
(c) Unless delayed by causes beyond Landlord's reasonable
control, Landlord shall deliver to Tenant within 120
days after the end of each Fiscal Year a statement
certified to be correct by Landlord, (the
"Statement") setting out in reasonable detail the
amount of Operating Costs for the Building for such
Fiscal Year and Tenant's Proportionate Share thereof.
If the aggregate of installments of Tenant's
Proportionate Share of Operating Costs for the
Building actually paid by Tenant to Landlord during
such Fiscal Year differs from the amount of Tenant's
Proportionate Share of Operating Costs for the
Building for such Fiscal Year in accordance with the
Statement, Tenant shall pay or Landlord shall credit
the difference without interest within 30 days after
the date of delivery of the Statement.
(d) If Tenant disagrees with the accuracy of the
Operating Costs for the Building or Tenant's
Proportionate Share thereof as set forth in the
Statement, Tenant shall nevertheless make payment in
accordance with the Statement, but Tenant shall,
within 30 days of delivery of the Statement, advise
Landlord thereof and the disagreement shall
immediately be referred by Landlord for prompt
decision by a public accountant, architect, insurance
broker or other professional consultant who in the
opinion of Landlord and Tenant by mutual agreement is
best qualified to assess and determine the matter and
who shall be deemed to be acting as an expert(s) and
not as an arbitrator(s) and whose determination shall
be final and binding on Landlord and Tenant, unless
within 21 days of the determination either party
elects to submit the matter to arbitration pursuant
to applicable law. The cost of the expert(s) and of
any arbitration shall be borne equally by Landlord
and Tenant. Any adjustment required to any previous
payment made by Tenant or Landlord by reason of any
final decision shall be made, without interest,
within 30 days thereof.
(e) Neither party may claim a re-adjustment in respect of
Operating Costs for a period if based upon any error
or computation or allocation except by notice
delivered to the other party within 6 months after
the date of delivery of the Statement.
<PAGE> 6
4
(f) If the Term expires or the Lease is otherwise
terminated on a date other than the last day of
the Fiscal Year, Tenant's Proportionate Share of
Operating Costs for the Building shall be
adjusted on a per diem basis, based on and
calculated at the time of delivery of the next
Statement after such date. If the aggregate of
installments of Operating Costs actually paid by
Tenant to Landlord during the period up to and
including the expiry or earlier termination date
differs from the amount of Tenant's
Proportionate Share of Operating Costs for the
Building payable for the period up to such date,
Tenant shall pay or Landlord shall refund the
difference without interest within 30 days after
the date of delivery of the Statement.
PAYMENT OF 2.06 Tenant shall make payments to Landlord of Other Charges
OTHER CHARGES which pursuant hereto are the responsibility of Tenant.
ARTICLE 3
OPERATION OF THE PROJECT
STANDARDS 3.01 During the Term. Landlord shall operate and maintain
the Project in accordance with all applicable laws and
regulations, and with high standards of efficient and prudent
property management from time to time prevailing for buildings
in a project similar in age, use, type, and location.
SERVICES 3.02 Landlord shall (with participation by Tenant by payment
TO PREMISES of Tenant's Proportionate Share of Operating Costs for the
Building) provide in the Premises:
(a) heat, ventilation and air conditioning as required for
the comfortable use and occupancy of the Premises during
Normal Business Hours;
(b) janitorial services, including window washing, but
excluding dry-cleaning of drapes and shampooing of
carpets, to keep the Premises in a clean and tidy
condition, provided that Tenant shall leave the Premises
in a reasonably tidy condition at the end of each
business day;
and shall provide in the Premises at the cost of the Tenant:
(c) replacement of building standard fluorescent tubes,
light bulbs, ballasts, and starters as required from
time to time as a result of normal usage; and
(d) electric power for normal lighting and small business
office equipment, other than computers.
BUILDING 3.03 Landlord shall (with participation by Tenant by payment
SERVICES of Tenant's Proportionate Share of Operating Costs for the
Building) provide in the Project:
(a) hot and cold or tempered running water and necessary
supplies in public washrooms sufficient for the normal
use thereof;
(b) elevator or escalator service for access to and egress
from the Premises;
(c) heat, ventilation, air conditioning, lighting, electric
power, and janitorial services in the Common Areas; and
(d) a general directory board, under the exclusive control
of Landlord, on which Tenant shall be entitled to have
its name shown.
MAINTENANCE, 3.04 Landlord shall (with participation by Tenant by payment
REPAIR AND of Tenant's Proportionate Share of Operating Costs for the
REPLACEMENT Building) operate, maintain, repair and replace the systems,
facilities, and equipment necessary for the proper operation of
the Project and for the provision of services under this Article
(except as such may be installed by or be the property or
responsibility of Tenant, and shall be responsible for and shall
expeditiously maintain and repair the foundations, structures,
exteriors, and roofs of the Project and, pursuant to Article 7,
repair damage to the Project which Landlord is obligated to
insure against under this lease, provided that:
(a) if all or part of such systems, facilities and
equipment are destroyed, damaged or impaired,
Landlord shall have a reasonable time in which
to complete the necessary repair or replacement,
and during that time shall be required only to
maintain such services as are reasonably
possible in the circumstances;
(b) following initial installation and any
significant alteration of partitioning or
installations, proper operation of heating and
air handling systems will require balancing and
rebalancing;
<PAGE> 7
5
(c) Landlord may temporarily discontinue such services or
any of them at such times as may be necessary due to
causes (except lack of funds) beyond the reasonable
control of Landlord;
(d) Landlord shall use reasonable diligence in carrying out
its obligations under this Article, but shall not be
liable under any circumstances for any consequential
damage to any person or property for any failure to do
so;
(e) Landlord shall not be liable for damage to any person
or property, fixtures, furnishings, or equipment or
claims for loss of business, or other loss or damage
suffered or caused by failure of the mechanical or
electrical systems of the Project, or interruption in
the supply of power or other services, or malfunction
of the sprinkler system, or bursting or leaking of
sewer pipes or of gas, steam, or water, or leakage of
any type;
(f) no reduction or discontinuance of services under this
Article shall be construed as an eviction of Tenant, or
a breach of the covenant of quiet enjoyment, or release
Tenant from any of its obligations under this Lease;
(g) nothing contained herein shall derogate from the
provisions of Article 7; and
(h) Landlord shall be deemed to have observed and performed
the terms and conditions to be performed by Landlord
under this Lease, including those relating to the
provision of utilities and services, if in so doing it
acts in accordance with a directive, policy or request
of a governmental or quasi-governmental authority
serving the public interest in the fields of energy,
conservation or security.
ADDITIONAL 3.05 (a) If from time to time requested in writing by Tenant and
SERVICES to the extent that it is reasonably able to do so,
Landlord shall provide in the Premises services in
addition to those set out in this Article, except that
Tenant shall be solely responsible for the cost thereof
and shall within 10 days of receipt of an invoice for
any such additional service pay Landlord therefor at
such reasonable rates as Landlord may from time to time
establish.
(b) Tenant shall not, without Landlord's written consent,
install or permit in the Premises, equipment (including
telephone equipment) which generates sufficient heat to
affect the temperature otherwise maintained in the
Premises by the air conditioning system as normally
operated. If the Tenant should do so, Landlord may
install supplementary air conditioning units,
facilities or services in the Premises, or modify its
air conditioning system, as may in Landlord's
reasonable opinion be required to maintain proper
temperature levels, and Tenant shall pay Landlord for
all Outlays within 10 days of receipt of an invoice
therefor.
(c) If Landlord shall from time to time reasonably
determine that the use of electricity or any other
utility or service in the Premises is materially
disproportionate to the use of other tenants. Landlord
may separately charge Tenant for the excess costs
attributable to such disproportionate use and Tenant
shall pay Landlord the amount thereof within 10 days of
receipt of an invoice therefor. Tenant may and, at
Landlord's request, Tenant shall, install and maintain
at Tenant's expense, metering devices for checking the
use of such utility or service in the Premises.
ALTERATION 3.06 Landlord may from time to time:
BY LANDLORD (a) make repairs, replacement, changes or additions to the
structure, systems, facilities and equipment in the
Premises or the Project where necessary to serve the
Premises or the Project;
(b) make changes in or additions to any part of the Project
not in or forming part of the Premises; and
(c) change or alter the location of the Common Areas:
provided that in doing so, Landlord shall not disturb or interfere
with Tenant's use of the Premises and operation of its business
any more than is reasonably necessary in the circumstances and
shall repair any damage to the Premises caused thereby.
ACCESS 3.07 Tenant shall permit Landlord to enter the Premises outside
BY LANDLORD Normal Business Hours, and during Normal Business Hours where such
entry will not unreasonably disturb or interfere with Tenant's use
of the Premises and operation of its business, to examine,
inspect, and show the Premises to persons wishing to lease them,
to provide services or make repairs, replacements, changes or
alterations as set out in this Lease, and to take such steps as
Landlord may deem necessary for the safety, improvement or
preservation of the Premises or the Project. Landlord shall,
whenever possible, consult with or give reasonable notice to
Tenant prior to such entry, and shall use its best efforts to
observe security and safety measures reasonably requested by
Tenant from time to time, but such entry shall not be construed as
an eviction of Tenant, or a breach of the covenant of quiet
enjoyment, and shall not release Tenant from any of its
obligations under this Lease.
NAME OF 3.08 Landlord may determine and specify one or more names,
BUILDING numbers, or like designations, by which the Building or Project
(or any component thereof) shall be known and identified.
Landlord shall have the right after 30 days' notice to Tenant, to
change any such name, number or designation of the Building or
Project, without liability to Tenant.
<PAGE> 8
6
ARTICLE 4
MAINTENANCE OF THE PREMISES
CONDITION 4.01 Tenant shall (subject to fair wear and tear, provided
OF PREMISES that nothing herein shall require Landlord to remedy such fair
wear and tear) maintain the Premises and all improvements
therein in good order and condition, including, without
limitation:
(a) repainting and redecorating the Premises and
dry-cleaning drapes and shampooing of carpets at
reasonable intervals as needed; and
(b) making repairs, replacements and alterations as
needed.
FAILURE 4.02 If Tenant fails to perform any obligation under this
TO MAINTAIN Article, then on not less than 10 days' notice to Tenant,
PREMISES (except in the event of an emergency as determined by Landlord,
acting reasonably, in which case entry may be made immediately)
Landlord may enter the Premises and perform or cause performance
of such obligation without liability to Tenant for any loss or
damage to Tenant thereby occasioned, and Tenant shall pay
Landlord for all Outlays plus 20% of such for overhead and
supervision, within 10 days of receipt of an invoice therefor,
and the entry and performance of such obligations by Landlord
shall not be construed as an eviction of Tenant, or a breach of
the covenant of quiet enjoyment, and shall not release Tenant
from any of its obligations under this Lease. Tenant shall not
be entitled to any compensation for any inconvenience, nuisance
or discomfort occasioned by such entry.
ALTERATIONS 4.03 (a) Tenant may from time to time at its own expense
BY TENANT make changes, additions and improvements in the
Premises to better adapt the Premises to its
business, provided that any such change,
addition or improvement shall:
(i) comply with the requirements of any
governmental or quasi-governmental
authority having jurisdiction;
(ii) be made only with the prior written
consent of Landlord;
(iii) be equal or exceed the then current
building standard for the Project as
established by Landlord; and
(iv) be carried out only by persons selected
by Tenant and approved in writing by
Landlord, who shall, if required by
Landlord, deliver to Landlord before
commencement of the work, an authorized
building permit from the applicable
municipality, performance and payment
bonds, and proof of workers'
compensation and public liability and
property damage insurance coverage, with
Landlord named as an additional insured,
with companies and in amounts and with
coverages and in form reasonably
satisfactory to Landlord, and which
shall remain in effect during the entire
period in which the work will be carried
out and for a reasonable period of time
thereafter.
(b) Subject to compliance with such reasonable rules
and regulations as Landlord may make from time
to time, Tenant and its contractors shall have
access to the Building and the Premises for
purposes of undertaking the work approved
pursuant to sub-section (a), provided such work
shall be undertaken and completed with all
reasonable diligence; and such work shall, save
as Landlord acting reasonably may otherwise
require or direct that same be done by
Landlord's contractors at Tenant's expense, be
done by contractors selected by Tenant, provided
that there shall be no conflict caused thereby
with any union or other contract to which
Landlord or its contractor(s) may be a party,
and in the event that Tenant's contractors or
workmen cause such conflict Tenant shall
forthwith remove them from the Project.
(c) It is understood and agreed that Landlord shall
have no responsibility or liability whatsoever
with respect to any such work or attendant
materials left or installed in the Project, and
shall be reimbursed for any Outlays, and for any
delays caused Landlord or its constructor(s)
directly or indirectly as a result thereof.
Tenant shall be solely responsible for the
removal of any and all construction refuse or
debris resulting from such work with such
removal to occur only after Normal Business
Hours.
(d) Any increase in Taxes, fire or casualty
insurance premiums for the Project attributable
to such change, addition or improvement shall be
borne by Tenant. Tenant shall promptly repair
at its own expense any damage to the Premises or
the Project, without limitation including the
property of others, resulting from such changes,
additions or improvements.
BUILDERS' 4.04 Tenant shall pay before delinquency all costs for work
LIENS done or caused to be done by Tenant in the Premises which could
result in any lien or encumbrance on Landlord's interest in the
Project or any part thereof, and shall keep the title to the
Project and every part thereof free and clear of any lien,
certificate of lis pendens or encumbrance in respect of such
work, and shall indemnify and hold harmless Landlord against all
Outlays. Tenant shall immediately notify Landlord of any such
lien, claim of lien or other action of which it has or
reasonably should have knowledge and which affects the title to
the Project or any part thereof, and shall cause the same to be
removed within 15 days (or such additional time as Landlord may
allow in writing), failing which Landlord may take such action
as Landlord deems necessary to remove the same and Tenant shall
pay Landlord for all Outlays within 10 days of receipt of an
invoice therefor.
<PAGE> 9
SIGNS 4.05 All signs shall be at Tenant's expense and any sign, or
lettering or design of Tenant which is visible from the exterior
of the Premises shall be subject to approval by Landlord, and
shall conform to the uniform pattern of identification or signs
for tenants in the Project as prescribed by Landlord. Tenant
shall not inscribe or affix any sign, lettering or design in the
Premises or Project which is visible from the exterior of the
Project.
TENANT'S 4.06 (a) Tenant may install in the Premises its usual
PROPERTY trade fixtures and personal property in a
proper manner, provided that no such
installation shall interfere with or damage the
mechanical or electrical systems or the
structure of the Building. If Tenant is not
then in default hereunder, Tenant's Property
installed in the Premises by Tenant may be
removed from the Premises.
(i) from time to time in the ordinary course
of Tenant's business or in the course of
reconstruction, renovation, or alteration
of the Premises by Tenant, and
(ii) during a reasonable period prior to the
expiration of the Term, provided that
Tenant shall promptly repair at its own
expense any damage to the Premises or the
Project resulting from such installation
or removal.
(b) For purposes of this Lease the expression
"Tenant's Property" (whether owned or leased by
Tenant and whether or not affixed to the
Premises) shall mean personal property, trade
fixtures and fittings, furniture and
furnishings, supplies, inventories and
merchandise, and equipment and systems from time
to time installed, provided and used by Tenant
in the Premises for the conduct of its business.
LEASEHOLD 4.07 (a) Provided that nothing in this Section shall
IMPROVEMENTS inhibit Tenant's rights pursuant to Section 4.03
to make alterations or pursuant to Section 4.06
to install and replace Tenant's Property, all
Leasehold Improvements in or about the Premises
shall upon the completion thereof, whether by or
at the instance or cost of Landlord or Tenant,
forthwith and without more be and become the
absolute property of Landlord without
compensation therefor, but without Landlord
having or thereby accepting any responsibility
in respect of the maintenance, repair,
replacement or removal thereof (other than
pursuant to Articles 6 and 7 hereof) which shall
be Tenant's responsibility.
(b) For purposes of this Lease the expression
"Leasehold Improvements" shall include, without
limitation, all improvements, installations,
alterations and additions from time to time
made, erected or installed in the Building by or
for or on behalf of Tenant, or any previous or
other occupant of the Premises including,
without limitation, all partitioning, doors and
hardware, mechanical, electrical and utility
installations, light fixtures, floor and window
coverings, decorations, finishes and fixtures,
howsoever affixed and whether movable or
immovable, excepting only Tenant's Property.
ARTICLE 5
TAXES
LANDLORD'S 5.01 Landlord shall (with participation by Tenant by payment
TAXES of Tenant's Proportionate Share of Operating Costs for the
Building) pay Taxes, (except any payable by Tenant) before
delinquency, Landlord may to the fullest extent permitted by law
and provided it diligently prosecutes any contest or appeal of
Taxes, defer payment of Taxes or defer compliance with any
statute, by-law, or regulation in connection with the levying
and payment of Taxes.
ALLOCATION 5.02 If there are not separate assessments of Taxes for the
Premises or Building, Landlord shall allocate Taxes to the
Building and any other of the Project Components covered by or
included in an assessment covering the Land or the Building, on
an equitable basis having regard, without limitation, to the
various uses and values of the subject Project Components, any
separate assessments that may have been rendered by the taxing
authority, and any assessment principles known, or prescribed by
any lawful taxing authority.
TENANT'S 5.03 Tenant shall pay before delinquency every tax,
TAXES assessment, license fee, excise fee and other charge including
Sales Taxes (excluding income tax), however described, which is
imposed, levied, assessed or charged by any governmental or
quasi-governmental authority having jurisdiction and which is
payable in respect of the Term or upon or on account of:
(a) separate assessments of or in respect of the
Premises;
(b) operations at, occupancy of, or conduct of
business in or from the Premises by or with the
knowledge of Tenant;
(c) Tenant's Property or fixtures or personal
property in the Premises which do not belong to
Landlord; and
<PAGE> 10
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(d) the Rent paid or payable by Tenant to Landlord for
the Premises or for the use and occupancy of all or any
part thereof:
provided that if Landlord so elects by notice to Tenant, Tenant
shall add any amounts payable under this Section to the monthly
installments of Annual Rent payable and Landlord shall remit such
amounts to the appropriate authorities.
RIGHT TO 5.04 Tenant shall have the right to contest in good faith the
CONTEST validity or amount of any tax, assessment, license fee, excise fee
or other charge which it is responsible to pay under Section 5.03
or 5.05, provided that no contest by Tenant may involve the
possibility of forfeiture, sale or disturbance of Landlord's
interest in the Premises or Project and that upon the final
determination of any contest by Tenant, Tenant shall immediately
pay and satisfy the amount found to be due, together with any
costs, penalties and interest.
ADDITIONAL 5.05 If by reason of any act or election of Tenant, or any
TAXES subtenant, licensee or occupant of the Premises (except Landlord
after election by Landlord of any right to sublease pursuant to
this Lease), the Project, Building or Premises or any part thereof
shall be assessed an increased rate or assessment, the Tenant shall
pay before delinquency the amount by which the resulting Taxes
exceed those which would otherwise have been payable.
ARTICLE 6
INSURANCE
LANDLORD'S 6.01 (a) During the Term, Landlord shall maintain (with
INSURANCE participation by Tenant by payment of Tenant's
Proportionate Share of Operating Costs for the Building)
insurance on the Project and all property and interests
of Landlord in the Project, including, without
limitation, Leasehold Improvements, but excluding
Tenant's Property with coverage and in amounts and in
respect of risks which are from time to time acceptable
to a prudent owner of a project similar in age, use,
type and location and from time to time insurable at
reasonable premiums, all policies for such insurance
shall waive any right of subrogation against Tenant and
its officers, directors, partners and employees.
Landlord shall review its insurance in consultation with
an independent, professional insurance broker not less
frequently than every three years and may on the
recommendation of such insurance broker effect insurance
subject to reasonable deductibles to be borne by the
insured in the event of a claim arising. Nothing herein
shall preclude Landlord effecting so-called "all risks"
property insurance, or effecting blanket insurance in
respect of the Project and any other properties of which
Landlord is the owner or tenant, or in which Landlord
has an insurable interest. Landlord shall allocate (in
circumstances where the insurer or the insurer's agent
fails to do so) the cost of premiums to the Building and
any other of the Project Components (and such other
properties as may be appropriate), covered by the
insurance policy on an equitable basis having regard,
without limitation, to the various uses and values of
the subject Project Components, and any other properties
so included, and the recommendation of Landlord's
insurance broker.
(b) Provided that:
(i) if in the opinion of Landlord any Leasehold
Improvements do not constitute a finishing of the
Premises in a manner which would have general
utility but are specially or peculiarly adapted for
Tenant's use, or if the insuring of any of the
Leasehold Improvements in the Premises involves, or
would in the opinion of Landlord's insurance broker
involve a premium exceeding that for the insuring
of Leasehold Improvements normal in the Building,
or any special stipulations or conditions of a
policy of insurance are imposed or involved in the
insurance thereof, Landlord may from time to time
elect, by written notice to Tenant, not to insure
or cause to be insured any such Leasehold
improvements, in which event Landlord shall not be
required to insure such Leasehold Improvements.
(ii) If from time to time the insuring of the
Leasehold Improvements in the Premises (other
than those which Landlord may have elected
not to insure or cause to be insured as
aforesaid) requires a premium or an allocated
part of a premium, as established either by
the insurer or by the estimate of Landlord's
insurance broker, which exceeds the average
premium cost per unit of area for insuring
Leasehold Improvements normal to the
Building, Landlord may from time to time
charge the excess premium cost to Tenant and
Tenant shall make prompt payment therefor
upon receipt of invoices from Landlord.
(c) Upon the request of Tenant from time to time Landlord
will furnish a statement as to the perils in respect of
which and the amounts to which the Building and the
Leasehold Improvements in the Premises have been
insured, and Tenant shall be entitled at reasonable
times upon reasonable notice to Landlord to inspect
copies of the relevant portions of all policies of
insurance in effect and a copy of any relevant opinions
of Landlord's insurance broker.
<PAGE> 11
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TENANT'S 6.02 During the Term Tenant shall maintain at its own expense:
INSURANCE
(a) comprehensive general public liability insurance
(including bodily injury, death and property damage)
on an occurrence basis with respect to the business
carried on or in or from the Premises and Tenant's
use and occupancy thereof, which insurance shall
contain a cross liability clause, and include
Landlord as a named insured and shall protect
Landlord in respect of claims by or through Tenant as
if Landlord was separately insured; and shall be for
not less than $2,000,000 inclusive limits for
personal injury or property damage in respect of each
occurrence, or such higher limits as Landlord's
insurance broker may reasonably require from time to
time;
(b) insurance in respect of fire and other perils as are
from time to time defined in the usual endorsement
covering Tenant's Property and such Leasehold
Improvements (if any) as Landlord may have elected
not to insure, which insurance shall include Landlord
as a named insured as its interests may appear with
respect to insured Leasehold Improvements and provide
that any proceeds recoverable in the event of loss to
Leasehold Improvements shall be payable to Landlord
(but Landlord agrees to make available such proceeds
towards the repair or replacement of the insured
property if this Lease is not terminated pursuant to
any other provision hereof);
(c) such other insurance of the Premises, its
appurtenances, and the business conducted as would,
in the opinion of Landlord acting reasonably, be
carried by a prudent operator of premises similar in
use, type, and location.
All such policies of insurance shall provide Landlord with 30
days' prior notice of material amendment or cancellation and to
any additional extent required waive any right of subrogation
against Landlord and its directors, officers and employees.
USE OF 6.03 Tenant agrees that in the event of damage or destruction
PROCEEDS to the Premises covered by insurance required to be taken out by
the Tenant pursuant to Section 6.02 or otherwise, Tenant shall
use the proceeds of such insurance for the purpose of repairing
or restoring such damage or destruction. In the event of damage
to or destruction of the Project or the Building entitling
Landlord to terminate the Lease pursuant to this Lease, then, if
the Premises have been damaged or destroyed, Tenant shall pay to
Landlord all of its insurance proceeds relating to any Leasehold
Improvements in the Premises which Tenant was required to insure
and if the Premises have not been damaged or destroyed, Tenant
shall deliver to Landlord, in accordance with the provisions of
this Lease, all Leasehold Improvements and the Premises.
LANDLORD 6.04 If requested by Landlord, Tenant shall from time to time
MAY PLACE promptly deliver to Landlord evidence that insurance pursuant to
INSURANCE Section 6.02 is in effect. If Tenant fails to take out or to
keep in force any insurance referred to in Section 6.02, or
should any such insurance not be approved by either Landlord or
a mortgagee, and Tenant shall not diligently rectify the
deficiency within 2 business days after notice by Landlord to
Tenant (stating, if Landlord or the mortgagee does not approve
of such insurance, the reasons therefor), Landlord shall have
the right, without assuming any obligation in connection
therewith, to effect such insurance at the sole cost of Tenant
and Tenant shall pay Landlord for all Outlays within 10 days of
receipt of an invoice therefor.
INCREASE IN 6.05 Tenant shall not permit, keep, use, sell or offer for sale
INSURANCE in or upon the Premises or Project any article which may be
PREMIUMS prohibited by any fire insurance policy in force from time to
time covering the Premises or the Project. If (a) the occupancy
of the Premises, (b) the conduct of business in the Premises, or
(c) any acts or omissions of Tenant in the Project or any part
thereof, causes or results in any increase in premiums for the
insurance carried from time to time by Landlord with respect to
the Project, Tenant shall pay Landlord for any such increase
within 10 days of receipt of an invoice for such additional
premiums from Landlord. In determining whether increased
premiums are caused by or result from the use or occupancy of
the Premises, a schedule issued by the organization computing
the insurance rate on the Project showing the various components
of such rate, shall be conclusive evidence of the several items
and charges which make up such rate. The Tenant shall comply
promptly with all requirements of the insurer's advisory
organizations now or hereafter in effect or of the insurers
pertaining to or affecting the Premises or the Project.
CANCELLATION 6.06 If any insurance policy upon the Project or any part
OF INSURANCE thereof shall be cancelled or shall be threatened by the insurer
to be cancelled, or the coverage thereunder reduced in any way
by the insurer by reason of the use or occupancy of or any
article, material or equipment brought upon or stored or
maintained in the Premises or any part thereof by Tenant or by
any assignee or subtenant of Tenant, or by anyone permitted by
Tenant to be upon the Premises, (other than Landlord or an
agent, representative or designate of Landlord), and if Tenant
fails to remedy the condition giving rise to cancellation,
threatened cancellation, or reduction of coverage within 2
business days after notice thereof by Landlord, Landlord may, at
its option, either (a) re-enter and take possession of the
Premises forthwith by leaving upon the Premises a notice in
writing of its intention so to do and thereupon Landlord shall
have the same rights and remedies as are contained in this Lease
for events of default, or (b) enter upon the Premises and remedy
the condition giving rise to such cancellation, threatened
cancellation or reduction, without limitation or restriction
including removal of any offending article, and
<PAGE> 12
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Tenant shall pay Landlord for all Outlays within 10 days of
receipt of an invoice therefor. Landlord shall not be liable
for any damage or injury caused to any property of Tenant or of
others located on the Premises as a result of such entry.
Subject to this Section, any such entry by Landlord shall not
be construed as an eviction of Tenant or a breach of the
covenant of quiet enjoyment and shall not release Tenant from
any of its obligations under this Lease.
ARTICLE 7
DAMAGE BY FIRE
LIMITED 7.01 If all or part of the Premises are rendered untenantable
DAMAGE TO by damage from fire or other casualty which, in the reasonable
PREMISES opinion of the Architect, can be substantially repaired under
applicable laws and governmental regulations within 270 days
from the date of such casualty (employing normal construction
methods without overtime or other premium). Landlord shall
forthwith at its expense repair such damage exclusive of damage
to Tenant's Property.
MAJOR DAMAGE 7.02 If all or part of the Premises are rendered untenantable
TO PREMISES by damage from fire or other casualty whether to the Premises,
the Building, or the Project which, in the reasonable opinion of
the Architect, cannot be substantially repaired under
applicable laws and governmental regulations within 270 days
from the date of such casualty (employing normal construction
methods without overtime or other premium), then either
Landlord or Tenant may elect to terminate this Lease as of the
date of such casualty by notice delivered to the other not more
than 10 working days after receipt of the Architect's opinion,
failing which, Landlord shall forthwith at its expense, repair
such damage other than damage to Tenant's Property.
ABATEMENT 7.03 The Rent payable by Tenant hereunder shall be
proportionately reduced to the extent that the Premises are
untenantable by Tenant for its business, from the date of such
casualty until the earlier of:
(a) 5 days after completion by Landlord of the repairs
to the Premises (or part thereof rendered
untenantable) or the end of such extended period
as in the opinion of the Architect, Tenant, acting
delingently and expeditiously, would reasonably
require to repair other improvements which Tenant
may have installed (to the extent same may have
been damaged) or,
(b) Tenant again uses the Premises (or part thereof
rendered untenantable) in its business:
provided however that Rent payable by Tenant hereunder shall not
be reduced if the damage is caused by any act or omission of
Tenant, its agents, servants, employees or any other person
entering upon the Premises under express or implied invitation
of Tenant.
MAJOR DAMAGE 7.04 If all or a part (whether or not including the Premises
TO BUILDING of the Building or the Project is rendered untenantable
by damage from fire or other casualty to such a material or
substantial extent that, in the opinion of Landlord, the
Building should be totally or partially demolished, whether or
not to be reconstructed in whole or in part, Landlord may elect
to terminate this Lease as of the date of such casualty (or in
the date of notice if the Premises are unaffected by such
casualty) by notice delivered to Tenant not more than 60 days
after the date of such casualty, and thereupon Tenant shall have
60 days within which to vacate the Premises.
RECONSTRUCTION 7.05 If all or any part of the Premises are at any time
BY LANDLORD rendered untenantable as set out in this Article, and
neither Landlord or Tenant elect to terminate this Lease in
accordance with the rights granted herein, Landlord shall,
following such destruction or damage, commence diligently to
reconstruct, rebuild or repair that part of the Project or the
Premises or the Building which was damaged or destroyed, but
only to the extent required above, if Landlord elects to repair,
reconstruct or rebuilt. Landlord may repair, reconstruct or
rebuild according to plans and specifications and working
drawings other than those used in the original construction of
the Project. Any such repair, reconstruction or rebuilding
shall comply with applicable regulations and building codes in
force at such time. The Premises as repaired or re-built, will
have reasonably similar facilities and services to those in the
Premises prior to the damage or destruction having regard,
however, to the age of the Project at such time.
ARCHITECT'S 7.06 Whenever for any purpose of this Article an opinion or
CERTIFICATE certificate of the Article is required, the same shall be given
in writing to both Landlord and Tenant, Landlord covenants
that it shall request such opinion or certificate promptly
following the event which gives need for same and shall cause
the Architect to act diligently and expeditiously. The
certificate of the Architect shall bind the parties:
(a) whether or not the Premises are untenantable and
the extent of such untenantability; and
(b) the time required for and the date upon which the
Landlord's work or Tenant's work of reconstruction
or repair is commenced or completed or
substantially completed and the date when the
Premises are rendered tenantable.
<PAGE> 13
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LIMITATION OF 7.07 Except as specifically provided in this Article, there
LANDLORD'S shall be no reduction or abatement of Rent and Landlord shall
LIABILITY have no liability to Tenant by reason of any injury to or
interference with Tenant's business or property arising from
fire or other casualty, howsoever caused, or from the making of
any repairs resulting therefrom in or to any portion of the
Building, Project, or Premises.
INSURANCE 7.08 Upon the occurrence of any loss which by this Lease the
DEDUCTIBLE Landlord is required to insure against, the Tenant shall pay to
the Landlord the Tenant's Proportionate Share of all applicable
deductibles under such policies of insurance.
ARTICLE 8
INJURY TO PERSON OR PROPERTY
INDEMNITY OF 8.01 (a) Tenant agrees that Landlord shall not be liable
LANDLORD for any bodily injury or death of, or loss or
damage to any property belonging to, Tenant or
its employees, contractors, invitees or
licensees or any other person in, on or about
the Project unless resulting from the actual
fault, privity or negligence of Landlord, but in
no event shall Landlord be liable:
(i) for any damage caused or occasioned
through smoke or water, or by steam,
gas, rain or snow which may leak into,
issue or flow from any part of the
Project or from the pipes or plumbing
works, without limitation including the
sprinkler system, therein or from any
other place or quarter or for any damage
caused by or attributable to the
condition or arrangement of any electric
or other wiring or of sprinkler heads or
for any damage caused by anything done
or omitted by any other tenant;
(ii) without limitation for any act or
omission (including theft, malfeasance
or negligence) on the part of any agent,
contractor or person from time to time
employed by it to perform janitor
services, security services, delivery
services, supervision or any other work
in or about the Premises or the Project;
or
(iii) for loss or damage, however caused, to
money, securities, negotiable
instruments, books, files, papers or
other valuables of Tenant.
(b) Tenant shall indemnify and save harmless
Landlord in respect of:
(i) all claims for bodily injury or death,
property damage or other loss or damage
arising from the conduct of any work by
or any act or omission of Tenant or any
assignee, subtenant, agent, employee,
contractor, invitee or licensee of
Tenant, and in respect of all costs,
expenses and liabilities incurred by
Landlord in connection with or arising
out of all such claims, without
limitation including the expenses of any
action or proceeding pertaining thereto;
(ii) any loss, cost expense or damage
suffered or incurred by Landlord arising
from any breach by Tenant of any of its
obligations under this Lease; and
(iii) all costs, expenses and Outlays that may
be incurred or paid by Landlord in
enforcing against Tenant the covenants,
agreements and representations of the
Tenant set out in the Lease.
ARTICLE 9
ASSIGNMENT AND SUBLETTING BY TENANT
CONDITIONS 9.01 (a) Except as specifically provided in this Article,
Tenant shall not assign or transfer this Lease
or any interest therein, or in any way part with
possession of all or any part of the Premises,
or permit all or any part of the Premises to be
used or occupied by any other person. Any
assignment, transfer, or subletting or purported
assignment, transfer, or subletting except as
specifically provided herein shall be null and
void and of no force and effect and shall render
null and void as at and from the time thereof
any options or rights to renew this Lease, any
options or rights to additional space and any
options or rights to parking space.
(b) If and whenever Tenant shall wish or purport or
propose to assign this Lease, or sublet all or
part of the Premises, Tenant shall furnish
Landlord all such information, particulars and
documents as Landlord may reasonably require.
(c) Landlord may withhold its consent to an
assignment of this Lease or a sublease of all or
part of the Premises by Tenant to any tenant in
a building which is owned or managed by Landlord
or any affiliate of Landlord; or
<PAGE> 14
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to an assignee, subtenant, occupier, or other person
whatsoever, inconsistent, in the opinion of Landlord,
with the character of the Building, the Project, or
its other tenants; or if Section 9.04 has not been
complied with; or to any assignee or subtenant which
does not propose to occupy and use the Premises for
the conduct therein of its own business.
(d) The rights and interests of Tenant under this Lease
shall not be assignable by operation of law without
Landlord's written consent, which consent may be
withheld in Landlord's discretion.
(e) No assignment, transfer, or subletting (or use or
occupation of the Premises by any other person)
whether or not permitted under this Article shall in
any way release or relieve Tenant of its obligations
under this Lease unless such release or relief is
specifically granted by Landlord to Tenant in writing.
(f) Landlord's consent to an assignment, transfer, or
subletting (or use or occupation of the Premises by
any other person) shall not be deemed to be a
precedent or a consent to any subsequent assignment,
transfer, subletting, use, or occupation.
(g) Landlord's expenses and Outlays incurred in the
consideration of any assignment or subletting, or any
request therefor, and any documentation attendant on
any consent of Landlord, shall be borne by Tenant.
ASSIGNMENT 9.02 Tenant may not assign this Lease or in any manner
transfer or convey all or any part of its interest in this
Lease or the Premises without the prior written consent of
Landlord, which shall not be unreasonably withheld if the same
is:
(a) to an assignee who is a purchaser of all of the
business of Tenant that is conducted in the Premises,
a parent, or wholly owned subsidiary company of
Tenant, a company which results from the
reconstruction, consolidation, amalgamation or merger
of Tenant, or a partnership in which Tenant (or not
less than one-half of the principals thereof) has a
substantial interest, if such assignee shall covenant
with Landlord to observe and perform and comply with
each and every covenant, term and condition in this
Lease imposed on Tenant, or undertaken, made, or
assumed by Tenant; or
(b) to any other assignee if Section 9.04 has been
complied with, and Landlord has not exercised its
rights thereunder.
SUBLETTING 9.03 Tenant, with Landlord's prior written consent and
subject to Section 9.01 and Section 9.04, may sublet all or
any part of the Premises to a sublessee who will not be
inconsistent with the character of the Building, the Project,
and its other tenants.
FIRST OFFER TO 9.03 If Tenant wishes to assign this Lease (except as set
LANDLORD out in Sub-section (a) of Section 9.02) or sublet all or any
part of the Premises, Tenant shall first offer in writing to
assign or sublet (as the case may be) to Landlord for the
same period and upon the same conditions except that the last
day of the Term shall be excluded, that Landlord shall pay no
consideration for the assignment or sublease, and that every
assignment or sublease to Landlord shall be without profit to
Tenant, and the Rent payable by Landlord shall be the Rent
payable hereunder apportioned pro tanto to the portion(s) of
the Premises affected plus only a reasonable allowance in
respect of improvements and equipment in such portion(s) as
agreed between the parties or failing agreement determined
by arbitration pursuant to applicable law. Notwithstanding
the foregoing Tenant may, in respect of expansion space
taken by Tenant to accommodate future requirements of the
Tenant, sublet space, not exceeding in aggregate 30% of the
area of the Premises, without first offering such expansion
space to Landlord if the rent payable by the subtenant shall
not be less than the rate then being asked by Landlord for
space in the Building, and the term of the subtenancy shall
not be more than 3 years.
CORPORATE 9.05 If and while the Tenant is a corporation whose shares
CONTROL are not listed on any recognized stock exchange or which has
less than 25 shareholders, in the event at any time during the
Term it is proposed that any part or all of the shares or the
voting rights of shareholders be transferred by any means
whatsoever, or treasury shares be issued, or any such transfer
or issue shall occur, so as to result in a change of the
control of said corporation, such a transfer or issuance shall
be deemed to be an assignment of this Lease and all of the
provisions of this Article and all of the provisions of the
Lease relating to assignment, default and termination shall
apply mutatis mutandis. Tenant shall make available to
Landlord, or its lawful representatives, all corporate books
and records of Tenant for inspection at all reasonable times in
order to ascertain whether there has been any change in the
control of Tenant.
RELOCATION 9.06 Landlord shall have the right at any time and from time
to time during the Term to change the location of the Premises
and to move Tenant to other similar space in the Building of
equivalent or better area and finish, provided that all costs
of the move shall be borne by Landlords; the Rent for such
alternative space shall be no greater than the Rent payable for
the Premises hereunder; and the provisions of this Lease shall,
except where clearly inappropriate, continue in all respects
save only that such alternative space shall be substituted as
the Premises hereunder.
<PAGE> 15
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ARTICLE 10
SALE AND MORTGAGE BY LANDLORD
Transfers 10.01 (a) Subject to the rights of Tenant under this Lease,
by Landlord nothing in this Lease shall restrict the right of
Landlord to sell, convey, assign or otherwise deal
with all or a part of the Land, Building, or the
Project.
(b) A sale, conveyance, or assignment of the Land,
Building, or the Project shall, to the extent they are
assumed by the transferee or assignee, operate to
release Landlord of liability from and after the
effective date thereof upon all of the covenants,
terms, and conditions of this Lease express or
implied, except as such may relate to the period prior
to such effective date, and Tenant shall to the extent
aforesaid, thereafter look solely to Landlord's
successor in interest in and to this Lease. This Lease
shall not be affected by any such sale, conveyance, or
assignment, and Tenant shall attorn to Landlord's
successor in interest thereunder.
Subordination 10.02 (a) This Lease and all the rights of Tenant hereunder are
and Attornment subject and subordinate to all mortgages and deeds of
trust and all instruments similar or supplemental
thereto creating a charge or encumbrance and now or
hereafter existing on or which now or hereafter may
affect the Project or the Building, and to all
renewals, modifications, consolidations, replacements
and extensions thereof and to every charge or lien
resulting or arising therefrom and to every advance
made or to be made thereunder (collectively referred
to herein as a "Mortgage") and Tenant, whenever
requested by Landlord or any mortgagee, or any
trustee under a deed of trust or mortgage or any
holder of a charge of encumbrance or any purchaser,
their successors or assigns (collectively referred
to herein as a "Mortgagee"), shall acknowledge the
same and attorn to the Mortgagee as a tenant upon all
the terms of this Lease and give further assurances
as may be necessary.
(b) Such subordination of this Lease and the obligation
on the part of the Tenant to acknowledge and attorn as
aforesaid, shall be conditional upon the Mortgagee
acknowledging by agreement or otherwise, in form
binding on the Mortgagee, that so long as no default
exists nor any event has occurred which has continued
to exist for such period of time (after notice, if
any, required by the Lease) as would entitle Landlord
to terminate the Lease, or would cause, without
further action of Landlord, the termination of the
Lease or would entitle Landlord to dispossess Tenant
thereunder, the Lease shall not be terminated nor
shall Tenant's use, possession, or enjoyment of the
Premises be interfered with, nor shall the leasehold
estate granted by the Lease be affected in any manner
in any foreclosure or any action or proceeding
instituted under or in connection with the Mortgage,
or at law, and this Lease shall remain effective as
against the Mortgagee who shall be bound by the terms
of this Lease.
(c) Upon attornment, this Lease shall continue in full
force and effect as a direct lease between Mortgagee
and Tenant, upon all of the same covenants, terms, and
conditions as set forth in this Lease except that,
after such attornment, Mortgagee shall not be:
(i) liable for any act or omission of any prior
landlord; or
(ii) subject to any offsets or defenses which
Tenant might have against any prior landlord;
or
(iii) bound by any prepayment by Tenant of more than
one month's installment of Rent, or by any
previous modification of this Lease, unless
such prepayment or modification shall have been
approved in writing by Mortgagee, or such
prepayment shall have been made pursuant to the
provisions of this Lease.
Execution of 10.03 Tenant shall, upon request, execute and deliver any and
Instruments all instruments further evidencing such subordination and
(where applicable hereunder) such attornment notwithstanding
any previous subordination, postponement of attornment that may
have been given.
Status 10.04 Each of Landlord and Tenant shall at any time and from
Statement time to time, at the expense of the party requesting the
statement, forthwith after 20 days notice from the other,
executes, acknowledge, and deliver a written statement which
may be relied upon by a prospective transferee or encumbrancee
of all or any part of the Project, or the leasehold estate
created hereby, certifying:
(a) that this Lease is in full force and effect, subject
only to such modifications (if any) as may be set out
in such statement:
(b) whether Tenant is in possession of the Premises and
paying Rent as provided in this Lease:
(c) the dates (if any) as to which Rent is paid: and
(d) there are not, to such party's knowledge, any uncured
defaults on the part of the other party hereunder, or
specifying such defaults if any are claimed.
<PAGE> 16
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ARTICLE II
EXPROPRIATION
DEFINITIONS 11.01 In this Article,
(a) "Expropriation" means the taking of property for any
public or quasi-public use under any statute or by
any right of expropriation or condemnation or
purchased under threat of such taking.
(b) "Expropriation Date" means the date on which the
pertinent authority takes possession of property
which has been Expropriated.
TOTAL TAKING 11.02 If during the Term, all of the Building or the Project
OF PREMISES shall be Expropriated, this Lease shall automatically terminate
on the Expropriation Date.
PARTIAL TAKING 11.03 If any portion of the Premises (but less than the whole
OF PREMISES thereof) is Expropriated, and no rights of termination herein
conferred are timely exercised, the Term shall terminate with
respect to the portion so taken on the Expropriation Date. In
such event, the Rent payable hereunder with respect to such
portion so taken shall abate and the Rent thereafter payable
with respect to the remainder not so taken shall be adjusted pro
rata by Landlord in order to account for the resulting reduction
in the area of the Premises from the Expropriation Date.
PARTIAL TAKING 11.04 If during the Term, part of the Building or the Project
OF PROJECT is Expropriated, then:
(a) If in the reasonable opinion of Landlord substantial
alteration or reconstruction of the Building is
necessary or desirable as a result thereof, whether
or not the Premises are or may be affected, Landlord
shall have the right to terminate this Lease by
giving the Tenant 30 days' notice of such
termination; and
(b) if any of the area of the Premises is Expropriated
Landlord and Tenant shall each have the right to
terminate this Lease by giving the other 30 days'
notice thereof; and
(c) if either party exercises its right of termination
hereunder, this Lease shall terminate on the date
stated in the notice, provided, however, that no
termination pursuant to notice hereunder may occur
later than 90 days after the Expropriation Date.
SURRENDER 11.05 On any such Expropriation Date under this Article, Tenant
shall immediately surrender to Landlord the Premises or portion
thereof as the case may be and all interest therein under this
Lease. Landlord may re-enter and take possession of the
Premises or such portion thereof and remove Tenant therefrom,
and the Rent shall abate on the date of termination, except that
if the Expropriation Date differs from the date of termination,
Rent shall abate on the former date in respect of the portion
taken. After such termination, and on notice from Landlord
stating the Rent then owing (if any), Tenant shall forthwith pay
Landlord such Rent.
AWARDS 11.06 If the Project or any part thereof is Expropriated,
Landlord shall be entitled to receive and retain the entire
award or consideration for the affected lands and improvements,
and Tenant shall not have, nor advance any claim against
Landlord for the value of its property or its leasehold estate
or the unexpired Term, or for costs of removal or relocation, or
business interruption expense or any other damages arising out
of such taking or purchase, but nothing herein shall give
Landlord any interest in or preclude Tenant from seeking and
recovering on its own account from the pertinent authority any
award or compensation attributable to the taking or purchase of
Tenant's Property, chattels or trade fixtures, or the removal or
relocation of its business and effects, or the interruption of
its business. If any award made or compensation paid to either
party specifically includes an award or amount for the other,
the party first receiving the same shall promptly account
therefor to the other.
ARTICLE 12
RULES AND REGULATIONS
GENERAL 12.01 Subject to Section 12.04, Landlord may from time to time
PURPOSE modify by amendment, deletion, addition, recission or
replacement, rules and regulations for the safety, use, care,
and cleanliness of the Project, the comfort and convenience of
tenants and other persons in the Project, the preservation of
good order and efficient management, and the control of Common
Areas, Delivery Facilities, Parking Facilities, Retail
Concourse, any Project Component, construction activities,
movement in and out of the Project, delivery and shipping, and
other services and functions.
LOADING 12.02 (a) Landlord may from time to time pursuant to this
AND DELIVERY Article make and modify regulations for the orderly
and efficient operation of the Delivery Facilities,
and may require the payment of reasonable charges
for storage and for delivery services provided by
Landlord.
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(b) The delivery and shipping of merchandise,
supplies, fixtures, and other materials or goods
of whatsoever nature to or from the Premises and
all loading, unloading and handling thereof shall
in any event be done only at such times, in such
areas, by such means, and through such elevators,
entrances, malls and corridors, as are designated
by Landlord.
(c) Landlord accepts no liability and is hereby
relieved and released by Tenant in respect of the
operation of the Delivery Facilities, or the
adequacy thereof, or of the acts or omissions of
any person or persons engaged in the operation
thereof, or in the acceptance, holding, handling,
delivery or dispatch of any goods for or on behalf
of Tenant, or for any claim of Tenant by reason of
damage, loss, theft, or acceptance, holding,
handling, delivery or dispatch, or failure of any
acceptance, holding, handling or dispatch, or any
error, negligence or delay therein.
CONSTRUCTION 12.03 Landlord may from time to time pursuant to this Article
PROCEDURES make and modify regulations for the orderly, efficient and
expeditious conduct of alterations pursuant to Section 4.03 and
other construction work. Without limiting the generality of
the foregoing, such regulations may prescribe reasonable
provisions for:
(a) submission, examination and approval of drawings,
plans and specifications and standards to be
observed;
(b) supervision and co-ordination of such work with
any work of Landlord and other work proceeding
and avoidance of undue noise and vibration;
(c) protection of property, preservation of
warranties, compliance with pertinent by-laws and
codes, and procuring of permits;
(d) deliveries, access, hours of work, material and
equipment hoisting and storage, use of power,
heating, and washroom facilities, clean-up and
screening; and
(e) customary insurance and charges relating to above.
REPUGNANCY 12.04 Provided that rules and regulations aforesaid shall:
(a) not conflict with and negate the terms of this
Lease;
(b) be reasonable and conform to good standards of
property management;
(c) have general application to the Project other than
tenants whose use is different to that of Tenant;
(d) not impose charges, fees or costs which are not
customary or competitive;
(e) be effective only upon delivery of a copy thereof
to Tenant at the Premises.
OBSERVANCE 12.05 Tenant shall at all times comply with, and shall cause
its employees, agents, contractors, licensees and invitees to
comply with the rules and regulations from time to time in
effect.
NON- 12.06 Landlord shall use reasonable efforts (but shall not be
COMPLIANCE required to institute legal proceedings) to secure compliance
by all tenants and other persons with the rules and regulations
from time to time in effect, but shall not be responsible to
Tenant for failure of any person to comply with such rules and
regulations.
ARTICLE 13
COMMUNICATION
NOTICES 13.01 Any notice from one party to the other shall be in
writing and shall be deemed duly served if delivered to a
responsible employee of the party being served, or dispatched
by telegraph, telex, telecopier or like electronic means
(provided dispatch, receipt and content thereof can be
established and evidenced) or if mailed by registered or
certified mail addressed to Tenant at the Premises (or if
Tenant has departed from, vacated or abandoned the Premises by
attaching a copy to the main door thereof) or to Landlord at
the place from time to time established for the payment of Rent.
Any notice shall be deemed to have been given at the time of
delivery or, if mailed, 7 days after the date of mailing
thereof, except in case of disruption of postal service in which
case mail service shall not be used. Either party shall have
the right to designate by notice, in the manner established in
this Section, a change of address or one additional address to
which copies of notices are to be mailed. For purpose of this
Section, the expression "Notice" shall, without limitation,
include any request, response, statement, or other communication
to be given by one party to the other.
AUTHORITY 13.02 Landlord may act in any matter provided for herein by
FOR ACTION its property manager. Tenant may (and, if required by Landlord,
shall) designate in writing one or more persons to act on its
behalf in any matter relating to this Lease and may from time
to time change, by notice to Landlord, such designation. In the
absence of any such designation, the person with whom the
Landlord's property manager customarily deals shall be deemed to
be authorized to so act on behalf of Tenant.
WITHHOLDING 13.03 A party's sole remedy if the other unreasonably
OF CONSENT withholds or delays any consent or approval required by the
provisions hereof shall be an action for specific performance,
and the other party shall not be liable for damages.
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ARTICLE 14
DEFAULT
FORCE 14.01 Notwithstanding anything to the contrary contained
MAJEURE in this Lease, if either party hereto is bona fide
delayed or hindered in or prevented from the performance of any
term, covenant or act required hereunder by reason of strikes,
labour troubles, inability to procure materials or services,
power failure, restrictive government laws or regulations,
riots, insurrection, sabotage, rebellion, war, act of God, or
other reasons whether of a like nature or not, which is not the
fault of the party delayed in performing work or doing acts
required under the terms of this Lease, nor due to that party's
failure or inability to make payment, then performance of such
term, covenant, or act, is excused for the period of the
delay, and the party so delayed shall be entitled to perform
such term, covenant or act within the appropriate time period
after the expiration of the period of such delay. The
provisions of this Article shall not operate to excuse Tenant
from the prompt payment of Rent, or any other payments required
of this Lease.
EVENTS OF 14.02 If and whenever:
DEFAULT
(a) part or all of the Rent hereby reserved is not
paid when due, and such default continues
(inclusive of and not in addition to any period
or days of grace by law or custom prescribed or
allowed) for 7 days after notice thereof; or
(b) the Term, or any goods, chattels, or equipment
of Tenant on the Premises are taken or exigible
in execution or in attachment, or if a writ of
execution is issued against any thereof; or
(c) Tenant becomes insolvent or commits an act of
bankruptcy, or becomes bankrupt, or takes the
benefit of any statute that may be in force for
bankrupt or insolvent debtors, or becomes
involved in voluntary or involuntary winding-up
proceedings, or if a receiver shall be appointed
for any business, property, affairs, or revenues
of Tenant; or
(d) Tenant makes a bulk sale of its goods, or moves
or commences, attempts, or threatens to move
its goods, chattels, inventories or equipment
out of the Premises (other than in the normal
course of its business), or ceases to conduct
business from the Premises; or
(e) Tenant shall or shall purport or attempt to
assign this Lease or sublet all or part of the
Premises in contravention of Article 9, or
without the prior consent of Landlord, the
Premises shall be used or occupied by any
persons other than Tenant or its permitted
assigns or subtenants, or for any use other
than that for which they are leased, or if the
Premises shall be vacated or abandoned, or
remain unoccupied for 15 days or more while
capable of being occupied; or
(f) Tenant fails to observe, perform and keep each
and every of the covenants, terms and
conditions herein contained or otherwise to be
observed, performed and kept by Tenant (other
than payment of Rent) and persists in such
failure after 10 days' notice by Landlord
requiring that Tenant remedy, correct, desist or
comply (or if any such breach would reasonably
require more than 10 days to rectify, unless
Tenant commences rectification within the 10
days' notice period and thereafter promptly and
effectively and continuously proceeds with the
rectification of the breach);
then, and in any of such cases, at the option of Landlord, the
full amount of the current month's and the next ensuing three
months' installments of Annual Rent shall immediately become due
and payable and Landlord may immediately distrain for the same,
together with any arrears then unpaid, and Landlord may, without
notice or any form of legal process, forthwith re-enter upon and
take possession of the Premises or any part thereof in the name
of the whole and remove and sell Tenant's goods, chattels, and
equipment therefrom, any rule of law or equity to the contrary
notwithstanding, and Landlord may seize and sell such goods,
chattels and equipment of Tenant as are in the Premises or have
been removed therefrom and may apply the proceeds thereof to all
Rent to which Landlord is then entitled under this Lease. Any
such sale may be effected in the discretion of the Landlord by
public auction or otherwise, and either in bulk or by individual
item, or partly by one means and partly by another, all as
Landlord in its entire discretion may decide. If any of the
Tenant's Property is disposed of as provided in this Article 10
days' prior notice to Tenant of disposition shall be deemed to
be commercially reasonable.
INTEREST AND 14.03 Tenant shall pay to Landlord interest calculated and
COSTS payable at a rate equal to the lesser of the prime commercial
lending rate of the chartered bank with which Landlord conducts
its banking for the Project from time to time plus five per cent
per annum on a per diem basis, or the maximum rate permitted by
applicable law, upon all Rent required to be paid hereunder from
the due date for payment thereof until the same, including this
interest, is fully paid and satisfied. Tenant shall indemnify
Landlord against and shall pay on demand all Outlays incurred in
enforcing payment thereof, and in obtaining possession of the
Premises after default of Tenant or upon expiration or earlier
termination of the Term, or in enforcing any covenant, term or
condition herein contained.
LANDLORD'S 14.04 All covenants, terms and conditions to be performed by
RIGHT TO Tenant under any of the provisions of this Lease shall be
PERFORM performed by Tenant, at Tenant's sole cost and expense, and
COVENANTS without any abatement of Rent. If Tenant shall fail to perform
any act on its part to be performed hereunder, and such failure
shall continue for 10 days after notice thereof from Landlord
(or immediately in the case of an emergency of which Tenant has
knowledge). Landlord may (but shall not be obligated so
<PAGE> 19
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to do) perform such act without waiving or releasing Tenant
from any of its obligations relative thereto. Tenant shall pay
Landlord on demand for all Outlays, together with interest
thereon at the rate set out in this Article from the date each
such payment was made or each such cost was incurred by
Landlord, until paid in full.
WAIVER OF 14.05 Notwithstanding anything contained in any statute now
EXEMPTION AND or hereafter in force limiting or abrogating the right of
REDEMPTION distress, none of Tenant's goods, chattels or equipment on the
Premises at any time during the continuance of the Term shall
be exempt from levy by distress for Rent in arrears, and upon
any claim being made for such exemption by Tenant or in a
distress made by Landlord, this Article may be pleaded as an
estoppel against Tenant in any action brought to test the right
to the levying upon any such goods, chattels or equipment as
are named as exempted in any such statute. Tenant hereby
waiving all and every benefit that could or might have accrued
to Tenant under and by virtue of any such statute but for this
Lease. Landlord may seize Tenant's goods, chattels or equipment
at any place to which Tenant or any other person may have
removed them from the Premises in the same manner as if such
goods, chattels or equipment had remained in the Premises.
Tenant hereby expressly waives any and all rights of redemption
being granted by or under any present or future laws in the
event of Tenant being evicted or dipossessed for any cause, or
in the event of Landlord obtaining possession of the Premises by
reason of the violation by Tenant of any of the covenants, terms
or conditions of this Lease or otherwise.
TERMINATION 14.06 If and whenever Landlord is entitled to or does
re-enter, Landlord may terminate this Lease by giving notice
thereof, and in such event Tenant shall forthwith vacate and
surrender the Premises.
PAYMENTS 14.07 If the Landlord shall re-enter or if this Lease shall
be terminated as a result of a breach of this Lease by the
Tenant. Tenant shall pay to Landlord on demand:
(a) Rent up to the time of re-entry or termination,
whichever shall be the later, plus accelerated
Annual Rent as in Section 14.02 provided; and
(b) as damages for the loss of income of Landlord
expected to be derived from the Premises;
(i) the amounts (if any) which the Rent
which would have been payable under this
Lease exceeds the payments (if any)
received by Landlord from other tenants
in the Premises, payable on the first
day of each month during the period
which would have constituted the
unexpired portion of the Term had it
not been terminated; or
(ii) if elected by Landlord by notice to
Tenant at or after re-entry or
termination, a lump sum amount equal to
the Rent which would have been payable
under this Lease from the date of such
election during the period which would
have constituted the unexpired portion
of the Term had it not been terminated,
reduced by the rental value of the
Premises for the same period,
established by reference to the terms
and conditions upon which Landlord
re-lets them if such re-letting is
accomplished within a reasonable period
after termination, and otherwise
established by reference to all market
and other relevant circumstances, such
Rent and rental value being reduced to
present worth at an assumed interest of
10% per annum on the basis of
Landlord's estimates and assumptions of
fact which shall govern unless shown to
be erroneous.
REMEDIES 14.08 No reference to nor exercise of any specific right or
CUMULATIVE remedy by Landlord shall preclude Landlord from exercising or
invoking any remedy without limitation including any rights to
require specific performance, to obtain an injunction, and to
recover damages, whether allowed at law or in equity or
expressly provided for herein. No such remedy shall be
exclusive or dependent upon any other remedy, but Landlord may
from time to time exercise any one or more of remedies
independently or in combination.
ARTICLE 15
SURRENDER AND TERMINATION
SURRENDER OF 15.01 Upon the expiration or earlier termination of the
POSSESSION Lease, Tenant shall immediately quit and surrender possession
of the Premises in substantially the condition in which Tenant
is required to maintain the Premises excepting only reasonable
wear and tear, and damage covered by Landlord's insurance. Upon
such surrender, all right, title and interest of Tenant in the
Premises shall cease.
TENANT'S 15.02 Subject to Tenant's rights under Section 4.06, after
PROPERTY, the expiration or earlier termination of the Lease, all of
PERSONAL Tenant's Property, personal property and improvements remaining
PROPERTY AND in the Premises shall be deemed conclusively to have been
IMPROVEMENTS abandoned by Tenant and may be appropriated, sold, destroyed or
otherwise disposed of by Landlord without notice or obligation
to compensate Tenant or to account therefor, and Tenant shall
pay Landlord for all Outlays within 10 days of receipt of an
invoice therefor. Landlord may at its option, require Tenant to
remove all or part of the Leasehold
<PAGE> 20
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Improvements, made or installed in the Premises, by Tenant.
MERGER 15.03 The voluntary or other surrender of this Lease by
Tenant or the sublease of space by Tenant to Landlord or the
cancellation of this Lease by mutual agreement of Tenant and
Landlord shall not operate as a merger, but shall, at Landlord's
option, terminate all or any subleases and subtenancies or
operate as an assignment to Landlord of all or any subleases or
subtenancies. Landlord's options hereunder shall be exercised
by notice to Tenant and all known subtenants in the Premises or
any part thereof.
PAYMENTS AFTER 15.04 No payments of money by Tenant to Landlord after the
EXPIRATION OR expiration or earlier termination of the Lease or after the
TERMINATION giving of any notice (other than a demand for payment of
money) by Landlord to Tenant, shall reinstate, continue or
extend the Term or make ineffective any notice given to Tenant
prior to the payment of such money. After the service of notice
or the commencement of a suit, or after final judgement granting
Landlord possession of the Premises, Landlord may receive and
collect any sums of Rent due, and the payment thereof shall not
make ineffective any notice, or in any manner affect any pending
suit or any judgement theretofore obtained.
HOLDING OVER 15.05 (a) If Tenant remains in possession of the Premises
after the expiration or earlier termination of the
Lease, a tenancy from year-to-year shall not be
created, and Tenant shall be deemed to be
occupying the Premises on a month-to-month tenancy
only, at a monthly rental equal to the Rent, which
is payable or accrues hereunder on an installment
or monthly or periodic basis, but nothing
contained in this Article shall be construed to
limit or impair any of Landlord's rights of
re-entry or eviction or constitute a waiver
thereof.
(b) Any such month-to-month tenancy may be terminated
by Landlord or Tenant on the last day of any
calendar month by delivery of 30 days' advance
notice of termination to the other.
(c) Any such month-to-month tenancy shall be subject
to all other terms and conditions of this Lease
except any right of extension or renewal; except
any right of Tenant to require, after the
expiration or earlier termination of the Lease,
any reconciliation, adjustment or repayment of
amounts paid or payable on an estimated or
contingent basis, which amounts, or any thereof,
may, at the option of Landlord, be deemed final
payments or accruals in respect of the month for
which they are paid or due; and except that
Landlord, at its option, may resort to Section
2.01(b) as if the date of expiration or earlier
termination and the first day of every month
thereafter was a date set for review.
ARTICLE 16
AMENDMENT AND WAIVER
AMENDMENT OR 16.01 No amendment, modification, or supplement to this
MODIFICATION Lease shall be valid or binding unless set out in writing and
executed by the parties hereto in the same manner as the
execution of this Lease.
NO IMPLIED 16.02 No provision of this Lease shall be deemed to have been
SURRENDER waived by a party unless such waiver is in writing signed by
OR WAIVER that party. A party's waiver of a breach of any term or
condition of this Lease shall not prevent a subsequent act or
omission which would have originally constituted a breach, from
having all the force and effect of any original breach.
Landlord's receipt of Rent with knowledge of a breach by Tenant
of any term or condition of this Lease shall not be deemed a
waiver of such breach. Landlord's failure to enforce against
Tenant or any other tenant any rule or regulation made under
Article 12 shall not be deemed a waiver of such rule and
regulation. No act or thing done by Landlord, its agents or
employees during the Term, without limitation including
inspection, repair, re-entry, or sale or leasing (or attempts
thereat) of all or any part of the Premises shall be deemed a
constructive termination of this Lease or an acceptance of a
surrender of the Premises, or an eviction of Tenant or a breach
of the covenant of quiet enjoyment and no agreement to accept a
surrender of the Premises shall be valid, unless in writing
signed by Landlord. The delivery of keys to any of Landlord's
agents or employees shall not operate as a termination of this
Lease or a surrender of the Premises. No payment by Tenant, or
receipt by Landlord, of a lesser amount than the Rent due
hereunder shall be deemed to be other than on account of the
earliest stipulated Rent, nor shall any endorsement or statement
on any cheque or any communication accompanying any cheque, or
payment of Rent, be deemed an accord and satisfaction, and
Landlord may accept such cheque or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue
any other remedy available to Landlord. The acceptance by
Landlord of Rent or any installment or proportion of Rent from
any person other than Tenant shall not be construed as a
recognition or acceptance of the right of such person to use or
occupy the Premises, not as a waiver of any of Landlord's rights
hereunder.
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ARTICLE 17
INTERPRETATION
TIME 17.01 Time is of the essence of this Lease and every part
hereof and schedule hereto.
OBLIGATIONS 17.02 Each obligation of Landlord or Tenant expressed in
AS COVENANTS this Lease, even though not expressed as a covenant, is
considered to be a covenant for all purposes.
SEVERABILITY 17.03 Should any provision of this Lease be or become
invalid, void, illegal or not enforceable, it shall be
considered separate and severable from the Lease and the
remaining provisions shall remain in force and be binding
upon the parties hereto as though such provision had not been
inserted.
GOVERNING LAW 17.04 This Lease shall be interpreted under and is governed
by the laws of the Jurisdiction in which the Land is located.
GRAMMATICAL 17.05 The necessary grammatical changes required to make
CONFORMANCE the provisions of this Lease apply to all genders and to
corporations, associations, partnerships, or individuals, and
in the plural sense where a party may comprise more than one
entity, will be assumed in all cases as though in each case
so fully expressed.
HEADINGS AND 17.06 The indices, article headings, and section headings
CAPTIONS are inserted for convenience of reference only and are not to
be considered when interpreting this Lease.
EXTENDED 17.07 The words "hereof", "herein" and similar expressions
MEANINGS used in any Article, Section or paragraph of this Lease
relates to the whole of this Lease and not to that Article,
Section or paragraph only, unless otherwise expressly
provided.
ARTICLE 18
CONTRACTUAL
ENTIRE 18.01 This Lease contains the entire agreement between
AGREEMENT Landlord and Tenant concerning the Premises and the subject
matter of this Lease, and Tenant acknowledges that it has not
relied upon any representations, warranties, covenants,
agreements, conditions or understanding except such as are
set out in this Lease.
RELATIONSHIP 18.02 Nothing contained in this Lease shall create any
OF PARTIES relationship between the parties hereto other than that of
lessor and lessee, and it is acknowledged and agreed that
Landlord does not in any way or for any purpose become a
partner of Tenant in the conduct of its business, or a joint
venturer, or a member of a joint or common enterprise with
Tenant.
JOINT AND 18.03 If the Tenant hereunder comprises more than one person
SEVERAL LIABILITY or corporation then all representations, warranties,
conditions, covenants and undertaking on the part of the
Tenant hereunder shall be joint and several representations,
warranties, conditions, covenants, agreements and
undertakings of each and all such persons and corporations.
SUCCESSORS 18.04 Except as otherwise provided, the covenants, terms
BOUND and conditions contained in this Lease shall apply to the
benefit of and bind the heirs, executors, administrators,
successors, and assigns of the parties hereto.
REGISTRATION 18.05 Neither Tenant nor anyone on Tenant's behalf or
claiming under Tenant shall register this Lease or any
assignment or sublease of this Lease or any document
evidencing any interest of Tenant in the Lease or the
Premises, against the Land or any part thereof. If any such
party intends to register a document for the purpose only of
giving notice of this Lease or of any assignment or sublease
of this Lease, then such party shall be permitted to register
only a caveat in the appropriate land titles office. The
form of the caveat shall be prepared by Tenant and shall only
describe the parties, the Premises, the Commencement Date,
the expiration date of the Term, and such other matters
necessary to give proper notice of Tenant's interest and
shall be submitted to Landlord for its review prior to
registration. Forthwith following termination of this Lease
any such caveat shall be removed. All costs and expenses
necessary to prepare, approve, register or file the caveat
and the ultimate removal thereof shall be paid by Tenant.
DIVISION OF 18.06 (a) Landlord shall be entitled to sever the Land
PROJECT into separate parcels, or to consolidate the Land
with other parcels, and after completion of such
severance or consolidation the definitions of
"Land" and "Project" shall be read to correspond
to such change. The separate parcels of the Land
on severance may be owned by or may be treated as
if they were owned by separate entities other
than Landlord, Landlord may in its discretion
create and grant rights and easements among
separate parcels or Project Components and may
register same as encumbrances.
(b) Tenant acknowledges and agrees that if the Land
is severed into two or more separate parcels or
consolidated into fewer parcels, Tenant will
register any caveat indicating its interest in
this Lease and the Premises against only the
parcel(s) of the Land which is directly affected
by Tenant's interest in this Lease and the
Premises as directed by Landlord, and if the Land
is severed subsequent to the registration of such
caveat, Tenant shall, at Landlord's request,
cause to be registered a partial discharge of
such caveat against the
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parcels of Land not so directly affected by Tenant's interest
in this Lease and the Premises. If Tenant fails to cause such
partial discharge to be registered within 15 days of a written
request from Landlord, Landlord may take such steps as it
considers necessary to cause such caveat to be partially
discharged, and Tenant shall pay Landlord for all Outlays within
10 days of receipt of an invoice therefor.
(c) (i) Landlord may from time to time, if in the opinion of
Landlord more efficient or economical operation of the
Project or more equitable distribution of Operating
Costs will result, establish Project Components (of
which the Building shall be one) and divide, apportion,
and allocate Operating Costs among such Project
Components.
(ii) In any such division, apportionment and allocation of
Operating Costs, Landlord shall charge any item which
relates exclusively to one of the Project Components
directly to that Project Component only, and, in
respect to items which do not exclusively relate to any
single Project Component, Landlord shall divide,
apportion and allocate same to all Project Components
affected thereby, on an equitable basis having regard,
without limitation, to the various uses and values of
the subject Project Components, to prudent practices of
property management, to the provisions of this Lease,
and to generally accepted accounting and engineering
principles. The aggregate so directly charged or
divided, apportioned and allocated to the Building is
herein called the "Operating Costs for the Building".
(iii) If such treatment would result in a more equitable and
compatible recognition of the cost of their respective
usage, Landlord may similarly, mutatis mutandis, charge,
divide, apportion and allocate Operating Costs, or
Operating Costs for the Building, among office, retail
and other differing elements of the Building.
Tenant hereby accepts this Lease of the Premises, to be held by it as
Tenant subject to the covenants, conditions, and restrictions set forth herein
and implied. Tenant's taking of possession of all or any portion of the
Premises shall be conclusive evidence as against Tenant that the Premises or
such portion thereof of which possession is taken are in satisfactory condition
on the date of taking possession, subject only to latent defects and to
deficiencies (if any) listed in writing in a notice delivered by Tenant to
Landlord not more than 30 days after the later of the date of taking possession
or the Commencement Date.
Tenant acknowledges that Oxford Development Group Inc. has executed this
Lease for and on behalf of, in the name of and which the authority of Landlord
and that the covenants and agreements of Landlord are obligations of the
Landlord and its successors and assigns only and are not obligations personal
to or enforceable against Oxford Development Group Inc. in its own right.
IN WITNESS WHEREOF, LANDLORD AND TENANT HAVE EXECUTED AND DELIVERED
THIS LEASE BY AUTHORIZED SIGNATURES, AND BY AFFIXING CORPORATE SEALS WHEN
APPLICABLE, EFFECTIVE THE DATE INDICATED ON PAGE 1 OF THIS LEASE AGREEMENT.
LANDLORD
OXFORD DEVELOPMENT GROUP INC.
on behalf of
OXFORD DEVELOPMENT GROUP INC. AND TENANT
PENRICH PROPERTIES, LTD. JDA SOFTWARE SERVICES INC.
PER /s/ STEVEN A. LELIEVER PER /s/ D. MARLIN
------------------------------ ------------------------------
NAME & TITLE Steven A. Leliever NAME & TITLE D. Marlin
General Manager President
------------------------------ ------------------------------
PER /s/ JAMIE A. McVICAR PER
------------------------------ ------------------------------
NAME & TITLE Jamie A. McVicar NAME & TITLE
Legal Counsel &
Assistant Secretary
------------------------------ ------------------------------
WITNESS
------------------------------ ------------------------------
<PAGE> 23
SCHEDULE 1
[MAP]
<PAGE> 24
SCHEDULE 2
PROJECT SUPPLEMENT
PART ONE - DEFINITIONS
1. In this Lease, unless the context or content otherwise requires:
Annual Rent means the amount so identified on Page 1 of this
Lease.
Architect means such firm of independent professional
architects or engineers engaged by Landlord from
time to time in regard to the Project, including
any consultant appointed by the Landlord or
Architect.
Article means an Article of this Lease.
Building means that building so identified on Page 1 of
this Lease, being the Project Component in which
the Premises are situated.
Clause means a numbered subdivision of a Part of this
Schedule.
Commencement Date means the date so identified on Page 1 of this
Lease.
Common Areas means at any time those portions of the Project
which are not leased or designated for lease by
Landlord to tenants but are provided (and which
may be changed from time to time) to be used in
common by Landlord, Tenant, and other tenants of
the Project (or by the sublessees, agents,
employees, customers or licensees of Landlord,
Tenant and such other tenants) whether or not
the same are open to the general public, and
shall, without limiting the generalities
aforesaid, include all improvements, fixtures,
chattels, equipment, systems, decor, signs,
facilities, utilities, or landscaping contained
therein or maintained or used in connection
therewith, and also all pedestrian and vehicular
exits and entrances, and all malls, courtyards,
passageways, hallways, stairways and public
washrooms, and any elevators and escalators, and
any pedestrian walkway system, park, bus stop,
transportation facility or other public facility
for which Landlord is subject to obligations
from time to time in its capacity as owner of
the Project.
Delivery means those portions of the Common Areas on or
Facilities below street level of the Project as are from
time to time designated by Landlord as
facilities to be used in common by Landlord,
tenants of the Project, and others, for the
purposes of loading, unloading, delivery,
dispatch and holding of merchandise, goods,
and materials entering or leaving the Project
and giving vehicular access thereto.
Fiscal Year means a twelve month period from time to time
determined by Landlord at the end of which
Landlord's financial statements for the Project
are prepared and audited.
<PAGE> 25
- 2 -
LAND means the land on which the Building is constructed, as so
identified on Page 1 of this Lease, subject to the
provisions of Section 18.06 of this Lease.
LANDLORD means that party or parties so identified on Page 1 of this
Lease.
LEASE means this Lease document (including without limitation all
of its schedules, attachments and appendices) and every
properly executed instrument which by its terms amends,
modifies, or supplements it.
LEASEHOLD has the meaning prescribed in Section 4.07(b) of the Lease.
IMPROVEMENTS
NORMAL BUSINESS means the hours from 8:00 a.m. to 8:00 p.m. Monday through
HOURS Friday, excluding days which are legal or statutory holidays
in the jurisdiction where the Project is located, or such
other reasonable hours as Landlord may stipulate from time
to time in respect of one or more or all Project Components.
OPERATING COSTS has the meaning defined, distinguished, prescribed or
identified in Part Two of this Schedule.
OPERATING COSTS has the meaning prescribed in Section 18.06 of the Lease.
FOR THE BUILDING
OTHER CHARGES means all amounts other than Annual Rent and Operating
Costs, which are payable by Tenant under this Lease, without
limitation including Outlays.
OUTLAYS means any and all costs of any nature or kind whatsoever,
incurred by Landlord as a direct or indirect result of
failure by Tenant to perform its obligations under this
Lease, or for account of Tenant pursuant to this Lease.
PARKING FACILITIES means that part of the Project containing parking facilities
with vehicular access thereto without limitation including
parking spaces, ramps, circulation space, vehicular
entrances and exits, the structural elements thereof and
services, facilities and systems contained in or servicing
the Parking Facilities.
PREMISES means the space so identified on Page 1 of this Lease
(approximately shown in outline on Schedule 1), having the
agreed area shown on Page 1, but specifically excluding any
part of the roof or exterior of the Project.
PROJECT means the Land, and all improvements and buildings (without
limitation including the Building and any other Project
Components) and all equipment and facilities erected thereon
or situate therein from time to time together with all such
other land, easements, licenses, leases or rights (if any)
contiguous, convenient, adjacent or appurtenant to the Land,
and like improvements, buildings, equipment and facilities
thereon or therein, which Landlord may from time to time
own, develop, or operate as an entity integrated with the
Building.
<PAGE> 26
- 3 -
PROJECT means the segments of the Project (of which the Building shall
COMPONENTS be one and which together comprise the whole Project) which may
be designated by Landlord from time to time.
PROPORTIONATE has the means prescribed in Clause 2 of Part Two of this
SHARE Schedule.
RENT means the aggregate of all amounts payable by Tenant to
Landlord under this Lease for and relating to, but not limited
to
(a) Annual Rent;
(b) Operating Costs;
(c) Other Charges;
(d) Percentage Rent in leases of space in the Retail
Concourse and other leases which provide therefor.
RENTABLE AREA has the meaning determinable from Clause 3 of Part Two of this
Schedule.
RETAIL means the floors or areas (if any) of the Project whether
CONCOURSE located on the ground level, or any upper or lower level as
designated from time to time by Landlord for occupation and use
as retail stores, service or financial outlets, restaurants,
cafeterias, kiosks and like commercial purposes (sometimes
called retail space) together with all improvements, equipment,
facilities, escalators, installations, systems and services and
all public areas in or adjacent to the Retail Concourse or
which serve or are for the benefit of the Retail Concourse, and
any alteration, expansion or reduction thereto or thereof.
SALES TAXES means all multistage sales taxes, sales taxes, goods and
services taxes, use taxes, consumption taxes, value-added
taxes, business transfer taxes and other taxes of a similar
nature levied, rated, charged or assessed against either the
Landlord of the Tenant by a governmental authority (whether
federal, provincial, municipal or otherwise) in respect of the
Rent, the occupation of the Premises or otherwise in respect of
this Lease.
SECTION means any numbered subdivision of an Article.
TAXES means the aggregate of all taxes, duties and imposts, without
limitation including property, school, and local improvement
taxes, rates, charges, levies, assessments and capital taxes,
payable by Landlord and imposed by any competent governmental
authority upon or in respect of the Project and all
improvements thereon or services therein or on account of its
ownership thereof, and any other amounts which are imposed in
lieu of, or in addition to any such taxes, whether of the
foregoing character or not and whether in existence at the
Commencement Date or not, together with all expenses incurred
by Landlord in contesting in good faith the imposition, amount
or payment of any of them; but excluding any income, profits,
excess profits, and business tax imposed upon the income of
Landlord and any other impost of
<PAGE> 27
-4-
a similar nature charged or levied against Landlord, except
to the extent that such is levied in lieu of taxes, rates,
charges, or assessments in respect of the Project or
improvements thereon, or the ownership or operation thereof
by Landlord.
TENANT means that party or parties so identified on Page 1 of this
Lease.
TENANT'S PROPERTY has the meaning prescribed in Section 4.06(b) of this Lease.
TERM means the period of time so identified on Page 1 of this
Lease.
USE means that permitted and restricted usage identified on Page
1 of this Lease.
2. (a) "Unit of Area" means a conventional component of expressing
or measuring the aggregate area of space, denoted either in
square metres (metric system) or square feet (imperial
system) or computed in the equivalent relationship or
conversion of one to the other, in all cases limited to two
decimal figures.
(b) The Landlord may for any purpose of this Lease, without
limitation including any measurement of Rentable Area or any
formula prescribed in this Lease, substitute, or convert one
or more of all unit(s) of the area using conversion factors
of .0929 square feet to square metres and 10.7639 square
metres to square feet.
PART TWO - OPERATING COSTS
1. For purposes of this Lease and subject to the provisions of Section 18.06:
Operating Costs means the aggregate amount, without duplication, of all
costs and charges incurred by or on behalf of Landlord
during the Fiscal Year in operating, supervising,
securing, repairing, managing, and maintaining the
Project in good repair as a first class facility, as
established in accordance with generally accepted
accounting principles and confirmed in a certificate of
Landlord, including, without limitation:
(a) all costs, charges, wages, salaries and expenses
which are attributable to the operation,
management, supervision, security, repair, and
maintenance of the Project, including, without
limitation, wages, salaries, and other amounts
paid or payable to and for all on-site
personnel; and Taxes (except where same are paid
by individual tenants pursuant to Section 5.03
and 5.05 of the Lease);
(b) the applicable amortization (properly allocable
to such fiscal year) of all costs incurred after
the date any space in the Building was first
occupied by any tenant for
(i) any capital improvement to the Project
required by any change in the laws,
rules, regulations or orders of any
governmental
<PAGE> 28
- 5 -
or quasi-governmental authority having
jurisdiction, or incurred by Landlord
principally to reduce Operating Costs, or
(ii) any replacement not charged to Operating Costs
in the year in which incurred of any equipment,
floor covering or system in the Building, or
(iii) any repairs, including without limitation
structural repairs and repairs to the exterior,
roof or equipment of the Building not charged to
operating costs in the year in which incurred.
which costs shall be amortized over the useful life of
the subject capital improvement, replacement or repair,
and the rate of interest shall be the prime rate charged
by the Landlords principal bankers plus one per cent
per annum;
(c) all other costs of repairs, maintenance and
replacements to the Project, without limitation
including painting, renovations, repair and replacement
of carpet, snow clearing, and gardening and landscaping;
(d) the total of the costs and amounts paid for all gas,
steam or other fuel used in heating and cooling the
Project, all electricity furnished to the Project
(except for electricity furnished to and paid for by
individual tenants), all hot and cold water, telephone
and other utility costs used in the operation,
supervision, repair, security and maintenance of the
Project (except where any of these is chargeable to
individual tenants by reason of their extraordinary
consumption);
(e) all costs of insuring the Project and the improvements,
equipment, and other property in the Project and such
other insurance in respect of the Project as Landlord
from time to time reasonably determines;
(f) audit fees and the cost of accounting services incurred
in the preparation of the Statements required to be
furnished by Landlord pursuant to this Lease, and in the
computation of Rent and other charges payable by tenants
of the Project;
(g) a charge for offsite management overhead equal to
4 percent of the Landlord's gross revenue from the
Project in such Fiscal Year excluding revenues under
this Section (g) or 15 percent of Operating Costs in
such Fiscal Year excluding costs under this Section (g),
whichever is greater;
but the following costs shall be specifically excluded:
(i) Outlays;
<PAGE> 29
- 6 -
(ii) Capital improvements, replacements,
additions, or alterations to the Project or
its equipment except as provided in
sub-clause (b) above;
(iii) repair and replacement resulting from
interior or deficient design, workmanship, or
materials in the initial construction of the
Project or for which Landlord is reimbursed
by insurers or pursuant to warranties;
(iv) interest on and capital retirement of debt;
(v) repair or maintenance done for the direct
account of other tenants and of unleased
space; and
(vi) tenant improvements, tenant allowances and
leasing commissions.
* see page 6(a)
2. For purposes of this Lease:
Proportionate Share (a) means a fraction, which has as its numerator the
rentable area of the Premises, and has as its
denominator the total rentable area of the Project,
calculated by Landlord in accordance with the
method of measurement described in clause 3 below.
(b) Provided that, if and whenever pursuant to Section
18.06 of the Lease, Landlord shall have established
and designated Project Components, in respect of
operating costs which pertain only to a Project
Component, the denominator aforesaid shall be the
total Rentable Area of such areas as comprise that
Project Component.
(c) If and whenever the Building shall have been
established and designated a Project Component,
"Operating Costs for the Building" shall have the
meaning indicated in Section 18.06, and sub-clause
(b) above shall govern apportionment thereof.
(d) In calculating Operating Costs for the Building for
any Fiscal Year, if and while less than 95% of the
Building is occupied by tenants, then the amount of
Operating Costs shall be deemed for purposes of
this Schedule to be increased to an amount equal to
Operating Costs which normally would be expected to
have been incurred had occupancy of the Building
been 95% during period(s) when vacancies existed,
to the intent that, after allowing for a periodic
vacancy factor of 5%, the cost of services actually
provided by Landlord to the Premises will be
recovered by Landlord from Tenant, while Landlord
will absorb the costs incurred in or attributable
to Rentable Areas which are not occupied.
<PAGE> 30
6(a)
PART TWO-OPERATING COSTS - continued
1.(g) (vii) increases in Landlord's insurance premiums in Section 6.05
resulting from unusual or extraordinary business or activities
conducted by other tenants;
(viii) an amount equal to all recoveries of Operating Costs under
insurance required to be carried by the Landlord in
Section 6.05 or by other tenants of the Premises;
(ix) uninsured costs incurred due to the willful act or the neglect
of the Landlord and persons for whom the Landlord is
responsible;
(x) an amount equal to all recoveries of Operating Costs by the
Landlord arising from other tenants' negligence, special
use, special requirements, or use of Common Areas.
Notwithstanding the foregoing, the Landlord covenants and agrees that
there will be no duplication of recovery of Operating Costs with
respect to the Project, or the Project Components, as the case may be.
<PAGE> 31
- 7 -
3. Method of Measurement If not specified herein or otherwise or by
of Rental Area agreement determined, Rentable Areas shall
be measured as below prescribed.
(a) For Office Space - Single Tenancy Floors
The Rentable Area for premises on a single tenancy floor in the
Building (if any), shall be calculated (from dimensioned Architect's
drawings) to the inside face of the glass, whenever the area of the
exterior Building walls, as measured from the interior between the
floor and finished ceiling, is at least 50% glass; or, if not, to the
inside finish of permanent exterior Building walls. It shall include
all space within exterior building walls except for stairs, elevator
shafts, flues, pipe shafts, and vertical ducts forming part of the
basic Building service areas and their enclosing walls. No deduction
shall be made for washrooms, janitor closets, air conditioning rooms,
fan closets, or electrical or telephone cupboards within and servicing
that floor, or for any mail conveyor shutes or other rooms, corridors,
stairways or areas available to the subject lessee on that floor for
its use, furnishings, or personnel, or for any columns, whether
internal, corner or perimeter columns, located wholly or partially
within that space, or for reveals, or for any enclosures around the
periphery of the Building used for the purpose of cooling, heating, or
ventilating.
(b) For Office Space - Multiple Tenancy Floors
The Rentable Area for premises on a multiple tenancy floor in the
Building (if any), shall be calculated (from dimensioned Architect's
drawings) from the inside face of the glass or permanent exterior walls
as described in subclause (a) for a single tenancy floor, to the face
of permanent interior walls, or, as the case may be, to the centre line
of demising partitions. If contained within the subject premises no
deduction shall be made for washrooms, columns, janitor closets, air
conditioning rooms, fan closets, or electrical or telephone cupboards;
or for any mail conveyor shutes or other rooms, corridors, stairways,
or areas exclusively available to the subject lessee for its use,
furnishings, or personnel, or for reveals, or for any enclosures
around the periphery of the Building used for the purpose of cooling,
heating, or ventilating. There shall be added to the area so measured
an area equal to the product of multiplying:
(i) a fraction in which the numerator is the Rentable Area of the
subject premises, so calculated, and the denominator is the
aggregate of all Rentable Areas, measured according to this
sub-clause (b), of space on that floor; by
(ii) the area obtained when such denominator is deducted from the
Rentable Area of the subject floor if measured according to
sub-clause (a).
(c) For Retail Space
The Rentable Area of retail space in the Building (if any), shall be
calculated (from dimensioned Architect's drawings) from the inside face
of permanent exterior walls, to the centre line of demising partitions,
or, as the case may be, to the face of permanent interior walls, or to
the centre line of a predetermined lease line (usually referred to as
the storefront line) in the case of retail space facing onto either an
interior public mall
<PAGE> 32
- 8 -
or corridor or onto a public street or lane. No deduction shall be
made for vestibules inside the permanent exterior Building walls or
inside the pre-determined lease line or for washrooms, columns,
janitor closets, air conditioning rooms, fan closets, or electrical or
telephone cupboards within the subject premises; or for any other
rooms, corridors, or areas exclusively available to the subject lessee
for its use, furnishings, or personnel, or for any enclosures around the
periphery of the Building used for the purpose of cooling, heating or
ventilating.
(d) Total Area of the Building
The total Rentable Area of the Building shall be calculated (from
dimensioned Architect's drawings) and shall be the aggregate area of
the Building rentable as office or retail space, excluding all storage
and parking areas. The area for offices shall be calculated as if the
Building were entirely occupied by tenants renting single tenancy
floors on each floor of the Building. The total Rentable Area of the
Building shall be adjusted from time to time to give effect to
any structural, functional, or other changes affecting the Building.
<PAGE> 33
PART THREE - SPECIAL ATTRIBUTES
(7220/7330 Fisher Street S.E.)
Certain special criteria, features and provisions related to the Project and
form part of the terms, covenants, and conditions of the Lease, namely:
1. PROJECT NAME
The Project may from time to time be known as "7220 Fisher Street S.E."
2. LAND
Land means
First . . . . . . Plan Calgary 5699 J.K.
Block Three (3)
Corner Cut
Excepting thereout all mines and minerals.
Secondly . . . . Plan Calgary 2134 G.N.
That portion of Burns Avenue (now known as
71 Avenue S.E.) which lies to the east of Fisher
Road on Plan Calgary 5699 J.K.
Excepting thereout all mines and minerals.
Thirdly . . . . . Plan Calgary 6628 H.D.
Block Six (6)
Lot Three (3) Containing 3.30 Hectares (8.14 Acres)
More or Less Excepting thereout all mines and
minerals.
<PAGE> 34
SCHEDULE 3
SUPPLEMENTARY TERMS
JDA SOFTWARE SERVICES LTD.
210,7220 FISHER STREET S.E.
CALGARY, ALBERTA
3.1 ANNUAL RENT
For the period AUGUST 01, 1994 to JULY 31, 1995 ANNUAL RENT shall be TWENTY SIX
THOUSAND THREE HUNDRED AND SIX ($26,306.00) DOLLARS per annum being TWO
THOUSAND ONE HUNDRED AND NINETY TWO AND 66/100 ($2,192.66) DOLLARS per month
such that ANNUAL RENT equates to THREE AND 50/100 ($3.50) DOLLARS per square
foot.
For the period AUGUST 01, 1995 to JULY 31, 1996 ANNUAL RENT shall be TWENTY
EIGHT THOUSAND ONE HUNDRED AND EIGHTY FIVE ($28,185.00) DOLLARS per annum being
TWO THOUSAND THREE HUNDRED AND FORTY EIGHT AND 75/100 ($2,348.75) DOLLARS per
month such that ANNUAL RENT equates to THREE AND 75/100 ($3.75) DOLLARS per
square foot.
For the period AUGUST 01, 1996 to JULY 31, 1997 ANNUAL RENT shall be THIRTY
THOUSAND AND SIXTY FOUR ($30,064.00) DOLLARS per annum being TWO THOUSAND FIVE
HUNDRED AND FIVE AND 33/100 ($2,505.33) DOLLARS per month such that ANNUAL RENT
equates to FOUR ($4.00) DOLLARS per square foot.
For the period AUGUST 01, 1997 to JULY 31, 1998 ANNUAL RENT shall be THIRTY ONE
THOUSAND NINE HUNDRED AND FORTY THREE ($31,943.00) DOLLARS per annum being TWO
THOUSAND SIX HUNDRED AND SIXTY ONE AND 91/100 ($2,661.91) DOLLARS per month
such that ANNUAL RENT equates to FOUR AND 25/100 ($4.25) DOLLARS per square
foot.
For the period AUGUST 01, 1998 to JULY 31, 1999 ANNUAL RENT shall be THIRTY
THREE THOUSAND EIGHT HUNDRED AND TWENTY TWO ($33,822.00) DOLLARS per annum
being TWO THOUSAND EIGHT HUNDRED AND EIGHTEEN AND 50/100 ($2,818.50) DOLLARS
per month such that ANNUAL RENT equates to FOUR AND 50/100 ($4.50) DOLLARS per
square foot.
3.2 ADVANCE ANNUAL RENT
The Landlord acknowledges receipt of THREE THOUSAND ONE HUNDRED AND EIGHTY THREE
AND 34/100 ($3,183.34) DOLLARS which will be applied towards the last one
month's Annual Rent and includes 7% G.S.T. (Goods and Services Tax) of TWO
HUNDRED AND EIGHT AND 26/100 ($208.26) DOLLARS.
3.3 TENANT'S WORK
Tenant shall pay the cost of the design, co-ordination and construction of all
leasehold improvements (and any special requirements beyond those existing in
the Premises) all in accordance with the provisions of the Lease.
<PAGE> 35
3.4 TENANT ALLOWANCE
Provided Tenant has executed the Lease and is not in default thereunder, and
has submitted to Landlord a statutory declaration stating that the Tenant's
Work is complete and the Tenant's designers, contractors, sub-contractors,
workmen and materialmen have been paid in full for all work performed and
materials and equipment supplied by them on the Premises, Landlord shall pay to
Tenant after August 1, 1995 an amount equal to $3.50 per square foot of the
net rentable area of the Premises.
3.5 PARKING
Landlord shall make provision for and Tenant shall commit to take Ten (10)
reserved energized stalls at the rate of $20.00/month per stall and Ten (10)
reserved stalls at no additional charge to the Tenant for the Term of the
Lease. Such reserved stalls shall be reserved only during Normal Business
Hours of the Building and shall be unreserved at all other times.
*802
<PAGE> 1
EXHIBIT 11.1
CALCULATION OF EARNINGS PER SHARE:
<TABLE>
<S> <C>
PRO FORMA:
Common Shares outstanding at December 31, 1995................................ 7,200,000
Shares to be issued upon conversion of the Series A Preferred Stock........... 2,800,000
-----------
10,000,000
===========
Pro Forma Net Income
Historical net income...................................................... $ 5,572,828
Adjust income tax provision................................................ (1,172,000)(1)
-----------
Pro forma net income....................................................... $ 4,400,828
===========
Earnings Per Share:........................................................ $ 0.44
===========
PRO FORMA:
Common Shares outstanding at December 31, 1995................................ 7,200,000
Shares to be issued upon conversion of the Series A Preferred Stock........... 2,800,000
Number of shares required to fund the redemption of the Series B Preferred
Stock ($7,500,000) and $4,881,000 of notes payable to stockholders which
arose from the Reorganization, assuming a $13.00 per share price. (Staff
Accounting Bulletin Topic 1.B.3)........................................... 952,000
-----------
10,952,000
===========
Pro Forma Net Income
Historical net income...................................................... $ 5,572,828
Adjust income tax provision................................................ (1,172,000)(1)
Interest expense on certain stockholder notes.............................. 175,000
-----------
Pro forma net income....................................................... $ 4,575,828
===========
Earnings Per Share:........................................................ $ 0.42
===========
</TABLE>
- ---------------
(1) To reflect a tax provision as if the U.S. federal income had been taxable to
JDA rather than the stockholders through March 30, 1995.
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF JDA SOFTWARE GROUP, INC.
JDA Software, Inc., an Arizona corporation
JDA Software Services, Inc., a Delaware corporation
JDA Worldwide, Inc., an Arizona corporation
JDA International Ltd., a Great Britain corporation
JDA Asia Pte Ltd., a Singapore corporation
JDA Software GmbH, a German corporation
JDA Software Canada Ltd., a Canadian corporation
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders of
JDA Software Group, Inc.
Phoenix, Arizona
We consent to the use in this Registration Statement of JDA Software Group,
Inc. on Form S-1 of our report dated January 20, 1996, appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the headings "Selected Consolidated Financial Data" and
"Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of JDA Software Group,
Inc., listed in Item 16b. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
November 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,411
<SECURITIES> 0
<RECEIVABLES> 15,924
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,370
<PP&E> 6,755
<DEPRECIATION> (2,744)
<TOTAL-ASSETS> 37,047
<CURRENT-LIABILITIES> 8,242
<BONDS> 0
0
0
<COMMON> 124
<OTHER-SE> 28,458
<TOTAL-LIABILITY-AND-EQUITY> 37,047
<SALES> 32,354
<TOTAL-REVENUES> 32,354
<CGS> 11,419
<TOTAL-COSTS> 11,419
<OTHER-EXPENSES> 12,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (277)
<INCOME-PRETAX> 8,450
<INCOME-TAX> 3,375
<INCOME-CONTINUING> 5,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,074
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
