<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-27876
JDA SOFTWARE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0787377
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11811 NORTH TATUM BLVD., SUITE 2000
PHOENIX, ARIZONA 85028
(602) 404-5500
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days.
YES /X/ NO / /
The number of shares outstanding of the Registrant's Common Stock,
$0.01 par value, was 23,456,570 as of July 31, 1998.
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JDA SOFTWARE GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Page No.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997........................................3
Condensed Consolidated Statements of Income for the Three and
Six Months Ended June 30, 1998 and June 30, 1997.............4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and June 30, 1997.............5
Notes to Interim Condensed Consolidated Financial Statements..........7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................9
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...................25
Item 5. Other Events..........................................................25
Item 6. Exhibits and Reports on Form 8-K......................................25
Signature.....................................................................26
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................... $ 85,370 $ 27,304
Accounts receivable, net .................................................... 42,065 32,444
Deferred tax asset .......................................................... 2,973 1,190
Prepaid expenses and other current assets ................................... 6,362 2,471
--------- --------
Total current assets .................................................... 136,770 63,409
PROPERTY AND EQUIPMENT, NET ...................................................... 21,307 16,071
GOODWILL AND OTHER INTANGIBLES, NET .............................................. 13,035 3,722
DEFERRED TAX ASSET ............................................................... 14,217 --
--------- --------
Total assets ............................................................ $ 185,329 $ 83,202
========= ========
CURRENT LIABILITIES:
Accounts payable ............................................................ $ 3,652 $ 3,076
Accrued expenses and other liabilities ...................................... 14,767 8,268
Income taxes payable ........................................................ 3,340 668
Deferred revenue ............................................................ 5,743 3,058
--------- --------
Total current liabilities ............................................... 27,502 15,070
DEFERRED TAX LIABILITY ........................................................... -- 222
--------- --------
Total liabilities ....................................................... 27,502 15,292
--------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value. Authorized 2,000,000 Shares; None issued or -- --
outstanding
Common stock, $.01 par value. authorized 50,000,000 Shares; Issued and
outstanding 23,439,865 and 19,726,869, respectively ..................... 234 132
Additional paid in capital .................................................. 171,936 65,966
Retained earnings (deficit) ................................................. (13,811) 2,117
Accumulated other comprehensive income (loss) ............................... (532) (305)
--------- --------
Total stockholders' equity .............................................. 157,827 67,910
--------- --------
Total liabilities and stockholders' equity ..................... $ 185,329 $ 83,202
========= ========
</TABLE>
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Software licenses ........................... $ 12,312 $ 9,557 $ 24,361 $ 17,423
Consulting, maintenance and other services .. 23,374 11,540 42,218 20,518
-------- -------- -------- --------
Total revenues .......................... 35,686 21,097 66,579 37,941
-------- -------- -------- --------
COST OF REVENUES:
Software licenses ........................... 603 233 1,108 433
Consulting, maintenance and other services .. 16,045 9,093 29,889 15,797
-------- -------- -------- --------
Total cost of revenues .................. 16,648 9,326 30,997 16,230
-------- -------- -------- --------
GROSS PROFIT ..................................... 19,038 11,771 35,582 21,711
-------- -------- -------- --------
OPERATING EXPENSES:
Product development ......................... 4,753 2,351 9,032 4,586
Sales and marketing ......................... 4,600 3,059 8,496 5,576
General and administrative .................. 3,417 2,407 6,540 4,096
Purchased in-process research and development 40,000 40,000
-------- -------- -------- --------
Total operating expenses ................ 52,770 7,817 64,068 14,258
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS .................... (33,732) 3,954 (28,486) 7,453
Other income ................................ 846 364 1,175 720
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES ................ (32,886) 4,318 (27,311) 8,173
Income tax (benefit) provision .............. (13,554) 1,728 (11,463) 3,270
-------- -------- -------- --------
NET INCOME (LOSS) ................................ $(19,332) $ 2,590 $(15,848) $ 4,903
======== ======== ======== ========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ...... $ (.87) $ .13 $ (.76) $ 0.25
======== ======== ======== ========
SHARES USED TO COMPUTE:
Basic earnings per share .................... 22,108 19,560 20,987 19,536
======== ======== ======== ========
Diluted earnings per share .................. 22,108 19,796 20,987 19,693
======== ======== ======== ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income(loss) ................................................................ $ (15,848) $ 4,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................... 2,452 1,003
Provision for doubtful accounts ............................................. 301 236
Write-off of purchased in-process research and development .................. 40,000 --
Deferred income taxes ....................................................... (16,221) (121)
Changes in assets and liabilities:
Accounts receivable ......................................................... (9,922) (6,581)
Prepaid expenses and other current assets ................................... (3,891) (584)
Accounts payable ............................................................ 576 292
Accrued and other liabilities ............................................... 979 769
Income taxes payable ........................................................ 2,672 (639)
Deferred revenue ............................................................ 2,685 32
--------- --------
Net cash provided by (used in) operating activities .................... 3,783 (690)
--------- --------
INVESTING ACTIVITIES:
Purchase of Arthur Retail Business Unit ......................................... (44,000) --
Purchase of property and equipment .............................................. (7,461) (4,726)
Purchase of LIOCS Corporation, net of cash acquired ............................. -- (1,588)
--------- --------
Net cash used in investing activities .................................. (51,461) (6,314)
--------- --------
FINANCING ACTIVITIES:
Issuance of common stock - secondary offering ................................... 99,634 --
Issuance of common stock - stock option plan .................................... 4,008 260
Issuance of common stock - employee stock purchase plan ......................... 434 739
Tax benefit - stock options and employee stock purchase plan .................... 1,917 1,285
Payments on capital lease obligations ........................................... (22) (65)
--------- --------
Net cash provided by financing activities .............................. 105,971 2,219
--------- --------
Effect of exchange rates on cash ..................................................... (227) (181)
--------- --------
Net increase (decrease) in cash and cash equivalents ................................. 58,066 (4,966)
--------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................................... $ 27,304 30,986
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................................. $ 85,370 $ 26,020
========= ========
</TABLE>
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1998 1997
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest ....................................................... $ 6 $ 17
======== ========
Income taxes ................................................... $ 311 $ 3,056
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of the Arthur Retail Business Unit:
In-process research and development ................................. $(40,000)
Purchase price in excess of net assets acquired ..................... (2,840)
Other intangibles ................................................... (6,700)
Liabilities assumed ................................................. 5,540
--------
Net cash used to purchase the Arthur Retail Business Unit $(44,000)
========
Acquisition of LIOCS Corporation:
Fair value of assets acquired, other than cash ...................... $ (622)
Purchase price in excess of net assets acquired ..................... (2,022)
Liabilities assumed ................................................. 366
Notes payable ....................................................... 690
--------
Net cash used to purchase LIOCS Corporation ............. $ (1,588)
========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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JDA SOFTWARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PERCENTAGES, SHARES, PER SHARE
AMOUNTS, OR AS OTHERWISE STATED)
(UNAUDITED)
1. 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 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 nature. Operating results for the three and six months ended
June 30, 1998, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.
2. SECONDARY PUBLIC OFFERING
The Company completed a secondary public offering of 3,450,000 common
shares in May 1998, receiving approximately $99.6 million in net
proceeds. The Company intends to use the net proceeds of this offering
for general corporate purposes including product development, working
capital and potential acquisitions. In June 1998, the Company used $44
million of the proceeds to acquire the Arthur Retail Business Unit. See
note 5.
3. STOCK SPLIT
On June 15, 1998, the Company's Board of Directors announced a
three-for-two stock split to be effected in the form of a 50% stock
dividend. The stock dividend was paid on or about July 17, 1998 to
stockholders of record on June 26, 1998. An amount equal to the par
value of the common shares issued plus cash paid in lieu of fractional
shares was transferred from retained earnings to effect the split. All
historical share, weighted average share and per share amounts have
been restated to reflect the stock split.
4. EARNINGS (LOSS) PER SHARE
Shares used in the earnings (loss) per share calculation are as
follows. Common stock equivalents have been excluded from the earnings
(loss) per share calculation for the three and six months ended June
30, 1998 as their effect would be antidilutive:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares--Basic earnings per share 22,108 19,560 20,987 19,536
Dilutive common stock equivalents -- 236 -- 157
------ ------ ------ ------
Shares--Diluted earnings per share 22,108 19,796 20,987 19,693
====== ====== ====== ======
</TABLE>
5. ACQUISITION OF THE ARTHUR RETAIL BUSINESS UNIT
On June 4, 1998, the Company acquired the Arthur Retail Business Unit
("Arthur Retail") from Comshare, Incorporated for $44 million in cash.
Arthur Retail is a leading provider of strategic merchandise management
software applications that provide retailers with integrated tools for
merchandise planning, product, store allocation and store assortment
decision making, and enterprise-wide decision support.
The acquisition has been accounted for as a purchase and, accordingly,
the operating results of Arthur Retail have been included in the
Company's consolidated financial statements from the date of
acquisition.
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The purchase price was allocated to certain intangible assets and
in-process research and development based on their fair market values.
The excess of the purchase price over the fair market value of the
underlying assets is being amortized over a period of ten years.
Purchased in-process research and development includes the value of
products in the development stage for which technological feasibility
has not been established and which the Company believes have no
alternative future use. In accordance with applicable accounting rules,
the Company expensed $40 million of purchased in-process research and
development during the three months ended June 30, 1998 and recorded a
related tax benefit of $16.2 million.
The following unaudited pro forma consolidated results of operations
for the six months ended June 30, 1998 and 1997 assume the Arthur
Retail acquisition occurred as of January 1 of each year. The pro forma
results are not necessarily indicative of the actual results that would
have occurred had the acquisition been completed as of the beginning of
each of the periods presented, nor are they necessarily indicative of
future consolidated results.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1998 1997
---- ----
<S> <C> <C>
Total revenues............................. $74,809 $46,958
Net income................................. $ 6,767 $ 3,268
Basic and diluted earnings per share....... $ .32 $ .17
</TABLE>
6. CORPORATE OFFICE LEASE
In April 1998, the Company entered into a ten-year lease for a 100,000
square foot office facility in Phoenix. The lease is scheduled to
commence in April 1999 at an initial monthly rate of approximately
$112,000. Concurrent with the execution of the lease, the Company was
granted an option to purchase approximately five acres of real property
contiguous to the office facility. The option may be exercised at a
pre-determined price on or before August 2001 provided the Company
occupies at least 25% of the office facility.
7. COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS No. 130") effective January
1, 1998. SFAS No. 130 requires that items defined as other
comprehensive income, such as foreign currency translation adjustments,
be separately classified in the financial statements and that the
accumulated balance of other comprehensive income be reported
separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. The components of comprehensive
income for the three and six months ended June 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Comprehensive income(loss):
Net income (loss) ................. $(19,332) $ 2,590 $(15,848) $ 4,903
Other comprehensive income (loss) -
Foreign currency adjustment .. (429) 40 (227) (181)
-------- -------- -------- --------
Comprehensive income (loss) .. $(19,761) $ 2,630 $(16,075) $ 4,722
======== ======== ======== ========
</TABLE>
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8. SEGMENT DISCLOSURES
The Company adopted Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS No. 131") effective January 1, 1998. SFAS No. 131
requires public companies to report certain information about operating
segments in their financial statements, and establishes related
disclosures about products and services, geographic areas and major
customers. SFAS No. 131 does not need to be applied to interim
financial statements in the initial year of application; however,
comparative information for interim periods in the initial year of
application will be reported in the financial statements for interim
periods in fiscal 1999.
9. RECLASSIFICATIONS
Certain reclassifications were made to the December 31, 1997 balance
sheet to conform with the June 30, 1998 presentation.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report on Form 10-Q contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Discussion containing such forward-looking statements may be found in
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the captions "Overview," "Three Months Ended June 30, 1998
Compared to Three Months Ended June 30, 1997," "Six Months Ended June 30, 1998
Compared to Six Months Ended June 30, 1997," "Liquidity and Capital Resources,"
"Year 2000 Compliance," and "Certain Risks." Such forward looking statements may
concern growth and future operating results, capital expenditures, potential
acquisitions, new products and product enhancements, research and development
activities and expenditures, the hiring of additional personnel, strategic
relationships with third parties, liquidity and the Company's strategy. Such
forward looking statements are generally accompanied by words such as "plan,"
"estimate," "expect," "believe," "should," "would," "could," "anticipate" or
other words that convey uncertainty of future events or outcomes. Actual results
for future periods could differ materially from those discussed in this report
on Form 10-Q as a result of the various risks and uncertainties discussed
herein.
OVERVIEW
JDA Software Group, Inc. ("JDA" or the "Company") is a global provider
of integrated enterprise-wide software products and services that address the
mission-critical management information needs of the entire retail supply chain.
The Company offers merchandising, merchandise planning and allocation, decision
support and financial systems at the corporate level; warehouse management and
logistic systems at the distribution level; and point-of-sale, back office and
distributed processing applications at the store level. JDA also offers a wide
range of professional services through its consulting and customer support
organizations, including project management, system planning, design and
implementation, custom modifications, training and support services.
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 open platforms. As a result of these
efforts, the Company commercially released ODBMS, an open, client/server
enterprise system, in September 1996, and Win/DSS, a Windows-based in-store
system, in January 1997. The Company also released Retail IDEAS, a data
warehouse system, in January 1997 and acquired WCC, a client/server warehouse
automation and management system, in connection with the acquisition of LIOCS
Corporation ("LIOCS") in April 1997. In June 1998, the Company acquired the
Arthur Retail Business Unit ("Arthur Retail") from Comshare, Incorporated.
Arthur Retail is a leading provider of strategic merchandise management software
applications, collectively referred to as the Arthur Enterprise Suite. The suite
includes applications that complement and expand the Company's existing product
lines by providing retailers with integrated tools for merchandise planning,
product, store allocation and store assortment decision making, and
enterprise-wide decision support.
JDA has historically derived the majority of its revenues from software
licenses and consulting,
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maintenance and other services relating to MMS. Total revenues from MMS product
line represented 48% of the Company's total revenues during the six months ended
June 30, 1998 as compared with 56% and 80% in fiscal years 1997 and 1996,
respectively. Although the Company expects MMS revenues to continue to represent
a significant portion of total revenues for the foreseeable future, MMS revenues
as a percentage of total revenues may continue to decline as a result of the
increased revenues attributable to the Company's newer product lines,
particularly ODBMS, Win/DSS and the Arthur Enterprise Suite.
Software license revenues and consulting, maintenance and other
services revenues represented 37% and 63%, respectively, of JDA's total revenues
during the six months ended June 30, 1998, as compared with 46% and 54%,
respectively in fiscal year 1997, and 51% and 49%, respectively, in fiscal year
1996. 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. During the past two
years, the Company has accelerated the growth of its services organization in
anticipation of an increased mix of consulting, maintenance and other services
revenues in both domestic and international markets, and continued market
acceptance of its newer client/server product lines, which require longer
implementation cycles. The Company's current operating model calls for services
to comprise from 55% to 60% of the annual revenue base. However, the mix of
service revenues in relation to total revenues is historically higher during the
first, second and third quarters of each fiscal year because, the Company
believes, retailers prefer to purchase software in the 4th quarter in order
to implement systems during those periods that have the least amount of
disruption to their sales cycle. In addition, the Company's revenue mix was
affected in the three months ended June 30, 1998 by lower than anticipated
software license revenues attributable to the economic conditions in the
Asia/Pacific region, the Company's realignment of its international sales
management group during the quarter, slower than expected demand in Latin
America, and increased competition in Europe. The Company believes its ability
to offer a wide range of professional services provides it with a competitive
advantage as well as additional revenue streams. Consulting, maintenance and
other services revenues are generally more predictable but generate
significantly lower gross margins than software revenues. In addition,
consulting, maintenance and other services costs tend to be higher during
periods of rapid expansion, particularly with the opening of new international
offices where initial recruiting costs, training and other start-up expenses
must be incurred in advance of anticipated revenues, and as a result of the
reduced labor efficiencies associated with the introduction of products to a new
customer base.
The Company has pursued a strategy of addressing international markets
by developing localized versions of its products and establishing international
offices with direct sales and consulting capabilities. International revenues,
which include revenues from international offices and export sales, represented
46% of total revenues for the six months ended June 30, 1998, as compared with
55% and 43% of total revenues in fiscal years 1997 and 1996, respectively.
Consulting, maintenance and other services in support of international software
licenses typically have lower gross margins than those achieved domestically due
to generally lower prevailing billing rates and/or higher costs in certain of
the Company's international markets. Therefore, significant growth in the
Company's international operations may result in further declines in gross
margins on consulting, maintenance and other services.
The Asia/Pacific region continues to have unstable local economies and
significant devaluation in its currencies. The economic situation in the region
has resulted in slower payment of outstanding receivable balances and various
requests for extended or modified payment terms. This region represented 4% of
the Company's revenues for the six months ended June 30, 1998 and less than 10%
of revenues and 2% of income from operations during fiscal year 1997.
Asia/Pacific receivables, net of reserves, were approximately 9% of the
Company's total net receivables at June 30, 1998. To the extent the Asia/Pacific
region grows in importance to the Company, or that the factors affecting the
region begin to adversely affect retailers in other geographic locations, the
Company's business, operating results and financial condition could be adversely
affected.
To the extent the Company's international operations expand, the
Company expects that an increasing portion of its international software 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's operations have not been materially
adversely affected by fluctuations in foreign currency exchange rates, and the
Company has not engaged 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
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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.
The Company adopted the American Institute of Certified Public
Accountants' Statement of Position No. 97-2, Software Revenue Recognition ("SOP
97-2") effective January 1, 1998. The adoption of SOP 97-2 did not have a
significant impact on the Company's financial statements for the three or six
months ended June 30, 1998. However, there can be no assurance that subsequent
interpretations of this pronouncement by the Company's independent auditors or
the Securities and Exchange Commission will not modify the Company's revenue
recognition policies, or that such modifications will not have a material
adverse effect on the operating results reported in any particular quarter.
There can be no assurance that the Company will not be required to adopt changes
in its software licensing or services practices to conform to SOP 97-2, or that
such changes will not result in delays or cancellations of potential sales of
the Company's products.
The Company completed a secondary public offering of 3,450,000 common
shares in May 1998, receiving approximately $99.6 million in net proceeds. The
Company intends to use the net proceeds of the offering for general corporate
purposes including product development, working capital and potential
acquisitions. In June 1998, the Company used $44 million of the proceeds to
acquire Arthur Retail.
The Company announced a three-for-two stock split in June 1998 to be
effected in the form of a 50% stock dividend. The stock dividend was paid in
July 1998 and an amount equal to the par value of the common shares issued plus
cash paid in lieu of fractional shares was transferred from retained earnings to
effect the split. All historical share, weighted average share and per share
amounts have been restated to reflect the stock split.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenues
Total revenues for the three months ended June 30, 1998 were $35.7
million, an increase of 69% over the $21.1 million reported in the comparable
prior year period. Revenues consist of software licenses and consulting,
maintenance and other services, which represented 35% and 65%, respectively, of
total revenues during the three months ended June 30, 1998, and 45% and 55%,
respectively in the comparable prior year period.
Software Licenses. Software license revenues for the three months ended
June 30, 1998 were $12.3 million, an increase of 29% over the $9.6 million
reported in the comparable prior year period. Domestic software license revenues
increased 91% between the comparable periods on increased sales of the MMS,
Win/DSS and Retail IDEAS product lines and incremental sales of the Arthur
Enterprise Suite. International software license revenues decreased 23% from the
comparable prior year quarter. The decrease resulted from economic conditions in
the Asia/Pacific region, the Company's realignment of its international sales
management group during the quarter, slower than anticipated demand in Latin
America and increased competition in Europe. The strategic realignment involved
the movement of several key employees to other roles within the Company in order
to ensure a rapid assimilation of the Arthur Retail division and to position JDA
for future growth opportunities.
Consulting, Maintenance and Other Services. Consulting, maintenance and
other services revenues for the three months ended June 30, 1998 were $23.4
million, an increase of 103% over the $11.5 million reported in the comparable
prior year period. This increase resulted from the higher volume of software
license sales including client/server products that require longer
implementation cycles, increased billing rates and the incremental consulting
and maintenance revenues related to the Arthur Enterprise Suite. Although
domestic consulting, maintenance and other services revenues increased 90%
between the comparable periods, 54% of total revenue growth occurred in the
Company's international markets where the comparative increase was 116%. The
Company's current operating model calls for services to comprise from 55% to 60%
of the annual revenue base.
Cost of Revenues
Cost of software licenses was $603,000 for the three months ended June
30, 1998 and $233,000 in the
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comparable prior year period. Cost of software licenses represented 5% and 2% of
software license revenues in the respective periods. The increase between such
periods reflects the higher costs associated with the ODBMS, Retail IDEAS and
Arthur Enterprise Suite products that incorporate software technology licensed
from third party suppliers. Consulting, maintenance and other services costs for
the three months ended June 30, 1998 were $16 million, an increase of 76% over
the $9.1 million reported in the comparable prior year period. The Company has
expanded its consulting and customer support organizations as a result of and in
anticipation of continued increased sales of new software licenses and increased
demand from the existing client base for additional support and professional
services. The Company increased the number of personnel in its consulting,
maintenance and other services organization by 81% between the comparable
periods, and as of June 30, 1998 the Company had more than 600 employees
involved in these functions. The Company anticipates that the dollar amount of
consulting, maintenance and other services will continue to increase as the
Company expands its operations.
Gross Profit
Gross profit for the three months ended June 30, 1998 was $19.0
million, an increase of 62% over the $11.8 million reported in the comparable
prior year period. Gross profit as a percentage of total revenues decreased from
56% in the three months ended June 30, 1997 to 53% in the comparable current
year period. This decrease resulted from the higher mix of consulting,
maintenance and other services revenues as a percentage of total revenues
between the comparable periods. Gross margins on consulting, maintenance and
other services revenues increased between the comparable periods from 21% in
1997 to 31% in 1998, reflecting the favorable impact of higher average billing
rates and improved utilization rates.
There can be no assurance that the Company will successfully maintain
or improve consulting, maintenance and other services margins, and such margins
could be materially, adversely affected if revenues were to fall short of
expectation, or if other factors were to significantly affect the utilization
rates of the service personnel. Other factors include the continued rapid
expansion of the Company's consulting infrastructure and the resulting high
front-end recruiting, training and downtime costs, and the higher costs
associated with the continued or increased use of outside contractors in
international markets such as the United Kingdom to service the increased demand
for installation work.
Operating Expenses
Product Development. Product development expenses for the three months
ended June 30, 1998 were $4.8 million, an increase of 102% over the $2.4 million
reported in the comparable prior year period. Product development expenses as a
percentage of total revenues increased between the comparable periods from 11%
in 1997 to 13% in 1998. The Company increased its product development staff by
93% between the comparable periods and currently has nearly 200 employees in its
product development group. In addition, certain product development activities
were conducted by the Company's service organization and by outside contractors
during the three months ended June 30, 1998. Such activities were conducted
primarily by the Company's internal product development staff in the prior year
period. The Company believes that a strong commitment to product development
will be required in order to remain competitive. JDA has identified certain
functions and design features in connection with early installations of ODBMS
that are being added to the base code in order to shorten the deployment cycle
and increase customer satisfaction. The Company currently expects product
development expenses in 1998 to be between $20 million and $21 million as it
incorporates these features into the ODBMS product and adds similar improvements
to Win/DSS and other product lines. In addition, the Company intends to add an
additional 35 to 45 developers during the second half of 1998 in order to
accomplish its development plans for existing product lines and the recently
acquired Arthur Enterprise Suite. The Company believes its current process for
developing software is essentially completed concurrent with the establishment
of technological feasibility, and accordingly, no costs have been capitalized.
Sales and Marketing. Sales and marketing expenses for the three months
ended June 30, 1998 were $4.6 million, an increase of 50% over the $3.1 million
reported in the comparable prior year period. Sales and marketing expenses as a
percentage of total revenues decreased between the comparable periods from 14%
in 1997 to 13% in
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1998 due to the significant increase in total revenues. The increase in absolute
dollars resulted from the Company's efforts to increase its sales and marketing
presence in both domestic and international markets. The Company more than
doubled the number of quota carrying sales representatives between the
comparable periods. The Company anticipates that sales and marketing expenses
may continue to increase in absolute dollars as the Company expands its
operations.
General and Administrative. General and administrative expenses for the
three months ended June 30, 1998 were $3.4 million, an increase of 42% over the
$2.4 million reported in the prior year period. General and administrative
expenses as a percentage of total revenues decreased between the comparable
periods from 11% in 1997 to 10% in 1998. The increase in absolute dollars
results from the addition of administrative personnel to support the Company's
domestic and international growth. The Company anticipates that general and
administrative expenses may continue to increase in absolute dollars as the
Company expands its operations.
Purchased In-process Research and Development. The Company took a
one-time charge of $40 million during the three months ended June 30, 1998 for
in-process research and development acquired in connection with the purchase of
the Arthur Retail Business Unit, and recorded a related tax benefit of $16.2
million. Purchased in-process research and development includes the value of
products in the development stage for which technological feasibility has not
been established and which the Company believes have no alternative future use.
Earnings per share for the three months ended June 30, 1998, excluding the
one-time charge for in-process research and development and related tax benefit,
was $.20 per share.
Provision for Income Taxes
The Company's effective tax rates reflect statutory federal, state and
foreign tax rates, partially offset by reductions for research and development
expense tax credits. The Company expects its effective income tax rate to be 40%
during the second half of 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues
Total revenues for the six months ended June 30, 1998 were $66.6
million, an increase of 75% over the $37.9 million reported in the comparable
prior year period. Revenues consist of software licenses and consulting,
maintenance and other services, which represented 37% and 63%, respectively, of
total revenues during the six months ended June 30, 1998, and 46% and 54%,
respectively in the comparable prior year period.
Software Licenses. Software license revenues for the six months ended
June 30, 1998 were $24.4 million, an increase of 40% over the $17.4 million
reported in the comparable prior year period. Domestic software license revenues
increased 97% between the comparable periods on increased sales of the MMS,
Win/DSS and Retail IDEAS product lines and incremental sales of the Arthur
Enterprise Suite. International software license revenues decreased 7% between
the comparable periods. The decrease resulted from the economic conditions in
the Asia/Pacific region, the Company's realignment of its international sales
management group during the second quarter, slower than anticipated demand in
Latin America and increased competition in Europe.
Consulting, Maintenance and Other Services. Consulting, maintenance and
other services revenues for the six months ended June 30, 1998 were $42.2
million, an increase of 106% over the $20.5 million reported in the comparable
prior year period. Although domestic consulting, maintenance and other services
revenues increased 89% between the comparable periods, nearly 55% of total
revenue growth occurred in the Company's international markets where the
comparative increase was 124%.
Cost of Revenues
Cost of software licenses was $1.1 million for the six months ended
June 30, 1998 and $433,000 in the comparable prior year period. Cost of software
licenses represented 5% and 2% of software license revenues in the respective
periods, with the increase in 1998 resulting from the higher costs associated
with the Company's products that incorporate software technology from third
party suppliers. Consulting, maintenance and other services costs
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for the six months ended June 30, 1998 were $29.9 million, an increase of 89%
over the $15.8 million reported in the comparable prior year period. The Company
has expanded its consulting and customer support organizations as a result of
and in anticipation of continued increased sales of new software licenses and
increased demand from the existing customer base for additional professional
services.
Gross Profit
Gross profit for the six months ended June 30, 1998 was $35.6 million,
an increase of 64% over the $21.7 million reported in the comparable prior year
period. Gross profit as a percentage of total revenues decreased from 57% in the
six months ended June 30, 1997 to 53% in the comparable current year period.
This decrease resulted from the higher mix of consulting, maintenance and other
services revenues as a percentage of total revenues between the comparable
periods. Gross margins on consulting maintenance and other services revenues
increased between the comparable periods from 23% in 1997 to 29% in 1998,
reflecting the favorable impact of higher average billing rates and improved
utilization rates.
Operating Expenses
Product Development. Product development expenses for the six months
ended June 30, 1998 were $9.0 million, an increase of 97% over the $4.6 million
reported in the comparable prior year period. Product development expenses as a
percentage of total revenues increased between the comparable periods from 12%
in 1997 to 14% in 1998. The Company increased its incremental spending for
development efforts on ODBMS, Win/DSS, Retail IDEAS, and WCC, and to make
further enhancements to the MMS product line.
Sales and Marketing. Sales and marketing expenses for the six months
ended June 30, 1998 were $8.5 million, an increase of 52% over the $5.6 million
reported in the comparable prior year period. Sales and marketing expenses as a
percentage of total revenues decreased from 15% in 1997 to 13% in 1998. The
increase in absolute dollars between the comparable periods resulted from the
Company's efforts to increase its sales and marketing presence in both domestic
and international markets and the corollary increase in headcount.
General and Administrative. General and Administrative expenses for the
six months ended June 30, 1998 were $6.5 million, an increase of 60% over the
$4.1 million reported in the comparable prior year period. General and
Administrative expenses as a percentage of total revenues decreased from 11% in
1997 to 10% in 1998.
Purchased In-process Research and Development. The Company took a
one-time charge of $40 million during the six months ended June 30, 998 for
in-process research and development acquired in connection with the purchase of
the Arthur Retail Business Unit, and recorded a related tax benefit of $16.2
million. Earnings per share for the six months ended June 30, 1998, excluding
the one-time charge for purchased in-process research and development and
related tax benefit, was $.38 per share.
Provision for Income Taxes
The Company's effective income tax rates reflect statutory federal,
state and foreign tax rates, partially offset by reductions for research and
development expense tax credits. The Company expects its effective income tax
rate to be 40% during the second half of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through cash generated from operations and public sales of equity securities
and, to a lesser extent, borrowings under its bank line of credit. The Company
had working capital of $109.3 million at June 30, 1998 compared with $48.3
million at December 31, 1997. Cash and cash equivalents at June 30, 1998 were
$85.4 million, an increase of $58.1 million from the $27.3 million reported at
December 31, 1997.
Operating activities provided cash of $3.8 million and utilized cash of
$690,000 during the six months ended June 30, 1998 and 1997, respectively. Cash
provided by operating activities increased in 1998 due to $7.9 million in net
income, excluding the one-time charge for purchased in-process research and
development and
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<PAGE> 15
related tax benefit. The Company had net accounts receivable of $42.1 million
and $32.4 million at June 30, 1998 and December 31, 1997, respectively, which
represented 107 days and 99 days of sales outstanding ("DSOs"). DSOs have
historically been higher in the second and third quarters of each fiscal year,
as a result, the Company believes, of the seasonal cash flow requirements of its
retail customers. DSOs at June 30, 1998 were also impacted by a $2.0 million
increase in trade receivables for which the related revenue was deferred, which
represents approximately five days of the increase. DSOs may fluctuate
significantly on a quarterly basis due to a number of factors including
seasonality, shifts in customer buying patterns, the underlying mix of products
and services, and the geographic concentration of revenues.
Investing activities utilized cash of $51.5 million and $6.3 million
during the six months ended June 30, 1998 and 1997, respectively. The 1998
activity includes the $44 million purchase of the Arthur Retail Business Unit
and $7.5 million in capital expenditures to support the Company's growth. The
1997 activity includes an initial payment of $1.6 million for the purchase of
LIOCS Corporation and $4.7 million in capital expenditures.
Financing activities provided cash of $106 million and $2.2 million
during the six months ended June 30, 1998 and 1997, respectively. The 1998
activity includes net proceeds of $99.6 million from the issuance of 3,450,000
shares of the Company's stock in May 1998 in a secondary public offering. The
remaining activity in both periods consists primarily of proceeds from the
issuance of stock and related tax benefits under the Company's stock option and
employee stock purchase plans.
Changes in the currency exchange rates of the Company's foreign
operations had the effect of decreasing cash by $227,000 and $181,000 during the
six months ended June 30, 1998 and 1997, respectively. The Company did not enter
into any foreign exchange contracts or engage in similar hedging strategies
during either of these periods.
The Company may in the future pursue additional acquisitions of
businesses, products and technologies, or enter into joint venture arrangements,
that could complement or expand the Company's business. Any material acquisition
or joint venture could result in a decrease to the Company's working capital
depending on the amount, timing and nature of the consideration to be paid. In
addition, any material acquisitions of complementary businesses, products or
technologies could require the Company to obtain additional equity or debt
financing.
The Company maintains a $5 million revolving line of credit for working
capital purposes which matures on July 1, 2000. The credit facility is
collateralized by property and equipment, receivables and intangibles; accrues
interest at the bank's reference rate, which approximates prime; and requires
the Company to maintain certain current ratios and tangible net worth. There
were no amounts outstanding on the line of credit as of June 30, 1998. The
Company believes that its cash and cash equivalents, available borrowings under
the bank line of credit and funds generated from operations will provide
adequate liquidity to meet the Company's normal operating requirements for at
least the next twelve months.
YEAR 2000 COMPLIANCE
Many currently installed computer systems are not capable of
distinguishing 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/or software used by many companies in a
very wide variety of applications will experience operating difficulties unless
they are modified or upgraded to adequately process information involving,
related to or dependent upon the century change. Significant uncertainty exists
in the software and other industries concerning the scope and magnitude of
problems associated with the century change. The Company recognizes the need to
ensure its operations will not be adversely impacted by Year 2000 software
failures, and has established a project team to assess Year 2000 risks. The
project team will coordinate the identification and implementation of changes to
computer hardware and software applications that will ensure availability and
integrity of the Company's financial systems and the reliability of its
operational systems. The Company is also assessing the potential overall impact
of the impending century change on the Company's business, operating results and
financial condition.
Based on the Company's assessment to date, the Company believes its
current versions of its software products and services are "Year 2000
compliant," that is, they are capable of adequately distinguishing 21st century
dates from 20th century dates. However, the Company believes some of the
Company's customers are running
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<PAGE> 16
earlier versions of the Company's software products that are not Year 2000
compliant, and the Company has been encouraging such customers to migrate to
current product versions. Moreover, the Company's products are generally
integrated into enterprise systems involving complicated software products
developed by other vendors. The Company may in the future be subject to claims
based on Year 2000 problems in others' products, custom modifications made by
third parties to the Company's products, or issues arising from the integration
of multiple products within an overall system. Although the Company has not been
a party to any litigation or arbitration proceeding to date involving its
products or services and related to Year 2000 compliance issues, there can be no
assurance that the Company will not in the future be required to defend its
products or services in such proceedings, or to negotiate resolutions of claims
based upon Year 2000 issues. The costs of defending and resolving Year
2000-related disputes, and any liability of the Company for Year 2000-related
damages, including consequential damages, could have a material adverse effect
on the Company's business, operating results and financial condition.
The Company is currently reviewing its internal management information
and other systems in order to identify and modify those products, services or
systems that are not Year 2000 compliant. The total cost of these Year 2000
compliance activities has not been, and is not anticipated to be, material to
the Company's financial condition or its operating results. These costs and the
timing in which the Company plans to complete its Year 2000 modification and
testing procedures are based on management's best estimates. However, there can
be no assurance that the Company will timely identify and remediate all
significant Year 2000 problems, or that remedial efforts will not have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company also faces risk to the extent that suppliers of products,
services and systems purchased by the Company and others with whom the Company
transacts business on a worldwide basis do not comply with Year 2000
requirements. In the event any such third parties cannot timely provide the
Company with products, services or systems that meet the Year 2000 requirements
on a timely basis, or in the event Year 2000 issues prevent such third parties
from timely delivery of products or services required by the Company, the
Company's operating results could be materially adversely affected. Also, no
assurance can be given that Year 2000 problems within the Company's prospective
customer base of retail organizations will not result in the deferral or
cancellation of such organizations' decisions to license and implement
information systems such as those offered by the Company. To the extent Year
2000 issues cause significant delays in, or cancellation of, decisions to
purchase the Company's products or services, the Company's business, operating
results and financial condition would be materially adversely affected.
CERTAIN RISKS
Variability 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: demand for
the Company's products and services; the size and timing of individual sales;
the lengthening of the Company's sales cycle; competitive pricing pressures;
customer order deferrals in anticipation of new products; changes in the mix of
products and services sold; the timing of introductions and enhancements of
products by the Company or its competitors; market acceptance of new products;
technological changes in platforms supporting the Company's products; changes in
the Company's operating expenses; changes in the mix of domestic and
international revenues; the Company's ability to complete fixed-price consulting
contracts within budget; personnel changes; foreign currency exchange rate
fluctuations; expansion of international operations; changes in the Company's
strategies; 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.
Specifically, within each fiscal year software license revenues have been
highest in the fourth quarter. Further, the gross margin on software licenses is
significantly greater than the gross margins on consulting, maintenance and
other services. As a result, the Company's gross margin has fluctuated from
quarter to quarter, and management expects that its gross margin may continue to
fluctuate significantly based on revenue mix and seasonality.
The Company's software products typically ship when contracts are
signed. Consequently, software license backlog at the beginning of any quarter
has represented only a small portion of that quarter's expected revenues. As a
result, software license revenues in any quarter are difficult to forecast
because such revenues are substantially dependent on agreements executed and the
related shipment of software in that quarter. Moreover, the Company typically
recognizes a substantial amount of its revenues in the last weeks or days of the
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<PAGE> 17
quarter. The Company generally derives a significant portion of its quarterly
software license revenues from a small number of relatively large sales. The
timing of large individual sales is difficult to predict, and in some cases,
large individual sales have occurred in quarters subsequent to those originally
anticipated by the Company. The Company anticipates that the foregoing trends
will continue. Any significant cancellation or deferral of customer orders, or
the Company's inability to conclude license negotiations in the compressed time
frame at the end of a fiscal quarter may have a material adverse effect on its
operating results reported in any particular quarter.
Further, the Company's expense levels are based on its expectations of
future revenues. Since software license sales are typically accompanied by a
significant amount of consulting, implementation and support services, the
Company's consulting and support resources must be managed to meet anticipated
software license revenues. As a result, service personnel are generally hired
and trained in advance of anticipated software license revenues. If such
revenues were to fall short of expectations, or if other factors were to
significantly affect the utilization rates of the service personnel, the
operating results reported in any particular quarter are likely to be adversely
affected because a significant portion of the Company's expenses are not
variable in the short-term, and cannot be quickly reduced to respond to any
unexpected revenue shortfall.
The Company adopted the American Institute of Certified Public
Accountants' Statement of Position No. 97-2, Software Revenue Recognition ("SOP
97-2") effective January 1, 1998. The adoption of SOP 97-2 did not have a
significant impact on the Company's financial statements for the three or six
months ended June 30, 1998. However, there can be no assurance that subsequent
interpretations of this pronouncement by the Company's independent auditors or
the Securities and Exchange Commission will not modify the Company's revenue
recognition policies, or that such modifications will not have a material
adverse effect on the operating results reported in any particular quarter.
There can be no assurance that the Company will not be required to adopt changes
in its software licensing or services practices to conform to SOP 97-2, or that
such changes, if adopted, will not result in delays or cancellations of
potential sales of the Company's products.
Based on all of the foregoing, the Company believes that future
revenues, expenses and operating results are likely to vary significantly from
quarter to quarter. As a result, quarter to quarter comparisons of operating
results are not necessarily meaningful or indicative of future performance.
Furthermore, the Company believes it is likely that in some future quarter the
Company's operating results may be below the expectations of public market
analysts or investors. In such event, or in the event that adverse conditions
prevail, or are perceived to prevail, with respect to the Company's business or
generally, the market price of the Common Stock would likely be materially
adversely affected.
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 software products is relatively discretionary and generally involves a
significant commitment of capital, which is 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 products and services could be adversely 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. 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
operating results will not be adversely affected by 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,
operating results and financial condition.
Management of Growth. The Company's business has grown rapidly in
recent years, with revenues increasing from $30.1 million in 1995 to $47.8
million in 1996, and to $91.8 million in 1997. The Company's recent expansion
has resulted in substantial growth in the number of its employees, the scope of
its operating systems and the geographic distribution of its operations and
customers. This recent rapid growth has placed, and if continued will continued
to place, a significant strain on the Company's management and operations.
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<PAGE> 18
For example, the Company believes that recent management realignments in support
of the Company's international operations and the newly acquired Arthur Retail
may have adversely affected sales efforts in Europe and Latin America during the
three months ended June 30, 1998. The Company's ability to compete effectively
and to manage future growth, if any, will depend on its ability to continue to
implement and improve operational, financial and management information systems
on a timely basis, to expand, train, motivate and manage its work force, in
particular its direct sales force and consulting services organization, and to
deal effectively with third-party systems integrators and consultants. Several
of the Company's executive management personnel have only recently joined the
Company. In addition, Brent W. Lippman has only recently assumed the role of
Chief Executive Officer. The Company's future growth and success depends in
significant part upon the ability of the company's executive management team to
effectively manage the expansion of the Company's operations. There can be no
assurance that the Company will be able 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.
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. The Company's
ability to undertake new projects and increase revenues is substantially
dependent on the availability of consulting personnel to assist in the design,
planning and implementation of the Company's solutions. Consequently, the
Company will not be able to continue to increase its business at historical
rates without adding significant numbers of trained consulting personnel.
Moreover, in the event the Company is unable to sufficiently increase 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. Therefore, in anticipation of increasing its business the Company
continues to significantly increase its consulting capacity. However, to the
extent anticipated revenues fail to materialize following the hiring and
training of new personnel requires the Company to incur significant start-up
expenses, including procurement of office space and equipment, initial training
costs and low utilization rates of new personnel. Such start-up expenses have in
the past contributed and may in the future contribute to significant reductions
in gross margin on consulting, maintenance and other services revenues and on
overall gross margin. There can be no assurance that start-up expenses incurred
in connection with the hiring of additional technical personnel will not result
in a material adverse impact on the Company's future operating results.
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
design, planning and implementation of the Company's solutions. In particular,
the Company's ability to install, maintain and enhance its products is
substantially dependent upon its ability to locate, hire train and retain
qualified software engineers. The market for such individuals is intensely
competitive, particularly in international markets. In this regard, as part of
its strategy, the Company plans to significantly increase the number of
consulting personnel in connection with the continuing roll-out of its
client/server products and to support further development and implementation of
MMS. Given the critical roles 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 and retain other highly
qualified technical and managerial personnel in the future. The inability to
attract and retain the necessary technical and managerial personnel could have a
material adverse effect upon the Company's business, operating results and
financial condition.
Limited Deployment of and Uncertain Market for New Software Products.
The Company's newer software products, ODBMS, Win/DSS, Retail IDEAS and WCC,
which are designed for open, client/server environments, have all been
commercially released within the last two years. To date, only a limited number
of customers have licensed or implemented the Company's client/server products.
The market for these products is new and evolving, and the Company believes that
retailers may generally be more cautions than other businesses in adopting
client/server technologies. Consequently, it is difficult to assess or predict
with any assurance the growth rate, if any, and size of the market for the
Company's client/server products and there can be no assurance that this market
will continue to develop. Potential and existing customers may find it
difficult, or be unable, to successfully implement the Company's client/server
products, or may not purchase such products for a variety of reasons, including:
the customer's inability to obtain hardware, software, networking
infrastructure, or sufficient internal
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staff required to implement, operate and maintain an open, client/server
solution; the generally longer time periods and greater cost required to
implement such products as compared to IBM AS/400-based products; and limited
implementation experience with such products by the Company's service personnel
or third-party implementation providers. Furthermore, the Company must overcome
significant obstacles to successfully market its client/server solutions,
including limited experience of the Company's sales and consulting personnel in
the client/server market and limited existing reference accounts in this market.
If the market for the Company's client/server products 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.
Product Concentration. The Company has historically derived the
majority of its revenues form software licenses and consulting, maintenance and
other services related to MMS. MMS revenues are in part dependent on continued
vitality in and support by IBM of its AS/400 platform. Although the Company
expects MMS revenues to continue to represent a significant portion of total
revenues for the foreseeable future, MMS revenues as a percentage of total
revenues may continue to decline as a result of the increased revenues
attributable to the Company's newer software products, particularly ODBMS,
Win/DSS and the Arthur Enterprise Suite. The life cycle of the MMS product line
is difficult to estimate due largely 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. Any decline in
MMS revenues, as a result of competition, technological change, a decline in the
market for or support of the IBM AS/400 platform, or other factors, to the
extent not offset by the increases in revenues from other products, would have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that prospective purchasers of
the Company's IBM AS/400-based products will respond favorably to the Company's
future or enhanced software products or that the Company will continue to be
successful in selling its software products or services in the IBM AS/400
market.
International Operations. The Company's international revenues, which
include revenues from international subsidiaries and export sales, represented
46% of total revenues for the six months ended June 30, 1998 as compared with
55% and 43% of total revenues in fiscal 1997 and 1996, respectively. The Company
expects that international revenues will continue to account for a significant
percentage of the Company's revenues for the foreseeable future. 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 offices. In addition, the Company has only limited experience in
developing localized versions of its products and in marketing and distributing
its products internationally. International introductions of the Company's
products often require 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. There
can be no assurance that the countries in which the Company operates will have a
sufficient pool of qualified personnel from which the Company may hire, 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 expand its international operations in a timely manner could
materially adversely affect the Company's business, operating results and
financial condition.
The Company's international business operations are subject to risks
inherent in international 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 in
certain countries, potentially adverse tax consequences, difficulties in
staffing and managing geographically disparate operations, greater difficulty in
safeguarding intellectual property, licensing and other trade restrictions,
currency fluctuations, repatriation of earnings, the burdens of complying wit a
wide variety of foreign laws, and general economic conditions in international
markets. In addition, consulting, maintenance and other services in support of
international software licenses typically have lower gross margins than those
achieved domestically due to generally lower prevailing billing rates and/or
higher costs in certain of the Company's international markets. Accordingly, any
significant growth in the Company's international operations may result in
further declines in gross margins 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 software 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's operations have not been materially adversely
affected by
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<PAGE> 20
fluctuations in foreign currency rates, and the Company has not currently
engaged 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.
The Asia/Pacific region continues to have unstable local economies and
significant devaluation in its currencies. The economic situation in the region
has resulted in slower payments of outstanding receivable balances and various
requests for extended or modified payment terms. To date, this region has not
represented a significant portion of the Company's revenues. However, to the
extent the Asia/Pacific region grows in importance to the Company, or the
factors affecting the region begin to adversely affect retailers on other
geographic locations, the Company's business, operating results and financial
condition could be materially adversely affected.
Competition. The markets for retail information systems are highly
competitive. The Company believes the principal competitive factors in such
markets are product quality, reliability, performance and price, vendor and
product reputation, retail industry expertise, 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 internally developed
systems and with third-party developers such as Intrepid Systems, Island
Pacific, Radius PLC, Retek (a subsidiary of HNC Software, Inc.), STS Systems and
Richter Management Services. In addition, the Company believes that new market
entrants will offer fully integrated enterprise level systems targeting the
retail industry. In particular, SAP AG is actively marketing an integrated
client/server enterprise system competitive with the Company's products, and
PeopleSoft, Inc. has recently acquired Intrepid Systems and announced plans to
develop products that are expected to compete directly with ODBMS.
In the in-store systems market, which is more fragmented than the
enterprise systems market, the Company competes with major hardware original
equipment manufacturers such as ICL, NCR and IBM, as well as software companies
such as CRS Business Computers, Datavantage, STS Systems, Trimax and GERS Retail
Systems. In the distribution and warehouse management systems market, the
Company's WCC product competes with products from Catalyst International, Inc.,
EXE and McHuge Freeman. The Retail IDEAS product competes with products from
Microstrategy and Intrepid, among other vendors. The Arthur Enterprise Suite
competes with products from STS Systems and Mitech, and IBM's Makaro product
line. In the market for consulting services, the Company is pursuing a strategy
of forming informal working relationships with leading retail systems
integrators such as Andersen Consulting and Ernst & Young LLP. These
integrators, as well as independent consulting firms such as the Global Services
Division of IBM, also represent potential competition to the Company's
consulting services group.
Many of the Company's existing competitors, as well as a number of
potential new competitors, have significantly greater financial, technical,
marketing and other resources than the Company, each of which could provide them
with a significant competitive advantage over the Company. There can be no
assurance that the Company will be able to commit 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.
Risks Associates with Strategic Relationships. The Company has from
time to time established formal and informal relationships with other companies,
including IBM and Silvon, Inc., involving collaboration in areas such as product
development, marketing and distribution. The maintenance of these relationships
and the development of other such relationships is a meaningful part of the
Company's business strategy. Currently, the Company's relationship with IBM is
cooperative in that there is no written agreement defining the parties'
obligations. There can be no assurance that the Company's current informal
relationship will be beneficial to the Company, that such relationships will be
sustained, or that the Company will be able to enter into successful new
strategic relationships in the future.
Lengthy Implementation Process; Fixed-Price Service Contracts. The
Company's software products are complex and perform or directly affect
business-critical functions across many different functional and geographic
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<PAGE> 21
areas of the enterprise. Consequently, implementation of the Company's software
is a complex, lengthy process that involves a significant commitment of
resources by the Company's customers and that is subject to a number of
significant risks over which the Company has little or no control. The Company
believes that implementation of the client/server versions of its products may
contribute to the length of the implementation process. Delays in the completion
of implementations of any of its software products, whether by the Company or
its business partners, may result in customer dissatisfaction or damage to the
Company's reputation and could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company offers a combination of software products, implementation
and support services to its customers. Typically, the Company enters into
service agreements with its customers that provide for consulting and
implementation services on a "time and expenses" basis. Certain customers have
asked for, and the Company has from time to time entered into, fixed-price
service contracts. These contracts specify certain milestones to be met by the
Company regardless of actual costs incurred by the Company in fulfilling those
obligations. The Company believes that fixed-price service contracts may
increasingly be offered by its competitors to differentiate their product and
service offerings. As a result, the Company may enter into more fixed-price
contracts in the future. There can be no assurance that the Company can
successfully complete these contracts on budget, and the Company's inability to
do so could have a material adverse effect on its business, operating results
and financial condition.
Technological Change and 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 markets, 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.
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. 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.
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. 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 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
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<PAGE> 22
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 alternative resources exist for each of the material
components of technology licensed by the Company form 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
delays in the Company's ability to sell 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 operating results. 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, if 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 form 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 that software developers may become increasingly subject to
infringement claims. Any such claims against the Company, with or without merit
as well as claims initiated by the Company against third parties, could be time
consuming and expensive to defend, prosecute or resolve.
Product Defects; Product Liability; Risk of Integration Difficulties.
The Company's software product 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. In particular, it is common for complex software programs, such as the
Company's newer, client/server software products, to contain undetected errors
when first released which are discovered only after the product has been
implemented and used over time with different computer systems and in a variety
of applications and environments. 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. In
addition, the Company or its customers may from time to time experience
difficulties integrating 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 errors in the Company's software
products will not be discovered or, if discovered, that they will be
successfully corrected on a timely basis, if at all. Further, 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. The Company's future business growth
is substantially dependent on the continued development of market acceptance of
its newer, client/server products. If customers experience significant problems
with implementation of the Company's client/server products or are otherwise
dissatisfied with the functionality or performance of such products, or if such
products fail to achieve market acceptance for any reason, the Company's
business, operating results and financial condition would be materially
adversely affected.
Since the Company's products may be used by its customers to perform
mission-critical functions, design
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<PAGE> 23
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. Prior to 1998, the
Company did 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 on the
Company's business, operating results and financial condition.
Dependence on Key Personnel. The Company's performance is substantially
dependent on the continued performance of its executive officers and other key
employees, particularly the performance and services of Brent W. Lippman, the
Company's Chief Executive Officer. The Company does not have in place "key
person" life insurance policies on any of its employees. The loss of the
services of Mr. Lippman or other key executive officers or employees could have
a material adverse effect on the business, operating results and financial
condition of the Company.
Volatility of Market Price. The market price of the Common Stock has
experienced large fluctuations which may be expected to continue. Future
announcements concerning the Company or its competitors, quarterly variations in
operating results, accounts receivable balances or aging, 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, changes in earnings or other estimates, or recommendations
by analysts or other factors could cause the market price of the Common Stock to
fluctuate substantially. In addition, stock process for many technology
companies have fluctuated widely for reasons which have often been unrelated to
the operating results of such companies. 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 Common
Stock.
Acquisition Strategy. It is expected that the Company will grow
internally and through strategic acquisitions in order, among other things, to
expand the breadth and depth of its product suite and to build its professional
services organization. The Company continually evaluates potential acquisitions
of complementary businesses, products and technologies, including those which
could be material in size and scope. Acquisition opportunities considered to
date include private companies, public companies and divisions and product lines
of companies with annual revenues that range from several million dollars to
revenues comparable to those of the Company. From time to time the Company has
taken a number of actions with acquisition candidates in pursuit of various
acquisition opportunities, including: engaged in preliminary discussions;
exchanged nonpublic information; provided verbal and written expressions of
interest; reviewed technological feasibility; and made preliminary proposals
regarding potential transaction structures and prices.
Acquisitions, such as the recently completed acquisition of the Arthur
Retail Business Unit, involve a number of special risks, including diversion of
management's attention to the assimilation of the operations and personnel of
acquired businesses, and the integration or acquired businesses products and
technologies into the Company's business and product offerings. Achieving the
anticipated benefits of any acquisition will depend, in part, upon whether the
integration of the acquired business, products or technology is accomplished in
an efficient and effective manner, and there an be no assurance that this will
occur. The difficulties of such integration may be increased by the necessity of
coordinating geographically disparate organizations, the complexity of the
technologies being integrated, and the necessity of integrating personnel with
disparate business backgrounds and combining different corporate cultures. The
inability of management to successfully integrate any acquisition the Company
may pursue, and any related diversion of management's attention, could have a
material adverse effect on the business, operating results and financial
condition of the Company. Moreover, there can be no assurance that any products
acquired will gain acceptance in the Company's markets, or that the Company will
obtain the anticipated or desired benefits of such acquisitions. Any acquisition
pursued or consummated by the Company could result in potentially dilutive
issuance of equity securities, the incurrence by the Company of debt and
contingent liabilities, amortization of goodwill and other intangibles,
purchased research and development expense, other acquisition-related expenses
and the loss of key employees, any of which items could have a material adverse
effect on the Company's business, operating results and financial condition.
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<PAGE> 24
A relatively large acquisition by the Company could result in the use
of a significant portion of the Company's available cash. Although the Company
believes it can negotiate a credit facility, which may be used for acquisitions,
there can be no assurance that such financing will be available on acceptable
terms, if at all.
Although the Company anticipates that one or more acquisitions,
including material acquisitions, may become available in the near future, the
Company is unable to predict with any reasonable degree of certainty the
likelihood of any such acquisition being completed. Consequently, no assurance
can be given that any acquisition by the Company will occur, or that any
completed acquisition will not materially and adversely affect the Company's
business, operating results or financial condition.
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<PAGE> 25
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The Company held its Annual Meeting of Stockholders on June 11, 1998 to
vote on the following matters.
1. The election of Kurt R. Jaggers to serve on the Board of
Directors for a three-year term. There were 12,048,122 votes
cast in favor of Mr. Jaggers' election with 115,674 withheld.
Four additional directors, James D. Armstrong, Frederick M.
Pakis, William C. Keiper and Brent W. Lippman will continue to
serve their existing terms through 1999 (Messrs. Armstrong and
Pakis) or 2000 (Messrs. Keiper and Lippman).
2. To amend the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of common stock
from 18,000,000 to 50,000,000. There were 7,965,380 votes cast
in favor of the amendment with 4,196,646 against and 1,770
abstentions.
3. To approve an increase in the number of common shares
authorized for issuance under the 1996 Stock Option Plan from
1,250,000 to 3,000,000 provided Proposal No. 2 was approved.
There were 6,653,609 votes cast in favor of the increase with
4,720,541 against and 3,644 abstentions.
4. To approve adoption of the 1998 Employee Stock Purchase Plan
which provides for the issuance of up to 300,000 shares of
common stock to employees of the Company provided Proposal No.
2 was approved. There were 11,323,475 votes cast in favor of
the adoption with 55,204 against and 4,953 abstentions.
5. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the year ending
December 31, 1998. There were 12,160,610 votes cast in favor
of the ratification with 1,714 against and 1,472 abstentions.
ITEM 5. OTHER EVENTS:
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders of the Company must be received by the Company at 11811
North Tatum Boulevard, Suite 2000, Phoenix, Arizona 85028, no later than 5:00
p.m. Phoenix time on December 28, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: See Exhibit Index
(b) Reports on Form 8-K:
A Form 8-K dated April 22, 1998 was filed with the Securities
and Exchange Commission to announce the resignation of
Crawford L. Cole as a member of the Board of Directors. In
addition, the Company announced the appointment of William C.
Keiper as a member of the Board of Directors. Mr. Keiper
assumed Mr. Cole's seat as a Class I director, and will serve
until the Company's Annual Meeting of Stockholders in 2000 or
until his successor is duly elected and qualified.
A Form 8-K dated June 4, 1998 was filed with the Securities
and Exchange Commission to announce the acquisition of certain
assets and the assumption of certain liabilities of Comshare,
Incorporated pursuant to an Asset Purchase Agreement dated
June 4, 1998. The financial statements of the business
acquired and the required pro forma financial information will
be filed with the Commission on the Company's Report on
Form 8-K/A.
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<PAGE> 26
JDA SOFTWARE GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JDA SOFTWARE GROUP, INC.
Dated: August 14, 1998 By: /s/ Kristen L. Magnuson
-----------------------
Kristen L. Magnuson
Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE> 27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1* Asset Purchase Agreement dated as of June 4, 1998 by and among JDA
Software Group, Inc., JDA Software, Inc. and Comshare, Incorporated.
2.2* Software License Agreement dated as of June 4, 1998 by and between
Comshare, Incorporated and JDA Software, Inc.
3.1 Second Restated Certificate of Incorporation together with Certificate
of Amendment dated June 12, 1998.
3.2 First Amended and Restated Bylaws.
4.2** Stock Redemption Agreement by and among the Company, James D.
Armstrong, and Frederick M. Pakis dated March 30, 1995.
10.6 Employment Agreement between James D. Armstrong and JDA Software Group,
Inc. dated January 1, 1998.
10.7 Employment Agreement between Frederick M. Pakis and JDA Software Group,
Inc. dated January 1, 1998.
10.32 Lease Agreement between Opus West Corporation and JDA Software Group,
Inc. dated April 30, 1998, together with First Amendment dated June 30,
1998.
10.33 Real Estate Option Agreement and Escrow Instructions between Mall at
the Crossroads, Inc. and JDA Software Group, Inc. dated June 8, 1998.
10.34 Form of Amendment of Stock Option Agreement between JDA Software
Group, Inc. and Brent W. Lippman, amending certain stock options
granted to Mr. Lippman pursuant to the JDA Software Group, Inc. 1996
Stock Option Plan on (i) June 19, 1996; (ii) January 28, 1997; (iii)
July 10, 1997; and (iv) January 27, 1998.
10.35 Form of Amendment of Stock Option Agreement between JDA Software Group,
Inc. and Kristen L. Magnuson, amending certain stock options granted to
Ms. Magnuson pursuant to the JDA Software Group, Inc. 1996 Stock Option
Plan on September 11, 1997 and January 27, 1998.
10.36 Form of Amendment of Stock Option Agreement between JDA Software Group,
Inc. and Brent W. Lippman, amending that certain stock option granted
to Mr. Lippman pursuant to the JDA Software Group, Inc. 1995 Stock
Option Plan on November 15, 1995.
27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to the Company's Current Report on Form 8-K
dated June 4, 1998, as filed on June 19, 1998.
** Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-748), declared effective March 14, 1996.
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<PAGE> 1
EXHIBIT 3.1
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
JDA SOFTWARE GROUP, INC.,
a Delaware Corporation
JDA SOFTWARE GROUP, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:
ONE: The name of this Corporation is JDA SOFTWARE GROUP, INC.
TWO: The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of Delaware on the 14th day of
March, 1995.
THREE: This Second Restated Certificate of Incorporation
restates and integrates and also further amends the Certificate of Incorporation
as heretofore in effect. This Second Restated Certificate of Incorporation has
been adopted by the Board of Directors and shareholders of the Corporation in
the manner and by the vote prescribed by Sections 242 and 245 of the General
Corporation Law of the State of Delaware, and is as follows:
I
The name of this Corporation is JDA SOFTWARE GROUP, INC. (the
"Corporation").
II
The address of the registered office of this Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.
III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
IV
<PAGE> 2
This Corporation is authorized to issue two classes of stock
to be designated, respectively, the "Preferred Stock" and the "Common Stock."
The total number of shares of capital stock which this Corporation is authorized
to issue is Twenty-Four Million Fifty Thousand Four (24,050,004) shares.
Eighteen Million (18,000,000) shares shall be common stock, par value $0.01 per
share (the "Common Stock"), and Six Million Fifty Thousand Four (6,050,004)
shares shall be Preferred Stock, par value $1.00 per share (the "Preferred
Stock").
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Restated Certificate of Incorporation, to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V
The rights, preferences, privileges, restrictions and other
matters relating to the Common Stock are as follows:
(a) Dividends. If the Board of Directors shall elect
to declare dividends out of funds legally available therefor, such dividends
shall be declared in equal amounts per share on all shares of Common Stock and
Series A Preferred Stock then outstanding (on an as-converted to Common Stock
basis).
(b) Liquidation Rights. In the event of any
liquidation, dissolution or winding up of this Corporation, either voluntary or
involuntary, and after the payment of any preferential liquidating distribution,
if any, to the holders of the Preferred Stock as provided in Article VI, any
remaining assets shall be distributed ratably among the holders of this
Corporation's Common Stock and Series A Preferred Stock (on an as-converted to
Common Stock basis).
(c) Voting Rights. The holders of Common Stock voting
as a separate class, shall be entitled to elect two Directors. Such Directors
shall be the two candidates receiving the highest number of affirmative votes
(with each holder of Common Stock entitled to cast one vote for or against each
candidate with respect to each share of Common Stock held by such holder) of the
outstanding shares of Common Stock (the "Common Stock Director Designees") with
votes cast against such candidates and votes withheld having no legal effect.
The election of the two Common Stock Director Designees by the holders of the
Common Stock shall occur at the annual meeting of holders of capital stock or at
any special meeting of holders of Common Stock called by holders of a majority
of the outstanding shares of Common Stock or by the written consent of all such
holders. If a person elected by the holders of Common Stock
<PAGE> 3
should cease to be a Director for any reason, the vacancy shall only be filled
by the vote or written consent of holders of a majority of the outstanding
shares of Common Stock. The holder of each share of Common Stock shall be
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders and shall vote together with the holders of
the Preferred Stock upon any items submitted to a vote of stockholders except
for the election of Directors (which shall be governed as otherwise specifically
provided for herein) and those matters required by law to be submitted to a
class vote. Upon the closing of the first sale of the Corporation's Common Stock
pursuant to a firmly underwritten registered public offering, the foregoing
provisions of this Section (c) of Article V shall no longer be effective and
shall be null and void, and the holder of each share of Common Stock shall be
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders.
VI
Two Million Eight Hundred Thousand (2,800,000) shares of the
Preferred Stock are hereby designated "Series A Preferred Stock," and One
Million Two Hundred Fifty Thousand Four (1,250,004) shares of the Preferred
Stock are hereby designated "Series B Preferred Stock" with the rights,
preferences and privileges specified herein.
The rights, preferences, privileges, restrictions and other
matters relating to the Series A Preferred Stock and Series B Preferred Stock
are as follows:
1. Dividends. If the Board of Directors shall elect to declare
dividends out of funds legally available therefor, such dividends shall be
declared in equal amounts per share on all shares of Common Stock and Series A
Preferred Stock then outstanding (on an as-converted to Common Stock basis). No
dividends shall accrue or be payable on any shares of Series B Preferred Stock.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, the holders of the Series
B Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of this Corporation to the
holders of the Series A Preferred Stock and Common Stock by reason of their
ownership thereof, an amount per each outstanding share of Series B Preferred
Stock then held by such holders equal to the quotient obtained by dividing (i)
the amount of $7,500,000 by (ii) the sum of (A) the number of outstanding shares
of Series B Preferred Stock actually outstanding, plus (B) the number of shares
of Series B Preferred Stock issuable upon conversion of all shares of Series A
Preferred Stock then outstanding, plus (C) the number of shares of Series B
Preferred Stock that were issuable upon conversion of that number of shares of
Series A Preferred Stock, if any, that were previously redeemed by this
Corporation pursuant to Section 3 of this Article VI, plus (D) the number of
shares of Series B Preferred Stock, if any, that were previously redeemed by
this Corporation pursuant to Section 3 of this Article VI. Such per share amount
shall be adjusted for any dividends, subdivisions, combinations or
reclassifications and the like with respect to the Series A Preferred Stock or
Series B Preferred Stock. If, upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series B
<PAGE> 4
Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of this
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock. The Corporation's remaining
assets, if any, shall then be distributed to the holders of the series A
Preferred Stock, and the holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of this Corporation to the holders of the Common Stock
by reason of their ownership thereof, the amount of $5.35715 per share (the
"Original Series A Issue Price") (adjusted for any dividends, subdivisions,
combinations or reclassifications and the like with respect to such shares) for
each share of Series A Preferred Stock then held by them, plus an amount equal
to any declared but unpaid dividends, if any, on each such share of Series A
Preferred Stock as provided in Section 1 of this Article VI. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full preferential amount, then the entire
remaining assets and funds of this Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock. Any remaining assets shall then be distributed ratably among
the holders of this Corporation's Common Stock and Series A Preferred Stock (on
an as-converted to Common Stock basis).
(b) A consolidation or merger of this Corporation or a
corporation affiliated with this Corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of this
Corporation in one or more related transactions, or the effectuation by this
Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of this Corporation is disposed of (each, an
"Acquisition Transaction") may, upon the election of the holders of either a
majority of the then outstanding shares of Series A Preferred Stock or a
majority of the then outstanding shares of Series B Preferred Stock, as
applicable, but without any obligation to so do, be treated as (i) a
liquidation, dissolution or winding up for purposes of this Section 2 of this
Article VI or may, upon the election of the holders of either a majority of the
then outstanding shares of Series A Preferred Stock or a majority of the then
outstanding shares of Series B Preferred Stock, as applicable, but without any
obligation to so do, be treated as (ii) an event requiring a redemption pursuant
to the provisions of Section 3(b)(i) of this Article VI.
(c) In the event this Corporation shall propose to take any
action of the type described in subsection (a or (b) of this Section 2 of this
Article VI, this Corporation shall, within ten (10) days after the date the
Board of Directors approves such action or twenty (20) days prior to any
stockholders' meeting called to approve such action, whichever is earlier, give
each holder of shares of Preferred Stock written notice of the proposed action.
Such written notice shall describe the material terms and conditions of such
proposed action, including a description of the stock, cash and/or other
property to be received by the holders of shares of the Preferred Stock upon
consummation of the proposed action and the proposed date of delivery thereof.
If any material change in the facts set forth in the notice shall occur, this
Corporation shall promptly give written notice to each holder of shares of
Preferred Stock of such material change.
(d) This Corporation shall not consummate any proposed action
of the type described in subsection (a) or (b) of this Section 2 of this Article
VI before the expiration of
<PAGE> 5
thirty (30) days after the mailing of the initial written notice or ten (10)
days after the mailing of any subsequent written notice, whichever is later;
provided, however, that any such 30-day or 10-day period may be shortened upon
the written consent of the holders of a majority of the outstanding shares of
the Preferred Stock.
(e) If this Corporation shall propose to take any action of
the type described in subsection (a) or (b) of this Section 2 of this Article VI
which will involve the distribution of assets or properties other than cash,
this Corporation shall promptly engage, at its expense, independent competent
appraisers whose findings must be acceptable to the Preferred Stock Director
Designee (as defined herein) and the two Common Stock Director Designees to
determine the value of the assets or properties to be distributed to the holders
of shares of the Preferred Stock and the Common Stock. This Corporation shall,
upon receipt of such appraiser's valuation, give prompt written notice of the
appraiser's valuation to each holder of shares of the Preferred Stock.
3. Redemption.
(a) (i) This Corporation shall, solely at the option of the
holders of at least a majority of the then outstanding shares of such series of
Preferred Stock, upon receiving, (A) at any time prior to the fifth anniversary
of the Original Issue Date (as defined in Section 5(c) of this Article VI), a
written request for the redemption of Series A Preferred Stock signed by holders
owning a majority of the then outstanding shares of Series A Preferred Stock, or
a written request for the redemption of Series B Preferred Stock signed by the
holders owning a majority of the then outstanding shares of Series B Preferred
Stock, redeem in cash at the Series A Redemption Price or the series B
Redemption Price (each as defined below), as applicable, or both on the fifth
anniversary of the Original Issue Date a number of shares of each such series of
Preferred Stock equal to 50% of the shares of such series of Preferred Stock
that are outstanding on such date and on the sixth anniversary of the Original
Issue Date the remaining number of shares of each such series of Preferred Stock
that are outstanding on such date, or (B) at any time prior to the sixth
anniversary of the Original Issue Date, a written request for the redemption of
each or both such series of Preferred Stock signed by the holders owning a
majority of the then outstanding shares of each such series redeem in cash at
the Series A Redemption Price or the Series B Redemption Price, as applicable,
on the sixth anniversary of the Original Issue Date all outstanding shares of
each such series of Preferred Stock.
(i) This Corporation shall redeem each then
outstanding share of Series B Preferred Stock for the Series B Redemption Price
no later than two business days after the date of the closing of any public
offering of securities of this Corporation, at which time such Series B
Preferred Stock shall be cancelled and retired.
(ii) Upon the receipt of a written redemption request
referenced in Section 3(a)(i) of this Article VI, this Corporation shall give
written notice by mail, postage prepaid, to the holders of such series of
Preferred Stock then outstanding to be redeemed that all shares of such series
of Preferred Stock will be redeemed on such relevant redemption date as
specified in Section 3(a)(i) of this Article VI. First, the price per each share
of Series B Preferred Stock then held by such holders shall be equal to the
quotient obtained by dividing (i) the amount of $7,500,000 by (ii) the sum of
(A) the number of shares of Series B Preferred Stock then
<PAGE> 6
outstanding, plus (B) the number of shares of Series B Preferred Stock issuable
upon conversion of all shares of Series A Preferred Stock then outstanding, plus
(C) the number of shares of Series B Preferred Stock, if any, that were
previously redeemed by this Corporation pursuant to this Section 3 of this
Article VI, plus (D) the number of shares of Series A Preferred Stock, if any,
that were previously redeemed by this Corporation pursuant to this Section 3 of
this Article VI (such quotient shall be referred to herein as the "Series B
Redemption Price"). The Series B Redemption Price shall be adjusted for any
dividends, subdivisions, combinations or reclassifications and the like with
respect to the Series A Preferred Stock or Series B Preferred Stock. If upon the
occurrence of such event, the assets and funds legally available therefor thus
distributed among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount for redemption, then the entire assets and funds of this Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series B Preferred Stock. Second, the Corporation's remaining
assets, if any, legally available therefor shall then be distributed to the
holders of the Series A Preferred Stock, and the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of this Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$5.35715 per share (adjusted for any dividends, subdivisions, combinations or
reclassifications and the like with respect to such shares) for each share of
Series A Preferred Stock then held by them, plus an amount equal to any declared
but unpaid dividends, if any, on each such share of Series A Preferred Stock as
provided in Section 1 of this Article VI (the "Series A Redemption Price"). If
upon the occurrence of such event, the assets and funds legally available
therefor thus distributed among the holders of the Series A Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amount for redemption, then the entire assets and funds of this
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock. The notice shall further call
upon such holders to surrender to this Corporation on or before such applicable
redemption date at the place designated in the notice such holder's certificate
or certificates representing the shares to be redeemed and shall state that, if
applicable, in lieu of redemption, a holder of Series A Preferred Stock may,
prior to either such applicable redemption date, convert its Series A Preferred
Stock into Common Stock and Series B Preferred Stock in accordance with Section
5 of this Article VI. On or after such applicable redemption date, each holder
of shares of such series of Preferred Stock called for redemption shall
surrender the certificate evidencing such shares to this Corporation, except
that, in the case of the Series A Preferred Stock, such number of shares shall
be reduced by the number of shares which have been converted into Common Stock
and Series B Preferred Stock between the date of the written redemption request
and such redemption date, at the place designated in such notice and shall
thereupon be entitled to receive payment of the Series A Redemption Price or
Series B Redemption Price, as applicable.
(b) (i) Upon the written request and at the sole option of
either the holders of a majority of the then outstanding shares of Series A
Preferred Stock or the holders of a majority of the then outstanding shares of
Series B Preferred Stock received by this Corporation within twenty (20) days
after the date of this Corporation's initial written notice specified in Section
2(d) of this Article VI with respect to an Acquisition Transaction, this
Corporation shall redeem in cash all of the shares of each such series of
Preferred Stock then outstanding effective on the closing date (the "Closing
Date") of such Acquisition Transaction at the Series A Redemption Price or
Series B Redemption Price, as applicable.
<PAGE> 7
(i) Upon receipt of the written request referenced in
subsection 3(b)(i) of this Article VI, this Corporation shall give written
notice by mail, postage prepaid, to the holders of such series of Preferred
Stock that all shares of such Series A Preferred Stock will be redeemed on the
Closing Date at the Series A Redemption Price and that all shares of such Series
B Preferred stock will be redeemed on the Closing Date at the Series B
Redemption Price. The notice shall further call upon such holders to surrender
to this Corporation on or before the Closing Date at the place designated in the
notice such holder's certificate or certificates representing the shares to be
redeemed and shall state that, in lieu of redemption, a holder may, prior to the
Closing Date, convert its Series A Preferred Stock into Common Stock and Series
B Preferred Stock in accordance with Section 5 of this Article VI. On or after
the Closing Date, each holder of shares of such series of Preferred Stock called
for redemption shall surrender the certificate evidencing such shares to this
Corporation (or this Corporation's successor in interest), except that such
number of shares shall be reduced by the number of shares of Series A Preferred
Stock which have been converted into Common Stock and Series B Preferred Stock
between the date of the written request of a majority of the holders of the then
outstanding shares of such series of Preferred Stock and the Closing Date, at
the place designated in each such notice and shall thereupon be entitled to
receive payment of the Series A Redemption Price or Series B Redemption Price,
as applicable.
(c) From and after the relevant redemption date, unless there
shall have been a default in payment of the Series A Redemption Price or the
Series B Redemption Price, as applicable, all rights of the holders with respect
to such redeemed shares of Preferred Stock (except the right to receive on the
Closing Date the Series A Redemption Price or the Series B Redemption Price, as
applicable, with interest upon surrender of the stock certificates) shall cease
and such shares shall not thereafter be transferred on the books of this
Corporation or be deemed to be outstanding for any purpose whatsoever.
(d) If the funds of this Corporation legally available for
redemption of shares of such Series A Preferred Stock or the Series B Preferred
Stock, as applicable, on the relevant redemption date are insufficient to redeem
the total number of shares of such series of Preferred Stock to be redeemed on
such date, then the entire assets and funds of this Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series B Preferred Stock. The Corporation's remaining assets, if any, shall then
be distributed to the holders of the Series A Preferred Stock, and the holders
of the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of this
Corporation to the holders of the Common Stock by reason of their ownership
thereof, the Series A Redemption Price. The Corporation shall also require its
subsidiaries, and each subsidiary shall have the obligation, to provide
sufficient assets to the Corporation to fund such redemption obligation. The
shares of such series of Preferred Stock not redeemed shall remain outstanding
and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of this Corporation are legally available for
the redemption of shares of such series of Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which this Corporation
has become obligated to redeem on the relevant redemption date but which it has
not redeemed.
<PAGE> 8
(e) Although this Corporation and its subsidiaries and the
holders of each series of Preferred Stock expect this Corporation will have
sufficient funds to effect each such redemption, if this Corporation lacks
legally sufficient funds and assets at the time of request to effect the timely
redemption of the shares of each series of Preferred Stock that are subject to
redemption, then this Corporation shall pay, on each six-month anniversary
following the first applicable redemption date and each subsequent six-month
anniversary date until the overdue redemption payment is made in full, a
dividend on the aggregate overdue redemption payment for each outstanding share
of each series in an amount equal to the product of the aggregate overdue
redemption payment from time to time outstanding during the six months preceding
such six-month anniversary and the annualized rate of the greater of 10% or 3%
over the "reference rate" of the Bank of America, NT & SA, from time to time in
effect ("Prime Rate"), but in no event at a rate higher than that permitted by
applicable law.
(f) On or prior to the relevant redemption date, this
Corporation shall deposit with a bank or trust company in San Francisco,
California having a capital and surplus of at least $100,000,000, as a trust
fund, a sum equal to the aggregate Series A Redemption Price and Series B
Redemption Price for all shares of such series of Preferred Stock called for
redemption on such date and not yet redeemed, with irrevocable instructions and
authority to the bank or trust company to pay, on or after such redemption date,
the Series A Redemption Price and Series B Redemption Price to the holders upon
the surrender of their share certificates. From and after the date of such
deposit, the shares so called for redemption shall be redeemed. The deposit
shall constitute full payment of the shares to their holders, and from and after
the date of the deposit, the shares shall be deemed to be no longer outstanding,
all dividends with respect to such shares shall cease to accrue and the holders
thereof shall cease to be stockholders with respect to such shares and shall
have no rights with respect thereto except the right to receive form the bank or
trust company payment of the Series A Redemption Price and Series B Redemption
Price of the shares, without interest, upon surrender of their certificates
therefor, and the right to convert such shares as provided for herein.
4. Voting Rights.
(a) The holders of outstanding shares of Series A Preferred
Stock and outstanding shares of Series B Preferred Stock, voting together as a
separate class, shall be entitled to elect one Director. Such Director shall be
the candidate receiving the highest number of affirmative votes (with each
holder of Series A Preferred Stock entitled to cast one vote for or against each
candidate with respect to each share of Series A Preferred Stock held by sc
holder and with each holder of Series B Preferred Stock entitled to cast that
number of votes for or against each candidate with respect to each share of
Series B Preferred Stock held by each holder as set forth below) of the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock (the
"Preferred Stock Director Designee") with votes cast against such candidate and
votes withheld having no legal effect. The election of a Director by the holders
of the Series A Preferred Stock and Series B Preferred Stock shall occur at the
annual meeting of holders of capital stock or at any special meeting of holders
of Series A Preferred Stock and Series B Preferred Stock called by holders of a
majority of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock or by the written consent of all such holders. If a person
elected by the holders of Series A Preferred Stock and Series B Preferred Stock
should cease to be a Director for any reason, the vacancy shall only be filled
by the vote or written consent of
<PAGE> 9
holders of a majority of the outstanding shares of Series A Preferred Stock and
Series B Preferred Stock, voting together as a separate class as specified
above. The holder of each share of Series A Preferred Stock shall be entitled to
that number of votes equal to (i) the sum of the number of shares of Common
Stock into which such share of Series A Preferred Stock could be converted on
the record date for the vote or consent of stockholders plus (ii) the product of
the number of shares (or fraction thereof) of Series B Preferred Stock into
which such share of Series A Preferred Stock could be converted on the record
date for the vote or consent of stockholders multiplied by the number of votes
that each share of Series B Preferred Stock is entitled to at such time (as set
forth below in Section 4(b) of this Article VII), and shall vote with holders of
the Common Stock upon any matter submitted to a vote of stockholders, except for
the election of Directors (which shall be governed as otherwise specifically
provided for herein) and those matters otherwise set forth herein or required by
law to be submitted to a class vote.
(b) Each holder of Series B Preferred Stock shall be entitled
to the number of votes equal to one multiplied by the quotient obtained by
dividing the Original Series A Issue Price (as defined in Section 2(a) of
Article VI) by the Series A Conversion Price (as defined in Section 5(a) of
Article VI) that would be applicable to a share of Series A Preferred Stock that
was being converted on the record date for the vote or consent of stockholders
(as adjusted for any dividends, subdivisions, combinations, or reclassifications
with respect to such shares), and shall vote with the holders of the Series A
Preferred Stock, if any, as set forth in Section 4(a) of this Article VI upon
any matter submitted to a vote of stockholders.
5. Conversion. The holders of the Series B Preferred Stock shall have
no conversion rights. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of this Corporation or any transfer agent
for such shares, into (A) such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series A Issue Price by
the Series A Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion
(as adjusted for any dividends, splits, subdivisions, combinations,
reclassifications and the like) and (B) 0.44643 fully paid and nonassessable
shares of Series B Preferred Stock. The initial Series A Conversion Price shall
equal the Original Series A Issue Price. The Series A Conversion Price shall be
subject to adjustment from time to time as provided below.
(ii) (1) Each share of Series A Preferred Stock shall
automatically be converted into such number of shares of Common Stock at the
then effective Series A Conversion Price and such number of shares of Series B
Preferred Stock as determined in Section 5(a)(i) of this Article VI immediately
upon the closing of an underwritten public offering covering this Corporation's
Common Stock at a minimum offering price of $10.7143 per share (as adjusted for
stock splits, stock dividends, subdivisions, combinations, reclassifications and
the like) and in which this Corporation receives $15,000,000 or more in net
proceeds after deduction of expenses relating to such offering; or
<PAGE> 10
(1) upon this Corporation's receipt of the
written consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock to the conversion of all then outstanding
Series A Preferred Stock under this Section 5(a)(ii) of this Article VI.
(iii) No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred Stock. Any fractional share of
Common Stock (based on the aggregate number of shares of Series A Preferred
Stock the holder is converting at the time) shall be redeemed for the then
effective Series A Conversion Price, payable as promptly as possible, whenever
funds are legally available therefor.
(b) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock and Series B Preferred Stock, it shall surrender the certificates
therefor, duly endorsed, at the office of this Corporation or of any transfer
agent for the Series A Preferred Stock, and shall give written notice to this
Corporation at such office that it elects to convert the same. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series A Preferred Stock certificates for the number of shares of
Common Stock and Series B Preferred Stock to which it shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock and Series B Preferred Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such shares of Common Stock
and Series B Preferred Stock on such date. If the conversion is in connection
with an underwritten offering of securities pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder tendering
shares of Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock and
Series B Preferred Stock upon conversion of the Series A Preferred Stock shall
not be deemed to have converted such Series A Preferred Stock until immediately
prior to the closing of such sale of securities, and upon such conversion of the
Series A Preferred Stock, all shares of Series A Preferred Stock shall be
cancelled and retired.
(c) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Section
5(c), the following definitions shall apply: (1) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities; (2) "Original Issue Date" shall mean the
date on which this Corporation first issues shares of Series A Preferred Stock;
(3) "Convertible Securities" shall mean any evidences of indebtedness, shares or
other securities convertible or exercisable into or exchangeable for Common
Stock; (4) "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or, pursuant to Section 5(c)(iii), deemed to be issued) by this
Corporation after the Original Issue Date, other than shares of Common Stock
issues or issuable at any time (A) upon conversion of the Series A Preferred
Stock outstanding at any time, (B) to service providers of this Corporation or
any of its subsidiaries pursuant to an incentive equity ownership program
approved by the Board of Directors (including the approval of the Preferred
Stock Director-Designee) up to a
<PAGE> 11
maximum of 1,350,000 shares of Common Stock or rights or options to purchase
Common Stock (as adjusted for stock splits, stock dividends, reorganizations and
the like) and (C) shares issued in circumstances where the provisions of Section
5(c)(vii) apply.
(ii) No Adjustment of Conversion Price. No adjustment in the
Series A Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share (determined pursuant
to Section 5(c)(vi) hereof) for an Additional Share of Common Stock issued or
deemed to be issued by this Corporation is less than the Series A Conversion
Price in effect immediately prior to such issue.
(iii) Deemed Issue of Additional Shares of Common Stock;
Options and Convertible Securities. In the event this Corporation at any time or
from time to time after the Original Issue Date shall issue any Options or
Convertible Securities (other than those options and option shares set forth in
Section 5(c)(i)(4)(B) or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for an antidilution adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion, exercise or exchange of such Convertible Securities
and Options, shall be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date shall have been fixed,
as of the close of business on such record date; provided, that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the Series A Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion, exercise
or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to this Corporation, or decrease in the number of
shares of Common Stock issuable, upon the conversion, exercise or exchange
thereof, the Series A Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
insofar as it affects such Options or the rights of conversion, exercise or
exchange under such Convertible Securities;
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Series A Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or
<PAGE> 12
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by this Corporation for the issue of all
such Options, whether or not exercised, plus the consideration actually received
by this Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by this Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by this Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
this Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by this Corporation upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised;
(4) no readjustment pursuant to clause (2) or (3)
above shall have the effect of increasing the Series A Conversion Price to an
amount which exceeds the lower of (i) the Series A Conversion Price on the
original adjustment date, or (ii) the Series A Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date; and
(5) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no adjustment of
the Series A Conversion Price shall be made until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same manner
provided in clause (3) above.
(iv) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 5(c)(iii) without consideration or for a
consideration per share less than the Series A Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such Series
A Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
this Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Series A Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common Stock so
issued; provided that immediately after any Additional Shares of Common Stock
are deemed issued pursuant to Section 5(c)(iii), such Additional Shares of
Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
Section 5(c), the consideration received by this Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
<PAGE> 13
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by this Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors (including the vote of the
Preferred Stock Director-Designee); and
(C) in the event Additional Shares of Common
Stock are issued together with the other shares or securities or other assets of
this Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by this Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 5(c)(iii), relating
to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by this Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to this Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustments for Stock Dividends, Subdivisions,
Combinations or Consolidation of Common Stock. In the event of a dividend on
shares of Common Stock paid in shares of Common Stock or in the event the
outstanding shares of Common Stock shall be subdivided (by stock split or
otherwise), into a greater number of shares, the Series A Conversion Price then
in effect shall, concurrently with the record date of such stock dividend or the
effectiveness of such subdivision, be proportionately decreased. In the event
the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common , the
Series A Conversion Price then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(vii) Adjustments for Other Distributions. In the
event this Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive any
distribution payable in securities of this
<PAGE> 14
Corporation other than shares of Common Stock, then and in each such event
provisions shall be made so that the holders of Series A Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of this Corporation which
they would have received had their Series A Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 5 with respect to the rights of the holders of the Series A Preferred
Stock.
(viii) Adjustments for Reorganization,
Reclassification, Exchange and Subdivision. If the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock shall be changed into
the same or a different number of shares of any other class or classes of stock
or other securities or property whether by reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for
above), the Series A Conversion Price then in effect shall, concurrently with
the effectiveness of such reorganization or reclassification, be proportionately
adjusted such that the Series A Preferred Stock shall be convertible into, in
lieu of the number of shares of Common Stock which the holders would otherwise
have been entitled to receive, a number of shares of such other class or classes
of stock or securities or other property equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series A Preferred Stock immediately before such event; and,
in any such case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interest thereafter of the holders of the Series
A Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the Series A
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Series A Preferred Stock.
(d) No Impairment. This Corporation and each subsidiary will
not, by amendment of its Restated Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this Corporation and each subsidiary but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
(e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to this
Section 5, this Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock
<PAGE> 15
and Series B Preferred Stock and the amount, if any, of other property which at
the time would be received upon the conversion of Series A Preferred Stock.
(f) Notices of Record Date. In the event that this Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up, then, in connection with each
such event, this Corporation shall send to the holders of the Series A Preferred
Stock:
(1) at least 20 days' prior written notice
of the date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to in (ii) and (iv) above; and
(2) in the case of the matters referred to
in (iii) and (iv) above, at least 20 days' prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or
given by first class mail, postage prepaid, addressed to the holders of Series A
Preferred Stock at the address for each such holder as shown on the books of
this Corporation.
(g) Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock and Series B Preferred Stock solely for the
purpose of effecting the conversion of the shares of the Series B Preferred
Stock such number of its shares of Common Stock and Series B Preferred Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock and Series B Preferred
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock, this Corporation will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock and Series B Preferred Stock to such number of shares as
shall be sufficient for such purpose.
<PAGE> 16
(h) Notices. Any notices required by the provisions
of this Section 5 to be given to the holders of shares of Series A Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of this Corporation.
6. Protective Provisions. Neither this Corporation nor any
subsidiary will, without first obtaining the approval (by vote or written
consent) of the holders of at least a majority of the total number of shares of
Preferred Stock then outstanding:
(a) Amend this Restated Certificate of Incorporation
to alter or change the rights, preferences or privileges of, or increase the
authorized number of shares of, any series of Preferred Stock or amend this
Corporation's Bylaws or amend any subsidiary's charter documents (which shall
include the articles or certificate of incorporation or association and bylaws
and like instruments); or
(b) Authorize, create or issue shares of any class or
series of stock having any rights, preferences and privileges on a parity with
or superior to any such rights, preferences and privileges of any series of
Preferred Stock; or
(c) Reclassify or recapitalize any outstanding shares
of securities into shares having rights, preferences or privileges on a parity
with or superior to any such rights, preferences and privileges of any series of
Preferred Stock; or
(d) Agree to merge or consolidate this Corporation or
any affiliated corporation with or into any other corporation, or sell,
transfer, or lease all or substantially all of the assets or stock of this
Corporation or sell, transfer or lease all or a substantial portion of the
assets or stock of any subsidiary or liquidate, dissolve or windup this
Corporation or any subsidiary, each in one or more related transactions;
provided however that the approval of such holders of Preferred Stock pursuant
to this Section 6(d) shall not be required if (i) the proposed merger or asset
purchase is valued by a bona fide third party offeror in excess of $108 million
and (ii) the offer consists of cash and/or unrestricted equity securities of a
corporation whose common stock actively trades on the New York Stock Exchange or
the Nasdaq National Market; or
(e) Declare and pay a dividend or other distribution
or repurchase or redeem any shares of capital stock, except for the original
purchase price thereof upon an employee termination pursuant to a pre-existing
agreement; provided however that the approval of such holders of Preferred Stock
pursuant to this Section 6(e) shall not be required if (i) the declaration and
payment of dividends, distributions, repurchases or redemptions is effected
after December 31, 1996 and (ii) any such payment does not cause the
Corporation's then existing consolidated net cash balances (exclusive of cash
generated through any borrowings) to be less than an amount equal to the
Corporation's total expenses (as such term is defined in the Corporation's
internally-prepared financial statements) for the six-month period immediately
preceding the date of any such payment. Notwithstanding the foregoing in this
Section 6(e), without the consent of such holders of Preferred Stock, neither
the Corporation nor any subsidiary shall declare and pay any dividend or other
distribution or repurchase or redeem shares of capital stock if any such
corporation shall be in default or shall appear to be in default
<PAGE> 17
under any instrument governing then existing indebtedness or the redemption
obligation set forth in this Restated Certificate of Incorporation.
7. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock actually and legally acquired by this Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue, provided this Corporation complies
with the terms of this Restated Certificate of Incorporation.
VII
The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors. In addition to
the powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the directors are
hereby empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation.
(b) The directors of the Corporation need not be
elected by written ballot unless the Bylaws so provide.
(c) On and after the closing date of the first sale
of the Corporation's Common Stock pursuant to a firmly underwritten registered
public offering (the "IPO"), any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders. Prior to the IPO, unless otherwise
provided by law, any action which may otherwise be taken at any meeting of the
stockholders may be taken without a meeting and without prior notice, if a
written consent describing such actions is signed by the holders of outstanding
shares having not less than the minimum number of votes which would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
(d) Upon the closing of the IPO, special meetings of
stockholders of the Corporation may be called only (1) by the Board of Directors
pursuant to a resolution adopted by at least one-third of the total number of
directors then in office or (2) by the Corporation's President or Chief
Executive Officer.
VIII
(1) The number of directors shall be set at four (4)
and, thereafter, shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to
<PAGE> 18
the Board for adoption). Upon the closing of the IPO, the directors shall be
divided into three classes with the term of office of the first class (Class I)
to expire at the first annual meeting of the stockholders following the IPO; the
term of office of the second class (Class II) to expire at the second annual
meeting of stockholders held following the IPO; the term of office of the third
class (Class III) to expire at the third annual meeting of stockholders; and
thereafter for each such term to expire at each third succeeding annual meeting
of stockholders after such election. All directors shall hold office until the
expiration of the term for which elected, and until their respective successors
are elected, except in the case of the death, resignation, or removal of any
director.
(2) Upon the closing of the IPO, subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation or other cause (other than removal from office by a vote of the
stockholders) may be filled only by a majority vote of the directors then in
office, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the next annual meeting of stockholders at which the term of
office of the class to which they have been elected expires, and until their
respective successors are elected, except in the case of the death, resignation,
or removal of any director. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
(3) Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any directors, or the entire Board
of Directors, may be removed from office at any time, with or without cause, but
only by the affirmative vote of the holders of at least a majority of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class. Vacancies in the Board of Directors resulting from such removal
may be filled by a majority of the directors then in office, though less than a
quorum. Directors so chosen shall hold office for a term expiring at the next
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires, and until their respective successors are
elected, except in the case of the death, resignation, or removal of any
director.
ARTICLE IX
<PAGE> 19
Prior to the closing of the IPO, the Bylaws of the Corporation
shall be amended as provided in the Bylaws. Upon the closing of the IPO, the
provisions of this Article IX shall apply. The Board of Directors is expressly
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of at least two-thirds (2/3) of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any resolution providing for adoption,
amendment or repeal is presented to the Board). The stockholders shall also have
power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the stockholders shall
require, in addition to any vote of the holders of any class or series of stock
of the Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
ARTICLE X
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is hereafter amended
to authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this
Article X by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE XI
The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that
upon the closing of the IPO, notwithstanding any other provision of this
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any vote of the holders of
any class or series of the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at least
66-2/3% of the voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal this Article XI, Article VII, Article VIII, Article IX or Article X.
<PAGE> 20
IN WITNESS WHEREOF, JDA SOFTWARE GROUP, INC. has caused this
Second Restated Certificate of Incorporation to be signed by its President and
attested to by its Secretary this 25th day of January, 1996.
JDA SOFTWARE GROUP, INC.
By: /s/ Frederick M. Pakis
--------------------------
Frederick M. Pakis, President
ATTEST
By: /s/ Thomas M. Proud
----------------------------------
Thomas M. Proud, Secretary
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
JDA SOFTWARE GROUP, INC.
JDA Software Group, Inc., a corporation duly organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation") hereby certifies as follows:
FIRST: The amendment to the Corporation's Second Restated Certificate
of Incorporation set forth below was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
SECOND: Article IV of the Corporation's Second Restated Certificate of
Incorporation is amended to read in its entirety as follows:
ARTICLE IV
This Corporation is authorized to issue two classes of stock to be
designated, respectively, the "Preferred Stock" and the "Common Stock." The
total number of shares of capital stock which this Corporation is authorized to
issue is Fifty-Six Million Fifty Thousand Four (56,050,004) shares. Fifty
Million (50,000,000) shares shall be common stock, par value $0.01 per share
(the "Common Stock"), and Six Million Fifty Thousand Four (6,050,004) shares
shall be preferred stock, par value $1.00 per share (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Restated Certificate of Incorporation, to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of Second Restated Certificate of Incorporation to be signed and
attested by its duly authorized officer this 12th day of June, 1998.
By: /s/ Brent W. Lipman
----------------------------------------
Brent W. Lipman, Chief Executive Officer
<PAGE> 1
EXHIBIT 3.2
FIRST AMENDED AND RESTATED BYLAWS
OF
JDA SOFTWARE GROUP, INC.
<PAGE> 2
JDA SOFTWARE GROUP, INC.
FIRST AMENDED AND RESTATED BYLAWS
ARTICLE I.
OFFICES
Section 1. The registered office shall be in the County of New Castle,
State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall each year
fix, which date shall be within thirteen (13) months subsequent to the date of
the last annual meeting of stockholders.
Section 2. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 3. Special Meetings of the stockholders (or of any specific
class thereof), for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
and shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing of a
stockholder or stockholders owning at least ten percent (10%) of the number of
shares of stock (or, with respect to meetings of a specific class, the number of
shares of such specific class thereof of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Upon the closing of the first sale of the
1
<PAGE> 3
Corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), special meeting of the stockholders may be called only by
the President or the Chief Executive Officer and shall be called by the
President or Chief Executive Officer at the request in writing of at least
one-third (1/3) of the directors then in office, and shall be held at such
place, on such date. and at such time as the President or Chief Executive
Officer shall fix. Business transacted at special meetings shall be confined to
the purpose or purposes stated in the notice.
Section 4. Written notice of the place, date, and time of all annual
meetings of the stockholders shall be given, not less than ten (10) nor more
than sixty (60) days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from time
to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation). Written notice of a special meeting stating
the place, date, and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be given not less than five (5) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 5. At an annual or special meeting of the stockholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before a meeting, business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the President, Chief Executive Officer or Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) properly brought before a special meeting by a stockholder, but if, and only
if, the notice of a special meeting provides for business to be brought before
the meeting by stockholders. For business to be properly brought before a
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder
proposal to be presented at an annual meeting shall be received at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date that the Corporation's (or the Corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a special meeting, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual or special meeting (a) a brief description of the
business desired to be brought before the annual or special meeting and the
reasons for conducting such business at the special meeting, (b) the Dame and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders (or any
specific class thereof) for the transaction of business except
2
<PAGE> 4
as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by any meeting of the
stockholders, the chairman of the meeting or the holders of a majority of shares
of stock entitled to vote thereat who are present, in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 7. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one on which by express provision of the General
Corporation Laws of the State of Delaware or of the Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question. Each stockholder shall
at every meeting of the stockholders be entitled to one vote in person or by
proxy for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three (3) years from its date,
unless the proxy provides for a longer period.
Section 8. Prior to the IPO, unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, provided, however, that upon
the closing of the IPO, this Section 8 of Article II shall no longer be
effective and shall be null and void. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III.
DIRECTORS
Section 1. The number of directors shall be between four (4) and seven
(7), with the number initially set at four (4), and thereafter shall be fixed
from time to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption). The four (4)
directors shall be elected at the annual meeting of the stockholders, who shall
vote for such directors as provided in the Certificate of Incorporation. Upon
the closing of the IPO, the directors shall be divided into three (3) classes,
with the term of office of the first class, which
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class shall initially consist of one (1) director, to expire at the first annual
meeting of stockholders held after the IPO; the term of office of the second
class, which class shall initially consist of one (1) director, to expire at the
second annual meeting of stockholders held after the IPO; the term of office of
the third class, which class shall initially consist of two (2) directors, to
expire at the third annual meeting of stockholders held after the IPO; and
thereafter for each such term to expire at each third succeeding annual meeting
of stockholders after such election. Upon the closing of the IPO, a vacancy
resulting from the removal of a director by the stockholders as provided in
Article III, Section 2 below may be filled by the Board of Directors. All
directors shall hold office until the expiration of the term for which elected
and until their respective successors are elected, except in the case of the
death, resignation or removal of any director. Directors need not be
stockholders.
Section 2. Prior to the IPO, any vacancies on the Board of Directors
shall be filled by the stockholders of the Corporation entitled to fill such
vacancy as provided in the Certificate of Incorporation and the director so
chosen shall hold office until such director's successor is elected and
qualified. Vacancies from any newly created directorships resulting from any
increase in the authorized number of directors may be filled by all of the
directors then in office, and the directors so chosen shall hold office until
such directors' successors are elected and qualified. Upon the closing of the
IPO, subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification or other cause
(other than removal from office by a vote of the stockholders) may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders at which the term of office of the class to
which they have been elected expires. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 3. The business of the Corporation shall be managed by its
Board of Directors which shall have and exercise full power in the management
and conduct of the business and affairs of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation of by these Bylaws directed or required to be exercised or done by
the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held immediately following the annual meeting of shareholders and in
the same place as the annual meeting of shareholders, and no notice to the newly
elected directors of such meeting shall be necessary in order legally to hold
the meeting provided a quorum shall be present. In the event such meeting is not
held, the meeting may be held at such time and place as shall be
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specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver by all of the
directors.
Section 6. Regular meetings of the Board of Directors shall be held at
least quarterly and may be held without notice at such time and at such place as
shall from time to time be determined by the board.
Section 7. Prior to the IPO, special meetings of the Board of Directors
may be called by the President or any one (1) director on one (1) day's notice
to each director, either personally or by mail or by telegram or facsimile (with
receipt of confirmation of transmission); special meetings shall be called by
the President or Secretary in like manner or on like notice on the written
request of one director. Upon the closing of the IPO, special meetings of the
board may be called by the President or Chief Executive Officer or by resolution
adopted by at least one-third (1/3) of the directors then holding office, though
less than a quorum, on one (1) day's notice to each director, either personally
or by mail or by telegram or facsimile (with receipt of confirmation of
transmission).
Section 8. At all meetings of the board, a majority of all the
directors of the Corporation shall constitute a quorum and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by the General Corporation Law of the State of Delaware, by the Certificate of
Incorporation or by these Bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Members of the Board of Directors, or any committee
designated by the board, may participate in a meeting of such board or committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of two (2) or more of the directors of the Corporation. The board may
designate one (1) or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all
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papers which may require it; provided, however, that in the absence or
disqualification of any member of such committee or committees and any alternate
members, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act the meeting
in the place of any such absent or disqualified member. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committee may be allowed like compensation for attending
committee meetings.
ARTICLE IV.
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these Bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram or facsimile (upon receipt of
confirmation of transmission).
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V.
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the Board
of Directors and may include, or if otherwise required by the Delaware General
Corporation Law, shall include, a President, a Chief Executive Officer, a Vice
President, a Secretary and a Treasurer. The Board of Directors may also choose
additional Vice Presidents, and one or more Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders must choose a President, one or more Vice
Presidents, a Secretary and a Treasurer.
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Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
THE PRESIDENT
Section 6. The President shall be the executive officer of the
Corporation, shall preside at all meetings of the stockholders and the Board of
Directors shall see that all orders and resolutions of the Board of Directors
are carried into effect, and shall perform the duties that usually pertain to
this office.
Section 7. He shall execute bonds, mortgages, and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise, signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. The Vice Presidents
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
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Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
Section 13. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 14. The Assistant Treasurer, or if there shall be more than one
(1), the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI.
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by, the
chairman or vice chairman of the Board of Directors or the President or a Vice
President or the Treasurer or an Assistant Treasurer,
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or the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
Section 2. Where a certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee, or, (2) by a registrar other than
the Corporation or its employee, the signatures of the officers of the
Corporation may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution of allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be (i)
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor (ii) more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors for
action by stockholder consent in writing without a meeting, nor (iii) more than
sixty (60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
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to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice hereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII.
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
director from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall end on the last day
of December in each year unless the Board of Directors shall determine
otherwise.
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SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
BOOKS AND RECORDS
Section 7. The books and records of this Corporation shall be
maintained in the County of Maricopa, State of Arizona, or at such other place
as may be specified from time to time by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such Proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by Delaware Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said Law permitted the Corporation
to provide prior to such amendment) against all expenses, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
amounts paid or to be paid in settlement and amounts expended in seeking
indemnification granted to such person under applicable law, this Bylaw or any
agreement with the Corporation) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer or employee and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in Section 3 of this Article VIII, the Corporation
shall indemnify any such person seeking indemnity in connection with an action,
suit or Proceeding (or part thereof) initiated by such person only if (a) such
indemnification is expressly required to be made by law, (b) the action, suit or
Proceeding (or part thereof) was authorized and approved by the Board of
Directors of the Corporation, or (c) the action, suit or Proceeding (or part
thereof) is brought to establish or enforce a right to indemnification under an
indemnity agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law. Such right shall be a
contract right and shall include the right to be paid by the Corporation
expenses incurred in defending any such Proceeding in advance of its final
disposition; provided.
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however. that, unless" the Delaware General Corporation Law then so prohibits,
the payment of such expenses incurred by a director or officer of the
Corporation in his or her capacity as a director or officer (and not in any
other capacity in which service was or is tendered by such person while a
director or officer, including, without limitation. service to an employee
benefit plan) in advance of the final disposition of such Proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it should be
determined ultimately that such director or officer is not entitled to be
indemnified under this Section or otherwise.
Section 2. Prepayment of Expenses. The Corporation shall pay the
expenses incurred by an officer or director in defending any Proceeding in
advance of its final disposition, provided however, that the payment of expenses
incurred by a director or officer in advance of the final disposition of a
Proceeding shall be made only upon receipt of an undertaking by the director or
officer to repay all amounts advanced if it should be ultimately determined that
the director or officer is not entitled to be indemnified under this Article or
otherwise. For purposes of this Section 2, the terms "expenses incurred by an
officer or director in defending any Proceeding" shall not include any fees or
expenses incurred in connection with the affirmative prosecution of any claim
against the Corporation by such director or officer, whether as plaintiff,
counterclaimant, cross-claimant or otherwise.
Section 3. Claims. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty (60) days after a
written claim therefor has been received by the Corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action, the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 4. Non-exclusivity of Rights. The rights conferred on any
person by this Article VIII shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director or
officer of another corporation, partnership, joint venture, trust enterprise or
non-profit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit enterprise.
Section 6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VIII shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
Section 7. Insurance. The Corporation shall maintain insurance to the
extent reasonably available, at its expense, to protect itself and any such
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other
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enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE IX.
AMENDMENTS
Section 1. Prior to the closing of the IPO, these Bylaws may be altered
or repealed at any regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of such alteration or repeal is
contained in the notice of such special meeting. Prior to the closing of the
IPO, any amendments to these Bylaws must be approved by a majority of the
directors then serving and approved by the holders of at least a majority of the
total number of shares of Preferred Stock then outstanding. Upon the closing of
the IPO, the Board of Directors shall be expressly empowered to adopt, amend or
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of
the Corporation by the Board of Directors shall require the approval of at least
two-thirds (2/3) of the total number of authorized directors (whether or not
there exist any vacancies in previously authorized directorships at the time any
resolution providing for adoption, amendment or repeal is presented to the Board
of Directors). The stockholders shall also have power to adopt, amend or repeal
the Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of
the Corporation by the stockholders shall require, in addition to any vote of
the holders of any class or series of stock of the Corporation required by law
or by this Certificate of Incorporation, the affirmative vote of the holders of
at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
of the then outstanding shares of the capital stock of the Corporation entitled
to vote generally in the election of directors, voting together as a single
class.
These First Amended and Restated Bylaws were adopted by all the
directors of the Corporation on the 11th day of October, 1997.
JDA SOFTWARE GROUP, INC.
By: /s/ Frederick M. Pakis
------------------------------------
Frederick M. Pakis, Co-Chairman
Attest:
/s/ Kristen L. Magnuson
- ----------------------------------
Kristen L. Magnuson, Secretary
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TABLE OF CONTENTS
Page
ARTICLE I. OFFICES..................................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS.................................... 1
ARTICLE III. DIRECTORS................................................... 3
ARTICLE IV. NOTICES..................................................... 6
ARTICLE V. OFFICERS.................................................... 6
ARTICLE VI. CERTIFICATES OF STOCK....................................... 8
ARTICLE VII. GENERAL PROVISIONS......................................... 10
ARTICLE VIII. INDEMNIFICATION............................................ 11
Section 1. Right to Indemnification................................... 11
Section 2. Prepayment of Expenses..................................... 12
Section 3. Claims..................................................... 12
Section 4. Non-exclusivity of Rights.................................. 12
Section 5. Other Indemnification...................................... 12
Section 6. Amendment or Repeal........................................ 12
Section 7. Insurance.................................................. 12
ARTICLE IX. AMENDMENTS...................................................... 13
-i-
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Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into and shall
be effective as of January 1, 1998 (the "Effective Date"), by and among JDA
SOFTWARE GROUP, INC., a Delaware corporation ("JDA"), JDA SOFTWARE, INC., an
Arizona corporation and subsidiary of JDA ("Subsidiary"), and JAMES D. ARMSTRONG
("Employee").
RECITALS
A. Employee was formerly employed by Subsidiary, in the capacity of
President pursuant to that certain Employment Agreement dated effective as of
March 30, 1995 and First Amendment to Employment Agreement dated January 12,
1996 (collectively, the "Original Agreement").
B. Employee resigned as President of Subsidiary and accepted an
appointment to the newly created office of the Co-Chairman of the Board of
Directors of JDA, effective as of October 11, 1997.
C. Subsidiary and Employee now desire to terminate the Original
Agreement to reflect Employee's voluntary termination of employment with
Subsidiary, and JDA desires to employ Employee and Employee desires to accept
employment with JDA on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
1. TERMINATION OF ORIGINAL AGREEMENT. The Original Agreement is hereby
terminated as of the Effective Date. Such termination by Employee is voluntary,
and Employee expressly agrees that no additional compensation is due to Employee
under the terms of the Original Agreement.
2. EMPLOYMENT. JDA agrees to employ Employee as Co-Chairman of the
Board of Directors and Employee agrees to accept such employment with JDA on the
terms and subject to the conditions set forth in this Agreement.
3. TERM. The term of this Agreement (the "Employment Term") shall
commence on the Effective Date and continue until terminated as hereafter
provided.
4. COMPENSATION.
a. Base Salary. During the Employment Term, JDA agrees to pay
Employee a salary at the rate of One Hundred Thousand and No/100 Dollars
($100,000.00) per year,
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<PAGE> 2
payable in equal semi-monthly installments of Four Thousand One Hundred
Sixty-Six and 66/100 Dollars ($4,166.66) each (the "Base Salary"). Employee's
Base Salary will be reviewed by the parties on or before each anniversary of the
Effective Date and may be increased or decreased from time to time during the
Employment Term by such amount(s) as JDA and Employee may agree to in writing.
b. Bonus Compensation. In addition to Employee's Base Salary,
JDA may pay to Employee such bonus(es) as the Board of Directors of JDA
("Board"), in its sole and absolute discretion , may from time to time deem
appropriate. Any bonus(es) shall be in such amounts and payable at such times as
the Board, in its sole and absolute discretion, may determine.
c. No Additional Compensation. Employee acknowledges and
agrees that, except as expressly provided in this Section 4 and Sections 6 and 7
below (relating to certain expense reimbursements and employment benefits),
Employee is not entitled to any other or additional compensation or payments as
a result of his employment with JDA.
d. Taxes. All compensation paid to Employee pursuant to this
Agreement shall be subject to customary withholding taxes and other employment
taxes or levies as required with respect to compensation paid by JDA to an
employee.
5. DUTIES. Employee shall serve as the Co-Chairman of the Board of JDA
and in the executive capacity involved in mergers and acquisitions and strategic
alliances. Employee agrees that during the Employment Term he will devote his
best efforts and that amount of business time, attention, skill and efforts to
the business and affairs of JDA, and to the furtherance of JDA's best interests
as is necessary to fulfill Employee's duties as set forth herein. In addition to
the duties and responsibilities described above, JDA may, from time to time,
establish standards and regulations regarding its employees' employment (the
"Employment Standards"). Employee further agrees that in the performance of his
duties and in all respects of his employment, Employee shall also comply with
any Employment Standards which JDA may from time to time establish. To the
extent of any inconsistencies between this Agreement and any Employment
Standards, the terms of this Agreement shall control.
6. EXPENSE REIMBURSEMENT, FACILITIES AND BENEFITS.
a. Reimbursement of Expenses and Facilities. JDA shall pay or
reimburse Employee for all reasonable travel and other expenses incurred by
Employee in performing Employee's obligations under this Agreement. JDA further
agrees to furnish Employee with such assistance and accommodations (i.e., an
office in the size, type and quality as provided to Employee prior to the
Effective Date) as shall be suitable to the character of Employee's position
with JDA and adequate for the performance of Employee's duties hereunder.
b. Other Benefits. During the period of employment under this
Agreement, Employee (and his spouse and eligible dependents) shall be entitled
to receive all other benefits of employment generally available to other members
of JDA's management and those benefits for which key executives are or shall
become eligible, when and as Employee becomes eligible
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<PAGE> 3
therefor, including, without limitation, group health, life and disability
insurance benefits and participation in JDA's 401(k) Plan.
c. Benefits Payable Upon Disability or Death. If Employee
shall be prevented during the term of this Agreement from properly performing
services hereunder by reason of illness or other physical or mental incapacity
("disabilities"), JDA shall continue to pay Employee the then current salary
hereunder for a period of twelve (12) months, following the onset of such
disability. In the event of the death of Employee during the term of this
Agreement, Employee's then current salary payable hereunder shall continue to be
paid, as a death benefit, to Employee's surviving spouse, or if there is no
spouse surviving, then to Employee's personal representative (as the case may
be) for a period of twelve (12) months following Employee's death.
7. TERMINATION.
a. Termination for Death or Permanent Disability. Upon
Employee's death or permanent disability (a disability which continues for a
period of twelve (12) months from the date of onset of such disability), this
Agreement shall terminate; provided that Employee and Employee's spouse (or
surviving spouse, as the case may be) and eligible dependents shall be entitled
to continuation rights under JDA's group health plans as required under COBRA,
with the "qualifying event" occurring and minimum required period of coverage to
commence upon the termination of this Agreement; and provided further that, in
the event of Employee's death, Employee's surviving spouse or Personal
Representative, as the case may be, shall be entitled to the death benefits
described in Section 6(c).
b. Termination by JDA Without Cause. JDA may terminate this
Agreement without cause on three (3) years' written notice to Employee. For a
period of one (1) year following the date such written notice is given to
Employee, all the terms and conditions of this Agreement shall remain in full
force and effect. Effective one (1) year following the date JDA gives such
written notice to Employee, JDA and Employee may agree upon new duties to be
assigned to Employee (commensurate with Employee's level of expertise and
knowledge) and a salary (also commensurate with Employee's duties agreed to by
the parties) to be paid to Employee for the remaining two (2) year term of this
Agreement; provided that (regardless of whether the parties agree on Employee's
new duties and salary) for the remaining two (2) years of the term of this
Agreement, JDA will continue to provide Employee with the expense
reimbursements, facilities and benefits described in Section 6. After the
expiration of such two (2) year period, Employee and his spouse and eligible
dependents shall be entitled to continuation benefits under JDA's group health
plans as required under COBRA, with the "qualifying event" occurring and minimum
required period of coverage to commence upon the termination of this Agreement.
c. Termination by Employee Without Cause. Employee may
terminate this Agreement without cause on one (1) year's written notice to JDA.
During such one year period, this Agreement and all of the terms hereof shall be
in full force and effect and shall not be affected by such written notice of
termination. Upon the conclusion of such one year period, this
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<PAGE> 4
Agreement shall terminate, and thereafter Employee and his spouse and eligible
dependents shall be entitled to continuation rights under JDA's group health
plans as required under COBRA, with the "qualifying event" occurring and minimum
required period of coverage to commence upon the termination of this Agreement.
d. Termination for Cause. JDA may, without liability,
terminate Employee's employment hereunder for cause at any time upon written
notice from the Board of Directors specifying such cause; provided, however,
that such written notice shall not be delivered until after the Board of
Directors shall have given Employee written notice specifying the conduct
alleged to have constituted such cause and Employee has failed to cure such
conduct, if curable, within thirty (30) days following receipt of such notice.
As used in this Agreement, the term "cause" shall mean a willful breach of duty
in the course of Employee's employment or habitual neglect of Employee's duty.
(i) Contesting Termination. In the event of a
termination for cause pursuant to this Section 7(d), if Employee advises JDA in
writing that Employee disputes its action, JDA shall continue to pay Employee's
then-current compensation as specified in this Agreement until the earlier of:
(A) a final decision by the arbitrator(s) affirming JDA's actions; or (B) the
mutual written agreement of the parties. If the arbitrator(s) finds in favor of
Employee and does not confirm JDA's actions in attempting to terminate this
Agreement, then the term of this Agreement shall remain unaffected and Employee
shall continue in the employment of JDA hereunder.
(ii) Severance Benefits. Notwithstanding anything to
the contrary in this Agreement, if Employee is terminated by JDA for cause in
accordance with this Section 7(d) and if Employee does not contest such
termination as provided in this Section 7(d)(i) or if Employee does contest such
termination and the arbitrator(s) issues an award affirming JDA's action, then
Employee shall be entitled to a severance benefit equal to Employee's then
current salary hereunder payable for one (1) year following the date of the
expiration of the cure period set forth in this Section 7(d). Such severance
benefit shall be payable at the same time and in the same amount as Employee's
then current salary. During such one (1) year period, JDA shall continue to
provide Employee and his spouse and eligible dependents the same group health
plan benefits provided to its other executives. Following the expiration of such
one year period, Employee and his spouse and eligible dependents shall be
entitled to such continuation rights under JDA's groups health plan as required
under COBRA with the "qualifying event" occurring and minimum period of coverage
to commence upon the termination of such one (1) year period.
8. NON-COMPETITION AND CONFIDENTIALITY.
a. Consideration. Employee unconditionally and irrevocably
covenants and agrees to be bound by the provisions of this Section 8. Employee
acknowledges and agrees that employment by JDA and the benefits Employee is
entitled to receive pursuant to this Agreement constitute the consideration paid
by JDA for Employee's agreement to be bound by this Section 8. Employee further
acknowledges and agrees that the foregoing consideration is valuable and
sufficient to support the restrictions placed on Employer by this Section 8.
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<PAGE> 5
Employee further acknowledges that JDA has entered into this Agreement in strict
reliance on Employee's Agreement to, and the enforceability of, each term and
provision set forth in subsections 8(b) through 8(g) below.
b. Definition of JDA. For purposes of this Section 8, the term
"JDA" shall include all of JDA's subsidiaries, divisions and affiliates as from
time to time constituted.
c. Confidentiality. Employee shall execute and deliver to JDA
a letter agreement in the from attached hereto as Exhibit "A", which is
incorporated by this reference, whereby Employee covenants and agrees to keep
confidential that information known by or made available to Employee on account
of his relationship with JDA.
d. Covenant Not to Hire Employees. Employee covenants and
agrees that, for the Non-Competition Period, as defined below, Employee shall
not, directly or indirectly, hire or engage or attempt to hire or engage any
individual who shall have been an employee of JDA at any time during the period
beginning one (1) year prior to the Effective Date and ending at the end of the
Non-Competition Period, whether for or on behalf of Employee or for any entity
in which Employee shall have a direct or indirect interest (or any subsidiary or
affiliate of any such entity), whether as a proprietor, partner, co-venturer,
financier, investor or stockholder, director, officer, employer, employee,
servant, agent, representative or otherwise.
e. Non-Competition Agreement. In order to afford fair
protection to JDA and the goodwill it has established, Employee covenants and
agrees as follows:
(i) Non-Competition. Employee represents, warrants
and agrees with JDA that during the Employment Term and for a period of three
(3) years thereafter (the "Non-Competition Period"), Employee will not, directly
or indirectly, within the counties of any States of the United States or in any
city in any country in which JDA currently or upon Employee's termination of
employment has business offices or conducts business ("Prohibited Territory"),
directly or indirectly, either alone or with others, engage, and shall not make
equity investments in, be employed by, consult for, have an interest in or in
any way assist any person, firm or company, engaged in the business or practice
of developing, marketing, licensing and servicing retail merchandise management
and/or point of sale software directed to the retail industry and related
activities ("Prohibited Activity"). This subparagraph (i) shall not apply to (1)
such activities by Employee during the term of and as reasonably incidental to
Employee's performance under this Agreement for the benefit of JDA and its
affiliates; (2) investments Employee may make in publicly held companies of less
than 5% of such company's outstanding shares; or (3) investments made by
Employee in business entities which a reasonable business person would not view
to be a competitor of JDA.
(ii) Non-Solicitation. Employee further covenants and
agrees, during the Non-Competition Period, that Employee will not directly or
indirectly canvass, solicit, contact or accept any person or entity (or the
employee or agent of such person or entity) who is or was an existing or
prospective client, customer, licensee, purchaser, supplier, distributor,
manufacturer or contractor of or to JDA and with whom Employee has obtained
significant business contacts ("Business Contacts"), for the purpose of directly
or indirectly engaging in any
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<PAGE> 6
Prohibited Activity. Employee acknowledges that the geographic scope of this
non-solicitation covenant is not limited to the Prohibited Territory. The
geographic scope has not been limited since the residences of the Business
Contacts are not limited to the Prohibited Territory and JDA has a legitimate
protectable business interest in preventing the solicitation of its Business
Contacts regardless of the geographical locations of the residences of the
Business Contracts or where Employee is engaged in business when such
solicitations are attempted. Therefore, Employee agrees that the time and
geographic provisions of this non-solicitation covenant are reasonable.
f. Reasonableness of Restrictions; Severability.
(i) Reasonableness. EMPLOYEE HAS CAREFULLY READ AND
CONSIDERED THE PROVISIONS OF SECTIONS 8(a) THROUGH 8(g), INCLUDING THE AGREEMENT
SET FORTH ON EXHIBIT "A", AND HAVING DONE SO, AGREES THAT THE RESTRICTIONS SET
FORTH IN THESE SECTIONS ARE FAIR AND REASONABLE AND ARE REASONABLY REQUIRED FOR
THE PROTECTION OF THE INTERESTS OF JDA AND ITS BUSINESS, OFFICERS, DIRECTORS AND
EMPLOYEES. Employee further agrees that the restrictions set forth in this
Agreement do not impair Employee's ability to enter into the field or fields of
Employee's choice, subject to the restrictions on non-competition in the
Prohibited Territory and subject to all other provisions of this Section 8.
(ii) Severability. The provisions of this Agreement
shall be deemed severable, and the invalidity or unenforceability of any one or
more of the provisions shall not affect the validity and enforceability of the
remaining provisions.
(iii) Assignment. Employee acknowledges the right and
ability of JDA to assign its rights under this Section 8 to third parties,
whether in connection with a merger, reorganization, liquidation or otherwise.
(iv) Reformation. In the event that any of the
provisions of this Section 8 should ever be deemed to exceed the time or
geographic limitations permitted by the applicable laws, then Employee and JDA
covenant and agree that such provisions shall be reformed to the maximum time or
geographic limitations permitted by applicable law.
g. Remedies of JDA. If Employee violates any of the provisions
of this Section 8, then JDA shall, notwithstanding any other term or provision
of this Agreement, have the unconditional right to:
(i) Withhold any payments, compensation,
distributions or consideration otherwise owed or to be paid to Employee pursuant
to this Agreement or any other agreement.
(ii) Seek, apply for and receive a temporary
restraining order without notice enjoining Employee and/or Employee's partners,
co-venturers, employers, employees, servants, agents, representatives and any
and all persons directly or indirectly acting for, on
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<PAGE> 7
behalf of or with Employee, from continued violation of this Section 8; for that
purpose only, Employee waives notice of any petition or application for a
temporary restraining order.
(iii) Seek and recover monetary damages for
Employee's violation of the provisions of this Section 8.
(iv) Avail itself of all of the above remedies and
all other available legal and equitable remedies; these remedies shall be
cumulative and not mutually exclusive.
In addition, Employee covenants and agrees that, if he shall violate any of the
covenants or agreements under this Section 8, JDA shall be entitled to an
accounting and repayment of all profits, compensation, royalties, commissions,
remunerations or benefits which Employee directly or indirectly shall have
realized or may realize relating to, growing out of or in connection with any
such violation; such remedies shall be in addition to and not in limitation of
any injunctive relief or other rights or remedies to which JDA is or may be
entitled at law or in equity or otherwise under this Section 8.
9. MISCELLANEOUS.
a. Arbitration. If any controversy or claim arising out of
this Agreement (except for any controversy or claim arising out of Section 8)
cannot be resolved by the parties, such controversy or claim shall be resolved
by arbitration in accordance with the then current rules of the American
Arbitration Association governing commercial disputes (except as provided in
Section 8(f)(ii)). Such matters shall be arbitrated in Phoenix, Arizona, and,
for purposes of this Agreement, each party consents to arbitration in such
place. Arbitration proceedings shall commence when any party notifies the other
that a dispute subject to arbitration exists and requests that the dispute be
arbitrated. If the parties to a dispute cannot, within thirty (30) days after
the date arbitration proceedings commence, mutually agree upon an arbitrator or
arbitrators to settle their dispute, each party to the dispute shall select an
arbitrator. The two arbitrators shall, within fifteen (15) days after the
appointment of the last arbitrator, select a third arbitrator and the three
arbitrators shall determine the matter. Each arbitrator shall act impartially.
If for any reason an arbitrator is not appointed within the time provided or the
arbitrators appointed by the parties cannot agree upon a third arbitrator, then
an arbitrator shall be appointed by the Superior Court of the State of Arizona,
in and for the County of Maricopa, in accordance with A.R.S. Section 12-1501 et
seq. Unless the parties mutually agree otherwise, any arbitrator selected shall
be familiar with employer-employee disputes. The final decision will be that of
the sole arbitrator or of the majority of arbitrators, and shall be final and
binding upon the parties, except as otherwise provided by law. The sole
arbitrator or the majority of arbitrators shall also determine the allocation of
costs of such arbitration among the parties, and shall have the right to award
to the prevailing party all costs of arbitration, regardless of whether such
costs are taxable as such under Arizona law, including reasonable attorneys'
fees.
b. Assignment. Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, nor shall
Employee's rights be subject to encumbrance or subject to the claims of JDA's
creditors. Nothing in this Agreement shall prevent the consolidation of JDA
with, or its merger into, any other corporation, or the sale by
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<PAGE> 8
JDA of all or substantially all of its properties or assets; and this Agreement
shall inure to the benefit of, be binding upon and be enforceable by, any
successor surviving or resulting corporation, or other entity to which such
assets shall be transferred. This Agreement shall not be terminated by the
voluntary or involuntary dissolution of JDA.
c. Attorneys' Fees. In the event any party is required to hire
an attorney to enforce any of the terms and conditions of this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees and costs
incurred.
d. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and hand delivered or sent by
certified or registered mail, return receipt requested, to his last known
residence in the case of Employee, or to its principal offices in the case of
JDA. Such notice shall be effective upon receipt in the case of hand-delivery or
two (2) days after deposit in the case of certified or registered mail.
e. Waiver of Breach. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any party.
f. Severability. If any court of competent jurisdiction rules
that any portion of this Agreement is invalid for any reason, the remaining
portions of this Agreement shall nevertheless remain in full force and effect.
g. Non-Disclosure. Employee covenants and agrees to keep all
terms of this Agreement strictly confidential, and that Employee will not
disclose any information concerning this Agreement to anyone, including, but not
limited to, present or prospective employees of JDA, unless compelled to do so
by court order or other lawful authority.
h. Employee Review. By executing this Agreement, Employee
represents and covenants that he has carefully read each and every term and
provision contained in this Agreement in its entirety, that Employee has had an
opportunity to discuss the provisions of this Agreement with an attorney, that
Employee understands, accepts and agrees to be bound by each and every term and
provision of this Agreement and that Employee has executed this Agreement
knowingly, voluntarily and without any duress, compulsion or undue influence.
i. Amendment. This Agreement contains the entire and complete
understanding of the parties with regard to Employee's employment by JDA, and
supersedes any and all prior written or oral agreements of the parties. This
Agreement may not be varied, modified or contradicted by any other Agreement
unless such Agreement is later in time, in writing, and duly executed by the
party to be bound.
j. Governing Law. This Agreement is executed in, and shall be
governed by and construed in accordance with, the laws of the State of Arizona.
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IN WITNESS WHEREOF, the parties have executed duplicate originals of
this Agreement as of the date first hereinabove set forth.
JDA JDA SOFTWARE GROUP, INC., a Delaware corporation
By /s/ Brent W. Lippman
--------------------------------------------
Brent W. Lippman
Chief Executive Officer
Subsidiary JDA SOFTWARE, INC., an Arizona corporation
By /s/ Brent w. Lippman
--------------------------------------------
Brent W. Lippman
Chief Executive Officer
Employee /s/ James D. Armstrong
--------------------------------------------
JAMES D. ARMSTRONG
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<PAGE> 10
EXHIBIT A
JDA SOFTWARE GROUP, INC
11811 N. Tatum Blvd. Suite 2000
Phoenix, AZ 85028-1626
January 1, 1998
Mr. James D. Armstrong
8600 North 64th Place
Paradise Valley, Arizona 85253
Dear Mr. Armstrong:
This letter agreement sets forth and confirms certain understandings
between you and JDA Software Group, Inc., a Delaware corporation ("Company")
with respect to your employment with the Company and your responsibilities and
obligations to the Company, its current and future affiliates (collectively, the
"Affiliates"), and third parties who have provided confidential information to
the Company or any of its Affiliates ("Third-Party Beneficiaries").
You understand that your employment (or continued employment) with the
Company is conditioned upon and in consideration for your entering into this
agreement. This agreement is intended to protect important interests of the
Company, its Affiliates, and Third-Party Beneficiaries, particularly the
interests of those entities in valuable technology, business and confidential
information that the Company and its Affiliates have acquired or obtained access
to over the years. It is hoped that in the long run the terms of this agreement
will be a benefit to all personnel by promoting the welfare and success of the
Company as a leader in the industry and in the community.
During the course of your employment, you will obtain access to
information regarding the business of the Company and its Affiliates which is
confidential to the Company, its Affiliates or Third-Party Beneficiaries
("Confidential Information"). For the purposes of this agreement, "Confidential
Information" includes, but is not limited to:
(1) Application, data base, and other computer software developed or
acquired by the Company or any of its Affiliates, whether now or hereafter
existing, and all modifications, enhancements and versions thereof and all
options available with respect thereto, and all future products developed or
derived therefrom;
(2) Source and object codes, flowcharts, algorithms, coding sheets,
routines, sub-routines, design concepts and related documentation and manuals;
<PAGE> 11
Mr. James D. Armstrong
January 1, 1998
Page 2
(3) Marketing techniques and arrangements, mailing lists, purchasing
information, pricing policies, quoting procedures, financial information,
customer and prospect names and requirements, employee, customer, supplier and
distributor data and other materials and information relating to the Company's
business and activities and the manner in which the Company does business;
(4) Discoveries, concepts and ideas including, without limitation, the
nature and results of research and development activities, processes, formulas,
inventions, computer-related equipment or technology, techniques, "know-how,"
designs, drawings and specifications;
(5) Any other materials or information related to the business or
activities of the Company that are not generally known to others engaged in
similar businesses or activities;
(6) All ideas which are derived from or related to your access to or
knowledge of any of the above enumerated materials and information; and
(7) Any materials or information related to the business or activities
of the Third-Party Beneficiaries that are received by the Company or any
Affiliate in confidence or subject to nondisclosure or similar covenants,
including without limitation, confidential, proprietary business records,
financial information, trade secrets, strategies, methods and practices of
licensees of JDA software.
Maintaining the confidentiality of the Confidential Information is of
utmost importance to the Company and its Affiliates. Accordingly, you agree
that, except in the performance of your duties as an employee of the Company,
from and after the date of this agreement (including after the termination of
your relationship with the Company, for whatever reason), you will not disclose
to any person, association, firm, corporation or other entity in any manner,
directly or indirectly, any of the Confidential Information (in whatever form),
received, acquired, or developed by you through your association with the
Company or any Affiliate, or use, or permit any person, association, corporation
or other entity to use, in any manner, directly or indirectly, any such
Confidential Information.
When your relationship with the Company ends (regardless of the
reason), and earlier if the Company requests, you agree to return to the Company
all materials, correspondence, documents and other writings, computer programs
and printouts, and other information in written, graphic, magnetic, optical,
computerized or other form, which relate to or reflect any Confidential
Information, or the business of the Company or any Affiliate, and you agree that
you will not retain any copies thereof, regardless of where or by whom such
materials and information were kept or prepared.
You acknowledge that items (1) through (6) of the Confidential
Information that you make, conceive, discover or develop, whether alone or
jointly with others, at any time during your employment with the Company,
whether at the request or upon the suggestion of the
<PAGE> 12
Mr. James D. Armstrong
January 1, 1998
Page 3
Company or otherwise, shall be the sole and exclusive property of the Company;
provided that such items relate to or are useful in connection with any business
now or hereafter carried on or contemplated by the Company or any Affiliate,
including developments or expansions of their present fields of operations. You
agree to promptly disclose to the Company all Confidential Information made,
conceived, discovered, or developed in whole or in part by you for the Company
or any Affiliate during the term of your employment with the Company and to
assign to the Company or such Affiliate any right, title or interest you may
have in such Confidential Information. You agree to execute any instruments and
to do all other things reasonably requested by the Company (both during and
after your employment with the Company) in order to vest more fully in the
Company or such Affiliate all ownership rights in those items hereby transferred
by you to the Company or such Affiliate. If any one or more of such items are
protectable by copyright, and are deemed in any way to fall within the
definition of "work made for hire," as that term is defined in 17 U.S.C. Section
101, such works shall be considered "works made for hire," the copyright of
which shall be owned solely, completely and exclusively by the Company or such
Affiliate. If any one or more of the aforementioned items are protectable by
copyright and are not considered to be included in the categories of works
covered by the "work made for hire" definition contained in 17 U.S.C. Section
101, such works shall be deemed to be assigned and transferred completely and
exclusively to the Company or such affiliate by virtue of your execution of this
letter.
The terms and provisions of this Agreement shall be binding upon you
and the Company, and its successors and assigns and shall inure to the benefit
of you, the Company, its Affiliates and the Third-Party Beneficiaries. The
failure of the Company or any Affiliate at any time or from time to time to
require performance of your obligations under this agreement shall in no manner
affect the right of the Company or such Affiliate to enforce any provisions of
this agreement at a subsequent time, and shall not constitute a waiver of any
rights arising out of any subsequent or prior breach. This agreement (a) may not
be modified orally, but only by written agreement signed by you and the designee
of the Company's Board of Directors; and (b) supersedes any prior agreements on
this subject. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement. Nothing in this Agreement shall be construed as a
guarantee that your employment will continue for any specific period of time.
This Agreement shall be governed by and construed in accordance with the laws of
Arizona.
If this is consistent with your understanding of the terms and
conditions of your employment, please so indicate by signing in the space
provided below.
JDA SOFTWARE GROUP, INC.
By: /s/ Brent W. Lippman
-----------------------------------
Brent W. Lippman
<PAGE> 13
Mr. James D. Armstrong
January 1, 1998
Page 4
Chief Executive Officer
ACCEPTED AND AGREED:
/s/ James D. Armstrong
- --------------------------------
JAMES D. ARMSTRONG
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into and shall
be effective as of January 1, 1998 (the "Effective Date"), by and among JDA
SOFTWARE GROUP, INC., a Delaware corporation ("JDA"), JDA SOFTWARE, INC., an
Arizona corporation and subsidiary of JDA ("Subsidiary"), and FREDERICK M. PAKIS
("Employee").
RECITALS
A. Employee was formerly employed by Subsidiary, in the capacity of
President pursuant to that certain Employment Agreement dated effective as of
March 30, 1995 and First Amendment to Employment Agreement dated January 12,
1996 (collectively, the "Original Agreement").
B. Employee resigned as President of Subsidiary and accepted an
appointment to the newly created office of the Co-Chairman of the Board of
Directors of JDA, effective as of October 11, 1997.
C. Subsidiary and Employee now desire to terminate the Original
Agreement to reflect Employee's voluntary termination of employment with
Subsidiary, and JDA desires to employ Employee and Employee desires to accept
employment with JDA on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
1. TERMINATION OF ORIGINAL AGREEMENT. The Original Agreement is hereby
terminated as of the Effective Date. Such termination by Employee is voluntary,
and Employee expressly agrees that no additional compensation is due to Employee
under the terms of the Original Agreement.
2. EMPLOYMENT. JDA agrees to employ Employee as Co-Chairman of the
Board of Directors and Employee agrees to accept such employment with JDA on the
terms and subject to the conditions set forth in this Agreement.
3. TERM. The term of this Agreement (the "Employment Term") shall
commence on the Effective Date and continue until terminated as hereafter
provided.
4. COMPENSATION.
a. Base Salary. During the Employment Term, JDA agrees to pay
Employee a salary at the rate of One Hundred Thousand and No/100 Dollars
($100,000.00) per year, payable in equal semi-monthly installments of Four
Thousand One Hundred Sixty-Six and
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<PAGE> 2
66/100 Dollars ($4,166.66) each (the "Base Salary"). Employee's Base Salary will
be reviewed by the parties on or before each anniversary of the Effective Date
and may be increased or decreased from time to time during the Employment Term
by such amount(s) as JDA and Employee may agree to in writing.
b. Bonus Compensation. In addition to Employee's Base Salary, JDA
may pay to Employee such bonus(es) as the Board of Directors of JDA ("Board"),
in its sole and absolute discretion, may from time to time deem appropriate.
Any bonus(es) shall be in such amounts and payable at such times as the Board,
in its sole and absolute discretion, may determine.
c. No Additional Compensation. Employee acknowledges and agrees
that, except as expressly provided in this Section 4 and Sections 6 and 7 below
(relating to certain expense reimbursements and employment benefits), Employee
is not entitled to any other or additional compensation or payments as a result
of his employment with JDA.
d. Taxes. All compensation paid to Employee pursuant to this
Agreement shall be subject to customary withholding taxes and other employment
taxes or levies as required with respect to compensation paid by JDA to an
employee.
5. DUTIES. Employee shall serve as the Co-Chairman of the Board of JDA
and in the executive capacity involved in mergers and acquisitions and strategic
alliances. Employee agrees that during the Employment Term he will devote his
best efforts and that amount of business time, attention, skill and efforts to
the business and affairs of JDA, and to the furtherance of JDA's best interests
as is necessary to fulfill Employee's duties as set forth herein. In addition to
the duties and responsibilities described above, JDA may, from time to time,
establish standards and regulations regarding its employees' employment (the
"Employment Standards"). Employee further agrees that in the performance of his
duties and in all respects of his employment, Employee shall also comply with
any Employment Standards which JDA may from time to time establish. To the
extent of any inconsistencies between this Agreement and any Employment
Standards, the terms of this Agreement shall control.
6. EXPENSE REIMBURSEMENT, FACILITIES AND BENEFITS.
a. Reimbursement of Expenses and Facilities. JDA shall pay or
reimburse Employee for all reasonable travel and other expenses incurred by
Employee in performing Employee's obligations under this Agreement. JDA further
agrees to furnish Employee with such assistance and accommodations (i.e., an
office in the size, type and quality as provided to Employee prior to the
Effective Date) as shall be suitable to the character of Employee's position
with JDA and adequate for the performance of Employee's duties hereunder.
b. Other Benefits. During the period of employment under this
Agreement, Employee (and his spouse and eligible dependents) shall be entitled
to receive all other benefits of employment generally available to other members
of JDA's management and those benefits for which key executives are or shall
become eligible, when and as Employee becomes eligible
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<PAGE> 3
therefor, including, without limitation, group health, life and disability
insurance benefits and participation in JDA's 401(k) Plan.
c. Benefits Payable Upon Disability or Death. If Employee shall be
prevented during the term of this Agreement from properly performing services
hereunder by reason of illness or other physical or mental incapacity
("disabilities"), JDA shall continue to pay Employee the then current salary
hereunder for a period of twelve (12) months, following the onset of such
disability. In the event of the death of Employee during the term of this
Agreement, Employee's then current salary payable hereunder shall continue to be
paid, as a death benefit, to Employee's surviving spouse, or if there is no
spouse surviving, then to Employee's personal representative (as the case may
be) for a period of twelve (12) months following Employee's death.
7. TERMINATION.
a. Termination for Death or Permanent Disability. Upon Employee's
death or permanent disability (a disability which continues for a period of
twelve (12) months from the date of onset of such disability), this Agreement
shall terminate; provided that Employee and Employee's spouse (or surviving
spouse, as the case may be) and eligible dependents shall be entitled to
continuation rights under JDA's group health plans as required under COBRA, with
the "qualifying event" occurring and minimum required period of coverage to
commence upon the termination of this Agreement; and provided further that, in
the event of Employee's death, Employee's surviving spouse or Personal
Representative, as the case may be, shall be entitled to the death benefits
described in Section 6(c).
b. Termination by JDA Without Cause. JDA may terminate this
Agreement without cause on three (3) years' written notice to Employee. For a
period of one (1) year following the date such written notice is given to
Employee, all the terms and conditions of this Agreement shall remain in full
force and effect. Effective one (1) year following the date JDA gives such
written notice to Employee, JDA and Employee may agree upon new duties to be
assigned to Employee (commensurate with Employee's level of expertise and
knowledge) and a salary (also commensurate with Employee's duties agreed to by
the parties) to be paid to Employee for the remaining two (2) year term of this
Agreement; provided that (regardless of whether the parties agree on Employee's
new duties and salary) for the remaining two (2) years of the term of this
Agreement, JDA will continue to provide Employee with the expense
reimbursements, facilities and benefits described in Section 6. After the
expiration of such two (2) year period, Employee and his spouse and eligible
dependents shall be entitled to continuation benefits under JDA's group health
plans as required under COBRA, with the "qualifying event" occurring and minimum
required period of coverage to commence upon the termination of this Agreement.
c. Termination by Employee Without Cause. Employee may terminate
this Agreement without cause on one (1) year's written notice to JDA. During
such one year period, this Agreement and all of the terms hereof shall be in
full force and effect and shall not be affected by such written notice of
termination. Upon the conclusion of such one year period, this
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Agreement shall terminate, and thereafter Employee and his spouse and eligible
dependents shall be entitled to continuation rights under JDA's group health
plans as required under COBRA, with the "qualifying event" occurring and minimum
required period of coverage to commence upon the termination of this Agreement.
d. Termination for Cause. JDA may, without liability, terminate
Employee's employment hereunder for cause at any time upon written notice from
the Board of Directors specifying such cause; provided, however, that such
written notice shall not be delivered until after the Board of Directors shall
have given Employee written notice specifying the conduct alleged to have
constituted such cause and Employee has failed to cure such conduct, if curable,
within thirty (30) days following receipt of such notice. As used in this
Agreement, the term "cause" shall mean a willful breach of duty in the course of
Employee's employment or habitual neglect of Employee's duty.
(i) Contesting Termination. In the event of a termination for
cause pursuant to this Section 7(d), if Employee advises JDA in writing that
Employee disputes its action, JDA shall continue to pay Employee's then-current
compensation as specified in this Agreement until the earlier of: (A) a final
decision by the arbitrator(s) affirming JDA's actions; or (B) the mutual written
agreement of the parties. If the arbitrator(s) finds in favor of Employee and
does not confirm JDA's actions in attempting to terminate this Agreement, then
the term of this Agreement shall remain unaffected and Employee shall continue
in the employment of JDA hereunder.
(ii) Severance Benefits. Notwithstanding anything to the contrary
in this Agreement, if Employee is terminated by JDA for cause in accordance with
this Section 7(d) and if Employee does not contest such termination as provided
in this Section 7(d)(i) or if Employee does contest such termination and the
arbitrator(s) issues an award affirming JDA's action, then Employee shall be
entitled to a severance benefit equal to Employee's then current salary
hereunder payable for one (1) year following the date of the expiration of the
cure period set forth in this Section 7(d). Such severance benefit shall be
payable at the same time and in the same amount as Employee's then current
salary. During such one (1) year period, JDA shall continue to provide Employee
and his spouse and eligible dependents the same group health plan benefits
provided to its other executives. Following the expiration of such one year
period, Employee and his spouse and eligible dependents shall be entitled to
such continuation rights under JDA's groups health plan as required under COBRA
with the "qualifying event" occurring and minimum period of coverage to commence
upon the termination of such one (1) year period.
8. NON-COMPETITION AND CONFIDENTIALITY.
a. Consideration. Employee unconditionally and irrevocably covenants
and agrees to be bound by the provisions of this Section 8. Employee
acknowledges and agrees that employment by JDA and the benefits Employee is
entitled to receive pursuant to this Agreement constitute the consideration paid
by JDA for Employee's agreement to be bound by this Section 8. Employee further
acknowledges and agrees that the foregoing consideration is valuable and
sufficient to support the restrictions placed on Employer by this Section 8.
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<PAGE> 5
Employee further acknowledges that JDA has entered into this Agreement in strict
reliance on Employee's Agreement to, and the enforceability of, each term and
provision set forth in subsections 8(b) through 8(g) below.
b. Definition of JDA. For purposes of this Section 8, the term "JDA"
shall include all of JDA's subsidiaries, divisions and affiliates as from time
to time constituted.
c. Confidentiality. Employee shall execute and deliver to JDA a
letter agreement in the from attached hereto as Exhibit "A", which is
incorporated by this reference, whereby Employee covenants and agrees to keep
confidential that information known by or made available to Employee on account
of his relationship with JDA.
d. Covenant Not to Hire Employees. Employee covenants and agrees
that, for the Non-Competition Period, as defined below, Employee shall not,
directly or indirectly, hire or engage or attempt to hire or engage any
individual who shall have been an employee of JDA at any time during the period
beginning one (1) year prior to the Effective Date and ending at the end of the
Non-Competition Period, whether for or on behalf of Employee or for any entity
in which Employee shall have a direct or indirect interest (or any subsidiary or
affiliate of any such entity), whether as a proprietor, partner, co-venturer,
financier, investor or stockholder, director, officer, employer, employee,
servant, agent, representative or otherwise.
e. Non-Competition Agreement. In order to afford fair protection to
JDA and the goodwill it has established, Employee covenants and agrees as
follows:
(i) Non-Competition. Employee represents, warrants and agrees
with JDA that during the Employment Term and for a period of three (3) years
thereafter (the "Non-Competition Period"), Employee will not, directly or
indirectly, within the counties of any States of the United States or in any
city in any country in which JDA currently or upon Employee's termination of
employment has business offices or conducts business ("Prohibited Territory"),
directly or indirectly, either alone or with others, engage, and shall not make
equity investments in, be employed by, consult for, have an interest in or in
any way assist any person, firm or company, engaged in the business or practice
of developing, marketing, licensing and servicing retail merchandise management
and/or point of sale software directed to the retail industry and related
activities ("Prohibited Activity"). This subparagraph (i) shall not apply to (1)
such activities by Employee during the term of and as reasonably incidental to
Employee's performance under this Agreement for the benefit of JDA and its
affiliates; (2) investments Employee may make in publicly held companies of less
than 5% of such company's outstanding shares; or (3) investments made by
Employee in business entities which a reasonable business person would not view
to be a competitor of JDA.
(ii) Non-Solicitation. Employee further covenants and agrees,
during the Non-Competition Period, that Employee will not directly or indirectly
canvass, solicit, contact or accept any person or entity (or the employee or
agent of such person or entity) who is or was an existing or prospective client,
customer, licensee, purchaser, supplier, distributor, manufacturer or contractor
of or to JDA and with whom Employee has obtained significant business contacts
("Business Contacts"), for the purpose of directly or indirectly engaging in any
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<PAGE> 6
Prohibited Activity. Employee acknowledges that the geographic scope of this
non-solicitation covenant is not limited to the Prohibited Territory. The
geographic scope has not been limited since the residences of the Business
Contacts are not limited to the Prohibited Territory and JDA has a legitimate
protectable business interest in preventing the solicitation of its Business
Contacts regardless of the geographical locations of the residences of the
Business Contracts or where Employee is engaged in business when such
solicitations are attempted. Therefore, Employee agrees that the time and
geographic provisions of this non-solicitation covenant are reasonable.
f. Reasonableness of Restrictions; Severability.
(i) Reasonableness. EMPLOYEE HAS CAREFULLY READ AND CONSIDERED
THE PROVISIONS OF SECTIONS 8(a) THROUGH 8(g), INCLUDING THE AGREEMENT SET FORTH
ON EXHIBIT "A", AND HAVING DONE SO, AGREES THAT THE RESTRICTIONS SET FORTH IN
THESE SECTIONS ARE FAIR AND REASONABLE AND ARE REASONABLY REQUIRED FOR THE
PROTECTION OF THE INTERESTS OF JDA AND ITS BUSINESS, OFFICERS, DIRECTORS AND
EMPLOYEES. Employee further agrees that the restrictions set forth in this
Agreement do not impair Employee's ability to enter into the field or fields of
Employee's choice, subject to the restrictions on non-competition in the
Prohibited Territory and subject to all other provisions of this Section 8.
(ii) Severability. The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions shall not affect the validity and enforceability of the remaining
provisions.
(iii) Assignment. Employee acknowledges the right and ability of
JDA to assign its rights under this Section 8 to third parties, whether in
connection with a merger, reorganization, liquidation or otherwise.
(iv) Reformation. In the event that any of the provisions of
this Section 8 should ever be deemed to exceed the time or geographic
limitations permitted by the applicable laws, then Employee and JDA covenant and
agree that such provisions shall be reformed to the maximum time or geographic
limitations permitted by applicable law.
g. Remedies of JDA. If Employee violates any of the provisions of
this Section 8, then JDA shall, notwithstanding any other term or provision of
this Agreement, have the unconditional right to:
(i) Withhold any payments, compensation, distributions or
consideration otherwise owed or to be paid to Employee pursuant to this
Agreement or any other agreement.
(ii) Seek, apply for and receive a temporary restraining order
without notice enjoining Employee and/or Employee's partners, co-venturers,
employers, employees, servants, agents, representatives and any and all persons
directly or indirectly acting for, on
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<PAGE> 7
behalf of or with Employee, from continued violation of this Section 8; for that
purpose only, Employee waives notice of any petition or application for a
temporary restraining order.
(iii) Seek and recover monetary damages for Employee's violation
of the provisions of this Section 8.
(iv) Avail itself of all of the above remedies and all other
available legal and equitable remedies; these remedies shall be cumulative and
not mutually exclusive.
In addition, Employee covenants and agrees that, if he shall violate any of the
covenants or agreements under this Section 8, JDA shall be entitled to an
accounting and repayment of all profits, compensation, royalties, commissions,
remunerations or benefits which Employee directly or indirectly shall have
realized or may realize relating to, growing out of or in connection with any
such violation; such remedies shall be in addition to and not in limitation of
any injunctive relief or other rights or remedies to which JDA is or may be
entitled at law or in equity or otherwise under this Section 8.
9. MISCELLANEOUS.
a. Arbitration. If any controversy or claim arising out of this
Agreement (except for any controversy or claim arising out of Section 8) cannot
be resolved by the parties, such controversy or claim shall be resolved by
arbitration in accordance with the then current rules of the American
Arbitration Association governing commercial disputes (except as provided in
Section 8(f)(ii)). Such matters shall be arbitrated in Phoenix, Arizona, and,
for purposes of this Agreement, each party consents to arbitration in such
place. Arbitration proceedings shall commence when any party notifies the other
that a dispute subject to arbitration exists and requests that the dispute be
arbitrated. If the parties to a dispute cannot, within thirty (30) days after
the date arbitration proceedings commence, mutually agree upon an arbitrator or
arbitrators to settle their dispute, each party to the dispute shall select an
arbitrator. The two arbitrators shall, within fifteen (15) days after the
appointment of the last arbitrator, select a third arbitrator and the three
arbitrators shall determine the matter. Each arbitrator shall act impartially.
If for any reason an arbitrator is not appointed within the time provided or the
arbitrators appointed by the parties cannot agree upon a third arbitrator, then
an arbitrator shall be appointed by the Superior Court of the State of Arizona,
in and for the County of Maricopa, in accordance with A.R.S. Section 12-1501 et
seq. Unless the parties mutually agree otherwise, any arbitrator selected shall
be familiar with employer-employee disputes. The final decision will be that of
the sole arbitrator or of the majority of arbitrators, and shall be final and
binding upon the parties, except as otherwise provided by law. The sole
arbitrator or the majority of arbitrators shall also determine the allocation of
costs of such arbitration among the parties, and shall have the right to award
to the prevailing party all costs of arbitration, regardless of whether such
costs are taxable as such under Arizona law, including reasonable attorneys'
fees.
b. Assignment. Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, nor shall
Employee's rights be subject to encumbrance or subject to the claims of JDA's
creditors. Nothing in this Agreement shall prevent the consolidation of JDA
with, or its merger into, any other corporation, or the sale by
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<PAGE> 8
JDA of all or substantially all of its properties or assets; and this Agreement
shall inure to the benefit of, be binding upon and be enforceable by, any
successor surviving or resulting corporation, or other entity to which such
assets shall be transferred. This Agreement shall not be terminated by the
voluntary or involuntary dissolution of JDA.
c. Attorneys' Fees. In the event any party is required to hire an
attorney to enforce any of the terms and conditions of this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees and costs
incurred.
d. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and hand delivered or sent by
certified or registered mail, return receipt requested, to his last known
residence in the case of Employee, or to its principal offices in the case of
JDA. Such notice shall be effective upon receipt in the case of hand-delivery or
two (2) days after deposit in the case of certified or registered mail.
e. Waiver of Breach. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
f. Severability. If any court of competent jurisdiction rules that
any portion of this Agreement is invalid for any reason, the remaining portions
of this Agreement shall nevertheless remain in full force and effect.
g. Non-Disclosure. Employee covenants and agrees to keep all terms
of this Agreement strictly confidential, and that Employee will not disclose any
information concerning this Agreement to anyone, including, but not limited to,
present or prospective employees of JDA, unless compelled to do so by court
order or other lawful authority.
h. Employee Review. By executing this Agreement, Employee represents
and covenants that he has carefully read each and every term and provision
contained in this Agreement in its entirety, that Employee has had an
opportunity to discuss the provisions of this Agreement with an attorney, that
Employee understands, accepts and agrees to be bound by each and every term and
provision of this Agreement and that Employee has executed this Agreement
knowingly, voluntarily and without any duress, compulsion or undue influence.
i. Amendment. This Agreement contains the entire and complete
understanding of the parties with regard to Employee's employment by JDA, and
supersedes any and all prior written or oral agreements of the parties. This
Agreement may not be varied, modified or contradicted by any other Agreement
unless such Agreement is later in time, in writing, and duly executed by the
party to be bound.
j. Governing Law. This Agreement is executed in, and shall be
governed by and construed in accordance with, the laws of the State of Arizona.
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IN WITNESS WHEREOF, the parties have executed duplicate originals of
this Agreement as of the date first hereinabove set forth.
JDA JDA SOFTWARE GROUP, INC., a Delaware
corporation
By /s/ Brent W. Lippman
---------------------------------------
Brent W. Lippman
Chief Executive Officer
Subsidiary JDA SOFTWARE, INC., an Arizona corporation
By /s/ Brent W. Lippman
---------------------------------------
Brent W. Lippman
Chief Executive Officer
Employee /s/ Frederick M. Pakis
------------------------------------------
FREDERICK M. PAKIS
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EXHIBIT A
JDA SOFTWARE GROUP, INC
11811 N. Tatum Blvd. Suite 2000
Phoenix, AZ 85028-1626
January 1, 1998
Mr. Frederick M. Pakis
8600 North 64th Place
Paradise Valley, Arizona 85253
Dear Mr. Pakis:
This letter agreement sets forth and confirms certain understandings
between you and JDA Software Group, Inc., a Delaware corporation ("Company")
with respect to your employment with the Company and your responsibilities and
obligations to the Company, its current and future affiliates (collectively, the
"Affiliates"), and third parties who have provided confidential information to
the Company or any of its Affiliates ("Third-Party Beneficiaries").
You understand that your employment (or continued employment) with the
Company is conditioned upon and in consideration for your entering into this
agreement. This agreement is intended to protect important interests of the
Company, its Affiliates, and Third-Party Beneficiaries, particularly the
interests of those entities in valuable technology, business and confidential
information that the Company and its Affiliates have acquired or obtained access
to over the years. It is hoped that in the long run the terms of this agreement
will be a benefit to all personnel by promoting the welfare and success of the
Company as a leader in the industry and in the community.
During the course of your employment, you will obtain access to
information regarding the business of the Company and its Affiliates which is
confidential to the Company, its Affiliates or Third-Party Beneficiaries
("Confidential Information"). For the purposes of this agreement, "Confidential
Information" includes, but is not limited to:
(1) Application, data base, and other computer software developed or
acquired by the Company or any of its Affiliates, whether now or hereafter
existing, and all modifications, enhancements and versions thereof and all
options available with respect thereto, and all future products developed or
derived therefrom;
(2) Source and object codes, flowcharts, algorithms, coding sheets,
routines, sub-routines, design concepts and related documentation and manuals;
<PAGE> 11
Mr. Frederick M. Pakis
January 1, 1998
Page 2
(3) Marketing techniques and arrangements, mailing lists, purchasing
information, pricing policies, quoting procedures, financial information,
customer and prospect names and requirements, employee, customer, supplier and
distributor data and other materials and information relating to the Company's
business and activities and the manner in which the Company does business;
(4) Discoveries, concepts and ideas including, without limitation, the
nature and results of research and development activities, processes, formulas,
inventions, computer-related equipment or technology, techniques, "know-how,"
designs, drawings and specifications;
(5) Any other materials or information related to the business or
activities of the Company that are not generally known to others engaged in
similar businesses or activities;
(6) All ideas which are derived from or related to your access to or
knowledge of any of the above enumerated materials and information; and
(7) Any materials or information related to the business or activities
of the Third-Party Beneficiaries that are received by the Company or any
Affiliate in confidence or subject to nondisclosure or similar covenants,
including without limitation, confidential, proprietary business records,
financial information, trade secrets, strategies, methods and practices of
licensees of JDA software.
Maintaining the confidentiality of the Confidential Information is of
utmost importance to the Company and its Affiliates. Accordingly, you agree
that, except in the performance of your duties as an employee of the Company,
from and after the date of this agreement (including after the termination of
your relationship with the Company, for whatever reason), you will not disclose
to any person, association, firm, corporation or other entity in any manner,
directly or indirectly, any of the Confidential Information (in whatever form),
received, acquired, or developed by you through your association with the
Company or any Affiliate, or use, or permit any person, association, corporation
or other entity to use, in any manner, directly or indirectly, any such
Confidential Information.
When your relationship with the Company ends (regardless of the
reason), and earlier if the Company requests, you agree to return to the Company
all materials, correspondence, documents and other writings, computer programs
and printouts, and other information in written, graphic, magnetic, optical,
computerized or other form, which relate to or reflect any Confidential
Information, or the business of the Company or any Affiliate, and you agree that
you will not retain any copies thereof, regardless of where or by whom such
materials and information were kept or prepared.
You acknowledge that items (1) through (6) of the Confidential
Information that you make, conceive, discover or develop, whether alone or
jointly with others, at any time during your employment with the Company,
whether at the request or upon the suggestion of the
<PAGE> 12
Mr. Frederick M. Pakis
January 1, 1998
Page 3
Company or otherwise, shall be the sole and exclusive property of the Company;
provided that such items relate to or are useful in connection with any business
now or hereafter carried on or contemplated by the Company or any Affiliate,
including developments or expansions of their present fields of operations. You
agree to promptly disclose to the Company all Confidential Information made,
conceived, discovered, or developed in whole or in part by you for the Company
or any Affiliate during the term of your employment with the Company and to
assign to the Company or such Affiliate any right, title or interest you may
have in such Confidential Information. You agree to execute any instruments and
to do all other things reasonably requested by the Company (both during and
after your employment with the Company) in order to vest more fully in the
Company or such Affiliate all ownership rights in those items hereby transferred
by you to the Company or such Affiliate. If any one or more of such items are
protectable by copyright, and are deemed in any way to fall within the
definition of "work made for hire," as that term is defined in 17 U.S.C. Section
101, such works shall be considered "works made for hire," the copyright of
which shall be owned solely, completely and exclusively by the Company or such
Affiliate. If any one or more of the aforementioned items are protectable by
copyright and are not considered to be included in the categories of works
covered by the "work made for hire" definition contained in 17 U.S.C. Section
101, such works shall be deemed to be assigned and transferred completely and
exclusively to the Company or such affiliate by virtue of your execution of this
letter.
The terms and provisions of this Agreement shall be binding upon you
and the Company, and its successors and assigns and shall inure to the benefit
of you, the Company, its Affiliates and the Third-Party Beneficiaries. The
failure of the Company or any Affiliate at any time or from time to time to
require performance of your obligations under this agreement shall in no manner
affect the right of the Company or such Affiliate to enforce any provisions of
this agreement at a subsequent time, and shall not constitute a waiver of any
rights arising out of any subsequent or prior breach. This agreement (a) may not
be modified orally, but only by written agreement signed by you and the designee
of the Company's Board of Directors; and (b) supersedes any prior agreements on
this subject. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement. Nothing in this Agreement shall be construed as a
guarantee that your employment will continue for any specific period of time.
This Agreement shall be governed by and construed in accordance with the laws of
Arizona.
If this is consistent with your understanding of the terms and
conditions of your employment, please so indicate by signing in the space
provided below.
JDA SOFTWARE GROUP, INC.
By: /s/ Brent W. Lippman
-----------------------
Brent W. Lippman
Chief Executive Officer
<PAGE> 13
Mr. Frederick M. Pakis
January 1, 1998
Page 4
ACCEPTED AND AGREED:
/s/ Frederick M. Parks
- -----------------------
FREDERICK M. PAKIS
<PAGE> 1
EXHIBIT 10.32
OFFICE LEASE
SCOTTSDALE NORTHSIGHT
THIS INDENTURE OF LEASE (the "Lease"), dated as of the 30th day of
April ____, 1998, by and between OPUS WEST CORPORATION, a Minnesota corporation,
owner of the Office Complex (as hereinafter defined), hereinafter referred to as
"Lessor", and JDA SOFTWARE GROUP, INC., a Delaware corporation, hereinafter
referred to as "Lessee".
WITNESSETH:
That Lessor, in consideration of the rents and covenants hereinafter
set forth, does hereby lease and let unto Lessee, and Lessee does hereby hire
and take from Lessor, that certain space shown and designated on the site plan
attached hereto and made a part hereof as Exhibit A, which space shall consist
of not less than 95,000 rentable square feet (the final area to be determined
pursuant to Article XXI, below) and shall be comprised of the entire rentable
areas on the second (2nd) and third (3rd) floors (at a minimum) of the Office
Complex containing approximately 136,000 rentable square feet, to be constructed
by Lessor west and contiguous to 87th Street and south of Raintree Drive,
Scottsdale, Arizona 852__, and, subject to the naming rights of Lessee provided
herein, to be known as Scottsdale Northsight. The aforesaid space leased and let
unto Lessee is hereinafter referred to as the "Premises"; the land (including
all easement areas appurtenant thereto) upon which the building ("Building") of
which the Premises are a part is hereinafter referred to as the "Property"; and
the Property and all buildings and improvements and personal property of Lessor
used in connection with the operation or maintenance thereof located therein and
thereon and the appurtenant parking facilities, if any, are hereinafter called
the "Office Complex".
Lessee hereby accepts this Lease and the Premises upon the covenants
and conditions set forth herein and subject to any encumbrances (but subject
also to the non-disturbance covenants contemplated in Article XV, below),
covenants, conditions, restrictions and other matters of record and all
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations governing and regulating the use of the Premises.
TO HAVE AND TO HOLD THE SAME PREMISES, without any liability or
obligation on the part of Lessor to make any alterations, improvements or
repairs of any kind on or about the Premises, except as expressly provided
herein, for a term of ten (10) years, commencing on the first (1st) day of
April, 1999 (as such date may be extended due to force majeure or Lessee's
Delays, and herein referred to as the "Target Commencement Date"), and ending on
the thirty-first (31st) day of March, 2009, unless sooner terminated, in the
manner provided hereinafter, to be occupied and used by Lessee for general
office purposes and for no other purpose, subject to the covenants and
agreements hereinafter contained. The commencement of the term of this Lease
shall be the later of (i) fifteen (15) days after the delivery of possession of
Premises to Lessee, with the Tenant Improvements substantially completed or (ii)
the delivery to Lessee of an occupancy permit for the Premises. Lessee shall not
be required to accept delivery of possession prior to March 15, 1999. The
commencement of operations (and not mere fixturization) by Lessee in any portion
of the Premises shall be deemed to be acceptance of delivery of the Premises.
<PAGE> 2
ARTICLE I. BASE RENT: In consideration of the leasing aforesaid, Lessee agrees
to pay to Lessor, at c/o Opus West Management Corporation, 2415 East Camelback,
Road, Suite 840, Phoenix, Arizona 85016, or at such other place as Lessor from
time to time may designate in writing, an annual rental equal to the product of
the rentable area of the Premises multiplied by the rental rate for the
applicable portion of the term of this Lease, as hereinafter set forth, which
annual rental may sometimes hereinafter be referred to as the "Base Rent",
payable monthly, in advance, in equal monthly installments, commencing on the
first day of the term and continuing on the first day of each and every month
thereafter for the next succeeding months during the balance of the term:
<TABLE>
<CAPTION>
Applicable Portion Annual Rental Rate Per
of Term Rentable Square Foot
------------------ --------------------
<S> <C>
Months 1 through 60 $13.40
Months 61 through 120 15.41
</TABLE>
If the term commences on a date other than the first day of a calendar month or
ends on a date other than the last day of a calendar month, monthly rent for the
first month of the term or the last month of the term, as the case may be, shall
be prorated based upon the ratio that the number of days in the term within such
month bears to the total number of days in such month.
The amounts set forth above as the Annual Rental Rate per Rentable
Square Foot are subject to reduction, based upon any savings realized in the
"Total Project Costs", pursuant to Exhibit "E" attached hereto. For this
purpose, "Total Project Costs" shall include all costs incurred in the
acquisition, construction, development, and completion of the Office Complex,
including, without limitation, land acquisition and related costs, permits, use
fees, design, survey, engineering, environmental and soils consultants, legal,
financing and interest expenses, commissions, labor, materials, real estate and
other taxes, and allowances of three percent (3%) for a development fee, five
percent (5%) for overhead and profit and five percent (5%) for general
conditions. No other general contractor employed to construct this Office
Complex shall be entitled to charge such fees (although subcontractors and
suppliers may charge reasonable general conditions and overhead and profit
fees). (Notwithstanding the foregoing, to the extent the water use fees exceed
$1.00 per gross square foot based on the area of the Building, and to the extent
such excess results in the actual amount of the "Total Project Costs" (set forth
on Exhibit "E" attached hereto) exceeding the budget "Total Project Costs"
(before the Tenant Improvement Allowance), then such excess shall reduce the
Tenant Improvement Allowance otherwise available to Lessee under this Lease.)
Lessor shall be responsible to supply to the Premises the 2' x 4' layin
parabolic light fixtures, the 2' x 2' layin ceiling tile and the necessary
ceiling grid. To the extent the costs of supplying the materials listed in the
preceding sentence results in the actual amount of the "Total Project Costs"
(set forth on Exhibit "E" attached hereto) exceeding the budget "Total Project
Costs" (before the Tenant Improvement Allowance and the water use fees
referenced above), then such excess shall reduce the Tenant Improvement
Allowance otherwise available to Lessee under this Lease. Accordingly, within
sixty (60) days after the Commencement Date, Lessor shall provide to Lessee a
reconciliation of the Total Project Costs, and a computation of the Base Rent
(with reference to the 10.42% return) and including the 5% adjustment to the
land acquisition (which adjustment shall be subject to reduction in inverse
proportion to the increase in the initial area of the Premises, as designated by
Lessee herein), as illustrated in Exhibit "E". In the event the resulting "rent"
is less than $13.40, then the Base Rent for months 1 through 60 shall be such
"rent", and the Base Rent for months 61 through 120 shall be 115% of the reduced
Base Rent amount. All work which is a component of the Total Project Costs will
be performed on an "open book" basis with Lessee (subject to confidentiality
covenants of Article XXV)
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<PAGE> 3
having access to all cost accounting records and books with respect to such work
upon reasonable advance notice to Lessee.
ARTICLE II. ADDITIONAL RENT: In addition to the Base Rent payable by Lessee
under the provisions of Article I hereof, Lessee shall pay to Lessor "Additional
Rent" as hereinafter provided for in this Article II. All sums under this
Article II and all other sums and charges required to be paid by Lessee under
this Lease (except Base Rent), however denoted, shall be deemed to be
"Additional Rent". If any such amounts or charges are not paid at the time
provided in this Lease, they shall nevertheless be collectible as Additional
Rent with the next installment of Base Rent falling due.
For purposes of this Article II, the parties hereto agree upon the
following Definitions:
A. The term "Lease Year" shall mean each of those calendar years
commencing with and including the year during which the term
of this Lease commences, and ending with the calendar year
during which the term of this Lease (including any extensions
or renewals) terminates.
B. The term "Real Estate Taxes" shall mean and include all
personal property taxes of Lessor relating to Lessor's
personal property located in the Office Complex and used or
useful in connection with the operation and maintenance
thereof, real estate taxes and installments of special
assessments, including interest thereon, relating to the
Property and the Office Complex, and all other governmental
charges, general and special, ordinary and extraordinary,
foreseen as well as unforeseen, of any kind and nature
whatsoever, or other tax, however described, which is levied
or assessed by the United States of America or the state in
which the Office Complex is located or any political
subdivision thereof, against Lessor or all or any part of the
Office Complex as a result of Lessor's ownership of the
Property or the Office Complex, and payable during the
respective Lease Year. It shall not include any net income
tax, estate tax, inheritance tax, excess profit taxes,
franchise taxes, gift taxes, capital stock taxes, other taxes
applied or measured by Lessor's net income, and any items
included as Operating Expenses (defined below).
C. The term "Operating Expenses" shall mean and include all
expenses incurred with respect to the maintenance and
operation of the Property and the Office Complex as determined
by Lessor's accountant in accordance with generally accepted
accounting principles consistently followed, including, but
not limited to property, casualty or liability insurance (and
such other types of insurance typically procured by landlords
for office projects comparable to the Office Complex) premiums
(including insurance premiums for rent insurance), maintenance
and repair costs, steam, electricity, water, sewer, gas and
other utility charges, fuel, lighting (including the tubes,
ballasts and starters of fluorescent parabolic lights), window
washing, janitorial services, trash and rubbish removal, wages
payable to employees of Lessor whose duties are connected with
the operation and maintenance (and specifically excluding
administration) of the Property and the Office Complex (but
only for the portion of their time allocable to work related
to the Office Complex (and specifically excluding
administration)), amounts paid to contractors or
subcontractors for work or services performed in connection
with the operation and maintenance of the Property and the
Office Complex, all costs of uniforms, supplies and materials
used in connection with the operation and maintenance of the
Property and the Office Complex, all payroll taxes,
unemployment insurance costs, vacation allowances and the
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<PAGE> 4
cost of providing disability insurance or benefits, pensions,
profit sharing benefits, hospitalization, retirement or other
so-called fringe benefits, and any other expense imposed on
Lessor or its contractors or subcontractors, pursuant to law
or pursuant to any collective bargaining agreement covering
such employees, all services, supplies, repairs, replacements
or other expenses for maintaining and operating the Office
Complex, reasonable attorneys' fees and costs in connection
with appeal or contest of real estate or other taxes or
levies, and such other expenses as may be ordinarily incurred
in the operation and maintenance of an office complex and not
specifically set forth herein, including reasonable management
fees (which, as charged to Lessee, shall not exceed two and
one-half percent (2 1/2%) of the Base Rent plus Additional
Rent) and the costs of a building office at the Office
Complex. Lessor agrees, however, that a building office shall
not be at the Office Complex, unless located in Phase II, or
otherwise approved by Lessee. Lessee shall have the right to
approve the janitorial service contractor. The term "Operating
Expenses" shall not include any capital improvement to the
Office Complex other than replacements required for normal
maintenance and repair, nor shall it include repairs,
restoration or other work occasioned by fire, windstorm or
other insured casualty, expenses incurred in leasing or
procuring tenants, leasing commissions, advertising expenses,
expenses for renovating space for new tenants, or for any cost
or expense incurred solely for the benefit of a tenant or
occupant at the Office Complex, other than Lessee, legal
expenses incident to enforcement by Lessor of the terms of any
lease, interest or principal payments on any mortgage or other
indebtedness of Lessor, compensation paid to any employee of
Lessor above the grade of building superintendent,
depreciation allowance or expense. Notwithstanding the
foregoing, in the event Lessor installs equipment in or makes
improvements or alterations to the Office Complex which are
for the purpose of reducing energy costs, maintenance costs or
other Operating Expenses (and which, based upon reasonable
evidence, do reduce such costs and expenses) or which are
required under any governmental laws, regulations or
ordinances which were not required at the date of commencement
of the term of this Lease, Lessor may include in Operating
Expenses reasonable charges for interest on such investment
and reasonable charges for depreciation on the same so as to
amortize such investment over the reasonable life of such
equipment, improvement or alteration on a straight line basis.
Operating Expenses shall also be deemed to include expenses
incurred by Lessor in connection with city sidewalks adjacent
to the Property and any pedestrian walkway system (either
above or below ground) or other public facility to which
Lessor or the Office Complex is from time to time subject in
connection with operations of the Property and the Office
Complex. The term "Operating Expenses" shall also include any
assessments or fees or other charges imposed upon the Office
Complex, or upon Lessor as a result of Lessor's ownership of
the Office Complex, under any encumbrances, covenants,
conditions, restrictions or other matters now of record or
hereafter recorded against the Office Complex. Lessor shall
use commercially reasonable efforts to maintain Operating
Expenses (and each component thereof) at competitive, market
rates, and to cooperate with Lessee in this regard, including
re-bidding any service or cost-item deemed, by Lessee, to be
above competitive, market rates. Lessee's failure to assess
any charges to Lessee of any additional, or previously
unbilled Operating Expenses or Real Estate Taxes for a Lease
Year by
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<PAGE> 5
December 31 of the following calendar year shall be deemed a
waiver by Lessee of its right to assess and collect such
additional unbilled amount.
D. The term "Lessee's Pro Rata Share of Real Estate Taxes and
Operating Expenses" shall mean the product of (i) the
percentage obtained by dividing the rentable area of the
Premises by the rentable area of the Office Complex, and (ii)
the Real Estate Taxes and Operating Expenses for the
applicable Lease Year; provided, however, the percentage used
to calculate Lessee's Pro Rata Share of Real Estate Taxes and
Operating Expenses shall be amended each Lease Year to the
greater of the following: (i) if the total rentable area
leased in the Office Complex (pursuant to leases under which
the term has commenced) is ninety-five percent (95%) or less
than the rentable area of the Office Complex, the percentage
shall be that which the rentable area of the Premises bears to
ninety-five percent (95%) of the total rentable area of the
Office Complex for such Lease Year; or (ii) if the total
rentable area leased in the Office Complex (pursuant to leases
under which the term has commenced) is greater than
ninety-five percent (95%), the percentage shall be that which
the rentable area of the Premises bears to the actual rentable
area of the Office Complex for such Lease Year. Rentable area
shall in no event include basement storage space or garage
space.
E. Anything herein to the contrary notwithstanding, it is agreed
that in the event the Office Complex is not fully occupied
during any calendar year or any Lease Year, a reasonable and
equitable adjustment shall be made by Lessor in computing the
Operating Expenses for such year so that the Operating
Expenses shall be adjusted to the amount that would have been
incurred had the Office Complex been fully occupied during
such year. Any such adjustment shall be consistent with
prudent property management practices, shall be disclosed in
writing to Lessee in each Lease Year's reconciliation
statement of Operating Expenses provided to Lessee, and shall
not conflict with the provisions of Article II.D., above.
As to each Lease Year during the term of this Lease, Lessor shall
estimate for each such Lease Year (i) the total amount of Real Estate Taxes and
Operating Expenses; (ii) Lessee's Pro Rata Share of Real Estate Taxes and
Operating Expenses; and (iii) the computation of the annual and monthly rental
payable during such Lease Year as a result of increases or decreases in Lessee's
Pro Rata Share of Real Estate Taxes and Operating Expenses. Said estimate shall
be in writing and shall be delivered or mailed to Lessee at the Premises. Lessor
shall endeavor to deliver said estimate no later than April 30 of each Lease
Year. As of the date of this Lease, Lessor estimates the total amount of Real
Estate Taxes and Operating Expenses for the first lease Year of Operation of the
Office Complex to be approximately $6.00, per rentable square foot.
Lessee shall pay, as Additional Rent, the amount of Lessee's Pro Rata
Share of Real Estate Taxes and Operating Expenses for each Lease Year, so
estimated, in equal monthly installments, in advance, on the first day of each
month during each applicable Lease Year. In the event that said estimate is
delivered to Lessee after the first day of January of the applicable Lease Year,
said amount, so estimated, shall be payable as Additional Rent, in equal monthly
installments, in advance, on the first day of each month over the balance of
such Lease Year, with the number of installments being equal to the number of
full calendar months remaining in such Lease Year.
From time to time during any applicable Lease Year, Lessor may
re-estimate the amount of Real Estate Taxes and Operating Expenses
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<PAGE> 6
and Lessee's Pro Rata Share thereof, and in such event Lessor shall notify
Lessee, in writing, of such re-estimate in the manner above set forth and fix
monthly installments for the then remaining balance of such Lease Year in an
amount sufficient to pay the re-estimated amount over the balance of such Lease
Year after giving credit for payments made by Lessee on the previous estimate.
Upon completion of each Lease Year (and in any event prior to the
immediately succeeding June 30), Lessor shall cause its accountants to determine
the actual amount of Real Estate Taxes and Operating Expenses for such Lease
Year and Lessee's Pro Rata Share thereof and deliver a written certification of
the amounts thereof (in reasonable detail) to Lessee after the end of each Lease
Year. If Lessee has paid less than its Pro Rata Share of Real Estate Taxes and
Operating Expenses for any Lease Year, Lessee shall pay the balance of its Pro
Rata Share of the same within thirty (30) days after the receipt of such
statement. If Lessee has paid more than its Pro Rata Share of Real Estate Taxes
and Operating Expenses for any Lease Year, Lessor shall, at Lessee's option,
either (i) refund such excess, or (ii) credit such excess against the most
current monthly installment or installments due Lessor for its estimate of
Lessee's Pro Rata Share of Real Estate Taxes and Operating Expenses for the next
following Lease Year. A pro rata adjustment shall be made for a fractional Lease
Year occurring during the term of this Lease or any renewal or extension thereof
based upon the number of days of the term of this Lease during said Lease Year
as compared to three hundred sixty-five (365) days and all additional sums
payable by Lessee or credits due Lessee as a result of the provisions of this
Article II shall be adjusted accordingly.
Further, Lessee shall pay, also as Additional Rent, all other sums and
charges required to be paid by Lessee under this Lease, and any tax or excise on
rents, gross receipts tax, transaction privilege tax or other tax, however
described, which is levied or assessed by the United States of America or the
state in which the Office Complex is located or any political subdivision
thereof, or any city or municipality, against Lessor in respect to the Base
Rent, Additional Rent, or other charges reserved under this Lease or as a result
of Lessor's receipt of such rents or other charges accruing under this Lease;
provided, however, Lessee shall have no obligation to pay net income, estate or
inheritance taxes of Lessor.
ARTICLE III. LATE CHARGE AND OVERDUE AMOUNTS - RENT INDEPENDENT: Lessee shall
pay to Lessor, as liquidated damages, a late charge equal to five percent (5%)
of any amount not paid on the date when the same is due to compensate Lessor for
its costs in connection with such late payment by Lessee. Notwithstanding the
preceding sentence, as a condition to Lessor's assessment and collection of said
late charge, the late charge shall not be due unless Lessee fails to pay any
amount within ten (10) days after notice from lessor; however, said condition
shall only apply to the first two (2) delinquencies during any calendar year
during the term of this Lease. The assessment or collection of a late charge
hereunder shall not constitute the waiver by Lessor of a default by Lessee under
this Lease and shall not bar the exercise by Lessor of any rights or remedies
available under this Lease. In addition, any installment of Base Rent,
Additional Rent or other charges to be paid by Lessee accruing under the
provisions of this Lease, which shall not be paid when due, shall bear interest
at the rate of one percent (1%) per month from the date which is thirty (30)
days after the date when the same is due until the same shall be paid, but if
such rate exceeds the maximum interest rate permitted by law, such rate shall be
reduced to the highest rate allowed by law under the circumstances. Lessee's
covenants to pay the Base Rent and the Additional Rent are independent of any
other covenant, condition, provision or agreement herein contained. Nothing
herein contained shall be deemed to suspend or delay the payment of any amount
of money or charge at the time the same becomes due and payable hereunder, or
limit any other remedy of Lessor. Base Rent
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<PAGE> 7
and Additional Rent are sometimes collectively referred to as "rent". Rent shall
be payable without deduction, offset, prior notice or demand, in lawful money of
the United States, except as expressly provided herein.
ARTICLE IV. POSSESSION OF PREMISES: Lessor shall use commercially reasonable and
diligent efforts to construct and deliver the Premises as required by the
provisions of this Lease. If Lessor shall be unable to give possession of the
Premises on the Target Commencement Date because the construction of the Office
Complex or the completion of the Premises has not been sufficiently completed to
make the Premises ready for occupancy or if Lessor shall fail to provide a
certificate of occupancy, or for any other reason, Lessor shall not be subject
to any claims, damages or liabilities for the failure to give possession on said
date except as expressly set forth in this Article IV. Under said circumstances,
the rent reserved and covenant to pay same shall not commence until possession
of the Premises is given or the Premises are ready for occupancy, whichever is
earlier. Failure to give possession on the date of commencement of the term
shall in no way affect the validity of this Lease or the obligations of Lessee
hereunder; provided, however, that if the date of commencement of the initial
term is delayed beyond the Target Commencement Date, the expiration date of the
initial term shall be extended to provide for a full ten-year initial term of
this Lease. If Lessee is given and accepts possession of the Premises on a date
earlier than the date above specified for commencement of the term, and
commences operating its business therefrom (and not merely installing equipment
and fixtures), the rent reserved herein and all covenants, agreements and
obligations herein and the term of this Lease shall commence on the date that
possession of the Premises is given to Lessee.
The acceptance of possession by Lessee shall be deemed conclusively to
establish that the Premises and all other improvements of the Office Complex
required to be constructed by Lessor for use thereof by Lessee hereunder have
been completed at such time to Lessee's satisfaction and in conformity with the
provisions of this Lease in all respects unless Lessee notifies Lessor in
writing within sixty (60) days after commencement of the term as to any items
not completed. Lessee waives any claim as to matters not listed in said notice.
Lessor shall exercise commercially reasonable efforts to complete, repair or
replace any aspect of the Premises set forth in said notice, within sixty (60)
days of said notice. Lessee acknowledges that neither Lessor nor any agent of
Lessor has made any representation or warranty with respect to the Premises or
the Office Complex or with respect to the suitability or fitness of either for
the conduct of Lessee's business or for any other purpose except as expressly
set forth herein. Nothing contained in this Article shall affect the
commencement of the Lease term or the obligation of Lessee to pay any rent due
under this Lease.
On or before February 1, 1999, Lessor shall notify Lessee (said notice
herein referred to as the "Target Notice") of the "Target Delivery Date"
(defined for purposes herein as that date when Lessor shall deliver
non-exclusive possession of the Premises to Lessee with substantial completion
of the Tenant Improvements at which time Lessee may commence installation of its
fixtures and equipment) as well as the Target Commencement Date (which, in
absence of Lessee's written approval, shall be not less than fifteen (15) days
after the Target Delivery Date). If Lessor fails to provide the Target Notice as
required and such failure continues for five (5) business days after notice of
such failure from Lessee (which notice shall describe the obligation of Lessor
to provide said notice, and the resulting termination right (described below) of
Lessee), then Lessee, by subsequent notice (given prior to Lessor's Target
Notice) may elect to, and thereby, terminate this Lease.
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<PAGE> 8
Tenant's existing premises for its corporate headquarters at 11811 N.
Tatum Boulevard (the "Existing Premises"), is governed and created by several
leases, is comprised of 55,977 rentable square feet, is scheduled to expire on
March 31, 1999, and has an average base rent (before addition of the triple net
charges) of $17.33 per rentable square foot. Tenant shall use diligent efforts
to reach an agreement with its existing landlord to allow a holdover of such
existing premises, at no extraordinary penalty or additional cost, until the
Target Commencement Date, and to thereby mitigate the amount of the
reimbursement obligation of Lessor described in the next paragraph. Lessor
acknowledges that as of the date of this Lease, said landlord has refused to
agree to any holdover arrangement. However, Lessor and Lessee shall continue to
cooperate with each other in negotiating with said landlord to provide for
holdover rights deemed acceptable to Lessor and Lessee.
If the Target Notice indicates a Target Delivery Date which is a date
beyond March 15, 1999, or a Target Commencement Date which is a date beyond
April 1, 1999, then Lessor shall assist Lessee to procure substitute premises in
a "Class 'B'" or better quality office project (as such category is generally
understood as of the date hereof), of approximately the same size as the
Existing Premises at an alternate location in the greater metropolitan Phoenix
area for Lessee's benefit, until the Target Commencement Date. Lessor shall
reimburse Lessee (within twenty (20) days of receipt of Lessee's demand
therefore with reasonable, supporting documentation) for Lessee's out of pocket,
verified costs: (i) directly related to relocating to said substitute premises
from the Existing Premises; and (ii) for leasing said substitute premises, to
the extent the total rent rate payable for the substitute premises exceeds the
total rent rate payable at the time of expiration of the leases for the Existing
Premises (collectively, the "Reimbursement Obligation"); the parties intend by
the foregoing provision to have Lessor pay for the additional costs (as
specified in (i) and (ii) above) incurred by Lessee as a result of Lessor's
inability to complete and deliver the Premises by the dates set forth in the
first sentence of this paragraph.
If the actual substantial completion and delivery to Lessee of the
Premises occurs after the Target Delivery Date, and the actual commencement of
the term of this Lease occurs after the Target Commencement Date (as each
"Target" date is set forth in the Target Notice), then Lessor shall also pay to
Lessee, the sum of $40,000.00 for each month (and prorated for any partial
months) transpiring between the Target Commencement Date and the actual
commencement of the term of this Lease, and such amount shall be included (in
addition to the amounts described in the preceding paragraph) in the
"Reimbursement Obligation".
If by December 31, 1998, a construction and building permit has not
been issued for the Building (exclusive of the Tenant Improvements for the
Premises) despite the commercially reasonable efforts of Lessor, then either
party, by notice to the other within fifteen (15) days of such date, may
terminate this Lease, in which case, neither party shall have any further
liability to the other, and Lessor shall have no Reimbursement Obligation.
Further, if by September 15, 1999, the Premises have not been substantially
completed and all required occupancy permits have not been provided, then
Lessor's Reimbursement Obligation shall cease accruing as of said date, and
further Lessee may elect to terminate this Lease by notice to Lessor within
fifteen (15) days of such date.
All obligations of Lessor in this Lease to plan, develop, improve and
construct the Office Complex, including the Premises, are subject to acts of
God, strikes, labor troubles, failure or refusal of governmental authorities to
timely issue permits or approvals or conduct reviews or inspections (despite the
commercially reasonable efforts of Lessor), civil disorder, inability to procure
materials (despite the commercially reasonable efforts of Lessor), restrictive
governmental laws or regulations,
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<PAGE> 9
acts or omissions of Lessee which interfere with the discharge by Lessor of its
obligations, the failure or refusal of Lessee to act or respond in a timely
manner, or other causes beyond Lessor's reasonable control ("force majeure"). To
the extent the substantial completion of the Office Complex, including the
Premises, is delayed because of causes force majeure, then the dates applicable
for the Target Delivery Date, the Target Commencement Date, the dates set forth
in the preceding paragraph, and all other dates set forth in this Lease which
relate to the construction and delivery of the Office Complex and the Premises,
shall be postponed in an amount corresponding to the amount of the delays, and
in addition, any Reimbursement Obligation of Lessor thereby resulting shall not
be the responsibility of Lessor, notwithstanding anything in this Lease to the
contrary.
Lessee acknowledges that except for certain conduits, trenches and
related facilities to be constructed by Lessor (to the extent described under
the plans and specifications described on Exhibit "F", hereto) intended to
accommodate the telephone service to the Office Complex, the failure to have
operating telephone service to the Office Complex shall not affect the
commencement of the term of this Lease, or the determination of the substantial
completion of the Premises.
ARTICLE V. SERVICES: Subject to the provisions of Article II hereof, Lessor
shall provide the following services on all days excepting Saturdays, Sundays,
holidays, and as otherwise stated:
A. Nightly janitorial services Monday through Friday in and about
the Premises; provided, however, Lessor may, but shall not be
obligated to, elect to furnish janitorial service on Saturday
or Sunday in lieu of furnishing such service on Friday. The
janitorial services furnished to the Premises shall include
normal cleaning and upkeep services, normal removal of trash
and rubbish, vacuuming and spot cleaning of carpeting,
maintenance of towels, tissue and other restroom supplies and
such other work as is customarily performed in connection with
such nightly janitorial services in an office complex similar
in construction, general location, use and occupancy to the
Office Complex. Lessor shall also provide periodic interior
and exterior window washing and cleaning and waxing of
uncarpeted floors in accordance with Lessor's reasonable
schedule.
B. Electrical energy will be provided for lighting and operation
of office machines, air conditioning, and heating as required
for normal office usage during the normal working hours set
forth in subparagraph C of this Article. Office machines will
include electric typewriters and other office equipment of
similar low electrical consumption. This does not include
special lighting in excess of building standard (2.2 watts per
square foot installed), or any other item of electrical
equipment which singularly consumes more than 0.5 kilowatts
per hour at rated capacity or requires a voltage other than
one hundred twenty (120) volts single phase. If electrical
consumption exceeds the requirement of normal office use as
specified above (such as in a computer room), Lessor reserves
the right to include and Lessee shall pay upon receipt of
invoice, a charge based on the average cost per unit of
electricity for the Office Complex applied to the excess use
determined by an engineer selected by Lessor and/or by
submeter. At the option of either Lessor or Lessee, a submeter
may be provided and installed at Lessee's expense, if
allowable under law and local utility regulations. Lessee
shall pay the cost of all equipment and of the installation of
all facilities provided and installed by Lessor to provide
such electrical capacity in excess of the above normal office
standards. Lessee shall not make any installation requiring
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<PAGE> 10
excess electrical energy without first receiving Lessor's
written consent thereto, which shall not be unreasonably
withheld; and provided further that Lessee shall pay all costs
of installation of facilities necessary to furnish such excess
capacity and for such increased electrical usage. All electric
lighting bulbs for specialized lighting within the Premises
shall be replaced by Lessor at the expense of Lessee and shall
be paid by Lessee upon receipt of invoice from Lessor as rent.
The electrical service required of Lessor by this subparagraph
B, and electricity for other uses consented to by Lessor,
shall be available at all times subject to the requirement
that Lessee pay for usage in excess of the electrical service
to be provided pursuant to the terms of this subparagraph B.
C. Heat and air conditioning, when necessary in Lessor's
reasonable judgment (consistent with standards of prudent
property management applicable for comparable office
projects), for normal comfort, from 7 o'clock A.M. to 6
o'clock P.M. on non-holiday weekdays, and on Saturdays which
are not holidays, from 7 o'clock A.M. to 1 o'clock P.M. Air
conditioning to the Premises is to be provided based on
standard lighting and normal incidental office use only.
During other hours, Lessor shall provide such amounts of
heating and air conditioning within designated and configured
(based upon the HVAC distribution system) zones within the
Premises,upon reasonable advance notice from Lessee to Lessor,
which advance notice shall not be less than twenty-four (24)
hours; and Lessee, upon presentation of a bill therefor, shall
pay Lessor for such service on an hourly basis at the then
prevailing rates as established by Lessor. As of the date of
this Lease, said rate shall be $2.50 per hour per air
distribution zone, subject to reasonable provider increases as
a result of increased utility or other charges.
D. Hot and cold water from the regular building outlets for
lavatory and restrooms and for drinking purposes, at all
times.
E. Passenger elevator service in common with other tenants to be
provided by automatic elevators, at all times. Lessor shall
have the right to restrict the use of elevators for freight
purposes to the freight elevator and to hours to be determined
by Lessor. Lessor shall have the right to limit the number of
elevators to be in operation on Saturdays, Sundays and
holidays.
F. Maintenance in good order, condition and repair of the parking
facilities and all driveways leading thereto and keeping the
same free from any unreasonable accumulation of snow. Lessor
shall keep and maintain the landscaped area and parking
facilities in a neat and orderly condition. Lessor reserves
the right to designate areas of the appurtenant parking
facilities where Lessee, its agents, employees and invitees
shall park and may exclude Lessee and its agents, employees
and invitees from parking in other areas as designated by
Lessor; provided, however, Lessor shall not be liable to
Lessee for the failure of any tenant or its invitees,
employees, agents or customers to abide by Lessor's
designations or restrictions. Lessee is aware that Lessor may
be required to designate certain parking stalls due to
governmental request or order to accommodate car or van
poolers.
G. Lessee shall be solely responsible for the direct payment of
all utilities which are separately metered or separately
charged (electric, natural gas (if any), telephone, cable
television (if any) and any other special
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utility requirements of Lessee), if any, to the Premises or to
Lessee and shall make such payments to the respective utility
companies prior to delinquency. Such amounts shall not be
included as Operating Expenses.
No interruption in, or temporary stoppage of, any of the aforesaid
services caused by repairs, renewals, improvements, alterations, strikes,
lockouts, labor controversy, accident, inability to obtain fuel or supplies, or
other causes shall be deemed an eviction or disturbance of Lessee's use and
possession, or render Lessor liable for damages, by abatement of rent or
otherwise or relieve Lessee from any obligation herein set forth; provided,
however, that if there is a localized interruption in, or localized temporary
stoppage of, any of the aforesaid services in the Premises (as opposed to an
interruption in the general vicinity of the Office Complex not under Lessor's
control), and if such interruption or temporary stoppage is within the sole
control of Lessor and, after notice to Lessor, Lessor does not diligently
attempt and continue diligent attempts to cure such interruption or temporary
stoppage, then Lessee shall be entitled to a reasonable abatement of Base Rent
and Additional Rent if after twenty-four (24) hours after Lessor's receipt of
notice, Lessor's efforts to cure same have failed. In no event shall Lessor be
required to provide any heat, air conditioning, electricity or other service in
excess of that permitted by voluntary or involuntary guidelines or laws,
ordinances or regulations of governmental authority. Lessor reserves the right,
from time to time, to make reasonable and non-discriminatory modifications to
the above standards for utilities and services.
Lessee shall not, without the prior written consent of Lessor, use any
apparatus or device in or about the Premises which shall cause any substantial
noise or vibration or which will increase the amount of electricity or water, if
any, usually furnished or supplied for use of the Premises as general office
space. Lessee shall not connect with electric current or water pipes, except
through existing electrical or water outlets already in the Premises, any
apparatus or device for the purposes of using electric current or water.
ARTICLE VI. INSURANCE: Lessor shall keep the Office Complex insured for the
benefit of Lessor in an amount equivalent to the full replacement value thereof
(excluding foundation, grading and excavation costs and a commercially
reasonable deductible) against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as
are now or may be customarily covered with respect to
buildings and improvements similar in construction, general
location, use, occupancy and design to the Office Complex,
including, but without limiting the generality of the
foregoing, windstorms, hail, explosion, vandalism, malicious
mischief, civil commotion and such other coverage as may be
deemed necessary by Lessor, provided such additional coverage
is obtainable and provided such additional coverage is such as
is customarily carried with respect to buildings and
improvements similar in construction, general location, use,
occupancy and design to the Office Complex.
These insurance provisions shall in no way limit or modify any of the
obligations of Lessee under any provision of this Lease. Lessor agrees that such
policy or policies of insurance shall permit releases of liability as provided
herein and/or waiver of subrogation clause as to Lessee, and Lessor waives,
releases and discharges Lessee from all claims or demands whatsoever which
Lessor may have or acquire arising out of damage to or destruction of the Office
Complex or loss of use thereof occasioned by fire or other casualty, whether
such claim or demand may arise because of the negligence or fault of Lessee or
its agents, employees, cus-
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<PAGE> 12
tomers or business invitees, or otherwise, and Lessor agrees to look to the
insurance coverage only in the event of such loss. Insurance premiums paid
thereon shall be a portion of the "Operating Expenses" described in Article II
hereof. Notwithstanding the above, in the event a release of Lessee or waiver of
subrogation as to Lessee (without invalidation of coverage) becomes generally
unavailable in insurance policies as to commercial office projects similar to
the Office Complex, the release and any waiver of subrogation above provided for
shall cease upon written notice by Lessor to Lessee of such event. Thereafter,
Lessee may, upon written notice to Lessor, require Lessor to secure a waiver of
subrogation as to Lessee if (a) a right to waive subrogation as to Lessee
thereafter becomes available without increased premium, or (b) a right to waive
subrogation as to Lessee becomes available and Lessee pays any increased premium
required in connection therewith.
Lessee shall keep all of its machinery, equipment, furniture, fixtures,
personal property (including also property under the care, custody or control of
Lessee) and business interests which may be located in, upon or about the
Premises insured for the benefit of Lessee in an amount equivalent to the full
replacement value or insurable value thereof against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as
are now, or may in the future be, customarily covered with
respect to a tenant's machinery, equipment, furniture,
fixtures, personal property and business located in a building
similar in construction, general location, use, occupancy and
design to the Office Complex, including, but without limiting
the generality of the foregoing, windstorms, hail, explosions,
vandalism, theft, malicious mischief, civil commotion and such
other coverage as Lessee may deem appropriate or necessary.
Lessee agrees that such policy or policies of insurance shall permit
releases of liability as provided herein and/or waiver of subrogation clause as
to Lessor, and Lessee waives, releases and discharges Lessor and its agents,
employees and contractors from all claims or demands whatsoever which Lessee may
have or acquire arising out of damage to or destruction of the machinery,
equipment, furniture, fixtures, personal property and loss of use thereof
occasioned by fire or other casualty, whether such claim or demand may arise
because of the negligence or fault of Lessor or its agents, employees,
contractors or otherwise, and Lessee agrees to look to the insurance coverage
only in the event of such loss.
Lessee shall be permitted to "self-insure" or to establish deductible
limits under such policies, provided, however, that the amount of such retained
risk shall not exceed, at any time, ten percent (10%) of Lessee's Tangible Net
Worth (defined in the last paragraph of this Article), as the same may change
from time to time. Lessee agrees that such policy or policies of insurance shall
permit releases of liability as provided herein and/or waiver of subrogation
clause as to Lessor, and Lessee waives, releases and discharges Lessor and its
agents, employees and contractors from all claims or demands whatsoever which
Lessee may have or acquire arising out of damage to or destruction of the
machinery, equipment, furniture, fixtures, personal property and loss of use
thereof occasioned by fire or other casualty, whether such claim or demand may
arise because of the negligence or fault of Lessor or its agents, employees,
contractors or otherwise, and Lessee agrees to look to the insurance coverage
only in the event of such loss.
Lessor shall, as a portion of the Operating Expenses defined in Article
II, maintain, for its benefit and the benefit of its managing agent, general
public liability insurance against claims for personal injury, death or property
damage occurring upon, in or about the Complex, such insurance to afford
protection to Lessor
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<PAGE> 13
and its managing agent in such amounts as Lessor deems commercially reasonable
and comparable to the amounts maintained for projects similar to the Complex,
but in no event less than $2,000,000.00 of total insurance coverage for the
commercial general liability policy.
Lessee shall, at Lessee's sole cost and expense but for the mutual
benefit of Lessor, its managing agent and Lessee, maintain general public
liability insurance against claims for personal injury, death or property damage
occurring upon, in or about the Premises, such insurance to afford protection to
Lessor, its managing agent and Lessee to the limit of not less than One Million
and No/100 Dollars ($1,000,000.00) in respect to the injury or death to a single
person, and to the limit of not less than Two Million and No/100 Dollars
($2,000,000.00) in respect to any one accident, and to the limit of not less
than Five Hundred Thousand and No/100 Dollars ($500,000.00) in respect to any
property damage or any greater amounts, if Lessee procures insurance with
greater limits. Such policies of insurance shall be written in companies
reasonably satisfactory to Lessor, naming Lessor and its managing agent as
additional insureds thereunder, and such policies, or a memorandum or
certificate of such insurance, shall be delivered to Lessor, which certificate
shall require the insurance underwriter to notify Lessor, not less than thirty
(30) days prior to any cancellation or termination of such insurance coverage.
At such time as insurance limits required of tenants in office buildings in the
area in which the Office Complex is located are generally increased to greater
amounts, Lessor shall have the right to require such greater limits as may then
be customary. Lessee agrees to include in such policy the contractual liability
coverage insuring Lessee's indemnification obligations provided for herein. Any
such coverage shall be deemed primary to any liability coverage secured by
Lessor. Such insurance shall also afford coverage for all claims based upon
acts, omissions, injury or damage, which claims occurred or arose (or the onset
of which occurred or arose) in whole or in part during the policy period.
Lessee agrees to indemnify, protect, defend and hold harmless Lessor
and Lessor's partners, shareholders, employees, lender and managing agent
harmless from and against any and all claims, losses, costs, liabilities,
actions and damages, including without limitation attorneys' fees and costs, by
or on behalf of any person or persons, firm or firms, corporation or
corporations, arising from any breach or default on the part of Lessee in the
performance of any covenant or agreement on the part of Lessee to be performed,
pursuant to the terms of this Lease, or arising from any act or negligence on
the part of Lessee or its agents, contractors, servants, employees or licensees,
or arising from any accident, injury or damage to the extent caused by Lessee or
its agents or employees to any person, firm or corporation occurring during the
term of this Lease or any renewal thereof, in or about the Premises and the
Office Complex, and from and against all costs, reasonable counsel fees,
expenses and liabilities incurred in or about any such claim or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor or its managing agent, by reason of any such claim, Lessee upon
notice from Lessor, covenants to resist or defend such action or proceeding by
counsel reasonably satisfactory to Lessor.
Lessee agrees, to the extent not expressly prohibited by law, that
Lessor and Lessor's agents, employees and servants shall not be liable, and
Lessee waives all claims for damage to property and business sustained during
the term of this Lease by Lessee occurring in or about the Office Complex,
resulting directly or indirectly from any existing or future condition, defect,
matter or thing in the Premises, the Office Complex or any part thereof, or from
equipment or appurtenances becoming out of repair, or from accident, or from any
occurrence or act or omission of Lessor, Lessor's agents, employees or servants
(other than as a result of the gross negligence or willful misconduct of Lessor,
its agents, employees or servants), any tenant or occupant of the Office
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<PAGE> 14
Complex or any other person. This paragraph shall apply especially, but not
exclusively, to damage caused as aforesaid or by the flooding of basements or
other subsurface areas, or by refrigerators, sprinkling devices, air
conditioning apparatus, water, snow, frost, steam, excessive heat or cold,
falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or
leaking of pipes or plumbing fixtures, and shall apply equally, whether any such
damage results from the act or omission of other tenants or occupants in the
Office Complex or any other persons, and whether such damage be caused by or
result from any of the aforesaid, or shall be caused by or result from other
circumstances of a similar or dissimilar nature.
Anything herein to the contrary notwithstanding, in the event any
damage to the Office Complex results from any act or omission of Lessee or its
agents, employees or invitees, and all or any portion of Lessor's loss is within
the "deductible" portion of Lessor's insurance coverage, Lessee shall pay to
Lessor the amount of such deductible loss (not to exceed $1,000 per event). All
property in the Office Complex or on the Premises belonging to Lessee or its
agents, employees or invitees or otherwise located at the Premises, shall be at
the risk of Lessee only, and Lessor shall not be liable for damage thereto or
theft, misappropriation or loss thereof, and Lessee agrees to defend and hold
Lessor and Lessor's agents, employees and servants harmless and indemnify them
against claims and liability for injuries to such property. Lessee shall not do
or permit anything to be done in or about the Premises nor bring or keep
anything therein which will in any way increase the existing rate of or affect
in any other way any fire or other insurance upon the Office Complex or any of
its contents, or cause a cancellation of any insurance policy covering the
Office Complex or any of its contents. Notwithstanding anything to the contrary
contained herein, Lessee shall within thirty (30) days of demand, reimburse
Lessor for the full amount of any additional premium charged for such policy by
reason of Lessee's failure to comply with the provisions of this paragraph, it
being understood that such demand for reimbursement shall not be Lessor's
exclusive remedy. Lessee shall promptly, upon demand, reimburse Lessor for any
additional premium charged for any such policy by reason of Lessee's failure to
comply with the provisions of this Article.
In the event Lessee fails to provide Lessor with evidence of insurance
required under this Article VI, Lessor may, but shall not be obligated to, and
after ten (10) days demand upon Lessee, and without waiving or releasing Lessee
from any obligation contained in this Lease, obtain such insurance and Lessee
agrees to repay, upon demand, all such sums incurred by Lessor in effecting such
insurance. All such sums shall become a part of the Additional Rent payable
hereunder, but no such payment by Lessor shall relieve Lessee from any default
under this Lease.
For purposes hereof, "Tangible Net Worth" shall mean equity of Lessee
and its subsidiaries on a consolidated basis determined in accordance with GAAP,
minus the net book value of all intangible assets including, without limitation,
good will, trademarks, trade names, service marks, brand names, copyrights,
patents and unamortized debt discount and expense, organizational expenses and
the excess of the equity in any subsidiary over the cost of the investment in
such subsidiary.
ARTICLE VII. CERTAIN RIGHTS RESERVED BY LESSOR: Lessor reserves the following
rights exercisable without notice and without liability to Lessee and without
effecting an eviction, constructive or actual, or disturbance of Lessee's use or
possession, or giving rise to any claim for setoff or abatement of rent:
A. Subject to Article XXXVI, below, to control, install, affix
and maintain any and all signs on the Property, or on the
exterior of the Office Complex and in the corridors, entrances
and other common areas thereof,
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<PAGE> 15
except those signs within the Premises not visible from
outside the Premises.
B. To reasonably designate, limit, restrict and control any
service in or to the Office Complex, including but not limited
to the designation of sources from which Lessee may obtain
sign painting and lettering (however, Lessor agrees not to
unreasonably withhold its consent to Lessee's designation).
Any restriction, designation, limitation or control imposed by
reason of this subparagraph shall be imposed uniformly on
Lessee and other tenants occupying space in the Office
Complex, and pursuant to the comprehensive sign program,
applicable to the Office Complex, which shall be subject to
Lessee's reasonable consent.
C. To retain at all times and to use in appropriate instances
(which, except during an emergency, shall require reasonable
prior notice) keys to all doors within and into the Premises.
No locks shall be changed without the prior written consent of
Lessor. This provision shall not apply to Lessee's safes or
other areas maintained by Lessee for the safety and security
of monies, securities, negotiable instruments or similar
items.
D. To make repairs, improvements, alterations, additions or
installations, whether structural or otherwise, in and about
the Office Complex, or any part thereof, and for such purposes
to enter upon the Premises (after reasonable advance notice of
twenty-four (24) hours), and during the continuation of any of
said work, to temporarily close doors, entryways, public
spaces and corridors in the Office Complex and to interrupt or
temporarily suspend services and facilities.
E. To restrict or prohibit vending or dispensing machines of any
kind in or about the Premises; provided, however, Lessor
consents to the installation of vending machines in the pantry
or kitchen areas of the Premises for the dispensing of soda
and other similar drinks and snack foods to only Lessee's
employees, clients and visitors.
F. To approve the weight, size and location of safes and other
heavy equipment and articles in and about the Premises and the
Office Complex and to require all such items to be moved into
and out of the Office Complex and the Premises only at such
times and in such manner as Lessor shall direct in writing.
G. To grant to anyone the exclusive right to conduct any
particular business or undertaking in the Office Complex other
than general office use, for only the following businesses:
banks, savings and loan associations, candy and/or tobacco
shops, and other stores selling retail products.
Lessor and its agents may enter the Premises at any time in case of
emergency and shall have the right to use any and all means which Lessor may
deem proper to open such doors during an emergency in order to obtain entry to
the Premises. Any entry to the Premises obtained by Lessor in the event of an
emergency shall not, under any circumstances, be construed or deemed to be a
forcible or unlawful entry into, or detainer of, the Premises, or to be an
eviction of Lessee from the Premises or any portion thereof.
Lessee shall permit Lessor and its agents twenty-four (24) hours
advance notice, to enter and pass through the Premises or any part thereof at
reasonable times during normal business hours to: (a) post notices of
nonresponsibility; and (b) exhibit the Premises to holders of encumbrances on
the interest of Lessor under the
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<PAGE> 16
Lease and to prospective purchasers, mortgagees or lessees of the Office
Complex.
All covenants and agreements to be performed by Lessee under any of the
terms of this Lease shall be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent. If Lessee shall fail to pay any sum
of money (other than rent due Lessor) required to be paid by it hereunder or
shall fail to perform any other act on its part to be performed hereunder,
including, but not limited to, the failure to commence and complete repairs
promptly and adequately, and the failure to remove any liens or otherwise to
perform any act or fulfill any obligation required of Lessee under this Lease,
Lessor may, but shall not be obligated to do so, without waiving or releasing
Lessee from any obligations of Lessee, and upon reasonable prior notice to
Lessee, make any such payment or perform any such act on Lessee's part to be
made or performed as in this Lease provided. All sums so paid by Lessor and all
necessary incidental costs, together with an administrative charge in the amount
of ten percent (10%) of any costs incurred by Lessor, and interest thereon at
the rate set forth in Article III accruing from the date paid or incurred by
Lessor until reimbursed to Lessor by Lessee, shall be payable to Lessor by
Lessee as rent on demand and Lessee covenants to pay all such sums. Lessor shall
have (in addition to any other right or remedy of Lessor) the same rights and
remedies in the event of Lessee's nonpayment of such sums, as in the case of
default by Lessee in the payment of rent to Lessor
ARTICLE VIII. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make any
improvements, alterations, additions or installations in excess of $10,000.00 or
otherwise affecting the Building structure or systems, in or to the Premises
(hereinafter referred to as "Work") without Lessor's prior written consent,
which consent may not be unreasonably withheld. Along with any request for
Lessor's consent and before commencement of the Work or delivery of any
materials to be used in the Work to the Premises or into the Office Complex,
Lessee shall furnish Lessor with plans and specifications, names and addresses
of contractors, copies of contracts, necessary permits and licenses, an
indemnification in such form and amount as may be reasonably satisfactory to
Lessor, and for Work estimated to cost $100,000.00 or more, a performance bond
executed by a commercial surety reasonably satisfactory to Lessor in an amount
equal to the cost of the Work and for the payment of all liens for labor and
material arising therefrom. Lessee agrees to defend and hold Lessor forever
harmless from any and all claims and liabilities of any kind and description
which may arise out of or be connected in any way with said improvements,
alterations, additions or installations. All Work shall be done only by
contractors or mechanics reasonably approved by Lessor and at such time and in
such manner as Lessor may from time to time reasonably designate. All Work done
by Lessee or its agents, employees or contractors shall be done in such a manner
as to avoid labor disputes. Lessee shall pay the cost of all such improvements,
alterations, additions or installations (including a reasonable charge, not in
excess of prevailing market rates, for Lessor's services and for Lessor's
inspection and engineering time) and the cost of painting, restoring or
repairing the Premises and the Office Complex occasioned by such improvements,
alterations, additions or installations. Upon completion of the Work, Lessee
shall furnish Lessor with contractor's affidavits, full and final waivers of
liens and receipted bills covering all labor and materials expended and used.
The Work shall comply with all insurance requirements and all laws, ordinances,
rules and regulations of all governmental authorities and shall be constructed
in a good and workmanlike manner. Lessee shall permit Lessor to inspect
construction operations in connection with the Work. Lessee shall not be allowed
to make any improvements, alterations, additions or installations if such action
results or would result in a labor dispute or otherwise would materially
interfere with Lessor's operation of the Office Complex. Lessor, by written
notice to Lessee given at or prior to termination of this Lease, may require
Lessee, at
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<PAGE> 17
Lessee's sole cost and expense, to remove any improvements, alterations,
additions or installations which are not typical of similar office projects used
for general office purposes, installed by Lessee in the Premises and to repair
or restore any damage caused by the installation and removal of such
improvements, alterations, additions or installations; provided, however, the
only improvements, alterations, additions or installations which Lessee shall
remove shall be those specified in Lessor's notice. Lessee shall keep the
Premises and the Office Complex free from any liens arising out of any work
performed, material furnished or obligations incurred by Lessee, and shall
indemnify, protect, defend and hold harmless Lessor from any liens and
encumbrances arising out of any work performed or material furnished by or at
the direction of Lessee. In the event that Lessee shall not, within twenty (20)
days following the imposition of any such lien, cause such lien to be released
of record by payment or posting of a proper bond, Lessor shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of and/or defense against the claim giving rise to
such lien. All such sums paid by Lessor and all expenses incurred by it in
connection therewith, including attorneys' fees and costs, shall be payable as
Additional Rent to Lessor by Lessee on demand with interest at the rate provided
in Article III accruing from the date paid or incurred by Lessor until
reimbursed to Lessor by Lessee.
ARTICLE IX. REPAIRS: Subject to Article VI hereof, Lessee shall, during the term
of this Lease, at Lessee's expense, keep the Premises in as good order,
condition and repair as they were at the time Lessee took possession of the
same, reasonable wear and tear and damage from fire and other casualties
excepted. Lessee shall keep the Premises in a neat and sanitary condition, and
Lessee shall not commit any nuisance or waste on the Premises or in, on or about
the Office Complex, throw foreign substances in the plumbing facilities, or
waste any of the utilities furnished by the Lessor. All uninsured damage or
injury to the Premises or to the Office Complex caused by Lessee moving
furniture, fixtures, equipment or other devices in or out of the Premises or the
Office Complex or by installation or removal of furniture, fixtures, equipment,
devices or other property of Lessee or its agents, contractors, servants or
employees, due to carelessness, omission, neglect, improper conduct or other
cause of Lessee or its servants, employees, agents, visitors or licensees, shall
be repaired, restored and replaced promptly by Lessee at its sole cost and
expense to the satisfaction of Lessor. All repairs, restorations and
replacements shall be in quality and class equal to the original work and shall
comply with all requirements of this Lease.
Subject to Article II hereof and to Lessee's specific obligations,
except to the extent of any damage caused by the fault or negligence of Lessee,
Lessor shall maintain and keep in good order, condition and repair all common
areas of the Office Complex and the structural portions of the Office Complex,
including the outer walls, roof, floors, foundations, load bearing members,
trusses, and joists, the HVAC facilities serving the Premises, and the portions
of the plumbing and electrical lines located outside of the Premises which serve
the Premises.
Lessor and its employees and agents shall have the right to enter the
Premises at any reasonable time or times after twenty-four (24) hours advance
notice, for the purpose of inspection, cleaning, repairs, altering or improving
the same but nothing contained herein shall be construed as imposing any
obligation on Lessor to make any repairs, improvements, alterations, additions
or installations which are the obligation of Lessee.
Either party may give written notice to the other party at least thirty
(30) days prior to vacating the Premises for the express purpose of arranging a
meeting for a joint inspection of the Premises.
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<PAGE> 18
ARTICLE X. ASSIGNMENT AND SUBLETTING: Lessee shall not, without the prior
written consent of Lessor, (i) transfer, pledge, mortgage or assign this Lease
or any interest hereunder; (ii) permit any assignment of this Lease by voluntary
act, operation of law or otherwise; (iii) sublet the Premises or any part
thereof; or (iv) permit the use of the Premises by any parties other than Lessee
and its agents and employees. Notwithstanding the foregoing, a sublease or
assignment to a subsidiary of Lessee, or an arrangement resulting from a merger
or reorganization in which the surviving entity has a "Tangible Net Worth"
(defined in Article VI of not less than Lessee's immediately prior to the merger
or reorganization, shall not require the consent of Lessor. Lessee shall seek
such written consent of Lessor by a written request therefor, setting forth such
information as Lessor may deem necessary. Lessee shall, by notice in writing,
advise Lessor of Lessee's intention, from, on and after a stated date (which
shall not be less than twenty (20) days after the date of Lessee's notice), to
assign this Lease or to sublet any part or all of the Premises for the balance
or any part of the term. Lessee's notice shall include all of the terms of the
proposed assignment or sublease and shall state the consideration therefor.
Lessee's notice shall state the name and address of the proposed assignee or
subtenant and a true and complete copy of the proposed assignment or sublease
shall be delivered to Lessor with Lessee's notice.
Lessor, upon receiving Lessee's notice with respect to any such space,
shall not unreasonably withhold its consent to Lessee's assignment of the Lease
or subletting such space to the party identified in Lessee's notice; provided,
however, that in the event Lessor consents to any such assignment or subletting,
and as a condition thereto, Lessee shall pay to Lessor fifty percent (50%) of
all profit derived by Lessee from such assignment or subletting. For purposes of
the foregoing, profit shall be deemed to include, but shall not be limited to,
the amount of all rent payable by such assignee or sublessee in excess of the
Base Rent, and rent adjustments, payable by Lessee under this Lease after
recovery by Lessee of its reasonable and necessary costs incurred in procuring
the sublease or assignment. If a part of the consideration for such assignment
or subletting shall be payable other than in cash, the payment to Lessor shall
be in cash for its share of any non-cash consideration based upon the fair
market value thereof.
Lessee shall and hereby agrees that it will furnish to Lessor upon
request from Lessor a complete statement, certified by an independent certified
public accountant, setting forth in detail the computation of all profit derived
and to be derived from such assignment or subletting, such computation to be
made in accordance with generally accepted accounting principles. Lessee agrees
that Lessor and its authorized representatives shall be given access at all
reasonable times to the books, records and papers of Lessee relating to any such
assignment or subletting, and Lessor shall have the right to make copies
thereof. The percentage of Lessee's profit due Lessor hereunder shall be paid by
Lessee to Lessor within ten (10) business days of receipt by Lessee of all
payments made from time to time by such assignee or sublessee to Lessee.
For purposes of the foregoing, any change in the partners of Lessee, if
Lessee is a partnership, or, if Lessee is a corporation, any transfer of any or
all of the shares of stock of Lessee by sale, assignment, operation of law or
otherwise resulting in a change in the present control of such corporation by
the person or persons owning a controlling portion of such shares as of the date
of this Lease, shall be deemed to be an assignment within the meaning of this
Article X.
Unless the express, written consent of Lessor is given regarding
releasing Lessee, any subletting or assignment hereunder shall not release or
discharge Lessee of or from any liability, whether past, present or future,
under this Lease, and Lessee shall continue fully liable thereunder. Lessor
shall have no obligation to agree to such release or discharge. The subtenant or
subtenants
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or assignee shall agree in a form satisfactory to Lessor to comply with and be
bound by all of the terms, covenants, conditions, provisions and agreements of
this Lease to the extent of the space sublet or assigned, and Lessee shall
deliver to Lessor promptly after execution an executed copy of each such
sublease or assignment and an agreement of compliance by each such subtenant or
assignee. Consent by Lessor to any assignment of this Lease or to any subletting
of the Premises shall not be a waiver of Lessor's rights under this Article X as
to any subsequent assignment or subletting.
Any sale, assignment, mortgage, transfer or subletting of this Lease
which is not in compliance with the provisions of this Article X shall be of no
effect and void. Lessor's right to assign its interest in this Lease shall
remain unqualified. Lessor may make a reasonable charge to Lessee for any
reasonable attorneys' fees or expenses incident to a review of any documentation
related to any proposed assignment or subletting by Lessee.
Notwithstanding anything to the contrary in this Lease, Lessee shall
not assign its rights under this Lease or sublet all or any part of the Premises
to a person, firm or corporation which is (or, immediately prior to such
subletting or assignment, was) a tenant or occupant of the Office Complex owned
by Lessor.
The consent of Lessor to a transfer may not be unreasonably withheld,
provided that should Lessor withhold its consent for any of the following
reasons, which list is not exclusive, such withholding shall be deemed to be
reasonable:
(a) A proposed transferee whose occupation of the Premises would
cause a diminution in the reputation of the Office Complex or
the other businesses located therein;
(b) A proposed transferee whose impact on the common areas or the
other occupants of the Office Complex would be
disadvantageous; or
(c) A proposed transferee whose occupancy will require any
variation in the terms and conditions of this Lease.
ARTICLE XI. DAMAGE BY FIRE OR OTHER CASUALTY: If fire or other casualty shall
render the whole or any material portion of the Premises untenantable, and the
Premises can reasonably be expected to be made tenantable within one hundred
twenty (120) days from the date of such event, then Lessor shall repair and
restore the Premises and the Office Complex to as near their condition prior to
the fire or other casualty as is reasonably possible within such one hundred
twenty (120) day period (subject to delays for causes beyond Lessor's reasonable
control) and notify Lessee that it will be doing so, such notice to be mailed
within thirty (30) days from the date of such damage or destruction, and this
Lease shall remain in full force and effect, but the rent for the period during
which the Premises are untenantable shall be abated pro rata (based upon the
portion of the Premises which is untenantable). If Lessor is required to repair
the Office Complex and/or the Premises, as aforesaid, said work shall be
undertaken and prosecuted with all due diligence and speed.
If fire or other casualty shall render the whole or any material part
of the Premises untenantable and the Premises cannot reasonably be expected to
be made tenantable within one hundred twenty (120) days from the date of such
event, then either party, by notice in writing to the other mailed within thirty
(30) days from the date of such damage or destruction, may terminate this Lease
effective upon a date within thirty (30) days from the date of such notice.
In the event that more than fifty percent (50%) of the value of the
specific office structure of which the Premises is a part is damaged or
destroyed by fire or other casualty, and irrespective of
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whether damage or destruction can be made tenantable within one hundred twenty
(120) days thereafter, then at Lessor's option, by written notice to Lessee,
mailed within forty-five (45) days from the date of such damage or destruction,
Lessor may terminate this Lease effective upon a date within ninety (90) days
from the date of such notice to Lessee. Further, if the foregoing damage or
destruction results in a materially adverse effect on Lessee's use and enjoyment
of the Premises, the Lessee shall have the same right to terminate as is
provided to Lessor (and within the same time periods) in the foregoing sentence.
If fire or other casualty shall render any material portion of the
Premises or any material portion of the Office Complex untenantable and the
insurance proceeds are not sufficient to make repairs, then Lessor may, by
notice to Lessee, mailed within thirty (30) days from the date of such damages
or destruction, terminate this Lease effective upon a date within thirty (30)
days from the date of such notice. However, Lessee may within fifteen (15) days
from Lessor's notice of termination elect to fund the repair cost shortfall and
upon making such funds available to lessor or an independent escrowee within
fifteen (15) days of Lessee's election notice, Lessor's termination election
shall be rescinded, and Lessor shall proceed to repair or restore the Premises
and the Office Complex.
If the Premises or the Office Complex is damaged, and such damage is of
the type insured against under the fire and special form property damage
insurance maintained by Lessor hereunder, the cost of repairing said damage up
to the amount of the deductible under said insurance policy shall be included as
a part of the Operating Expenses. If the damage is not covered by such insurance
policies and Lessor elects to repair the damage, then Lessee shall pay Lessor a
pro rata share of the "deductible amount" (if any) under Lessor's insurance
policies based on Lessee's percentage interest of the Premises and, if the
damage was due to an act or omission of Lessee, Lessee shall pay Lessor the
difference between the actual cost of repair and any insurance proceeds received
by Lessor.
If fire or other casualty shall render the whole or any material part
of the Premises untenantable and the Premises cannot reasonably be expected to
be made tenantable within one hundred twenty (120) days from the date of such
event and neither party hereto terminates this Lease pursuant to its rights
herein or in the event that more than fifty percent (50%) of the value of the
Office Complex is damaged or destroyed by fire or other casualty, and Lessor
does not terminate this Lease pursuant to its option granted herein, or in the
event that fifty percent (50%) or less of the value of the Office Complex is
damaged or destroyed by fire or other casualty and neither the whole nor any
material portion of the Premises is rendered untenantable, then Lessor shall
repair and restore the Premises and the Office Complex to as near their
condition prior to the fire or other casualty as is reasonably possible with all
due diligence and speed (subject to delays for causes beyond Lessor's reasonable
control) and the rent for the period during which the Premises are untenantable
shall be abated pro rata (based upon the portion of the Premises which is
untenantable). In no event shall Lessor be obligated to repair or restore any
special equipment or improvements installed by Lessee. Anything herein contained
to the contrary notwithstanding, Lessor shall not be obligated to spend more
than the net insurance proceeds received by Lessor on account of any fire or
other casualty in order to repair or restore the Premises or the Office Complex
following such casualty; provided, however, Lessor shall notify Lessee promptly
after the casualty if Lessor is unwilling to expend more than the net insurance
proceeds.
In the event of a termination of this Lease pursuant to this Article
XI, rent shall be apportioned on a per diem basis and paid to the date of the
fire or other casualty.
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ARTICLE XII. EMINENT DOMAIN: If the whole of or any substantial part of the
Premises is taken by any public authority under the power of eminent domain, or
taken in any manner for any public or quasi-public use, so as to render the
remaining portion of the Premises unsuitable for the purposes intended
hereunder, then the term of this Lease shall cease as of the day possession
shall be taken by such public authority and Lessor shall make a pro rata refund
of any prepaid rent. All damages awarded for such taking under the power of
eminent domain or any like proceedings shall belong to and be the property of
Lessor, Lessee hereby assigning to Lessor Lessee's interest, if any, in said
award. In the event that fifty percent (50%) or more of the building area or
fifty percent (50%) or more of the value of the Office Complex is taken by
public authority under the power of eminent domain, then, at Lessor's option, by
written notice to Lessee mailed within thirty (30) days from the date possession
shall be taken by such public authority, Lessor may terminate this Lease
effective upon a date within thirty (30) days from the date of such notice to
Lessee. Further, if the whole of or any material part of the Premises is taken
by public authority under the power of eminent domain, or taken in any manner
for any public or quasi-public use, so as to render the remaining portion of the
Premises unsuitable for the purposes intended hereunder, upon delivery of
possession to the condemning authority pursuant to the proceedings, Lessee may,
at its option, terminate this Lease as to the remainder of the Premises by
written notice to Lessor, such notice to be given to Lessor within thirty (30)
days after Lessee receives notice of the taking. Lessee shall not have the right
to terminate this Lease pursuant to the preceding sentence unless (i) the
business of Lessee conducted in the portion of the Premises taken cannot be
carried on with substantially the same utility and efficiency in the remainder
of the Premises (or any substitute space securable by Lessee pursuant to clause
(ii) hereof); and (ii) Lessee cannot secure substantially similar (in Lessee's
reasonable judgment) alternate space upon the same terms and conditions as set
forth in this Lease (including rental) from Lessor in the Office Complex. Any
notice of termination shall specify the date no more than sixty (60) days after
the giving of such notice as the date for such termination.
Anything in this Article XII to the contrary notwithstanding, Lessee
shall have the right to prove in any condemnation proceedings and to receive any
separate award which may be made for damages to or condemnation of Lessee's
movable trade fixtures and equipment and for moving expenses; provided, however,
Lessee shall in no event have any right to receive any award for its interest in
this Lease or for loss of leasehold; and, provided further, Lessee shall not be
entitled to claim any award to the extent the award to Lessor would be reduced
below the amount which would be allowed to Lessor absent such claim by Lessee.
Anything in this Article XII to the contrary notwithstanding, in the event of a
partial condemnation of the Office Complex or the Premises and this Lease is not
terminated, Lessor shall, at its sole cost and expense, restore the Premises and
Office Complex to a complete architectural unit and the Base Rent provided for
herein during the period from and after the date of delivery of possession
pursuant to such proceedings to the termination of this Lease shall be reduced
proportionately based upon the resulting rentable area of the Premises versus
the rentable area of the Premises prior to such taking.
ARTICLE XIII. SURRENDER OF PREMISES: On the last day of the term of this Lease,
or on the sooner termination thereof, Lessee shall peaceably surrender the
Premises in good condition and repair consistent with Lessee's duty to make
repairs as herein provided. On or before the last day of the term of this Lease,
or the date of sooner termination thereof, Lessee shall, at its sole cost and
expense, remove all of its property and trade fixtures and equipment from the
Premises, and all property not removed shall be deemed abandoned. Lessee hereby
appoints Lessor its agent to remove all property of Lessee from the Premises
upon termination of this Lease at the sole cost and risk of Lessee, and Lessor
shall not be liable for damage, theft, misappropriation or loss thereof and
Lessor
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shall not be liable in any manner in respect thereto. Lessee shall pay
all costs and expenses of such removal. Lessee shall leave the Premises in good
order, condition and repair, reasonable wear and tear and damage from fire and
other casualty not caused by Lessee excepted. Lessee shall reimburse Lessor upon
demand for any expenses incurred by Lessor with respect to removal,
transportation or storage of abandoned property and with respect to restoring
said Premises to good order, condition and repair. All improvements,
alterations, additions, installations and fixtures, other than Lessee's trade
fixtures and equipment, which have been made or installed by either Lessor or
Lessee upon the Premises shall remain the property of Lessor and shall be
surrendered with the Premises as a part thereof, unless Lessee is required to
remove same pursuant to the provisions of Article VIII hereof. Lessee shall
promptly surrender all keys for the Premises to Lessor at the place then fixed
for the payment of rent and shall inform Lessor of the combinations of any
vaults, locks and safes left on the Premises.
ARTICLE XIV. DEFAULT OF LESSEE: The occurrence of any one or more of the
following events (in this Article sometimes called "Event of Default") shall
constitute a default and breach of this Lease by Lessee:
A. If Lessee fails to pay any Base Rent or Additional Rent
payable under this Lease or fails to pay any obligation
required to be paid by Lessee when and as the same shall
become due and payable, and such default continues for a
period of ten (10) days after written notice thereof given by
Lessor to Lessee.
B. If Lessee fails to perform any of Lessee's nonmonetary
obligations under this Lease for a period of thirty (30) days
after written notice from Lessor; provided that if more time
is required to complete such performance, Lessee shall not be
in default if Lessee commences such performance within the
thirty-day period and thereafter diligently pursues its
completion. However, Lessor shall not be required to give such
notice if Lessee's failure to perform constitutes a
non-curable breach of this Lease. The notice required by this
subsection is intended to satisfy any and all notice
requirements imposed by law on Lessor and is not in addition
to any such requirement.
C. If Lessee, by operation of law or otherwise, violates the
provisions of Article X hereof relating to assignment,
sublease, mortgage or other transfer of Lessee's interest in
this Lease or in the Premises or in the income arising
therefrom.
D. If Lessee, by operation of law or otherwise, violates the
provisions of Article XVI.R relating to compliance with
environmental laws.
E. If (i) Lessee makes a general assignment or general
arrangement for the benefit of creditors; (ii) a petition for
adjudication of bankruptcy or for reorganization or
rearrangement is filed by or against Lessee and is not
dismissed within thirty (30) days; (iii) if a trustee or
receiver is appointed to take possession of substantially all
of Lessee's assets located at the Premises or of Lessee's
interest in this Lease and possession is not restored to
Lessee within thirty (30) days; or (iv) if substantially all
of Lessee's assets located at the Premises or of Lessee's
interest in this Lease is subjected to attachment, execution
or other judicial or non-judicial seizure which is not
discharged within thirty (30) days. If a court of competent
jurisdiction determines that any of the acts described in this
subsection does not constitute an Event of Default and a
trustee is appointed to take possession (or if Lessee
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remains a debtor in possession) and such trustee or Lessee
transfers Lessee's interest hereunder, then Lessor shall
receive, as Additional Rent, the difference between the rent
(or any other consideration) paid in connection with such
assignment or sublease and the rent payable by Lessee
hereunder. As used in this subsection, the term "Lessee" shall
also mean any guarantor of Lessee's obligations under this
Lease. If any such Event of Default shall occur, Lessor, at
any time during the continuance of any such Event of Default,
may give written notice to Lessee stating that this Lease
shall expire and terminate on the date specified in such
notice, and upon the date specified in such notice this Lease,
and all rights of Lessee under this Lease, including all
rights of renewal whether exercised or not, shall expire and
terminate, or in the alternative or in addition to the
foregoing remedy, Lessor may assert and have the benefit of
any other remedy allowed herein, at law, or in equity.
Upon the occurrence of an Event of Default by Lessee, and at any time
thereafter, with or without notice or demand and without limiting Lessor in the
exercise of any right or remedy which Lessor may have, Lessor shall be entitled
to the rights and remedies set forth below:
A. Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall not terminate
unless Lessor gives written Notice to Lessee of its intention
to terminate this Lease and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event, Lessor
shall have the immediate right to reenter and remove all
persons and property, and such property may be removed and
stored in a public warehouse or elsewhere at the cost of, and
for the account of Lessee, all without service of notice or
resort to legal process and without being deemed guilty of
trespass, or becoming liable for any loss or damage which may
be occasioned thereby. In the event that Lessor shall elect to
so terminate this Lease, then Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason
of Lessee's default, including:
1. The equivalent of the amount of the Base Rent and
Additional Rent which would be payable under this
Lease by Lessee if this Lease were still in effect,
less
2. The net proceeds of any reletting affected pursuant
to the provisions of this Article XIV hereof after
deducting all of Lessor's reasonable expenses in
connection with such reletting, including, without
limitation, all repossession costs, brokerage
commissions, legal expenses, reasonable attorneys'
fees, alteration costs, and expenses of preparation
of the Premises, or any portion thereof, for such
reletting.
Lessee shall pay such current damages in the amount determined
in accordance with the terms of this Article XIV as set forth
in a written statement thereof from Lessor to Lessee
(hereinafter called the "Deficiency"), to Lessor in monthly
installments on the days on which the rent would have been
payable under this Lease if this Lease were still in effect,
and Lessor shall be entitled to recover from Lessee each
monthly installment of the Deficiency as the same shall arise.
B. At any time after an Event of Default, whether or not Lessor
shall have collected any monthly Deficiency as set forth in
this Article XIV, Lessor shall be entitled to
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recover from Lessee, and Lessee shall pay to Lessor, on
demand, as and for final damages for Lessee's default, an
amount equal to the then present worth of the aggregate of the
Base Rent and Additional Rent and any other charges to be paid
by Lessee hereunder for the unexpired portion of the term of
this Lease (assuming this Lease had not been so terminated).
In the computation of present worth, a discount at the rate of
ten percent (10%) per annum shall be employed. If the
Premises, or any portion thereof, shall be relet by Lessor for
the unexpired term of this Lease, or any part thereof, before
presentation of proof of such damages to any court, commission
or tribunal, the amount of rent received upon such reletting
shall be offset against any monies claimed pursuant to this
subsection. Nothing herein contained or contained in this
Article XIV shall limit or prejudice the right of Lessor to
prove for and obtain, as damages, an amount equal to the
maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be
greater, equal to or less than the amount of the difference
referred to above.
C. Upon the occurrence of an Event of Default by Lessee, Lessor
shall also have the right, with or without terminating this
Lease, to reenter the Premises to remove all persons and
property from the Premises. Such property may be removed and
stored in a public warehouse or elsewhere at the cost of and
for the account of Lessee. If Lessor shall elect to reenter
the Premises, Lessor shall not be liable for damages by reason
of such reentry.
D. If Lessor does not elect to terminate this Lease as provided
in this Article XIV then Lessor may, from time to time,
recover all rent as it becomes due under this Lease. At any
time thereafter, Lessor may elect to terminate this Lease and
to recover damages to which Lessor is entitled.
E. In the event that Lessor should elect to terminate this Lease
and to relet the Premises, it may execute any new lease in its
own name. In the event that Lessor should not elect to
terminate this Lease, it may re-let the Premises to a
substitute tenant at the then prevailing market rate. Lessee
hereunder shall have no right or authority whatsoever to
collect any rent from such substitute tenant. The proceeds of
any such reletting shall be applied as follows:
1. First, to the payment of any indebtedness other than
rent due hereunder from Lessee to Lessor, including
but not limited to storage charges or brokerage
commissions owing from Lessee to Lessor as the result
of such reletting;
2. Second, to the payment of the costs and expenses of
reletting the Premises, including repairs which were
required to be performed by Lessee and which Lessor,
in its sole discretion, deems reasonably necessary
and advisable and reasonable attorneys' fees incurred
by Lessor in connection with the retaking of the
Premises and such reletting;
3. Third, to the payment of rent and other charges due
and unpaid hereunder; and
4. Fourth, to the payment of future rent and other
damages payable by Lessee under this Lease.
Upon any Event of Default by Lessee, Lessor agrees to use commercially
reasonable efforts to mitigate the resulting damages.
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Lessee may contest the damage claim of Lessor, if Lessor fails to exert such
mitigation effort.
Lessor shall not be deemed to have terminated this Lease and the
Lessee's right to possession of the leasehold or the liability of Lessee to pay
rent thereafter to accrue or its liability for damages under any of the
provisions hereof, unless Lessor shall have notified Lessee in writing that it
has so elected to terminate this Lease. Lessee covenants that the retaking of
possession by Lessor or the service by Lessor of any notice pursuant to the
applicable unlawful detainer statutes of the state in which the Office Complex
is located and Lessee's surrender of possession pursuant to such notice shall
not (unless Lessor elects to the contrary at the time of, or at any time
subsequent to the service of, such notice, and such election be evidenced by a
written notice to Lessee) be deemed to be a termination of this Lease or of
Lessee's right to possession thereof.
All rights, options and remedies of Lessor contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Lessor shall have the right to pursue any one or all
of such remedies or any other remedy or relief which may be provided by law
whether or not stated in this Lease. No waiver by Lessor of a breach of any of
the terms, covenants or conditions of this Lease by Lessee shall be construed or
held to be a waiver of any succeeding or preceding breach of the same or any
other term, covenant or condition therein contained. No waiver of any default of
Lessee hereunder shall be implied from any omission by Lessor to take any action
on account of such default if such default persists or is repeated, and no
express waiver shall affect default other than as specified in said waiver. The
consent or approval by Lessor to or of any act by Lessee requiring Lessor's
consent or approval shall not be deemed to waive or render unnecessary Lessor's
consent to or approval of any subsequent similar acts by Lessee.
Lessee shall reimburse Lessor, upon demand, for any costs or expenses
incurred by Lessor in connection with any breach or default of Lessee under this
Lease, whether or not suit is commenced or judgment entered. Such costs shall
include, but not be limited to: legal fees and costs incurred for the
negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if
any action for breach of or to enforce the provisions of this Lease is
commenced, the court in such action shall award to the party in whose favor a
judgment is entered a reasonable sum as attorneys' fees and costs. Such
attorneys' fees and costs shall be paid by the losing party in such action.
Lessee shall also indemnify Lessor against and hold Lessor harmless from all
costs, expenses, demands and liability incurred by Lessor if Lessor becomes or
is made a party to any claim or action (a) instituted by Lessee, or by any third
party against Lessee; (b) for foreclosure of any lien for labor or material
furnished to or for Lessee or such other person; (c) otherwise arising out of or
resulting from any act or transaction of Lessee or such other person; or (d)
necessary to protect Lessor's interest under this Lease in a bankruptcy
proceeding or other proceeding under Title 11 of the United States Code, as
amended. Lessee shall defend Lessor against any such claim or action at Lessee's
expense with counsel reasonably acceptable to Lessor or, at Lessor's election,
Lessee shall reimburse Lessor for any legal fees or costs incurred by Lessor in
any such claim or action.
In addition, Lessee shall pay Lessor's reasonable attorneys' fees
incurred in connection with Lessee's request for Lessor's consent in connection
with any act which Lessee proposed to do and which requires Lessor's consent.
Lessee hereby waives all claims by Lessor's reentering and taking
possession of the Premises or removing and storing the property of Lessee as
permitted under this Lease and will save Lessor harmless from all losses, costs
or damages occasioned Lessor
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thereby. No such reentry shall be considered or construed to be a forcible entry
by Lessor.
ARTICLE XV. SUBORDINATION: This Lease shall be subject and subordinate to any
mortgage, deed of trust or ground lease now or hereafter placed upon the
Premises, the Office Complex, the Property or any portion thereof by Lessor or
its successors or assigns, and to amendments, replacements, renewals and
extensions thereof. Lessee agrees at any time hereafter, upon demand, to execute
and deliver any instruments, releases or other documents that may be reasonably
required for the purpose of subjecting and subordinating this Lease, as above
provided, to the lien of any such mortgage, deed of trust or ground lease. It is
agreed, nevertheless, that as long as Lessee is not in default in the payment of
Base Rent, Additional Rent, and other charges to be paid by Lessee under this
Lease and in the performance of all covenants, agreements and conditions to be
performed by Lessee under this Lease, then neither Lessee's right to quiet
enjoyment under this Lease, nor the right of Lessee to continue to occupy the
Premises and to conduct its business thereon, in accordance with the terms of
this Lease as against any lessor, lessee, mortgagee, trustee or their successors
or assigns shall be disturbed.
The above subordination shall be effective without the necessity of the
execution and delivery of any further instruments on the part of Lessee to
effectuate such subordination. Notwithstanding anything hereinabove contained in
this Article XV, in the event the holder of any mortgage, deed of trust or
ground lease shall at any time elect to have this Lease constitute a prior and
superior lien to its mortgage, deed of trust or ground lease, then, and in such
event, upon any such holder or landlord notifying Lessee to that effect in
writing, this Lease shall be deemed prior and superior in lien to such mortgage,
deed of trust or ground lease, whether this Lease is dated prior to or
subsequent to the date of such mortgage, deed of trust or ground lease, and
Lessee shall execute such attornment agreement as may be reasonably requested by
said holder or Lessor.
Lessee agrees, provided the mortgagee, ground lessor or trust deed
holder under any mortgage, ground lease, deed of trust or other security
instrument shall have notified Lessee in writing (by the way of a notice of
assignment of lease or otherwise) of its address, that Lessee shall give such
mortgagee, ground lessor, trust deed holder or other secured party
("Mortgagee"), simultaneously with delivery of notice to Lessor, by registered
or certified mail, a copy of any such notice of default served upon Lessor.
Lessee further agrees that said Mortgagee shall have the right to cure any
alleged default during the same period that Lessor has to cure such default.
On or before the commencement of the term of this Lease, Lessor agrees
to provide an express "non-disturbance" agreement from the holder of any
mortgage or deed of trust in place as of such time.
ARTICLE XVI. MISCELLANEOUS:
A. Lessee represents that Lessee has dealt directly with and only with
Lee & Associates (Craig Coppola and Bill Blake), as broker, in connection with
this Lease and that insofar as Lessee knows, no other broker negotiated or
participated in negotiations of this Lease or submitted or showed the Premises
or is entitled to any commission in connection therewith. Lessor and Lessee
agree that no broker shall be entitled to any commission in connection with any
renewal of the term of this Lease. Lessor shall pay the commission, if any, owed
to the "broker" named above for any expansion of the Premises.
B. Lessee agrees from time to time, upon not less than ten (10)
business days prior written request by Lessor, to deliver to Lessor a statement
in writing certifying (i) this Lease is
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unmodified and in full force and effect (or if there have been modifications
that the Lease as modified is in full force and effect and stating the
modifications); (ii) the dates to which the rent and other charges have been
paid; (iii) Lessor is not in default in any provision of this Lease or, if in
default, the nature thereof specified in detail; (iv) the amount of monthly
rental currently payable by Lessee; (v) the amount of any prepaid rent, and (vi)
such other factual matters as may be reasonably requested by Lessor or any
Mortgagee or prospective purchaser of the Office Complex.
If Lessee does not deliver such statement to Lessor within such ten
(10) day period, Lessor and any prospective purchaser or encumbrancer of the
Premises or the Office Complex may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have not been
changed except as otherwise represented by Lessor; (ii) that this Lease has not
been canceled or terminated and is in full force and effect, except as otherwise
represented by Lessor; (iii) that the current amounts of the Base Rent and
security deposit are as represented by Lessor and that any charges made against
the security deposit are uncontested and valid; (iv) that there have been no
subleases or assignments of the Lease; (v) that not more than one month's Base
Rent or other charges have been paid in advance; and (vi) that Lessor is not in
default under the Lease. In such event, Lessee shall be estopped from denying
the truth of such facts.
C. All notices, demands and requests shall be in writing, and shall be
effectively served by forwarding such notice, demand or request by certified or
registered mail, postage prepaid, or by commercial overnight courier service
addressed as follows:
(i) If addressed to Lessee:
JDA Software Group, Inc.
11811 North Tatum Boulevard
Suite 2000
Phoenix, Arizona 85018-1626
Attn: Kristen L. Magnuson, CFO
with a copy to:
JDA Software Group, Inc.
11811 North Tatum Boulevard
Suite 2000
Phoenix, Arizona 85018-1626
Attn: Karen L. Nagel, General Counsel
(ii) If addressed to Lessor:
Opus West Corporation
2415 East Camelback Road
Suite 800
Phoenix, Arizona 85016
Attn: Thomas W. Roberts, President
with a copy to:
Opus U.S. Corporation
2415 East Camelback Road
Suite 800
Phoenix, Arizona 85016
Attn: Daniel T. Haug, Esq.
and with a copy to:
Opus West Management Corporation
2415 East Camelback Road
Suite 840
Phoenix, Arizona 85016
Attn: Property Manager
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<PAGE> 28
and with a copy to:
Gallagher & Kennedy, P.A.
2600 North Central Avenue
Phoenix, Arizona 85004-3020
Attn: Mr. Gregory L. Mast
or at such other addresses as Lessor and Lessee may hereafter designate by
written notice. The effective date of all notices shall be the time of mailing
such notice or the date of delivery to a commercial overnight courier service.
D. All rights and remedies of Lessor under this Lease or that may be
provided by law may be executed by Lessor in its own name, individually, or in
the name of its agent, and all legal proceedings for the enforcement of any such
rights or remedies, including those set forth in Article XIV, may be commenced
and prosecuted to final judgment and execution by Lessor in its own name or in
the name of its agent.
E. Lessor covenants and agrees that Lessee, upon paying the Base Rent,
Additional Rent and other charges herein provided for and observing and keeping
the covenants, agreements and conditions of this Lease on its part to be kept
and performed, shall lawfully and quietly hold, occupy and enjoy the Premises
during the term of this Lease. Time is of the essence of this Lease and each and
every provision contained herein, and any extension of time granted by Lessor to
Lessee for the performance of any obligation of Lessee under this Lease shall
not be considered an extension of time for the performance of any subsequent
obligation of Lessee under this Lease.
F. The covenants and agreements herein contained shall bind and inure
to the benefit of Lessor and its successors and assigns and Lessee and its
permitted successors and assigns. All obligations of each party constituting
Lessee hereunder shall be the joint and several obligations of each such party.
G. If any term or provision of this Lease shall to any extent be held
invalid or unenforceable, the remaining terms and provisions of this Lease shall
not be affected thereby, but each term and provision of this Lease shall be
valid and enforced to the fullest extent permitted by law. This Lease shall be
construed and enforced in accordance with the laws of the state in which the
Premises are located.
H. Lessee covenants not to do or suffer any waste or damage or
disfigurement or injury to the Premises or the Office Complex and Lessee further
covenants that it will not vacate or abandon the Premises during the term of
this Lease.
I. The term "Lessor" as used in this Lease so far as covenants or
obligations on the part of Lessor are concerned shall be limited to mean and
include only the owner or owners of the Office Complex at the time in question,
and in the event of any transfer or transfers or conveyances and an assumption
by the assignor or successor of the obligation of "Lessor" herein, the then
grantor shall be automatically freed and released from all personal liability
accruing from and after the date of such transfer or conveyance as respects the
performance of any covenant or obligation on the part of Lessor contained in
this Lease to be performed, it being intended hereby that the covenants and
obligations contained in this Lease on the part of Lessor shall be binding on
the Lessor, its successors and assigns, only during and in respect to their
respective successive periods of ownership.
In the event of a sale or conveyance by Lessor of the Office Complex or
any part of the Office Complex, the same shall operate to release Lessor from
any future liability upon any of the covenants or conditions herein contained
and in such event Lessee agrees to look solely to the responsibility of the
successor in
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<PAGE> 29
interest of Lessor in and to this Lease. This Lease shall not be affected by any
such sale or conveyance, and Lessee agrees to attorn to the purchaser or
grantee, which purchaser or grantee shall be personally obligated on this Lease
only so long as it is the owner of Lessor's interest in and to this Lease.
J. The marginal or topical headings of the several Articles are for
convenience only and do not define, limit or construe the contents of said
Articles.
K. All preliminary negotiations are merged into and incorporated in
this Lease, except for written collateral agreements executed contemporaneously
herewith.
L. This Lease can only be modified or amended by an agreement in
writing signed by the parties hereto. No receipt of money by Lessor from Lessee
or any other person after termination of this Lease or after the service of any
notice or after the commencement of any suit, or after final judgment for
possession of the Premises, shall reinstate, continue or extend the term of this
Lease or affect any such notice, demand or suit, or imply consent for any action
for which Lessor's consent is required, unless specifically agreed to in writing
by Lessor. Any amounts received by Lessor may be allocated to any specific
amounts due from Lessee to Lessor as Lessor determines.
M. Lessor shall have the right to close any portion of the building
area or land area to the extent as may, in Lessor's reasonable opinion, be
necessary to prevent a dedication thereof or the accrual of any rights to any
person or the public therein. Lessor shall at all times have full control,
management and direction of the Office Complex, subject to the rights of Lessee
in the Premises, and subject to the approval of Lessee, which approval shall not
be unreasonably withheld, Lessor reserves the right at any time and from time to
time to reduce, increase, enclose or otherwise change the size, number and
location of buildings, layout and nature of the Office Complex, to construct
additional buildings and additions to any building, and to create additional
rentable areas through use and/or enclosure of common areas, or otherwise, and
to place signs on the Office Complex. No implied easements are granted by this
Lease.
N. Lessee shall permit Lessor (or its designees), upon not less than
twenty-four (24) hours advance notice, to erect, use, maintain, replace and
repair pipes, cables, conduits, plumbing, vents, and telephone, electric and
other wires or other items, in, to and through the Premises, as and to the
extent that Lessor may now or hereafter deem necessary or appropriate for the
proper operation and maintenance of the Office Complex, but without material
disruption to Lessee's use and enjoyment of the Premises.
O. Employees or agents of Lessor have no authority to make or agree to
make a lease or other agreement or undertaking in connection herewith. The
submission of this document for examination does not constitute an offer to
lease, or a reservation of, or option for, the Premises. This document becomes
effective and binding only upon the execution and delivery hereof by the proper
officers of Lessor and by Lessee. Lessee confirms that Lessor and its agents
have made no representations or promises with respect to the Premises or the
making of or entry into this Lease except as in this Lease expressly set forth,
and Lessee agrees that no claim or liability shall be asserted by Lessee against
Lessor for, and Lessor shall not be liable by reason of, breach of any
representations or promises not expressly stated in this Lease. This Lease,
except for the Building Rules and Regulations, in respect to which subparagraph
P of this Article shall prevail, can be modified or altered only by agreement in
writing between Lessor and Lessee, and no act or omission of any employee or
agent of Lessor shall alter, change or modify any of the provisions hereof.
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<PAGE> 30
P. Lessee shall perform, observe and comply with the Building Rules and
Regulations of the Office Complex as set forth on Exhibit B attached hereto and
by this reference incorporated herein, with respect to the safety, care and
cleanliness of the Premises and the Office Complex, and the preservation of good
order thereon, and, upon written notice thereof to Lessee, Lessee shall perform,
observe and comply with any changes, amendments or additions thereto as from
time to time shall be established and deemed advisable by Lessor for tenants of
the Office Complex. Lessor shall not be liable to Lessee for any failure of any
other tenant or tenants of the Office Complex to comply with such Building Rules
and Regulations. Lessor shall enforce such Building Rules and Regulations in a
reasonable, uniform and nondiscriminatory manner.
Q. Neither party shall use the Premises or permit (which, in the case
of Lessor, shall require knowledge and consent) anything to be done in or about
the Premises which will, in any way, conflict with any law, statute, ordinance
or governmental rule or regulation now in force or which may hereafter be
enacted or promulgated. Lessee shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules and
regulations now in force or which may hereafter be in force, including, without
limitation, those pertaining to indoor air quality, and with the requirements of
any fire insurance underwriters or other similar body now or hereafter
constituted relating to or affecting the condition, use or occupancy of the
Premises. Lessee shall use the Premises and comply with any recorded covenants,
conditions, and restrictions affecting the Premises and the Office Complex as of
the commencement of the Lease or which are recorded during the lease term.
R. Neither party shall (either with or without negligence) cause or
permit (which, in the case of Lessor, shall require knowledge and consent) the
escape, disposal or release of any biologically or chemically active or other
hazardous substances or materials. Lessee shall not allow the storage or use of
such substances or materials in any manner not sanctioned by law and by the
highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Office Complex any
such materials or substances except to use in the ordinary course of Lessee's
business, and then only after written notice is given to Lessor of the identity
of such substances or materials. Without limitation, hazardous substances and
materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., any applicable state or local laws and the regulations
adopted under these acts. If any lender or governmental agency shall ever
require testing to ascertain whether or not there has been any release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Lessee to Lessor upon demand as additional charges if such requirement applies
to the Premises. In addition, Lessee shall execute affidavits, representations
and the like from time to time at Lessor's request concerning Lessee's best
knowledge and belief regarding the presence of hazardous substances or materials
on the Premises. In all events, Lessee shall indemnify Lessor in the manner
elsewhere provided in this Lease from any release of hazardous materials on the
Premises occurring while Lessee is in possession, or elsewhere if caused by
Lessee or persons acting under Lessee. The within covenants shall survive the
expiration or earlier termination of the term of this Lease.
S. All obligations of Lessee hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to Operating Expenses and Real
Estate Taxes and all obligations concerning the condition of the Premises.
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<PAGE> 31
T. Any claim which Lessee may have against Lessor for default in
performance of any of the obligations herein contained to be kept and performed
by Lessor shall be deemed waived unless such claim is asserted by written notice
thereof to Lessor within thirty (30) days of commencement of the alleged default
or of accrual of the cause of action. Furthermore, Lessee agrees to look solely
to Lessor's interest in the Office Complex, including the rents therefrom, for
the recovery of any judgment from Lessor, it being agreed that Lessor, or if
Lessor is a partnership, its partners whether general or limited, or if Lessor
is a corporation, its directors, officers or shareholders, or if Lessor is a
limited liability company, its members, shall never be personally liable for any
such judgment.
U. Lessee shall furnish to Lessor promptly upon demand, a corporate
resolution, proof of due authorization of partners, or other appropriate
documentation reasonably requested by Lessor evidencing the due authorization of
Lessee to enter into this Lease.
V. This Lease shall not be deemed or construed to create or establish
any relationship or partnership or joint venture or similar relationship or
arrangement between Lessor and Lessee hereunder.
W. Lessee shall in all respects comply with the Americans With
Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.), as the same may be
amended from time to time (as amended, the "ADA"), and Lessee agrees to
indemnify and save Lessor and its managing agent harmless against and from any
and all claims, loss, damage and expense by or on behalf of any person or
persons, firm or firms, corporation or corporations, arising from any failure or
alleged failure of Lessee to comply with the ADA or arising from any claim made
under the ADA in connection with the Premises, and from and against all costs,
reasonable attorneys' fees, expenses and liabilities incurred in or about any
such claim or action or proceeding brought thereon; in case any action or
proceeding be brought against Lessor or its managing agent by reason of any such
claim, Lessee, upon notice from Lessor, covenants to resist or defend such
action or proceeding by counsel reasonably satisfactory to Lessor.
X. Lessee shall not place, or permit to be placed or maintained, on any
exterior door, wall or window of the Premises any sign, awning or canopy, or
advertising matter or other thing of any kind, and will not place or maintain
any decoration, lettering or advertising matter on the glass of any window or
door, or that can be seen through the glass, of the Premises except as
specifically approved in writing by Lessor. Lessee further agrees to maintain
such sign, awning, canopy, decoration, lettering, advertising matter or thing as
may be approved, in good condition and repair at all times. Lessee agrees at
Lessee's sole cost, that any Lessee sign will be maintained in strict
conformance with Lessor's sign criteria, if any, as to design, material, color,
location, size, letter style, and method of installation.
ARTICLE XVII. MISCELLANEOUS TAXES: Lessee shall pay, prior to delinquency, all
taxes assessed or levied upon its occupancy of the Premises, or upon the trade
fixtures, furnishings, equipment and all other personal property of Lessee
located in the Premises, and when possible, Lessee shall cause such trade
fixtures, furnishings, equipment and other personal property to be assessed and
billed separately from the property of Lessor. In the event any or all of
Lessee's trade fixtures, furnishings, equipment or other personal property, or
Lessee's occupancy of the Premises, shall be assessed and taxed with the
property of Lessor, Lessee shall pay to Lessor its share of such taxes within
ten (10) days after delivery to Lessee by Lessor of a statement in writing
setting forth the amount of such taxes applicable to Lessee's personal property.
ARTICLE XVIII. OTHER PROVISIONS: The following are made a part hereof, with the
same force and effect as if specifically set forth herein:
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<PAGE> 32
A. Site Plan - Exhibit A.
A-1. Floor Plan - Exhibit A-1
A-2. Phase II Site Plan - Exhibit A-2
B. Building Rules and Regulations - Exhibit B.
C. Rider To Lease - Exhibit C.
D. [RESERVED]
E. Total Project Cost Illustrative Calculation - Exhibit E.
F. Base Building Plans - Exhibit F
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
LESSOR: LESSEE:
OPUS WEST CORPORATION, a JDA SOFTWARE GROUP, INC., a
Minnesota corporation Delaware corporation
By /s/ Thomas W. Roberts By /s/ F.M. Pakis
---------------------- -------------------
Thomas W. Roberts Name Frederick M. Pakis
Its President Print
Its: Co-Chairman
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<PAGE> 33
FIRST AMENDMENT TO OFFICE LEASE
SCOTTSDALE NORTHSIGHT
This First Amendment to Office Lease (the "Amendment") dated as of the
30th day of June, 1998, by and between OPUS WEST CORPORATION, a Minnesota
corporation ("Lessor") and JDA SOFTWARE GROUP, INC., a Delaware corporation
("Lessee").
RECITALS
1. By that Lease dated as of April 30, 1998 (the "Lease") by and
between Lessor and Lessee, the parties agreed to lease approximately 95,000
rentable square feet (the "Premises"), within that Office Complex to be
constructed by Lessor, west and contiguous to 87th Street and South of Raintree
Drive in Scottsdale, Arizona;
2. Pursuant to Article XXI. DETERMINATION OF AREA OF PREMISES OF THE
LEASE, Lessee has the right to give notice to Lessor, prior to the date of the
construction permit, to designate additional areas on the first floor of the
Building to be included as part of the Premises, and accordingly, this Amendment
shall constitute said notice by Lessee, and a revision of the area intended to
be the Premises.
THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
A. Notwithstanding any provision in the Lease to the contrary, the
parties agree that the Premises shall be comprised of the entire second (2nd)
and third (3rd) floor of the Building, plus (approximately) 20,000 rentable
square feet located in the first floor of the Building. Exhibit A-1 attached to
this Amendment sets forth the conceptual depiction and location of the Premises
as expanded hereby. Such adjustment in the rentable area of the Premises shall
be effective for all purposes referenced in the Lease, including, without
limitation, in the determination of the Lessee's Pro Rata Share of Real Estate
Taxes and Operating Expenses, the Tenant Improvement Allowance (although said
amount shall continue to be computed based upon usable square feet), the
allocation of parking rights pursuant to Article XLIII (i.e. at the rate of six
(6) spaces per 1,000 rentable square feet), and for other purposes set forth in
the Lease. Notwithstanding the foregoing, the commencement date memorandum to be
executed by the parties pursuant to Article XXVIII of the Lease shall control as
to the exact amount of rentable and usable area for the Premises.
B. Except as specifically modified or amended hereby, the parties
confirm and ratify the Lease as enforceable and binding in accordance with its
terms and provisions. All capitalized terms not otherwise defined herein shall
have the meanings provided in the Lease.
IN WITNESS WHEREOF, the undersigned parties have executed this
Amendment to be effective as of the date first written above.
LESSOR: LESSEE:
OPUS WEST CORPORATION, a JDA SOFTWARE GROUP, INC., a
Minnesota corporation Delaware corporation
By /s/ T. W. Roberts By /s/ Brent W. Lippman
Thomas W. Roberts Name Brent W. Lippman
Its President Print Brent W. Lippman
Its: Chief Executive Officer
<PAGE> 34
EXHIBIT A-1
FLOOR PLAN
[LOCATION OF THE PREMISES]
[FIRST FLOOR]
EXHIBIT A-1
(Page 1 of 3)
<PAGE> 35
EXHIBIT A-1
FLOOR PLAN
[LOCATION OF THE PREMISES]
[SECOND FLOOR]
EXHIBIT A-1
(Page 2 of 3)
<PAGE> 36
EXHIBIT A-1
FLOOR PLAN
[LOCATION OF THE PREMISES]
[THIRD FOOR]
EXHIBIT A-1
(Page 3 of 3)
<PAGE> 1
EXHIBIT 10.33
REAL ESTATE OPTION AGREEMENT
AND ESCROW INSTRUCTIONS
THIS REAL ESTATE OPTION AGREEMENT AND ESCROW INSTRUCTIONS (the
"Agreement") is made and entered into by and between MALL AT THE CROSSROADS,
INC., a Washington corporation (the "Optionor"), and JDA SOFTWARE GROUP, INC., a
Delaware corporation (the "Optionee").
RECITALS:
A. Optionor has entered into a Real Estate Purchase Agreement
and Escrow Instructions (the "Purchase Agreement") with Opus West Corporation
("Opus"), pursuant to which Optionor has agreed to sell to Opus approximately
ten acres of real property located on the west side of 87th Street south of
Raintree Drive, Scottsdale, Arizona, the general location and configuration of
which are shown on Exhibit "A" attached hereto (the "10-acre Parcel").
B. Optionee desires to acquire from Optionor the exclusive
option to purchase approximately five acres located north of the 10-acre Parcel,
and Optionor is willing to grant such option to Optionee on the terms and
conditions specified herein, provided that Opus consummates the purchase of the
10-acre Parcel.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth in this Agreement, the parties hereby agree as
follows:
1. GRANT OF OPTION.
Optionor hereby grants to Optionee the exclusive option (the
"Option") to purchase all of Optionor's right, title, interest and privilege in
approximately five acres of real property located on the west side of 87th
Street south of Raintree Drive, Scottsdale, Arizona, together with all
rights-of-way, easements, licenses, and other rights and benefits appurtenant to
or used in connection with the beneficial use and enjoyment of such real
property (collectively, the "Option Parcel"). The general location and
configuration of the Option Parcel are shown on Exhibit "A" attached hereto. The
exact size and description of the Option Parcel shall be determined during the
Examination Period under the Purchase Agreement between Optionor and Opus for
the sale and purchase of the 10-Acre Parcel, provided that the Option Parcel
shall consist of approximately five (5) net acres, shall be approximately
rectangular in shape, and shall have a southern boundary that is entirely
contiguous to the northern boundary of the 10-acre Parcel. It is understood and
agreed that the total area of the 10-acre Parcel and the Option Parcel together
shall not exceed fifteen (15) net acres. Notwithstanding any other provision in
this Agreement, the Option is contingent upon Opus' purchase of
<PAGE> 2
the 10-acre Parcel from Optionor, and in the event the Purchase Agreement for
the 10-acre Parcel is terminated for any reason, this Agreement shall be null
and void and Optionee shall have no right to purchase the Option Parcel.
2. EXERCISE OF OPTION.
The Option must be exercised by written notice given to
Optionor in the manner provided in Section 16 below, which notice shall specify
a Closing Date not less than ninety (90) days from the date on which such notice
is given. Optionee shall have a period of forty-five (45) days from the date on
which such notice is given (the "Examination Period") during which to make such
examination and investigation of the Option Parcel as Optionee wishes to make.
At any time prior to the expiration of the Examination Period, if Optionee
determines, for any reason whatsoever, that it does not desire to complete the
purchase of the Option Parcel, Optionee may rescind its notice of intent to
exercise the Option by so notifying Seller and Escrow Agent in writing, in which
event this Agreement and the escrow provided for herein shall be terminated and
the Earnest Money Deposit and all earnings thereon shall be immediately returned
to Optionee. If Optionee fails to rescind its notice of intent to exercise the
Option prior to the expiration of the Examination Period, Optionee shall be
deemed to have approved the Option Parcel and to have waived all conditions
precedent to the Closing, except performance by Optionor. The Closing must occur
on or before August 24, 2001. Optionee may exercise the Option only if, at the
time Optionee gives notice of its intent to exercise the Option, Opus has
completed construction of an office building on the 10-acre Parcel and Optionee
has executed a lease with Opus pursuant to which Optionee will occupy at least
twenty-five percent (25%) of the building. From the date of this Agreement to
the expiration of the period during which the Option may be exercised or the
earlier termination of this Agreement, Optionee shall have a continuing right of
access and entry to the Option Parcel in order to make its investigations and
determinations as to the feasibility of the property and whether or not to elect
to exercise the Option. Optionee hereby indemnifies Optionor and the Option
Parcel and holds Optionor and the Option Parcel free and harmless from any and
all loss or liability resulting from the activities of Optionee, its agents and
employees upon the Option Parcel, and from any and all mechanics', materialmen's
and other liens resulting from such conduct of Optionee, its agents and
employees upon the Option Parcel. The foregoing indemnification shall survive
the termination of this Agreement.
3. ESCROW.
At such time as Optionee has given notice of its intent to
exercise the Option, the parties shall establish an escrow with Security Title
Agency (Jan Dooley, Escrow Officer), at its office located at 8787 East Pinnacle
Peak Road, Suite 120, Scottsdale, Arizona 85255 (the "Escrow Agent"). Upon
delivery to the Escrow
2
<PAGE> 3
Agent of this executed Agreement, Escrow Agent is instructed to open an escrow
and to deliver copies of the executed Agreement to Optionor and Optionee. This
Agreement, and the exhibits attached hereto, shall constitute escrow
instructions to Escrow Agent in connection with this transaction. Should the
Escrow Agent require, in addition to this Agreement, the execution of its
standard form printed Escrow Instructions, the Escrow Agent shall prepare such
Escrow Instructions in accordance with the directions contained herein and in a
form mutually acceptable to the parties and the parties hereto shall execute
such Escrow Instructions on receipt from the Escrow Agent. The Escrow
Instructions shall not supersede, modify or amend any of the terms of this
Agreement, and in the event of any conflict or ambiguity between any of the
terms of this Agreement and those of the Escrow Instructions, this Agreement
shall govern and control. The parties expressly agree that the "13-day
cancellation" clause or any clause providing for a period of time after breach
before the escrow can be cancelled shall be stricken from the printed form
Escrow Instructions and that upon a breach of this Agreement, the escrow may be
cancelled by the non-breaching party immediately upon giving notice to the other
party.
4. OPENING AND CLOSING DATES.
"Opening of Escrow" shall occur when Escrow Agent accepts this
Agreement as provided at the end of this Agreement. The closing of this
transaction (the "Closing" or the "Close of Escrow") shall take place at the
office of the Escrow Agent on or before August 24, 2001 or such earlier date as
specified in Optionee's notice of its intent to exercise the option (the
"Scheduled Closing Date").
5. PURCHASE PRICE.
The purchase price for the Option Parcel shall be Ten Dollars
($10.00) per net square foot if the Closing occurs on or before August 24, 2000,
and Ten and 50/100ths Dollars ($10.50) per net square foot if the Closing occurs
after August 24, 2000. For purposes of such computation, the "net square
footage" shall be the gross square footage within the boundaries of the Property
less the square footage located within dedicated public rights-of-way. The "net
square footage" shall be determined based on an ALTA survey of the Option Parcel
prepared by a registered engineer or licensed surveyor, certified to Optionee
and the Escrow Agent, and meeting the minimum ALTA requirements for issuance by
Escrow Agent of an extended coverage owner's policy of title insurance, which
shall be furnished by Optionor to Optionee within thirty (30) days after the
date of this Agreement. The purchase price shall be paid as follows:
(A) The sum of Twenty-Five Thousand Dollars
($25,000.00) (the "Earnest Money Deposit") shall be paid to the Escrow Agent, in
cash or certified funds, concurrently with the Opening of Escrow and shall be
disbursed to the Optionor upon the Close of Escrow. The Earnest Money Deposit
shall be fully
3
<PAGE> 4
refundable until expiration of the Examination Period, at which time, if
Optionee has not rescinded its notice of intent to exercise the Option, the
Earnest Money Deposit shall become non-refundable and forfeitable to Optionor
upon Optionee's failure to perform, subject only to performance by Optionor.
Immediately upon receipt of the Earnest Money Deposit, the Escrow Agent shall
deposit the funds in a short-term interest-bearing account at a financial
institution mutually acceptable to Optionee and Optionor. The interest earned on
such deposit shall accrue to the benefit of the Optionee, except in the event
Optionor becomes entitled to retain the Earnest Money Deposit, in which event
said interest shall accrue to the benefit of the Optionor.
(B) The balance of the purchase price, plus or minus
prorations as hereinafter provided, shall be paid into escrow to the Escrow
Agent, in cash or certified funds or by wire, on or before the Scheduled Closing
Date and shall be disbursed to Optionor upon the Close of Escrow.
6. TITLE.
(A) Within thirty (30) days after the date of this
Agreement, Optionor shall provide to Optionee a title commitment for an ALTA
extended owner's title insurance policy (the "Title Report"), together with
full, complete and legible copies of all instruments of record referred to
therein, as well as the ALTA survey referred to in Paragraph 5 above (the
"Survey"). Optionee may, at its option request such endorsements to the title
insurance policy as Optionee may wish to obtain; provided, however, that
Optionee shall pay all costs for such extended coverage and/or endorsements in
excess of the cost of a standard coverage policy. Optionee shall have until the
expiration of the Examination Period under the Purchase Agreement between
Optionor and Opus for the sale and purchase of the 10-acre Parcel to notify
Optionor in writing of any objections which Optionee has to the Title Report or
the Survey. If Optionee fails to give written notice of any objection to the
Title Report or the Survey during such Examination Period, Optionee shall be
deemed to have approved all matters shown on the Title Report and the Survey.
All matters shown on the Title Report and the Survey, except those to which
Optionee timely objects, are hereinafter referred to as "Permitted Title
Exceptions." Notwithstanding the foregoing, Optionor hereby discloses to
Optionee that the Option Parcel is now, and will be at the Closing, subject to
the exceptions to title set forth on Exhibit "B" attached hereto. Optionee
hereby agrees that the exceptions to title set forth on Exhibit "B" and any
cross access easements which have been agreed to by Optionor and Optionee shall
be "Permitted Title Exceptions," to which Optionee will not object. Within
thirty (30) days after Optionee has given notice of its intent to exercise the
Option, Optionor shall provide Optionee with an updated Title Report. At the
Closing, Optionor shall convey the Option Parcel to Optionee by a special
warranty deed, subject only to the Permitted Title Exceptions.
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<PAGE> 5
(B) Optionor shall cause Escrow Agent to furnish and
deliver to Optionee, at the Close of Escrow, an ALTA extended owner's title
insurance policy or binding commitment to issue same issued as of the Close of
Escrow, insuring Optionee that Optionee has acquired good and marketable fee
simple title to the Option Parcel in the amount of the purchase price, subject
only to (i) the Permitted Title Exceptions, and (ii) the printed exceptions and
conditions customarily set forth in Escrow Agent's ALTA extended owner's title
insurance policy. Optionor shall pay for the cost of a standard owner's title
insurance policy, and Optionee shall pay for all costs in excess of such cost.
7. OPTIONOR'S REPRESENTATIONS AND WARRANTIES.
In addition to any other express agreements of Optionor
contained herein, the matters set forth in this Section 7 constitute
representations, warranties and covenants by Optionor which shall be true and
correct as of the date hereof and the date of Close of Escrow (regardless of any
investigations Optionee shall have made with respect thereto prior to the Close
of Escrow) and which shall survive the Close of Escrow. In the event that,
during the period between the date hereof and the Close of Escrow, Optionor
learns, or has reason to believe, that any of the following representations and
warranties may cease to be true, Optionor hereby covenants to give written
notice thereof to Optionee within three (3) days. Optionor hereby represents,
warrants and covenants (with the understanding that Optionee shall rely upon
said representations, warranties and covenants) as to each of the matters set
forth below:
(A) Optionor is owner of good marketable fee simple
title to the Option Parcel and has the legal right, power and authority to cause
this Agreement to be executed and to transfer and convey the Option Parcel to
Optionee pursuant hereto. The individual executing this Agreement on behalf of
Optionor is authorized to do so and, upon executing this Agreement, this
Agreement shall be binding and enforceable upon Optionor in accordance with its
terms.
(B) Optionor is not aware of any liens, encumbrances,
claims of liens or encumbrances, or any possible defects, or claims of defects
to the title to the Option Parcel which do not appear in the Title Report, and
Optionor shall protect Optionee against and remove as a lien or encumbrance any
such matter arising during the escrow period except those caused by Optionee.
(C) To the actual knowledge of Optionor and its
agents, there are no (i) claims, actions, suits, condemnation actions or other
proceedings pending or threatened by any entity, (ii) approvals, permits,
easements, rights-of-way, zoning changes, uses or rights that have been denied
or may be denied by any governmental department or agency, and (iii) violations
of any law, statute, government regulation or requirement that in any manner or
to any extent may materially affect the value of the Option Parcel
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<PAGE> 6
or the likely eventual use of the Option Parcel or Optionee's right, title or
interest in and to the Option Parcel; except that Optionor has knowledge that
the Arizona Department of Transportation ("ADOT") is considering limiting access
to 87th Street from the Option Parcel and reconfiguring the intersection of 87th
Street and Raintree Drive, either of which actions, if undertaken by ADOT, may
affect the Option Parcel.
(D) To the actual knowledge of Optionor and its
agents, there has been no and there currently is no generation, location,
transportation, storage, treatment, discharge, disposal or release upon, in or
under the Option Parcel of any hazardous materials or any "pollutant" (as that
term is defined in A.R.S. Section 49-201(23)) subject to regulation under the
Resource Conservation and Recovery Act (as amended by the Hazardous and Solid
Waste Amendments of 1984), the Comprehensive Environmental Response,
Compensation and Liability Act (as amended by the Superfund Amendments and
Reauthorization Act of 1986), or any other applicable State or Federal
environmental protection law or regulation.
(E) Prior to the Close of Escrow, Optionor shall
maintain the Option Parcel in the same state of repair as of the date hereof.
(F) To the actual knowledge of Optionor and its
agents, there exist no adverse claims by any person or persons (including but
not limited to adjoining property owners) and no encroachments with respect to
the Option Parcel, and all fences and walls located on the Property are within
the Option Parcel boundaries.
(G) Optionor shall not withdraw or compromise any
petition or protest pertaining to taxes or other charges relating to the Option
Parcel from the date hereof until Close of Escrow, without the prior written
consent of Optionee.
(H) Optionor has received no notice that the Option
Parcel is in violation of any applicable license, permit, law or regulation
(including, but not limited to, zoning regulations and building and fire codes).
(I) To the actual knowledge of Optionor and its
agents, there are no assessments payable in installments which have resulted in
or may result in a lien being placed on the Option Parcel. Further, to the
actual knowledge of Optionor, there are no proposed plans for assessments by any
government, municipality, or subdivision thereof, including without limitation,
improvement districts.
(J) To the actual knowledge of Optionor and its
agents, all information provided by Optionor to Optionee contains no material
omission, misstatement or error.
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<PAGE> 7
8. DISCLAIMER.
(A) Except as herein specifically set forth, Optionor
makes no representations or warranties, express or implied, with respect to, and
shall have no liability for: (1) the condition of the Option Parcel or the
suitability of the Option Parcel for Optionee's intended use or for any use
whatsoever; (2) any applicable building or zoning laws or regulations or with
respect to compliance therewith or with respect to the existence of or
compliance with any required permits, if any, of any governmental agency; (3)
the availability of water, sewer or other utilities; (4) water, sewer or other
utility districts; (5) access to any public or private sanitary sewer system; or
(6) the presence of any hazardous substances on or under the Option Parcel.
Without limiting the generality of the foregoing, Optionor shall have no
liability to Optionee with respect to the condition of the Option Parcel under
common law, or any federal, state, or local law or regulation, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended, 42 U.S.C.A. Section 9601 et seq., or any similar state
statutes in Arizona, including but not limited to the Arizona State Superfund
Act, as codified in A.R.S. Sections 49-281 through 287, and Optionee hereby
waives any and all claims which the Optionee has or may have against the
Optionor with respect to the condition of the Option Parcel, including any
private causes of action arising under the foregoing statutes concerning the
Option Parcel and any conditions in the Option Parcel.
(B) Optionee's giving of notice of its intent to
exercise the Option shall act as an acknowledgment by Optionee that: (i)
Optionee has had the opportunity to review the Option Parcel to determine if the
Option Parcel is in violation of any federal, state or local environmental law,
rule or regulation or otherwise contains levels or concentrations of "hazardous
substances," "hazardous materials," "toxic substances" or "hazardous waste," as
such terms are defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended 42 U.S.C. Section 9601 et seq., the
Hazardous Materials Transportation Act 49 U.S.C. Section 1801 et seq., the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.,
or the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.,
or analogous provisions of state law; (ii) Optionee is purchasing the Option
Parcel"as is" in its present condition, subject only to the representations and
warranties contained in this Agreement, in the special warranty deed and in the
affidavit of non-foreign status; and (iii) Optionee has fully inspected the
Option Parcel and assumes the responsibility and risks of all defects and
conditions, including such defects and conditions, if any, that cannot be
observed by casual inspection.
(C) By closing the transaction hereunder, Optionee
agrees that (i) Optionee shall be deemed to have accepted all risks associated
with adverse physical characteristics and existing environmental conditions that
may or may not have been revealed by
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<PAGE> 8
the Optionee's investigation of the Option Parcel,(ii) as between the Optionee
and the Optionor, Optionee shall be deemed to have accepted all costs and
liability associated in any way with the physical and environmental condition of
the Option Parcel (expressly excluding liability for injuries to property or
persons arising from accidents or intentional conduct not caused by Optionee),
and (iii) the Optionee hereby waives any and all objections, setoffs, claims, or
causes of action (whether under a statute or common law) concerning the physical
characteristics and existing conditions of the Option Parcel, including, without
limitation, any environmental hazards.
(D) Notwithstanding the foregoing disclaimers,
waivers and releases, nothing in this Section 8 shall be deemed to relieve
Optionor of any liability to Optionee for release of hazardous materials or
other environmental contamination on the Option Parcel caused by Optionor or
Optionor's officers, directors, shareholders, employees, agents, contractors, or
invitees; nor shall this Section 8 be deemed to release Optionor from liability
for breach of any express representations or warranties contained in this
Agreement, the special warranty deed or the affidavit of non-foreign status.
9. POSSESSION.
Possession of the Option Parcel and risk of loss will be
delivered to the Optionee at the Close of Escrow.
10. CONDEMNATION.
If any condemnation or eminent domain proceedings are
commenced by any competent public authority with respect to the Option Parcel,
or any part thereof, prior to the Closing, Optionor shall promptly give Optionee
written notice thereof, and Optionee shall have the option, to be exercised
within fifteen (15) days of such notice, to (i) close the purchase of the Option
Parcel on the Scheduled Closing Date subject to such proceedings, whereupon any
award paid or to be paid in connection therewith shall be paid to or assigned to
Optionee by Optionor at the Closing, or (ii) terminate this Agreement, whereupon
the rights and obligations of the parties to this Agreement shall cease and
terminate.
11. CLOSING PRORATIONS AND COSTS.
All real property taxes and assessments shall be prorated as
of the Closing Date on the latest information available to the Escrow Agent.
Escrow fees shall be borne one-half by each party, and, unless provided
elsewhere in this Agreement to the contrary, all other closing costs shall be
charged and allocated to the parties in the manner customary for commercial real
estate transactions in Maricopa County, Arizona. If any tax or assessments
affects the Option Parcel and any additional land not a part of the Option
Parcel, only that portion of the tax or assessment attributable to the Option
Parcel shall be prorated between
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<PAGE> 9
Optionee and Optionor, and the remainder of said tax or assessment shall remain
the sole obligation of the Optionor. The determination of the portion of the tax
or assessment attributable to the Option Parcel shall take into account the
value of improvements (if any) made to the Option Parcel and/or any other
property covered by the tax bill to properly account for differences in the
valuation of, and resulting tax or assessment levied against, the entire
property covered by the bill
12. DESIGN APPROVAL.
Neither Optionee nor any party who subsequently acquires the
Option Parcel may construct any improvements on the Option Parcel without first
obtaining Optionor's approval of the design of said improvements, which approval
not be unreasonably withheld, conditioned or delayed by Optionor. Optionor
agrees that the design of improvements that are substantially the same as set
forth in Opus' Application No. 70-DR-98 submitted to the Scottsdale Development
Review Board will be approved. At the Closing, Optionor and Optionee shall
execute and record a memorandum memorializing Optionor's design approval rights.
The memorandum shall be prepared by Optionor and submitted to Optionee for its
approval prior to the expiration of the Examination Period under the Purchase
Agreement between Optionor and Opus for the sale and purchase of the 10-acre
Parcel. The memorandum shall automatically expire at such time as Optionee
commences development of the Option Parcel consistent with Optionor's approval.
13. EASEMENTS.
The parties agree to cooperate with one another in granting
ingress and egress and utility easements. If either party determines that it
will need an easement for such purposes over the other's property, the parties
shall mutually agree, prior to the expiration of the Examination Period under
the Purchase Agreement between Optionor and Opus for the sale and purchase of
the 10-acre Parcel, upon the location of said easement and the form and content
of an easement agreement to be executed and recorded at the closing.
14. BROKERS' COMMISSIONS.
(A) The parties acknowledge that, in the event the
transaction contemplated hereunder is consummated, a real estate commission in
an amount equal to three percent (3%) of the purchase price is payable to Lee &
Associates (acting through its agents Craig Coppola and Bill Blake) (the
"Broker"). Said commission shall be the sole responsibility of the Optionor and
shall be paid in cash at the Closing. Optionor's obligation to pay any
commission to the Broker is specifically conditioned upon the Close of Escrow
and, in the event that escrow fails to close, Optionor shall have no obligation
whatever to pay any commission to Broker in connection with this transaction. It
is expressly understood and agreed that the Broker shall have no claim or lien
against any funds
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<PAGE> 10
received by Optionor as liquidated damages hereunder and that the Broker's
consent is not required for the termination or cancellation of the escrow.
(B) Optionee and Optionor warrant, each to the other,
that except as provided in the preceding subparagraph, there are no fees or
commissions owing to any broker or other party for bringing about the sale
contemplated hereunder. If any other person shall assert a claim to a fee,
commission or other compensation on account of alleged employment as a broker or
finder or for performance of services as a broker or finder in connection with
this transaction, the party hereto under whom the broker or finder is claiming
shall indemnify and hold harmless the other party against and from any such
claim and all costs, expenses and liabilities incurred in connection with such
claim or any action or proceeding brought thereon (including, but without
limitation, counsel and witness fees and court costs in defending against such
claim).
15. REMEDIES.
(A) Optionor's Remedies. In the event of a breach of
this Agreement by Optionee, Optionor shall, as its sole remedy, terminate this
Agreement, which termination shall be effective immediately upon notice to
Optionee and Escrow Agent, and retain the Earnest Money Deposit as liquidated
damages, and neither party shall have further obligation or liability to the
other in connection with the escrow or under this Agreement. It is understood
that the Earnest Money Deposit represents a reasonable and good faith estimate
of Optionor's damages in the event of a default by Optionee. Notwithstanding the
foregoing, if Optionee's default consists of a breach of any of its obligations
or indemnities which expressly survive the termination of this Agreement,
Optionor shall be entitled to pursue any remedies available at law or in equity
with respect thereto, including, but not limited to, suit for damages,
reasonable attorneys' fees and court costs.
(B) Optionee's Remedies. In the event of a breach of
this Agreement by Optionor, Optionee may exercise any remedies provided by law
or equity and those, if any, set forth in this Agreement, including without
limitation the right to specific performance and damages.
16. NOTICES.
All notices, requests and other communications hereunder shall
be given in writing and either (i) personally served on the party to whom it is
given, or (ii) mailed by registered or certified mail, postage prepaid, return
receipt requested, or (iii) sent by private overnight courier such as Federal
Express or Airborne, or (iv) sent by facsimile to the number set forth below, as
long as such facsimile transmission is confirmed as received by the transmission
equipment, and is followed the next business day
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<PAGE> 11
by another permissible means of notice hereunder, addressed as follows:
If to Optionor:
Mall at the Crossroads, Inc.
c/o Northsight Corporation
Attn: Tom Treaccar
14100 N. Northsight Blvd.
Scottsdale, Arizona 85260
Fax No. (602) 991-2735
With a copy to:
Wayne A. Smith
Robbins & Green, P.A.
1800 Norwest Tower
3300 North Central Avenue
Phoenix, Arizona 85012
Fax No. (602) 266-5369
If to Optionee:
JDA Software Group, Inc.
Attn: Paul Mehlhorn
11811 N. Tatum Blvd., Suite 2000
Phoenix, AZ 85028
Fax No. (602) 485-3158
With a copy to:
JDA Software Group, Inc.
Attn: Karen L. Nagle
11811 N. Tatum Blvd., Suite 2000
Phoenix, AZ 85028
Fax No. (602) 285-3158
And a copy to:
Steven M. Goldstein
Sacks Tierney, P.A.
2929 N. Central Ave., 14th Floor
Phoenix, AZ 85012
Fax No. (602) 279-2027
If to Escrow Agent:
Security Title Agency
Attn: Jan Dooley
8787 East Pinnacle Peak Road
Suite 120
Scottsdale, Arizona 85255
Fax No. (602) 563-5305
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<PAGE> 12
All notices shall be deemed given when delivered or, if mailed as provided
above, on the second day after the day of mailing, and if sent by overnight
courier, on the next day after the date of deposit with the courier, and if sent
by facsimile, upon machine confirmation of receipt. Any party may change his
address for the receipt of notices at any time by giving written notice thereof
to the other parties in accordance with the terms of this section. The inability
to deliver notice because of a changed address of which no notice was given, or
rejection or other refusal to accept any notice, shall be deemed to be the
effective receipt of the notice as of the date of such inability to deliver or
rejection or refusal to accept.
17. AFFIDAVIT OF NON-FOREIGN STATUS; IRS FORM 1099B.
Optionor shall deliver or cause to be delivered to Escrow
Agent at the Close of Escrow an affidavit executed by Optionor under penalty of
perjury setting forth Optionor's taxpayer identification number and stating that
Optionor is not a foreign person, in accordance with Internal Revenue Code
Section 1445(b)(2). Optionor shall also execute and deliver to Escrow Agent at
the Close of Escrow a copy of IRS Form 1099B for filing by Escrow Agent with the
Internal Revenue Service (the "IRS"). Escrow Agent, as the party responsible for
closing the transaction contemplated hereby within the meaning of Section
6045(e)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), is
instructed to file all necessary information reports, returns and statements
(collectively the "reports") regarding the transaction required by the Code,
including, but not limited to, the reports required pursuant to Section 6045 of
the Code.
18. CLOSING PROTECTION LETTER.
If Escrow Agent acts as an agent for an underwriter and does
not issue policies of title insurance, Escrow Agent agrees that, as a condition
to acting as the escrow agent for this transaction, it shall cause its
underwriter (the "title insurer") to issue to Optionor and Optionee, within
twenty (20) days after the Opening of Escrow, an escrow and closing protection
letter, insured escrow and closing service, or statement of service
responsibility in written form satisfactory to both Optionor and Optionee.
19. MISCELLANEOUS.
(A) This Agreement and the exhibits attached hereto
embody the entire agreement between the parties in connection with this
transaction, and there are no oral agreements existing between the parties
relating to this transaction that are not expressly set forth herein and covered
hereby; this Agreement may not be modified except in a writing signed by all
parties.
(B) Time is of the essence of this Agreement.
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<PAGE> 13
(C) In the event of any litigation arising out of
this Agreement, the defaulting party or the party not prevailing in such
dispute, as the case may be, shall pay any and all costs and expenses incurred
by the other party in enforcing or establishing his rights hereunder, including,
without limitation, court costs and reasonable counsel fees.
(D) The captions and section numbers appearing in
this Agreement are inserted only as a matter of convenience, and do not define,
limit, construe or describe the scope or intent of such sections or articles of
this Agreement nor in any way affect this Agreement.
(E) This Agreement may be executed in multiple
counterparts, each of which shall, for all purposes, be deemed an original and
all of which, taken together, shall constitute one and the same agreement. The
partially executed signature page of any counterpart of this Agreement may be
attached to any other partially executed counterpart of this Agreement without
impairing the legal effect of the signature(s) on such signature page.
(F) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors in interest
and permitted assigns. Optionee may assign its rights hereunder to a contractor
or developer of its choice by giving written notice of the assignee's name and
address to Optionee to Optionor and Escrow Agent prior to the Close of Escrow;
provided that said assignee executes an instrument acknowledging and agreeing to
be bound by all of the terms and conditions of this Agreement.
(G) The Superior Court of the State of Arizona shall
have exclusive jurisdiction over any dispute arising out of this Agreement, and
both parties consent to the exercise of personal jurisdiction by that forum.
(H) After it has given notice of its intent to
exercise the option, Optionee may, at its expense, place a sign on the Option
Parcel advertising its intention to develop the Option Parcel, provided that
such sign complies with all applicable laws and ordinances and further provided
that Optionee shall indemnify and hold Optionor harmless from all costs and
liability arising by reason of such sign. Upon termination of this Agreement for
any reason, Optionee shall promptly remove the sign at its expense.
(I) At the Closing on the 10-acre Parcel, Optionor
and Optionee shall execute and record a Memorandum of Option, in the form
attached hereto as Exhibit "C", which shall describe the Option Parcel and
disclose Optionee's option to purchase the Option Parcel. Also, at the Closing
on the 10-acre Parcel, Optionor shall cause Escrow Agent to furnish and deliver
to Optionee an optionee's title insurance policy in the amount of the purchase
price for the Option Parcel, subject only to the Permitted Title Exceptions and
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<PAGE> 14
the printed exceptions and conditions customarily set forth in Escrow Agent's
form of such policy.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the last date set forth below their respective signatures.
OPTIONOR: OPTIONEE:
MALL AT THE CROSSROADS, INC., JDA SOFTWARE GROUP, INC.,
a Washington corporation a Delaware corporation
By /s/ May M. Welk By /s/ Kristen L. Magnuson
---------------------------- -----------------------------
Its: Vice President Its: CFO/SR VP
----------------------- ---------------------------
Date: 5/27/98 Date: 5/18/98
------------------------- --------------------------
AGREEMENT AND CONSENT BY ESCROW AGENT AND TITLE INSURER
The undersigned, Security Title Agency, hereby agrees to (i) accept
the foregoing Real Estate Purchase Agreement and Escrow Instructions as
instructions to the undersigned, (ii) act as Escrow Agent and Title Insurer
under said Agreement in consideration of its fees normally charged in such
transactions, and (iii) be bound by said Agreement in the performance of its
obligations as the Escrow Agent and Title Insurer.
Dated this 8 day of June, 1998.
SECURITY TITLE AGENCY
By: /s/ Jan Dooley
Its: Branch Mgr.
14
<PAGE> 15
EXHIBIT "A"
[MAP DEPICTING OPTION PARCEL]
[Phase Two Site Plan]
<PAGE> 16
EXHIBIT "B"
PERMITTED TITLE EXCEPTIONS
1. Water rights, claims or title to water, whether or not shown by the
public records.
2. Current taxes, a lien, but not yet due and payable.
3. Reservations or exceptions in patents or in Acts authorizing the
issuance thereof.
4. Easements and Restrictions shown on Map of Dedication NORTHSIGHT
recorded in Book 302 of Maps, page 11.
<PAGE> 17
EXHIBIT "C"
PLEASE RETURN RECORDED
INSTRUMENT TO:
MEMORANDUM OF OPTION AGREEMENT
NOTICE IS HEREBY GIVEN that MALL AT THE CROSSROADS, INC., a
Washington corporation, whose address is c/o Northsight Corporation, 14100 N.
Northsight Blvd., Scottsdale, Arizona 85260 ("Optionor"), and JDA SOFTWARE
GROUP, INC., a Delaware corporation, whose address is
_________________________________________________ ____________________
("Optionee"), have entered into that certain Real Estate Option Agreement and
Escrow Instructions dated ____________, 1998, pursuant to which Optionor has
granted to Optionee the exclusive option to purchase that certain real property
described on Exhibit "A" attached hereto. The option is for a term commencing on
____________, 1998, and expiring on August 24, 2001, and is subject to the terms
and conditions specified in said Real Estate Option Agreement and Escrow
Instructions, copies of which are in the possession of Optionor and Optionee.
DATED this _____ day of _______________, 1998.
OPTIONOR: OPTIONEE:
MALL AT THE CROSSROADS, INC., JDA SOFTWARE GROUP, INC.,
a Washington corporation a Delaware corporation
By /s/ Mary M. Welk By /s/ Kristen L. Magnuson
Name: Mary M. Welk Name: Kirsten L. Magnuson
Title: Vice President Title: SR VP/CFO
<PAGE> 18
STATE OF Washington)
) ss.
County of Snohomish)
On this 27th day of May, 1998, before me, the undersigned
Notary Public, personally appeared Mary M. Welk, known to me (or satisfactorily
proven) to be the person whose name is above subscribed, who acknowledged to me
that (s)he is the Vice President of Mall at the Crossroads, Inc., a Washington
corporation, and that (s)he executed the foregoing instrument in such capacity
on behalf of said corporation, being so authorized to do.
/s/ Stacey Jessup
------------------------------
Notary Public
[Notary Seal]
My Commission Expires:
01/09/01
- ----------------------
STATE OF Arizona)
) ss.
County of Maricopa)
On this 19th day of May, 1998, before me, the undersigned
Notary Public, personally appeared Kristen L. Mangnuson, known to me (or
satisfactorily proven) to be the person whose name is above subscribed, who
acknowledged to me that (s)he is the SR. VP/CFO of JDA Software Group, Inc., a
Delaware corporation, and that (s)he executed the foregoing instrument in such
capacity on behalf of said corporation, being so authorized to do.
/s/ Connie K. Brinks
------------------------------
Notary Public
[Notary Seal]
My Commission Expires:
August 21, 2000
- ----------------------
<PAGE> 19
EXHIBIT "A"
TO
MEMORANDUM OF OPTION AGREEMENT
LEGAL DESCRIPTION
[To Be Attached]
<PAGE> 1
Exhibit 10.34
JDA SOFTWARE GROUP, INC.
AMENDMENT OF
STOCK OPTION AGREEMENT
THIS AMENDMENT OF STOCK OPTION AGREEMENT (the "Amendment") is made by and
between JDA Software Group, Inc., a Delaware corporation (the "Company"), and
Brent W. Lippman (the "Optionee").
RECITALS
WHEREAS, on ____________, the Company granted to the Optionee an option
to purchase ________________ shares of the Company's common stock at an exercise
price of $______________ per share (the "Option"), which was evidenced by a
Stock Option Agreement (the "Option Agreement"); and
WHEREAS, the Company and the Optionee wish to amend the Option to
provide for acceleration of vesting of any unvested shares subject to the Option
upon the occurrence of certain events related to an acquisition of the Company,
pursuant to the terms and conditions set forth below;
AGREEMENT
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Effective Date. This Amendment is effective as of May 22, 1998.
2. Acceleration of Vesting. Notwithstanding any provisions of the
Option Agreement to the contrary, in the event of a Termination After Transfer
of Control (as defined below), any unexercised portion of the Option shall be
immediately exercisable and vested in full as of the date of the Optionee's
termination of employment with the Company.
(a) Post-Termination Exercise. In the event of a Termination After
Transfer of Control, the Option, to the extent unexercised by the Optionee on
the later of (i) the date on which the Optionee's employment terminated and, if
applicable, (ii) the termination of the Consulting Agreement (such later date,
the "Termination Date"), may be exercised by the Optionee within three (3)
months (or six (6) months if the Optionee is subject to restrictions on transfer
to comply with "Pooling-of-Interests" accounting rules) following the
Termination Date, but in any event no later than the expiration date set forth
in the Option Agreement.
(b) Escrow. In the event that the Termination After Transfer of
Control results from the Optionee's resignation for Good Reason and such
termination occurs within nine (9) months after the Transfer of Control, the
Company may require that any certificates
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<PAGE> 2
evidencing shares which were acquired upon an exercise of the Option that was
permissible solely by reason of this Amendment be deposited with an agent
designated by the Company under the terms and conditions of an escrow agreement
reasonably approved by the Optionee and the Company. The escrow agent shall hold
the certificates in order to secure the Optionee's agreement to continue in the
full time employ of the Company or its parent or successor for a period of up to
nine (9) months following a Transfer of Control. Such employment shall be
pursuant to an employment agreement ("Employment Agreement") reasonably
acceptable to the Employee which shall provide in its essential terms (i) that
Optionee shall continue to receive his salary and bonus at such rate and upon
such terms as prior to the Transfer of Control; (ii) that Optionee's
responsibilities shall not be diminished during the term of the Employment
Agreement; (iii) that Optionee shall not be required to relocate during the term
of the Employment Agreement; and (iv) such other terms as are consistent with
maintaining Optionee's stature and responsibilities. While the certificates are
held in escrow, the Optionee may direct the use (including without limitation
the sale, transfer or other distribution for fair value) and voting of the
shares represented by the escrowed certificates, although the escrowed shares
(or the proceeds from the transfer thereof) may not be released from escrow
until the expiration of the term of the Employment Agreement. The Company shall
bear the expenses of any escrow established pursuant to this Amendment.
3. Pooling of Interests Accounting. Notwithstanding anything in the
Option Agreement and this Amendment to the contrary, no acceleration of
exercisability or vesting of the Option shall occur pursuant to this Amendment
in the event that (i) the Securities and Exchange Commission (the "SEC") asserts
that such acceleration of exercisability or vesting precludes the use of
"pooling of interests" accounting treatment of the Transfer of Control, (ii) the
Transfer of Control is supported by the Board of Directors of the Company, and
(iii) the SEC will not reverse its position following reasonable persuasive
efforts by the Company. In the event that acceleration of exercisability or
vesting of the Option is precluded as a result of this Section 3, the Company
and the Optionee shall enter into the Consulting Agreement as soon as
practicable following such determination.
4. Section 4999 Limitation. This Section 4 shall apply only if the
Optionee, on an after-tax basis, would receive more value under this Option
after the application of this Section 4 than before the application of this
Section 4. For this purpose, "after-tax basis" shall mean a calculation taking
into account all federal and state income and excise taxes imposed on the
Employee, including (without limitation) the excise tax described in section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"). If this
Section 4 is applicable, it shall supersede any conflicting provision of this
Amendment and the Option Agreement.
(a) Basic Rule. Options shall accelerate pursuant to the
provisions of this Option Agreement, including without limitation those set
forth in Section 2 hereof, to the extent but only to the extent that such
acceleration would not subject the Optionee to the excise tax described in
section 4999 of the Code. All calculations required by this Section 4 shall be
made by the independent auditors retained by the Company most recently prior to
the Transfer of Control (the "Auditors"), based on information supplied by
Company and Optionee, and shall be
2
<PAGE> 3
binding on the Company and the Optionee. All fees and expenses of such auditors
shall be paid by the Company.
5. Definitions. For purposes of this Amendment, the following terms
shall have the meanings set forth below:
(a) "CAUSE" shall occur if the Optionee's employment is
terminated for any of the following reasons:
(i) Theft, dishonesty, or intentional falsification of any
employment or Company records;
(ii) Improper disclosure of the Company's confidential or
proprietary information; or
(iii) The Optionee's conviction (including any plea of guilty
or nolo contendere) for any criminal act that impairs his ability to perform his
duties for the Company.
(b) "CONSULTING AGREEMENT" shall mean the Consulting Agreement in
substantially the form attached hereto as Exhibit A.
(c) "GOOD REASON" shall mean the occurrence of any of the
following conditions, without the Optionee's written consent, which condition(s)
remain(s) in effect twenty (20) days after written notice to the Company from
Optionee of such condition(s):
(i) a material, adverse change in the Optionee's
responsibilities or duties, as measured against the Optionee's responsibilities
or duties immediately prior to the Transfer of Control, causing the Optionee's
position to be of materially less stature or responsibility; provided, that for
purposes of this Amendment, a material, adverse change shall be deemed to occur
if the Optionee no longer serves as Chief Executive Officer (who shall be the
principal executive officer) of a publicly-traded company reporting directly to
the Board of Directors;
(ii) the relocation of the Optionee's work place for the
Company to a location more than thirty (30) miles from the Optionee's work
location prior to the Transfer of Control;
(iii) a failure to pay, or any reduction of the Optionee's
base salary as in effect immediately prior to the Transfer of Control or the
Optionee's bonus compensation in effect prior to the Transfer of Control
(subject to applicable performance requirements with respect to the actual
amount of bonus compensation earned by the Optionee); or
(iv) any material breach of this Amendment by the Company.
(d) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
3
<PAGE> 4
(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 is 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.
(e) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean the
occurrence, within eighteen (18) months following a Transfer of Control, of
either (i) termination of the Optionee's employment by the Company for any
reason other than for Cause, or (ii) the Optionee's resignation for Good Reason.
"Termination After Transfer of Control" shall not include any termination of the
employment of the Optionee (i) by the Company for Cause; (ii) by the Company as
a result of the disability of the Optionee; (iii) as a result of the death of
the Optionee; or (iv) as a result of the voluntary termination of employment by
the Optionee (other than for Good Reason).
(f) "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.
6. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) or to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Amendment and
agree expressly to perform the obligations under this Amendment in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. Failure of the Company to obtain
such agreement shall be a material breach of this Amendment. For all purposes
under this Amendment, the term "Company" shall include any successor to the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Amendment by operation of law.
(b) Optionee's Successors. All rights of the Optionee hereunder
shall inure to the benefit of, and be enforceable by, the Optionee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Optionee shall have no
4
<PAGE> 5
right to assign any of his obligations or duties under this Amendment to any
other person or entity.
7. Continuation of Other Terms. Except as set forth herein, all other
terms and conditions of the Option Agreement shall remain in full force and
effect.
8. Applicable Law. This Amendment shall be governed by the laws of
the State of Delaware as such laws are applied to agreements between Delaware
residents entered into and to be performed entirely within the State of
Delaware.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first above written.
JDA SOFTWARE GROUP, INC.
By:_________________________________
Title:______________________________
OPTIONEE:
____________________________________
5
<PAGE> 1
Exhibit 10.35
JDA SOFTWARE GROUP, INC.
AMENDMENT OF
STOCK OPTION AGREEMENT
THIS AMENDMENT OF STOCK OPTION AGREEMENT (the "Amendment") is made by
and between JDA Software Group, Inc., a Delaware corporation (the "Company"),
and Kristen L. Magnuson (the "Optionee").
RECITALS
WHEREAS, on ______________, the Company granted to the Optionee an
option to purchase ____________________ shares of the Company's common stock at
an exercise price of $__________________ per share (the "Option"), which was
evidenced by a Stock Option Agreement (the "Option Agreement"); and
WHEREAS, the Company and the Optionee wish to amend the Option to
provide for acceleration of vesting of any unvested shares subject to the Option
upon the occurrence of certain events related to an acquisition of the Company,
pursuant to the terms and conditions set forth below;
AGREEMENT
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Effective Date. This Amendment is effective as of May 22, 1998.
2. Acceleration of Vesting. Notwithstanding any provisions of the
Option Agreement to the contrary, in the event of a Termination After Transfer
of Control (as defined below), any unexercised portion of the Option shall be
immediately exercisable and vested in full as of the date of the Optionee's
termination of employment with the Company.
(a) Post-Termination Exercise. In the event of a Termination After
Transfer of Control, the Option, to the extent unexercised by the Optionee on
the later of (i) the date on which the Optionee's employment terminated and, if
applicable, (ii) the termination of the Consulting Agreement (such later date,
the "Termination Date"), may be exercised by the Optionee within three (3)
months (or six (6) months if the Optionee is subject to restrictions on transfer
to comply with "Pooling-of-Interests" accounting rules) following the
Termination Date, but in any event no later than the expiration date set forth
in the Option Agreement.
3. Pooling of Interests Accounting. Notwithstanding anything in the
Option Agreement and this Amendment to the contrary, no acceleration of
exercisability or vesting of the Option shall occur pursuant to this Amendment
in the event that (i) the Securities and
1
<PAGE> 2
Exchange Commission (the "SEC") asserts that such acceleration of exercisability
or vesting precludes the use of "pooling of interests" accounting treatment of
the Transfer of Control, (ii) the Transfer of Control is supported by the Board
of Directors of the Company, and (iii) the SEC will not reverse its position
following reasonable persuasive efforts by the Company. In the event that
acceleration of exercisability or vesting of the Option is precluded as a result
of this Section 3, the Company and the Optionee shall enter into the Consulting
Agreement as soon as practicable following such determination.
4. Section 4999 Limitation. This Section 4 shall apply only if the
Optionee, on an after-tax basis, would receive more value under this Option
after the application of this Section 4 than before the application of this
Section 4. For this purpose, "after-tax basis" shall mean a calculation taking
into account all federal and state income and excise taxes imposed on the
Employee, including (without limitation) the excise tax described in section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"). If this
Section 4 is applicable, it shall supersede any conflicting provision of this
Amendment and the Option Agreement.
(a) Basic Rule. Options shall accelerate pursuant to the
provisions of this Option Agreement, including without limitation those set
forth in Section 2 hereof, to the extent but only to the extent that such
acceleration would not subject the Optionee to the excise tax described in
section 4999 of the Code. All calculations required by this Section 4 shall be
made by the independent auditors retained by the Company most recently prior to
the Transfer of Control (the "Auditors"), based on information supplied by
Company and Optionee, and shall be binding on the Company and the Optionee. All
fees and expenses of such auditors shall be paid by the Company.
5. Definitions. For purposes of this Amendment, the following terms
shall have the meanings set forth below:
(a) "CAUSE" shall occur if the Optionee's employment is
terminated for any of the following reasons:
(i) Theft, dishonesty, or intentional falsification of any
employment or Company records;
(ii) Improper disclosure of the Company's confidential or
proprietary information; or
(iii) The Optionee's conviction (including any plea of guilty
or nolo contendre) for any criminal act that impairs his ability to perform his
duties for the Company.
(b) "CONSULTING AGREEMENT" shall mean the Consulting Agreement in
substantially the form attached hereto as Exhibit A.
2
<PAGE> 3
(c) "GOOD REASON" shall mean the occurrence of any of the
following conditions, without the Optionee's written consent, which condition(s)
remain(s) in effect twenty (20) days after written notice to the Company from
Optionee of such condition(s):
(i) a material, adverse change in the Optionee's
responsibilities or duties, as measured against the Optionee's responsibilities
or duties immediately prior to the Transfer of Control, causing the Optionee's
position to be of materially less stature or responsibility; provided, that for
purposes of this Amendment, a material, adverse change shall be deemed to occur
if the Optionee no longer serves as Chief Financial Officer (who shall be the
most senior financial officer) of a publicly-traded company reporting directly
to the Chief Executive Officer;
(ii) the relocation of the Optionee's work place for the
Company to a location more than thirty (30) miles from the Optionee's work
location prior to the Transfer of Control;
(iii) a failure to pay, or any reduction of the Optionee's
base salary as in effect immediately prior to the Transfer of Control or the
Optionee's bonus compensation in effect prior to the Transfer of Control
(subject to applicable performance requirements with respect to the actual
amount of bonus compensation earned by the Optionee); or
(iv) any material breach of this Amendment by the Company.
(d) 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 is 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.
(e) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean the
occurrence, within eighteen (18) months following a Transfer of Control, of
either (i) termination of the Optionee's employment by the Company for any
reason other than for Cause, or (ii) the Optionee's resignation for Good Reason.
"Termination After Transfer of Control" shall not include any termination of the
employment of the Optionee (i) by the Company for Cause; (ii) by the Company as
a result of the disability of the Optionee; (iii) as a result of the death of
the Optionee; or (iv) as a result of the voluntary termination of employment by
the Optionee (other than for Good Reason).
3
<PAGE> 4
(f) "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.
6. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) or to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Amendment and
agree expressly to perform the obligations under this Amendment in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. Failure of the Company to obtain
such agreement shall be a material breach of this Amendment. For all purposes
under this Amendment, the term "Company" shall include any successor to the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Amendment by operation of law.
(b) Optionee's Successors. All rights of the Optionee hereunder
shall inure to the benefit of, and be enforceable by, the Optionee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Optionee shall have no right to assign any
of her obligations or duties under this Amendment to any other person or entity.
7. Continuation of Other Terms. Except as set forth herein, all other
terms and conditions of the Option Agreement shall remain in full force and
effect.
8. Applicable Law. This Amendment shall be governed by the laws of
the State of Delaware as such laws are applied to agreements between Delaware
residents entered into and to be performed entirely within the State of
Delaware.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first above written.
JDA SOFTWARE GROUP, INC.
By:_________________________________
Title:______________________________
OPTIONEE:
____________________________________
5
<PAGE> 1
Exhibit 10.36
JDA SOFTWARE GROUP, INC.
AMENDMENT OF
STOCK OPTION AGREEMENT
THIS AMENDMENT OF STOCK OPTION AGREEMENT (the "Amendment") is made by
and between JDA Software Group, Inc., a Delaware corporation (the "Company"),
and Brent W. Lippman (the "Optionee").
RECITALS
WHEREAS, on November 15, 1995, the Company granted to the Optionee an
option to purchase 11,500 shares of the Company's common stock at an exercise
price of $5.25 per share (the "Option"), which was evidenced by a Stock Option
Agreement (the "Option Agreement"); and
WHEREAS, the Company and the Optionee wish to amend the Option to
provide for acceleration of vesting of any unvested shares subject to the Option
upon the occurrence of certain events related to an acquisition of the Company,
pursuant to the terms and conditions set forth below;
AGREEMENT
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Effective Date. This Amendment is effective as of May 22, 1998.
2. Acceleration Upon Non-Assumption of the Option. In the event of a
Transfer of Control (as defined below), the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), shall either assume the Company's rights and
obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation's stock. In the event that the
Acquiring Corporation fails to assume the Company's rights and obligations under
the Option or substitute for the Option in connection with the Transfer of
Control, and provided that the Optionee's employment with the Company has not
been terminated by the Company for Cause and has not expired prior to such date,
any unexercised portion of the Option shall be immediately exercisable and
vested in full as of the date ten (10) days prior to the date of the Transfer of
Control. An exercise of the Option that was permissible solely by reason of the
acceleration of exercisability provided by this Amendment shall be conditioned
upon the consummation of the Transfer of Control.
1
<PAGE> 2
3. Acceleration of Vesting. Notwithstanding any provisions of the
Option Agreement to the contrary, in the event of a Termination After Transfer
of Control (as defined below), any unexercised portion of the Option shall be
immediately exercisable and vested in full as of the date of the Optionee's
termination of employment with the Company. Any exercise or vesting of the
Option that was permissible solely by reason of this Amendment shall be subject
to the provisions of Section 4 below.
(a) Post-Termination Exercise. In the event of a Termination After
Transfer of Control, the Option, to the extent unexercised by the Optionee on
the later of (i) the date on which the Optionee's employment terminated and, if
applicable, (ii) the termination of the Consulting Agreement (such later date,
the "Termination Date"), may be exercised by the Optionee within three (3)
months (or six (6) months if the Optionee is subject to restrictions on transfer
to comply with "Pooling-of-Interests" accounting rules) following the
Termination Date, but in any event no later than the expiration date set forth
in the Option Agreement.
(b) Escrow. In the event that the Termination After Transfer of
Control results from the Optionee's resignation for Good Reason and such
termination occurs within nine (9) months after the Transfer of Control, the
Company may require that any certificates evidencing shares which were acquired
upon an exercise of the Option that was permissible solely by reason of this
Amendment be deposited with an agent designated by the Company under the terms
and conditions of an escrow agreement reasonably approved by the Optionee and
the Company. The escrow agent shall hold the certificates in order to secure the
Optionee's agreement to continue in the full-time employ of the Company or its
parent or successor for a period of up to nine (9) months following a Transfer
of Control. Such employment shall be pursuant to an employment agreement
("Employment Agreement") reasonably acceptable to the Employee which shall
provide in its essential terms (i) that Optionee shall continue to receive his
salary and bonus at such rate and upon such terms as prior to the Transfer of
Control; (ii) that Optionee's responsibilities shall not be diminished during
the term of the Employment Agreement; (iii) that Optionee shall not be required
to relocate during the term of the Employment Agreement; and (iv) such other
terms as are consistent with maintaining Optionee's stature and
responsibilities. While the certificates are held in escrow, the Optionee may
direct the use (including without limitation the sale, transfer or other
distribution for fair value) and voting of the shares represented by the
escrowed certificates, although the escrowed shares (or the proceeds from the
transfer thereof) may not be released from escrow until the expiration of the
term of the Employment Agreement. The Company shall bear the expenses of any
escrow established pursuant to this Amendment.
4. Pooling of Interests Accounting. Notwithstanding anything in the
Option Agreement and this Amendment to the contrary, no acceleration of
exercisability or vesting of the Option shall occur pursuant to this Amendment
in the event that (i) the Securities and Exchange Commission (the "SEC") asserts
that such acceleration of exercisability or vesting precludes the use of
"pooling of interests" accounting treatment of the Transfer of Control, (ii) the
Transfer of Control is supported by the Board of Directors of the Company, and
(iii) the SEC
2
<PAGE> 3
will not reverse its position following reasonable persuasive efforts by the
Company. In the event that acceleration of exercisability or vesting of the
Option is precluded as a result of this Section 4, the Company and the Optionee
shall enter into the Consulting Agreement as soon as practicable following such
determination.
5. Section 4999 Limitation. This Section 5 shall apply only if the
Optionee, on an after-tax basis, would receive more value under this Option
after the application of this Section 5 than before the application of this
Section 5. For this purpose, "after-tax basis" shall mean a calculation taking
into account all federal and state income and excise taxes imposed on the
Employee, including (without limitation) the excise tax described in section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"). If this
Section 5 is applicable, it shall supersede any conflicting provision of this
Amendment and the Option Agreement.
(a) Basic Rule. Options shall accelerate pursuant to the
provisions of this Option Agreement, including without limitation those set
forth in Sections 2 and 3 hereof, to the extent but only to the extent that such
acceleration would not subject the Optionee to the excise tax described in
section 4999 of the Code. All calculations required by this Section 5 shall be
made by the independent auditors retained by the Company most recently prior to
the Transfer of Control (the "Auditors"), based on information supplied by
Company and Optionee, and shall be binding on the Company and the Optionee. All
fees and expenses of such auditors shall be paid by the Company.
6. Definitions. For purposes of this Amendment, the following terms
shall have the meanings set forth below:
(a) "CAUSE" shall occur if the Optionee's employment is
terminated for any of the following reasons:
(i) Theft, dishonesty, or intentional falsification of any
employment or Company records;
(ii) Improper disclosure of the Company's confidential or
proprietary information; or
(iii) The Optionee's conviction (including any plea of guilty
or nolo contendre) for any criminal act that impairs his ability to perform his
duties for the Company.
(b) "CONSULTING AGREEMENT" shall mean the Consulting Agreement in
substantially the form attached hereto as Exhibit A.
(b) "GOOD REASON" shall mean the occurrence of any of the
following conditions, without the Optionee's written consent, which condition(s)
remain(s) in effect twenty (20) days after written notice to the Company from
Optionee of such condition(s):
3
<PAGE> 4
(i) a material, adverse change in the Optionee's
responsibilities or duties, as measured against the Optionee's responsibilities
or duties immediately prior to the Transfer of Control, causing the Optionee's
position to be of materially less stature or responsibility; provided, that for
purposes of this Amendment, a material, adverse change shall be deemed to occur
if the Optionee no longer serves as Chief Executive Officer of a publicly-traded
company reporting directly to the Board of Directors;
(ii) the relocation of the Optionee's work place for the
Company to a location more than thirty (30) miles from the Optionee's work
location prior to the Transfer of Control;
(iii) a failure to pay, or any reduction of the Optionee's
base salary as in effect immediately prior to the Transfer of Control or the
Optionee's bonus compensation in effect prior to the Transfer of Control
(subject to applicable performance requirements with respect to the actual
amount of bonus compensation earned by the Optionee); or
(iv) any material breach of this Amendment by the Company.
(c) 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 is 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.
(d) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean the
occurrence, within eighteen (18) months following a Transfer of Control, of
either (i) termination of the Optionee's employment by the Company for any
reason other than for Cause, or (ii) the Optionee's resignation for Good Reason.
"Termination After Transfer of Control" shall not include any termination of the
employment of the Optionee (i) by the Company for Cause; (ii) by the Company as
a result of the disability of the Optionee; (iii) as a result of the death of
the Optionee; or (iv) as a result of the voluntary termination of employment by
the Optionee (other than for Good Reason).
(e) "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
4
<PAGE> 5
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.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) or to all or substantially all of the Company's
business and/or assets shall assume the obligations under this Amendment and
agree expressly to perform the obligations under this Amendment in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. Failure of the Company to obtain
such agreement shall be a material breach of this Amendment. For all purposes
under this Amendment, the term "Company" shall include any successor to the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Amendment by operation of law.
(b) Optionee's Successors. All rights of the Optionee hereunder
shall inure to the benefit of, and be enforceable by, the Optionee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Optionee shall have no right to assign any
of his obligations or duties under this Amendment to any other person or entity.
8. Continuation of Other Terms. Except as set forth herein, all other
terms and conditions of the Option Agreement shall remain in full force and
effect.
9. Applicable Law. This Amendment shall be governed by the laws of
the State of Delaware as such laws are applied to agreements between Delaware
residents entered into and to be performed entirely within the State of
Delaware.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
JDA SOFTWARE GROUP, INC.
By:_________________________________
Title:______________________________
OPTIONEE:
____________________________________
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JDA SOFTWARE
GROUP, INC.'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 85,370
<SECURITIES> 0
<RECEIVABLES> 44,761
<ALLOWANCES> (2,696)
<INVENTORY> 0
<CURRENT-ASSETS> 136,770
<PP&E> 28,773
<DEPRECIATION> (7,466)
<TOTAL-ASSETS> 185,329
<CURRENT-LIABILITIES> 27,502
<BONDS> 0
0
0
<COMMON> 234
<OTHER-SE> 157,593
<TOTAL-LIABILITY-AND-EQUITY> 185,329
<SALES> 0
<TOTAL-REVENUES> 66,579
<CGS> 0
<TOTAL-COSTS> 30,997
<OTHER-EXPENSES> 64,068
<LOSS-PROVISION> 301
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<INCOME-PRETAX> (27,311)
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